A Notice of Assessment, Taxable Valuation and Property Classification (Notice) from your local assessor is on the way to your mailbox, if you haven’t already received it, for each parcel of real property that you own. Printed on the top of the Notice in big, red capital letters is: THIS IS NOT A TAX BILL. So, most folks are inclined to throw the notice away. Don't.
This Notice lists five important things about your property as determined by the assessor: its assessed value; its taxable value; its classification; whether certain exemptions, such as principal residence, qualified agricultural property or others, apply; and whether the property was transferred in the prior year. The Notice lays out the process for appealing any of the above items, should you want to do so.
It’s important to understand the alphabet soup of terms and acronyms. The assessed value, or AV, is 50 percent of the true cash value, or TCV, as determined by the local assessor as of December 31 of the prior year. Generally, TCV is the usual selling price or fair market value of property as determined by any method recognized as accurate and reasonably related to market value.
The state equalized value, or SEV, is 50 percent of the TCV, as determined by the State Tax Commission once all properties throughout the state have been uniformly assessed. If the local assessor has done his or her job properly, the AV will ultimately be adopted as the SEV.
In the year immediately following a transfer of ownership, the taxable value, or TV, of the property is the same as the SEV, or 50 percent of the TCV of the property on December 31 of the prior year. Until ownership in the property is transferred again, the TV of the property is the lower of either the SEV for that year or the TV for the prior year increased by the lesser of 5 percent or the rate of inflation. This allows a taxpayer to enjoy some tax protection in a rising real estate market, yet still typically receive a tax break in a falling market.
Classification describes the actual use of the property—or in some cases the property’s highest and best use—such as industrial, commercial, agricultural, residential, etc. This is not the same as zoning, which limits the uses to which a property can be put.
Property owners need to file their appeals strictly in accordance with the instructions provided on the Notice, which may vary slightly from jurisdiction to jurisdiction, if they would like to challenge the assessed or taxable value or classification of their property. Where there is a good reason to file an appeal, make sure to do so in a timely manner. If you miss a deadline, you won't be able to continue the appeal. So carefully scrutinize the Notice, understand your rights and appeal on time.
Chris Meyer is a partner and chair of the Property Tax Group at Warner Norcross & Judd LLP and can be reached at 616.752.2423 or firstname.lastname@example.org