If you own commercial property, especially hotels/motels, apartment buildings, self-storage facilities, or other property that is commonly rented, you have probably received a request from the county Property Appraiser for your property’s income and expense data. This post will explain why the Property Appraiser seeks this data, how it is used, whether you are required to respond, and the consequences for failure to respond.
Why does the Property Appraiser need my financial information?
Commercial property is commonly assessed by what is referred to as the “income approach.” In a nutshell, the value of the property is determined by capitalizing the property’s net operating income from the prior year. In order to determine a reasonable amount of revenue and expenses for each commercial property, the Property Appraiser’s office requests that the property owners provide that data, which is then analyzed and used county-wide.
Will my financial information be treated as confidential?
Yes, for the most part. Fla. Stat. 195.027 authorizes the Property Appraisers to seek taxpayers’ financial records, but states that the financial information is confidential in the hands of the Property Appraiser, except upon court order or order of an administrative body having quasi-judicial powers in ad valorem tax matters. Thus, in most cases, your information will be kept confidential.
However, if another owner of income-producing property were to take the Property Appraiser to court over their assessment, they could conceivably ask the court to order the Property Appraiser to produce any income data that they used to assess the property, including data received from other taxpayers. Of course, in my experience, if a judge is going to order the Property Appraiser to produce confidential taxpayer data, they will usually allow the Property Appraiser to redact any identifying information.
Also, if you challenge the Property Appraiser’s assessment of your own property in court or before the Value Adjustment Board, the Property Appraiser will in all likelihood want to use any previously-provided data in their defense. There has been some disagreement as to whether the Property Appraisers can do so without a court order, but in such a situation the court would in all likelihood allow the Property Appraiser to use your data in court.
What happens if I refuse to respond?
If a taxpayer does not voluntarily provide their financial records to the Property Appraiser, the Property Appraiser has the authority under Fla. Stat. 195.027 and Florida Administrative Code Rule 12D-1.005 to file an action in circuit court requesting a subpoena duces tecum directing the taxpayer to produce the records. However, this procedure is used very rarely. Usually, if a taxpayer does not respond, the Property Appraiser will just assess their property using the best available information, such as information provided by owners of similar property in the area or data from national publications.
The most serious consequence of failing to respond is that you essentially forfeit your ability to use that data to challenge your property tax assessment, even if your own income and expenses would result in a lower value. Years ago, the Supreme Court of Florida in Palm Corporation v. Homer held that a taxpayer who refused to provide their income data to the Property Appraiser could not use it in a later lawsuit to challenge the Property Appraiser’s assessment.
Can I wait until I receive my Trim notice to decide whether to respond?
In Higgs v. Good, the taxpayer did just that and the appellate court held that he could not use his income data in a court action to challenge the Property Appraiser’s assessment. Basically, the Property Appraiser needs this information in the spring in order to use it in the assessment process, since the tax roll must be completed by July 1st. The courts have thus found that it is unreasonable to withhold financial data until after the assessments are completed and then submit it only if it suits the taxpayer (i.e. if it would indicate a lower value).
That said, the Florida Department of Revenue has recently raised quite a ruckus by stating in its proposed 2010 VAB Training Materials that, in the Value Adjustment Board process, as long as the taxpayer submits their evidence to the Property Appraiser 15 days before the hearing, it should be considered timely, regardless of when the data was requested. This proposal has no doubt received a lot of negative commentary from the Property Appraisers, as it appears to ignore the court ruling in Higgs v. Good. But unless this is changed, it is possible that, beginning in 2010, taxpayers may have the option of withholding their income data until they receive their TRIM notice. Although they would not be able to use that data in court, the DOR’s materials may allow them to use that data in a VAB hearing.