(1)
Personal property
identification. The appraisal staff shall identify personal property,
determine its taxability, and classify it for addition to the county ad valorem
tax digest in accordance with this paragraph.
(a)
Distinguishing personal property.
The appraiser shall be required to correctly identify personal property
and distinguish it from real property where the proper valuation procedures, as
set forth in this Rule, may be followed.
1.
Examples. As used in this Chapter, personal property shall be that
property defined in Rule
560-11-10-.02(1)(r).
This Rule shall provide illustrations to assist the appraiser in the proper
interpretation of the definition. However, these illustrations should not be
construed in a manner that conflicts with the definition. Examples of personal
property are tangible items such as aircraft; boats and motors; inventories of
retail stock, finished manufactured or processed goods, goods in process, raw
materials and supplies; furniture, personal fixtures, trade fixtures, machinery
and equipment.
2.
Identification of trade fixtures. When property the appraiser
believes is a trade fixture has not been returned by the tenant, the appraiser
shall require the tenant to produce their lease agreement and shall carefully
review the agreement before making a recommendation to the board of tax
assessors regarding the classification of the property in question. The
appraiser shall inform the tenant that they may redact, at their option, any
information relating to the payments that are required by the lease agreement.
(b)
Assessment
date. Code section
48-5-10provides that each return by a property owner shall be for property held and
subject to taxation on January 1 of the tax year. The appraisal staff shall
base their decisions regarding the taxability, tax situs, uniform assessment,
and valuation of personal property on the circumstances of such property on
January 1 of the tax year for which the assessment is being prepared. When
personal property is transferred to a new owner or converted to a new use, the
circumstances of such property on January 1 shall nevertheless be considered as
controlling.
(c)
Freeport
exemptions.1.
Mailing
applications. The appraisal staff shall, by U. S. mail, send a new
freeport exemption application to any person, firm or corporation that was
approved for freeport exemption by the board of tax assessors for the tax year
proceeding the tax year for which the application is to be made. The
application provided by the appraisal staff shall be deposited with the local
post office no later than the 15th day after the official who is responsible
for receiving returns has opened the books for returns. The failure of the
appraisal staff to comply with this requirement shall not relieve a person,
firm or corporation from the responsibility to timely file a freeport
application.
2.
Reviewing
applications. The appraisal staff shall, upon receipt of a freeport
application, reconcile the figures reported on such form to any inventory
totals that may have been returned by the property owner. The appraisal staff
may obtain relevant information as is available from financial records or other
records of the property owner when needed to reconcile the figures reported on
the application. Once the appraisal staff has completed the reconciliation of
the freeport application, they shall forward the application and their
recommendations, along with any supporting documentation, to the board of tax
assessors. When the appraisal staff recommends the freeport application be
denied, in whole or in part, they shall include the reasons for their
recommendation.
(d)
Tax situs. The appraisal staff shall inquire into the proper tax
situs of personal property before preparing the proposed assessment to ensure
that the property owner is made subject to only those taxes that may legally be
levied. The tax situs inquiry shall be sufficiently specific to determine
whether the property is subject to tax by each of the authorities authorized to
levy taxes in the county.
1.
General
tax situs. Unless otherwise provided in subparagraph (d) of this
paragraph, the appraisal staff shall consider the tax situs of personal
property to be as provided in this subparagraph.
(i)
Tax situs of personal property of
Georgia residents. The appraisal staff shall consider the tax situs of
personal property owned by a Georgia resident as being the domicile of the
owner unless such property has acquired a business situs elsewhere. The
appraisal staff shall consider the tax situs of personal property owned by a
Georgia resident and used in connection with a business as being the location
of the business. In making the determination of tax situs, the appraisal staff
shall consider such factors as the principal location of the personal property,
the base from which its operations normally originate and whether the personal
property is connected with some business enterprise that is situated more or
less permanently in the county, as distinguished from an enterprise whose
location is merely transitory or temporary. When personal property used in
connection with a business is moved about in such a manner that it is not
predominantly located during the year in one place, the appraisal staff shall
consider the headquarters of the business as the tax situs.
(ii)
Tax situs of personal property of
non-residents. The appraisal staff shall consider the tax situs of
personal property owned by non-residents as being where the property is
located. The appraisal staff shall recommend to the board of tax assessors a
"no tax situs" status for any personal property owned by a nonresident who does
not maintain a place of business in Georgia and who gives the personal property
to a commercial printer in Georgia for printing services to be performed in
Georgia.
2.
Tax
situs of boats. In accordance with Code section
48-5-16(d), the appraisal staff shall consider the tax situs of a boat to be the tax
district wherein lies the domicile of the owner, even when the boat is located
within another tax district in the county. When the boat is functionally
located for recreational or convenience purposes for 184 days or more in a
county other than where the owner is domiciled, the appraisal staff shall
consider the tax situs of the boat to be where it is functionally
located.
3.
