Taxation of Business Property: Is Uniformity Still a Valid Norm?

By John H. Bowman; Frederick D. Stocker | Go to book overview

expected, show that tax managers are not satisfied with the treatment they receive in property taxation.


CONCLUSIONS

This chapter has reviewed and reported on the property tax base that consists of income-producing, or business, property. It centered on results of three surveys that were completed by corporate tax managers, state tax administrators, and local tax district officials. While the chapter focused on business property, it used as a basis of comparison the administrative and policy treatment of residential property.

The relative taxable share of the property tax that consists of commercial and industrial property represented between 20 percent and 30 percent in the majority of taxing jurisdictions. Other income-producing properties such as farms, public utilities and railroads, and mineral property represent about 15 percent of the total tax base in local taxing jurisdictions. The balance of the taxable property tax base is composed of residential property. The non-taxable portion of the tax base, or the tax- exempt property, is equal to about 10 percent of the total tax base. Of course, there is substantial variation in the distribution of taxable classes within local taxing jurisdictions.

The process of establishing value for business property is generally similar to the process for residential property--the same legal standard of value and apparently similar implementation of the appraisal processes, although with generally different methodologies used to estimate value. In theory, all of the different methodologies, if correctly applied, achieve acceptable estimates of the value standard.

There are, however, important differences from the treatment of residential property. The differential treatment of business property is of great concern to corporate tax managers. Most indicated that business property is not appraised properly, and that the unfair treatment of business property is the result of tax policies, such as unequal assessment ratios and improper application of appraisal methodologies to business properties. A number of corporate tax managers are also concerned about the politics of local tax administration. They reported that in many taxing jurisdictions, a key determination of taxable value was the desire to ease the tax burden on residential taxpayers and put it on "non-voting" business interests.

In sum, the surveys used in this analysis reveal a tax base that is relatively important and that in some areas is being treated the same as the residential portion of the tax base. In other areas, such as actual appraisal practices, the business portion of the tax base could be treated better.


NOTES
1.
Taxable value is the value listed on the tax rolls of the assessment jurisdiction. Market value is the value that the property would trade for in a market transaction. In practice, the

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Taxation of Business Property: Is Uniformity Still a Valid Norm?
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Tables vii
  • Foreword xi
  • 1: Taxation of Business Property Overview 1
  • Conclusion 21
  • 2: Perspectives on the Business Property Tax Base 25
  • Conclusions 43
  • Notes 43
  • 3: Emerging Legal Issues: Valuation and Expenditures Limitations, Toxic Waste Impacts, and Intangibles Valuation 45
  • Conclusion 61
  • Notes 62
  • 4: Uniformity as a Policy Objective 63
  • 5: Uniformity in the Context of Other Concerns 77
  • Conclusions 89
  • Notes 91
  • 6: Enforcement of Uniformity 93
  • Notes 109
  • 7: Business Property Tax Incentives and Economic Development 111
  • Appendix 7 Business Property Tax Incentives by State, 1992 124
  • 8: Special Problems in the Valuation of Business Property 139
  • Conclusion 149
  • 9: Tax Valuation of Contaminated Property 151
  • Conclusions 158
  • 10: Selected Business Property Taxation Issues: Personal Property 161
  • Notes 169
  • 11: Future Directions for Business Property Taxation 171
  • Notes 182
  • References 185
  • Index 195
  • CONTRIBUTORS 203
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