Understanding the Property Appraisal Process

Most appraisal districts use an inappropriate method to value personal property that typically results in a valuation estimate two to five times what is reasonable.Appraisal districts use a >physical-life depreciation schedule for personal property. However, the tool is not suitable. The personal property values generated by appraisal districts using physical-life depreciation schedules are not reasonable or reliable. If you are using the wrong tool you can’t expect to generate an appropriate result. The conclusion> that appraisal district business personal property schedules typically grossly overstate the market value of property rendered was made after serious due diligence, including reviewing schedules from most states. The source of the appraisal district valuation schedules is unknown. However, there are striking similarities between the values in IRS and appraisal district schedules. These schedules appear somewhat related to physical-life schedules. Even the most cursory review of the appraisal district schedules display they are overstating the value. Consider, for example, a $300 chair. The appraisal district value is $252 after one year and $30 to $90 after fifteen-plus years.

How Appraisal Districts Determine Your Property Value

Appraisal districts simply use a physical-life depreciation model based on cost, for the most part. However, the appraisal district model typically does not address the following:

• The variance between a value based on a physical-depreciation schedule and market value
• Value of warranty
• Value of intangible property embedded in total cost such as software, data and research
• External obsolescence
• Functional obsolescence caused by technology and innovation
• Freight
• Special purpose buildings>
• Setup

Some appraisal districts will not adjust for any of the above factors. It is up to the owners of the property to correct the appraisal district’s errors. The owner will pay the inflated amount unless an alternate valuation is developed.

Why are Valuation Estimates Usually Inflated?

• Rendition is a compliance task at most companies
• Often considered a regulatory compliance issue<
• Staff preparing renditions lack tax reduction perspective
• Complex and nuanced issues
• Lack of expertise to separate tangible and intangible property
• No pressure from legislature
• Inertia

Texas taxpayers have several options with renditions including filing a rendition or providing cost details by category.

Challenging the Property Appraisal Process

Taxpayers will fare better by providing an opinion of market value. The appraisal district’s estimate could be 200% to 500% of market value and may need to be appealed.

Success depends on having support for an opinion of market value. Consider working with companies that provide appraisal or property tax appeal services.

DIY (Do It Yourself) or Done for You?

Alternatively, you can engage a tax consultant to handle all aspects of the appeal including hearings and further processes.

Do Appraisal Districts Attempt to Separate Intangible Personal Property?

Tangible personal property includes equipment, furniture, and inventory. Intangible property includes patents, trademarks, contracts, and proprietary processes.

Intangible costs to be deducted include specialized buildings, warranty, service contracts, software, and business-related benefits.