Tax situs of
aircraft. In accordance with Code section
48-5-16(e), the appraisal staff shall consider the tax situs of an aircraft to be the tax
district wherein lies the domicile of the owner, even when the aircraft is
located within another tax district in the county. When the aircraft's primary
home base is in a county other than where the owner is domiciled, the appraisal
staff shall consider the tax situs of the aircraft to be where it is
principally hangered or tied down and out of which its flights normally
originate.
4.
Tax situs of
foreign merchandise in transit. The appraisal staff shall recommend to
the board of tax assessors a "no tax situs" status for foreign merchandise that
is in transit through this state. The recommendation of "no tax situs" shall be
made regardless of the fact that while the foreign merchandise is in the
warehouse it is assembled, bound, joined, processed, disassembled, divided,
cut, broken in bulk, relabeled, or repackaged. The grant of "no tax situs"
status shall be liberally construed. In deciding whether goods are foreign, the
appraisal staff shall determine if the point of origin is a non-domestic
shipping port. In deciding whether goods are in transit, the appraisal staff
shall consider whether the interruption in the transport of the goods may be
characterized as having a business purpose or advantage, rather than just being
an incidental interruption in the continuity of transit.
(e)
Assessments of personal property
used on state contracts. Under Code section
50-17-29(e)(1), the appraisal staff shall not propose an assessment upon the personal property
of any contractor or subcontractor as a condition to or result of the
performance of a contract, work, or services by such contractor or
subcontractor in connection with any project being constructed, repaired,
remodeled, enlarged, serviced, or destroyed for, or on behalf of, the state or
any of its agencies, boards, bureaus, commissions, and authorities. The
appraisal staff shall inquire into the nature of the use of such property and
prepare their proposed assessment in accordance with this Subparagraph.
1.
Personal property located in
headquarters' county. When the tax situs of the personal property being
used on state projects is in the same county as where the property owner's
permanent business headquarters and administrative offices are located, and
such property is not used exclusively for the state projects contemplated by
Code section
50-17-29(e)(1), the appraisal staff shall not apportion their proposed assessment of the
property. When such property is used exclusively for such state projects, such
property is made exempt by Code section
50-17-29(e)(1)
from ad valorem taxation by the county and the appraisal staff shall treat such
property as exempt property is treated.
2.
Personal property not located in
headquarters' county. When the tax situs of the personal property being
used on state projects is in a county other than where the property owner's
permanent business headquarters and administrative offices are located, and
such property would not be located in the county absent the state projects,
then the appraisal staff shall apportion their proposed assessment of such
property as follows: The exempt portion of the personal property being used on
state projects shall be that pro rata portion of the total value of such
property that represents the percentage the contractor or subcontractor can
reasonably demonstrate is likely to represent the portion of their business
that will result from state projects during the tax year. The appraisal staff
may consider the percentage of income, production output, or time attributable
to state projects during the preceding year. The appraisal staff shall consider
any information submitted by the property owner regarding the basis for the
apportionment. The appraisal staff shall not apportion the personal property
when the property owner fails to provide reasonable evidence necessary to
determine the portion of the property owner's business that will result from
state projects during the year.
(f)
Partial assessments. Unless
specifically provided by law and this Rule, the appraisal staff shall not
prepare a partial appraisal based on the fact that personal property is owned
or used during the year in a manner that would make it exempt part of the year
and taxable part of the year.
(2)
Classification. The
appraisal staff shall classify personal property as provided in Rule
560-11-2-.21 for inclusion in the
county tax digest.
(3)
Return
of personal property. In accordance with Code section
48-5-299(a), the appraisal staff, on behalf of the board of tax assessors, shall investigate
diligently and inquire into the property owned in the county for the purpose of
ascertaining what real and tangible personal property is subject to taxation in
the county and to require the proper return of the property for taxation. The
appraisal staff shall make such investigation as may be necessary to determine
the value of any property upon which for any reason all taxes due the state or
the county have not been paid in full as required by law. In all cases where
taxes are assessed against the owner of property, the appraisal staff shall
prepare a proposed assessment on the property according to the best information
obtainable.
(a)
Information sources.
The appraisal staff should develop and maintain information sources for
the discovery of unreturned personal property.
(b)
Returns. Property owners
shall use Department of Revenue authorized return forms when returning personal
property. No other forms shall be provided for this purpose to property owners
by the county official responsible for receiving returns unless previously
approved in writing by the Revenue Commissioner.
1.
Authorized return forms. The
returns described in this subparagraph shall be authorized for use when
returning personal property.
(i)
Form
PT-50P. The return form PT-50P, entitled "Business Personal Property Tax
Return," may be used for the return of business personal property
(ii)
Form PT-50PF. The return
form PT-50PF, entitled Application for Freeport Exemption," may be used for the
application for freeport exemption.
(iii)
Form PT-50MA. The return
form PT-50MA, entitled "Marine / Aircraft Personal Property Tax Return," may be
used for the return of boats or aircraft.
2.
Obtaining returns from receiver.
