When is Appealing your Property Tax Bill Worth the Money?

NC Commercial Property Tax Appeal

You are responsible for paying property tax in North Carolina. You think the assessed value of your property exceeds fair market value.  How much might you stand to save in property taxes through an appeal?  

The potential tax savings is equal to the potential assessed value reduction multiplied by the tax rate and multiplied again by the number of years remaining in the applicable revaluation cycle.  So, there are just three variables:

  1. Potential Assessed Value Reduction
  2. Tax Rate
  3. Years Remaining in the Applicable Revaluation Cycle

Calculating Your Tax Rate

The tax rate is easy enough to determine.  Call the applicable county tax office to ask which tax jurisdictions (county, city, town, fire district, etc.) apply to your property or refer to your last bill (but make sure it is a combined billing, and not a county-only billing). Then, look up those jurisdictions in this document published annually by the North Carolina Department of Revenue:  http://dornc.com/publications/2015-16_taxrates_prelim.pdf  Add the applicable rates together and you have your tax rate.  Although tax rates can change from year to year, and may change over your relevant revaluation cycle, using this rate as a constant will get you relatively close to your potential savings.

Determining Your Revaluation Year

It's also relatively easy to determine the years remaining in the applicable revaluation cycle. As we’ve mentioned before, all 100 of North Carolina’s counties are obligated to revalue real property within their boundaries at least once every eight years. In the years that follow a revaluation and until the next county-wide revaluation, the assessed value will generally remain constant unless it is reduced through appeal. That’s true even if market conditions change.  Also, note that a reduction from a successful appeal is only forward-facing and not retroactive.  If you appeal and obtain a reduction in the revaluation year of a county with an 8 year revaluation cycle, you get 8 years of potential savings.  If you appeal in the year just before the next scheduled revaluation year, you will only get 1 year of potential savings. You can use this document published annually by the North Carolina Department of Revenue to determine the proper revaluation date for your appeal and how many years are remaining until the next scheduled revaluation, and therefore how many years of potential savings there may be in your appeal.  If you are in these 24 counties, 2017 is a great time to appeal.   

Estimating Potential Assessed Value Reduction

The most difficult variable to determine is the potential assessed value reduction, which requires you to estimate the fair market value of the fee simple interest in your property as of the relevant valuation date. If you happen to have an appraisal of the relevant interest as of or very near the relevant date, then you should use that appraisal as your measuring stick. Since most people do not have an appraisal at this stage, you’ll have to do your best to formulate a reasonable valuation position based upon your knowledge of the market or resources at your disposal. Calls to knowledgeable brokers may also prove valuable to your analysis. Once you’ve formed your estimate, deduct it from the current assessed value to determine the potential assessed value reduction.

Calculating Your ROI

Let’s put the formula to work using an example:  You are in charge of the property tax function for an office building in Winston-Salem’s downtown business district. Thus, your tax rate is 1.38%, or .0138. Since your property is in Forsyth County, you’ll soon receive a revaluation notice setting the assessed value effective January 1, 2017, and that value will generally be in place for four years absent a reduction through appeal. You do your research and determine that your property is worth about $7,000,000, but the revaluation notice says the assessed value will be $10,000,000, yielding a potential assessed value reduction of $3,000,000. Applying these figures to the formula, you can determine that your potential tax savings from an appeal is about $165,600, or $3,000,000*.0138*4.

If you would like our help in analyzing the potential for appeal, give us a call.

Photo "Charlotte Skyline" Courtesy of James Willamor

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About the Author

Justin Hardy

Justin M. Hardy

Justin focuses his practice on property tax appeals, intellectual property law, tax controversy law, and general business law.  He is a regular contributor to both The North Carolina Property Tax Law Monitor and The Trademarketing Blog.  You can follow him on Twitter @JustinHardyBDP.
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