Things We Have Learned
First in a series
Cold River Tax has been researching, appealing, remitting and salvaging property taxes since 2008 for some of the largest real property portfolios in the U.S. We scrambled during the financial crisis to prevent multi-million dollar collateral losses at community banks and capital funds. We’ve cleaned up and paid tax bills by the tens of thousands for REITS as they’ve assembled portfolios from New York to California. And we’re working today with some of the country’s largest residential builders: breaking down plats and recording pro-rations as construction crews restock the housing supply. Through it all, our team at Cold River Tax has built a reputation for speed, accuracy and responsiveness.
Along the way, we’ve gained valuable experience in dealing with the patchwork of regulations that constitute U.S. property tax law. Our know-how helps customers avoid the frustrations that accompany regulations and deadlines. Contending with portfolios that cross jurisdictions—let alone MUDs and enterprise zones, can be tedious, distracting and expensive. Managing tax obligations will never generate a single dollar of revenue for your business--but clients across the markets we serve attest to millions in expense reductions and efficiencies that Cold River has accomplished for their bottom lines.
Over the years, we’ve accumulated “cautionary tales” that speak to the trepidations of this business. As the first in a series, here are a few things we’ve learned:
Richland County, SC: A property investor acquired 25 acres of raw land at a foreclosure auction in 2012. At the time of acquisition, the county tax office failed to remove an agricultural exemption that the previous owner had secured for a farming operation. The tax value levied by the county on this parcel amounted to $312.86 for 2012, 2013 and 2014 (South Carolina assesses real property once every five years—a so-called “cycle state”). It wasn’t until 2015 that the tax office realized the investor wasn’t a farmer. They removed the exemption from the previously commercial-zoned property...and calculated the 2015 tax bill based on what the assessment would have been at initiation of the cycle in 2011. The county’s invoice to the investor/owner, including “roll-back” taxes, amounted to $665,000. Ouch!
Lesson Learned: Do thorough tax research before acquiring a property. Be on the lookout for exemptions and appeal freezes that don’t transfer to a new owner. Taxing jurisdictions have varied levels of experience, accuracy and sophistication. And title search companies are more concerned with ownership than tax records.
Georgia: When a homeowner appeals a property assessment, he still needs to pay 85% of the tax bill by the due date. Appeal hearings can be a challenge to schedule, and often take place long after the tax bill is due. The difference between 85% and the final bill is settled at the conclusion of the hearing.
If a residential builder sells a new home that was appealed prior to closing, then somebody had better inform the closing attorney that an appeal is pending: if the closing statement shows only the taxes that were paid on the property, and the appeal is subsequently settled for less than a 15% reduction, the homeowner is going to owe the tax office more money. The homeowner is not going to understand why he got another bill…the closing attorney will only have the title search to refer to, and the builder is unlikely to have any tax records whatsoever.
Lesson Learned: When acquiring property, know whether you’re evaluating a temporary or final tax bill.
Baldwin County, Alabama: Excess proceeds that result from an auction bidding up a tax lien beyond its face value has been ruled by a probate judge to belong to the property owner (yes, the very owner who couldn’t pay his taxes). In most states, any “excess” bid is held in escrow by the county in which the auction took place until either: 1. the homeowner redeems the tax lien (whereupon the excess is returned to the bidder) or 2., the winning bidder waits out a redemption period and gets the excess back upon securing a tax lien deed. In Baldwin County though, tax delinquent homeowners are dancing in the streets, because their homes are almost always worth more than their tax bills…and the judge apparently believes that tax lien investors wear black hats. In 2013, the Baldwin probate court awarded a $65,000 excess bid to a property owner whose tax bill and interest amounted $6,674.53. The judge ruled that the excess bid belonged to the originator of the lien. The winning bidder, you might imagine, filed an appeal. An urgent, exasperated appeal.
Lesson Learned: Tax liens are perilous, and case law is not uniformly applied. Courtroom appeals are painful, time-consuming and costly. Seek advice before pursuing lien-based acquisitions.
Perils, adventures and cautionary tales abound in the property tax industry. We’ll serve up a few more parcels in our next edition of Things We Have Learned. In the meantime, Cold River Tax would love to help your company avoid bad experiences with taxes. Give us a call at 770-844-0782 or check out our video trailer at www.coldrivertax.com.
P.S.: Unlike some tax firms, Cold River has never purchased a tax lien at auction. We only wear white hats.
Bob Koncerak, President
Cold River Land, LLC
6435 Shiloh Road, Suite A
Alpharetta, GA 30005