Why Are Banks Paying Too Much in Property Taxes?
Most companies are paying too much in property taxes. Here are 5 key reasons banks are susceptible to the pitfalls that inflate tax bills:
Most CPAs Focus on Income Tax
When it comes to business taxes, very few CPAs have much experience or expertise with property taxes. The accounting industry, similar to the medical field, has seen a push toward specialization. Thus, dealing with the myriad of details required for the IRS and state income tax, a lot of time and meticulous attention to detail is given to income taxes over local property taxes. That leads many of the CPAs who represent banks to simply overlook or assume particular rules which lead to overpaying property taxes.
Asset Tagging and Ghost Assets
For personal property tax calculation, effective asset tagging is difficult for any company. Banks have many assets to count, often in multiple facilities, providing the opportunity for the same items to make the list multiple times. Ghost assets are those items for which you are paying taxes though they are no longer in your possession or in use, and they often haunt the ledgers of financial institutions. Miscounting business personal property can lead to excessive property tax payments.
Mass Appraisal Techniques
Counties perform property valuation at least every eight years, though some counties do it more frequently. Wake County in North Carolina, for example, has historically performed property valuations every four years. Counties employ mass appraisal techniques to determine real estate property value, rather than relying on individual appraisers to visit commercial property. They utilize software to see and evaluate each building on your campus based on a number of factors, including:
- Number of structures
- Size of the parcel
- Each building’s purpose(s)
- External additions
- Quality of construction materials
Wake County went through a round of valuations in 2020. The News and Observer reported, "On average, homes in Wake County increased 20% in value from four years ago, and commercial properties increased 33%." This has led many banks to wonder rightly if their property was appraised fairly. We worked with a bank whose three-story building was classified as retail banking space; however, in truth, only their first floor was used for retail. Mass appraisal leaves room for these errors that can cost your financial institution a lot of money.
Like the story above, there are many opportunities for mis-categorizations that can lead to double taxation for banks. Vault doors are something we see often taxed as both personal property and real estate property, as they are considered personal property by some counties and are included with the real estate assessment in others. Many third-party audit firms hired by counties to perform audits of personal property listings use this little known rule to collect additional taxes as the IRS does not recommend setting up Vault doors as personal property for income tax purposes.
Banks often have multiple branches across many counties and states. That means seemingly small details like a single ghost asset or double-taxed vault door may be compounded exponentially. Uncovering all of those seemingly hidden ways in which your bank is paying too much in property taxes is challenging.
How We Help Banks Reduce Property Tax Bills
Consulting a CPA with property tax expertise is the best method for ensuring you are not giving too much away when you pay your tax bill. Even with a single branch, keeping up with inventory and assets and ensuring accurate property valuations is a full-time job. Across multiple locations, it can be an overlooked burden. Specializing in property taxes allows us to help financial institutions property categorize, count, and calculate what they own, often reducing their tax burdens substantially. We provide free assessments that help determine:
- Whether your real estate property has been corrected valued
- Whether you could potentially see saving by appealing your valuation
- Whether your assets have been correctly tagged
- Whether you have ghost assets haunting your books
- Whether you have the potential for significant savings
We excel at finding tax savings opportunities for our clients. We offer our assessments at no cost to you, so you can explore the potential to lower your property taxes with no risks. Contact Lyall CPA for more information about how your bank or business can reduce overhead by lowering your property tax bill.