A property-tax expert explains that almost every company is overassessed for its personal property and how to lower it.
Want a simple -- and all-too-often overlooked -- way to cut expenses? Challenge your company's "personal-property tax" assessment. (See "Fighting Back on Property Taxes," July, [Article link].) "My assumption is that every company is at least 10% overassessed until proven otherwise," says Dennis Neilson, Coopers & Lybrand's partner in charge of property-tax services.
Personal property is usually defined as any property other than land, land improvements, buildings, and large below-ground assets. Included in the category are computers, furniture, artwork, and the like. Companies often pay more tax on those items than is necessary, says Neilson. These are the problem areas:
· Ghost assets (items that have been discarded) often remain on tax-assessment lists at original cost.
· "Situs" (or location)confusion sometimes results when off-site equipment is being taxed by more than one jurisdiction. If it is legally and logistically possible, park that property in whichever location is cheaper taxwise, advises Neilson.
· Obsolete equipment often remains taxed on the basis of its original purchase price, rather than on its fair market value.
Hiring an expert to challenge your personal-property-tax assessment can cost up to $5,000 -- an expense that should be offset fairly quickly if you now pay $50,000 or more in such taxes. If your company is small or strapped for cash, Neilson says, "you might get some savings if you visit your tax assessor's office yourself and build a case about obsolete equipment."