The Future of Reappraisal: What a Four-Year Cycle Could Look Like

reappraisal

 

County representatives from across the state have joined together to form the NC Reappraisal Study Committee – a group tasked with investigating & analyzing the potential benefits of moving from an 8-year to a 4-year real property reappraisal cycle.

Stan Duncan & Brent Weisner, both members of the Reappraisal Study Committee, co-wrote an article called Making the Case for a Four-Year Reappraisal Cycle. The article explains that a four-year plan “is particularly attractive for staffing and budgeting concerns of NC counties” when considering the general time schedule being proposed1.

An overview of what this four-year reappraisal timeline could look like in NC is listed below (Duncan and Weisner):

What a Four-Year Cycle Could Look Like

  • Year 1: The Year of the Reappraisal (Effective as of January 1st of the calendar year):
    • Complete mailing notices of reappraisal values.
    • Conduct all informal and Board of Equalization & Review meetings.
    • Review appeals at the local level.
    • Maintain inventory of legal and physical changes to property.
    • Identify areas for redress in preparing for the next reappraisal.
  • Year 2 of the Reappraisal Cycle:
    • Complete all appeals pending before the NC Property Tax Commission, either by Consent Agreement or adjudication by hearing before the Commission, and possibly appellate courts.
    • Continue to maintain inventory of legal and physical changes, and continue redress areas of concern for the next reappraisal.
  • Year 3 of the Reappraisal Cycle:
    • Increase attention to market analysis, especially those market forces having changed since the effective date of the most recent reappraisal.
    • Continue to maintain inventory of legal and physical changes.
    • Develop preliminary Schedules of Values, Standards, and Rules for the upcoming reappraisal.
  • Year 4 of the Reappraisal Cycle:
    • Continue to monitor the local real estate market by location and property type in order to accurately prepare and apply the Schedules of Values, Standards, and Rules to be adopted by the board of county commissioners for the upcoming reappraisal.
    • Continue to maintain inventory of all legal and physical changes, verify areas of concern identified during the first two years of the cycle have been adequately studied and remedied if necessary, and review and reappraise all neighborhoods at market value with attention to equity among and between all neighborhoods, value stratifications, and property types.
  • Year 1: The Year of the Next Reappraisal
    • Start the process over again, while applying lessons learned and knowledge gained from the previous reappraisal.

Overall, “a four-year reappraisal cycle would eliminate the need for conducting sales assessment ratio studies in the fourth and seventh years under the current eight-year reappraisal cycles as provided for under G.S. 105-284(b), the Uniform Assessment Standards. And, under the current law, public service companies could only challenge the median ratio established in the year of the reappraisal.”1

Sources:
1. Duncan, Stan, and Brent Weisner, “Making the Case for a Four-Year Reappraisal Cycle,” Print 2014.

Prepare Taxpayers for the Supply vs. Inventory Distinction

suppy v inventory

As we gear up towards the end of yet another calendar year, put plans in place now to give a little PR time to the taxable, yet confusing, differences between Business Personal Property “supplies” and “inventory” for manufacturers, wholesalers, retailers, and contractors.

Why advertise this distinction?
While we may know and understand the ins and outs of the NC tax statutes, not all taxpaying citizens share in our enthusiasm for a thorough-read of the Machinery Act.

With NC on a 10 year population gain streak, it’s more important than ever to clearly advertise on the key differences in our state BPP laws versus some of the surrounding states in our southeast region. Virginia, West Virginia, Kentucky, Tennessee, Mississippi, and Georgia – all DO include business inventory in their tax base – where NC has chosen to keep it exempt.

Sounds straightforward enough, right?

Unfortunately, problems arise when what is defined as “inventory” from the taxpayer’s perspective differs from the legal definition of inventory for taxing purposes – especially those taxpayer’s who are new NC, and therefore new to making that distinction.

According to the NCDOR, the following are commonly reported issues county appraisers have with business owners concerning supplies & inventory:

  • Taxpayers call supply items their inventory!
  • Taxpayers don’t know how to list their supplies
  • Taxpayers don’t keep up with the amounts that are on hand
  • Taxpayers wants to exclude certain items when their business is not manufacturing, retail, wholesale, or contractor related

Year after year, as NC continues to draw in new business, you receive the same questions and spend more time and resources on discoveries for those taxpayers who fail to list their taxable business property “supplies” by confusing them for exempt “inventory.”

Save yourself time and increase your revenue pool: Don’t leave room for interpretation. 

Making the plans to highlight on these key differences now will save you time in the future. So cut down on unnecessary office calls and questions by hosting and highlighting the information on your website and in your office.

Online: Make links readily available on your county homepage, again on your tax department page, and again alongside any information related to BPP tax listings/payments.

In office: Place the information in convenient, easy-to-access locations around your office. Hang signs and offer brochures.

Don’t make business taxpayers hunt for information you want them to find. Make use of bold lettering and larger fonts to draw attention to details that need to stand out. And don’t leave room for interpretation – try offering examples that typically fall under each category and keep your taxpayers from guessing come listing period.

Need a refresher yourself on the differences between BPP “supplies” and “inventory”? Read The Taxable Difference Between Supplies & Inventory for a quick summary.

Sources:

Duty, David. “Cross Section of Business Personal Property Issues.” 2013 Advanced Personal Property Seminar. Sheraton Four Seasons Hotel, Greensboro, NC. 23 September 2013. PowerPoint Presentation.

