Pretty soon, meaning sometime before March 1, the County Assessor of each county in Arizona will be mailing to all property owners the annual notice of the valuation of the property for purposes of property tax assessment. You know, it’s that postcard you get every year. It’s called a notice of valuation. What does it really mean, and what can you do about it if you think the valuation of your property is too high?
First I should point out that even though it is supposed to be sent before March 1, sometimes the notice of valuation is sent out late. The director of the Arizona Department of Revenue can extend the deadline for the Assessor to send the notice if there is a delay caused by an act of God, flood or fire. I recall that in past years the notice has been sent out late without there being any act of God, flood, or fire that I knew about. I don’t think there’s any penalty if the Assessor doesn’t meet the March 1 deadline, however.
Anyway, regardless of when the notice of valuation is sent, a property owner has sixty days from that date to ask the Assessor to review the valuation and/or classification of the property. The review is requested by filing a petition with the Assessor. If the property owner is asking for a review of the valuation, the petition must state the owner’s opinion of the full cash value of the property, and must also provide “substantial information that justifies that opinion of value,” in the words of the statute.
And what is “substantial information that justifies that opinion of value?” The owner must “state the method or methods of valuation on which the opinion is based” and provide additional information based on which method of valuation is being used to support the opinion of value. The three methods of valuation are the income approach, the market approach, and the cost approach.
Since most people use the market approach, I’ll discuss that one here. The others are less commonly used, mainly because the income approach doesn’t work unless property is income-producing, and the cost approach is rarely going to result in a value lower than the current value.
To use the market approach, the property owner must include in the petition either the full cash value of at least one comparable property in the same geographic area, or a sale price of the subject property. Be aware, however, that this is the minimum requirement for a petition to be considered by the Assessor. Don’t think that your petition is going to be successful if you find one comparable property that has a lower valuation. By statute, the Assessor must consider the valuation of other similar properties. Pointing to one outlier isn’t going to get the assessor to lower the valuation of your property.
The Assessor has until August 15 to rule on all petitions filed. If the property owner is not satisfied with the Assessor’s decision, the property owner can appeal to the county Board of Equalization, then the State Board of Equalization. The property owner also has the option, either after appealing to the Board of Equalization, or instead of appealing to the Board of Equalization, to appeal to either the Superior Court or the Arizona Tax Court. There are, of course, deadlines that must be met along the way in this process.
In addition to the deadlines, one other thing to look out for if you appeal the Assessor’s decision is that if the director of the Department of Revenue thinks the Board of Equalization set the valuation of the property too low, the director can appeal the decision to the Superior Court.
There are a lot more procedural details that I’m leaving out, as you might expect. The goal of the process is to produce, by the end of the year (except for cases where there is an appeal to court), a final valuation of all properties subject to taxation, so that the various taxing jurisdictions can levy and collect taxes next year based on the valuations determined this year.
Don’t be intimidated by the process. When you get the postcard from the Assessor, if you think the full cash value shown on it for your property is really too high, let’s talk about filing a petition for review.
ANOTHER TIDBIT ABOUT FORD, WITH A TAX AVOIDANCE ANGLE
In my October, 2013, Estate Planning Law Report, I mentioned that it had been 100 years since Henry Ford put into service the first moving assembly line for making automobiles. That prompted my able production assistant and word processor, Silvia, to alert me to an item that appeared in the Automotive News concerning the history of the ownership of Ford Motor Company. Whaddaya know, there’s a tax avoidance story there.
It seems that in an effort to minimize the effect of the estate tax on what was then still a privately held company, Henry Ford created two classes of shares of stock in the company, Class A nonvoting and Class B voting shares. The idea was to transfer the nonvoting shares out of the family (most of those shares were used to endow the Ford Foundation) to reduce the value held by the family, while retaining effective control of the company.
The stock restructuring was done in 1935, long after the Model T had been replaced by the Model A. Ford Motor Company remained privately held until 1956, nine years after Henry Ford died. The sale of Ford Motor Company shares to the public was the largest stock offering ever up to that time.
QUOTE OF THE MONTH
I have an existential map. It has ‘You are here’ written all over it.
≈ Steven Wright (1955 – ) US comedian and actor
