Most of us are familiar with the saying “What happens in Vegas, stays in Vegas”.  This advertising slogan was adopted by the Las Vegas Convention and Visitors Authority in 2002, after their decision to shed the family image.  It worked!  Most of us immediately know the slogan and relate it back to Las Vegas (if the “Vegas” part didn’t already give it away).  Movies like “What happens in Vegas” and more recently “Hangover” reinforce the point that “What happens in Vegas, stays in Vegas”.

The story of “What happens in Vegas” (2007) revolves around two strangers who wake up to discover that they have gotten married after a night on the town and one of them has won a huge jackpot.  Neither can remember all the details.  “Hangover” (2009), which is along the same line, revolves around a group of guys who go to Vegas for a bachelor party and wake up to find that they lost the groom.  Again, none of them can remember what happened the night before.

So how does this relate to property taxes?  Great question!  Let’s start with the property tax process for real estate in Las Vegas.  The tax year officially starts on July 1st.  In December, assessment notices are sent.  Appeals on those assessments are normally heard January through March of the following year.  In other words, the completion of values for real estate can take up to 9 months.  When you are articulating why you want a reduction in value, you have to rely on what you may have been thinking 6-9 months earlier.  It is kind of confusing…. like trying to remember what happened after a night on the town in Las Vegas.

I wonder how well this methodology worked right before the recent real estate crash.  From the time the valuation process began in July, 2007, to the time the last appeals were heard in March of 2008 a lot had changed.  Real estate values had plummeted.  In mid-2007 would anyone have been able to accurately estimate what would happen to those real estate values?  If so, I recommend they find the nearest casino and begin betting.  In fact, they need to seriously consider moving to Las Vegas.

When it comes to property taxes, it may be a good thing that “What Happens in Vegas, Stays in Vegas”.

When it’s time to measure depreciation for ad valorem tax purposes, obsolescence is typically nowhere to be found.  Understandably, obsolescence is much more difficult to measure than physical depreciation, but that doesn’t mean it shouldn’t be accounted for.  More often than not, functional and external obsolescence are not listed on a property record card.  What’s wrong with this picture?

Typically, assessor’s market value is based on the cost approach and doesn’t include obsolescence.  In many instances, however, we find the assessor’s market value to be greater than the potential sale price of a property.  If only physical depreciation is accounted for, then the difference may be attributable to obsolescence. 

To determine obsolescence, you can look for a superadequacy or a design deficiency and the cost to fix it.  Or you can identify external forces, such as government restrictions, that may negatively affect your property.  The best way to get started is to ask the following question:  If you were to build your facility new today, what changes would you make?

 If you'd like to learn more on Obsolescence join us on March 23rd for a Live Webinar

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War is hell!  This often repeated statement is thought to have originated in a speech given by General Sherman during the Civil War.  War IS hell, but is it also a time to ponder enacting a Federal property tax?  Well it was in at least two instances.

In 1798 we had an “Undeclared War with France” after they captured hundreds of US merchant vessels.  In an effort to fund the “war” Congress passed a national property tax.  Property was divided into three categories:  houses over $100, land and houses under $100, and slaves.  Assessors in each of the 16 states were authorized to carry out the property tax.  Values were established, taxes were collected and the war ended in 1800 (yes, contrary to what you might think we are no longer at war with France).

In 1943, three economists, commissioned by the Treasury Committee on Intergovernmental Fiscal Relations, wrote a proposal to modernize property taxation.  They recommended dozens of reforms to centralize and standardize property assessment at a Federal level.

World War II had changed people’s opinions on taxation.  People, in general, were motivated to contribute to the war effort at all levels.  The Revenue Act of 1942 forced most workers to pay income tax for the first time and still opinion polls consistently showed 85-90% of people thought the new taxes were fair.  Property taxes weren’t quite as popular, though, because they didn’t go directly to the war effort.  This, coupled with overwhelming disagreements in Congress, killed the idea of a Federal property tax.  War is not the best solution.  A Federal property tax probably isn’t either.

Are breast pumps taxable for personal property taxes?  Now I understand that this may be a question that you never contemplated…..You may be wondering, “what’s the relevance between property taxes and breast pumps?”  Or even “how can an item that might only cost $200-$500 be taxable for property taxes?”  Those are great questions.

Let’s say your company distributes breast pumps to hospitals for use in the maternity ward……  For instance, a commercial style, double pump, electric, adjustable speed breast pump complete with battery pack and a nice travel bag….not that I would know.  Even though this pump sounds really fancy, and I’m sure it is, the resulting property tax on that pump will only be around $10.  Yet, many jurisdictions (and remember 39 states tax personal property) will still require you to report it and pay tax on it.

Don’t we all file enough personal property tax returns already (Los Angeles County alone has 1.7 million personal property tax returns filed annually)….. why the need to pump out more?  Why give taxpayers an additional cost for processing a personal property return that will only result in a $10 tax (not to mention their costs for processing a $10 check to pay that tax)?  It sure would be nice to wean taxing jurisdictions off these nuisance returns.