I am often asked by businesses whether an attorney is needed for commercial property tax appeals in front of the Missouri State Tax Commission. This question is most often asked by those that made the decision, for whatever reason, to represent themselves at their County’s Board of Equalization hearing. Those businesses mistakenly believe that the State Tax Commission hearing will be just as informal as their hearings in front of the Board of Equalization.
I am quick to dispel this misconception. Indeed, there are multiple reasons why an attorney is needed for commercial real estate tax appeals, aside from the formalities of a State Tax Commission hearing:
1. In many cases, an attorney is mandatory.
If the taxpayer is an entity (i.e., not an individual), an attorney is required, in order to appeal to the State Tax Commission under Missouri law. Because most commercial properties are owned by corporations, limited liability companies, partnerships, trusts, estates, or nonprofit organizations, most commercial property tax appeals require an attorney.
2. State Tax Commission hearings are formal hearings (unlike the Board of Equalization).
The State Tax Commission strictly adheres to the Missouri Rules of Civil Procedure. Discovery, including depositions, is conducted. Witnesses are examined (and cross-examined), arguments are made, and the rules of evidence are strictly followed. In most respects, these hearings are no different than a court proceeding, other than the fact that a judge is replaced with a hearing officer.
3. The burden of proof is higher.
At State Tax Commission hearings, there is a presumption of validity, good faith and correctness of assessment by the County’s Board of Equalization. The presumption of correct assessment is rebutted ONLY when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been for the property.
This is not impossible by any means. Indeed, it happens quite often. However, if a taxpayer lost at the Board of Equalization level, what makes the taxpayer think they stand a better chance, without an attorney familiar with the process, in front of the State Tax Commission, when the burden is, now, even higher than it was before?
4. An attorney encourages the County to perform an actual appraisal.
Only in very rare circumstances would the County conduct an actual appraisal of the property for tax appeal purposes prior to the State Tax Commission hearing. If an attorney enters his or her appearance for the State Tax Commission appeal, the County almost always conducts, at the very least, an in-house appraisal. While, theoretically, the County is not required to perform one (it is the taxpayer’s burden of proof, and the County may simply argue that the taxpayer did not satisfy that burden), most Counties presume that an attorney, unlike an unrepresented taxpayer, will likely seek to admit an appraisal of the subject property, so the County wants one of their own.
Prior to the State Tax Commission hearing, the only data the County would have to rely upon would be the data supplied by the taxpayer at the Board of Equalization hearing and its mass appraisal data which, by its very nature, is not property-specific and unreliable. If the County actually conducts an appraisal, it may, for the first time, realize that the taxpayer’s position has some merit and seek to resolve the matter prior to the hearing.
5. Data presented at the Board of Equalization may not be admissible in front of the State Tax Commission.
For example, often times, at Board of Equalization hearings, I see taxpayers presenting MLS data for proof of comparable commercial or residential properties. There is certainly nothing wrong with this. There are no rules of evidence at Board of Equalization hearings, so the Board can choose to do whatever it wants with that type of data. Sometimes MLS data is valuable. Sometimes it is not.
That same data, however, is unreliable and inadmissible in front of the State Tax Commission, unless it is incorporated into an appraiser’s report. In short, MLS data, aside from being hearsay and unauthenticated, does not accurately compare two given properties or, put another way, does not control for the inherent and unique differences between properties, without the assistance of an expert appraiser.
6. Your adversary will be an attorney.
Unlike at the Board of Equalization, where an agent of the assessor’s office (or the assessor him/herself) usually represents the County, the County will be represented by outside counsel, a county counselor or, in smaller counties, the prosecuting attorney, in front of the State Tax Commission. Why? For most of the same reasons I cited above.
Contact Drey Cooley today to speak to an experienced commercial real estate tax appeals and non-profit tax exemption attorney.
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