Have you ever had the opportunity to view the Grand Canyon from an airplane on a clear day?  At 277 miles long and up to 18 miles wide, it is a site to see!  The North Rim is generally accessible from Las Vegas and the South Rim from Phoenix or Flagstaff.  Attempting to hike from one rim to the other is discouraged by park officials because of the distance, steepness, rocky trails, elevation changes, and potential heat exhaustion.  Even though rescues are often required for unsuccessful rim-to-rim travelers, hundreds of physically fit hikers complete the trip every year.  For those who are in exceptional shape, there is even a 78 mile ultra-marathon through the canyon.

We, in the property tax industry, have our own Grand Canyon.  It plays out like this…..  Property tax departments are on the South Rim of the canyon, having driven up from Phoenix, while executives of their organizations are on the North Rim, having driven over from Vegas.  For years property tax representatives have complained that upper management doesn’t understand property taxes and has made few attempts to hike to the South Rim.  In fact, evidence shows that most executives have a very limited knowledge of property taxes.  An often quoted CFO magazine article states that property tax is the “least understood tax” by CFOs.

But what is happening on the South Rim?  How many attempts have been made to cross over to the North Rim?  In a recent assessment we conducted, the PropTax Assessment, we found that only 50% of property tax departments were providing upper management with ”easy to understand, insightful property tax reports” on a regular basis.  Only 50%!  Property tax departments often complain of lacking resources to adequately do the job they have been charged with doing.  Those with the capabilities of authorizing resources are on the North Rim.  If they aren’t learning about the impact that your department is providing to the organization from you, they probably aren’t learning about it.

Perhaps it’s time to get in shape and hike to the North Rim.  If you have already taken that hike a few times, you might consider taking it up a notch and signing up for the ultra-marathon.

Remember the legendary Roman Empire?  That’s the one whose mythical foundation started with abandoned twins, nursed by a wolf and raised by a shepherd.  It was in Rome that the world first witnessed a republic established on principles of self government.  The city thrived on its’ republic ideals and expanded into an empire to become the undisputed ruler of Italy, and ultimately the world.

The creation of a sophisticated and ground breaking property tax system was one of the milestones of the Roman Empire.  Property taxes were paid based on land value, livestock, structures, even plants and trees and all other personal property.  The United States has taken some cues from this legendary government, well, minus the wolf-nursed abandoned twins.  Many of the property tax policies in Rome have found their way into our current property tax systems.

Performing a fixed asset inventory can be about as exciting as a root canal.  But like any good root canal, a proper inventory can alleviate a great deal of pain - in this case, the pain of a surprise tax bite when an audit reveals that your property tax and fixed asset accounting departments disagree on the cost of your fixed assets.

By developing a strategy that addresses the distinct goals of both your property tax and fixed asset accounting departments, you can not only avoid the pain, but even experience some outstanding benefits, including:

• Meaningful fixed asset inventories
• Detailed support information for tax or internal accounting audits
• Reduced duplication of efforts

If property taxes motivate people to do anything it tends to be taking a trip to the local assessor’s office.  The Roman Empire found a way to create a more positive response to property taxes.  Augustus Caesar accomplished this through flat-rate land property taxes.  This meant that property taxes were assessed not on what a property did produce but on what it could produce.

Many companies are ill-equipped to manage property taxes effectively. According to CFO magazine, “Property tax is one of the biggest tax expenses – and the hardest to manage”. The sheer volume of jurisdictions (estimated at over 12,000 townships, counties, and states) can be overwhelming. Companies may have property in hundreds or even thousands of jurisdictions, all with their own set up rules and filing requirements.

Several misconceptions regarding property taxes exist. Property taxes are often viewed as fixed costs.  Receive a bill; pay a bill; nothing more. Fair market value is equated with net book value or is based solely on a formula. Finally, there is a fear of the unknown, a fear of making waves in the community.

It is not a rosy picture on the jurisdiction side either. Jurisdictions do not have the manpower or expertise to evaluate each real estate or personal property parcel individually. Out of necessity they must employ mass appraisal processes to value all of the properties in their jurisdiction. In Los Angeles County alone over 1.5 million personal property returns are filed annually. You can probably double or triple that figure for the number of real estate parcels that must be managed every year.

Is property tax a pain in your company? What steps have you taken to improve the process and minimize the pain?