The assessed value of your commercial real estate may be inflated, even arbitrary, having little to do with its production of revenue. A critic of this administrative/governmental reality, I am a proponent of a current income approach to property evaluation. Therefore, a challenge to the assessed value of your commercial real estate may be a most advantageous project to undertake. Certainly, a property tax protest is in your financial interest as a real estate owner. Also, no matter the type of commercial real estate owned, challenging property tax is not only prudent, but your legal right.
Oklahoma state law authorizes and states the purposes for the levy of an ad valorem or property tax. Public schools, government administration, public roads, parks, libraries, police, public safety and municipal operations are the usual benefactors. Also, each county differs in regard to administrative policies and procedures affecting property valuation and tax collection. In fact, property tax is probably the oldest tax in the United States. The value of commercial property for tax purposes should reflect recent financial performance. Arbitrary property evaluations are inaccurate and unjustifiable. A property tax consultant should base its property tax protest upon year-end financial information, considering some other factors as well.
Nothing can be done about the tax statement received late last year. If a protest is successful, you will realize the benefit later this year. First, the consultant determines if a protest is feasible for both parties. Upon receipt of period-ending financials, a tax consultant begins planning a presentation. It will consist of a summary of property financial performance and a review of recent comparable sales. The consultant calculates a value using recent net operating income, comparable rates of capitalization and other guidelines established by the assessor. If the assessor denies the protest, the consultant appeals to a higher authority, usually a board of equalization. Litigation is the more expensive and final approach to a lower assessed value.
I anticipate that year-end 2020 financials for most commercial property owners will reflect a material downturn in revenue. As a result, tax statements received in 2021 could possibly show a reduction in assessed value; thus, lower tax due if the protest is successful. As an example only, in Oklahoma County today, a lowering of $300,000 in assessed value may reduce property tax $3990; and, a reduction of $1,000,000 may lower taxes $13,300. Do remember, in Oklahoma there is a 5% CAP on increasing the assessed value in any one year. With this in mind, I suggest that property owners in Oklahoma contact a company like First Marc Commercial Group(405/495-7391) in Oklahoma City soon. First Marc staff will explain the process, required information and explain the contingent fee payable only if the protest is successful.