Tax Exemption Identification
States, counties, and cities have identified some assets as exempt from personal or real estate taxes. Often, those assets require specific requirements and identification to qualify for exemptions. The process to obtain these exemptions are often overlooked or entirely unknown by clients.
If your organization simply does not have the time or the know-how to take advantage of all available means to lower your tax bill, reach out to us today. At Sharon Lyall, CPA., we utilize our expertise and experience to ensure that our clients receive the tax exemptions for which they qualify.
What Are Exemptions?
For most organizations, it is worth the time and effort to identify and request all applicable exemptions. Depending on your tax bill, it could save you thousands of dollars every year.
Tax exemptions give you the right to exclude some or all of your property from taxation once you’ve met specific requirements.
Common Personal Property Exemptions
Before we dive into the types of exemptions, let’s go over which states don’t tax business personal property at all. While it’s not an exemption, per se, operating in one of these states could reduce your property tax liability.
These twelve states do not tax business personal property:
- North Dakota
- South Dakota
- New Jersey
- New York
- New Hampshire
While it may be tempting to move or open your business in one of these locations, there are additional factors to consider. In New York, only real property, like land and the structures attached to it, is subject to taxation. However, New York also has a highly complex tax code and some of the country’s highest real estate taxes. Our full post on business personal property taxes and which states are affected.
Pollution Control Exemptions
Federal, state, or local regulations require that businesses reduce or eliminate specific pollutants from their activities and processes. To offset the cost of implementing pollution control, state programs typically offer tax credits, property tax exemptions, and other incentives.
Qualification for these incentives is based on the type of industry or activity your business is involved in and varies by state.
Pollution control equipment includes various items used to reduce water contamination, vapors, odors, and other contaminants.
There are several systems and other items that may be considered pollution control equipment, such as:
- Air Filtration Systems
- Retaining Walls
- Double-Walled Tanks
- Low-Emission or Zero-Emission Vehicles
- Electric Vehicles
- Structures that support the use of electric vehicles (such as charging stations)
It is crucial to bear in mind that the definition of pollution control equipment varies state-to-state, as do the types and formats of incentives.
Types of Incentives Could Include:
- Corporate Income Tax Credits
- Property Tax Exemptions
- Cash Grants
- Sales & Use Tax Exemptions
Some states offer a combination of incentives for pollution control equipment, like Alabama. Some states, such as Pennsylvania, provide a sales and use tax exemption to purchase and operate some types of pollution control equipment by a manufacturing or mining company.
Qualifications, available incentives, and applications for pollution control exemptions can be difficult to decipher - especially if you have multiple locations across multiple states. At Sharon Lyall, CPA., we will ensure that you receive all of the pollution control exemptions for which you qualify.
As it relates to freeport exemptions, Sharon Lyall CPA typically files inventory-related freeport exemptions. Inventory usually refers to things that a company sells.
Businesses that may be eligible for freeport exemptions must be involved in the export of tangible goods.
“For instance, let’s say a company that is based in Texas sells chair rails and crown molding. Texas imposes a tax based on the valuation of that inventory. However, part of this company’s inventory is destined for another state. In a case such as this, we could apply for a freeport exemption for your business.” - Sharon Lyall
Additional qualifications, as well as available savings, will vary. However, freeport exemptions are typically based on the percentage of inventory shipped outside the state in the previous year.
Real Estate Property Tax Exemptions/Deferrals
Present Use Value Tax Deferral Program
These deferments apply to land currently being used as agricultural land, horticultural land, forestland, or historical property.
- Agricultural: Land is part of a farm actively engaged in the commercial growth or production of crops, plants, or animals.
- Horticultural: Land that is actively involved in the commercial growth or production of fruits, vegetables, or floral products (or other nursery products).
- Forestland: Land that is currently being used for the commercial growth or production of trees.
- Historical: Real property is a property designated as a historic structure or site by ordinance and approved by the Historical Property board and the Board of Commissions.
The deferral program powerfully discounts the land’s value - sometimes as much as 90%. The taxes will become due if the property loses its land-use classification.
- Senior Citizens: Some states and counties offer a property tax deferral/reduction program for senior citizens who fall into a certain age range and whose income is beneath a set ceiling. Applications must be submitted through the county’s tax office.
How Sharon Lyall, CPA. Can Help
Understanding the qualifications, applications, deadlines, and types of exemptions your organization qualifies for can be time-consuming. Though it is often worth the effort to ensure your business or organization is taking advantage of all available exemptions, it is best to bring in a professional.
At Sharon Lyall, CPA. we have the expertise to ensure that you are paying your fair share of taxes and nothing more.
Some common questions about tax exemptions.