Tennessee 2017 Revals - All Four Major Markets

by DMA Staff | Mar 07, 2017

By: Patrick Price, CCIM | Director, Property Tax at DMA

If you own commercial or industrial property in any of the four major Tennessee jurisdictions (Davidson, Knox, Shelby & Hamilton Counties), you should be preparing now to take action pertaining to the cyclical reappraisals that are performed every 4 years by Tennessee tax assessors; and which will be impacting you for the 2017 tax year. As you may or may not be aware, these new valuation notices have already started being mailed to all taxpayers, with forthcoming appeal deadlines if you need to challenge the County's proposed valuation of your property.

The reason this is so important in the State of Tennessee is because the counties only perform these reappraisals or "revals" once very 4 years. That's a fairly long cycle, compared to states that update their values annually to capture market changes. Moreover, whatever value is assessed for 2017 will generally be locked-in for the next four years, meaning the impact on your current and future tax liabilities is substantial.

Time is of the essence for multiple reasons, not the least of which is that this initial notice of reappraisal will create a flurry of activity in each jurisdiction. We expect most taxpayers will see an increase...from modest to dramatic, depending on the asset category and location. Upon initial mailing, it is typical for thousands of appeals to be filed - as such, the assessing authorities are motivated to reconcile legitimate issues, address credible concerns and resolve as many disputes as possible. 

Without question, this is the optimal time period in which to impact change in the assessment for the next 4-year cycle; whether that's calling the assessor's attention to unique nuances of your property, challenging factual errors in the assessment record, bringing to their attention functional or external obsolescence issues impacting your property, and/or providing other valuation-related evidence for this review. Typically, taxpayers must request such an informal review within 30-days of the notice.

Thereafter, you will have opportunity for a more formal appeal to the county-level Board of Equalization. While this is certainly a productive and fair venue, it would be unwise to not take full advantage of the informal review process as well. Most assessors are receptive to credible and relevant information, and will work cooperatively with the taxpayer in order to achieve fair & accurate assessments. Most assessors understand that they are employing "mass-model" techniques that produce credible results to the broad universe of properties in their population overall; but also, that such models can't possibly produce accurate valuations for every particular, individual property. It is imperative that taxpayers call to their attention those instances where the mass-assessment processes result in an assessment disconnected from a property's "real world" value. Thus, it is highly recommended that you be prepared to review and evaluate the new assessment notices as soon as they are received. 

Given the short window of opportunity for the first level of appeal, if you aren't proactive in determining what your property's accurate assessment-value "should be" at present, then you may find yourself at a disadvantage once the notice is received and the clock has already started ticking on your rights. Knowing that this event is coming, it is advisable to act now and eliminate the need for fire-drills or the stress created by having to make decisions with a sense of urgency. If you aren't knowledgeable about current market conditions or property valuation methodologies, there are outside experts who can assist you.

I should also mention that you are not necessarily precluded from appealing your assessment in future years, post-reval. However, practical experience indicates that both the assessment staff and the BOE may be somewhat reluctant to make significant changes in the middle of a reappraisal cycle. Whether appropriate or not, failure to protest an initial assessment in the first year of the reval can be perceived as agreement with, or acceptance of, the county's original appraisal.  Additionally, you must always argue or prove the value as-of the last reval period; meaning in a future tax year you will be making a retroactive assessment-valuation case. While this is certainly possible, it can be more difficult; both for the appellant to present and the adjudicator to accept.

So the conclusion is that 2017 is an extremely critical tax year for property owners with assets in these counties. It is the optimal time to evaluate the fairness of the new assessment and to negotiate (if warranted) with the assessing authorities. Any success in obtaining a reduction or mitigating the amount of increase will impact the next 4 years' tax liabilities. And all CRE owners know that excessive operating expenses inherently decrease a property's market valuation. These notices are is the time to prepare. Firms such as DMA, and others, can proactively assist you in this process if you lack the resources, capacity or expertise to perform this task internally.

Please do not hesitate to contact your local DMA office should you have specific questions or requests.