Business Personal Property Tax Compliance: Advanced Strategies

Business Personal Property Tax Compliance:

Advanced Strategies to Avoid Costly Errors Overcoming Challenges With Exemptions and Exclusions, Depreciation, Valuation, and Jurisdiction

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TUESDAY, NOVEMBER 12, 2013

Presenting a live 110-minute teleconference with interactive Q&A

Ian Carr, Senior Manager, Deloitte Financial Advisory Services, Atlanta

Megan K. Lusby, Principal, SC&H Group, Sparks, Md.

Selena Longway, Senior Manager, SC&H Group, Sparks, Md.

Bobby Barnes, National Director of Property Tax Compliance Services, Ducharme McMillen & Associates,

Indianapolis

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FOR LIVE EVENT ONLY

Business Personal Property Tax Compliance: Advanced Strategies to Avoid Costly Errors Seminar

Megan K. Lusby, SC&H Group

[email protected]

Selena Longway, SC&H Group

[email protected]

Nov. 12, 2013

Ian Carr, Deloitte

[email protected]

Bobby Barnes, Ducharme McMillen & Associates

[email protected]

Today’s Program

Personal Property Definitions, Exemptions Slide 8 – Slide 29

[Bobby Barnes]

Jurisdictional Considerations Slide 30 – Slide 46

[Megan K. Lusby]

Valuation “Speed Bumps” Slide 47 – Slide 63

[Ian Carr]

Internal Controls and Compliance Slide 64 – Slide 79

[Selena Longway]

Notice

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY

THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY

OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT

MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR

RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

You (and your employees, representatives, or agents) may disclose to any and all persons,

without limitation, the tax treatment or tax structure, or both, of any transaction

described in the associated materials we provide to you, including, but not limited to,

any tax opinions, memoranda, or other tax analyses contained in those materials.

The information contained herein is of a general nature and based on authorities that are

subject to change. Applicability of the information to specific situations should be

determined through consultation with your tax adviser.

PERSONAL PROPERTY DEFINITIONS, EXEMPTIONS

Bobby Barnes, Ducharme McMillen & Associates

NORTH AMERICA’S TRUSTED CHOICE FOR CORPORATE TAX SOLUTIONS

DuCharme, McMillen & Associates, Inc. All rights reserved. Reproduction of this document or any portion thereof without written consent is prohibited.

9

STRAFFORD PUBLICATIONS:

DEFINITIONS OF PERSONAL

PROPERTY AND EXEMPTIONS

BOBBY BARNES

NATIONAL DIRECTOR PROPERTY TAX

NOVEMBER 12, 2013



10

Personal Property

States

Cycle

Terms

Inventory

States

Terms

Freeport

Exemptions & Incentives

PERSONAL PROPERTY OVERVIEW



11

WHAT IS PERSONAL PROPERTY TAX

An annual local tax on tangible assets owned by a business

Based on value, age, and use of assets

Linked to specific street address, not just zip code

Real Estate: physical land and appurtenances affixed to the land

Real Property: rights to real estate; property is related to the use of the land on which the business is conducted

Personalty: property is related to the business operations



12

WHICH STATES HAVE IT?

Delaware

Hawaii

Illinois

Iowa

Minnesota

New York

New Jersey

New Hampshire

North Dakota

South Dakota

Pennsylvania

Ohio

These 12 states do not assess BPP tax:

All 39 remaining states DO assess BPP tax



13

REAL VS. PERSONAL EXAMPLES

Real Property Fences

Land

Buildings

Building Improvements

Sprinkler Systems

Parking Lots

Roof repairs

Personal Property Machinery & Equipment

Furniture & Fixtures

Computer Equipment

Tools, Molds, Dies & Jigs

Inventory

Supplies

CIP



14

Capitalized and Expensed Assets

CIP

Supplies

Leased Assets

Inventory

Vehicles

WHAT IS POTENTIALLY TAXABLE



15

THE (TYPICAL) PROPERTY TAX CYCLE ASSESSMENT

DATE

RETURN FILED

NOTICE OF VALUE

RECEIVED VALUE PROTEST

DEADLINE

TAX BILL

RECEIVED

TAX BILL

DUE

APR

JULY

OCT

JAN

DATA

GATHERED



16

Lien/Assessment date: all assets in place on this date must be reported on rendition

