As we enter a new year, one of the first tax deadlines business owners must address is the filing of property tax renditions. Many business owners are unaware that property tax applies to business personal property just like it does real estate. A rendition is a form that allows you to self-report your business personal property to the County Appraisal District. The County uses this information to help estimate the market value of your property for taxation purposes. Here are some frequently asked questions about renditions and the process of filing.
Who is required to file?
A person or business who owns the tangible personal property used to produce income is required to file a property tax rendition. Charitable organizations, religious organizations, certain schools, and state or national governments are exempt and are not required to file.
Where do I file?
The rendition is filed with the County Appraisal District where the personal property is located. If you have business establishments in different counties, you will need to file separate renditions in each county. Also, some counties require separate renditions for certain types of businesses or specific assets like vehicles or airplanes. It is wise to check the County Appraisal District website for more information about which forms to file.
What are the important dates I need to be aware of?
The deadline to file Texas property tax renditions is April 15th with a one-month extension upon request. The due date may be different for property owned outside of Texas. In Texas, the County Appraisal Districts will begin mailing Notices of Appraised Value starting May 1st, and the deadline to file a protest is May 31st (or 30 days after the Notice of Appraised Value was mailed, whichever is later). Be aware, the County Appraisal District is only required to send out a Notice of Appraised Value if the value has increased by more than $1,000. Tax bills are mailed out by the Tax Assessor in October after the appraisal districts have certified their tax rolls and set their tax rates. Business owners have until January 31st to pay the prior year’s property tax.
What happens if I do not file, or file late?
If you do not file a rendition, the appraised value of your property will be based on an appraiser’s estimate using comparable business types. In addition, if you fail to file your rendition before the deadline or you do not file at all, a penalty equal to 10% of the amount of taxes ultimately imposed on the property will be levied.
What types of property must be rendered?
Any property that is used in the production of income will need to be reported. This includes machinery and equipment, vehicles, and office furniture. This also includes supplies, finished goods inventory, raw materials, and work in process. If you own a restaurant, this even includes food and liquor inventory. Intangibles such as goodwill, software, and accounts receivable are not subject to property tax. Certain leasehold improvements may not be either if they are affixed to real property.
How is the property valued?
When completing the rendition, the property may be reported using a good faith estimate of the market value or the historical cost when new. You report the property you have on January 1st each year. Owners with tangible personal property of less than $20,000 can file a simplified rendition, however, property values of over $20,000 are required to complete a full rendition statement.
Note that when you self-report values, the County Appraisal District does not have to accept the values you report. They will use the data you supply and will sometimes calculate what they believe to be the value. You will have the opportunity to protest if you disagree with their value.
What is the difference between good faith estimate of market value and historical cost?
Market value means the price at which property would transfer for cash or its equivalent under prevailing market conditions. For inventory, market value is defined as the price for which it would sell as a unit to a purchaser who would continue the business.
If your business has fewer than 50 employees, your estimate of value can be based on the net depreciated federal income tax basis (cost less accumulated depreciation).
Instead of reporting your assets at market value, you can provide the original cost and date you acquired the property. Original cost, also known as “historical cost when new”, refers to the amount you paid to acquire the property. Your cost would include transportation and any other necessary expenses incurred in acquiring the property. If you render the property using historical cost, the appraiser will apply depreciation rates based on the age and class of the property in order to determine the current market value.
What is the tax rate?
In Texas, the rate is the same as it is for real property. The rate will depend on the location of the property and will be a combination of county, city, school district, college district, and special purpose district rates for that area.
How do I prepare?
There is no time like the present to do some spring cleaning of your asset lists. Start by reviewing depreciation schedules. Remove obsolete or sold assets and add any assets you have purchased over the last year. Having clean asset lists will simplify the reporting process.
ATKG is Here to Help
Your ATKG advisors are here to address any questions you may have. We are also glad to assist you with the process of gathering your information and preparing your property tax renditions. As always, ATKG is here to help its clients navigate the ever-changing landscape of tax legislation and provide insightful solutions for the prosperity of your business and family.