Frequently Asked Questions
Table of Contents
- What is the procedure for assessing Business Personal Property?
- How are Recovery Periods determined under 137.122 RSMo?
- Where can I find the IRS Publication 946?
- What types of business personal property are found in the different recovery periods?
- Is there an alphabetical listing of Business Personal Property Groups?
- What is Assessment?
- How Often is Property Reassessed?
- What Happens in the Even Year?
- What types of Property are there?
- Is All Property Taxed?
- Why is Reassessment Necessary?
- Who is Responsible for Reassessing property?
- What are Assessors's Qualifications?
- What is Market Value?
- How is My Assessment Level Established?
- How are the Real Estate Classifications Determined?
- How Does the Assessor Know What Personal Property I Have?
- How Does the Assessor Value My Real Property?
- Will All Property Values Change Due to Reassessment?
- If No Improvements Have Been Made to My Property, Why Should the Assessed Value Increase?
- Will I be Notified if there is an Increase in My Assessment?
- What If I Disagree with My Assessment?
- Will Political Subdivisions Lower Their Levies?
- How Does Reassessment Affect My Taxes?
- Statement Of Non-Assessment: What's That?
- What Property Is Liable For Taxation?
- I Just Purchased A Vehicle, Will I Owe Property Taxes On It This Year?
In 2005, §137.122, RSMo was enacted into law to provide for uniform assessment of business personal property beginning in 2007 for property put into service after January 1, 2006. To establish the assessment under that section, the following process must be followed:
- The original cost paid by the current owner, less freight, installation, and sales or use taxes and date of purchase is reported by the owner. Assessors may access sample forms at www.moassessorsassn.org/ in the "Assessor Use Only" section.
- The Class Life and Recovery period is determined by using IRS Publication 946, Appendix B, Table B-1 & B-2 – Table of Class Lives and Recovery Periods (see cite to IRS internet source below).
- The assessor applies the proper depreciation schedule found in §137.122.3, RSMo, by applying the years since acquisition and the appropriate recovery period to determine the appraised value.
- The appraised value is multiplied by the statutory assessment level for personal property, 33 1/3% to establish the assessed value.
Example: To determine the 2007 value of a special mold used for manufacturing motor vehicles, bought in February 2006 for $100,000 the process would be as follows:
- The cost and acquisition date is reported by the owner.
- A recovery period of 3 years is determined (Asset Class 37.2) by using Publication 946.
- Because the statute instructs that "the percentage shown for the first year shall be the percentage of the original cost used for January first of the year following the year of acquisition," a depreciation factor of 75% is used. In other words, by using the table in section 137.122.3, and applying a Recovery Period 3 and using Year 1, 75permil; is indicated. Then multiply 75% by the cost, $100,000, for an appraised value of $75,000.
- Multiply $75,000 by 33 1/3 (the assessment level) to determine an assessed value of $25,000.
- Multiply $75,000 by 33 1/3% (the assessment level) to determine an assessed value of $25,000.
To assess business personal property (BPP) pursuant to §137.122, RSMo, an assessing officer must determine the recovery period for each item. The Class Lives and Recovery Periods found in IRS Publication 946, Appendix B, Table B-1 & B-2 – Table of Class Lives and Recovery Periods provide the information necessary to establish these recovery periods. They are identified as GDS (MACRS) in Publication 946, where a detailed description of each of the asset classes can be found. To determine exactly how BPP should be depreciated, it is necessary to read the exact description from Publication 946, pages 98 through 107. An Adobe-Acrobat Reader is required to view, download, or print the publication. To access Publication 946, go to www.irs.gov/pub/irs-pdf/p946.pdf.
The State Tax Commission, utilizing IRS Publication 946, has provided a quick reference in two formats:
- List of BPP Groups by Recovery Period The recovery periods established by §137.122, RSMo are 3, 5, 7, 10, 15 and 20 years. Accordingly, the first listing covers various groups of BPP organized by the length of the recovery periods applicable under MACRS. The depreciation factors (percent good of price paid by current owner for the item without freight, installation, or sales or use tax) established by §137.122, RSMo applicable to each group are also provided. The percent good factor is simply determined by matching the recovery period with the years since placed in service.
