The Other Tax Season: Property Tax Time In Missouri And Kansas
Mar 23, 2021
When tax season rolls around each spring, income taxes are usually at the forefront of our minds. When we receive our property valuation statements in the mail, they're often just another thing to be dealt with, another piece of paper to be filed, a bill to paid. In Kansas and Missouri, however, this is a missed opportunity. For commercial property owners, property tax season is a critical time to evaluate and minimize your tax liabilities.
Did you know that Kansas and Missouri have some of the highest property taxes in the country? Property taxes are part of the "three-legged tax stool"—comprised of sales, income and property taxes—supporting state and local government spending. However, according to a recent survey by Tax Foundation, Kansas and Missouri lean more heavily on the property tax leg than most states. Kansas property owners bore the 15th highest property tax burden in the country this year, followed closed by Missouri at 22nd. Property taxes fall especially hard on commercial property owners, who pay taxes at taxes at a rate that is double or nearly double the rate paid by residential homeowners. For many business owners, property taxes represent one of their largest fixed expenses, and managing property tax liability can be the difference between struggling and thriving.
MANAGING PROPERTY TAXES AT ACQUISITION
Property taxes for most property types are based on market value, which is (highly summarized) the amount of money that a property would sell for in an open and competitive market. In determining the fair market value of commercial real estate, county assessors rely upon a variety of data sources, including sale prices of similar property types. Determination of “market value” is critically important. Unfortunately, county assessors acquire most, if not all, of their sales data from a form, known as a Sales Validation Questionnaire or a Certificate of Value. This form is required by state law in all transactions of real estate, and it provides an opportunity to list the sale price along with qualifying information such as personal property and intangible assets included in such price or anomalies associated with the sale. This form can greatly impact the property tax value of the property being transferred, as well as other similar properties in the county. However, it is often filled out by the closing agent and signed by the seller without input from the buyer. To avoid unwanted tax implications, commercial property buyers should consult a property tax professional to assist with the preparation of this form, ensuring that their future tax liabilities are not overstated by an unadjusted or incorrectly-reported sales price.
MANAGING PROPERTY TAXES THROUGH THE APPEALS PROCESS
Of course, it is not always possible to correct the issue of “market value” prior to assessment. Instead, you may have to go through an appeal process after assessments are performed.
For existing real estate owners, the property tax assessment process begins in the spring with the receipt of the county's valuation. In Kansas, Valuation Notices must be bailed by March 1 of each year, and appeals must be filed within 30 days. In Missouri, valuation notices are mailed later in the spring, and appeals are due either the third Monday of June or the second Monday of July, depending on the county. Unlike Kansas, though, Missouri only reassesses property, with limited exceptions, in odd-numbered years. 2021 is a reassessment year in Missouri, which is the primary time to correct or reset values.
The valuation notice sent by the county assessor will report the market value or appraised value assigned by the county appraiser to each parcel of real estate along with the property's classification. If the property owner believes the county's appraised value is higher than market value or that the classification is incorrect, he or she may appeal the county appraiser's determination. In both Missouri and Kansas, the first level of appeal is local – either before the Board of Equalization in Missouri, or in an informal meeting with the county appraiser in Kansas. If the taxpayer is not satisfied with the results at the local level, an appeal to Missouri State Tax Commission or the Kansas Board of Tax Appeals is the next step.
WHAT ABOUT THE PANDEMIC?
The impacts of the COVID-19 pandemic are far reaching and have strained many businesses. Are businesses entitled to property tax relief if they struggled financially in the last year? It depends.
Property tax is not a measure of any individual business's success; rather, it is based upon the value of the tangible property owned by that business. Nonetheless, outside influences that affect the financial performance of a business can also affect the value of that business's property, and this is where pandemic issues might still affect the market value of your property. For example, the hospitality and travel industries have suffered greatly from the massive reduction in travel during the pandemic. Because the industry as a whole is generating less revenue and profit, buyers may be more wary of purchasing hospitality-related real estate, such as hotels, due to the depressed performance and outlook for the industry. Similarly, the rising prevalence of remote work may have an impact on office space in future years. If those changes – or uncertainty about those changes – impact real estate sale prices, then those impacts should be reflected in property tax values.
CONSULT YOUR PROPERTY TAX PROFESSIONAL FOR MORE INFORMATION
Unfortunately, the concept of fair market value and the property tax process are not intuitive or obvious; however, managing commercial property taxes is an important part of operating almost any business. Just as business owners hire accountants to assist with income tax planning and compliance, they should consider consulting with a property tax professional to manage their property tax liabilities. Property tax professionals may be accountants, appraisers or attorneys, but not all accountants, appraisers or attorneys are property tax professionals. Before hiring someone, seek out a trusted referral and inquire about your professionals’ experience with local property tax laws and processes.
Jarrod Kieffer is a partner in Stinson LLP's Wichita office. Representing both taxpayers and taxing jurisdictions, he guides clients through every step of the property tax process. Jarrod focuses on issues relating to real and personal property valuation and classification, property tax exemptions and property tax compliance.