Property Tax Assessment Appeals

MARKET VALUE. Iowa law requires real estate to be assessed at its actual value, which is defined as "the fair and reasonable market value." Iowa Code Section 441.21 defines "market value" as the fair and reasonable exchange in the year in which the property is listed and valued between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and each being familiar with all the facts relating to the particular property.

Sale prices of the property or comparable property in normal transactions reflecting market value, and the probable availability or unavailability of persons interested in purchasing the property, are to be considered in arriving at its market value.

If market value of the property cannot be readily established in the foregoing manner, then the Assessor may consider its productive and earning capacity if any, industrial conditions, its cost, physical and functional depreciation and obsolescence, and replacement cost, and all other factors which would assist in determining the fair and reasonable market value of the property but the actual value shall not be determined by use of only one such factor.

The County Assessor is not to consider: special value or use value of the property to its present owner, and the good will or value of a business which uses the property as distinguished from the value of the property as property. There are special rules for inventories, goods in bulk, and agricultural property.

IMPORTANT DATES

ASSESSMENT. Real estate is assessed as of January 1 each year and is reassessed every odd-numbered year. The assessed value is used to calculate real estate taxes 18 months later. For example, the January 1, 2001, assessed value is used to calculate the real estate taxes which are due and payable in the fiscal year July 1, 2002, through June 30, 2003.

PROTEST OF ASSESSMENT. The protest must be filed with the County Board of Review on or after April 16 to and including May 5 of the year of assessment. Section 441.37.

APPEAL TO DISTRICT COURT. A notice of appeal to the Iowa District Court from an adverse decision of the Board of Review must be filed within 20 days after the Board of Review adjourns, which is on May 31 unless its session is extended. The notice of appeal must serve in the manner of an original notice.

GROUNDS FOR PROTEST AND APPEAL. Section 441.37 permits only five statutory grounds for the protest of an assessment in an assessment year:

• The assessment is not equitable as compared with assessments of other like property in the taxing district.
• The property is assessed for more than the value authorized by law.
• The property is not assessable.
• There is an error in the assessment.
• There is fraud in the assessment.

Grounds 1 and 2 are the most common. No ground may be alleged on appeal to the District Court which was not alleged in the protest to the Board of Review.

BURDEN ON THE TAXPAYER. The burden of proof is on the taxpayer who challenges the valuation as excessive, inadequate, inequitable, or capricious. However, in protest or appeal proceedings when the taxpayer offers competent evidence by at least two disinterested witnesses that the market value of the property is less than the market value determined by the Assessor, the burden of proof shifts to the officials seeking to uphold the valuation. According to the Iowa Supreme Court, the "burden of proof" as used in Section 441.21 means the burden of going forward only, and the judgment of the Assessor will not be disturbed except for abuse of discretion in failing to consider all of the criteria set forth in the statute or acting arbitrarily in evaluating the various elements of valuation

Taxpayers often obtain opinions of value from two real estate professionals in order to shift the burden to the Assessor. The Board of Review usually requires that the two disinterested witnesses be willing to appear at a hearing before the Board.

APPROACHES USED BY APPRAISERS. Professional appraisers generally use one or more of the following methods of appraisal to estimate market value.

• MARKET. Under the market approach, the appraiser gathers evidence of actual recent sales of property comparable to the subject property. This approach is more useful in appraising residential property and unimproved land because of the availability of comparable actual sales but may be of limited use in appraising certain commercial and industrial property which is not actively bought and sold. This is generally considered the most reliable approach.
  
  
• INCOME. Under this approach, the appraiser estimates the rental income which could be derived from the subject property and capitalizes the rental income to arrive at an estimated market value. The rental income is estimated by an examination of comparable rental properties. The estimated value of the property is determined by multiplying the annual rental income by the inverse of the capitalization rate. (For example, if yearly rent were $1,000 and capitalization rate were 10 percent, the estimated value would be $1,000 x 1/.10 = $10,000.)
  
  
• COST. Under the cost approach, the appraiser estimates the replacement cost of the property and depreciates the replacement cost to reflect the age and condition of the property. This is generally considered the least reliable approach.