- Alphabetical Listing of BPP Groups The second listing provides each type of property alphabetically followed by the Asset Class numbers and recovery period for that type of asset.
NOTE: The listings are abbreviated versions of the more detailed descriptions found in Publication 946. That publication must be consulted to accurately determine recovery periods.
To view the listings, go to the www.stc.mo.gov, click on FAQs and then click on question # 4 for the List of BPP Groups by Recovery Period or click on question # 5 for the Alphabetical Listing of BPP Groups.Where can I find the IRS Publication 946? What types of business personal property are found in the different recovery periods?
Link to business personal property by recovery period (PDF document)Is there an alphabetical listing of Business Personal Property Groups? What is Assessment?
Assessment is the process of placing value on a property for the purpose of property taxation. Reassessment is an update of all real property assessments in the county, conducted by the county assessor to equalize values among taxpayers and to adjust values to current market conditions.How Often is Property Reassessed?
The assessor places assessed values of real estate on the tax rolls every odd-numbered year 2005, 2007, 2009 etc.What Happens in the Even Year?
For most real estate owners, nothing. However, if new construction or improvements have been made, the property's market value is adjusted to reflect the added value of those changes. The total value is based upon the market conditions as of January 1 of the preceding odd-numbered year.
For example, if your house was valued by the assessor at $50,000 as of January 1, 2005, and you added a bedroom in June of 2005, the increase in value would be added for the 2006 tax year. If the house with the new bedroom would have been worth $60,000 on January 1, 2005, your market value for 2006 would be $60,000.What types of Property are there?
Missouri recognizes two types of tangible property:
- Real Property – this includes land, improvements to the land and all rights inherent in ownership.
- Personal Property – this is any property that is not real property, and is not permanently affixed to or part of real estate. Personal property includes cars, boats and farm equipment.
No. Some personal property is exempt, including household goods, inventories, wearing apparel and items of personal use and adornment. Exempt real estate includes property owned by governments, and property used as non-profit cemeteries, exclusively for religious worship, for schools and colleges, and for purely charitable purposes.
In addition, there are about 50 economic development zones in the state, located in places where there is blight, unemployment, etc. To attract employers, or encourage employers to expand in those areas, some property improvements may be given tax abatements for a period of years.What is Reassessment and Why is it Necessary?
Under Missouri's Constitution, all assessments for property tax purposes must be based upon market value and be uniform within the same class or subclass of property.
Reassessment is the review of all the property in a county to ensure the assessments are uniform and equitable. The assessor updates the assessments in each county to equalize values among the taxpayers and adjusts value to reflect current market conditions.
Over time, the value of property may change, depending upon its nature, location, and other factors. Some values change more rapidly than others. Reassessment is the only way to be sure that the taxpayer is being taxed fairly, and is taxed the same as other comparable property.Who is Responsible for Reassessing property?
The county assessor is primarily responsible for assessing property within the county. However, the assessor's work is subject to review by the county Board of Equalization and the State Tax Commission. The State Tax Commission is the state agency charged with general supervision of assessors and with enforcing property tax laws.What are Assessors' Qualifications?
Assessors are trained in all aspects of the assessment process including determining value using income approach, cost approach, and comparable sales approach. (These approaches are described below). Assessors must participate in approved continuing education courses to remain certified with the State Tax Commission.What is Market Value?
Market value, true value in money and appraised value have the same meaning under Missouri law. A simple definition of market value is the price the property would bring when offered for sale by a person who is willing but not obligated to sell it, and is bought by a person who is willing to purchase it but who is not forced to do so.How is My Assessment Level Established?
