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How Can A Machinery & Equipment Appraisal Help Your Tangible Personal Property Ad Valorem Tax Appeal Case?

How Can A Machinery & Equipment Appraisal Help Your Tangible Personal Property Ad Valorem Tax Appeal Case?

What is an Ad Valorem Tax?

An ad valorem tax is based on the assessed value of an item such as real estate or personal property. The most common ad valorem taxes are property taxes levied on real estate; however, ad valorem taxes may extend to a number of tax applications, such as import duty taxes on goods from abroad. Ad valorem property taxes are typically a major, if not the major, revenue source for both state and municipal governments, and municipal property ad valorem taxes are commonly referred to as simply “property taxes.”

The Latin phrase, ad valorem, means “according to value.” In short, all ad valorem taxes are levied based on the determined value of the item being taxed. In the most common application of ad valorem taxes, municipal property taxes, the real estate of property owners is periodically assessed by a public tax assessor to determine its current value. The assessed value of the property is used to compute a tax annually levied on the property owner by a municipality or other government entity.

Ad valorem taxes, which are based on ownership of a real asset, can be looked at in contrast to transactional taxes, such as sales taxes. While ad valorem taxes are determined and levied annually, transactional taxes are only levied at the time of a transaction.

Tangible Personal Property Ad Valorem taxes are usually levied by a municipality but may also be levied by other local government entities such as counties, school districts or special taxing districts, also known as special purpose districts. Property owners may be subject to ad valorem taxes levied by more than one entity, for example, both a municipality and a county.

What is Tangible Personal Property?

Tangible Personal Property is everything other than real estate used in a business.  It includes machinery & equipment, furniture, fixtures, tools, signs, leasehold improvements, supplies, leased equipment or any other equipment used in a business or to earn income.

How Can a Tax Payer Appeal a Personal Property Tax Assessment?

As a property owner, you have the right to appeal the property appraiser’s assessment of your property’s value. As part of the appeal process, you may do the following:

  • Ask for an informal conference with your county property appraiser.
  • File a petition with your local Value Adjustment Board (“VAB”).
  • File a lawsuit in circuit court.

Informal Conference with your Property Appraiser – You have the right to an informal conference with your property appraiser to discuss your value or application for a property exemption or classification. By having an informal conference, you may be able to settle the issue without going to a hearing or going to court.

Petition the Value Adjustment Board – If you petition the VAB, you must still pay all your non-ad valorem assessments and the required portion of your ad valorem taxes before they become delinquent.

A lawsuit in Court – You may file a lawsuit in circuit court to challenge the property appraiser’s assessment or denial of an exemption or classification. You are not required to participate in an informal conference with the property appraiser or file a petition with the value adjustment board before filing a lawsuit.

Machinery & Equipment Appraisals for Ad Valorem Tax Appeal Purposes – The tax appraiser’s office utilizes cost information that may or may not accurately reflect the market current market value of the subject machinery & equipment.  A machinery & equipment appraisal is an integral document that can be utilized as part of the taxpayer’s tangible personal property tax appeal process. By preparing a formal and defensible machinery & equipment appraisal, the taxpayer can present an accurate estimate of the current market value of the subject machinery & equipment, regardless of the appeal methodology utilized.

M&E Appraisal Associates is expert in providing appraisals to assist the Ad Valorem Tangible Personal Property Tax Appeal process. If you have any questions about the machinery & equipment appraisal process, please call us at (844)VALUEME (825-8363).

Tax Appeal process Tips - Machinery & Equipment Appraisal can help

Desktop Equipment Appraisals

desktop-equipment-appraisalsM&E Appraisal Associates, Inc. (“M&EAA”) is experienced and knowledgeable in the provision of desktop equipment appraisals. The following are frequently asked questions regarding the desktop approach for appraisaing machinery & equipment.

