U.S. telecom company Windstream was recently cleared by the IRS to reclassify most of its copper and fiber-optic lines as real estate by forming a REIT, a maneuver that could yield tax savings of more than $100 million a year for the company. Real estate basically involves income-earning assets that can't be moved, but this deal shows how the definition of real-estate investment trusts has been stretched into new territory. The IRS' decision could enable the entire industry reduce their tax burden by billions of dollars and prompt other American companies to follow suit in an effort to minimize their tax bills.
Categories: Paradigm Info
Due to a nearly $30 million budget shortfall facing the city, Orlando Mayor Buddy Dyer and Chief Financial Officer Rebecca Sutton said a property tax hike is needed in order to fill the gap. According to WFTV.com, Dyer proposed raising property taxes by $1 on Monday, which would bring the tax to $6.25 for every $1,000 of taxable value. The preliminary millage rate hike was approved Monday, which means the city is one step closer to the tax hike. If the budget changes are approved by city council in September, it would go into effect on Oct. 1, which is the first day of the city's fiscal year. The mayor said the budget shortfall is due in part to a statewide property tax passed in 2008 that caps the growth of property tax revenue a local government can receive. He said the city needs to address the budget hole, as the gap will likely get wider as the demand for city services increases in an improving economy.
By Jack Nash, Northeast Area Leader / Principal, Philadelphia
Categories: Distribution Centers, Personal Property, New Jersey, Office, Industrial, Real Property, Resorts, Bankruptcies, Gaming / Casinos, Apartments, Hospitality, Retail, Paradigm Info, Hotels, Multi Family, Warehouse, Economy
Today, New York State Attorney General Eric Schneiderman moved to dismiss a class action suit seeking to overturn existing city and state property tax laws, which the plaintiffs contend is racially discriminatory. According to Capital New York, the class action suit in question, filed in February, seeks to overturn a property tax system that is widely acknowledged to benefit single family homeowners in wealthy neighborhoods at the expense of homeowners in less wealthy ones. It also benefits homeowners as a class at the expense of condo and co-op owners and, more to the point of this lawsuit, at the expense of renters, a disproportionate number of whom are black and Hispanic. Last year, the Citizens Budget Commission concluded that in fiscal year 2014, the owners of one-, two- and three-family homes paid 15 percent of the city's property taxes, even though they comprised 46 percent of the city's real-estate value. Apartment buildings paid 37 percent of the levy, even though they comprised 24 percent of its value. Although Mayor Bill de Blasio's administration acknowledged in April that the suit highlights a major issue of unfairness and inequity in the property tax system and needs addressed, de Blasio is expected to file a dismissmal today as well. It will likely look a lot like Schneiderman's, who contended in his filing that the court lacks jurisdiction, that the plaintiffs have failed to state a cause of action, and that the "injunctive relief sought by Plaintiffs violates separation of powers principles."
The fairness of commercial property assessments has been a highly-debated topic throughout Texas this year. As a response to the growing concerns that the property tax system favors owners of large commercial properties, the Travis Central Appraisal District has requested a $2.9 million increase in next year’s budget to scrutinize the agency’s appraisals for accuracy. After deciding not to challenge this year's entire commercial property tax roll, the Travis County Commissioners and Austin City Council voted to study property appraisals, and initiatives in the appraisal district’s proposed budget would add to those efforts.
By Gary Koenke, Senior Managing Consultant, Atlanta
Despite budget cuts and no overall increase in tax rates, Miami-Dade Mayor Carlos Gimenez’s proposed budget for 2015 forecasts a gain of $112 million in property taxes, due to an increase in higher real estate values. The county is forecast to collect 8 percent more than the $1.25 billion in property taxes that the county is expected to collect in the current year, but the projected gain would inch up to nearly 10 percent if county commissioners succeed in adopting a higher library tax than Gimenez proposed that would generate about $8 million extra for the library system.
Over the past few years San Francisco has seen significant growth in hotel performance, and experts believe that the city is on its way to performance supremacy atop the United States hotel industry. According to Hotel News Now, hotels in the City by the Bay have been posting annual double-digit increases in revenue per available room since 2011 and show no signs of slowing down. The extraordinary boom market is driven by the tech, social media and digital retail sectors, thanks to Twitter, Facebook, Yahoo and Google headquarters located in San Francisco. The city also boasts a thriving biotech sector, bustling leisure tourism and a robust convention market, which has helped produce the thriving hotel market.
