The COVID-19 pandemic has had a major effect on many aspects of our lives, including taxes. Other outside experts are urging companies to pursue 2020 property valuation reductions based on corona virus-related economic losses as they seek financial relief in whatever way they can. Most income-producing assets would suffer financial losses due to the coronavirus, and they should seek assessment reduction.
Many jurisdictions, on the other hand, base California property tax assessment on prior-year revenue. As a result, basing 2020 assessment reductions solely on coronavirus economic losses would be unacceptable in most nations. Despite the ongoing health crisis, business property tax values for the 2020 assessment date for the personal property would most likely stay unchanged.
As a result, based on a systematic assessment analysis, companies can pursue property assessment reductions in 2020 and 2021.
Kinds of property tax relief
Property tax relief is divided into two types: disaster relief and economic relief.
Disaster relief: Covers “physical damage” to property(s) caused by natural disasters such as fire, earthquakes, tornadoes, and storms. Physical damage may result in a current-year reduction in property assessment value/property tax. It does not exclude economic losses from property taxation.
Economic relief: If there is a drop in income due to general financial realities, this refers to revenue-generating property.
The COVID-19 pandemic has generated a period of considerable uncertainty, which has exacerbated pre-existing political and economic uncertainties and seriously disrupted commercial real estate operations, at least for the time being. The effect of the pandemic on commercial real estate valuations is difficult to estimate today while focusing exclusively on the form and timing of an economic recovery.
Many commercial property owners are wondering how the pandemic will affect property taxes in the future. What options do I have? Can assessors grant changes in evaluations due to the pandemic?
We know that in 2020 and 2021, the federal, state, and local governments will face large budget deficits. Property taxes are the most reliable and largest funding source of municipal revenue, so the need for revenue from all sources would be at an all-time high.
To put it another way, rising government expenditure combined with a smaller tax base equals rising property tax rates. If the tax rate rises more than the value decreases, you’ll have to pay more in property taxes.
Beginning with their 2021 evaluations, most commercial property owners should foresee a value drop. The main issue is how much of a decline can be anticipated and what taxpayers can do to get an estimate that reflects post-pandemic market conditions.
Equitable post-pandemic valuations would require increased collaboration between leasing, asset management, and property tax practitioners. Property income and expenditure prediction rolls are one-dimensional information, but without an effective narrative to turn them into three-dimensional data, value mitigation opportunities would be missed.
How can business property owners defend themselves post-COVID?
To begin, stay up to date on legislative updates that could affect your business clients’ taxes. Then, every year, go over your clients’ property tax estimates with them. When we study our clients’ evaluations, we often notice mistakes, miscalculations, or obsolete material. Correcting these mistakes and properly defending the client’s case will result in significant long-term savings for companies. Local assessors aren’t trying to get customers, but they are under pressure to do everything reasonably possible to help councils close massive budget gaps.
Land prices could be much smaller than what municipal tax assessors have on record due to the existing market conditions created by the pandemic. Starting this year, there could be substantial changes to reduce clients’ property taxes. Documenting their COVID-induced value losses will lead to substantial tax gains at a time when companies need every bit of assistance they can receive.