While all states authorize the imposition of a tax on real property, only thirty-eight (38) states authorize a tax on personal property.
In these states, which include Missouri, Colorado and Kansas, but not Illinois, personal property is valued as of one date (the “assessment date”). The local official responsible for the administration of property taxes is the assessor.
Business personal property owners are required annually to a file a rendition with the local assessor detailing the cost of the personal property they own as of the assessment date (generally, January 1)
These declarations (or renditions) must be filed by March 1 in Missouri, March 15 in Kansas, April 15 in Colorado and during the period of February through April in most other states. It is this reporting requirement that leads to errors and omissions, which can result in over-valuation, excessive taxation and onerous penalties.
Keep in mind that every industry is unique. The personal property owned by those in the media and entertainment industries, for example, tends to be technology driven. Cutting-edge equipment purchased five years ago may no longer be as useful as when it was purchased.
Many local assessors use trend tables to estimate the fair market value of equipment. These trend tables may indicate that the fair market value of these items never falls below 20% of historical cost, although the equipment may be functionally and physically obsolete.
Most personal property owners simply send the assessor a detailed list of assets from their tax depreciation schedule. While that may be a good starting point, such a simplistic approach can result in the over-reporting of taxable acquisition cost of assets, which results in an over assessment.
Prior to the filing of any personal property renditions, the owner of personal property needs to ask and answer the following questions:
- What property items are “owned” and must be declared?
- Where are these items located?
- Is the item reportable under the applicable local laws and administrative policies?
- Is the item part of the real estate?
- Is the item technologically out-of-date?
- What is the fair market value of the property?
- Does this equate to the value determined using the assessor’s trend tables?
If these questions and answers raise concerns or uncertainties, the State and Local Tax (SALT) professionals at RubinBrown can assist you in resolving those concerns. We are available to assist in the preparation of these filings and to help you determine the fair market values of your company’s real and personal property, thereby assuring that the correct amount of property taxes are being paid.