Rendition: taxpayer’s report of assets to jurisdiction, categorized according to state class

Situs: geographical location of the asset

Due Date: rendition must be postmarked by this date to be timely filed; penalties accrue if rendition is filed late Must have US Postal Service proof of postmark; i.e., date-

stamped Certified Mail Receipt

Extension: request for additional time to file rendition; not all jurisdictions grant them

PROPERTY TAX TERMS



17

Notice of Value: official notification to taxpayer of assessed value; not all jurisdictions send these

Appeal: taxpayer’s protest of assessed value

Can be informal (desktop) or formal

Tax Bill: property tax bill based on assessed value, can be issued in arrears

For some jurisdictions, this is the only notification of assessed value the taxpayer receives

PROPERTY TAX TERMS



18

Three Forms of Obsolescence

Physical (normal wear & tear)

Technical/Functional (outdated product, inefficient use of energy, etc.)

Economic (reduction in demand)

PROPERTY TAX TERMS



19

Original/Reported Cost: acquisition cost of asset when first purchased/acquired

Acquisition/In Service Date: date asset was first purchased/acquired by owner

Index Factor: Replacement Cost New trends up cost of asset to present day value, accounts

for inflation

Depreciation Factor: jurisdiction defined rate of asset depreciation, not related to Corporate Tax Depreciation

PROPERTY TAX TERMS



20

Market/Current Value: value of asset after cost trending and depreciation application

Assessment Ratio: jurisdiction defined ratio applied to market value to render taxable value

Assessed/Taxable Value: value of asset used to calculate property taxes owed

Rendered Value: taxpayer’s estimate of assessed value

Used in comparison with assessed value to gauge appropriateness of assessment

PROPERTY TAX TERMS

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22

Real Estate

Intangibles

Vehicles in most states

Inventory in most states

Software in a few states

POTENTIALLY EXCLUDED ASSETS



23

These 12 states tax Inventory:

Arkansas

Georgia

Kentucky

Louisiana

Maryland

Mississippi

Oklahoma

Tennessee

Texas

Virginia

Vermont

West Virginia

INVENTORY STATES



24

Inventory: goods intended for sale or lease

Merchandising Inventory: goods held for sale (retail) or resale (wholesale)

Anything bought to be sold

Manufacturer’s Inventory: manufactured goods held for sale or resale

Anything made to be sold

4 types

INVENTORY TERMS



25

Raw materials: natural resources, ore, oil, lumber, components (circuit boards)

Work in Process (WIP): costs of raw materials that are in process of being acted upon to produce an item

Finished Goods: items that have gone through the manufacturing process and are complete; ready for sale or next phase

Manufacturing Supplies: items that are consumed during the manufacturing process Chemicals, repair parts, lubricants

INVENTORY TERMS



26

Freeport exemption in some states Inventory exemption for goods shipped out of state

• Some sub jurisdictions do not honor

Inventory manufactured in the state (limited)

• Sometimes only a flat percentage applies

Goods in Transit

Interstate commerce

INVENTORY FREEPORT



27

Documentation that can be requested Additional form to file

Monthly balances

Sales reports by state

Cost of good sold

Signed affidavit

True-up filing in subsequent year

INVENTORY



28

Often annual compliance required to receive benefit

Pollution Control Assets

Inventory shipped out of state

Enterprise Zone, IFT, TIF

Abated assets or other tax incentives

FILOT

PILOT

Grants

Bond program

“Under” threshold

POSSIBLE EXEMPTIONS & INCENTIVES



29

Manufacturing and Tooling equipment in some states

Idle equipment and R&D assets favorable treatment in some states

Ownership (military hospitals, non-profits)

Use (Leased to hospitals, non-profits, gov’t entities

POSSIBLE EXEMPTIONS & INCENTIVES

JURISDICTIONAL CONSIDERATIONS

Megan K. Lusby, SC&H Group

MEGAN LUSBY SLIDES



• Jurisdictional boundaries affect tax liabilities

• Accuracy in location assignment of fixed assets

• Tracking and taxation of fixed assets used by others

• Tracking of inventory, just like fixed assets

32



• Where is your property located?