Each year, after the deadline for filing returns, the appraisal staff
shall secure the returns from the official responsible for receiving returns on
or before the tenth day following such deadline.
3.
Automatic returns. In
accordance with Code section
48-5-20, the appraisal staff shall deem any property owner that does not file a return
by the deadline as returning for taxation the same property as was returned or
deemed to have been returned in the preceding tax year at the same valuation as
the property was finally determined to be subject to taxation in the preceding
year.
(c)
Reporting schedules. Property owners shall use Department of
Revenue authorized reporting schedules when reporting supporting information
for authorized return forms. No other reporting schedules shall be provided for
this purpose to property owners by the county official responsible for
reviewing returns unless previously approved in writing by the Revenue
Commissioner. A property owner may attach other schedules or documents that
provide further support for the value they have placed on their personal
property return. The appraisal staff shall consider all additional information
submitted by the property owner with the return and reporting schedules. The
reporting schedules required by Rule 560-11-10-.08(3)(c) and appropriate for
the type of personal property being returned and any other information
submitted with the return by the property owner are made confidential by Code
section
48-5-314 and shall be treated as such by the appraisal staff. The appraisal staff shall
not consider as fully returned any property that is omitted, misrepresented, or
undervalued on the supporting reporting schedules and accompanying property
owner documents, as these provide the basis for the property owner's
declarations of value on the return and are necessary for the board of
assessors to carry out their responsibility under Code section
48-5-299 to, through their appraisal staff, ascertaining what personal property is
subject to taxation in the county and to require the proper return of the
property for taxation.
1.
Authorized
reporting schedules. The reporting schedules described in this
subparagraph shall be authorized for use when reporting information to support
the return of personal property.
(i)
Schedule A. The reporting schedule entitled "Schedule A" may be
used to list and describe any furniture, trade fixtures, personal fixtures,
machinery and equipment that is included on the property owner's
return.
(ii)
Schedule
B. The reporting schedule entitled "Schedule B" may be used to list and
describe any inventory that is included on the property owner's
return.
(iii)
Schedule
C. The reporting schedule entitled "Schedule C" may be used to list and
describe any construction in progress that is included on the property owner's
return.
(iv)
Schedule D.
The reporting schedule entitled "Schedule D" may be used to list and
describe any boats or aircraft that are included on the property owner's
return.
(4)
Verification. The appraisal
staff shall review and audit the returns in accordance with policies and
procedures set by the county board of tax assessors consistent with Georgia law
and this Rule.
(a)
Omissions and
undervaluations. If not otherwise prohibited by law or this Rule, the
appraisal staff shall recommend an additional assessment to the board of tax
assessors when any review or audit reveals that a property owner has omitted
from their return any property that should be returned or has failed to return
any of their property at its fair market value. The appraisal staff shall
recommend a reduced assessment to the board of tax assessors when any review or
audit reveals that a property owner has overstated the amount of personal
property subject to taxation.
(b)
Reassessments. The appraisal staff shall recommend to the board of
tax assessors a new assessment when the property owner has omitted personal
property from their return or failed to return personal property at its fair
market value, when such omission or undervaluation has been discovered by an
audit conducted pursuant to Rule 560-11-10-.08(4)(d). The appraisal staff shall
not be precluded from conducting such an audit merely because a change of
assessment has been made on the personal property as a result of a review
conducted pursuant to Rule 560-11-10-.08(4)(c). However, the appraisal staff
may not recommend to the board of tax assessors a reassessment of the same
personal property for which an audit has been conducted pursuant to Rule
560-11-10-.08(4)(d) and a final assessment has already been made by the
board.
(c)
Review. The
purpose of a review is to determine if a property owner has correctly and fully
completed their return and reporting schedules. It is based upon the good-faith
disclosures of the property owner and information that is readily ascertainable
by the appraisal staff. The review of an owner's return may consist of, but is
not limited to, an analysis of any improper omissions or inclusions, improperly
applied or omitted depreciation, and improperly applied or omitted inflation or
deflation of the value of the owner's property. The examination should include
a comparison of the current return information with return information from
prior years. The appraiser should contact the owner or their agent by an
on-site visit, telephone call, or written correspondence to attempt to resolve
any questionable items. Returns with unresolved discrepancies, unexpected
values, or incomplete information should be escalated to an audit.
(d)
Audits. The purpose of an
audit is to gather information that will allow the appraiser to make an
accurate determination of the fair market value of the property owned by the
property owner and subject to taxation. An audit is an examination of the
records of the property owner to make an independent determination of the fair
market value of such property where such determination does not solely depend
upon the good-faith disclosures of the property owner and information that is
readily ascertainable by the appraisal staff. The appraisal staff shall
perform, consistent with Georgia Law and policies that are established by the
board of tax assessors, audits of the records of the property owners to verify
the returns of personal property. These audits may take place at any time
within the seven-year statute of limitations, which begins on the date the
personal property was required by law to be returned.
1.
