Texas Industrial Property Tax Reduction Strategies for 2019
If reducing your Texas industrial property taxes in 2019 is a priority, it’s time to start looking at a tax strategy for the New Year. As 2019 gears up, here are some things you need to know.
Be aware of filing deadlines.
- Protest Deadlines. To be entitled to a hearing and determination of a protest, property owners must file a written notice with the Appraisal Review Board no later than May 15 or by the 30th day after the tax notice was delivered, whichever is later.
- Renditions. Business personal property renditions are due April 1 for any county that allows a freeport exemption. On written request of the property owner or agent, the chief appraiser will allow a 30-day extension to May 1. The deadline to file renditions for properties regulated by the Public Utility Commission of Texas, the Railroad Commission of Texas, the federal Surface Transportation Board, or the Federal Energy Regulatory Commission must be delivered to the chief appraiser no later than April 30, with exceptions.
- Freeport Exemptions. Applications for freeport exemptions are due April 30; however, you have only until June 15 to file an application for a late freeport exemption with a 10 percent penalty.
- Interstate/Foreign Commerce (IFC) Exemptions. If you have “pre-committed” inventory located in Texas on January 1 that is awaiting shipment to an out-of-Texas destination, you may qualify for a 100% property tax exemption. The deadline for filing is April 30th.
- Pollution Control Exemptions. Applications for qualifying pollution control equipment exemptions must be filed with the Texas Commission of Environmental Quality (TCEQ)
- by January 31. Upon issuance of a Positive Use Determination certificate, an exemption application must then be filed with the appraisal district by April 30th.
- Allocation Applications. Allocation applications are due on March 31. If the property is newly added to the appraisal roll, the taxpayer has 30 days from receipt of the notice to file an allocation application. For good cause, the chief appraiser can extend the deadline for a period not exceeding 30 days.
Take another look at 2018. For some businesses, it may be a good idea to look in the rearview mirror. Under certain circumstances, you may still be able to contest your 2018 assessment, as long as you file a substantial error appeal by January 31, 2019. To be eligible, you have to meet certain qualifying criteria:
- You must not have filed a protest in 2018 or signed a value settlement agreement with the appraisal district; and
- You must be able to demonstrate that the appraisal district’s assessed value of fixed assets, real estate, or (most often) inventory is at least one-third greater than the true market value.
Adopt a new lien date. Normally, inventory is assessed based on the fair market value of what you own on January 1 of the tax year. However, the Texas Property Tax Code allows you to adopt September 1 as an alternative lien date which, depending on your historical inventory balances, may yield a lower taxable basis. Note, though, you must file an application to change your lien date by July 2019 to claim a September 1, 2019 lien date.
Analyze your 2018 inventory shipments. Do you ship to in-state customers who, in turn, redistribute out of state? If so, you may be eligible for additional freeport exemptions on your taxable inventory in 2019. This is a particularly lucrative benefit to industries such as advanced technology component manufacturers, steel service centers, and chemical plants.
Reexamine your obsolescence. Are you maximizing tax savings due to obsolescence? Essentially, if your equipment isn’t being fully utilized or if there is excess capacity in your market, you may be eligible to negotiate obsolescence adjustments based on those conditions.
In addition to quantifying inutility, abnormal depreciation can be determined by applying several universally accepted appraisal techniques, including cost to cure analysis, measuring excess capital cost through comparing replacement versus reproduction cost, determining the net present value of excess operating cost, calculating income shortfall, and return on capital analysis.
These strategies can be applied to any industry, from sausages to semiconductors, and must be reviewed annually to assure the lowest possible property tax liability. They just need to be framed within the unique operating metrics of your industry. In many cases, coupled with available exemptions – including freeport, interstate foreign commerce, pollution control, and other initiatives – they can yield extraordinary property tax savings of 50 percent or more.
The key to successful property tax savings is a thorough knowledge of the unique issues affecting the market value of your property, framed within the context of your industry, coupled with technical knowledge of the assessor’s valuation process and the applicable local or state property tax code.
If you are a large capital asset-intensive industrial firm with significant tax liability and feel you may not be taking advantage of all available opportunities for property tax savings, contact us for a risk-free, detailed analysis and situational assessment. We specialize in recovering property tax savings left behind by others and are the only industrial property tax consultant to offer a 100 percent performance guarantee, along with a success-based fee structure.