Contesting Your Ad Valorem Taxes (Opinion)

Economist John Maynard Keynes said, “The avoidance of taxes is the only intellectual pursuit that carries any reward.”

Anyone who values police, firefighters, libraries, roads and other amenities of the social contract would hope Keynes was only joking. And his seemingly cynical statement was most likely an attempt at humor. But under Keynes’ glibness lies an obvious truth: Whether a tax is based on income, sales, inheritance or property, we pay grudgingly and only the amount owed, not a penny more.

But many of us may pay more in taxes on personal property (car, trailer, boat) and real property (land and the structures on it) than should and could be owed. Ensuring your property is taxed according to its true value carries a reward.

The system by which Arkansans pay taxes on real and personal property is called ad valorem taxation, and it is administered at the county level. Ad valorem is Latin for “according to value,” and the tax is based on the value of the property. In some instances, you can contest the value placed on your property, resulting in a lower tax burden.

Property is assessed according to its value as of Jan. 1 of each year, but the assessment actually takes place between January and July. Assessors may use different approaches in placing a value on the property.

Depending on the type of real property, assessors may use an income capitalization approach or a cost-less-depreciation approach, or look at comparable sales. The assessed value is equal to 20 percent of the market value, and your tax is determined by multiplying the assessed value by the prevailing millage rates.

For personal property, assessors use established procedures to determine its value. As with real property, the assessed value is the market value multiplied by 20 percent. The assessed value multiplied by the millage rate is the tax due. To avoid a 10 percent penalty, you must have your personal property assessed by May 31 each year.  

Every three to five years, depending on the county you live in, a countywide reappraisal is made. Exempt property, such as churches, schools and public property, is not taxed.

Tax statements are mailed by July 1, and taxes from the previous year are due by Oct. 15. Review your tax statement. If you disagree with the assessed value, you can petition the county board of equalization for an adjustment. Petitions are due on or before the third Monday in August.

The board only considers assessments for the current year, and may adjust the value if it believes the property was incorrectly valued. The board is required to hold hearings after business hours at least one day per week while in session to accommodate taxpayers who cannot take time off work. If the board’s decision isn’t to your liking, you can appeal to the county judge, but must file the appeal on or before the second Monday in October.

County court hearings are typically informal. Appellants may bring a third-party appraisal or a private appraiser to the hearing to bolster the assertion that the value placed on the property is too high. If you lose in county court, you can appeal in circuit court.

If you discover the assessed value was too high after you’ve paid the tax, the board of equalization cannot help you. But if the property was erroneously assessed, you can go directly to county court and seek a refund for taxes paid on the erroneous assessment(s) for the last three years.

Several types of errors might allow for a refund. For example, if the property description is wrong or the property is classified as commercial when it should be residential, any overpayment based on that error may be refunded. An assessment record showing an improvement where the improvement no longer exists may also merit a refund.

Know your rights. Do your homework. It may result in a tax refund, or lower assessments in the future. Don’t be afraid to call your local county employee. County judges, members of the board of equalization, and other county employees are knowledgeable and helpful.

M. Scott Hall is an attorney at Hall Estill in Fayetteville. Hall Estill also has offices in Tulsa, Oklahoma City and Washington, D.C. He can be reached at 479-973-5200.