Estate and Succession Planning
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In August each year, the elected local property appraisers of Florida issue assessment notices captioned “Notice of Proposed Property Taxes” to the owners of property in their counties. For historical reasons, these are generally referred to as “TRIM” notices. In addition to other information, the TRIM notices show the assessed value of the property, and the notices trigger important taxpayer rights. This article[*] summarizes relevant aspects of the process and the taxpayer’s options, with primary focus on the advantages and disadvantages of seeking relief from the assessment at the Value Adjustment Board (“VAB” or “Board”).
I. Foundational facts
The entire property tax process is dominated by procedural requirements having nothing to do with the value of property or its substantive eligibility for classification or exemption. In Florida’s ad valorem tax system everything must be done within a specified time, and in a specified way, or one can lose at the starting gate. This is especially the case with deadlines, some of which vary between years and between counties. The procedural aspects can be annoying, but attentiveness to them increases the taxpayer’s prospects for avoiding frustration and obtaining an acceptable result.
A taxpayer with a valuation issue has 25 days from the property appraiser’s mailing of the TRIM notice to petition the VAB. For classification and exemption issues the deadline is generally 30 days from the notice of denial from the property appraiser. These short windows are important, not only because of the logistics of meeting the deadline but because the law also requires the property appraiser (or his staff) to meet with the taxpayer upon request to discuss the disagreement. In general, it is wise to take advantage of this opportunity early in the filing period as many issues are resolved this way. However, if the issue is not fully resolved (and documented) before the VAB petition deadline, and if the taxpayer wishes to preserve the VAB remedy, a timely petition should be filed. It can be withdrawn later if no longer necessary.
The VAB is not the taxpayer’s only remedy. A taxpayer can file suit contesting an assessment in Circuit Court, with or without proceeding at the VAB first. And to the complete the array of possibilities, property appraisers who are unhappy with a VAB decision generally have a right to sue the taxpayer to reinstate the assessment. There are strict deadlines for filing property tax suits. Court litigation is a large topic and is not discussed further here, except to the extent it is helpful in evaluating the VAB remedy.
With these foundational aspects in mind, we now take a closer look at the VAB. Please note that this is not an exhaustive description.
II. The Value Adjustment Board
The VAB in many cases offers ad valorem taxpayers a simple and inexpensive mechanism to obtain relief from assessments. The VAB is empowered to entertain disputes over-valuation, classification (e.g., agricultural), and exemptions, and also over changes in ownership that trigger value increases beyond the legal limits that otherwise apply. The Board is comprised of two county commissioners, one school board member, and two citizen members. The clerk of the Circuit Court serves as clerk of the VAB. Because property tax disputes tend to involve technical appraisal or legal issues, the law provides for the appointment of special magistrates to conduct hearings and issue recommended decisions to the whole Board. Disputes over valuation are assigned to a special magistrate who is an appraiser, and other disputes are assigned to an attorney. A hearing is scheduled at which the magistrate receives evidence and argument from both sides and issues a recommendation on the disposition of the petition. In most counties, the Board defers to the magistrates and approves their recommendations without substantive review.
The VAB petition is a short form that can be obtained from the property appraiser. The law allows the VAB to charge a nominal filing fee. The form asks the taxpayer to estimate the time that will be required to hear the petition and the clerk is required upon request to consult with the parties about the time required. The VAB chooses hearing dates and notifies the parties; flexibility in rescheduling is limited. Most importantly, the taxpayer must, prior to the April 1 delinquency date, pay to the tax collector all the non-ad valorem assessments due and at least: (a) 75% of the ad valorem taxes billed (for value issues); or (b) the taxes admitted to be due and owing (for classification and other issues). Failure to make this payment (which can be reduced by the early payment discount) is fatal to the VAB remedy.
There is no discovery at the VAB as there is in court. Instead, the taxpayer is required to provide the property appraiser, at least 15 days before the hearing date, a list and summary of the evidence and copies of documentation to be presented at the hearing. The property appraiser must provide the taxpayer with a comparable submission no later than seven days before the hearing, but only upon specific request of the taxpayer who has complied with the submission requirement. In theory, evidence that was not provided in this exchange cannot be used, at least without rescheduling the hearing.
The VAB hearing resembles a court proceeding in the sense that there are opposing parties and a presiding officer (the magistrate), but is generally less formal. The parties need not bring lawyers, although it is common for one or both parties to do so. The courtroom rules of evidence do not apply, but each party is allowed to cross-examine witnesses. The proceedings are recorded, but generally not by a court reporter unless the taxpayer provides one.
In value cases, the property appraiser typically makes the first presentation, because his valuations enjoy a presumption of correctness if he establishes certain legally required elements. The lay taxpayer is at a disadvantage here as the requirements are technical and the distinction between actual compliance with them and paying lip service to them can be difficult to discern. The taxpayer presentation follows. Some appraisal expertise is generally necessary, particularly for business property. In classification and exemption cases, there is no presumption of correctness, and the issue will turn on the legal requirements of the specific classification or exemption at issue.
