Appealing property taxes: It’s about value
August 26, 2005
Chuck Chinnock is director of the Nevada Department of Taxation, which has authority over the State Board of Equalization. He also served for two years as a member of the Washoe County Board of Equalization, which hears and decides property tax appeals at the county level.
How do homeowners and small businesses go about appealing their property taxes? Who decides and what is the process?
It’s designed to start with the county assessors. We have 17 county assessors and they would like to know if someone feels their evaluation is incorrect. In my experience, they want to take another look at it before it goes to a board of equalization. Or they want to be able to inform the property owner how they came up with the evaluation they did.
The person can appeal to the county Board of Equalization. I can tell you with my experience on county and state boards, if a person comes in and shows evidence their valuation should be different, it is seriously looked at and often times there is a property tax reduction made. If you can show something such as the wrong measurements on the property or on the land, or you can say you have $75,000 on my lot and the lots down the street are selling for $60,000, they will make an adjustment.
If the county board votes against a reduction, they can absolutely appeal to the State Board of Equalization. And after that, they can go to district court if necessary.
What are valid grounds for an appeal?
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Primarily two areas. Is the property valued in accordance with statute and regulations and, second, does that taxable value for the property exceed market value?
It’s important to know we’re really appealing the value set, not the taxes. The taxes are a budgetary item set by the various taxing entities and the board of equalization doesn’t address property taxes.
A taxpayer has the right to appeal if they believe their valuation is in error.
In valuing property, first the improvements are valued at replacement cost, less statutory depreciation of 1.5 percent a year based on the age of the residence. If the building is 10 years old, 15 percent depreciation goes against that replacement value up to 50 years when you’d have a maximum 75 percent depreciation applied to it.
Then the land under the improvement must be valued, by statute, at market value – with one hitch, which is the use to which the property is being put. So if you have a residence sitting next to a casino, that residence must be valued as a residential property even though it could have a value of a million dollars because it’s next to a casino.
If there are substantial improvements and you make additions to older houses, then the assessor makes adjustments to the age of the house. They can take and average the age based on square footage of those newer improvements.
What types of grounds are not valid?
“My taxes went up too much this year.” That’s not a valid reason if the values went up and there have been tremendous increases in property values. If it went up, the issue is one that involves a separate budgetary process and the Board of Equalization doesn’t set the tax rates. Again, the issue is valuation.
Are there differences between how residences and businesses are taxed?
With commercial properties, there is one other element: Return on investment. When we look at a commercial property, one major factor we look at is the income that property generates and expenses against that income in determining whether taxable value has exceeded market value. The taxable value of a commercial improvement is still valued at replacement cost less the statutory depreciation of 1.5 per cent per year. Land is valued the same, market value. And then there’s the final check: Does taxable value exceed the market value of that property. In a business, that can include changes in the income that property generates.