The continued decline in property values in Detroit and surrounding southeast Michigan communities has created substantial discrepancies between taxable values and market values for real estate. Assessors are reluctant to hold or reduce taxable value notwithstanding reduced market value because of increases in the costs of providing public services. To make matters worse, assessors may apply an inflation increase of 4.4% to an assessment – possibly raising your tax bill despite falling property values.
Regardless of whether your property is residential, agricultural, commercial or industrial, and whether you are an owner, property manager or tenant, it is critical to review your tax assessments and understand the appeals process to determine if an appeal will result in tax savings.
Why You Should Review and Possibly Appeal an Assessment
There are a number of reasons why you might consider challenging your property tax assessment. Among them:
- Over-assessment: Market conditions preclude resale for at least two times the assessor’s determination of “taxable value” and/or property improvements have been overvalued;
- Property classification has changed;
- Transfers of title (through acquisition or internal reorganization) are treated as taxable transfers and/or “uncapping” events;
- For income producing property, income and expenses have changed (i.e., occupancy rates have declined and costs have increased);
- Tenant paying taxes in addition to rent, and has written authority to challenge assessments on behalf of landlord;
- Multiple contiguous parcels are taxed differently or inappropriately; and,
- Exempt status not granted to non-profit organization.
Basic Chronology of the Appeals Process
To better understand the appeals process, it is important to be aware of the timeline that begins with the initial assessment and continues with established and rigid deadlines for pursuing an appeal. If you have an assessment issue, you should contact your local assessor’s office to get information regarding deadlines and steps to preserve appeal rights because procedures often vary by jurisdiction:
December 31, 2008
The 2009 property tax assessment is based upon the value of the property as of December 31, 2008, or what is commonly referred to as “tax day.”
January to Early March
“Notices of Assessment” are issued to property owners during this time period, and depending on the municipality, taxpayers must often act before strict deadlines with little or no actual notice. The Notice of Assessment might warrant a valuation appeal if the market value (or “true cash value”) of the property is less than twice the stated Taxable Value. Additionally, the Notice of Assessment could raise issues regarding: classification, transfer of ownership (transfer tax liability and/or uncapping), principal residence exemption, and valuation of improvements. There are varied appeal procedures for each of these issues.
Some municipalities, including the cities of Detroit, Grand Rapids and Wyoming, require an assessor’s review or similar pre-appeal review process in early February to avoid forfeiting the right to appeal to the Board of Review and later, to the Michigan Tax Tribunal. In Detroit, for example, this review must be requested in person in the Board of Assessor’s office before February 15, 2009.
It is very important that you consult your local assessor’s office to determine whether this or a similar added requirement exists, and if so, the deadlines and special requirements for its completion.
Each municipality holds Board of Review hearings in March, generally from the second Monday in March unless a different day has been established by ordinance. Some municipalities allow written protests in lieu of a Board of Review appearance. Depending on the property classification and the type of appeal taken, the Board of Review must make its determination and give notice to the property owner typically no later than the first Monday in June following the Board of Review hearing.
General deadline for appealing Board of Review decisions to the Michigan Tax Tribunal is June 30. Depending on the property classification and type of appeal, the Tax Tribunal will have different appeal deadlines.
If you need help evaluating the risks, potential savings, and likelihood of success in pursuing an appeal; or if you have questions regarding your overall real estate strategy, please contact Randy Barker, a member of Berry Moorman’s Real Estate Practice Group.