Sometimes when two adults care for each other very deeply….. well, you know, there is mutual consent.  Mutual consent can apply to many dating situations (did you think I was going somewhere else with this blog?) such as where to go to dinner, what day to go, whose car to drive, who pays the bill…. Need I go on?  Mutual consent works well in dating.  Mutual consent also works well in the area of property taxes (not generally as fun as dating).

When mutual consent occurs in the administration of property taxes things always seem to go better.  Just like governments before them, the early American colonies tried their hand at property tax administration.  Property taxes in the early American colonies started with the pilgrims (yes the pilgrims who landed at Plymouth Rock).  Unlike with previous, more oppressive governments, the colonies created a tax system based on mutual consent.

The colonies agreed to a list of laws, including ones that discussed how to assess and collect property taxes.  Although the pilgrims divided the land equally, those with land that was deemed more productive paid a higher percentage of the taxes.  Everyone had a voice in the process…… So if you didn’t like your taxes there really was no one to blame but yourself.

I wonder when property taxes stopped being about mutual consent…… It could have been around the time I persuaded my first girlfriend to drive us to dinner… to my favorite dining establishment… using her credit card

Charlie Trotter’s is arguably one of the finest restaurants in Chicago (and the bill you receive at the end of the meal is arguably one of the largest).  In an effort to really impress my wife on our anniversary I surprised her with reservations at Charlie Trotters.  The big surprise to both of us was that they upgraded us to a table in the kitchen – typically this table has a 6 month waiting period and requires a party of 4.  From this strategic vantage point you can watch all the different chefs preparing foods, and, most importantly you are given samples of all that they prepare.  It is truly an amazing culinary experience.  I had no idea there were so many types of chefs, with such amazing skills, all in one kitchen.  From what we experienced, each chef possessed at least one core competency…. bakery, desserts, salads, sauces, etc.

When we think of a core competency we generally think of a fundamental knowledge, ability, or expertise in a specific area.  Core competencies for a business can take various forms, including technical know-how, reliable processes, technology integration, close customer relationships, product development, corporate culture and more.  Core competencies are particular strengths relative to other organizations in the industry or simply stated your company's core competencies are the things that you do better than your competitors.

Unless a company is in the property tax business, property tax compliance and management will likely  not be one of its core competencies.  The decision to outsource property tax functions, or any other function for that matter, is impacted largely by the amount of focus a company wants to give to its non-core functions.  By outsourcing, a corporation is attempting to shift one of its non-core functions to a third party who has that function as a core competency.

Oddly enough, even if a company is in the property tax business, it may not have a core competency in property taxes.  Property taxes might just be another service that they provide.  A competence that is central to your business operations but is not exceptional in some way is NOT a core competency - it doesn’t demonstrate a differentiated advantage over your competitors.

So, what’s your core competency?  Executive Chef?  Sous Chef?  Chef de Saucier?  Line Chef?  Chef de Partie?  Pastry Chef?  Banquet Chef? .... or maybe Property Tax?

Have you heard of companies being accused of “taking money from the children” when pursuing legitimate property tax refunds?  The fear alone of being maligned in the newspapers often keeps companies from pursuing legitimate appeals.  Where does fiscal responsibility on the part of school districts (or any government entity receiving property tax funds) come into play?  For the record, I am in no way recommending that corporations pay less than their fair share of property taxes… but why should they pay more?  And why are the politics of “taking money from the children” used against corporations who DO pay their fair share?

As a former tax manager for a major manufacturer, I had the opportunity to experience this firsthand.  For years, our company had been over assessed and we finally negotiated a settlement with a jurisdiction (who shall remain nameless).  The appeals and subsequent settlement included several prior years where we had significantly overpaid our property taxes… that meant refunds of over $1 million.  Knowing that the jurisdictions had spent all the money we asked that our refunds simply be spread over the following 3-5 years.

In a last ditch effort, the school superintendent strongly urged us to just forget the money, like other corporations had done.  In a dramatic fashion he told us how the school district really needed the money.  I thought he might break down and cry right there.  Fortunately we had done our research to fight off the emotional surge.  While the national average cost to educate a student was around $2,000 to 3,000 at the time, his jurisdiction was spending $14,000 per student.

When confronted with these facts (along with some sarcastic remarks about buying every student a band uniform using taxpayer dollars), the emotion quickly ceased and the settlement was accepted.  In reality, this case was not about taking money from the school children… but about using some common sense, especially when spending other people’s money.

Take a peak at this video about taxpayers taking on a school district when it comes to spending more of their money.

Outsourcing, which became part of the business lexicon in the 1980s, is simply subcontracting a process to a third party.  The decision to outsource property taxes is usually made in the interest of reducing cost and utilizing time and energy more effectively.  It allows a company to focus on its core competencies.  Unfortunately, a couple misconceptions with regard to outsourcing property taxes have surfaced… 1) Outsourcing means losing jobs, specifically in the United States… 2) Outsourcing means a loss of control, and the resulting benefits not actually coming to fruition.

Outsourcing property taxes does not necessarily mean a loss of American jobs.  There are firms whose core competency is property taxes with compliance practices in the United States.  Companies who look at outsourcing property taxes to the United States will continue to find ways to process property tax returns in a cost effective fashion without transferring jobs overseas.  If that is an important consideration to you, make sure you ask who will be processing the returns and where.

Property taxes management can be confusing, complex and voluminous, but it does not require a loss of control.  With technological resources available and by not totally washing their hands of the responsibility, companies can successfully transition the work but not the control.  The relationship between the company outsourcing and the outsource provider should be like “the office next door”.  If you had the staff internally instead of outsourcing, what would that look like?  Take that same model and talk to your outsource provider about replicating it.

If you would like to learn more about the pros and cons of outsourcing to help you better evaluate your situation, email me at dlevan@advantax.com.

As you can imagine, property tax assessors and collectors have not always had the best track record when it comes to love from the public.  To the Jewish people in biblical times, tax collectors were especially hated.  They were seen as traitors to their own people because they chose to serve the Roman Empire.  Furthermore, they often collected far more than was due from the people.

A famous story in the Bible describes one of these property tax collectors, Zacchias.  Because he was especially short, not to mention hated, he decided to climb a tree to see Jesus as he came through town.  Much to his surprise, he was called out by Jesus and told to come down from the tree (the Sunday school songs are coming back to me).  Much to the frustration of the religious leaders, Jesus spent the rest of the day with Zacchias.  What was even more unbelievable to them was when Jesus said, “The tax assessors and prostitutes are entering the kingdom of God ahead of you.”  How is that for a new perspective?