Avoid a BIG TRAP in Florida Property Tax Appeals

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Every state has different laws governing property taxes. One of the fundamentals is to know which one of two principles applies for all that follows should be consistent with the correct fundamental.

Florida is a value in exchange state. That means the application of data should be derived from market activity.

The other principle, value in use is wrong for Florida assessment purposes, BUT typically is applied in transactions.

So, the way to know if an ad valorem assessment complies with the value in exchange principle, taxpayers should see how valuation methods are applied and what assets are assessed.

Since each state has its own property tax laws, every taxpayer needs to know the standards applicable to their jurisdiction. In Florida, value in exchange is reflected in various ways. One way is to look at the definitions of property in the Finance and Tax chapters of the statutes.

The Florida Constitution separates the different assets for taxing purposes. Revenue assessed against real property is used to cover the costs of local governments and school boards.

Real property is defined as land, buildings, and fixtures attached thereto. Every other asset fits into one of four personal property categories. Tangible personal property is assessed locally too, except exemptions apply to homesteads. Intangible taxes, however, are assessed by the State. Leased fees, for example, are contracts and contracts are intangibles. Franchises are another form of intangibles. Inventory – such as the soda and chips in a convenience store – are tangible personal property but NOT subject to ad valorem taxation because the State collects sales tax on those items when they are sold. “Sold” is another term meaning “exchanged”.

What is a trap involving the fundamental principle and the definitions of property in Finance and Tax?

In Value Adjustment Board (VAB) appeals, most counties employ special magistrates for valuation petitions. Special magistrates are required to be appraisers. Appraisers are licensed under a legislative chapter which has its own definition of real property. That definition includes personal property. If a VAB special magistrate does not apply the correct definition of property, that error looks like malpractice, and there may be a ripple effect in the value assigned to the assets.

Hotels, service stations, automobile dealerships, sale/leasebacks involving credit tenants, restaurants, office complexes, rental apartments and other classifications or transaction types may include more than one kind of property. Therefore it is critical to learn what is being assessed first. Then determine what data is being used to value the property.

 

 

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