Tax laws

Income tax laws conflict with property tax rules

Federal and state tax laws do not treat coronavirus relief payments as taxable income, but the state has instructed assessors to treat payments as income when calculating a company’s property tax.

That contradiction unfolded Thursday before the Garland County Equalization Board, the panel of appointed officials who decide property tax appeals. Parth Patel, president of development for VIPA Hospitality Management, asked the board to reduce property taxes on two plots where four of the company’s hotels are located, arguing that the county’s contract assessment company would not have not had to include coronavirus relief payments in its calculation of hotels’ net operating results.

“In reality, it’s not real cash income,” he told the board, explaining that the relief reimbursed the company for keeping employees on the payroll when hotels were closed last year due to public health guidelines restricting travel and commerce.

“At the end of the day, we lost money again at the end of the year. If we didn’t get (relief money), we would be in an even worse situation than we were. “Patel said,” The state says you should include it, but it’s just a one-time thing. We’re not going to have it next year or in 2023. “

He said 2020 room revenue at the Quality Inn & Suites Hot Springs, Country Inn & Suites by Radisson, and La Quinta Inn & Suites by Wyndham fell by more than a third from 2019. 2020 room revenue from Home2Suites by Hilton were $ 427,000 lower than the previous year, he says.

Arkansas CAMA Technology, the appraisal company to which the county awarded an annual contract of $ 710,000, told the board that although relief payments were excluded from hotels’ net operating income, the Operating statement presented by Patel did not justify a reduction in the market value of the properties. .

The board agreed, confirming ACT’s assessments. His ruling kept the 2021 property taxes owed on the 4-acre parcel in the 4000 block of Central Avenue at $ 79,000, money that will primarily benefit the Hot Springs School District. Property taxes on the 1.64 acre parcel that houses Home2Suites by Hilton on St. John’s Island will remain at $ 43,583, an amount that will primarily benefit the Lakeside School District.

The 2021 tax bills will be released in February, with payment due the following October. The Central Avenue parcel was valued at $ 8,643,950 and the St. John’s Island parcel at $ 4,810,500. Twenty percent of a property’s market value is taxed at the mileage rate set by the Garland County Quorum Court for the various county tax entities.

Patel can appeal the board’s decision to the county court, chaired by County Judge Darryl Mahoney.

Barbie Weatherford, ACT’s chief business appraiser, told Patel her properties were undervalued.

“You are one of the most polite and courteous property owners in all of Garland County,” she said. “You are a wonderful person to have in our community. You are always keen to support nonprofits, anything of that nature. If there was someone I could personally, in as an appraiser, give a discount, Mr. Patel would be on the list.

“Looking at his raw numbers for net operating income, I found the property to be slightly undervalued. ownership based on your operating records. I cannot discount the property because I have undervalued it. “

Patel’s accountants told the board the relief payments were a reimbursement to keep employees on the payroll when hotels were closed or not operating at full capacity, noting that the legislature had changed the tax code from state earlier this year to exclude payments from taxable income and allow spending. the relief paid must be deducted from the taxable income of a business.

Weatherford cited a directive issued by the state revenue agency’s appraisal coordination division, which sets out rules for how real estate is appraised for tax purposes.

“While Arkansas laws have removed the taxable status of income from (relief payments), they do not remove from the definition of income for property,” she said. “In a typical appraisal practice, it would be appropriate to view this grant or loan to be given as income for appraisal practices.”

The county will begin its five-year reassessment cycle next year. The new property values ​​will be reflected on the 2022 tax accounts which will be released in February 2023 and will be due in October 2023.

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