To appeal your taxes or not appeal your real property taxes, that is the question.
For some property investors, 2020 has been a difficult year: Many retail properties, hotels and office buildings have suffered from high vacancies, high rental defaults, and slow-to-no calls from new tenants. For these categories of income-producing properties, the enormous challenges presented by COVID-19 seem to have caused a significant reduction in property values.
Thus, it makes perfect sense to challenge those values in 2021, right?
Well, not so fast. Here are some considerations:
State of Ohio
- Tax valuation challenges filed in Ohio in 2021 are for tax year 2020, and the “tax lien date,” the target date for valuation decisions is January 1, 2020.
- That is, of course, months before the deleterious effects of COVID-19 impacted the USA real estate market.
- Therefore, an Ohio property owner is likely to lose a valuation challenge brought in 2021 based primarily or solely upon a downturn starting in March of April of 2020.
- Even worse, a property owner is entitled to bring tax valuation challenges only once in a “triennial,” the 3-year cycle which Ohio uses for Board of Revision cases.
- Hamilton County, Clermont County, Butler County, Franklin County (Columbus) and Montgomery County (Dayton) all start new triennial cycles in tax year 2020. This means that if a property owner brings and loses a tax valuation challenge brought in calendar year 2021 in those counties, the valuation by law must stay in place through tax year 2022 (first challenged again in 2023).
- On the other hand, if a property owner waits until first quarter of 2022 to file a challenge (for tax year 2021) in those counties, he will have a much stronger basis for valuation reduction (valuation target date is then January 1, 2021).
- On the other hand, Warren County, Lucas County (Toledo), Stark County (Canton) and Cuyahoga County (Cleveland) (among others) are in their last year of the triennial in 2020, meaning a property owner can bring a complaint in 2021 (win or lose) and then turn around and bring a fresh challenge in 2022.
So, an Ohio property owner should carefully consider whether to bring a 2021 challenge. It could bring great rewards or lock in an articificllay high value for three years, potentially unnecessarily.
State of Kentucky
Kentucky is an entirely different matter. Challenges of value — which are started by PVA meetings the first two weeks of May — in 2021 are for tax year 2021. Thus, the full impact of COVID-19 on property values are at issue in challenges in 2021. It is much more straightforward.