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Act soon to reduce your Kentucky real property tax bill

Although the county sheriffs in Kentucky send out the tax bills for real property in the fall, the time to dispute “overvaluations” of real estate is in the spring. When the county Property Valuation Administrator (PVA) reappraises real estate, the PVA sends the owner a notice to inform them of the revaluation; however, the PVA generally does not send a notice when no change in value is made. Even so, owners may dispute the value of their real estate even if they do not receive a notice, as discussed below.

By way of background, the amount of property tax assessed on real property is directly proportional to its value, and so, Kentucky’s property tax is often referred to as an ad valorem property tax. Taxpayers cannot generally dispute the rate of tax on their real estate. Accordingly, to reduce your real estate tax, you must convince the PVA that your property has been overvalued.

One way of determining whether or not your real estate is overvalued for property tax purposes is to ask yourself: Would I sell my property immediately if someone offered to buy it at its property tax value? This is a pretty good litmus test to determine whether to dispute the value of your real estate; however, the PVA uses several methods to determine the “fair cash value” of real estate.

Methods of valuing real estate include, the sales comparison approach, the cost approach and the income approach, each of which may be used alone or in

combination with the others. The sales comparison approach, sometimes called the “market approach,” uses recent sales of similar properties to determine the value of the involved property. The cost approach estimates the value of real estate by trying to estimate the combined value of the land and the depreciated cost of improvements, i.e., buildings. The income approach is often used to value income producing property, such as rental property, using the present value of the property’s expected net income over its useful life.

In representing clients in real property disputes, we often recommend getting an appraisal to confirm a client’s informal opinion of the tax value of their real estate. However, successfully reducing overvalued property does not always require an appraisal.

Although the timelines are rigid, the process for disputing the tax value set by the PVA is relatively straightforward. The first step is to request a conference with the PVA during the statutory “inspection period.” By statute, the inspection period begins the first Monday in May and lasts for thirteen days; however, in Jefferson County, Kentucky, the inspection period often begins earlier. Failure to go through this process of having a conference with the PVA jeopardizes future appeal rights.

After the conference with the PVA, the PVA may uphold the tax value of the involved real estate or adjust the value.  If the PVA’s revised value remains unacceptable, an appeal may be filed with the county Board of Assessment Appeals (BAA), which holds a more formal hearing and makes yet another determination as to the value. Again, if the revised value is unacceptable, an appeal may be filed with the Kentucky Board of Tax Appeals (KBTA), which is the last level of administrative review prior to an appeal to the courts.

Again, each of these steps is a prerequisite for the following step. Failure to go through any given step will preclude an appeal to the next and successive levels. In this regard, although an individual owner may dispute the assessed value of his or her own real estate, it is often more prudent to involve an attorney on the front end, who knows the process and property tax law, rather than waiting until reaching the BAA or the KBTA levels. If you receive a notice revising the value of your real property, review it; if you do not receive a notice, take a look at your property tax bill from Fall 2006. Then, ask yourself if the property’s value for tax purposes is greater than its fair market value. If so, you should consider taking steps to reduce your 2007 property tax bill. As stated, you cannot wait until the property bill comes out in the fall to protest the value. By that time, the value is set by law and it cannot be protested. Act soon, before the inspection period closes in May 2007.

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