Every industry has been affected by the pandemic and the measures taken to reduce its spread by Americans staying at home. The travel industry, however, has been especially hard hit. Months of canceled reservations and reduced operations have left hotels and hotel chains well below their anticipated revenue. Even as some semblance of travel returns, for most it will not be enough to avoid significant repercussions. Now owners and executives are scrambling to find ways to reduce overhead and recover something of what they have lost.
This is definitely not a season to shell out more in taxes than you should owe, but unfortunately, hotels across the nation are often paying too much in property taxes. Property tax law is often misunderstood, and few CPAs have expertise in it. At Lyall CPA, we help hotels and hotel chains find significant savings with their personal property and real estate taxes. Here are some keep tips:
TIPS FOR REDUCING YOUR PROPERTY TAX BURDEN DURING A PANDEMIC
1) Finding Ghost Assets
When it comes to personal property taxes, it can feel like a full-time job to ensure every item is properly tagged in its appropriate category, accounting for depreciation and ensuring you pay your county or municipality all they are owed. Hotels collect many of those assets, so it is especially important to make sure you do not miss any. Unfortunately, when hotels update furniture, computers, software, etc., or these assets “fully depreciate” according to IRS/State tax rules, they are sometimes left on the books, haunting CPAs and hotel owners for years. These ghost assets may be items such as:
- Computer hardware and software no longer in use
- Hotel furniture such as beds, chairs, desks, refrigerators, etc.
- Office chairs and furniture
- Copiers and fax machines
- Telephone systems and company cell phones
- Kitchen appliances
- Check-in and check out systems and key card machines
- Brand Required Signage
Hotel chains are especially susceptible as these ghost assets are multiplied across numerous locations.
2) Challenging Mass Appraisal Techniques
Counties typically perform property revaluations every four to eight years. Utilizing mass appraisal techniques, your hotel property or properties are assigned value based on a multitude of factors. However, without stepping foot on your campus, we find hotels can be appraised incorrectly and unfairly. Yet, owners may not be aware of how to go about challenging these valuations. Sharon H. Lyall CPA has helped many hotels walk through the appeals process and find important savings that can make a huge difference in the bottom line.
3) Mergers and Franchises
When individual hotels or small chains merge with larger companies, we find that there are often changes that lead to increased property tax bills. Franchises often end up with a lot of assets on their books with a purchase price allocation or that have been merged with other similar assets. These merged assets are often now at a larger cost and a “newer” age and are then incorrectly listed with the counties and allowed to multiply tax increases across dozens and even hundreds of new locations.
4) Ask for Help
Before this difficult time, it may have seemed like more effort than it was worth to try to find property tax savings. It has never been more important to save. You need to make sure you have a team with years of property tax experience in your corner.
Very few accountants are well-versed in understanding property taxes. This results in your hotel's bottom line suffering immensely by paying more than you owe to your county and municipality. These issues are compounded across each hotel you own in every location. However, Sharon Lyall CPA can help. We provide free property tax reviews to help you see your potential savings before you pay us anything. Once you have become our client, you can count on us to be in your corner if you are ever audited and whenever you need us. There is no risk for your free evaluation, but you stand to gain the savings that can help your hotel business thrive even during this difficult season. If you are ready to learn more, please contact Sharon Lyall CPA.