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Property Tax Advisory: Strategies For Better Consulting

Posted by Carl Hoemke on May 19, 2020 8:00:00 AM

Property Tax Advisory: Strategies For Better Consulting

No matter what you were hired specifically to do, as a property tax consultant, your ultimate goal is always the same as that of your clients: to ensure they pay only their fair share of taxes. But some property tax consulting firms deliver more value than others, not because of the type of work they do (advisory, valuation, or compliance) but because they approach the consulting process more strategically, which often translates into better (and more) work.

Below are a few ideas on how to improve your property tax advisory practice; you can get even more mileage from them by combining them with the right technology tools.

3 Ways To Increase The Value Of Your Property Tax Advisory Services

1. Use research and creativity to uncover over-assessments in business personal property.

When you file a business personal property return, assets are mapped to certain categories. Take, for example, desks vs. computers. An assessor may place desks in a different category than computers, perhaps depreciating the desk over 10-15 years and the computer over 4-5 years. Assets on a shorter depreciation schedule lose their value faster, lowering your overall assessed value. The more assets belonging in categories with shorter depreciation schedules, the more over-assessments will be identified, resulting in your client overpaying taxes.

Mapping assets to categories properly requires research. Just because an asset isn’t labeled a “computer” doesn’t mean it can’t have a similar depreciation rate and be mapped to the same shorter-lived depreciation schedule. So gather knowledge about your client’s fixed assets to make sure they’re placed in the most logical categories. If not, talk to the client about how taking the time to reclassify them correctly will help them reduce their over-assessments.

See how TotalPropertyTax software helps you spend more time strategizing and less time on compliance work.

To make the most of this strategy:

Because of the emphasis on meeting deadlines, many organizations—and consultants—perform the same work the same way, year after year, without any changes, in an effort to get things done. As a result they over-report asset values because they simply don’t have time to take a fresh look at the data each year and reevaluate. You can gain the time needed to do this thorough review by using advanced property tax software to handle lower-level tasks like gathering and managing property tax data. (Check out how one user was able to reduce the time spent on these activities to the point where 70% fewer staff members were needed for compliance.) To learn more about how simplifying your processes and devoting time to more strategic work can impact your practice, visit our property tax blog.

2. Employ a variety of valuation strategies to ensure accurate property values.

Property value consultants should look beyond the standard valuation strategies for opportunities to reduce asset values. (Tweet this!) For example:

  • Ensure that functional obsolescence has been accounted for. In most cases, assessors account only for the life of an asset (it should last 4-5 years)—not for functionality. That means the value they assign to that asset may not be accurate. Become knowledgeable about the marketplace surrounding those types of assets and about the underlying technology you’re valuing. If your client has many assets susceptible to functional obsolescence and you believe the assessor is not properly accounting for it, there’s another reason for an unreasonable assessed value that could, in some cases, result in significant over-assessment of taxes.
  • Adjust for varying depreciation models. Often, when assessors assign an asset to a category and apply the depreciation table they are simply following a process, and may not always know the true basis of the depreciation rate being selected. Many times, depreciation tables used by assessors are too general for use with more complex assets, therefore alternative tables (such as technology forecasting curves published by Technology Futures Inc., for example) or other adjustments should be made to improve the fair market value estimate. Alternative methods tend to be more accurate because depreciation rates typically do not follow straight lines or constant percentage declines. Knowing how your clients’ assets depreciate over time could help you convince an assessor that those assets should be depreciated differently.
  • Ensure that economic obsolescence is accounted for. Like prices, asset values are also subject to normal supply and demand implications. However, oftentimes, assets are lumped together without any consideration of their market conditions, which could mean they’re being overvalued or undervalued. To enhance your property tax advisory work effectiveness, you need to become a specialist in those asset values. There’s no definitive source for finding out the economic implications around your clients’ assets, so do your research, search the internet for the prices of comparable assets, investigate auction prices, and talk to people in the market for the assets you are valuing. If you uncover some discrepancies to what the assessor uses for depreciation rates, talk to the client about these potential over-assessments and suggest further investigation.

To make the most of this strategy:

If your clients include large corporations, you likely face some data-related challenges. These companies have numerous assets and tons of asset-related data that need to be scrutinized in order to employ the strategies named above. An advanced property tax software makes it easy to organize all that data into a reportable format, so you can begin to understand it and formulate a corporate property tax strategy around it. Some tools also give you the ability to do scenario analysis and modeling, so you can determine what might happen by removing or adding assets, changing the depreciation life of an asset, etc. As an outsider, you need every advantage available to help you understand the corporation’s data as well as your client does, so you can prove your relationship is one worth keeping.

3. Clarify the goal of your property tax advisory services to improve the likelihood of success.

This one might sound obvious, but property tax consulting services are wide-ranging, and the reasons behind your hiring might not always be made clear to you at the start. Having that understanding will help you best serve your clients; it may give you insight as to how you can serve them better. For example:

  • Are they struggling to complete compliance tasks and meet deadlines? Perhaps there are additional tasks you can take off their hands beyond those they initially contracted for.
  • Do they have a lack of industry-specific knowledge? Your big-picture overview with regard to industry happenings and legislation could be useful in asset valuation.
  • Are they filing taxes in a jurisdiction for the first time? If you have connections, experience, and a good reputation in a taxing jurisdiction, your relationship-building skills (in addition to your property tax services) could be invaluable for companies new to the area.

Make The Most Of These Strategies With Advanced Property Tax Software

If you’re struggling to problem-solve and strategize in the face of massive amounts of data, tax regulations, and deadlines, you’ll benefit from adopting property tax software.

CrowdReason software provides the support your business needs to increase the value of your property tax advisory services. It allows you to:

Automate the manual, repetitive tasks associated with your daily work, giving you more time to focus on property tax consulting activities that are most valuable to your clients. MetaTaskerPT helps you manage high volumes of tax documents by extracting their strategic content quickly and accurately. TotalPropertyTax (TPT) helps reduce the time spent gathering jurisdictional information, managing asset data, and completing your returns. You can even create appeal packages and pay bills within TPT, speeding up the entire compliance process.

Better understand and analyze your clients’ data. TPT gives you greater control over data, helping you gain a full picture of your clients’ tax activity. It includes an integrated budgeting tool that captures historical tax information and tax rates, and assists with measuring changes in asset values for forecasting purposes. You can also easily create custom reports for your unique data analytic requirements, allowing you to identify emerging trends and make more accurate predictions for upcoming tax cycles than you could with a spreadsheet.

Interested in taking a look? Request a demo of our software to see how it works; or contact us to learn more.

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Topics: Property tax advisory