If you’re wondering about the difference between secured vs. unsecured property taxes, I’d wager a guess you live in California. Why? Because it’s the only state in the union that uses this terminology in reference to this common ad valorem tax. Everywhere else, “secured property tax” is simply called real estate tax (real estate is attached to or secured by land); and “unsecured property tax” is called personal property tax (movable property not permanently affixed to a particular location).
But there’s more to know about unsecured property tax than that. In this article, we’ll answer some key questions associated with the subject for companies that operate in California. And if your business is struggling to meet deadlines and handle appeals, keep reading to find out how technology can help manage your unsecured property taxes.
5 Common Questions About Unsecured Property Tax (& Tax Bills) Answered
1. What is unsecured property tax?
Unsecured property tax is an ad-valorem (value-based) property tax on movable property that is not attached to a permanent location. (Tweet this!) In contrast, “secured” property tax refers to real property that includes land and the structures attached directly to it, such as a home or building.
In using the terms secured versus unsecured property taxes, the state of California is referencing the fact that property tax is essentially a lien on the property. Immovable or real property serves as sufficient collateral to back the lien, making real property a “secured” debt. Personal property is movable, and may not be capable of being sold to pay the required tax; it also may not be owned by the same person who owns the real property it is located on. Therefore personal property tax is referred to as “unsecured.” Unsecured property tax includes items such as furniture, machinery, and computer equipment, as well as mobile homes, floating homes or vessels, aircraft, and more. Items that are tax exempt are business inventory, application software (like Microsoft Excel and QuickBooks, for example), and licensed vehicles.
2. How are unsecured property tax bills determined?
Any business that has personal property with a combined cost totaling $100,000 or more as of January 1 is required to file a business property statement (property tax return). This document provides local tax authorities with up-to-date information about a business’ personal property and valuation amounts. (Despite the $100,000 threshold, we recommend that, to be safe, all businesses file a property tax return regardless of the amount.) Assessors use this information to arrive at a valuation total.The tax amount owed is calculated by multiplying each jurisdiction’s tax rate by the valuation set by the assessor, then summing them to get the total tax due. Business property statements are due no later than April 1 annually. (For more important California due dates, see this article.)
3. Can we challenge the amount of our company’s unsecured property tax bill?
Yes! If you feel the value on your property is too high, it is your right to file an appeal to the county Assessment Appeals Board. Filings of this nature are formal and must be in writing. The normal window for filing an assessment appeal is July 1 to November 30 of the current fiscal year. Once the appeal is received, the Board may schedule a series of hearings to allow you to present data and evidence to support your argument of the value. (Not sure if it’s worth an appeal? Here’s some advice about how to decide.)
In the event your appeal is initiated but not yet complete by the bill due date, you must still pay the taxes due. If your appeal is successful, you’ll be issued a tax refund for the difference in tax amount based on the liability reduction.
4. Can the tax bill be paid in installments?
Secured taxes are given a two-installment payment option (12/10 and 4/10); unsecured taxes (business personal property) must be paid in full in a single installment (8/31). In just about every California county, if payment is not received by the due date(s), collectors may add a 10% penalty in addition to the tax amount due.
Note that California may also send supplemental bills apart from the standard tax bills. Supplemental bills are sent in response to a change in ownership, new construction, or a completed property tax audit and can be sent at varying points throughout the year; these bills tend to lag well behind the filings they are associated with, sometimes even arriving years after the related filing!
5. What happens if we’re unable to pay the tax bill?
In addition to the taxes owed, you will incur additional penalties and fees if your bill is paid after the due date. You can expect to receive a delinquency notice stating the status of your bill and any impending actions that may be taken to collect payment; it may result in a tax lien on your real and personal property.
The Unsecured Property Tax Cycle: Where Technology Helps
Whether you’re a small or large business in any state, managing unsecured property tax—including meeting multiple deadlines and filing the necessary appeals—can be a challenge. That’s why an increasing number of organizations are turning to technology for help. Not only is tax software incredibly useful for tracking and organizing what often turns out to be huge quantities of information, it also speeds up the tax process and frees up valuable time.