Once market value has been determined, the assessor calculates a percentage of that value to arrive at assessed value. The percentage is based on the classification, determined by the type of property or how it is used. The percentages are:
|Agriculture||12%||Farm Equipment, Livestock||12%|
|Commercial & all other||32%||Grain||½%|
|Cars, Boats, Other||33 1/3%|
As an example, a residence with a market value of $50,000 would be assessed at 19‰, which would place its assessed value at $9,500. An automobile with a market value of $10,000 would be assessed at 33 1/3‰%, or $3,333.How are the Real Estate Classifications Determined?
Missouri statutes define the three subclasses of real estate:
- Subclass 1 – Residential property, all real property improved by a structure which is used or intended to be used for residential living by human occupants, vacant land in connection with an airport, land used as a golf course, and manufactured home parks, but residential property shall not include facilities used primarily for transient housing.
- Subclass 2 – Agricultural and Horticultural property is that which is actively used for those purposes. The value of this land is established by its productivity, based on soil productivity guidelines set by the State Tax Commission. It is not based on market value. However, when the highest and best use of land is considered to be agricultural, and it is not actively farmed, it is assessed according to market value and not by productivity guidelines.
- Subclass 3 – Utility, industrial and railroad property, and any other real estate that does not fit either of the other two classes. Includes mines, stores, factories and property of non-profit corporations.
The assessor sends out blank assessment forms early each year. It is your responsibility to send a completed form to the assessor by March 1, listing all the taxable personal property you owned on January 1. If your form is late, the penalty ranges from $10 to $100, depending on the amount of valuation involved. The assessor may contact you to follow up if the form is not complete.How Does the Assessor Value My Real Property?
A number of methods are used. The assessor's staff looks at new construction that has taken place, sales prices of comparable property located nearby, the condition of your property, and any other factors that can help place an accurate value on the property.
Three appraisal methodologies are used to determine the value of property. These three methodologies are:
- Cost approach – First, the value of the land is estimated, as if vacant. The assessor then adds the amount it would take to replace your structure with one of similar construction and amenities, including current costs of materials and labor, profit, overhead, permit fees, and the like. If your structure is not new, the assessor then applies depreciation from all causes, and subtracts that amount from the calculation of replacement cost.
- Market approach – This is also called the sales comparison approach. Your property is evaluated by comparing similar properties that have recently sold. Adjustments may be made for differences such as a garage, finished basement, or better location of those comparable properties. This can be the most reliable approach for residential property where there are frequent sales and similarities in properties.
- Income approach –This approach works well for apartments, shopping centers and office buildings. The assessor first estimates potential gross income from rentals, then subtracts an amount for vacancies and operating expenses. The amount of net income is then converted to a value for the property, using a process called capitalization.
All values are likely to change, but not all will change to the same extent. Market values increase more in some neighborhoods than in others. A major purpose of reassessment is to make sure that the new values reflect all changes that have occurred.No Improvements Have Been Made to My Property, Why Should the Assessed Value Increase?
Market value changes over time even if no improvements are made to the property. For example, many people sell their homes for more money than they originally paid years earlier. The statutes require that property be periodically reassessed to maintain realistic market values and treat all taxpayers fairly.Will I be Notified if there is an Increase in My Assessment?
The assessor is required by the statutes to notify the owner of record of any increase in the valuation of real property.What If I Disagree with My Assessment?
If you do not agree with your assessment, there is an appeal process. This process is detailed in the pamphlet "Property Tax Appeals Before the State Tax Commission of Missouri". Please refer to that pamphlet for a more thorough explanation.
Remember that an assessment is based on current market value and our objective here is to establish the correct market value of the property. Stating that property taxes are too high is not relevant testimony. You should determine what you believe to be the value of your property and gather and present evidence that supports that value. Such evidence could include photographs, the recent sale of your property, or the oral testimony of someone who has done a recent appraisal of your property.
In a nutshell, there are three steps to the appeal process:
- Informal Appeals – Contact the county assessor's office as soon as you are notified of your assessment. An informal meeting with the assessor or one of the staff, where you can ask how your assessment was made, what factors were considered, and what type of records pertain to your property. Many disagreements are taken care of at this level.
