Tax appeal seminar

Presented by:Jeffrey M. Gradone, Esq.

Understanding the Residential Tax Appeal Process

How Assessments are Set

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.

Revaluation Basics

Data Collected During Inspection

• Building measurements

• Number of bedrooms, bathrooms, finished basements, porches, etc.

• Type, quality and age of construction

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.

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.

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.

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.

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.

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

To Appeal or Not to Appeal

Tax Appeal Basics

Market Valuex Ratio

Assessmentx Tax Rate

Property Taxes

Challenge this

Don’t directly challenge this

Cannot challenge this

Should I File?

• Assessed value ≠ Market value

• Convert assessment using “average ratio”

Assessment ÷ Ratio = Assessed fmv

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

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

Should I File?

Other Considerations

• Chapter 123− 15% statutory “leeway” for the assessor

• Increased assessments− 15% protection for taxpayer

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

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

The Appeal Process

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

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

Other Concerns

• Spot Assessment– Reassessment upon sale– Assessment maintenance

• “Reverse” Appeals– Seek to increase assessments!– Increasingly more common!– Taxing districts and occasional 3rd parties