As Texas and Florida residents and business owners who are still recovering from Hurricanes Harvey and Irma well know, hurricanes are large-scale, destructive events that can inflict damage over a large area, with little warning.
Overall, total damages to the Florida economy, were thankfully less than initially expected, given the magnitude of Hurricane Irma. Citigroup has estimated that damages were about $50 billion. Still, in the hardest hit areas, such as the keys, there are many small businesses that were all but destroyed. Even in areas where physical damage and flooding were less than anticipated, many businesses struggled to reopen due to days without power.
That damage, and lost time and revenue while you were forced to close shop during recovery, has implications for your taxes and property values, and not all of them as negative as you might imagine.
Questions About Post Disaster Property Valuations
In the aftermath of a hurricane or other significant natural disaster, it is critically important to consider all of the taxation and the financial reporting implications of such extreme events, as these impacts can be substantial.
Hurricanes Harvey and Irma have left a wake of destruction and confusion when it comes to property taxes. As 2018 quickly approaches, companies have many questions regarding the storm and its impact on property values. Some of the most common questions are:
- How will my property be valued?
- Will I have any opportunities for tax savings on real estate values?
- Will I have to pay full tax on my tangible personal property?
The answer to all of these questions is that despite the devastation caused by the storms, there could be tremendous opportunities for property tax savings.
From a property tax perspective, these opportunities fall under the concept of “functional and economic obsolescence.” Economic obsolescence takes place when a business cannot function in a normal capacity and deliver services or goods. Functional obsolescence occurs when a business cannot operate or utilize space, machinery, equipment or other business related functions. Many businesses in Texas and Florida experienced both kinds of obsolescence in the days or weeks they were forced to close, due to physical damage, or lack of power in the wake of the storms.
There will be tremendous opportunities in 2018 and beyond to claim personal property tax reductions on personal property not capable of use or personal property that has been destroyed. In addition, there can be tremendous opportunities in 2018 and beyond, to claim real estate tax reductions on land and structures that have suffered flooding and destruction.
How MBAF Can Help
In the aftermath of a hurricane or other disaster, you may be facing more than merely physical damage as your business tries to recover. With our years of expertise in providing post-disaster advice, we can help you answer the above questions and considerations relative to your specific business, and damage/loss you may have incurred. Our property tax professionals know how to work with the Tax Assessors and jurisdictions, to ensure that companies receive property tax relief and property tax reductions.
In addition, we also provide the following specific “post-disaster” services:
- Consulting on the application of GAAP
- Assistance with preparing for financial statement audits
- Business valuations
- Business interruption cases
- Help prepare insurance claims
- Post-Disaster tax planning
- Loss of profit claims
At MBAF, it is our sincere wish that all of our clients, their customers, associates and families, remain safe for the remainder of Hurricane Season, and we remind you, that we are here to help with disaster preparations and recovery in any and all ways that we can.
At MBAF we are at the forefront of all Sales Tax and Property Tax changes and opportunities. If you would like to benefit from our expertise in these areas, or if you have further questions on this Advisory, do not hesitate to contact our Tax and Accounting specialists, or call us at 1-800-239-1474.