County hires firm to audit property assessment

County hires firm to audit property assessment

Thursday, February 10, 2011 1:00 am
by Pat Munsey

How nice would it be to choose how much tax you pay? Some businesses and individuals get to do that, and the majority of them honestly shoulder their share of the load. But there are some who should be paying more. Soon, Howard County will know if there is unreported value out there that should be taxed, but isn’t.

There are thousands of real estate parcels in Howard County, and each of them has an assessed value for taxation assigned to them by the Howard County Assessor’s Office. With few exceptions, taxpayers accept this as an equitable way to spread the tax burden.

Then there is the assessment of personal property values. Unlike real estate, the value is reported by the owner, and the tax is assessed on that value. It’s basically the honor system on a large scale, and Howard County is experiencing how volatile the system can be. In the past year, two of the community’s largest taxpayers attempted to shed hundreds of millions of dollars in assessed valuation, forcing an enormous burden on all other taxpayers.

While the problem of reforming the system is far from being addressed effectively, Howard County assessor Jamie Shepherd and Center Township assessor Sheila Pullen have taken a step toward instilling more honesty in the process. They recently entered a contract with Tax Management Associates (TMA), an auditing firm that will evaluate some of the largest personal property returns to discover whether everything that should be reported is making it into the tax base.

“Our offices audit them every year with the resources we have available, but these will be more extensive audits, possibly with on-site visits,” said Shepherd. “They will be more in-depth and detailed. TMA makes sure line-items are reported correctly and flags those that aren’t.”

“This firm looks at the books,” added Pullen.

Shepherd explained that TMA has a track record of success in finding unreported value. It works with 450 clients in 14 states and has recaptured more than $30 billion in escaped personal property value, amounting to hundreds of millions of dollars in tax revenue. While she hopes that the company finds all taxing entities have been responsible in their reporting, she anticipates that the contractor will bring some much-needed revenue to the county.

“This is something we started thinking about doing a year or two ago,” said Shepherd. “Through GM and Chrysler devaluing their personal property returns, you can see the importance that these companies are held to the same standard that the real estate is held. We are making sure the personal property assessment is done on a fair and equitable basis. TMA will help assure that.”

The contractor will not be let loose upon the business community without direction, according to Pullen. She and Shepherd will identify which businesses get audited, and that decision will be based largely on the size of the current tax returns filed.

“They’re not coming in and making the decision,” said Pullen. “They will only audit what we give them permission to audit.”

The arrangement with TMA is structured so that the existing reported tax base doesn’t stand the expense of employing the company. An account is established for the revenue captured through the audit process, and TMA will not be paid more than what is collected. It’s sort of like a contingency fee structure, Shepherd said. But it stands to benefit Howard County for years to come. On average taxing units gain $4 for every $1 paid to TMA for its services.

“Let’s say we break even in the first year,” said Shepherd. “We still get to collect in subsequent years on the additional assessed value that is found. It’s a win for the county. They have found millions in assessed values in other counties. Do I have a number in mind? No. That’s not why we’re doing this. We’re doing this to make sure everybody pays their fair share.”

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