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Contact:
Nina McCann
Director of Public Relations
Forchelli, Curto, Deegan, Schwartz, Mineo, Cohn & Terrana, LLP
516-248-1700
nmccann@ForchelliLaw.com
Real Estate Taxes for Industrial
Properties in latest issue of Hauppauge Reporter
Uniondale, December, 2009 — By Forchelli, Curto,
Deegan, Schwartz, Mineo, Cohn & Terrana, LLP Associate
Douglas W. Atkins.
Any
owner of Long Island commercial real estate knows, property
taxes are one of the heaviest burdens to the bottom line. Industrial
and warehouse properties are no exception. While
some of these properties benefit from tax deals (e.g., Industrial
Development Agency, Empire Zones, etc.), most are fully
taxed. This article discusses how industrial property taxes
are calculated and then explores the possibility of reducing
them.
Property
taxes are a function of the tax assessment multiplied by
the tax rate. Suffolk
County is divided into ten towns and each has a tax assessor
who has the responsibility of assigning a tax assessment
to every property within that town. State
law dictates that tax assessments are to be based on the
market value of the property. Each year, the tax
assessor publishes his or her assessment roll. Then
once the local town, school district, police department,
garbage district and other disparate taxing jurisdictions
calculate their levy, the overall rate can be formed. This
rate, multiplied by the assessment, results in the tax
bill.
In Suffolk, the tax year runs from December
1st to November 30th. For example, the upcoming tax
year is 2009/10 and it begins on December 1, 2009. Shortly
thereafter, industrial property owners will receive their
tax bills in the mail. When you get your tax bill,
there are certain questions that you should ask.
First,
find out what taxing and assessing jurisdictions you are
in. Particular attention should be paid to the school district
since that is the largest component of your taxes. The
Hauppauge Industrial Park is split between the Town of
Islip and the Town of Smithtown, though all are in the
Hauppauge School District. This can
be confusing, but it is an important distinction since
a property located in Islip will be assessed differently
than a neighboring property in Smithtown.
Another
question to ask: is my property in an incorporated village? Properties
located in villages are typically taxed and assessed separately
by the village assessor. For
instance, warehouses located in the Village of Islandia
will pay property taxes through the Town of Islip, as well
as through the Village of Islandia.
Another
major question relating to your tax bill is, what does
my assessment actually mean? As stated above, the assessment is supposed
to be based on the value of the property as of a fixed date and time. The
most common method for valuing a property for assessment purposes is called income
capitalization. This
takes the income which could be generated from the rental
of a property and capitalizes it to arrive at a market value. Since industrial
properties typically will rent for less per square foot than office or retail
properties, industrial properties should be worth less on a per square foot basis. This
means that a 10,000 square foot warehouse should pay less
taxes than a 10,000 square foot office building. Unfortunately, this may
not be the reality since the assessment process is subjective and prone to errors.
Many
property owners ask, “is there anything I can do
to lower my taxes?” The
answer is “yes.” Under state law, a commercial
real estate taxpayer has the right to challenge his or
her tax assessment. An attorney
can file a claim wherein it is alleged that the town has
overvalued and over taxed your property. If successful,
there may be a refund from your tax bill, and/or a reduction
in future taxes. In many cases, the tax cut
could be drastic.
Sometimes
a tenant is responsible for paying the taxes and the landlord
may ask, “why
should I care what the taxes are if my tenants pay them?” The
answer is that lower taxes leads to higher net rents for
the landlord. This
is because a tenant will only be willing to pay a certain
amount for the rental of the building. For instance,
say a tenant in the medical products field is willing to
pay $10.00 per square foot in rent. That tenant is
willing to pay $10.00 without regard as to how that rent
is used by the landlord (for taxes, or otherwise). If
the property taxes on that building are $1.75 per square
foot, but the landlord gets them reduced to $1.25, the
tenant’s
rent of $10.00 per square foot now goes that much further
for the landlord.
ince
property taxes are one of the biggest expenses for big
and small businesses, you should be aware of how they affect
you. As recent history has shown, taxes typically only
go in one direction. That is, unless you look into
it and do something about it. For more information,
consult your attorney.
Founded
in 1976, Forchelli, Curto, Deegan, Schwartz, Mineo,
Cohn, & Terrana
LLP is one of Long Island's most acclaimed and distinguished
law firms. Headquartered in Uniondale, NY, the firm is conveniently located for clients in
Nassau and Suffolk. The Firm employs nearly 50 attorneys
who provide counsel to a broad range of clients, including
national, regional and local businesses, major real
estate developers and organizations, banks, insurance
companies, municipalities, educational institutions,
and individuals. Personal attention and quality representation
that is both practical and cost-effective are hallmarks
of the Firm's policy towards clients.
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