Property Tax and Classification

Property Tax and Classification

Developer owns three one acre lots on a Trunk Highway.

Each of the three parcels are CLASSIFIED as Commercial for Property Taxes and VALUED as Commercial for Property Taxes.

Initial research reveals:

Parcel
Zoning
Comp Plan
Tax Classification

A
Med Density Residential
Med Den Residential
Commercial

B
Med Density Residential
Commercial
Commercial

C
Commercial
Commercial
Commercial


Under Minnesota State Statute when there is a conflict between the Zoning and the Comprehensive Plan, like in Parcel B above, the Comprehensive Plan prevails when a development application is submitted.


Quiz: Answers at the end of the quiz

1) Parcel A should be CLASSIFIED for property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information




2) Parcel A should be VALUED for Property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information



3) Parcel B should be CLASSIFIED for property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information



4) Parcel B should be VALUED for Property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information



5) Parcel C should be CLASSIFIED for property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information



6) Parcel C should be VALUED for Property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information



7) If a property is misclassified as Commercial when it should be Residential, the Property TAX may be TRIPLE what it should be at the same Valuation.

a) True

b) False



Answers to the quiz:

1) A 2) C 3) A 4) C 5)B 6) C 7) A



You needed to know these two facts to ace the quiz:

A) For Property Tax Classification of VACANT land where there is no obvious use, its classified how its ZONED. Comp Plan is irrelevant in classification.

B) Property should be VALUED at its highest and best use. Highest and Best Use is based on what is a) Physically Possible; b) Legally Permissible; and c) Financially Feasible.

The Highest and Best Use is the most critical component of any appraisal. And I haven't finished my analysis for these three parcels to make that determination.



Classification is something I've observed most property owners blow off, focusing on the value. But challenging the classification may have even greater impact to your property taxes than challenging the valuation because there is such a huge difference in tax rates.



Are your properties misclassified? For a free evaluation, send me your PIDs, property locations and your contact info to heresthedirt@visi.com.

The deadline to challenge your Pay 2011 property taxes is April 29th, 2011.