The VAB has three options in value cases: it can sustain the property appraiser’s assessment; it can establish a different assessment if there is adequate evidence to support it; or it can remand to the property appraiser with instructions to re-value the property. There is no remand in classification and exemption cases. In any event, the magistrate prepares a recommendation with written findings of fact and conclusions of law. This is forwarded to the parties. After the Board members meet and approve the recommendations, the parties receive another notice. In many (but not all) situations, this commences the time period for either party to file suit.
The success rate of taxpayers at the VAB has historically varied by county.
III. Factors to consider in decision making
Based on the character of the VAB process as outlined above, here are some factors to consider in deciding whether to petition the VAB, with related suggestions:
- Strength of case. Every decision whether to contest a property tax assessment should begin with a sober evaluation of the merits. The fact that an assessment increased over the prior year value may not mean it is excessive. Under Florida law, each year’s assessment stands or falls independently of previous assessments. Taxpayers who do not understand this are regularly frustrated. On the other hand, the taxpayer is entitled to an explanation of the reason for an increase, and if the explanation is unconvincing the VAB is a viable option.
- Simplicity of the issue. In general, the VAB works best for simple issues that do not require extensive preparation and hearing time. Correction of errors, issues over the comparability of sales, and simple applications of the three approaches to value are good candidates. However, it can be difficult to fit a complex value case into the VAB process. The obstacles include the limited hearing time; lack of meaningful pre-hearing discovery; absence of formal rules of evidence; and having a nonlawyer appraiser as presiding officer.
- Amount at stake. Court litigation is expensive. The VAB may be the most cost-effective option given the amount in dispute.
- Fairness issues. VAB proceedings lack sufficient structure to assure their fairness. Historically the VAB has been an illusory remedy for most taxpayers, with the property appraisers exercising considerable control, including control over the selection of magistrates. The legislature has in recent years amended the law to curtail such abuses, but the VAB remains a work in progress.
- Preparation. Every VAB proceeding requires preparation, and the best preparation is undertaken well in advance of the event. A taxpayer should realistically consider whether sufficient time and resources can be devoted to it, particularly when hearings are scheduled in a short time frame. The clerk of court can advise the taxpayer of the block of time during which hearings will be held. See also “strategic risks and rewards” below.
- Expert support. If an appraiser is needed, there must be sufficient time before the hearing to engage the appraiser and for completion of the appraisal. Note that although VAB proceedings routinely occur without appraisers, the magistrate cannot reduce the assessment without evidence in the record to support a lower value.
- Strategic risks and rewards. Witnesses are required to testify under oath upon the request of either party. Obtaining the property appraiser’s testimony at an early VAB proceeding can be advantageous as it limits his freedom to develop different explanations in a future court proceeding. For this reason, the taxpayer should engage a court reporter to record the proceeding rather than rely on the VAB audio recording. Of course, this works both ways. The taxpayer who makes a mistake at the VAB can suffer from it later.
- Confidential information. Unlike court proceedings, the VAB process includes no mechanism for preserving the confidentiality of taxpayer information introduced at the VAB.
- Other taxpayers’ experiences. If it is known that other taxpayers have had the same issue at the VAB, the extent of their success should be considered.
- Use of lawyers. This depends on the case. The VAB remedy was probably created to afford taxpayers a simple remedy without a need for lawyers. However, the process has evolved and there is now a large body of statutes and regulations that govern it. The taxpayer who is unfamiliar with them is at a disadvantage, particularly if the property appraiser involves his own lawyer. Some taxpayers use lawyers to provide behind the scenes guidance for preparation rather than representation at the hearing.
IV. Conclusion
The VAB process is imperfect but can be useful in many situations. The taxpayer who understands the strengths and weaknesses of the remedy is in the best position to decide whether and how to invoke it.
[*] This article was originally posted on August 15, 2017, and it currently is reproduced due to the issuance of 2018 assessment notices. If you have any questions about property tax assessments and the remedies for contesting them, please contact Dean Mead attorneys Robert Goldman at rgoldman@www.deanmead.com, Mark Holcomb at mholcomb@www.deanmead.com, or French Brown at fbrown@www.deanmead.com.
About the Author:
Robert S. Goldman offers clients over 30 years of experience practicing in state and local taxation. He represents clients in audits, protests, litigation, rulemaking, tax planning, and legislation. His experience includes all the major state and local taxes (sales taxes, property taxes, corporate income taxes, communications service taxes, gross receipts taxes, insurance premium taxes, documentary stamp taxes). Mr. Goldman’s range of experience spans diverse industries including retail, manufacturing, energy, leasing, hospitality, telecommunications, government contracting, health care, transportation, and the service sector.
