Airlines Aren’t the Only Ones Who Nickel and Dime
Topic: A Tax to Grind, Property Tax Administration
Thursday, 24 September 2009 by David H. LeVan
Loading ...Flying to the West Coast today and reflecting on my travel experience thus far, I can’t help but wonder….. On a $300-$500 ticket, why do they charge an extra $15 to check a bag? Or $25 for a second bag? As a frequent flyer I don’t actually get charged the fee (which might upset some of you – remember that I am just the messenger – try to focus your anger elsewhere, perhaps towards the airlines). I do, however, still experience watching the definition of “carry on” expand in the minds of passengers. It is quite a spectacle watching my fellow passengers fighting with each other, the flight attendants and the overhead bins as they attempt to make bags of all sizes and shapes fit on the plane (I have to admit it can be quite entertaining). Flights are delayed, people are unhappy, overhead bins are destroyed and all for what…… an extra 15 bucks! What a nuisance the airlines have brought on themselves.
Who likes to be nickel and dimed (is that actually a verb??). How many corporate taxpayers have received a property tax bill for under a dollar? How about $.11? Why do jurisdictions do that? Last time I checked it cost the average company $25-30 to cut a check. If that is how much it costs a corporation to cut a check, I shudder to think of how much it costs the average jurisdiction to process a bill! Let’s wrongly assume that it is a similar cost for the jurisdiction. That means it collectively costs $50-60 to cut a check and process that $.11 property tax bill. What is wrong with this picture?
Just for fun, let’s find out who has received the lowest property tax bill. If you have received a bill for less than $1, tell us about it by commenting on this blog (for those of you who have never commented on a blog, congrats! for having the courage to try something new). And what the heck we’ll even throw in a prize for the lowest bill submitted (or most interesting story). I’ll make sure it’s worth more than a buck… so you don’t feel nickel and dimed.
Closing the GAAP
Topic: A Tax to Grind, Property Tax Management
Thursday, 17 September 2009 by David H. LeVan
Loading ...Property tax professionals and fixed asset accountants look at the same assets in different ways. Both parties start out looking at the historic, or acquisition, cost of an asset. But the similarity ends there. Fixed asset accountants are interested in book depreciation of an asset over time. Once an asset is acquired, their goal is to accurately depict its net book value, following the holy writ of Generally Accepted Accounting Principles (GAAP). In the pursuit of this goal, they often take an inventory of assets to reasonably verify that the net book value basis is appropriate. Assets with a net book value of zero are of little concern because they don’t affect the company financials. Property tax professionals, on the other hand, are NOT interested in the net book value but are instead interested in the historic cost of an asset, since this is the basis for reporting personal property taxes. Taxing jurisdictions determine the value of an asset by applying valuation factors, based on the acquisition year, to the asset’s historic cost. In many jurisdictions, the valuation floor is 30 – 40% of an asset’s historic cost. This being the case, the value of an asset will never reach zero thus creating a tax liability for years to come. It is, therefore, the goal of the property tax professional to write off “excess” or “ghost” costs on items no longer physically present. Without cooperation, the differing goals of these departments can lead to undesirable results. For example, a company in California had a policy to restrict physical inventories to assets with net book values over $1,000. This overlooked many assets, including several with historical costs in excess of $1 million. The company soon realized that they were paying taxes on dozens of “ghost” assets that were never physically inventoried by the fixed asset department. The tax department had to perform its own fixed asset study to support the non-reporting of all ghost assets under the $1,000 threshold set by the fixed asset accounting department.
Personal Property Tax is Like a Nascar Race
Topic: A Tax to Grind, Property Tax Management
Thursday, 10 September 2009 by David H. LeVan
Loading ...I had the opportunity to attend the August Nascar race in Bristol, TN, this year…. just me and 165,000 of my closest friends. There aren’t too many places left that serve fried turkey legs and Bud as a combo meal. The race was loud, exciting at times, long at other times and somehow on lap 429 I started thinking about personal property taxes (it might have been the turkey leg). It turns out that Nascar and personal property taxes have a lot in common. Now before you tune me out on this one…. let’s think about it.
Doesn’t it seem like you are going around and around the same circle when it comes to personal property taxes? When you think you have made it all the way around you realize you are just heading around again. 500 laps later you might be finished, but who has that kind of time? And it’s a bit confusing, having all those drivers out there on the track (not to mention all the sponsors painted on the cars). Sometimes you lose track of a driver because there are 43 other cars so close to each other. Sure, in personal property taxes we don’t have drivers and sponsors, but we do have 12,000 local jurisdictions and all the rules, tables and rates that they bring with them.
One of my favorite things about Nascar is that it is uniquely American. There’s nothing quite like it anywhere else in the world….. another similarity to personal property taxes (the debate might still be out on whether that is good or bad). In Nascar there are some real characters and it cost a lot of money to participate… more similarities to personal property taxes. Finally, Nascar was started by bootleggers trying to outrun the law. Only difference now is that the bootleggers are the law. The next time you think personal property, think Jeff Gordon.