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Tax
Abatement B.C. Underwood LLC has provided tax abatement services to both
property owners and municipalities as an appraiser, counselor, and expert
witness. The firm has a unique perspective since it has been retained by both
municipalities and property owners. THE
NEW HAMPSHIRE TAX ABATEMENT PROCESS Like most states in the United States, New Hampshire’s tax
abatement process puts the burden of proof upon the applicant. In most cases
this requires an appraisal report which then becomes the basis for the tax
abatement appeal. The tax abatement process can be cumbersome and confusing.
As a result, many property owners are reluctant to file a tax abatement
application. Is there a
tax abatement case? There are several easy steps the property owner can take to
determine whether or not the property is overassessed. First, the
municipality maintains a tax assessment card. A copy of the tax assessment
card can be obtained from the assessor’s office and in some cases, are
available online via the municipality’s website. (Note: The information
contained online is sometimes not as detailed as the actual property record
card available at the assessor’s office.) This card contains both land and
building data for the property. Review the card carefully and make sure that
the facts stated on the card regarding the land and building sizes are correct
as well as other building features that are listed on the card. Since most municipalities in New Hampshire do not reassess
property each year, the New Hampshire Department of Revenue Administration
establishes an equalization ratio for every municipality. In order to
calculate what the municipality states the property is worth in a given tax
year, divide the total assessed value by the equalization ratio. For example, if the tax assessment card indicates an assessed
value of $500,000 and the current equalization ratio is 92% then the
equalized assessed value of the property calculates to $543,478 ($500,000 ÷
0.92). The $543,478 amount is what should be used as a basis for determining
whether or not the property is overassessed. In New Hampshire, there are three reasons to file a tax
abatement. They are: 1. Physical data on the tax assessment card is incorrect. This is the easiest and least controversial of the three reasons
for a tax abatement. Information on the card that is factually incorrect can
usually only be corrected by filing a timely tax abatement application. 2. Market data for the property shows that the property is
overassessed based on the equalized assessed value of the property as
of April 1. This is the most common reason for filing a tax abatement
application. Generally, market data (properties that have sold) are compared
to the subject property to determine whether the property is overassessed.
This is most commonly done in an appraisal report prepared for tax abatement
purposes. It is important to note that the appraisal must be prepared as of
April 1st of the tax year appealed and prepared for tax abatement
purposes. Appraisal reports prepared for other purposes (i.e. estate
planning, lending, etc.) with other dates of valuation may not be given the
same weight in negotiation with the town and/or court. In some cases, these
reports may be summarily rejected. 3. Disproportionately assessed when compared to other properties
within the municipality. Proving disproportionality is the most difficult of the three
reasons for a tax abatement. Disproportionality is typically argued in
conjunction with the market data for the property. Assessment v.
Appraisal: What’s the Difference? Municipalities throughout the United States use mass appraisal
techniques. Generally speaking, cost and sale data are collected and
analyzed. In most cases, market data is collected within the municipality
only. Rates are then established for various property types and adjustments
are made for specific property characteristics. Mass appraisal techniques are
utilized to assess thousands of parcels in a municipality. In most cases, the
end result of the assessment using mass appraisal techniques should be similar
to the result of an appraisal. However, in the case of unique properties,
dynamic real estate markets, and other unique conditions, mass appraisal
techniques may fall short. The appraisal process differs significantly from the assessment
process. Rather than collect data and apply it to a large sample of
properties in a municipality, the appraisal focuses on one specific property.
Cost, sale, and income (if applicable) data are utilized in developing the
three approaches to value: cost, sales comparison, and income capitalization.
In an appraisal, market data may also be analyzed outside the municipality.
The three approaches are developed and then reconciled into a final value
conclusion for the subject property. Most assessments rely heavily upon the cost approach to value
the improvements and market data to establish the underlying land value. In
some cases, this works. However, in commercial and special use property
applications, this methodology sometimes is inadequate. In many ways, the appraisal report is no different than one that
may be used for bank financing. However, there are several significant
differences required for an appraisal report prepared for tax abatement
proceedings. First and foremost, the date of valuation is as of April 1st
of the tax year being appealed. For example, if the tax abatement application
is being filed this year before the deadline of March 1, 2010, the date of
valuation for the appraisal report is April 1, 2009. This date represents the
date of valuation for all property in the state to be assessed. There is a
case. Now what? Determining whether or not there is a tax abatement case is
sometimes difficult. In those instances, most property owners rely on the
assistance of a real estate professional to assist them in determining
the market value of the property. In the case of most residential properties,
the cost and sales comparison approaches to value are the most applicable.
However, in the case of commercial and industrial properties, the income
capitalization approach may also be applicable. Regardless of the property
type, an appraisal prepared for tax abatement purposes will be the basis for
the tax abatement appeal. Remember that the burden of proof is upon the
property owner. Simply stating in the abatement application that the property
is overassessed is not sufficient. Once the tax abatement application and appraisal report has been
filed with the municipality, the process becomes more or less a waiting game.
As stated previously, the filing deadline for the tax abatement application
is March 1st. The municipality then has until July 1st
to respond to the tax abatement application. The municipality can respond in
one of four ways: 1.
no response at all; 2.
an offer of something less than has been requested; 3.
a formal rejection of the appeal; or 4.
acceptance of the appeal. If the applicant is denied or the offer is unacceptable, the
applicant then has until September 1st to file an appeal one of
two places: 1.
New Hampshire Board of Tax and Land Appeals
(BTLA); or 2.
Superior Court. The less expensive and more informal route is by filing with the
BTLA.
Many residential property owners choose this option due to the lower costs and
the ease of self representation. This option does not necessarily require an
attorney. By filing with the Superior Court, legal counsel is usually present
for both the applicant and the municipality in this more formal setting. There are pros and cons to each option. From experience,
particularly when there is a substantial potential tax savings the firm
recommends filing at the Superior Court. It costs the town more money to have
legal counsel present and it may also require them to pay an appraiser to estimate
the market value of the property. The court route also demonstrates to the
municipality that the applicant is committed to having this issue resolved.
If the BTLA
route is chosen, the municipality may utilize their assessor to represent
them rather than their legal counsel. If applicants can recover their costs in two years or less, the
decision to proceed should be easy. When the payback period extends beyond
two years, the risk of the case should be carefully analyzed before
proceeding. Things to
Remember Filing a tax abatement application does not exempt the taxpayer
from paying the real estate tax bill. Any excess paid will be refunded plus
6% interest. Tax abatements are not retroactive; however, they do go forward
in time. If a tax abatement application is filed by March 1, 2010 and is
successful, the taxpayer will receive an abatement for the 2009-2010 tax
year. The revised assessment will carry forward in time until changes are
made to the property and/or the municipality conducts a revaluation. Mediation Both the New Hampshire Superior Court and the New Hampshire
Board of Tax & Land Appeals have adopted rules that requires parties to
mediate prior to going to a trial or a hearing respectively. It is
recommended that you pursue this option early in your tax abatement case.
B.C. Underwood LLC provides mediation services and has been successful in
resolving many tax abatement cases outside of the court house and hearing
room. Success
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