Saturday, December 15, 2018
Important Tax Roundup for Multifamily Developers and Owners
County assessors have been directed by the Oregon Department of Revenue to value newly completed income properties, including multifamily, at stabilized occupancy regardless of where the property is in lease-up.
Assessors are starting the income approach assuming 95% occupancy.
Assessors are assuming that concessions are temporary, and in many cases are using rents from the property’s website displaying asking rents -- not effective rents. Assessors are using low expense ratios—failing to recognize that over typical investment period expenses will increase as properties mature. For newly completed properties these are aggressively low in our opinion.
For 2018 and 2019 it will be critical to monitor assessors’ valuations as the multifamily investment market has changed from the last valuation cycle for newly completed properties with a 1-1-17 valuation date.
For 2018 assessments being mailed in November, the appeal deadline will be December 31, 2018.
New Construction Exemption Requirements
The Oregon Legislature passed legislation providing an exemption of newly constructed improvements for up to two years. The requirements are as follows:
1. The property is income-producing;
2. The property is under construction as of January 1 for the year in which the exemption is sought;
3. There has been no occupancy or income prior to that date; and
4. Construction is expected to take more than one year from commencement.
Commencement of construction is normally interpreted to be the pouring of foundation for the vertical building. Demolition and land preparation do not qualify as the commencement of construction.
The application deadline is April 1 for the tax year in which the exemption is sought. Timing is important to maximize the benefit of the exemption. Development should commence early in the calendar year. If you commence construction late in the calendar year you are not taking full advantage of the exemption. Please remember that this exemption applies to all types of income producing properties.
Christopher K. Robinson is an attorney specializing in property tax issues. He can be reached by phone at (503) 635-9330 or by e-mail at firstname.lastname@example.org.