City Government

Personal Property Tax Repeal Could Open Proverbial “Can Of Worms”

Before the personal property tax repeal has even been considered, the GUARDIAN got a call from a guy who has figured out how to beat the system–with a loophole that will be as bad as the current system. He predicts not only a loss of revenue from personal property taxes, but a steep decline in real property tax.

PERSONAL property is generally defined as items used to manufacture a product or provide a service which is not part of a building or land known as REAL property. Loosely defined that translates to “stuff not bolted down.” Our tax expert says items currently considered “bolted down” in apartments include appliances such as dishwashers, refrigerators, ranges, carpets, etc. When a building is sold or appraised for tax purposes, all those things are included to determine a value.

“I will tell me clients to remove the bolts, tear up the carpet, and declare all these items as personal property once the tax is repealed,” says our tax guy. It will be pretty hard for county assessors to make a case that a free standing range or an area rug are fixtures attached to REAL property. Even lighting could change. Instead of a fixture in the room, commercial buildings need only to change to plug-in lamps to beat the tax man.

But wait, there’s more! As luck would have it, the Idaho Tax Commission was conducting a winter training session for local assessors and appraisers Thursday, so we ran the idea past several of the instructors including Ron Gibbs, Chief Deputy Assesor of Yaupai County in Arizona. Gibbs said he has worked as an appraiser in Iowa where the personal property tax was repealed and there was no noticeable difference in personal property declarations following the repeal.

Gibbs noted that in Arizona where he works today, the first $130,000 in personal property is exempted from taxation, but the small businesses still have to file a personal property tax declaration even though no tax is due or collected.

An Idaho official who also taught some of the sessions told the GUARDIAN he anticipated “very little” attempt to lower real property values by declaring certain items as personal property if the repeal is passed. He said the marketplace will be the determining factor. If buyers and sellers start breaking out fixtures and ripping up carpet to lower appraised values it would be a “different result.”

Comments & Discussion

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  1. I am for an exemption similar to the homeowners exemption.

  2. Personal property taxation is a record keeping nightmare for small business, especially self-employed home offices, real estate and insurance agents,consultants, etc. Some are on the tax rolls, many are missed. Some taxable values are so minor the cost of preparing the assessment and the collection of taxes exceeds the tax revenue collected.
    One suggestion, exempt all office equipment, desks, chairs, file cabinets, computers, software, phones, printers, etc. The loss of revenue would be minor overall with no need for replacement revenue.

  3. Local Option Tax is just like giving heroin to an addict. We will be voting on tax increases every election and the local governments will use our own tax money to promote the issue.

    Please tell your legislators to vote NO on ANY local option tax authority.

  4. Double taxation of assets is wrong. Businesses pay sales tax (lots of it) on equipment and then get the privilege of paying additional yearly taxes on that same equipment in perpetuity. Government has no right to establish permanent tax liens against property of any kind – which reduces the “property owner” to a permanent renter of the asset. After proper sales tax is paid, title to assets should be free and clear of encumberances.

  5. Rod in SE Boise
    Jan 11, 2013, 3:51 pm

    If they repeal the business personal property tax, they need to replace that income (most of which goes to the counties, I believe), and they need to replace it with business income taxes, or personal income taxes on income > $250K. Replacing this income with property taxes, sales tax, or local option sales taxes is NOT, NOT, NOT acceptable.

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