Commercial Property Services Blog

For some owners who do not recognize American history in the property taxation process … the origins of this country really began in an active way about ten years before The American Revolution. King George of England wanted to tax colonists to pay for his wars and for other purposes which had no relationship or benefit to their businesses or their lives.

Having no effective recourse, colonists began to rebel. History records the British Stamp Act Rebellion, the Boston Tea Party, and other skirmishes. NOTE – after this new country was formed, the colonists never said “no taxation”. They said “fair taxation”.

How “fair taxation” was to be implemented is woven throughout the Constitution, the Bill of Rights, federal statutes, and United States Supreme Court decisions. One critical statute is the Tax Injunction Act which requires individual taxing authorities in state government(s) to provide a “meaningful” and “adequate” remedy for every tax levied.

SO, every state has some remedy for property taxes. While the states differ on what assets to tax, by whom, in what combinations if any, when, and how much, some consistent basics do exist.

The first basic is that effective tax rates should be uniformly applied to each substantially similar property subject to taxation. Equal protection may be rooted in the Founders’ keen awareness that the king, formerly, or now state or local government could arbitrarily pick on someone who would otherwise not be protected against retaliation or confiscation.

Another of the basics is that government typically provides the asset value, which can be challenged, because owners of property seldom have access to all of the data used to determine uniformity of asset values. That is another reason to need a remedy because without a system for challenging the asset value, effective taxes might not be constitutional – another word for fair.

Each state has a very different process and timetables. Florida re-assesses every year. And, the governing laws of assessment are found in Chapters 192 through 220, Florida Statutes. While the methods used for real property and tangible personal property (furniture, fixtures, and equipment) in a business are conventional appraisal techniques, the data to be used, and how, is materially different in some key respects.

Another distinction is the appraisal theory intended to be used in Florida for property taxation. There are two fundamental appraisal theories, The intended theory for Florida assessments is “value in exchange”. The corresponding assumption is that an arm’s length transaction  occurred, or would be applicable, to know what market value would be for the asset. Note – even “arm’s length transaction” is defined, and is more detailed than understood in conventional law or appraisal or accounting.

Individual or actual purchase prices, income, expenses, and costs are not consistent with the underlying appraisal principles used in value in exchange. Therefore, the data should be market. And, market means selected from the prior calendar year. If the tax year is, say, 2020, generally the data would be dated in 2019.

The other basic appraisal theory, called value in use, is NOT consistent with Florida standards of assessment, although commonly used in appraisals unrelated to taxation. Yet, sometimes local officials and even owners try to apply this inappropriate theory which is intended to include every kind of asset and business values. The result can be higher taxation, or unfair taxation, or unlawful taxation.

In fact, a recent trial court decision, in favor of Walt Disney Parks and Resorts U.S., Inc. against the Orange County (Orlando) Property Appraiser stresses the specific asset definitions in Chapter 192 and the need for compliance with those statutory meanings.

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