The Baltimore City Council passed a bill last week that will make 10 years of property tax credits available citywide for developers of apartments. The bill expanded the current apartment tax credit program to include both developers who renovate apartments and those who build new structures. The legislation was backed by Mayor Stephanie Rawlings-Blake, who believes the expansion will encourage investment that supports neighborhoods, promote historic preservation and generate millions of additional dollars for the city.
Commercial property owners in Washington, D.C. are facing much higher property tax bills for 2015 due to changes in the tax assessment policy that goes into effect on Jan 1. Assessments will be based on market values rather than actual occupancy and rental rates happening in the building, which means property owners may receive higher tax bills even if the rental income their buildings are generating has fallen due to increased vacancy rates. The new method is expected to levy an additional $10.1 billion in 2015, a 12.6 percent increase, but many building owners say it places an unfairly heavy burden on property owners whose buildings are not generating rental income due to vacancies. However, the District's largest developers banded together this spring to press the District to justify the change, and officials are now warming up to potential changes in the new tax assessment policy.
Many assessors throughout Louisiana believe current property tax exemptions granted to the oil and gas industry are unequal and not uniform, and are now seeking changes so that the industry pays its "fair share." According to the Daily World, at a recent hearing, assessors proposed that the commission lift its current exemption on taxing horizontal drilling, change the way the apparatus used in drilling wells is taxed and set up a new tax structure for injection wells, wells used to extract brine and those at natural gas storage facilities. Assessors are also questioning the way all well and drilling equipment are taxed, because Louisiana's current depreciation schedules fall well below the current ‘replacement cost new’ value that’s used in other states. The Louisiana Oil and Gas Association and Louisiana MidContinent Oil and Gas Association oppose the proposals, but are withholding their real opposition for an Aug. 6 meeting at which formal arguments will be heard.
Utah property owners are facing higher tax rates in the coming years due to a recent audit of the state's property tax system. The audit revealed a miscalculation that caused property owners in Utah to be undertaxed by more than $100 million since 2006. In recent years, Salt Lake City officials have been questioning why there has been so much growth and new development in the city, yet tax revenue projections seemed to remain flat. Utah's property tax system policy, known as truth-in-taxation, determines that although property values may rise, local government entities receive that same revenue from existing property from year to year. Additional revenue comes from newly developed properties, known as new growth. Earlier this year, Mayor Ralph Becker requested that the state auditor examine new growth within the tax system.
The Wisconsin Economic Development Corp. is once again accepting historic tax credit applications from developers, after the program was put on hold last month due to higher-than-expected demand. Earlier this year, Wisconsin doubled the amount of tax credits developers can receive for historic building rehabilitation projects. The program was expected to have a $4 million impact on the state budget, but the actual impact had reached $35 million.
The value of San Francisco's property grew by $10 billion for the fiscal year that started July 1 compared with the last fiscal year, now totaling $180 billion. This means more property taxes flowing to the city, San Francisco Unified School District and BART to fund parks, schools and other government services. According to San Francisco Gate, the increase in the property tax roll - up about 6 percent compared with fiscal 2013-14 - means there will be about $2.1 billion in property taxes owed. The city alone is expected to see its portion of property taxes increase by about $50 million for fiscal 2014-15, according to the assessor-recorder's office. Every San Francisco neighborhood saw an increase in assessed value this year, led by the Financial District, South of Market and Mission Bay, followed by South Beach and Pacific Heights. Commercial and residential properties accounted for $168 billion of the tax rolls for fiscal 2014-15, with business machinery and equipment comprising the remaining $12 billion.
This week, the Steering Committee on Symposia Series on Personal Property Tax met for the first time to begin a study of how personal property tax affects Wisconsin businesses and residents. In Wisconsin, there are four categories of personal property: furniture, fixtures, and equipment; machinery, tools, and patterns; boats and other watercraft; and all other personal property. Personal property is "self-assessed" and the cumbersome process is often a burden on business owners, in addition to being costly. Personal property taxes levies $270.4 million a year to local governments throughout the state to provide essential services, and local government input will be considered by the committee before any changes are to be made to the tax.
