Real Property Assessment

Real Property Assessment

Introduction

A real property assessment system is a major administrative component of a property tax system. Reflecting the dynamic and complex environment in which they operate (figure 1), property tax systems generally are complex. However, all are composed of elements, functions, phases, and linkages.

(figure 1).

Elements

Property tax systems comprise people, policies, technology, data, and processes (figure 2). Policies and processes acquire legitimacy through legislation. The legislative framework (the subject of a Thursday session) of a property tax system should set out policy choices clearly, provide the environment for their achievement, and assign responsibilities.

(figure 2).

Laws, regulations, and court decisions establish the legal framework. Matters requiring legal support include organizational responsibilities, power to tax, liability for tax, property subject to tax, basis of tax, taxpayer rights and responsibilities, and so forth.

Functions

Functionally, a property tax system does three things. It identifies and links taxable subjects (taxpayers) and objects (taxable property). It produces tax assessments. It collects taxes. If any of these is done poorly, tax equity will suffer, revenue generation also may suffer, and public acceptance will erode. The achievement of the ultimate objective of a property tax system—an equitable, legal apportionment of property tax—requires careful planning and wise use of resources, sufficient data, and—in market value-based systems--a mass appraisal program capable of producing accurate, supportable valuations. But the process does not stop with valuation. Exemptions and other tax relief measures must be applied. Valuation or tax notices must be issued and delivered to taxpayers. Taxpayers must be allowed to review their assessments and appeal them if they desire. Appeals must be processed. Tax payments must be

received, properly accounted for, and deposited in the appropriate treasury. Taxpayers must be provided with sufficient information to fulfil their obligations. Taxpayer questions must be answered and their acceptance of new property tax systems obtained(figure 3).

(figure 3).

The administrative component controls the other two. It dictates powers and responsibilities (including the power to tax property). It provides resources and controls how they are used. The assessment component determines who is to pay a tax and the size of each taxpayer's share of total taxes. The assessment component may include a valuation system. The collection component bills, receives, accounts for, and distributes property tax payments. It also embraces efforts to ensure compliance.

Phases

As the process framework implies, there is a time dimension as well. Tax systems always are dynamic, not static. Taxation occurs in annual cycles. Often there are longer intervals between reassessments.

Linkages

A property tax system does not exist in isolation of other systems. Consequently, there are the linkages among the property tax system, its clients or stakeholders, and other systems (figure 4).

(figure 4).

There are “internal” linkages when administrative responsibilities are divided among more than one agency or department. In a formal sense, the “clients” of the property tax system are the recipients of property tax revenues. At the same time, taxpayers should be satisfied that the system provides a legal, fair distribution of property tax ...