• County

• City

• Township

• School District

• Appraisal District, etc.

33



• Examples to consider where multiple tax rates exist

• Texas – county, school district, appraisal district, hospital district

• Maryland – county, incorporated town, fire/sewer

• California – county, school district, community college, water

• Colorado – county, city

• Michigan – county, city, township, village

34



• Resources available to verify reporting / taxing jurisdiction

• Software programs (for purchase)

• County / Taxing jurisdiction website

• Maps (online/hard copy)

• USPS website (for county only)

35



• Caution!

• Some streets may span multiple jurisdictions – odd vs. even addresses

• Some buildings or shopping centers could reside in multiple jurisdictions

• If you get multiple answers from the previously mentioned searches,

contact the local assessors for help

36





• NAUSEA



• Initial Purchase of Asset

• Purchasing in bulk

• Assignment of unique asset numbers/identifiers

• Correct initial location assignment

• Who is making the location decision?

• Does the decision-maker know the tax implications of an incorrect location?

• Was the asset purchased at Corporate, but being shipped to another location?

• Was the asset purchased, without knowing where the asset will ultimately

physically reside?

38



• Assets in place, that may move to another location

• All assets should be tagged / have a unique asset number

• Ensure there is a procedure in place to capture the movement of assets

• Ensure there is a documentation trail for a location manager to inform

corporate when an asset moves to another location; as well as capturing

the transfer in at the new location

• IT department should have a procedure in place for tracking computer

hardware – ensure that information is in sync with the Corporate fixed

asset tracking methods

39



• Building/Location spans multiple taxing jurisdictions

• A corporate office complex or a golf course may span two different taxing

jurisdictions

• Know in which building each asset is located

• Understand the assessment tables, ratios, and tax rates in each

• Assets may move between departments within a building that spans

multiple jurisdictions

• Each asset should be assigned to a specific department code, so you know

where it is physically located at all times, even if that department moves

40



• Physical Inventory

• If records are not in good order, consider a physical inventory of assets to

obtain an accurate starting point of where the assets are located

• Next step, make sure you have unique identifiers for each asset

• Make sure you put a procedure in place to track asset movements, going

forward

41



• Traditional Lessors of personal property

• Track property they own/use themselves

• Track property they lease/loan to other businesses

• Know the terms of the lease agreement with the Lessee

• If Lessor is responsible for reporting/paying tax, ensure property is being passed

through to Lessee, if that is how the agreement reads

• Ensure Lessee is not also reporting the property, as double taxation would be

an issue

• Ensure Lessee is notifying lessor when they move the property they are leasing

from the Lessor to another physical location

42



• Traditional Lessors of personal property

• Lessors must be clear in their lease agreements who is responsible for

reporting the fixed assets/equipment on the personal property renditions

• Provide filing ID # - both Lessor and Lessee

• Ensure both parties know the physical location of the property, as of the lien

date

• Don’t want the jurisdiction to assess both parties, as getting a refund could take

time away from your employees being able to handle other matters

• Property loaned/donated to others

• A company may loan or let another company use their fixed assets for a

set period of time – know the rules in your jurisdiction

• Who is responsible for reporting this property on the personal property returns,

and ensure it is being reporting in the location it was physically located at the

lien date

43


• Tracking of inventory, just as important as tracking fixed assets

• Inventory can include:

• Commercial/manufacturing

• Raw materials

• Inventory in process

• Finished goods/Stored goods

• Supplies, etc.

• Inventory can move around, just like fixed assets

• How is inventory being tracked?

• Can you see movements of inventory between locations?

