Video Gallery
Owing Back Taxes on A Property Purchase
PropTax Minute
Consider this scenario. You go to your favorite restaurant, sit in your favorite booth and order your favorite meal. After enjoying that meal and paying the bill, you receive an additional bill. You’re confused!?! The manager explains that the additional bill is to make up the difference for prior customers who sat in the booth and received discounts. Senior discounts, child discounts, reductions from coupons. In fact, not only does he want you to pay the difference between what their bill would have been and what it was with the discount, he has also added interest. That sounds crazy, right?
A company recently purchased land in Texas for a restaurant they were planning to build. Shortly after completing the purchase, they received a property tax bill for 5 years of “back taxes”. The jurisdiction explained that the land had been considered agricultural when the prior owner had it. The company had changed the land use to commercial when they purchased it. Commercial land is taxed at a higher level than agricultural. Therefore, the company was responsible for paying the difference in property taxes between agricultural and commercial use for the previous 5 years, even though they didn’t own the land during that time. On top of that the jurisdiction charged 7% interest over the 5 year period, as if these additional property taxes should have been paid. That sounds crazy too, right?
It turns out that Texas Property Tax Code Section 23.55 actually allows this: “If the use of land that has been appraised as provided by this subchapter changes, an additional tax is imposed on the land equal to the difference between the taxes imposed on the land for each of the five years preceding the year in which the change of use occurs that the land was appraised as provided by this subchapter and the tax that would have been imposed had the land been taxed on the basis of market value in each of those years, plus an interest at an annual rate of seven percent.”
That doesn’t seem fair at all! I think we all understand the concept of “Pay it Forward” but this sounds more like “Owe it Backward”.
For more property tax news, check out proptax minute at advantax.com.
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A New Sheriff In Town
PropTax Minute
Welcome to Advantax. I’m Regina Waldroup with your Proptax minute.
During the nineteenth century, most of the taxes collected were either from poll taxes or property taxes. In 1818, Illinois was the first state to adopt the uniformity law, which required that land be taxed based upon its value. By the end of the century, 33 other states had also adopted the law. As pioneers began to go west and create settlements, the need for property taxes became apparent. And the sheriff became the assessor and collector of property taxes.
Wyatt Earp, a successful lawyer, moved to Tombstone, Arizona in 1870. His plans? To make his fortune by operating a saloon and gambling concession, but he decided to get involved in politics instead. He ran for sheriff against the corrupt incumbent, Johnny Beham. The corrupt law system of the wild west ran its course and Earp lost the election.
Following the election, Earp and his friends gave American history one of its most infamous shoot-outs at the ok corral. I wonder what he would have done if he actually won the election. Guess we’ll never know…
Thanks for watching Proptax minute. For more property tax news, visit us at advantax.com.
Captain Barbossa and Property Tax
PropTax Minute
Welcome to Advantax. I’m Regina Waldroup with your Proptax minute.
A great Disney movie is “Pirates of the Caribbean: the curse of the black pearl” from 2003. There is a part in the movie when Elizabeth boards the black pearl and attempts to negotiate a cessation in hostilities against Port Royal with captain Barbossa. She uses a medallion that Barbossa wants as leverage and cites the pirates code. Once he has the medallion in hand, Barbossa changes what she thinks they have agreed upon by stating that the “code is more what you’d call guidelines than actual rules”.
Taxpayers often believe that using fixed asset listings as the basis for personal property taxation is a rule, when it is actually more like a guideline. Some assessors actually reject the taxpayer’s fixed asset listing and use their own listing, and some simply modify the listing. This is confusing for some taxpayers. This happens because personal property tax is based on fair market value and assessors are charged with determining fair market value. They aren’t required to use the fixed asset listing; they are simply guidelines.
Taxpayers are required to report the taxable personal property at their location and in effect assist the assessor in determining fair market value. If the fixed asset listing for your company doesn’t accurately reflect the taxable assets at the location you might consider making adjustments to it. For taxpayers, fixed asset listings are also more what you’d call guidelines than actual rules.
For ideas on how to make appropriate adjustments on your personal property returns visit us at advantax.com. Thanks for watching Proptax minute.
Even Property Tax History Repeats Itself
PropTax Minute
Welcome to Advantax. I’m Regina Waldroup with your Proptax minute.
We know that property taxes are based on value, so why have they continued to increase while values have plummeted? The answer to this question can be found from looking into the history of the great depression.
Leading up to the 1930s, the economy was strong and many assessors had a tradition of repeating or slightly increasing their assessment rolls from year to year. That seemed to work fine until the depression hit – values dropped but tax bills didn’t. Some taxpayers even saw increases in their taxes. The housing market slowed and students stayed in school longer because there was no work. In 1932, property owners associations throughout the nation started to threaten local officials with tax strikes, and tens of thousands of taxpayers didn’t pay their bills.
These events led to property tax reform, limiting local government spending and shifting some of the property tax burden to other state taxes. It led to more counties assessing properties owned by public utilities and implementing homestead exemptions. From 1932-1933, sixteen states voted to implement property tax limitations, including the extinction of property taxes on intangible property, creation of exemptions for the sick, poor, elderly, farmers and homesteads, and “circuit breakers” to limit the percentage of income one would pay on property tax.
