tax appeal seminar
TRANSCRIPT
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Presented by:Jeffrey M. Gradone, Esq.
Understanding the Residential Tax Appeal Process
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How Assessments are Set
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Revaluation Basics
Site Inspection• Letters sent to property owners advising of
inspection.• If no one is home, exterior inspections made.• Follow-up appointments are scheduled.• If no one is home for the second visit, the
property owner is asked to schedule a time for inspection, otherwise the interior will be estimated.
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Revaluation Basics
Data Collected During Inspection
• Building measurements
• Number of bedrooms, bathrooms, finished basements, porches, etc.
• Type, quality and age of construction
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Revaluation Basics
Delineation of Neighborhoods
• The revaluation company, with the assistance of the municipal tax assessor, determines neighborhoods for purposes of valuation.
• Neighborhoods are delineated based on similarities.
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Revaluation Basics
Use of Comparable Sales
• Sales are analyzed to determine whether sale prices are indicative of fair market value.
• Sale properties are inspected using the same guidelines as inspections for all properties in the municipality.
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Revaluation Basics
Land Value Extraction
• Value of site improvements is determined through calculation of reproduction costs, minus depreciation.
• Value of site improvements is subtracted from sale price to determine land value.
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Revaluation Basics
Land Value Extraction
• Land value is time-adjusted for applicable valuation date.
• Land value is also adjusted for site specific characteristics (location, slope, etc.).
• Land formula is derived for each neighborhood.
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Revaluation Basics
Calculation of Assessment
• Land Value− Land formula is applied to subject property.
− Adjustments are made for size, location and other site specific attributes.
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Revaluation Basics
Calculation of Assessment
• Improvement Value− Reproduction cost is calculated based on building class and
improvement square footage.
− Effective age of the improvement is determined and corresponding depreciation is applied to reproduction cost.
• Total Value = Land Value + Improvement Value
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To Appeal or Not to Appeal
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Tax Appeal Basics
Market Valuex Ratio
Assessmentx Tax Rate
Property Taxes
Challenge this
Don’t directly challenge this
Cannot challenge this
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Should I File?
• Assessed value ≠ Market value
• Convert assessment using “average ratio”
Assessment ÷ Ratio = Assessed fmv
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East Orange, NJ
Assessed Value Ratio Market Value
2013 10,000,000
2014 10,000,000
2015 10,000,000
2016 10,000,000 91.95% 10,875,476
2017 10,000,000 91.56% 10,921,800
100%
86.77%%
89.90%
10,000,000
11,524,720
11,123,470
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Should I File?
• Example− Assessment = $2,000,000− Appraiser’s fmv estimate = $10,000,000− Good Case?
• City of Elizabeth’s ratio – 13.09% $2,000,000 AV ÷ .1309 = $15,278,839 AFMV
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Should I File?
Other Considerations
• Chapter 123− 15% statutory “leeway” for the assessor
• Increased assessments− 15% protection for taxpayer
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Should I File?
Ratio Lower Limit Upper Limit (For Increase) (For Reduction)
New Brunswick 38.84% 33.01% 44.67%
$500,000 $ 1,287,333 $1,514,693 $1,119,319
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Should I File?
Other Considerations
• Cost/Benefit Analysis− Example
• Madison – 1.840% tax rate
• 1.840% tax rate - $1,840 savings for $100,000 reduction
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The Appeal Process
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Where & When
• Total assessment $1,000,000 or less County Board of Taxation• Total assessment greater than $1,000,000 CBT or Tax Court
Unless Monmouth
County, then January 15,or 45 days
from mailing of assessment
Regular Annual Assessment April 1,
or 45 days from mailing of assessment
Unless a revaluation or reassessment
then May 1
Unless an added, omitted or roll-back assessment, then December 1,
WITH EXCEPTIONS!!!or 30 days from the mailing of assessment
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Other Concerns
• Standing− Owner− Other aggrieved “taxpayers” – tenants
• Payment of taxes− Appeal dismissed for non-payment− Two statutes with technical differences
• Direct appeals – “cure” opportunity at Board of Court• Appeal to Tax Court from Board – no “cure”
• Lack of Prosecution at the County Board− Cases – mostly for unexcused failure to appear− Small efforts typically deemed sufficient by Tax Court
• Chapter 91 Requests
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Other Concerns
• Spot Assessment– Reassessment upon sale– Assessment maintenance
• “Reverse” Appeals– Seek to increase assessments!– Increasingly more common!– Taxing districts and occasional 3rd parties