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Avoid Overpaying Nursing Home Property Taxes

July 1, 2005
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Dealing with this common cause of unnecessary overhead by William B. Ardern II
BY WILLIAM B. ARDERN II Avoid overpaying nursing home property taxes
A primer on the pitfalls leading to unnecessary overhead
Annual property taxes for nursing homes can represent a significant overhead expense. Many nursing home administrators, operators, and owners are unaware that property taxes are an annual operating cost that can be reduced.

Assessment Authorities
There are 51 different sets of property tax assessment laws in the United States-one for each state and the District of Columbia. Within individual states are regional assessors, county, district, city, village, town, and other local municipalities. Because of the numerous property tax assessment authorities, and their interpretations of the state property tax assessment statutory laws, it is important to know as much as possible about the assessment jurisdiction where your company pays annual property taxes.

Personal Property Assessments
The majority of states that assess personal property require annual personal property return forms to be completed and filed on a timely basis. Each state has a statute, or statutes, that define "taxable personal property." Also, in addition to court decisions, many jurisdictions publish guidelines that interpret "personal" versus "real" property. Whether personal property return forms are prepared by an outside accountant or service bureau, steps can be taken to reduce annual personal property tax assessments.

Most companies "roll over" their personal property self-reporting form schedules every year by relying on the previous year's self-reporting form and updating it with asset disposals and current-year asset additions. Overassessments can easily be submerged on the self-reporting form schedules, unless an itemized review of personal property is completed. The benefit of an itemized review includes verifying that the asset is still on the premises and in use. Make sure taxes are not being paid on items that are no longer on-site.

Many companies are not aware of the full scope of certain statutory personal property assessment exemptions. Personal property overassessments can occur because statutory exemptions are not being maximized. Make sure your facility is maximizing the use of all available personal property assessment exemptions.

Another way personal property tax overhead can be reduced is to eliminate any overassessments that exist because of double assessments. Certain real estate improvements can also be assessed as personal property. Make sure that no double assessments exist between the personal property and real estate tax assessments.

Some taxing authorities establish annual personal property assessments with their own estimates if no personal property return form is filed with them. These are sometimes identified as "doomage assessments," and they can increase over time. If a doomage assessment exists for your organization's personal property, prepare a proper personal property return form and file it on a timely basis with the assessor. It may be possible to reduce the current year's personal property assessment with the filing and, if not, positive results can occur for the next assessment year.

Real Estate Assessments
It is extremely difficult to analyze and evaluate real estate assessments unless you know both the factual basis and valuation methodology being employed to establish the annual assessed valuations. Assuming some type of record exists within the assessor's office, personal contact should be made or a local tax specialist should be retained for assistance in obtaining written copies of all documentation contained in the assessment authorities' records concerning your real estate. Personal contact provides the opportunity to introduce your company to the local assessor and establish favorable communications. Retaining a local property tax specialist offers the advantage of using a local firm or individuals familiar with the assessment authorities' records, and helps ensure that all records are provided in a timely manner. This also serves as a convenient resource for completing a preliminary review of the records.

Correcting factual errors in the assessment records that have resulted in an over-assessment can be one method of reducing a real estate assessment. Facilities should cross-check all factual data contained in the assessment records and provide the assessor with correct information immediately if errors are identified. A local property tax specialist can complete this task with the assistance of corporate personnel.

If the assessment authority does not have a current diagram, drawing, or sketch of the building or site layout, provide one. Personnel within local assessors' offices appreciate taxpayers that maintain good communications with their offices and provide them with information that can help them do their jobs more effectively and efficiently. Valuation
Each state has adopted its own statutory definition of "value" for purposes of estimating annual real estate tax assessments. It is vital to determine the specific value standard for each jurisdiction where your corporation owns or leases real estate. In addition to knowing the applicable definition of value, it can be useful to be aware of key administrative and judicial interpretations of the standard.