Deciding to Appeal a Hospitality Assessment
By David Chitlik Vice President - Hospitality Tax, Altus Group | September 17, 2017
The decision to appeal a hotel's property assessment for tax purposes is only the first of a series of judgments before the case is resolved. Who will defend the appeal? Based on what facts? How far is an appellant willing to go to gain a remedy for the assessment?
Deciding to appeal seems straightforward, but before the decision is made, the hotelier needs to understand that appealing a property assessment can be more art than science. It's not just the facts and figures to consider. These have a supporting role, but an appeal puts them in context with other data to persuade an appeals board and, perhaps eventually, a judge that a property assessor with years in the business has made a mistake. It's showing convincingly that an appellant's opinion of value outweighs that of a professional assessor who works under strict laws, rules, regulations, guidelines and interpretations, many of them nuanced by the tax jurisdiction. Assessors can also benefit from a greater understanding of the appeal process than the appellant.
These elements of law and judicial culture are practices under which members of an appeals board and, if the case reaches that level, a judge will operate. In most jurisdictions, the assessor is considered correct until the appellant proves otherwise.
All of this must be understood before a hospitality owner challenges a property assessment. Also, in order to be successful in this effort, particularly if the appeal involves a large amount of money or is extremely complicated, the hotelier would be wise to seek out expert guidance. With this decision, new questions arise of where to find that guidance and how much it will ultimately cost.
First, the hotelier has the right to handle the appeal alone. Realistically, though, it's best to limit those efforts to small jurisdictions to which the hotelier is local, and where familiar players can be easily approached, often informally. Perhaps there is an easily remedied mistake: Assessment working papers say the hotel has 250 rooms, but there are only 225. Maybe there has been extensive remodeling that has been done in stages, necessitating taking rooms out of service for a considerable time. A fire closed 25 rooms or the events ballroom for most of a tax year. Those are errors that might merely require an assessor correct the work papers.
When the appeal involves more than simple factual errors, an appeals board will generally become involved. At that level, the appeal can become more complicated. Take, for example, a hotel that was refinanced during the past year at a greater amount than the property tax assessment. If a member of the board asks to see the appraisal supporting the refinance, the appellant's case could become harder to prove. Though the facts and figures of a mortgage are generally not applicable to an assessment, an appellant might well provide that information. A lawyer or tax consultant, knowing that the mortgage amount should not be part of an appeal, could claim no knowledge of that amount.