The Taxable Difference Between Supplies & Inventory

taxable difference

NC is one of the few states in the Southeastern US to offer a tax exemption on BPP inventory; and to taxpayers, there is often a thin and confusing line between what counts towards inventory versus supplies, and which types of businesses can benefit from this exemption.

Even more confusing, what is seen as supplies for one business, can count as inventory for another.

Why does the difference matter? It matters because while inventory is exempt from the tax base, supplies most certainly are not. Business supplies are required by NC General Statutes to be listed and taxed annually.

Supplies that are mistakenly viewed by taxpayers (and their accountants) as inventory go unreported and are left off the tax rolls. That’s yearly revenue lost for your tax office – and more time that will be spent on discoveries down the road.

Save time and resources by educating business owners! See below for a summarized refresher on the NCGS definitions of “supplies” versus “inventory” and the business types this distinction applies to.


Which businesses are exempt?

Manufacturers, retailers, wholesalers, & construction contractors are exempt while in the regular course of business.

Inventory: Items in stock, which are held for sale during the regular course of business, and any packaging materials that go with, and become a part of the goods sold.

Examples include: 

  • Manufacturers  – Raw materials, goods in process, finish goods, or other materials that accompany and become a part of the sale of the property being sold
  • Construction Contractors – Goods held to be furnished in the course of building, installing, repairing, or improving real property
  • Crops, livestock, poultry, feed used in the production of livestock and poultry, orr other agricultural or horticultural products held for sale.
  • Cars, trucks, tires, etc. sold in the automobile industry
  • TVs, computers, mobile phones, etc.  sold in the electronics

Supplies: Items used to help conduct and maintain a business, but are not the direct source of the income – and are not held for sale by the business.

For example, purchasing coffee and popcorn to have on-hand daily for customers at a car dealership may contribute to the business and play a part in retaining customers, but those items are not held for sale and are therefore categorized as supply verses inventory.

Additional examples include:

  • Cleaning/Janitorial items
  • Office items (paper clips, note pads)
  • Maintenance items (oils & lubricants)
  • Fuels (consumed in vehicles owned or leased by the business)
  • Medical/Dental/Doctor/Veterinarian items (syringes, molds, crutches, cat litter)
  • Barber/Beauty items (shaving cream, hair coloring, make-up)
  • Restaurant/Hotel items: (dishware, trashcans, glasses, linens)
  • Snacks & Drinks that are on hand & free for employees or customers
  • Rental items & replacement parts

For tips on how to prepare and educate your taxpayers for annual listing, check out this article on ways to Prepare Taxpayers for the Supply vs. Inventory Distinction.

Sources:

Duty, David. “Cross Section of Business Personal Property Issues.” 2013 Advanced Personal Property Seminar. Sheraton Four Seasons Hotel, Greensboro, NC. 23 September 2013. PowerPoint Presentation.

North Carolina General Statutes, Chapter 105 (2013).

NC Counties Topping the Collection Rate Charts

The higher percentage of all taxable property that your county collects, the more revenue your tax office is generating.

We’ve got the latest list of NC counties leading the property tax collection rate category (excluding motor vehicles). Since even a slight change in the percentage you’re collecting can mean a big difference in your county’s revenue, it’s important to know where you stand and set appropriate benchmarks.

collection rate chart

For the Fiscal Year ended June 30, 2013, the percentage of taxes that were collected by each county ranged from 91.71% to 99.81%.

The average state-wide percent collected for NC counties varied by the following population groups:

  • 100,000 or Above: 98.64%
  • 50,000 to 99,999: 97.42%
  • 25,000 to 49,000: 96.52%
  • Below 25,000: 96.17%

Click here now to view the full NC County Tax Collection Report and know where your county stands. This report lists all 100 counties, ranked by the percent collected for all property, excluding motor vehicles, in each jurisdiction.

National Trends in County Government

trending topics

The National Association of Counties (NACo) surveyed a portion of their members to gain perspectives on the latest trends in county government – ranging in topics from social media to the impact of natural disasters.

There are 3,068 county governments in the U.S. Discover if your viewpoints closely align with what others in local government offices are thinking – or, if they are way off base.

Read on to discover key findings and stats from the frame of reference of county officials nationwide!

Survey Says…

19% meet with their Congressional delegations in person or by phone more than 10 times per year.

20% served on a local tourism board to promote economic development.

24% believe a better trained workforce would improve their local economy.

25% think Tax Reform is the top issue facing congress.

34% do not categorize their county as urban, suburban, or rural. They describe it as a “strong mix of all”.

40% are anticipating a local revenue shortfall in the current fiscal year, which may result in reducing services to the people in their communities.

48% operated a county jail at or above capacity, placing additional burdens on the county justice system.

51% selected “economic growth” as their public service passion.

52% said state policies and programs have had a positive impact on their county – but amidst other policy challenges, reductions in state funding are the most common source of counties’ current revenue shortfalls.

63% want to keep the federal tax deduction for local property taxes.

66% are using Facebook and Twitter.

70% were in counties that received a Major Disaster Declaration over the last 5 years, appearing that the “new normal” of natural disasters is having widespread impact – reinforcing the importance of disaster aid for response and recovery.

72% support increasing the federal gas tax to boost the Highway Trust Fund and give high priority to new local investments in infrastructure, business development and workforce development.

73% authorized county funding for economic development.

78% support maintaining the tax-exempt status of municipal bonds, a key federal-state-local partnership.

81% support early voting measures in the election system.

Source: 2013 NACo Outlook and Opinion: National Trends through the County Lenshttp://www.naco.org/newsroom/pubs/Documents/Surveys/2013%20NACo%20Outlook%20and%20Opinion.pdf