Both land and the buildings and structures on the land are considered “real property.” The County Assessor’s Office determines your tax liability in this case. You have the legal right to challenge your property tax liability if you believe you are being over-assessed on your taxes. That is where we come in.
Paramount Property Tax Appeal will represent you throughout the entire process on the property tax appeals. We can do so on ALL types of real property in California, Nevada and Arizona:
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For California Properties with few exceptions there are basically two categories of appeals:
Proposition 8 required the County Assessors office to annually assign either a property’s “Prop 13” trending value or its current market value as of January 1, whichever is less. This process reduced the assessed value for the current year only and was not retroactive. This did not create a “new factor basis year.” In other words, your tax liability could significantly rise in subsequent years after you have won your appeal for prior years. Typically this type of appeal applies to one year only.
These appeals are for the newly assessed values that arise during a change of ownership or new construction. Applicants must file an appeal within 60 days of receiving a “supplemental bill” for the property. However if they file after the 60 days it can negatively impact the refund they can receive. Unlike a “Prop 8″ appeal, these appeals establish a factor base value of the property ownership history. Often the Assessors Office designates a higher value than the actual purchase price value of the new construction.
Possessory interest cases have tax stipulations and liabilities that apply to businesses that lease government land for private use. For example business that operated in a city-owned airport is considered possessory interest property, and the valuation process is normally unique and complex.
Possessory interest valuation uses the three conventional approaches to value – sales comparison, income and cost. However, the use of any of these three approaches must consider the fact that the property will revert back to the public owner at some point. This “reversion” value must be removed so that the taxable value reflects only the lessee’s portion of interest.
The most common type of possessory interest is the lease of land and/or improvements from a public owner. Typically, the public owner charges a rent to the lessee on a dollar per square foot basis, or it may require the payment of a percentage of the lessee’s revenue or income.
For valuation of these types of possessory interests, the use of the direct income approach is appropriate and requires a discounting of the economic rent through the full term of the lease contract (net present value), less the expenses paid by the public owner. By calculating the net present value of this income stream to the public owner, only the lessee’s portion of value or interest is considered. Therefore, it is unnecessary to remove a reversionary value for the lessor’s portion of interest.
Example / Pertinent Data:
| $ 3,000 | ||
| x 60 | (Five years, 60 months) | |
| $ 180,000 | ||
| -$5,400 | (Lessor admin. expense, 3%) | |
| $ 174,600 | ||
| x .607789 | (Net present value factor, 5 years, 10% discount rate, monthly payment) | |
| $ 106,120 | Indicated value of possessory interest |
Possessory interest properties can be very complex and have many other issues. We highly recommend you calling us to discuss your specific situation.
“Paramount Property Tax Appeal significantly reduced my tax bill. Their constant communication and expertise made the tax appeal process painless for me.”
– George Mayer, Coastline Equity