- Board of Equalization – If not satisfied after the informal meeting, you should contact your county clerk for information regarding forms and deadlines for appealing to the county board of equalization. A hearing will be scheduled where the board will hear evidence from the assessor and any evidence you might have regarding the value of the property which is the subject of the appeal.
- State Tax Commission – If you are still not satisfied with the assessment on your property, you have a right to appeal to the State Tax Commission by September 30 or 30 days after the final action of the board of equalization – whichever is later.
When the total assessed valuation in a political subdivision increases substantially, as often happens with a reassessment, it is allowed an increase in revenues to account for inflation, plus the revenues it receives from taxing new construction and improvements. Its governing body, after that, is required by the constitution to adjust tax rates downward. This is called a tax rate rollback. The allowed increase in revenues over the previous year for cost of living, refer to CPI certification at http://www.stc.mo.gov/pdf/CPI.pdf (there is a maximum of 5% allowed). After this allowance, and that for new construction during the previous year, the tax rates must be reduced to offset the valuation increaseHow Does Reassessment Affect My Taxes?
It depends. An increase in assessed value does not necessarily equate to an increase in property taxes. Taxes are calculated by multiplying your assessed value times the combined levies of the taxing entities which levy a tax on that particular property.
If levies increase, taxes may increase even if assessed values remain unchanged or decrease.
If levies decrease, an increase in assessed value may not cause an increase in taxes.
Another is a voluntary reduction voted by the governing body.
Tax levies are normally set during August. That means when you receive a notice that your assessment has been increased, it is too early to be able to calculate how the change in assessed value will affect your taxes. You will not know until the rates have been set by all of the local governments that tax your property.
As a simplified example, if your school district calculates that it is permitted $450,000 in property tax operating revenues and it has $10 million in assessed valuation, it could levy a tax of $4.50 per $100 assessed valuation ($450,000 / $10,000,000 * $100). Your county and city would make similar calculations based on their permitted revenues and their respective assessed valuations.
All of the tax rates of the local governments are added, along with the 3-cent state levy (for Blind Pension Fund), and multiplied against your assessed valuation. Assuming these tax rates total $5.80 per $100 valuation, and your house is valued at $50,000 market value, your tax bill would be calculated by determining 19% of your market value, or $9,500. That assessed value is multiplied by the tax rate, and the result divided by 100: $9,500 * $5.80 / $100 = $551 tax levied. Here is an illustration.
|Schools Tax Rate ($4.50)|
|County Revenues Allowed ($325,000)|
= County Tax Rate ($1.30)
|Total County Valuation ($25 million)|
Total Tax Rate ($5.80)
Assessed Valuation ($9500)
Divided By 100 Equals
Tax Bill ($551)
A statement of non-assessment is obtained from the county or City of St. Louis assessor if you did not own or have under your control any personal property as of January 1. You will need to contact the assessor in the county of your residence to request the statement of non-assessment and to be added to the assessment roll for the subsequent tax year.What Property Is Liable For Taxation?
In Missouri, all tangible personal and real property is subject to taxation with a few exceptions (see 137.075 RSMO).
Some personal property is exempt, including household goods, inventories, wearing apparel and items of personal use and adornment. Exempt real estate includes property owned by governments, and property used as non-profit cemeteries, exclusively for religious worship, for schools and colleges, and for purely charitable purposes.
In addition, there are a number of economic development zones in the state, located in places where there is blight, unemployment, etc. To attract employers, or encourage employers to expand in those areas, some property improvements may be given tax abatements for a period of years.I Just Purchased A Vehicle, Will I Owe Property Taxes On It This Year?
Property taxes are due on property owned, or under your control, as of January 1 of the year. If you did not own a vehicle on January 1, then no personal property taxes will be due. If you purchase a vehicle after January 1, no taxes will be due on it in the year of purchase. You will need to contact the county or City of St. Louis assessor and request a statement of non-assessment. If you traded or owned other vehicles on January 1 they will be assessed and liable for taxes for the year.