Asset Management for Valuation Reporting:

 Some of our tips on Plant Construction or Additions:

• Understand the project. What will it do? Add capacity? New process? Traditional methods or state of the art? Ask facilities or engineering people, if need to.
• What is the projected cost? (Compare to complete. What non-value adding costs, if any, were incurred that you should not pay on for property tax value?)
• Understand the systems, not just the titles of assets acquired or built.
• Take any and all tax exemptions allowed.
• For tax reporting, how will construction in process be reported and when?
• Look at sales tax and property tax reporting together. Issues: real v personal; exempt and short-lived; real taxable and long-lived.
• Perform (or engage us to) cost segregation study to maximize income tax deprecation. (We often save 20X or more our fees in real tax dollar savings.)
• Anticipate and plan for an asset record that will identify components as they are retired.

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Property Tax Tips:

Your assessed value should be based on its value - not its cost.  A number of factors cause you to spend money that does not return value.

Spend time preparing for your tax filings - all year long - in order to identify key items and issues (like retirements or abandonments) or where unfavorable shifts in your industry have occurred (obsolescence).

Iowa curves show structures have limited lives that anticipate the value of structures.

Taxpayers must balance between accounting cost disclosure and adequate reporting where adjustments for nontaxable and special circumstances exist.  A greater emphasis is being made to capture "omitted property" in many states.

Your Industrial Property Return (IPR) is an important tool in keeping property tax values in check. The IPR is the foundation for determining your assessed value by the Department of Revenue. Click here for a list of useful tips we've compiled to assist you when preparing your returns.

Functional & Economic Obsolescence - A very common point of dispute in property tax cases is obsolescence.

• Obsolescence can be either permanent or temporary. In other words, a taxpayer need only suffer from a temporary situation and still be entitled to relief.
• Overcapacity, reduced shifts, and stalled expansions are signs of obsolescence.
• Depreciation schedules allow for only NORMAL wear and tear, but no obsolescence.

  (Oregon taxpayers: You can download the DOR Personal Property Valuation Schedules and Industrial Valuation Schedules from DOR web site.)

Discounted Cash Flow (DCF) can tell you what your company is really worth. That is, when the proper measurements are applied. Need a quick, inexpensive "back of the napkin" estimate of value? DCF is a great indicator—before you file a tax appeal or need a measure of market worth. A couple of our tips on DCF calculations:

• Deduct net working capital from your business enterprise value.
• Adjust out assets not in existence on your valuation date.
• Does it make sense to assume the plant/mill will last forever? No. Estimate some parameters.

What you (probably) don’t know about published cost guides (the assessor’s bible). Did you know:

• Cost guides are just that—guides.
• The publishers won’t testify or defend conclusions.
• Depreciation tables have little explanation.
• Limitations on the tables should be understood—by you and by those putting a value on your property.
• Cost guides don’t explain how to make adjustments when your facts don’t fit their generic applications.

We find that the guides are useful but require extreme caution…..

Entrepreneurial profit is creeping into more testimony as a rationale for bridging "gaps" between approaches to value. Some misapplications of entrepreneurial profit:

• Confuses Value to the Owner: Investment value v. Market value. (Most statutes require market.)
• Confuses Cost with Value.
• Confuses Business Enterprise with Real Property: Intangible assets are not subject to ad valorem taxation incorporated into real property value.
• Confuses Opinion & Subjective Judgment with Market Evidence.

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Oregon Taxpayers Only:

Under the current system, neither "general ongoing maintenance and repair" nor "minor construction" is to be taxed.  It is up to the taxpayer to be sure these items are properly recognized and reported to avoid taxation.

Industrial taxpayers can choose between appeal forums.  For current year taxes, payable in mid-November, the taxpayer will appeal by late January to either 1) the local Board of Property Tax Appeals (BOPTA) or 2) the Magistrate's Division of the Oregon Tax Court.  The Magistrates have significant background in complex property tax issues often not found in local citizen's boards.