Have You Sabotaged Your 2022 Tax Appeal Opportunities? Advice For Florida CRE Owners
Florida's 2022 assessment notices, known as TRIM, will not be available until August, but it is critical that property owners follow effective practices during the first quarter of the new year. Tax advisers urge taxpayers to be vigilant during the next few months to avoid overpaying on what is already their largest expense.
"The new year presents opportunities for property owners to have more control over their highest line-item cost: property tax," said Jeff Nelson, managing partner with the Property Tax Alliance Group, a boutique property tax consulting firm located in Fort Lauderdale, Florida. "Considering 2022's proposed values aren't published until late August, there are a few property tax-related matters taxpayers should be thinking about during the first quarter."
When Do County Appraisers Assess Florida's Real Estate?
Florida's official lien date is Jan. 1, when the state's county appraiser offices annually assess all real estate. Qualified sales of comparable properties from January through December 2021 are a primary component of their opinions of taxable value.
In addition to sales, net operating income is also central to a county's opinion. But the county relies on taxpayers' input to fill in the blanks.
What Happens After Jan. 1?
After the new year, Florida businesses and commercial property owners receive county appraiser offices' annual financial information requests. Most think they are a strict form of compliance that the government forces on business owners — or is there more behind the curtain?
"It's a little of both," said Steve Tropea, director at PTAG. "Unaware their responses may not be mandatory, taxpayers are generally forthcoming with their confidential data that counties factor into their assessments, ultimately determining proposed values for the year. They don't realize their financials may support a higher assessment, increasing their property tax liability."
Tim Hart, partner at PTAG, warned that counties take other factors into consideration in making their assessments.
"In addition to the cost and sales approaches for determining property values, the income approach relies on an asset's NOI and cap rates for its calculation,” he said. “When county appraisers do not have the actual financials for a commercial property, they only have market data to reference for a pro forma valuation. Many consider this a more fair and equitable tax-friendly appraisal consistent within a location's market."
What Strategies Can Be Applied Today Ahead Of The Appeal Cycle Beginning In September?
"Supplying income and expense data is only required if it is supportive evidence for future value adjustment board tax appeal hearings," Hart said. "Owners don't obstruct their tax appeal opportunities once they understand our approach to controlling the flow of information."
Tropea added that savvy real estate owners leave all property tax processes, including correspondence with the local government, in the hands of their agents.
"The most-experienced professional property tax firms optimally manage all communications with county appraisers and supply only necessary data to benefit the taxpayer,” Tropea said. “We know which property values to appeal long before counties release their updated assessments and respond to county inquiries on behalf of the client when the financials will support an appeal later in the year."
Tropea warned property owners not to submit financial data if they haven't responded to county requests yet and to consult with their property tax agent. Their agent should already know the probability of a 2022 appeal and the type of evidence required.
Like managing federal taxes with the help of a capable accountant, clients can trust their tax agents to control all property tax processes to limit exposure, he said.
What Is Florida's Tangible Personal Property Tax?
TPP is everything other than real estate used in a business or rental property. This includes computers, furniture, tools, machinery, signs, equipment, leasehold improvements, supplies and leased equipment. Florida's business owners must file their TPP tax returns by April 1.
"Taxpayers who lease, lend or rent property must also file a return," Nelson noted. "Whether fully depreciated in accounting records or not, companies should report all property still in use or currently in possession on the Florida Department of Revenue's form DR-405."
Buying Or Developing Florida Property In 2022?
For investors interested in expanding their Florida footprint in 2022, Nelson highlights the value of his firm's proactive approach.
"Clients benefit from methodologies aimed at enrolling assets at their lowest possible initial tax basis, significantly impacting NOI,” he said. “Our institutional owners are especially all-in on strategies that give them an extra edge in the market."
PTAG professionals recommend that clients communicate their expansion plans during the earliest stages.
"Given their firsthand experience with the benefits that our full-service ethos has on profitability, our clients contact us when considering new opportunities," Nelson said. "The most successful owners are more conscious of controlling every possible taxable event during the buy phase than in years past. Our early involvement often illuminates prohibitive risks in potential deals, adding another layer of protection for clients."
Tropea added that applying effective tax mitigation strategies at the earliest stages will only improve investment performance.
"The amount of operating capital wasted on property taxes is alarming," he said. "Make sure to contact your representative if you feel your business would benefit from enhancing any of these practices."
This article was produced in collaboration between Studio B and the Property Tax Alliance Group. Bisnow news staff was not involved in the production of this content.
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