Three Good Reasons to Appeal Your Real Estate Taxes

Tax BillA unique feature of GSA leases is that when lessors reduce their operating costs, GSA does not receive the benefit, because the government pays for operating cost adjustments based upon the change in CPI–not actual cost changes. Yet, GSA does reimburse lessors for actual increases in Real Estate Taxes. In the event that taxes decrease, GSA receives the benefit.

Many lessors, therefore, focus hard on reducing operating costs because that improves NOI, but few lessors make any attempt to review and appeal real estate taxes because a successful appeal does nothing to improve the lessor’s financial position. That view is short-sighted–especially these days. Here are three reasons why you should seek to appeal your taxes regularly:

1. It’s smart business. As GSA casts about for opportunities to downsize, consolidate and realign, there will be winners and losers, and it is clear that real estate costs will be a factor in determining which buildings GSA continues to lease and which ones it downsizes or vacates. Smart lessors will make themselves a smaller target by reducing costs wherever possible. Among the most obvious ways to reduce costs now is to reduce real estate taxes. Reducing taxes should also be a part of your renewal strategy. In a competitive pricing environment there is no place for bloated real estate taxes.

2. Your tenant appreciates it. Real estate tax reimbursements are ultimately paid by your tenant agency. There is no greater gift you can give your tenant in this tight budget environment than the gift of savings. Plus, you will soon recognize the opportunity to improve your relationship with your tenant by annually reporting your efforts to save them money. Renewals are no longer a slam dunk and you need to explore all means of keeping your tenant happy.

3.  If you don’t do it, GSA will.  A year ago GSA delivered letters to many of its largest lessors requesting information regarding their appeal history. The purpose of the study was to determine if lessors are voluntarily appealing taxes proactively or if GSA needed to step in. Under the standard lease form, GSA has broad rights to conduct these appeals on their own. Do you really want GSA poring through your books, and exercising your staff? Will the timing of their appeal mesh with your overall leasing strategy for the building? Will the basis of their appeal sabotage your own future efforts in front of the same taxing authority? It’s your asset so it’s best for you to handle the process.

How do you do it?

The appeal process does not need to be a burden and there are tax consultants capable of managing the process in any jurisdiction nationally. Colliers Government Solutions provides these services through a strategic alliance with McIntosh & Associates, a minority-owned national tax consultant with experience working for the nation’s largest government property owners as well as the United States Postal Service.

Your property manager can provide all of the information the tax appeal specialist will need and many firms (including McIntosh & Associates) work on a contingent fee basis, so no payment is required unless the appeal results in an actual reduction of real estate taxes. Most GSA leases allow the lessor to subtract the reasonable costs of appeal before passing the remaining savings through to the government (just be sure to get the GSA’s explicit approval to deduct contingent fees prior to engaging in the process).

If you would like to learn more about McIntosh & Associates tax management and appeal services, click here or contact Keith McIntosh at keith@mcintoshtaxllc.com or 202-510-9732.

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