Property owners are aware of the appeal process for taxes on their real estate, but many do not realize the appeal process for business personal property. Here are some things you need to know for BPP in Texas.
For taxation purposes, the Texas Property Tax Code requires all business owners to supply information on all tangible personal property used for the production of income that is owned, managed and/or controlled as a fiduciary on Jan. 1. The rendering of these assets usually will include the tax payer’s tangible fixed assets, including, but not limited to, machinery and equipment, furniture and fixtures, computerized equipment and inventory.
It is important to note that these renditions will need to be reported to the appropriate assessing jurisdiction between January 1 and April 15. If additional time is needed, an automatic 30-day extension can be requested and will be granted by the assessing office, as long as the request is received prior to the April 15 deadline.
One of the largest BPP expenses companies will find in Texas is the inventory reporting requirement. This is because inventory is taxed at full fair market value and is not depreciated like other asset classes. In order to help relieve tax payers from this expense, and to enhance local economic development, many taxing jurisdictions have approved of a Freeport exemption on this inventory, as long as the tax payers meet the necessary qualifications.
According to exemption guidelines, Freeport property includes items in your inventory that are sent out of Texas within 175 days of the date they are acquired or brought into the state. The goods must be in Texas for certain purposes, such as assembly, storage, manufacturing, processing, or fabrication. In order to qualify, the exemption must be applied for each year and must be postmarked by April 30th to be considered timely filed for full credit. To minimize their tax liability, it is important for companies to understand the state’s property tax statutes when submitting filings to the districts.
It is important to proactively review the filing methodology, as well as identify asset classification issues that have not previously been identified or corrected. This typically involves scrubbing the fixed asset listing to remove any ghost or duplicated assets that should not be reported on the initial filings. Also consider the use of assets, in order to categorize them in the fastest depreciation table allowable and identify any issues that would warrant additional depreciation. For example, we have identified assets that are listed as machinery and equipment on the company depreciation schedule; however, the use of the assets would be considered molding or tooling and would move from a 10-year life to four-year life on the Dallas Central Appraisal District’s depreciation tables. This could drastically reduce the valuation of those assets.
Also seek to identify and obtain other tangible property exemptions or tax saving opportunities. Examples of this can include pollution control exemptions, inventory exemptions, credits/incentives, and the identification of exempt assets by jurisdictional laws or regulations.
Remember, an appeal filed to the district on the valuation of a personal property account will need to be filed no later than June 1, or 30 days after the valuation notice was delivered.
Amish Gupta is chief operating officer of Real Estate Tax Consultants Group.