Protesting Minnesota Commercial Property Tax Laws

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With the doom and gloom in the economy and the uncertainty in the real estate market, 2009 may be the year to challenge property taxes. Amy Grady understands Minnesota Property Tax Law including real estate taxes, property taxes, tax appeals, commercial property tax, retail property tax, challenge property tax and more. The deadline for filing tax petitions is April 30, 2009, so now is the time to look at all the factors that ultimately lead to a property tax bill and whether that bill can be reduced. Understanding the process and the deadlines will protect therights a commercial property owner may have to reduce property taxes this year, and for many years to come.

Property taxes are one of the single biggest expenses a commercial property owner faces. But foreclosures are on the rise, energy costs are eating into diminishing profits, tenants are downsizing or closing up altogether, and vacancy rates are therefore rising, all of which results in rising capitalization rates. With the crisis in the credit markets forcing a market downturn, every commercial property owner should look closely to see that tax assessments reflect what is happening in the

declining real estate market. It is important to contact an attorney with property tax law knowledge in Minnesota including knowledge of property tax refund, income property tax, property tax court, appeal property tax, tax property consultation, an d more.

Minnesota has a complex property tax system. Issues of valuation, exemption, classification, and equalization all play a part in the analysis of whether a property taxpayer will ultimately receive a check refunding overpaid property taxes. When looking at a property tax issue, ask the following questions.

When challenging property taxes, remember that the focus is on the value of the property, not the resulting taxes. The bottom-line question in every property tax appeal is, what was the property’s market value on the assessment date? Taxes are assessed as of January 2 each year for taxes payable the next year. So for the April 30, 2009, tax petition deadline, we are challenging the assessor’s market value as of January 2, 2008, for the taxes payable on May 15 and October 15, 2009. The status of the property as of that date is the issue to resolve, either through settlement discussions with the assessor or through litigation before a tax court judge. Whether you deal with industrial property tax, apartment property tax, manufacturing property tax, warehouse property tax, hotel property tax, or office property tax in Minnesota you should consult an attorney.

Assessors are required to value property each January 2 at “market value.” Market value means the price a willing buyer would pay a willing seller in an arm’s length transaction. So a property owner must ask, what would the economic (market) rent, vacancy rate, and cap rate be for my property as of January 2, 2008? In Minnesota, the “fee simple” interest, not the “leased fee” interest in property is to be valued. The issue of fee simple vs. leased fee has been the subject of protracted litigation in neighboring states and was just this year resolved by seven members of the Wisconsin Supreme Court in the Walgreens v. City of Madison decision. In a 58-page decision, the Wisconsin Supreme Court essentially wrote a treatise on the fee simple vs. leased fee issue that is now guiding other states grappling with this complex appraisal issue. A good lawyer can assist with real estate tax appeals, challenge real estate taxes, commercial real estate tax appeals, and much more.

It is also important to make sure that only the real estate itself, and not the income generated by the business, is being taxed. Ad valorem, or property taxation, requires that only the value generated by the real estate itself can be taxed. Assessors are required to physically inspect property every five years but must value every property every year, as of the January 2 assessment date. How do assessors do all that? Since assessors are often overworked and understaffed, they rely on a mass appraisal analysis, looking at sales in the vicinity and analyzing market trends. Most properties are assessed with little or no specific information on the property itself. Accordingly, the more information a property owner can share with the assessor, the more the assessment will address the specific valuation issues unique to that particular property.

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