Due to wide-ranging in disparities in property values of 25 Downtown buildings, the Pittsburgh City Council is struggling to set a new real estate tax rate for 2015. The disparities came after the Allegheny County assessment appeals in 2013, according to the Pittsburgh Tribune-Review, and Councilwoman Natalia Rudiak said appeals of properties Downtown and in the Strip District cost the city nearly $6 million in tax money, but attorneys for property owners argue their clients were overassessed and paid more in taxes after appealing. Rudiak said setting the millage rate right now would be like "hitting a moving target" due to the assessment flaws.
Demand for office space rebounded in the second quarter, but now a few major office markets in Texas, such as Dallas-Fort Worth (DFW) and Houston, are threatened by overbuilding. However, as the tech and energy industries continue to grow in these cities, experts believe it will also help drive more office space demand. According to a recent report from commercial real estate services firm Cassidy Turley, the U.S. office market absorbed 15.1 million sq. ft. of space in the second quarter. Demand is still leading supply, causing average asking rents, at $22.36, to rise 2.2 percent over the second quarter of 2013. But new supply growth is starting to catch up, with 73 million sq. ft. of new offices under construction, up 34 percent compared to a year ago.
By Theodore F. Bayer, Senior Managing Consultant / Principal, San Francisco
Despite New York City Mayor Bill de Blasio boasting that his Fiscal Year 2015 budget did not raise taxes, since overall rates aren't increasing, most homeowners will still be paying higher property tax bills. Earlier this week de Blasio said he was "proud" that his administration lowered the property tax rate on Class 1 properties (one-, two- and three-family homes) by .18 percent; however, the tax assessment rose an average of 4.23 percent, so those homeowners will be paying higher property taxes than last year. Class 4 (commercial and industrial) property owners have it even worse, as their property tax rate saw a 3.5-percent bump to 10.68 percent for Fiscal Year 2015, which began July 1. The gross levy for all those Class 4 properties is up nearly 11 percent.
In an effort to spur investment in industrial areas and commercial real estate, Maryland officials approved an expansion of state Enterprise Zone Focus Areas in East Baltimore and Harford County. Companies and property owners that do business in an Enterprise Zone are eligible for income and property tax credits based on the job creation numbers or investment in capital improvements. In addition to an 80 percent, 10-year tax credit, Enterprise Zone Focus Areas can also receive benefits such as an 80 percent personal property tax abatement for the same time frame. Officials also increased the state income tax credit from $1,000 to $1,500 for hiring new workers.
After the debut of the Actual Value Initiative (AVI) reform effort, 57 percent of Philadelphia commercial property owners and 54 percent of residential property owners paid higher real-estate taxes this year than they did the previous year. According to Philly.com, under AVI, which Mayor Nutter championed and pushed through a hesitant City Council, the city reassessed all 579,000 properties in Philadelphia to clean up its deeply flawed tax rolls. Although AVI was designed to be revenue-neutral in its first year, a primary concern for Council was whether it would cause residents' overall share of the tax burden to increase in relation to commercial property owners. However, only 70 percent of eligible homeowners (low-income residents who owned their homes for at least 10 years and saw their taxes triple) enrolled in the "homestead exemption," which deducts $30,000 from city assessments for primary residences.
Two companies, SolarCity Corp. and Sunrun Inc., filed a lawsuit yesterday against the Arizona Department of Revenue (ADOR) over its decision last year to tax leased solar panels, which could cost thousands of solar users hundreds or thousands of dollars annually and kill the local solar market. According to the Phoenix Business Journal, the companies claim that in 2009 Arizona Gov. Jan Brewer signed into law legislation clarifying that no taxes should be given to leased solar panels, and that the department’s interpretation of a law calling for leased solar panel taxes is illegal. The two solar installer companies are also asking the court to declare that the ADOR has no authority to tax leased solar systems under a statute designed for the taxation of utility-owned electrical generation facilities that use the transmission and distribution systems to deliver power to their customers. These leased solar systems are not subject to valuation or assessment by ADOR under the law because “it is used primarily for on-site consumption,” according to the lawsuit.