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me clients to remove the bolts, tear up the carpet, and declare all these items as personal property once the tax is repealed,” says our tax guy.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 Gibbs said he has worked as an appraiser in Iowa where the personal property tax was repealed and there was no noticeable difference in personal property declarations following the repeal.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.”
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