In-House Property Tax Challenges
There are over 60,000 taxing jurisdictions in the United States, and managing the property tax function at any company is difficult. However, for Lessors the job is even more complex;
- Property taxes are not an exact science and will always involve relationships with assessors. The more jurisdictions where equipment is located, the more relationships need to be maintained.
- Property Tax Software designed specifically for leased assets is expensive, difficult to learn, and limited in capabilities. Often a Lessor is reliant on the competence of one employee who uses the software, and their availability to answer questions.
- Leased assets move, leases terminate before tax bills arrive, and Lessees buy assets before the lease terminates. These events require a proactive approach and knowledge of how property taxes work to assure that the proper taxes are collected.
- Without property tax software Lessors may be paying too high a tax on values and may not have adequate support documentation available for Lessees.
- Penalties and Interest can become a major concern if Lessors cannot meet the many time-sensitive deadlines when assets are in multiple states.
- The pure volume of compliance work grows exponentially with each additional asset located in a new jurisdiction.
- Property taxes take a disproportionate amount of time and money to administer properly in-house.
- Because property taxes are paid in arrears, Lessors often don't realize they have problems with an in-house program until 9-18 months later. Unfortunately, correcting these problems can take up to 18 months.