Scope of audit. The audit may
be an advanced desk audit of certain additional property owner records that are
voluntarily submitted or obtained by subpoena from the property owner or a
complex on-site detailed audit of the property owner's books and records
combined with a physical inspection of the personal property. The documents the
appraisal staff should secure include, but are not limited to, schedules A, B,
and C of form PT-50P; a balance sheet or other type of financial record that
for a particular location reflects the business' book value as of January 1 of
the tax year being audited; a ledger of capitalized personal property items
held on January 1 of the tax year being audited; and an income statement.
(i)
Use of subpoena. The
appraiser should request the board of tax assessors to subpoena, within the
limitations of their subpoena powers, any existing documents the property owner
fails to provide voluntarily, when these documents are deemed by the appraiser
to be critical to the audit. Since the appraiser may not request a subpoena for
documents that do not presently exist in the format needed, the appraiser
should seek existing documents held by the property owner and solicit the
owner's voluntary cooperation in obtaining these documents.
2.
Contracts with auditing
specialists. The appraiser shall secure non-disclosure statements from
any contracted audit specialist to ensure that such specialist shall conform
with the confidentiality provisions of Code section
48-5-314 and shall not disclose the property owner's confidential records to
unauthorized persons or use such confidential records for purposes other than
the county's review for ad valorem tax purposes of the tax return and
supporting documentation. The appraisal staff shall provide a copy of such
non-disclosure statement to the property owner upon such owner's request. The
appraiser shall not recommend to the board of tax assessors any contract or
agreement with an audit specialist that provides for such specialist to
contingently share a percentage of the tax collected as a result of any audits
such specialist may perform.
(i)
Notice
to property owner. The lead appraiser shall ensure the property owner is
sent a notice they have been selected for an audit of their personal property
holdings for ad valorem tax purposes. The notice shall, at a minimum, indicate
the following: the purposes and goals of the audit and the law authorizing the
audit; the name of the lead appraiser who is primarily responsible for the
conduct of the audit; the names of the members of the audit team that will be
performing the audit; the number of years that will be audited; a description
of the type records that should be made available; a description of how the
audit will be conducted; the range of dates desired for the audit; and contact
information should the property owner wish to contact the lead appraiser. The
notice shall contain a statement that the lead appraiser will be contacting the
property owner by telephone to establish the date and time of the audit and to
determine the availability and location of records. At the conclusion of the
audit, if there is sufficient evidence to warrant a recommended change of
assessment, the lead appraiser shall have prepared a list of preliminary audit
findings and provide such list to the property owner to afford them an
opportunity to meet and discuss the findings and view any supporting schedules
and documents relied upon by the individuals conducting the audit. After any
such meeting requested by the property owner, the lead appraiser shall have
prepared the final audit report and proposed assessment and provide a copy to
the property owner and the board of tax assessors.
(e)
Audit selection
criteria. The appraisal staff shall recommend to the board of tax
assessors a review and audit selection criteria, and the appraisal staff shall
follow such criteria when adopted by the board. The criteria should be designed
to maximize the number of personal property returns that may be reviewed or
audited with existing resources. The criteria should be fair, unbiased, and
developed consistent with the requirements of Code section
48-5-299.
All personal property accounts should be reviewed or audited at least once
every three years.
(f)
Property owner records. The appraisal staff should first endeavor
to obtain the records necessary to substantiate the information returned or
reported by the property owner through the voluntary cooperation of the
property owner. When such voluntary cooperation is not forthcoming, and the
records requested from the property owner are believed by the appraiser to be
critical to a proper appraisal of the personal property, the appraiser may
request that the board of tax assessors issue an appropriate subpoena for such
records. The appraiser may request that the board of tax assessors issue an
appropriate subpoena for the testimony of any individuals the appraiser
believes poses knowledge critical to determination of the fair market value of
the property owner's personal property.
1.
Record types. The types of records the appraisal staff may request
the board of tax assessors to issue subpoenas for include, but are not limited
to, the following: chart of accounts, general ledger, detailed subsidiary
ledgers, journals of original entry, balance sheet, income statement, annual
report, Securities Exchange Commission Form 10K. The types of records the
appraisal staff may not request the board of tax assessors to issue subpoenas
for include the following:
(i)
Income
tax returns. Forms and schedules authorized by the Internal Revenue
Service or the revenue collecting agencies of the several states for use in
filing income tax returns to those agencies;
(ii)
Property appraisals. A
property appraisal that the property owner has obtained prior to any appeal
that is filed as a result of a change of assessment being made to the property
owner's personal property;
(iii)
Insurance policies. An insurance policy that may contain valuation
estimates of the insured personal property; or
(iv)
Tenant sales information. A
rent roll or document containing the individual tenant sales information on the
property owner's rented or leased personal property.
(5)
Valuation
procedures. The appraisal staff shall follow the provisions of this
paragraph when performing their appraisals. Irrespective of the valuation
approach used, the final results of any appraisal of personal property by the
appraisal staff shall in all instances conform to the definition of fair market
value in Code section
48-5-2 and
this Rule.