What is a desktop machinery & equipment appraisal? A desktop appraisal is a method of analysis which identifies and values the subject machinery & equipment without the benefit of inspection. The appraiser typically relies on information provided by the subject company as the basis for analysis and reporting. By definition, a desktop appraisal may not contain the detail and content that would be normally included in a standard appraisal.

What are the advantages of a desktop appraisal? A desktop appraisal is typically less costly than a standard appraisal. In many cases, the subject machinery & equipment may be sited at multiple locations or be in transit. Under these circumstances it may not be feasible from a cost perspective to inspect the subject machinery & equipment.

When should a desktop appraisal be considered? This determination should be made by the intended user of the appraisal. If the intended user is satisfied that the reporting of the subject items is accurate, then a desktop approach could be a viable appraisal alternative. It is ultimately the responsibility of the appraiser to determine that the information provided is sufficient in order to accurately identify the subject items for the purpose of developing credible appraisal results.

What general information is needed in order to contemplate a desktop appraisal? Any information that can be provided to assist the appraiser in accurately identifying the subject items is advantageous to the desktop process. Requisite information can include, but is not limited to the type of equipment, make, model, serial number, vehicle identification number, original year of manufacture, date of acquisition, size, capacity, hours, mileage, date and costs of rebuilds, and general opinion of condition.

What are the best types of machinery & equipment to appraise under the desktop approach? The desktop approach is most viable for machinery & equipment that is considered to be industry standard (non proprietary) with readily identifiable manufacturer, model, serial number/vehicle identification number, and original date of manufacture. These classifications of machinery & equipment include but are not limited to vehicles, trucks & trailers, construction equipment, machine tools, and medical equipment.

Greg-Feinsinger-CMEAGregory F. Feinsinger, CMEA, is the president of M&EAA. Greg is a certified machinery & equipment appraiser, and has over 25 years of machinery & equipment appraisal, inventory appraisal, and medical equipment appraisal experience.

All desktop machinery & equipment appraisals are completed in conformance with the Uniform Standards of Professional Appraisal Practice (USPAP) as promulgated by the Appraisal Foundation.

To discuss the specifics of your prospective desktop machinery & equipment appraisal, desktop inventory appraisal, or desktop medical equipment appraisal, please call us at (844) VALUEME (825-8363).

Appraisals For Charitable Contributions

M&E Appraisal Associates, Inc. (M&EAA) is expert in providing machinery & equipment appraisals for charitable contribution purposes.

IRS Publication 561 (Rev. April 2007) “Determining the Value of Donated Property” requires a qualified appraisal by a qualified appraiser for donated property for which a deduction of $5,000 or greater is claimed.

A qualified appraisal must include the following information:

1. A description of the property in sufficient detail for a person who is not generally familiar with the type of property to determine that the property appraised is the property that was (or will be) contributed,

2. The physical condition of any tangible property,

3. The date (or expected date) of contribution,

4. The terms of any agreement or understanding entered into (or expected to be entered into) by or on behalf of the donor that relates to the use, sale, or other disposition of the donated property, including, for example, the terms of any agreement or understanding that:
a. Temporarily or permanently restricts a donee’s right to use or dispose of the donated property,
b. Earmarks donated property for a particular use, or
c. Reserves to, or confers upon, anyone (other than a donee organization or an organization participating with a donee organization in cooperative fundraising) any right to the income from the donated property or to the possession of the property, including the right to vote donated securities, to acquire the property by purchase or otherwise, or to designate the person having the income, possession, or right to acquire the property,

5. The name, address, and taxpayer identification number of the qualified appraiser and, if the appraiser is a partner, an employee, or an independent contractor engaged by a person other than the donor, the name, address, and taxpayer identification number of the partnership or the person who employs or engages the appraiser,

6. The qualifications of the qualified appraiser who signs the appraisal, including the appraiser’s background, experience, education, and any membership in professional appraisal associations,

7. A statement that the appraisal was prepared for income tax purposes,

8. The date (or dates) on which the property was valued,

9. The appraised FMV on the date (or expected date) of contribution,

10. The method of valuation used to determine FMV, such as the income approach, the comparable sales or market data approach, or the replacement cost less depreciation approach, and

11. The specific basis for the valuation, such as any specific comparable sales transaction.

A qualified appraiser is an individual who meets all the following requirements.

