NEWSLETTER

COMMERCIAL REAL ESTATE ASSESSMENT APPEALS

In a tough economy, businesses need to reduce expenses wherever possible, including their commercial real estate assessments. There are various review options available if a business believes its assessment is too high. After gathering pertinent information and doing an analysis of the costs and benefits, businesses must meet the assessment appeal deadlines or they will lose their opportunity to reduce their assessment and pay less tax than they otherwise would pay.

The first review is with the County Assessor/Appraiser. Factual information, such as property condition, vacancies, comparable sales, etc., can be provided and the assessment discussed and potentially revised. The next level is the Departmental Appeal which must be filed by July 1st.

Departmental Appeals are not a prerequisite for the remaining two, more formal appeals, but since historically a greater percentage of assessments are revised at that level, these appeals should be considered, and can even be done while pursuing the more formal Board of Equalization ("BOE") appeal. If a business decides to file an appeal to the BOE, the deadline is August 1st. In order to be considered, supplementary written materials must be submitted by September 1st.

A last recourse is the appeal to the Circuit Court, generally within three years of the assessment. For appeals, the taxpayer has the burden of proof to show by substantial evidence that the assessed value is more than fair market value, that the assessment is not uniform in application or that the assessment is otherwise not equalized. Caution--Assessments can be lowered or raised based upon the proof presented.

Bills introduced in the General Assembly this year would shift the burden to the County/Assessor to show the assessment is uniform or would reduce the standard of proof to a preponderance of the evidence before the BOE, but unless and until those bills are adopted, the burden and standard of proof remain your responsibility to meet.

The Prince William BOCS wants to balance the need for revenue with the burden on County taxpayers, especially homeowners. The Board gave budget guidance to staff on December 15th. The Board directed a 2.0% increase, which would, because of substantial declines in residential assessments, on average, result in about a $60 increase in a residential tax bill, and an increase in the base tax rate from $1.212 to $1.224 per $100. The 12/15/09 resolution did not provide a dollar figure for change in the average commercial property tax bill, likely because commercial properties differ widely. The 12/15/09 Budget Guidance presentation showed the "guidance" rate would decrease a commercial tax bill by 24.3% - a strong indication that average commercial values are expected to continue to drop substantially. The Chairman's January 12th Annual Remarks predicted that reining in the size of government would result in the average commercial tax bill being reduced by at least 15%. This is an average and was made before release of assessments and tax rates.

However, at the January 20th "State of the County" Chamber of Commerce event, the Chairman also asked whether businesses could accept the up to 12.5 cents per $100 valuation additional tax that State law allows the local governing body to impose on commercial and industrial properties - to be used for transportation purposes (VA Code Sec. 58.1-3221.3). That avoids the issue of an appointed body imposing a tax, but has not yet been imposed by PWC.

Remember, value can be affected by inaccuracies, omissions or inclusion of comparables or property features that don't apply. Although the additional commercial property tax has not yet been imposed, this possibility makes it that much more important to be sure your assessment is accurate.

Each business and property owner must look at their own situation and decide whether it is worth appealing at any or all levels. There is no guarantee that you will obtain a sizable change, but what is clear is that if you do nothing, your assessment will stand, and you will pay taxes based on that full assessed value.

Author: Dennis M. Cate
703/565-5121