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?