• Transfers in and out of various locations or warehouses

• Location of inventory as of specific dates

44



• Examples of why inventory tracking is important

• MD – only a few counties, and some incorporated towns, tax commercial

and/or manufacturing inventory

• TN – only supplies & raw materials are taxable

• TX – all inventory is taxable

• GA – inventory is taxable at local level

• Note> See state/jurisdiction laws for specific taxability and exemptions for all states

45



• Exemptions exist for various kinds of inventory, depending on locality,

type of inventory, and movement of inventory

• Tracking movement of inventory into and out of different warehouses

• The starting and ending location of inventory could affect any exemption

• Tracking of the amount of time finished inventory is in a location before it is

shipped to a customer; turnaround time

• Freeport exemptions generally depend on the number of days the inventory is

sitting at a location before it is shipped out

• Inventory movements out of state

• Inventory movements out of the country

• Federal exemptions exist for inventory destined for non-US locations

Note> See state/jurisdiction laws for specific taxability and exemptions for all states

46

VALUATION “SPEED BUMPS” Ian Carr, Deloitte

Valuation “Speed Bumps”

Ian Carr, Deloitte Financial Advisory Services LLP

Copyright © 2013 Deloitte Development LLC. All rights reserved. 49

Overview of valuation “Speed Bumps” The property tax valuation process is riddled with “speed bumps” that can lead to additional time

spent with assessors post-filing, the risk of increased tax liability, and/or increased exposure

during assessor audits. We will go through the following discussion points to provide you with

areas to keep in mind:

• Starting Point

• Aligning Assets with Depreciation Schedules

• Composite table vs. Index and Depreciation Tables

• Identifying Proper Tables

• Appropriate Floor Values

• Fair Market Value Declarations

• Examples

• Valuations: Is one the answer?

• Mobile Property: Where is it located?


Starting Point

• Disposals/transfers booked topside

• Exemptions (intangibles, software, labor, legal fees, real property, LHI,

etc.)

• Identify costs/assets associated with idle, spare and abandoned

equipment

• Work papers document the reconciliation between sub-ledger and

balance filed on return

• Increasing risk of third party audits

The starting point is the fixed asset listing and compliance process.


Aligning Assets with Depreciation Tables Many jurisdictions prompt the taxpayer to select the appropriate depreciable life for their assets.

As a result, tax professionals have to be knowledgeable about property taxes, and about the

subject assets of their company.

• The economic life typically is directly related to the depreciation

table used by an assessor.

• Below are examples of economic life recommendations from the

Georgia Department of Revenue


Identifying Proper Tables Once you have identified the appropriate depreciable life for an asset, you may need to identify the

assessor table that reflects how the fair market value changes as equipment ages.

Example

North Carolina

8 Year Life 10 Year Life

Age Schedule A Schedule I Schedule A Schedule I

1 87 87 90 90

2 77 74 82 79

3 66 62 74 69

4 53 50 64 59

5 40 36 54 49

6 28 25 45 38

7 25 35 29

8 25 25


Composite Table vs. Index and Depreciation Tables

• Jurisdictions provide varying degrees of granularity and flexibility to

the taxpayer

• Some have composite tables

– A combination of the cost index trend factors and the percent

good factor

– E.g. Georgia

• Others maintain separate tables

– The cost index trend factors and the percent good factors are

separately shown

– E.g. Florida

An appraisal of personal property considers historical cost versus replacement cost new (RCN) for

an asset of like-kind utility and then adjusts RCN to reflect physical depreciation.


• The floor values may not be representative of the true fair market

value of the subject assets

• The floor values do not take into consideration functional, economic,

or technical obsolescence

• Example:

Floor Values Many jurisdictions maintain depreciation tables with high floor values, for a given depreciation

table.

Florida


• Certain jurisdiction property tax returns ask the taxpayer for a

declaration on the taxpayer’s estimate of value

– Georgia (in summary)

– Florida (in detail by asset type)

• Other jurisdiction do NOT have this option

– It is incumbent upon the taxpayer to provide this information in

some form of supplemental information or attachment

– e.g. California

• Issues with declaring a value on the return?