(a)
General
procedures. The appraisal staff shall consider the sales comparison,
cost, and income approaches in the appraisal of personal property. The degree
of dependence on any one approach will change with the availability of reliable
data and type of property being appraised.
1.
Information presented by property owner. The appraisal staff shall
consider any timely information presented by the property owner that may have
reasonable relevance to the appraisal of the owner's personal property. The
appraisal staff shall consider the effect of any factors discovered during the
review or audit of the return or directly presented by the property owner that
may reduce the value of the owner's personal property, including, but not
limited to all forms of depreciation, shrinkage, theft and damage.
2.
Selection of approach. With
respect to machinery, equipment, personal fixtures, and trade fixtures, the
appraisal staff shall use the sales comparison approach to arrive at the fair
market value when there is a ready market for such property. When no ready
market exists, the appraiser shall next determine a basic cost approach value.
When the appraiser determines that the basic cost approach value does not
adequately reflect the physical deterioration, functional or economic
obsolescence, or otherwise is not representative of fair market value, they
shall apply the approach or combination of approaches to value that, in their
judgment, results in the best estimate of fair market value. All adjustments to
the basic cost approach shall be documented to the board of tax
assessors.
3.
Rounding.
The appraisal staff may express the final fair market value estimate to
the board of tax assessors in numbers that are rounded to the nearest hundred
dollars.
(b)
Special procedures. The appraisal staff shall observe the
procedures in this Subparagraph when appraising inventory and construction in
process.
1.
Valuation of inventory.
When appraising inventory, the appraisal staff shall consider the value
of inventory to consist of all the charges incurred from its original state as
raw material to its final resting place for ultimate consumption, including
such items as freight and other overhead charges, with the exception of the
cost of the final sale The appraisal staff shall also consider factors
contributing to any loss of value including, but not limited to, obsolescence,
shrinkage, theft and damage.
2.
Construction in progress. Property owners who are constructing or
installing a large piece or line of production equipment may be required by
generally accepted accounting principles to accrue the total costs associated
with such equipment in a holding account until the construction or installation
is complete and the equipment is ready for production, at which time, the
property owner is permitted by such principles to post the total cost to a
fixed asset account, taking appropriate depreciation. If such holding account
is maintained by the property owner, the appraisal staff shall consider the
total cost reported in the property owner's holding account when appraising
such property. Construction in progress shall be appraised in the same manner
as other similar personal property taking into account that there may be little
or no physical deterioration on such property and that the fair market value
may be diminished due to the incomplete state of construction. If comparable
sales information of personal property under construction is generally not
available and there is no other specific evidence to measure the probable loss
of value if the property is sold in an incomplete state of construction, the
appraisal staff may multiply the identified total cost of construction by a
uniform market risk factor of .75.
3.
Overhauls. When appraising
machinery, equipment, furniture, personal fixtures, and trade fixtures, the
appraisal staff shall consider the cost of all expenditures, both direct and
indirect, relating to any efforts to overhaul an asset to modernize, rebuild,
or otherwise extend the useful life of such asset. The following procedure is
to be used by the appraisal staff to estimate the value of an overhauled asset:
An adjustment to the original cost of the asset is made to reflect the cost of
the components that have been replaced. The cost of the overhaul is divided by
an index factor representing the accumulated inflation or deflation from the
year of acquisition of the asset on which the overhaul was performed to the
year of the overhaul. This amount is then subtracted from the original cost of
the asset being overhauled. The remainder is then multiplied by the composite
conversion factor for the year of the original acquisition as specified in Rule
560-11-10-.08(5)(f)(4)(iii) of this section. The current year's composite
conversion factor is then applied to the cost of the overhaul, and these two
figures are combined to represent the estimate of value for the overhauled
asset.
(c)
Level
of trade. The appraisal staff shall recognize three distinct levels of
trade: the manufacturing level, the wholesale level, and the retail level. The
appraiser shall take into account the incremental costs that are added to a
product as it advances from one level to another that may increase its value as
a final product. The appraisal staff shall value the property at its level of
trade.
(d)
Ready markets.
When the appraiser lacks sufficient evidence to demonstrate the
existence of a ready market, he or she shall consider any evidence submitted by
the property owner demonstrating that a ready market is available. When the
property owner cannot prove the existence of a reliable ready market, the
appraiser may use other valuation approaches as authorized by law and Rule
560-11-10-.08(5).
1.
Liquidation
sales. The appraisal staff should recognize that those liquidation sales
that do not represent the way personal property is normally bought and sold may
not be representative of a ready market. For such sales, the appraisal staff
should consider the structure of the sale, its participants, the purchasers,
and other salient facts surrounding the sale. After considering this
information, the appraisal staff may disregard a sale in its entirety, adjust
it to the appropriate level of trade, or accept it at face value.
(e)
Sales comparison
approach. The sales comparison approach uses the sales of comparable
properties to estimate the value of the subject property being appraised.
1.
Widely used pricing guides.
