A Financial Institution’s Complete Guide to Implementing a Property Tax Savings Strategy on Branches and OREO

Are you leaving money on the table when it comes to paying property tax? If your bank has never appealed your branch property taxes, there’s a good chance you could be overpaying. But it doesn’t have to be that way. In fact, many banks can be more proactive in managing their costs, and a tax appeal on branches or OREO is a great starting point.

Did you know that property taxes are not necessarily a fixed cost and can often be assessed incorrectly? Often, bank branches are overassessed due to the fact that some municipalities suggest there are multiple uses for branches. In some cases, there may even be an error in the tax assessment itself.

To get a handle on the property tax issues that many bank branches face, we’ve put together this comprehensive guide to advise financial institutions on property tax facts, the property tax appeal process, and where to turn for help with a savings strategy.

property tax

What is Property Tax?

Property tax, by definition, is an ad valorem tax based on the value of a property. The cost of property taxes varies across states and depends on several variables like assessed land value, structures on the property, improvements made to the land and/or structures, and the local government’s tax rate.

How Property Tax is Calculated

Property tax rates are determined by tax assessors who assess the property every one to five years. Based on their assessments, they will determine the value of the property and bill the owner a rate that follows the standards set by the taxing authority. Your assessment determines your tax bill, which states how much you owe for the year. 

To calculate the numbers, local governments use an income and expense form, which is sent to commercial property owners and used to help determine the value of their investment. This form requires commercial property owners to provide details on all of the rents received (income) and expenses incurred in the past year, which are then used to determine if the property value has changed since its last assessment.

Need-to-Know Facts About Property Tax

From bank branches and financial institutions to residential homeowners, anyone who owns property is required to pay property tax.
Here are some important facts to note:

  1. As we mentioned, property tax laws vary by state — an important thing to note especially if you have branches in different parts of the country. In Georgia, for example, tax returns are expected to be filed with the county tax receiver or the county tax commissioner between January 1 and April 1. In Washington, property tax payments are due by April 30 and if received after this date, are considered delinquent and subject to one percent interest per month.
  2. There is a difference between commercial property and residential property tax. While similar, commercial property is often taxed at a higher rate, and some jurisdictions will also tax a business’s personal property. This includes things like equipment, fixtures, and other assets that help generate income. 
  3. Think you’re paying too much in property tax? It might be time to appeal. Maybe you’ve noticed that year after year, your property tax bill continues to rise — even though nothing about your property has changed. In this instance, you would want to consider filing a property tax appeal. 
  4. There are certain steps to take in the appeal process. Filing a property tax appeal takes a bit of preparation and due diligence. First, you’ll need to review your annual notice of assessment and determine if the value accurately reflects the true value of your property. From there, an appeal must be filed with the Board of Tax Assessors, and then the waiting game begins. Find out more about the steps in the property tax appeal process here.  
  5. You can deduct your property tax to increase returns. Property taxes are considered to be a deductible expense, according to the IRS. Yet you must tread carefully here, as there are, of course, some limitations and restrictions in regards to this exemption. For example, you can only deduct the portion of your property tax that is levied based on the assessed value. Learn more about how you can get more out of your property tax deductible here

Frequently Asked Questions About Property Tax

You’re not the only one with questions about property tax. Read the FAQs and find out how these taxes are calculated, why property taxes change, and how you can better manage them for your business or bank branch.

Can I lower my property tax payment?

If your annual assessment seems to increase significantly year after year, it is possible to lower your bill by filing a property tax appeal. Property tax bills are not necessarily a fixed cost. Properties are not always assessed correctly, and their values can change over time. For banks, appealing your bank branch property taxes can ultimately lower operating costs and subsequently lower your non-interest expense. For commercial property owners, a successful appeal can cut costs and improve cash flow. Find out more about the appeal process here.

How often does property tax change?

Every one to five years, tax assessors will value the property and bill the owner a rate that follows the standards set by the taxing authority. Changes in the assessed value may be contributed to the following: economic factors that affect the fair market value, including the inflation rate, interest rates, and current housing market; improvements to the property; and an increase or decrease in the millage rates that are determined by the needs of the county and/or city general funds.

It’s important to review your annual tax assessment carefully. If you notice a significant uptick year over year, you may have grounds to appeal your assessment and ultimately lower your tax payment.

Are property taxes considered a deductible expense?

Like many business costs, property taxes are considered a deductible expense. While property taxes are considered deductible, there are, of course, some limitations and restrictions when it comes to this expense. For one, you can only deduct the portion of your property tax that is levied based on the assessed value. To learn more about what qualifies as a deductible expense, please read our article about increasing returns by deducting your property tax expense.

How can I manage my bank branch or commercial property taxes?

Unsure if your property tax qualifies as a deductible expense? Need help understanding your property tax assessment? Want to file a property tax appeal? Hiring a third-party service, like MountainSeed, to manage your commercial property tax needs can help save you time and money across the board.

What Banks Need to Know About Property Taxes

Why should bank branches file a property tax appeal? The reason is simple: to save on real estate expenses. But the process? Now that’s a little more complicated.

Bank branches are often overassessed, or even assessed incorrectly because some municipalities maintain that there are multiple uses for branches. Assessment errors are not uncommon, and in some cases, specific laws could be in place that raise or lower taxes. Take Maine, for example. Utilizing solar power in certain parts of the state could raise your taxes, while other states are instating tax loopholes for that exact action. 

A common mistake that banks and other real estate owners make when it comes to property taxes is not having a clear grasp on the property’s true market value. If you don’t know what it’s worth, how can you be sure the tax rate was calculated accurately? This is why it’s vital for bank branches, or a third party tax appeal service, to comprehend the different factors that go into a valuation, such as cost approach, sales comparable approach, and income capital approach.

Property Tax Services from MountainSeed

The tax appeal process can be a long and complicated one, which means you’ll want to use a trusted, experienced service provider who is well-versed in the fine print. This is where MountainSeed comes in.

Over the years, MountainSeed has worked with over 600 financial institutions and thousands of real estate owners. Our team has extensive experience handling all types of property tax appeal scenarios, and the service is lead by an individual who oversaw a large metropolitan area’s tax assessment division for over 30 years. MountainSeed employes a full-time staff in locations throughout the country that serve clients in all different states. Our operational team has a multiple asset class understanding which helps us build the correct case when going through the appeal process.

Best of all, MountainSeed’s bank branch and OREO tax appeal business is a risk-free way to lower expenses and increase marketability for OREO assets. We do not require any upfront payment and there is no fixed cost — we work on a straight contingency basis and are only paid if we save our clients money.

Are you ready to implement a property tax savings strategy for branches and OREO?

Contact Us