In 2001 when Congress repealed the estate tax for the far off year of 2010, with the estate tax returning in full force in 2011, everyone assumed that Congress would act to revise the 2001 law before January 1, 2010. However, to everyone’s surprise, Congress did not act. The new year has come and gone and
Falling Property Values in Cuyahoga County
How low will they go?
Bending to market pressures, Cuyahoga County Auditor Frank Russo recently announced that the County’s 2009 valuation update will likely result in significant decreases in the County’s assessed value of residential homes – with an 8% average reduction across the County.
The media reports note that the State intends to compare Mr. Russo’s proposed values to the actual sales figures from each community and will ultimately approve new fair market values likely between 92% to 94% of the fair market value. The State’s suggestion of a 6% to 8% discount off of the appraised fair market value is really aimed at those properties that have not been recently sold. This “discount” should not be applicable to those non-residential properties where there was a recent arm’s length sale of the property.
School districts (when the sale exceeds the current assessed value) and property owners (when the sale is below the assessed value) actively seek adjustment of the market value of the non-residential properties to an amount equal to the purchase price. The Ohio Supreme Court has held that the purchase price paid in an arm’s length sale is the best indication of the fair market value of real property.
The Auditor’s decision to seek an 8% average reduction in value comes at the close of the property tax complaint filing season which ended March 31. In Cuyahoga County alone, a reported 17,000 decrease complaints were filed at the Cuyahoga County Board of Revision with respect to the 2008 tax year. Compared to the record 10,000 decrease filings last year with respect to the 2007 tax year, the 2008 “off-year” filings (the last year of the 2006-2008 triennium) are extremely notable.
The Ohio Supreme Court Clarifies the Effect of Low-Income Housing Tax Credit Restrictions on the Tax Value of Real Property
In Woda Ivy Glen Limited Partnership v. Fayette County Board of Revision (2009), 121 Ohio St.3d 175, the Supreme Court of Ohio considered whether restrictions on real property resulting from participation in the federal low-income housing tax credit program should be taken into account when appraising the property for real estate tax purposes. The
You Did What With My Money?!
On November 26, 2008, LandAmerica Financial Group, Inc. (“LandAmerica”) and its affiliate, LandAmerica 1031 Exchange Services, Inc. (“LES”) filed for Chapter 11 protection from creditors. LES abruptly ceased its 1031 exchange intermediary business two days prior to the bankruptcy filing and LandAmerica sold its Lawyers Title and Commonwealth Title underwriting subsidiaries to Fidelity Title and Chicago Title shortly after the petition date.
Monday, April 6, was the deadline for creditors in each case to file their bankruptcy claims. A review of the filed claims in each case tells quite a tale of woe, with the 1031 exchange customers of LES hit exponentially hard.
As a 1031 intermediary, LES held proceeds from the sale of its customer’s “relinquished property” for 180 days or until “replacement property” was purchased if earlier. For an extended period, LES had been investing its customer’s sales proceeds in auction rate securities (“ARS”), the market for which froze in February 2008. By November, LandAmerica could no longer fund the cash needs for replacement property purchases and this led to the Chapter 11 filing.
Customers who were in the middle of their 180-day replacement period awoke to find that their cash proceeds were not only unavailable (and likely tied up long term in illiquid investments) but that they would not be able to obtain their planned tax deferral under Section 1031 of the Revenue Code. If that was not injury enough, many of these customers already had replacement properties firmly under contract and suffered the insult of potential breach lawsuits by the sellers of those properties.
One LES creditor’s claim is reflective of the many similarly situated customers. Deblu Realty Corporation had almost $1.5 million deposited with LES from the sale of relinquished property, but its proof of claim was not only for that amount but for $373,000 in lost deferral of taxes (at capital gains rates), $3.7 million in potential lost profits on the thwarted acquisition of replacement property as well as yet to be determined amounts for alternate financing costs and legal fees.
Bankruptcy Court Refuses to Modify Interest Rate on Ohio Tax Certificates
In In re Cortner, decided February 4, 2009, the Bankruptcy Court for the Southern District of Ohio held that an Ohio property tax certificate holder was entitled to receive the auction-established rate of interest on its certificate, rather than a reduced, court-determined rate. The creditor held several tax certificates, purchased at auction as described in
Fact Check: Is Your Property Correctly Valued?
Many counties in Ohio, Hamilton and Franklin included, have just completed their triennial valuation of real property. In this day and age of falling real estate values and 401(k) balances, saving money is on everyone’s mind. That makes today a good day to review the Auditor’s new value of your property and ask yourself, “Am I paying taxes based upon my property’s correct value?”
Many factors influence property values, and the Auditor’s appraisers, despite their best efforts, are all too often not privy to all the information. The burden therefore falls on the shoulders of the property owner to provide additional information to the Auditor when necessary. In order to do this, a properly completed Complaint Against the Valuation of Real Property form (see links for Hamilton County, Franklin County, and Cuyahoga County forms) must be filed with the Auditor’s office on or before March 31st of the following tax year. This means if you are filing by March 31st of this year, you are actually challenging the valuation of your property as of January 1, 2008. And each county typically has its own set of procedural rules for filing a complaint, so be sure to familiarize yourself with the correct process to avoid dismissal of your case.
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