The appraisal staff should make a reasonable effort to obtain and use
generally accepted pricing guides that are published and widely used within the
market. When using such a guide to estimate the comparative sales approach
value, the appraiser shall begin with the listed retail price and then make any
value adjustments as provided in the guide instructions, based on the best
information available about the subject property being appraised.
2.
Lesser-known pricing guides.
The property owner may submit, and the appraisal staff shall consider,
lesser known publications, periodicals and price lists of the specific types of
personal property being returned. Such lists should be regularly consulted by
buyers of the type personal property reported, and should list prices at which
sellers, who regularly deal in the types of property reported, typically offer
such property for sale.
(i)
Validation
of lesser pricing guides. In all cases where unpublished, unrecognized,
or unverified sales data are submitted by the property owner, the steps the
appraiser may take to validate such data include, but are not limited to, the
following:
(I)
Arm's length
transactions. as defined in OCGA
48-5-2(.1): "'Arm's
length, bona fide sale' means a transaction which has occurred in good faith
without fraud or deceit carried out by unrelated or unaffiliated parties, as by
a willing buyer and a willing seller, each acting in his or her own
self-interest, including but not limited to a distress sale, short sale, bank
sale, or sale at public auction." Transactions where the lien holder receives
or repossesses the property, and deed under power of sale transactions are not
to be applied as an arm's length transaction.
(II)
Representativeness. Verify
that the sales data submitted is either all-inclusive or has been randomly
selected, so as to be unbiased and fairly represent the market for the personal
property being appraised. This may be accomplished by contacting known dealers
of the subject personal property to determine whether other significant market
data exists that supports the data submitted by the property owner.
(III)
Financing. Adjust the sale
price of the subject property for non-conventional financing.
(IV)
Time of sale. Adjust the
sale price of the subject property for the date of sale in order to estimate
the value as of the January 1 assessment date.
(V)
Discounts. Adjust the sale
price to remove trade and cash discounts.
(VI)
Comparability. Adjust the
sale price of the subject property for characteristics of the subject not found
in the sales to which it is being compared, such as condition, use, and extra
or missing features.
3.
Other factors. To finalize
the sales comparison approach, the appraiser shall consider any other factors,
appropriate to the approach, which may be affecting the value. When the
comparative sales approach is used as the basis for the appraisal of personal
property, the appraiser shall not make further adjustments to the value to
reflect economic obsolescence, functional obsolescence, or
inflation.
(f)
Cost
approach. The cost approach arrives at an estimate of value by taking
the replacement or reproduction cost of the personal property and then reducing
this cost to allow for physical deterioration, functional and economic
obsolescence.
1.
General procedure.
In applying the cost approach to personal property during a review or
audit of a return, the appraiser shall identify the year acquired, and total
acquisition costs, including installation, freight, taxes, and fees. The
acquisition costs shall then be adjusted for inflation and deflation and then
depreciated as appropriate to reflect current market values.
2.
Book value. The appraiser
should recognize that the appraisal and accounting practices for depreciating
personal property might differ. Accounting practices provide for recovery of
the cost of an asset, whereas appraisal practices strive to estimate the fair
market value related to the current market. The appraiser should consider
depreciation in the forms of physical deterioration, functional obsolescence,
and economic obsolescence, which may not necessarily be reflected in the book
value. The appraiser should consider that accounting practices of property
owners might also differ.
3.
Valuation as a whole. The appraiser may arrange the individual
items of personal property into groups with similar valuation characteristics
and value such group as a whole when the itemized appraisals of each item of
personal property will not add substantially to the accuracy of the
determination of the cost approach value.
4.
Basic cost approach. The
appraisal staff shall determine the basic cost approach value of machinery,
equipment, furniture, personal fixtures, and trade fixtures using the following
uniform four-step valuation procedures: Determine the original cost new of the
item of personal property to the property owner; determine the uniform economic
life group for the item of personal property; and multiply the original cost
new times the uniform composite conversion factor appropriate for the economic
life group and actual age of the item of personal property. Then determine a
salvage value of any item of personal property when it is taken out of use at
the end of its expected economic life.
(i)
Original cost new. The appraisal staff shall determine the
original cost new of the item of machinery, equipment, furniture, personal
fixtures, and trade fixtures. Any real improvements to the real property,
including real fixtures that had to be installed for the proper operation of
the property, shall be included in the appraisal of the real property and not
included in the basic cost approach value of the personal property. Those
portions of transportation costs and installation costs that do not represent
normal and customary costs for the type personal property being appraised shall
be excluded from the original cost new when determining the basic cost approach
value.
(ii)
Economic life
groups. When determining the basic cost approach value of machinery,
equipment, furniture, personal fixtures, and trade fixtures, the appraisal
staff shall separate the individual items of property into four economic life
groupings that most reasonably reflect the normal economic life of such
property as specified in this subparagraph. The appraiser shall use Table B-1
and B-2 of Publication 946 of the U.S. Treasury Department Internal Revenue
Service, as revised in 1998, to classify the individual asset into the
appropriate economic life group. For property that does not appear in such
publication, the appraisal staff may determine the appropriate economic life
group based on the best information available, including, but not limited to,
the property owner's history of purchases and disposals.
