Year after year, property taxes are one of the biggest line item expenses for franchise owners. But the good news is, there are strategies owners can employ to manage property taxes and lower the amount they pay.
Here are four things any franchise owner can do to limit the impact property taxes have on their bottom line:
The assessed value of a property plays a key role in determining the amount of property tax owed, but it's often overlooked. Appraisal districts are required to conduct periodical reassessments, in which they review property values throughout their jurisdiction to ensure their records are up-to-date with the various changes to a property.
The guidelines for reassessment vary by location. Some districts conduct annual reassessments, while others go 3-5 years, or even longer, between reassessments. Oftentimes properties can go years without a reassessment, which means the current assessed value won't take into account potentially significant changes, such as a shift in the market or the sale from a previous owner, which could result in a lower assessed value. Other times, the district simply has inaccurate property information on record (e.g., the wrong square footage) leading to an over-inflated value.
In addition, owners should ensure their assessed value is based on the value of the land and improvements only. If non-real property items are not identified, owners run the risk of paying more than their fair share.
While the tax rate of a given area is determined by the local government and cannot be changed, you can appeal your property's assessed value to potentially lower your property tax bill. Property owners should utilize the appeal process as frequently as permitted by their local statues, as it provides an opportunity to catch any mistakes from previous appeals and account for any other changes in the property's value. In addition, jurisdictions will often continue to increase property values year after year, even following a successful appeal, to boost revenue.
Property tax appeals are heard by a local assessor, and can be carried out by the property owner or with the help of a consultant or attorney who specializes in property taxes. Franchise owners can find their local assessor's office online, which will have the details about when and how to complete a property tax appeal.
When presenting a case for a property tax appeal, information is key; the more in-depth knowledge and evidence presented during the appeals process, the better. For example, an article about how restaurants have seen a dip in sales due to the economy could be used as evidence for an argument for a lower property assessment, since factors outside of the owner's control are affecting their restaurant's success. By keeping up with market and industry-related news, owners can build a collection of the most up-to-date, accurate data to use as evidence.
There's no right or wrong answer for how to appeal property taxes. Rulings often come down to how an argument treads the grey area. Owners should consider all approaches to value - sales comparison, cost and income capitalization - to identify which analysis presents the best opportunity to yield a value reduction. When looking for comparable properties, you don't have to stick strictly to other franchises when collecting data to support your case. And don't hesitate to look outside of your immediate market for useful evidence; other trends and data such as local labor market statistics and information about other properties in the area of similar size and value can play a role in a successful appeal.
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