Fair Market Value Declarations When filing an annual business personal property tax return, the company has the opportunity to

state their estimate of value and provide the assessor a basis for that value.





• OBJECT


• Benefits

– Valuations are beneficial but the benefits can decrease when the

valuation is used on a stand-alone basis

– Helpful for educating assessors on industry and more importantly

your subject assets

• Considerations

– A mailed in valuation without dialogue typically yields a lower

benefit

– A partial reduction in value vs. litigation

Valuations: Is one the answer? Valuations provide an estimate of the value of subject assets.


• Types of valuations analyses

– Valuation

– Normal useful life analysis

– Obsolescence study

– Quantify functional, economic, and/or technological obsolescence

– Index/trend analysis

– Exempt cost analysis

• Effective use of valuations

– Know the issues in your industry and with your assets

– Select the type of valuation analysis which will focus on your issues

– Open dialogue with assessors including an executive summary of

the valuation analysis

– Property tax is a negotiation

Other Valuation Considerations Valuations provide an estimate of the value of subject assets.


Example 1: LA County

Estimated Tax Savings:

81,730$ 114,659$

San Diego Table Valuation Table

Year Cost Depreciation Fair Market Value Tax Rate Liability

2012 10,000,000$ 85.0% 8,500,000$ 1.10% 93,500$

2011 8,000,000 69.0% 5,520,000 1.10% 60,720

2010 12,000,000 54.0% 6,480,000 1.10% 71,280

2009 5,000,000 40.0% 2,000,000 1.10% 22,000

2008 6,000,000 28.0% 1,680,000 1.10% 18,480

2007 7,000,000 18.0% 1,260,000 1.10% 13,860

2006 15,000,000 11.0% 1,650,000 1.10% 18,150

2005 11,000,000 10.0% 1,100,000 1.10% 12,100

74,000,000$ 28,190,000$ 310,090$


2012 10,000,000$ 76.0% 7,600,000$ 1.10% 83,600$

2011 8,000,000 52.0% 4,160,000 1.10% 45,760

2010 12,000,000 33.0% 3,960,000 1.10% 43,560

2009 5,000,000 15.0% 750,000 1.10% 8,250

2008 6,000,000 11.0% 660,000 1.10% 7,260

2007 7,000,000 11.0% 770,000 1.10% 8,470

2006 15,000,000 11.0% 1,650,000 1.10% 18,150

2005 11,000,000 11.0% 1,210,000 1.10% 13,310

74,000,000$ 20,760,000$ 228,360$


2012 10,000,000$ 78.5% 7,845,996$ 1.10% 86,306$

2011 8,000,000 46.0% 3,682,082 1.10% 40,503

2010 12,000,000 28.3% 3,393,463 1.10% 37,328

2009 5,000,000 12.5% 623,270 1.10% 6,856

2008 6,000,000 6.4% 386,429 1.10% 4,251

2007 7,000,000 6.1% 430,112 1.10% 4,731

2006 15,000,000 5.6% 834,489 1.10% 9,179

2005 11,000,000 5.2% 570,603 1.10% 6,277

74,000,000$ 17,766,445$ 195,431$

Los Angeles County Depreciation Table

San Diego County Depreciation Table

Valuation Depreciation Table


Example 2: Florida County

Estimated Tax Savings:

42,418$ 53,304$

Communication Index No Indexing

Year Cost Trend Depreciation Fair Market Value Tax Rate Liability

2012 10,000,000$ 1.00 90.0% 9,000,000$ 2.00% 180,000$

2011 8,000,000 1.03 79.0% 6,509,600 2.00% 130,192

2010 12,000,000 1.06 67.0% 8,522,400 2.00% 170,448

2009 5,000,000 1.06 54.0% 2,862,000 2.00% 57,240

2008 6,000,000 1.09 43.0% 2,812,200 2.00% 56,244

2007 7,000,000 1.12 33.0% 2,587,200 2.00% 51,744

2006 15,000,000 1.19 26.0% 4,641,000 2.00% 92,820

2005 11,000,000 1.24 22.0% 3,000,800 2.00% 60,016

74,000,000$ 39,935,200$ 798,704$


2012 10,000,000$ 1.00 90.0% 9,000,000$ 2.00% 180,000$

2011 8,000,000 1.01 79.0% 6,383,200 2.00% 127,664

2010 12,000,000 1.01 67.0% 8,120,400 2.00% 162,408

2009 5,000,000 1.01 54.0% 2,727,000 2.00% 54,540

2008 6,000,000 1.02 43.0% 2,631,600 2.00% 52,632

2007 7,000,000 1.03 33.0% 2,379,300 2.00% 47,586

2006 15,000,000 1.04 26.0% 4,056,000 2.00% 81,120

2005 11,000,000 1.04 22.0% 2,516,800 2.00% 50,336

74,000,000$ 37,814,300$ 756,286$


2012 10,000,000$ 1.00 90.0% 9,000,000$ 2.00% 180,000$

2011 8,000,000 1.00 79.0% 6,320,000 2.00% 126,400

2010 12,000,000 1.00 67.0% 8,040,000 2.00% 160,800

2009 5,000,000 1.00 54.0% 2,700,000 2.00% 54,000

2008 6,000,000 1.00 43.0% 2,580,000 2.00% 51,600

2007 7,000,000 1.00 33.0% 2,310,000 2.00% 46,200

2006 15,000,000 1.00 26.0% 3,900,000 2.00% 78,000

2005 11,000,000 1.00 22.0% 2,420,000 2.00% 48,400

74,000,000$ 37,270,000$ 745,400$

Florida - Average of All Index Factor

Florida - Communication Index Factor

Florida - No Index Factor


• Where is the property booked?

• Is the property easily tracked?

• Is the property constantly moving or is it fairly static for

periods of time?

Mobile Property: Where is it located? If your company has mobile property, there are several questions one should ask.


This presentation contains general information only and is based on the experiences and

research of Deloitte practitioners. Deloitte is not, by means of this presentation, rendering

business, financial, investment, accounting, tax. legal, or other professional advice or services.

This presentation is not a substitute for such professional advice or services, nor should it be

used as a basis for any decision or action that may affect your business. Before making any

decision or taking any action that may affect your business, you should consult a qualified

professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any

loss sustained by any person who relies on this presentation.

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Copyright © 2013 Deloitte Development LLC. All rights reserved.

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INTERNAL CONTROLS AND COMPLIANCE

Selena Longway, SC&H Group

SELENA LONGWAY SLIDES

INTERNAL ISSUES & CONTROLS

INTERNAL ISSUES & CONTROLS

• The personal property tax team

• Structure

• Training

• Turnover/extended absence

• Compliance software

• Selection

• Implementation

• Maintenance

• Tracking

• Big picture, key metrics

• Budgeting & accrual

• Other internal controls

66

PROPERTY TAX TEAM STRUCTURE

• By geographic region

• Pros – regional expertise, ability to ID issues and strategize

• Cons – procedures may not be standardized from region to region, tunnel

vision

• By property type – real & personal

• Pros – standardized procedures, easier onboarding

• Cons – risk for double-assessment of improvements, lack of visibility:

triggers for revaluation

67

PROPERTY TAX TEAM STRUCTURE

• By function – compliance & audit/controversy

• Pros – focused compliance team = shorter compliance season,

streamlined procedures, easier onboarding

• Cons – limited transfer of knowledge, lack of ownership

• Lean internal staff supplemented by outsourcing/co-sourcing

partners

• Pros – access to expertise, lessens need for internal training

• Cons – potential loss of control of data, lack of portability

68

STAFFING TURNOVER & EXTENDED ABSENCES

• When should you invest time developing and conducting in-house

training?

• When is it beneficial to use outside training resources?

