Businesses reap millions appealing tax assessment

ST. LOUIS -- Two ways of looking at how business equipment should be taxed in Missouri has allowed many companies to cut their property tax bills, in a trend that concerns many tax assessors.

Assessors in Missouri have lost each of 45 decisions before the state Tax Commission over 2 1/2 years, while the same commission's rulings have given millions in tax reductions to big businesses, the St. Louis Post-Dispatch reported Sunday.

W.B. "Bart" Tichenor, the state Tax Commission's chief hearing officer, said he's confident he and the two officers he supervises are following the law. "It has nothing to do with bias against assessors and it has nothing to do with the individual attorneys who practice before me."

The Missouri Tax Commission and two state courts have endorsed Tichenor's decisions, agreeing that county assessors are using weak evidence to back up their valuations.

The property tax system raises about $4 billion a year in local taxes, which fund local projects, such as schools, libraries, fire protection districts, hospitals, sewage systems and road districts.

Property is assessed at a percentage of its market value. People pay property taxes based on their home and automobile assessments. Companies pay based on the assessment of commercial real estate and their business equipment.

But businesses also can challenge assessments. And when the commission accepted Tichenor's findings and rejected the counties' assessments, it dramatically devalued millions of dollars worth of machinery.

Commission decisions have reduced the assessed valuation of business property in the 45 cases to $50 million from $137 million since 2001.

The $87 million difference amounts to a 64 percent reduction in the combined assessed valuation. That would generate a $5.2 million property tax cut based on a rate of $6 per $100 assessed valuation.

The Post-Dispatch found the cuts have concrete effects.

Some school districts, concerned about losing funding, are helping assessors finance the defense of their cases before the commission when large sums are at stake. Money that could go for teachers and books is being budgeted for appraisers.

Settling some cases

Also, assessors are settling some cases that reduce the assessed valuations of a company's equipment because they're concerned they'll lose future appeals before the commission.

Assessors and school officials are asking the legislature to change the state's property tax law.

Any taxpayer who disagrees with a local assessor's determination of property values may appeal to the county board of equalization and then to the state Tax Commission.

The big companies that appeal often rely on attorney Thomas Caradonna of St. Louis and a tax-consulting firm headed by Caradonna's father-in-law, Joseph Sansone, the former St. Louis assessor.

Caradonna and Sansone say the fact that the Tax Commission has lowered values so dramatically shows how out-of-whack the assessors' valuation methods are when it comes to business equipment.

"My experience in hundreds of cases is that business taxpayers are being overtaxed," Caradonna said.

David Glaser, chief financial officer for the Rockwood School District, understands that a business would want to cut expenses, but he said the cuts could be disastrous to the state and school districts.

Two pending cases could reduce personal property valuations more than all 45 cases decided since 2001. DaimlerChrysler has requested an assessed valuation reduction from $237.5 million to $140 million for its two plants in Fenton, outside of St. Louis. Settlement talks are under way between county officials and the company.

The Ford Motor Co. is also trying to win a reduction in the value of the machinery in its plant in Claycomo, near Kansas City, from $102 million to $66 million.

The dispute between the Tax Commission and assessors is based on how business machinery and equipment is valued.

Under Missouri law, property values are based on what a willing buyer and seller would exchange for an item. For business personal property, the assessed value is one-third of the market value.

Businesses provide the assessor the purchase price of equipment, and each year the assessor adjusts the market value downward.

This system is efficient for assessors, who must establish values for hundreds of companies.

The Tax Commission, however, has ruled it is not the most accurate.

"An item could be a hundred years old, and it never depletes in value as far as assessments are concerned because of the schedule that's being used," Sansone said.

Using sales records compiled by an appraiser based in Dallas, Caradonna and Sansone have argued that equipment was selling for less in the marketplace than the values the assessors were using. Tichenor agreed to use sales record values, often from auction sales, to determine the values of business equipment for tax purposes.

Assessors argue that auction prices are too low. They say the auction prices aren't the same as equipment still in use and making money for a company.

Tichenor has advised assessors to make their own equipment lists and to complete their own appraisals. But with hundreds of companies to assess, there aren't enough people to do that work.

"And big business knows that," said Matt Brown, manager of special assessments and business personal property appeals in St. Charles County.