CAE CAE Appeals and Dispute Resolution 2 — Questions and Answers
Question 1: What is the function of a Board of Review (or Board of Equalization) in the property tax appeal process?
- To set the annual tax levy for the jurisdiction
- To provide administrative review of assessment complaints before judicial proceedings (Correct answer)
- To audit the assessor's office for compliance with state laws
- To establish the assessment ratio for the jurisdiction
Correct answer: To provide administrative review of assessment complaints before judicial proceedings
A Board of Review or Board of Equalization serves as the administrative tribunal that hears taxpayer complaints about assessments before disputes proceed to court.
Question 2: Which approach is most appropriate when the subject property has no recent sales but comparable properties have sold?
- Income approach using rental income data
- Sales comparison approach using adjusted comparable sales (Correct answer)
- Cost approach using replacement cost new less depreciation
- Gross rent multiplier approach
Correct answer: Sales comparison approach using adjusted comparable sales
When the subject has not sold recently, the sales comparison approach using adjusted comparables is most appropriate to estimate market value for appeal purposes.
Question 3: What is 'equalization' in the context of a state board of equalization's role in appeals?
- The process of lowering all assessments to the lowest assessed value in the jurisdiction
- Adjusting assessments across jurisdictions to achieve a uniform assessment level for state purposes (Correct answer)
- Eliminating all property tax exemptions to equalize the tax burden
- Setting a single tax rate statewide
Correct answer: Adjusting assessments across jurisdictions to achieve a uniform assessment level for state purposes
State equalization adjusts assessed values across counties or jurisdictions to achieve a uniform assessment ratio for state aid, levy allocation, or other state purposes.
Question 4: Which remedy is typically available if a taxpayer wins a property tax appeal after already paying the full tax?
- A credit applied to next year's tax bill or a direct refund (Correct answer)
- A waiver of future tax obligations for the property
- A permanent reduction in the assessment for all future years
- A penalty assessed against the assessor's office
Correct answer: A credit applied to next year's tax bill or a direct refund
When a taxpayer succeeds in an appeal after paying, most jurisdictions provide a refund of the overpaid taxes or apply a credit toward the next tax period.
Question 5: What is the purpose of a 'comparative unit method' when used in an assessment appeal involving commercial property?
- To compare the subject's income per square foot to market norms
- To estimate the cost of the improvements on a per-unit basis for replacement cost analysis
- To directly compare the sale price per square foot of comparable properties (Correct answer)
- To calculate the gross rent multiplier for income-producing properties
Correct answer: To directly compare the sale price per square foot of comparable properties
The comparative unit method compares sale prices per square foot (or other unit) of comparable properties to the subject to support a sales comparison analysis in an appeal.
Question 6: In property tax appeals involving income-producing property, what does 'economic rent' refer to?
- The actual rent paid by current tenants under existing leases
- The market rent a property would command if available for lease at the valuation date (Correct answer)
- The rent established by government rent control regulations
- The net operating income divided by the capitalization rate
Correct answer: The market rent a property would command if available for lease at the valuation date
Economic rent (market rent) is the rental income a property would command in the open market as of the valuation date, which is used in income approach analysis for appeals.
CAE CAE Appeals and Dispute Resolution 2
What is the function of a Board of Review (or Board of Equalization) in the property tax appeal process?