There are a number of issues that must be identified, reviewed and measured when analyzing complex industrial and manufacturing properties. State and local laws must also be understood in order to accurately identify which issues apply to the locations being reviewed. The following are some of the typical issues considered when evaluating complex properties:
Most states offer some form of abatement or exemption for those assets used to control or reduce the pollution of soil, water or air. Often proactive steps are required on the part of the asset owner to capture these incentives, however. It is also important to ensure that all of the qualified costs are captured to maximize the incentive and reduce the overvaluation and overpayment of the tax.
The need for proper classification of the assets is becoming increasingly important due to the rapid changes in manufacturing technology. Correct classification must be ensured to minimize the potential for overvaluation or audit.
Managing assets is an increasingly demanding assignment. Factors such as asset transfer, assumption, disposal, and modification or improvement all contribute to this challenge. It is imperative that an operation ensure that only those assets or costs that are actually on site are reported and taxed.
Determining the true cash value of an asset at a given point in time can be a daunting task. The depreciation schedules utilized by the states vary in their treatment of asset type, and typically do not adequately account for obsolescence. This is of significant importance when taking into account the speed at which technology is changing manufacturing practices. What was state of the art yesterday may be archaic tomorrow.
Depending on the industry and specific equipment, it is often prudent to consider further adjustment to the value of an asset proposed by the taxing jurisdiction. Evidence such as actual market values or that developed utilizing other methodology of measuring obsolescence such as inutility, excess cost, or capital investments may be presented to support an estimated value.
There are a small number of states that tax inventory, all of which offer some sort of "freeport" exemption that reduces the taxable portion of the inventory. These abatements or exemptions are created with strict guidelines, therefore careful diligence must be exercised in order to capture the abatement or exemption.