When Hurricanes Katrina and Rita struck in August and September of 2005 — long after the Jan. 1 assessment date for setting values for Louisiana property taxes — real estate owners faced the menacing possibility that damaged property would be taxed based on pre-storm values.
An existing provision of Louisiana law required the revaluation of flooded property despite the fact that the assessors completed the tax rolls prior to the storms. However, no similar protection was accorded to other types of damage, such as non-flood damage.
Taxpayers in other states should pay close attention to the actions of the Louisiana Legislature and the steps taxpayers in Louisiana can take to avoid unfair taxation due to disasters. Louisiana lawmakers acted quickly after the storms, passing a bill that requires the revaluation of any property damaged or destroyed in a 2005 declared disaster. These provisions provide opportunities for tax reductions when taxpayers take the proper steps.
Many assessors in Louisiana made across-the-board percentage adjustments to pre-storm values for affected property in their districts or parishes. In many cases, an across-the-board 25% or 50% adjustment to fair market value won't be adequate to properly reflect the extent of the actual storm damage sustained by a particular property.
Accordingly, taxpayers with storm-damaged property in Louisiana should contact their assessor to determine the amount of the adjustments made to the fair market value of their property. In addition, owners need to ask the assessor what additional documentation they must provide to prove the necessity for further adjustments because of the extent of damage.
The normal deadline for filing appeals may have passed before final adjustments are negotiated; however, the likelihood exists that assessors will consider further adjustments. If the assessor refuses to make additional adjustments, the only alternative calls for contacting a tax attorney to determine the availability of remedies for 2005 adjustments.
Even if it's too late for adjustments in 2005, taxpayers should take the following steps to lower their 2006 assessments, if the damage persisted after Jan. 1, 2006:
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Get an appraisal of the property in its damaged condition as of Jan. 1, 2006. An appraisal provides the best evidence of a property's fair market value. To prepare a proper appraisal, the appraiser must inspect the property and review photographs, insurance claims, and other evidence concerning the property's Jan. 1 condition and value.
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Compile evidence of economic and functional obsolescence. Insurance claims and repair invoices are clear indications of functional obsolescence. General destruction in a neighborhood and other external factors affecting the usefulness of the property give support for an economic obsolescence adjustment.
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Confirm that 2006 tax reporting forms were filed on time. Generally, tax forms must be filed by April 1 each year. Taxpayers lose their right to challenge the assessor's valuation if they fail to file the forms in a timely fashion. If forms weren't filed or were filed late and the assessor refuses to consider appropriate adjustments, talk to a tax advisor. Some recourse may still be available.
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As early as possible, work with the assessor, including submitting relevant documentation concerning the extent of damage and the impact of the damage on fair market value.
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Don't accept an assessor's position that insurance coverage negates the need to make an adjustment. For most taxpayers, insurance proceeds are not taxable until they have been invested in repairs to the damaged property.
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Confirm that the assessor made the proper adjustments by inspecting the assessment rolls during the open rolls period beginning in August of each year.
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If negotiations with the assessor are unproductive, file an appeal to the local board of review in a timely manner. Failure to appeal to the board eliminates the taxpayer's right to further appeal.
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Furnish copies of all appraisals and other relevant documents to the review board. Failure to provide the board with relevant evidence prejudices a taxpayer's rights, if an appeal to the tax commission is filed.
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Boards of review frequently uphold the assessor's position. Thus, in the event of an adverse determination by the board, file a timely appeal to the Louisiana Tax Commission.
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Use a tax attorney for the tax commission appeal, because any appeal to the courts is based only on the transcript of the hearing before the tax commission and the documents properly filed into evidence during the hearing.
Taking the steps outlined above help ensure that damaged property isn't overvalued, reducing at least some of the expenses associated with the storms.
Chris Dicharry is a partner in the law firm Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman LLP, the Louisiana member of American Property Tax Counsel, the national affiliation of property tax attorneys.