It seems that history has a way of repeating itself, even in property taxes. Eighty years from now, i wonder what they’ll say about the property tax reforms that came out of this economic downturn.
For more property tax news, visit us at advantax.com.
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Mutual Consent on Property Taxes
PropTax Minute
Welcome to Advantax. I’m Regina Waldroup with your Proptax minute.
Mutual consent is essential for dating relationships. It can apply to many situations – where to go to dinner, what day to go, whose car to take, who pays, and so on.
Although it may not be as exciting or fun, mutual consent also works well in the area of property taxes. When it occurs in property tax, things always seem to run more smoothly. 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, and they 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. Even though the pilgrims divided up the land equally, those with the land that was deemed more productive paid a higher percentage of the taxes. Everyone had a say in this process, so if you didn’t like it, you could only blame yourself.
Are property taxes still about mutual consent? Do taxpayers feel they have a say in the matter?
Let us know how you feel about it at advantax.com. Thanks for watching Proptax minute.
Property Taxes as Punishment
PropTax Minute
Welcome to Advantax. I’m Regina Waldroup with your Proptax minute.
At the end of the civil war, a group of extremist politicians controlled Washington. They wanted to finish the south off once and for all, and the weapon to accomplish this was property taxes. The direct land tax of 1861 was set up before the war, to force revenue from the states that had succeeded or were thinking about succeeding. Property taxes on land were accrued for the duration of the war. When the war was over, penalties of 50% were added to the delinquent taxes. Special federal commissioners were sent to the south, empowered to collect the taxes or sell the land from anyone who couldn’t pay the tax. The extremists found a way to punish the already devastated south – property taxes used by politicians as a weapon.
For more property tax news, visit Proptax minute at advantax.com.
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The Cost of Mosquitos
PropTax Minute
Welcome to Advantax. I’m Regina Waldroup with your Proptax minute.
You may be surprised by how much mosquitoes and property taxes have in common. Mosquitoes cost people a lot of annoyance, fear, and money – especially if they live in Cook County, Illinois.
The taxpayers of Cook County are funding four separate mosquito abatement districts. In property tax revenue the four districts collect $10 million annually – and the majority of that money is spent on wages and benefits for employees.
You may wonder how we got here. Well, after several malaria outbreaks in the 1920s, public referendum’s created the mosquito abatement districts and they have managed to stay afloat ever since. Although there is little proof that the techniques used by the districts are successful in reducing deaths caused by west nile virus, it is fear of that same virus that keeps these districts going.
In 2002, despite the four districts working hard to keep illinois mosquito free, 67 people died from a spike in west nile; however, for the pat 10 years those number have gone down to the single digits.
So when we’re talking about rising property taxes, every government expenditure counts. Who likes mosquitoes anyway?
Thanks for watching Proptax minute. For more property tax news, visit advantax.com.
Taking the “Fast Track” Without Getting Burned
PropTax Minute
Welcome to Advantax. I’m Owen Jensen with your PropTax Minute.
Here’s the scenario…. Your company has a great idea for a new product and the decision is made to construct a new facility. In fact, there is so much excitement around the facility that they decide to put it on the “fast track” and build it in six months instead of the originally planned twelve months. Of course this will add significant cost but the new product produced at the new facility is going to be so big that “fast track” is the only option for the facility. Will this additional cost increase the taxable value of the facility? Depending on who you ask, you might get different answers. An aggressive tax assessor might say yes…. The answer might be no and here’s why.
Property taxes are based on value, not on how much money you might want to throw at a facility. Value requires that we look at the facility through the eyes of a potential investor. Would an investor pay more for a facility that cost more to build because it “had to be completed” in six months than for a similar property that incurred more “normal” costs and timeframe to build? Probably not.
Generally, excess costs in “fast track” construction will fall into two categories: additional equipment and additional labor.
Excess costs for “fast track” do not have to add to your taxable value. Do your homework, quantify the costs. If you’re going to take the fast track don’t get burned.
If your company needs assistance in reviewing the taxability of fast track costs, we can help. Just contact us at advantax.com
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Property Tax Assumptions in Miami
PropTax Minute
Welcome to Advantax. I’m Regina Waldroup with your PropTax Minute.
We all know what happens when we assume, and now the city of Miami knows more than ever.
The city of Miami decided to spend $487 million on a new stadium for the Miami Marlins. Then they spent another $100 million on a parking garage, creating a property tax liability of about $2 million per year.
Now, I don’t think the taxpayers were particularly happy about that. According to reports, the city assumed the parking garages would be exempt from property taxes since they were being funded and owned by the city. According to Florida statutes, property must be used solely for public purposes in order to be exempt from property taxes. In this situation, the garages were leased to the Marlins, who charge for parking — not exactly exempt.
The Marlins didn’t assume anything, though. They included a clause in their contract with the city stating that the city is responsible for all taxes. So in this case, it would all be coming out of the city’s budget. Ouch.
Luckily, the state has come to Miami’s rescue and passed legislation to exempt the city. Hopefully Miami has learned their lesson on assuming.
For more property tax news, check out PropTax Minute at advantax.com.
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