69


• Where in-house training makes sense:

• Processes and procedures specific to your company should be

documented for training purposes

• Determine where your process falls outside a process driven by compliance

software

• Ensure consistent procedures across your team

• Conduct peer reviews on a regular basis

• Non-standard reporting positions should be documented

• Critical in the event of staff turnover and/or extended absence of a team

member

• Easier to shift responsibilities to respond to increased audit activity or heavy

deadlines

• If you outsource or co-source any compliance, who is documenting this – you or

your provider?

70


• Where outside resources can be helpful:

• Software training

• Up-front training for current team members

• Access to future training for new team members

• Concept training

• Various organizations offer in-depth personal property tax or valuation concept

training

• Virtual training

• State-specific training

• Assessor organizations

• Local chapters of national organizations

71





• PACKET

PROPERTY TAX SOFTWARE SELECTION

• Selection criteria:

• Is it important to your organization that the same software application be used for both real and personal property tax compliance?

• How much content do you expect your compliance software to provide?

• Form updates, forms central vs. local filing, exemption forms, depreciation tables

• How much control do you want to have over the way assets are mapped for reporting purposes?

• How much fixed asset management do you expect your software application to handle?

• How easy is it to train (or get training for) new team members?

• What kind of customer support does the vendor offer?

• Do you want to give management access to reports/key summary data?

• What considerations are there from an IT perspective?

• Does your team like the software?

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IMPLEMENTING COMPLIANCE SOFTWARE

• Make sure you:

• Assign a project champion

• Allocate appropriate time/resources – don’t assume the vendor will

do the heavy lifting

• Start the selection process as soon as your compliance season winds

down

• Allow at least three months for implementation, training, and testing

• Take the time to understand standard fields, reports, and accrual

tools offered by the software, and consider what customization you

may want to perform

• Understand how the software’s workflow complements or conflicts

with your existing procedures, and how willing you are to make

changes

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MAINTAINING COMPLIANCE SOFTWARE

• Things to consider after implementation:

• Assign a team member to collect and communicate recurring issues

and suggestions for improvement back to the software vendor

• Perform periodic reviews of any content supported by the vendor –

don’t assume they are mapping assets correctly or have the most

current forms/tables

• Special considerations if you outsource or co-source:

• Is your provider using your software, or theirs?

• If theirs, is it an internally developed application, or one that is

commercially available?

• Who owns your data?

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TRACKING PERSONAL PROPERTY TAX DATA

• Know your liability

• Understand where your liabilities are concentrated, and what factors

are most important – geographical location, location type

• Know where you have appealed or been audited in the past, and

document the outcome

• Ability to summarize and analyze liability by location type, age,

jurisdiction, and asset type

• Ability to compare your assessed value to rendered value and prior

year value

• If you outsource – do you have visibility into these metrics both

during and after the engagement term?

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TRACKING PERSONAL PROPERTY TAX DATA

• Budgeting and accruals

• Consider frequency of updates to your budget/accrual and method

for accrual

• Based on your needs, should you use your compliance software or

will a spreadsheet suffice?

• Make sure your budget considers:

• New/projected CapEx

• Aging property and corresponding decrease in value

• Rate changes

• Carryforward of audit findings/escape assessments

• Tax rate changes

• Process for monitoring key jurisdictions

• How/when are accruals updated?

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OTHER INTERNAL CONTROLS

• Source data

• Establish contacts in fixed asset and inventory accounting

departments

• Capitalization/financial accounting procedures

• Compatibility with PPT reporting and assessment

• Late-capitalized assets

• Restated costs, asset impairments

• Lump-sum assets, vague descriptions

• Inclusion of intangibles

• Cost segregation studies implemented without regard to property tax

implications

• Unrecorded disposals

• Work-arounds vs. changes in capitalization procedures

• Leased real estate & potential personal property tax implications

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OTHER INTERNAL CONTROLS

• What is your process for monitoring and acting on jurisdictional

changes?

• Changes to tax rates, depreciation rates, forms

• Property tax legislation and rulings that may impact your reporting

posture

• Designate responsible person(s) on your team

• Report at regular intervals, or document during return preparation

• Use caution when relying on compliance software or content

subscription to provide updates

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Business Personal Property Tax Compliance: Advanced Strategies

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