TEXAS BPP TAXATION

April 13, 2017

 Topics
What is taxable?
How is it valued?
How should it be valued?
Rendition options
Valuation options
Appeals / getting results
 What is Taxable?
Real estate
Tangible business personal
property
Mineral interests
 What is Not Taxable?
Intangible personal property
Contracts
Leasehold improvements
Data
Computer programs
Business enterprise value
 What is Not Taxable?
Goodwill
Accounts receivable
Cash
Bonds
Stocks
Trademarks
 How is it Valued?
Market value on January 1
Typical willing buyer and
willing seller, neither under
duress, and both well
informed
Sales of the items as a group
 How is it Valued?
Based on depreciation
schedule if you render with
cost and year of acquisition.
 HCAD Suggestion
If your business has 50
employees or less, subsection
22.07(c) allows you to base
your good faith estimate of
market value on depreciation
schedules used for federal
income tax purposes.
IRS Depreciation Schedule
IRS Depreciation
IRS Depreciation Schedule
Rendition Options
Rendition Options
 Rendition Options
Regulatory compliance by
providing cost new and year
purchased (including
furniture purchased prior to
2002).
Tax reduction approach by
only providing the opinion of
value, which also provides
 Rendition Options

Render?
10%penalty if do not render.
Class A misdemeanor violation of
penal code to file false rendition.
50% penalty for bad faith, false
rendition.
Only 10% penalty if do not render.
 How Should BPP be
Valued?
Based on market value, and
not on IRS depreciation
schedules.
 Valuation Questions
Market value of an airplane
without the maintenance log?
The maintenance log is
essentially data that could be
kept in hard copy or
electronic copy.
50% discount?
Valuation of Deep Sea Rig?
Cost new in 2014 - $800
million
Market value January 1,
2017?
 Valuation of $3 Million of
FFE
Assume an office set up in
2016 and the equipment,
phone system and furniture
cost $3 million.
Market value on January 1,
2017?
How much would someone
pay for 6 month old FFE?
 Value of Car without
Software
$40,000 car came with
software. Software is not
taxable. Value without
software?
 Value of FFE?
Companies are leaving
behind furniture, equipment,
phone systems and
computers in the Energy
Corridor.
 Value of 6 Month Old FFE
90%
50%
35%
15%
1%
 Valuation Options?
In-house
Independent fee appraiser
 In-House Valuation?
Value of FFE as % of cost
new? Low
Cost of more valuable
equipment visit with
industry experts
Your estimate will be more
reasonable than the
appraisal district
 Appeal Options
Goal is to resolve value
through the rendition; that
typically works.
If not, need support for
value.
 Getting Results
Worst case scenario is to
obtain a third-party appraisal
and pursue a judical appeal.
Provided the value is
reasonable, the appraisal
district will settle.
 Contact
Patrick OConnor 713 822 8613
John Fisher 713 375 4297
Doug Ford 713 375 4233
Frank Ledesma 713 375 4250

www.poconnor.com
www.cutmytaxes.com