How a Recession Could Affect Commercial Property Tax 

In this unprecedented slowing economy, many finance and tax professionals are asking how various levels of government, businesses, assessors and others should respond to the current situation. One important question for everyone, especially organizations with large multi-property portfolios, is what will happen in terms of tax and appeal processes and timelines in times like these?

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Various levels of government have begun offering solutions such as the introduction of deferred property tax payments, or a certain amount of tax forgiveness to qualifying commercial property owners. That being said, what happens if your jurisdiction does not address the issue of property tax or if your organization is not eligible for aid? Since property tax is based on fair market value, depending on the reassessment cycle, it may take time for assessors to reevaluate values. Your next property tax valuation could still be high despite the months of closures, vacancies and decreased land value experienced during these extenuating circumstances. In fact, assessors might be more hesitant to lower property values during a recession due to declining local government revenues and increased need for social support.

One way to prepare for such fluctuations is to incorporate commercial property taxes into your overall financial strategic planning all year round. But, in extreme cases such as these, diligent preparation might not be enough. This is where proper and effective tracking and reporting are fundamental. It is important to be proactive and demonstrate to the assessing authorities the extent of the impact on businesses and values.

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Being able to support appeals with good data, including  value trends and benchmarks, and ensuring you have an accurate property tax calendar with important dates for each jurisdiction is key. You want to make sure that if you’re over assessed in a time of economic downturn, you are prepared with the information you need for an appeal. Timeliness in any appeal is crucial which is why having one system to track, notify and manage all the moving parts of an appeal can be incredibly valuable. This becomes especially pertinent as deadlines shift due to tribunal closures or government mandated deferrals in response to the pandemic.    

Property tax should always be top of mind as it is one of the largest expenses for owners, occupiers and managers of multi-property portfolios. Layer on top of that an unprecedented global crisis that launches most economies into a recession and it quickly becomes apparent how much of an impact fluctuations in this expense can have on an organization in times of stress. Since the processes associated with property tax have limited transparency and organizations must shoulder the burden of proof when it comes to proving fair market value, it quickly becomes apparent that property tax is a financial risk that needs to be closely monitored and proactively managed at all times.

Contact us to learn more about how our property tax technology can help mitigate risk for organizations with multi-property portfolios during economic downturn through proactive data management, trend forecasting, and critical appeal/payment deadline tracking and reminders.