Temporary Exemption for Qualified Property Damaged by a Federal Disaster related to COVID-19
On March 13, 2020, Texas Governor Greg Abbott declared the entire state of Texas a federal disaster area, due to COVID-19. Understanding a temporary exemption existed for properties damaged by a federal disaster, we sought legal advice on how best to represent our clients. Section 11.35 of the Texas Property Tax Code is a temporary exemption from property tax for real and personal qualified property damaged due to a federal disaster. See TPTC Section 11.35. The intent of the exemption, as further qualified by the Attorney General Opinion, dated April 14, 2020, is a result of physical damage to the property and not economic damage resulting from COVID-19. See AG Opinion.
While there is no legislative silver bullet, economic obsolescence can be effectively measured by comparing prior year to current year income. The difference in margin ratios and inventory turnover analysis will reflect the impact of COVID-19. For Personal Property and Real Property affected by COVID-19, there are valuation strategies that will significantly lower your property tax value. This type of valuation is irrespective of state borders (i.e out-of-state locations will also benefit.)
Making the Case for Obsolescence in your Company’s Assets and Inventory in the Era of COVID-19
Obsolescence causes assets to lose value. The appraisal process to determine the existence and extent of obsolescence in a company’s assets (machinery equipment, furniture, computers, leasehold, and commercial property), requires a great deal of knowledge and technical skill. For property tax purposes it’s the assessed value of the asset, adjusted for the loss in market value, due to COVID-19
There are three types of obsolescence to consider in the appraisal process: physical, functional, and economic. Economic obsolescence is the result of external factors that impact value. Such external factors as COVID-19 will be painfully obvious, as we near the end of 2020. So how do you measure the impact of COVID-19 on your company’s assessed value? It requires a review of your company’s Profit and Loss Statement for 2020, and then translating any losses to the valuation of your assets.
Vantage One has demonstrated experience in valuing economic obsolescence on your company’s assets. The existence of obsolescence will define market value and lower your property tax expense. Learn more about the impacts of COVID-19 on your company’s value by contacting a valuation specialist today at www.vantageonetax.com.
Income Valuation Approach for Commercial Property in the Era of COVID-19
Is the Income Approach the only appraisal process suitable for income producing properties?
The appraisal approach to value requires all three valuation techniques: 1) cost; 2) income; and 3) comparable sales. But in the era of COVID-19, the income approach will likely be your best valuation method to determine the impact on market value. One of the more convincing arguments, relates to the inverse relationship of the capitalization rate to the property’s value. Since the capitalization rate is a function of net operating income and the value of the property, you can see why this appraisal method would be an effective tool in determining the existence and extent of COVID-19 on value. Even owner-occupied property could benefit from using the income approach in the era of COVID-19.