Ad valorem taxes are tied to the value of a particular transaction or piece of property. Property taxes are local government’s main source of revenue for schools, police and fire departments and other local services. If the value of a property drops and government costs remain the same or grow, tax rates increase.

It is important for companies to assess and understand real and personal property taxes in order to contain them.

Typical candidates for reductions in ad valorem taxes include special-purpose structures, technologically obsolete or inferior facilities, non-operating properties and properties in deteriorating markets.

Typically, the largest taxpayers in a jurisdiction are paying a disproportionate tax burden. If an appeal is warranted, property tax savings can be immediate and may even include prior year appeals. A valuation of the property in question, obtained from an independent valuation provider, is critical to building an ad valorem case. To do this, a company may need to enlist multiple valuation experts to provide business enterprise valuations, personal property and real estate valuations.

There are three approaches to value: cost, market and income. The cost approach uses the concept of replacement as a value indicator and is based on the principle of substitution. The market approach estimates value based on market prices in actual transactions. The income approach capitalizes anticipated income streams associated with the assets being appraised.

Appraisals should conform to Uniform Standards of Professional Appraisal Practice (USPAP) and generally accepted valuation principles.

Our independent valuation experts, who are accredited senior appraisers (ASA), provide support for ad valorem cases with skills that include expert testimony in case a valuation is questioned.

We have experience in business enterprise valuations as well as real estate and personal property valuations. VRC can provide preliminary valuations to identify possible opportunities for tax reduction and to estimate the range of potential savings and quantify the effects of functional and economic obsolescence.

Perspectives