1. The individual either:
a. Has earned an appraisal designation from a recognized professional appraiser organization for demonstrated competency in valuing the type of property being appraised, or
b. Has met certain minimum education and experience requirements. For real property, the appraiser must be licensed or certified for the type of property being appraised in the state in which the property is located. For property other than real property, the appraiser must have successfully completed college or professional-level coursework relevant to the property being valued, must have at least 2 years of experience in the trade or business of buying, selling, or valuing the type of property being valued, and must fully describe in the appraisal his or her qualifying education and experience.

2. The individual regularly prepares appraisals for which he or she is paid.

3. The individual demonstrates verifiable education and experience in valuing the type of property being appraised. To do this, the appraiser can make a declaration in the appraisal that, because of his or her background, experience, education, and membership in professional associations, he or she is qualified to make appraisals of the type of property being valued.

4. The individual has not been prohibited from practicing before the IRS under section 330(c) of title 31 of the United States Code at any time during the 3-year period ending on the date of the appraisal.

5. The individual is not an excluded individual.

The principal of M&EAA, Gregory F. Feinsinger, has over 25 years of experience providing machinery & equipment appraisals for the purposes of charitable contributions.

Appraisals for Asset Based Lenders

M&E Appraisals Associates, Inc. (M&EAA) specializes in providing machinery & equipment appraisals and inventory appraisals for use by asset based lenders.

M&EAA maintains a nationwide network of certified machinery & equipment appraisers and inventory appraisers. We provide machinery & equipment appraisals and inventory appraisals in all 50 states, as well as Canada, and other international locations.

Asset based loans are structured to provide working capital and/or as term loans, and are secured by accounts receivable, inventory, machinery & equipment and/or real estate. This type of funding is great for startup companies, refinancing existing loans, financing growth, mergers and acquisitions, and management buy-outs (MBOs) and buy-ins (MBIs).

Appraisals that are accomplished for asset based lenders (secured lenders) or are related to a loan transaction are typically prepared on the basis of Forced Liquidation Value or Orderly Liquidation Value.

M&EAA defines Forced Liquidation Value as the estimated gross dollar amount which could typically be realized from a properly advertised and conducted public sale held under forced or distressed conditions and with a sense of immediacy. Inherent in the definition is the disposal of all assets in an “as is” condition with all expenses of removal and transportation incurred by the buyer.  It is assumed that the sale would be conducted by a qualified seller with experience in selling this type of equipment.

M&EAA defines Orderly Liquidation Value as the estimated gross dollar amount which could typically be realized from an orderly sale of the subject assets on a negotiated basis, held under forced or distressed conditions, with a limited marketing period.  Inherent in the definition is the disposal of all assets in an “as is” condition with all expenses of removal and transportation incurred by the buyer.  It is assumed that the sale would be conducted by a qualified broker familiar with this type of equipment.

Note: the specific time period for an orderly liquidation will vary based on the type and quantity of machinery & equipment involved, and more importantly, the costs associated with conducting the sale.  M&EAA’s appraisal reports will clearly state the contemplated liquidation period.  This time period is not arbitrary.  It is established specifically in order to maximize net orderly recovery.

Greg Feinsinger - CMEA

The principal of M&EAA, Gregory F. “Greg” Feinsinger, CMEA has over 25 years of full time machinery & equipment appraisal and inventory appraisal experience. Greg has significant familiarity with the specific appraisal requirements of national and regional asset based lenders.

Please contact Greg directly with any questions related to your pending or existing asset based loan related appraisal requirements.