We tend to think of some things as a zero-sum game, but with property taxes, we tend to assume they will go up, we just don't know how much. As a state, we have even tried to control this by providing in our Constitution for a five percent annual limit on increases in the property tax.
In reality, property taxes can and are supposed to go down if the value of the property goes down. This is exactly what has happened in some areas in the past two years as unemployment was rising, and more importantly, housing prices are depressed by stricter credit requirements.
Our system for valuing property is also provided for in the Constitution and then supplemented by various statutes. The basic procedure is the County Assessor values property under a system, which is intended to cover the whole county throughout the year's time. This "use value" as the term is used, is basically the market value based on similar sales for residential real estate. There are special rules for business property and farmland. This market value is then applied to an "assessed value" percentage, which is a range set by the county. Again, set in the Oklahoma Constitution, it can range from 11 to 13.5 percent.
In the spring, and many of you have received these already, you will receive a notice showing your new assessed value and an estimate of your property taxes for the following year of valuation. This is important; your 2010 notice is based on 2009 valuations.
I happen to live in Duncan, which is not much different than other Oklahoma communities. Using a summary prepared by a local residential appraiser from numbers from the Board of Realtors, out of 23 subdivisions, 12 had average sales prices per square foot in 2009 that were lower than in 2008. Thirteen had lower average prices in 2009 than two years earlier in 2007. Now, to be fair, some had very few sales. But, it is obvious some house prices were down in 2009 because of stricter credit requirements.
Should your assessed value go down? If you bought your house some time ago and the assessed value was not going up with the market, then maybe no. You have to reach market price first. But, if you purchased it within the past few years, and in particular, if you purchased a home in a troubled subdivision where foreclosures are high, then probably you should expect a reduction.
You can bet it will be hard for County Assessors to reduce property values for tax purposes, even if you think your property is worth less. But there is a procedure to appeal their decision. The Oklahoma statutes provide for an appeal process to the County Board of Equalization. According to law, they are required to hold sessions starting no earlier than April 1 and ending not later than May 31 for the purpose of correcting tax rolls and hearing protests.
There is a procedure for the protest that can vary some, but your County Clerk can tell you what you need to know for your county. The Clerk serves as the Secretary to the Board. But first, I recommend you do the following:
Do your research. Find recent sales of property similar to yours as close to your property as possible. This can be obtained from Realtors, private appraisers, the County Assessor and others. Remember, it is a 2009 value.
Talk to the County Assessor. They can change the value if you have good reason why they should. It is not a perfect system, as everything is an estimate.
Combine your efforts with your neighbors. They may be thinking the same way as you, and in a political setting, numbers make a difference.
If you don't feel you are being treated fairly, then present your protest. You can present it yourself, and there are means of carrying on after this protest but hopefully, this will be enough. And remember, after the protest period, the rolls are certified, and there is no changing them.
We are hearing from clients both inside and outside Oklahoma that County Assessors are reducing property values. If you think your property value has gone down, it probably has and worth challenging if the property taxes don't follow.
Steve W. Beebe, CPA/PFS, provides tax and financial planning from his office in Duncan, Okla. He has been a Certified Public Accountant in Duncan since 1980.
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