Valuation of Business Personal Property BPP
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Valuing Business Personal Property (BPP)
Overview
The valuation of Business Personal Property (BPP) often varies significantly, providing opportunities for substantial property tax reductions. It’s not uncommon for assessments of similar properties to differ by as much as 5,000%.
Key Points
Market Value and Unequal Appraisal
BPP assessments can differ greatly, with items like furniture and computers ranging from $1 to $50 per square foot within the same building. The disparity in assessments opens opportunities to appeal based on market value or unequal appraisal.
Valuation Methods
There are three popular valuation methods for BPP:
1. Market Value: Defined by the Texas Property Tax Code, this reflects what a property would sell for under normal conditions.
2. Book Value: Derived from federal depreciation schedules, often indicating higher values than market conditions might suggest.
3. Comptroller's Schedule: May list items like hotel furnishings at 90% of their purchase price after a year, which can be much higher than market value.
Inventory Assessment
Controversies include issues like damage or obsolescence, impacting market value. For example, post-Christmas returned merchandise might be worth less than the cost.
Unequal Appraisal
Assessments can vary widely even within the same industry. For instance, real estate offices might range from $10,000 to $500,000 for their BPP. This disparity is often due to the appraisal districts’ methodologies, relying heavily on property owners' renderings and fixed asset listings.
Appealing Unequal Appraisal
Contrary to common belief, BPP can be appealed on the basis of unequal appraisal. This approach, though relatively new, is underused by many property owners. Here’s how to prepare:
1. Gather Data: Obtain information on competitors’ assessed values and office space.
2. Compile Comparables: Use companies with the same Standard Industrial Code (SIC) for comparison.
3. File an Appeal: Researching comparable assessments can form the basis of your appeal.
When to Appeal
Appeals should be filed annually, focusing on market value and unequal appraisal. By researching and evaluating both options, you can decide on the best approach. If neither provides a strong basis, you can choose not to proceed with the hearing.
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In summary, understanding the nuances of BPP valuation can lead to significant property tax savings. Whether focusing on market value, book value, or the Comptroller's schedule, being well-prepared and informed can enhance the success of your appeals.
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