Unsecured property tax in every state revolves around an organization’s moveable assets and the depreciation of those assets. One of the main differences between secured vs. unsecured property tax is that the personal property tax cycle, as noted above, requires you to file a return estimating the value of your assets, while the real estate tax cycle does not. (For real estate, you simply receive a notice of your property’s assessed value, which kicks off the tax cycle.) This single difference—the valuation of assets—adds a layer of complexity to unsecured taxes that makes software a worthwhile investment.
Preparing and filing returns makes up the largest portion of the tax cycle. (For companies with thousands of accounts, it can be a nightmare to get business property statements out the door.) Your asset information is the basis of this stage. You’ll need to determine the correct depreciation for all your assets, or the overall value of your personal property will be incorrect.
If you’re tackling the filing stage without software, that means you’re doing the work of depreciating your assets elsewhere, perhaps in an Excel spreadsheet. That requires your team to contact assessors to get the appropriate depreciation schedules and then apply them to your assets manually, altering the numbers as needed to get an accurate valuation. Once those values are determined, you or another team member must enter them into return forms by hand.
Tax software reduces the time your team spends on filing. With all depreciation schedules built right into the system, values can be calculated and recalculated in a fraction of the time, making it easy for you to see what one depreciation collection looks like applied to your assets vs. another. And once your numbers are final, the software automatically transfers values onto the right tax return forms. It’s fast and accurate—more accurate than human data entry—and dramatically changes the way you calculate values and prepare and file returns.
Forget about spreadsheets—get a closer look at the advanced application that securely stores all your property data and documents, and reduces your returns filing time.
Assessments and Appeals
Tracking incoming assessments and protest deadlines is an important step in ensuring you’re being taxed fairly. If you don’t have enough time to prepare for a protest, you could miss out on significant savings.
Every assessment notice has valuable information that will be recorded in your books, including the assessor’s estimates of market, assessed, and taxable values. Without technology, you’ll have to compare your filing to the assessor’s numbers and do the recording manually. And if you want to appeal, you’ll have to assemble the supporting documents and track your appeal using spreadsheets or notes.
Again, tax software streamlines assessment tracking and protesting. The values you filed are kept in the system, making it easy to compare them to the assessor’s values and determine if you need to appeal. And if you do decide to protest, you can assemble the necessary documents quickly and efficiently, as well as track hearing notices and appeal responses.
Tracking and paying unsecured property tax bills constitutes another significant portion of the tax cycle. If your organization has multiple properties, you’re likely dealing with numerous tax bills in different jurisdictions. Tracking that the bills arrive, ensuring they’re correct, requesting checks, staying on top of installment payments, and meeting all due dates are essential activities in this stage. Without technology, it’s a major challenge (and incredibly time consuming) to keep up with it all. And a single missed deadline or incorrect payment amount also puts you at risk for incurring costly penalties.
Tax software allows you to track incoming tax bills, due dates, and receipt of payments so nothing falls through the cracks. Your tax bills can be clearly marked in the system as missing or received; you can also run reports on missing bills. And some software (like TotalPropertyTax) even links directly to an accounts payable solution, which automatically takes care of check requests and bill paying. Once your bills are paid, they can then be linked to all the relevant supporting documents stored in the system for future reference.
See how advanced property tax software helps manage your unsecured property tax
TotalPropertyTax is sophisticated property tax software that automates much of the manual, repetitive work associated with the tax cycle. Tax teams that take advantage of this technology have more time for higher-value tasks, like crafting appeals that save their organizations money. Why not book a demo to see our software in action? In addition to a customized tour of our software, we’ll discuss your team’s unique needs for property tax software and see how we can help. Take the first step toward simplifying your tax management process, and book a demo today.