(I)
Group I. The appraisal staff
shall place into Group I any assets that have a typical economic life between
five and seven years.
(II)
Group II. The appraisal staff shall place into Group II any assets
that have a typical economic life between eight and twelve years.
(III)
Group III. The appraisal
staff shall place into Group III any assets that have a typical economic life
of thirteen years or more.
(IV)
Group IV. The appraisal staff shall place into Group IV any assets
that have a typical economic life of four years or less. The appraisal staff
shall also place into Group IV those assets classified as Asset Class 00.12 in
Publication 946 of the U.S. Treasury Internal Revenue Service, Table B-1, as
revised in 1998.
(iii)
Composite conversion factors. The appraisal staff shall, in
accordance with this Rule, use the composite conversion factors as provided in
this subparagraph and apply the appropriate factor to the original cost new of
personal property to arrive at the basic cost approach value. The last
composite conversion factor in each economic life group shall not be trended
and shall represent the residual value.
(I)
Group I composite conversion factors. The following composite
conversion factors shall be applied to Group I assets to arrive at the basic
cost approach value for years one through seven: Y1-.87, Y2-.74, Y3-.58,
Y4-.43, Y5-.32, Y6-.26, Y7-.21. Thereafter the residual composite conversion
factor shall be .20.
(II)
Group II composite conversion factors. The following composite
conversion factors shall be applied to Group II assets to arrive at the basic
cost approach value for years one through eleven: Y1-.92, Y2-.85, Y3-.78,
Y4-.70, Y5-.63, Y6-.54, Y7-.44, Y8-.34, Y9-.28, Y10-.25, Y11-.25. Thereafter
the residual composite conversion factor shall be .20.
(III)
Group III composite conversion
factors. The following composite conversion factors shall be applied to
Group III assets to arrive at the basic cost approach value for years one
through sixteen: Y1-.95, Y2-.91, Y3-.87, Y4-.82, Y5-.79, Y6-.75, Y7-.70,
Y8-.63, Y9-.57, Y10-.52, Y11-.47, Y12-.41, Y13-.35, Y14-.31, Y15-.29, Y16-.28.
Thereafter the residual composite conversion factor shall be .20.
(IV)
Group IV composite conversion
factors. The following composite conversion factors shall be applied to
Group IV assets to arrive at the basic cost approach value for years one
through three: Y1-.67, Y2-.54, Y3-.31. Thereafter the residual composite
conversion factor shall be .10.
(iv)
Basic cost approach value.
The basic cost approach value shall be determined by multiplying the
composite conversion factor times the original cost new of operating machinery,
equipment, furniture, personal fixtures, and trade fixtures.
(v)
Salvage value. Once personal
property is taken out of service at or after the end of its typical economic
life, it shall be considered salvage until disposed of and the appraiser shall
determine a basic cost approach value by taking ten percent of the original
cost new of such property. The basic cost approach value for property withdrawn
from active use but retained as backup equipment shall be one-half the basic
cost approach value otherwise applicable for such property.
5.
Further depreciation to
basic cost approach value.
(i)
Physical deterioration. The appraiser shall consider any evidence
presented by the property owner demonstrating physical deterioration that is
unusual for the type of personal property being appraised.
(ii)
Functional obsolescence.
The appraisal staff shall consider any evidence presented by the
property owner demonstrating functional obsolescence for the type of personal
property being appraised. One method the appraisal staff may use to determine
the amount of functional obsolescence is to trend the original cost new for
inflation to arrive at the reproduction cost new, and then deduct the cost of a
newer replacement model with similar or improved functionality.
(iii)
Economic obsolescence. The
appraisal staff shall consider any evidence presented by the property owner
demonstrating economic obsolescence for the type of personal property being
appraised. One method the appraisal staff may use to determine the amount of
economic obsolescence is to capitalize the difference between the economic rent
of an item of personal property before and after the occurrence of the adverse
economic influence.
(g)
Income approach. The income
approach to value estimates the value of personal property by determining the
current value of the projected income stream. This approach is most applicable
to machinery, equipment, furniture, personal fixtures, and trade fixtures. The
approach should only consider the income directly attributable to the personal
property being valued and not the income attributable to the real or intangible
personal property forming the same business. The appraisal staff may use one of
the following methods when using the income approach for the appraisal of
applicable personal property:
1.
Straight-line capitalization method. The straight-line
capitalization method estimates the income approach value of personal property
by computing the investment necessary to produce the net income attributable to
the personal property. In essence, it is determined by first computing the
potential gross income for a subject property by taking the monthly rent, when
that is the rental basis, and multiplying that total by twelve months. The
potential gross income is then adjusted to a net operating income by
subtracting any expenses that legitimately represent the costs necessary for
production of that income. The net operating income will represent the amount
of revenue left after operating expenses that is available to return the
investment, pay property tax on the property, and return a profit to the owner.
