10 Aug The Intersection of IAAO & TMA
The collaboration between IAAO & TMA extends beyond partnerships at conferences | by Ryan Cavanah
The International Association of Assessing Officers (IAAO) plays a crucial role in our industry. The IAAO is recognized for setting standards and best practices for property taxation across all 50 states in the United States, the Caribbean, and multiple provinces in Canada. The IAAO mission is to ensure individuals are treated fairly and equitably in property taxation.
The IAAO is ever evolving with many exciting things on the horizon. As the IAAO grows, it is becoming a leading authority on mass appraisal worldwide. So, how does the IAAO become the most trusted authority on mass appraisal? This involves a multi-level discussion, starting with partnerships. The IAAO is actively partnering with organizations in the United States and abroad. For instance, the IAAO is collaborating with TEGOVA (The European Group of Valuers’ Associations) from the European Union to assist them in updating their standards. The growing respect for IAAO’s expertise in Europe is a promising development, leading to the formation of a new chapter in Europe where IAAO Standards and best practices will be implemented to ensure equity across the European Union.
Now that we have considered the significance of IAAO, let’s work on understanding TMA. Tax Management Associates (TMA), established in 1979, has dedicated decades to promoting fairness in property tax assessments for local governmental jurisdictions. TMA achieves this through tangible and intangible personal property tax verifications, hotel/motel tax verifications, sales and use tax verifications, and homestead verification processes. TMA possesses the expertise to audit and verify tax revenues collected by any government entity.
TMA’s primary focus is conducting Tangible Personal Property audits for over 40 years. This type of property can get overlooked in day-to-day operations of a tax office. By providing these services, TMA has worked with over 550 state and local government clients in 23 states, performing nearly 300,000 audits resulting in approximately $60 billion in previously unreported assets added to local tax rolls.
When you look at the big picture of a job in property tax assessment, it is our responsibility to value property using uniform valuation models while constantly testing these models. IAAO sets forth USPAP-compliant Standards to guide property assessors in modeling and conducting proper analysis, ensuring uniform and equitable valuation of all properties. Specifically in IAAO course 402, it is taught that “unless assessed values are equalized, jurisdictions will be penalized if they appraise property near market value and receive windfalls if they under appraised.”
America’s most trusted dictionary defines equitable as “dealing fairly and equally with all concerned.” So, the question becomes, is proper modeling enough to ensure equity? For example: A taxing jurisdiction needs $7,500,000 from their property tax in fiscal year 2024 to operate. The jurisdiction’s breakdown is:
Residential Property: $500,000,000
Commercial Property: $350,000,000
Personal Property: $150,000,000
Total Value: $1,000,000,000
Budget Needs: $7,500,000
Needed Millage Rate: 7.50
In this jurisdiction, with a total property value of $1 billion and a budget requirement of $7.5 million, let us consider two neighboring homeowners, Dale and Brennan. These neighbors own comparable homes valued at $250,000 each. They both receive property tax bills of $1,875, suggesting fairness. However, despite the similar appraisal models and tax bills, it does not mean they are both necessarily paying their fair share.
While real property undergoes revaluation annually with visual inspections every four years, personal property verification remains challenging. Self-reporting makes it difficult to ensure accuracy, leading to non-filers. This is where TMA steps in. By verifying reported personal property and identifying non-reported assets, TMA certifies that everyone pays their fair share of property taxes. Over 40 years of operation, TMA has discovered anywhere from a 50% to 80% discovery rate in new areas resulting in additional tax dollars on the roll. For example:
Residential Property: $500,000,000
Commercial Property: $350,000,000
Personal Property: $175,000,000
Total Value: $1,025,000,000
Budget Needs: $7,500,000
Needed Millage Rate: 7.32
With the new 7.32 millage rate, Dale and Brennan are paying $1,830/year in property tax. Although this is not a precipitous drop, this is a more equitable payment.
So where do IAAO and TMA intersect? The collaboration between IAAO and TMA extends beyond partnerships at conferences. Both organizations intersect in their commitment to promoting equity among taxpayers. IAAO recognizes the significance of personal property audits, as taught in course 501, ensuring a comprehensive review of all properties in a taxing jurisdiction. Course 501 also states: “An audit program, like many other functions of the Assessor’s office, initially can be achieved or supplemented by an outside contractor.” Additionally, IAAO offers workshops, such as 552 and 553, focused on teaching personal property auditing. Through these educational efforts, IAAO emphasizes the importance of personal property verification, not just as a revenue source but as an equalization tool for local tax bases.