COVID-19 Commercial Property Tax Relief

As Indiana businesses continue to look for ways to mitigate the effects of COVID-19, surprising solutions might be found in their property tax bills. KSM’s property tax practice leader, Chad Miller, answers frequently asked questions in the real property arena and provides insight into potential savings opportunities.

I am a business owner and a property owner, and I experienced financial hardship during COVID-19. Is there any relief to be had on my property tax bill?

In Indiana, there are multiple ways a property’s value can be determined. Many commercial properties are assessed based on the income a property generates, also known as the income approach to value. If there was a significant loss of income during 2020 related to your real estate property, there may be an opportunity to appeal your taxes. Specifically, you may be able to appeal the 2021 assessment valuation for taxes payable in 2022.

Upon review of the final 2020 financial statements, a taxpayer can calculate an estimated value using the income approach to valuation method, which can then be compared to the 2021 assessed value. If the 2021 assessed value is greater, an appeal may be necessary.

Deadlines for filing an appeal vary depending on when local government issues a “notice of assessment” to the taxpayer. If it is mailed before May 1, a taxpayer has until June 15, 2021, to file an appeal. If it is mailed on or after May 1, 2021, then a taxpayer has until June 15, 2022, to appeal the valuation. However, if the assessed value is already low or lower than the estimated valuation, taking into account the 2020 loss, then an appeal may be unwarranted.

If a taxpayer believes an appeal is warranted, they should contact their tax advisor for assistance. When considering an appeal, taxpayers need to weigh the post-COVID-year valuation impacts against a possible reduction to 2021 assessed values. It is likely that a taxpayer will be required to provide the three prior years’ worth of financial data. If the historical assessed values have been significantly lower than the value calculated under the income approach to value method calculated using the now available financial data from a typical year, future assessments may increase post-COVID.

Is there any way to adjust the 2020 assessed value due to loss of income from the COVID-19 pandemic?

There is an avenue to request disaster relief related to your 2020 assessed value, but the success rate may be limited. Indiana statutes offer relief to taxpayers whose property has been totally or partially destroyed as a result of a disaster shortly after the assessment date. Historically, this provision has been applied solely to physical destruction of the property and has been used for natural disasters such as tornados.

While some taxpayers may attempt to apply this provision to the pandemic and request relief under this section, the Department of Local Government Finance, county assessors, and other authorities have initially indicated its success may be low or limited.

Like all things COVID-related, this is an unprecedented time in property tax valuation. Indiana assessors have never dealt with a pandemic or had to assess property while in the midst of one. While there is a chance the disaster relief position may be heard at the Indiana Board of Tax Review or the Indiana Tax Court and be accepted, at this time, its effectiveness is untested.

What if I did not experience financial hardship, is there still a way to reduce my property tax bill?

Possibly. If there was not a significant loss of income related to your real estate property, then the assessed value should be compared to market value to see if the valuation is reasonable. If the current assessed value on the property is greater than the market value, there could be an opportunity to file an appeal. There are specific deadlines to consider when filing an appeal, however, so I recommend reaching out to your tax advisor for assistance.

What else should I be thinking about right now?

Right now, business owners should consider if they are in an industry where their property value has significantly diminished due to lack of revenue during COVID-19. If this is the case, work with your tax advisor to identify the issues facing the property. Once issues have been identified and after the 2020 financial statements have been finalized, it is a great time to review the assessment and see if there is an appeal opportunity. If an appeal opportunity is identified, then, prior to June 15, 2021, an appeal form will need to be filed with the assessor’s office.

Questions?

KSM continues to watch proposed legislation and executive orders issued by Gov. Holcomb for additional relief opportunities. In the meantime, please reach out to your KSM advisor with any questions related to commercial property tax assessments or complete this form.

Visit the KSM COVID-19 Resource Center