(i)
Income and expense analysis.
While complete data is not required on each individual property, there must be
sufficient data to develop typical unit rents, typical collection loss ratios,
and typical expense ratios for various type properties. Income and expense
figures used in the income approach must reflect current market conditions and
typical management. Actual figures may be used when they meet this criterion.
When actual figures are not available or appear to be unrepresentative, typical
figures should be used. Income and expense analysis builds upon the following
important components: typical unit rent, potential gross rent, collection loss,
typical gross income, typical expenses, and typical net income. Excluded are
expenses such as depreciation charges, debt service, income taxes, and business
expenses not associated with the property.
(ii)
Capitalization.
Capitalization involves the conversion of typical net income into an estimate
of value. The estimated income is divided by the capitalization rate to arrive
the estimated income approach value. The capitalization rate consists of three
components. The discount rate, the recapture rate, and the effective tax rate.
The discount rate represents the amount of return a prudent investor could
reasonably expect on an investment in the subject property. The recapture rate
represents the return of the potential investment. The effective tax rate
represents the portion of the income stream allocated to pay resulting ad
valorem taxes on the property.
(I)
Discount rate.The appraiser should calculate the appropriate
discount rate through a method known as the band of investment. The band of
investment represents the weighted-average cost of the money needed to purchase
the applicable personal property. The appraiser determines the percentage of
the cost typically borrowed and multiplies this percentage times the typical
cost of borrowing. The appraiser then determines the remaining percentage of
the cost typically contributed by an investor and multiplies this percentage
times the expected rate of return to the investor. An analysis of similar
properties might reveal the discount rate typical for a property of a given
type.
(II)
Recapture
rate. The appraiser should calculate the recapture rate by dividing one
by the number of years remaining in the economic life of the subject property.
The resulting percentage is the current year's recapture rate.
(III)
Effective tax rate. The
appraiser should calculate the effective tax rate by multiplying the forty
percent assessment level times the tax rate in the jurisdiction in which the
subject property is located. The effective tax rate is included in the
capitalization rate because market value is yet unknown and property taxes can
be addressed as a percentage of that unknown value in lieu of their inclusion
as an expense in calculation of net annual income.
2.
Direct sales analysis method.
The direct sales analysis method estimates the income approach value of
personal property by computing the relationship between income and sales data.
This relationship is expressed as a factor. The method represents a blend of
the sales comparison and income approaches because it involves application of
income data in conjunction with sales data. Sales of items similar to the
subject property are divided by the gross rents, for which they or identical
properties are leased, to develop gross income multipliers. A gross income
multiplier is selected as typical for the market, and multiplied against the
gross income of the subject, or that of an identical property, to result in an
estimated value. Limiting the income to rental income only produces a gross
rental multiplier.
(i)
Gross income or
rent multiplier. The appraiser should compute the gross income
multiplier by dividing the typical gross income on the personal property by the
typical sales price of the personal property. The appraiser should compute the
gross rent multiplier by dividing the typical gross rent on the personal
property by the typical sales price of the personal property. The appraiser
must identify the specific item of personal property to be valued and determine
the typical gross income as gross income is determined in Rule
560-11-10-.08(5)(g)(1)(i). The item is then stratified according to its typical
use. Typical use strata may include, but are not limited to, office equipment,
light-duty manufacturing equipment, heavy-duty manufacturing equipment, retail
sales equipment, furniture, personal fixtures, trade fixtures, restaurant
equipment, or any other stratum the appraiser believes will have similar
sensitivity to market fluctuations as the subject item. The appraiser may
develop an individual multiplier on a single item of personal property when
there are sufficient sales and rent information. This multiplier may then be
used for similar items of personal property for which there may be limited
sales and rent information. The income approach value estimate is computed by
multiplying the estimated gross income times the gross income multiplier or the
gross rent times the gross rent multiplier.
(I)
Adjustments.Income data and
sales prices used in the development of income multipliers should be reasonably
current. Older sales may be matched against recent income figures when the
sales are adjusted for time. Sales must also be adjusted for financing,
condition, optional equipment, and level-of-trade.
(6)
Final estimate of fair market value. After completing all
calculations, considering the information supplied by the property owner, and
considering the reliability of sales, cost, income and expense information, the
appraiser will correlate any values indicated by those approaches to value that
are deemed to have been appropriate for the subject property and form their
opinion of the fair market value. The appraisal staff shall present the
resulting proposed assessment, along with all supporting documentation, to the
board of tax assessors for an assessment to be made by that board.
O.C.G.A.§§
48-2-12, 48-5-2, 48-5-5, 48-5-10, 48-5-11, 48-5-12, 48-5-16, 48-5-18, 48-5-20, 48-5-105, 48-5-105.1, 48-5-264, 48-5-269, 48-5-269.1, 48-5-291, 48-5-292, 48-5-295, 48-5-299, 48-5-300, 48-5-314, 50-17-29.