A Strategic Approach to Property Taxes
For owners, developers, and investors in commercial real estate, a post-acquisition reassessment that raises the assessed value of the property by thirty percent or more is no longer an exceptional event. The resulting increase in property tax liability can exceed pro forma assumptions by six figures annually, diminishing net operating income and, consequently, asset value.
According to the FY24 State and Local Tax Burden Study, published jointly by Ernst & Young (EY) and the Council on State Taxation (COST), property taxes account for approximately thirty-four percent of a business’s annual state and local tax liability. Unlike sales tax, corporate income tax and payroll-related taxes, property tax is not tied to operating performance. The obligation remains constant whether a building is ninety-five percent leased or fifty-five percent leased.
That line item can be challenged. A disciplined, multi-year appeal strategy can produce material and recurring reductions across a portfolio. For real estate investors, the relevant question is not whether property taxes can be managed, but whether the current approach is optimal for the present assessment environment.
Why Today’s Assessment Environment Warrants a Closer Look
Assessment practices have grown more complex. Assessors increasingly rely on income-based approaches, market-derived assumptions, and mass appraisal techniques that may not reflect property-specific realities. In certain asset classes—such as data centers, senior housing, and net-leased investments—there is also ongoing tension between the value of real estate and the value of the business or contractual income streams associated with the asset.
At the same time, many jurisdictions have become more aggressive in defending assessed values. In certain states, third parties—including local boards of education—may file appeals against unsuspecting taxpayers seeking to increase the assessed value of their properties. These dynamics have meaningful implications for underwriting assumptions, refinancing decisions, and disposition timing, and they warrant a proactive, multi-year strategy aligned with investment objectives rather than a reactive, one-off challenge.
Representative Outcomes
The matters below illustrate the range of circumstances in which property tax appeals have produced material tax savings for commercial real estate owners. Prior results do not guarantee future outcomes; each property is evaluated on its own facts and market conditions.
Industrial—Harford County, Maryland. A 1,000,000+ SF industrial warehouse carried an assessed value of $40.8 million. An appeal to the Maryland Tax Court produced a reduction to $29 million, resulting in three years of tax savings totaling $371,666.
Industrial—Hendricks County, Indiana. A large-scale steel mill carried multi-year assessments that did not reflect the facility’s operating economics. An appeal strategy covering eight tax years recovered more than $1 million in tax.
Senior housing—Franklin County, Ohio. A continuing care retirement community was targeted by the local board of education, which filed a complaint seeking to increase the assessed value to match the property’s recent sale price. Successfully defeating that complaint—and securing a reduction from $16 million to $6.45 million—produced tax savings of more than $700,000.
The Case for Integrated Property Tax Strategy
In a market where margins are increasingly sensitive to operating costs, a comprehensive property tax strategy offers a clear opportunity to protect and enhance asset value. For sophisticated investors, the objective is not the reduction of taxes in isolation, but the optimization of performance across the full ownership lifecycle—from pre-acquisition due diligence, through operations and refinancing decisions, to eventual disposition. A property tax strategy structured around that lifecycle, rather than around annual assessment cycles in isolation, tends to produce materially different outcomes.
Request a Property-Specific Review
If you have questions about whether properties in your portfolio are over assessed, please reach out to Jones Pyatt Law. For portfolio assets that have recently been reassessed, recently acquired, or are approaching a filing deadline, a property-specific review can determine whether an appeal is likely to produce material tax savings and whether filing in the current cycle or a subsequent cycle is advantageous.
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