"Canned" software is software that is distributed "as is" for multiple users (think MS Office). Canned software is valued at 100% of cost for the first year, 50% in the second year and is exempt in the third year.

"Custom" software is designed or modified to meet the needs of a specific user (think custom database, accounts receivable systems, etc.). Custom software is exempt.

"Embedded" software resides permanently on a device, computer system or equipment and is integral to the "devices" operation (think the software that runs a piece of machinery). Embedded software is considered as part of the equipment and is valued at the established life of the personal property of which it is part of.

Additionally, interest will accrue on any under or over payments of taxes due at the rate of 12% per year from April 1st.

The enrolled bill can be found here.

The final analysis of HB 281 can be found here.

Prior to the enrollment of the HB 533 the 10% penalty for late filing was final and imposed when a taxpayer received their tax bill.

Now, the chief appraiser must notify the taxpayer prior to the issuance of the tax bill. The taxpayer then has the right to submit a written request for a waiver of the penalty by the later of June 1st or 30 days  after notification of the penalty. The chief appraiser may waive the penalty if is determined that the taxpayer exercised "reasonable diligence" to comply with the rendition requirements. If the Chief appraiser denies the waiver the taxpayer can file a protest with the appraisal review board and, if required, to the district court.

The penalty becomes final if the taxpayer does not request a waiver, does not protest the denial of a waiver to the appraisal review board or does not appeal the appraisal review board's determination to the district court.

Section 278.05, subdivision 6, has been amended to read:

Subd. 6. Dismissal of petition; exclusion of certain evidence. (a) In cases where 
the petitioner contests the valuation of income-producing property, information, including 
income and expense figures in the form of the following information must be provided to 
the county assessor no later than August 1 of the taxes payable year: 
(1) a year-end financial statements statement for the year prior to the assessment 
date,; 
(2) a year-end financial statements statement for the year of the assessment date, and; 
(3) a rent rolls roll on or near the assessment date including listing the tenant name, 
lease start and end dates, option terms, base rent, square footage leased and vacant space, 
verified net rentable areas in the form of net rentable square footage of the building or 
buildings, and anticipated income and expenses in the form of proposed budgets for 
the year subsequent to the year of the assessment date, must be provided to the county 
assessor no later than 60 days after the applicable filing deadline contained in section 
278.01, subdivision 1 or 4.;
(4) identification of all lease agreements not disclosed on a rent roll in the response 
to clause (3), listing the tenant name, lease start and end dates, base rent, and square 
footage leased;
(5) net rentable square footage of the building or buildings; and
(6) anticipated income and expenses in the form of a proposed budget for the year 
subsequent to the year of the assessment date.
(b) The information required to be provided to the county assessor under paragraph 
(a) does not include leases. Failure to provide the information required in this paragraph (a) 
shall result in the dismissal of the petition, unless (1) the failure to provide it was due to the 
unavailability of the evidence information at the time that the information was due, or (2) 
the petitioner was not aware of or informed of the requirement to provide the information.
If the petitioner proves that the requirements under clause (2) are met, the petitioner has 
an additional 30 days to provide the information from the time the petitioner became 
aware of or was informed of the requirement to provide the information, otherwise the 
petition shall be dismissed.
    (c) If, after the August 1 deadline set in paragraph (a), a county assessor determines 
that the actual leases in effect on the assessment date are necessary to properly evaluate 
the income-producing property, then a county assessor may require that the petitioner 
submit the leases. The petitioner must provide the requested information to the county 
assessor within 60 days of a county assessor's request. The tax court shall hear and decide 
any issues relating to subsequent information requests by a county assessor. Failure to 
provide the information required in this paragraph shall be addressed under Rules of 
Civil Procedure, rule 37.
    (b) (d) Provided that the information as contained in paragraph (a) is timely 
submitted to the county assessor, the county assessor shall furnish the petitioner at least 
five days before the hearing under this chapter with the property's appraisal, if any, 
which will be presented to the court at the hearing. The petitioner shall furnish to the 
county assessor at least five days before the hearing under this chapter with the property's 
appraisal, if any, which will be presented to the court at the hearing. An appraisal of the 
petitioner's property done by or for the county shall not be admissible as evidence if the 
county assessor does not comply with the provisions in this paragraph. The petition shall 
be dismissed if the petitioner does not comply with the provisions in this paragraph.
EFFECTIVE DATE.This section is effective for petitions contesting the 2010 
assessment and assessments made after that date.

Some of the most interesting and educational property tax cases often involve dealing with the complexities of special purpose properties. The recently decided case of UTGR v. Mandillo is no exception.

The owners of the former racing track turned casino in Lincoln, Rhode Island filed appeals on the grounds of overvaluation. Although UTGR argued against the assessor’s valuation of the land and improvement values, the most significant issue was the effect of functional obsolescence on the value of the improvements.

At the heart of UTGR’s functional obsolescence argument was accounting for the remnants of the former horse racing track that no longer had functional utility for the casino, including the track itself, a three story concrete grandstand and a large clubhouse designed to accommodate 30,000 patrons a day.

Do yourself a favor and give this case a read to find out how a well-executed functional obsolescence claim resulted in assessment reductions in excess of $40,000,000.

In it’s recent decision in the case of Nestle USA, Inc. v. Wisconsin Department of Revenue, the Supreme Court of Wisconsin affirmed The Court of Appeals decision denying Nestle’s property tax appeal regarding it’s Eau Claire, WI powdered infant formula facility.

The two major issues were the highest and best use of the special purpose infant formula production facility and whether or not it suffered from functional obsolescence due to super adequacy.

The Department of Revenue’s position was that the facility’s highest and best use was the continued use as a powdered infant formula production and that no functional obsolescence existed. The DOR’s valuation consisted of using the actual construction costs (the facility was only a few years old) and deducted a small amount of depreciation.

Nestle’s position, on the other hand, was that there was little, if any, market for infant formula facilities and, therefore, the highest and best use was as a food processing plant. Nestle’s appraiser hung his hat on the sales comparison approach using food processing facility sales.

The court found in favor of the DOR on virtually every aspect of the case.

Central to the case was the proper interpretation of Iowa Code Section 427A.1(1) and how certain large items of machinery should be treated.

In its decision the Supreme Court stated:

As framed by the parties in the summary judgment proceedings, the sole issue before the court is whether the phrase "[m]achinery used in manufacturing establishments" under Iowa Code section 427A.1(1)(e) includes within its scope common law fixtures. If common law fixtures are included, then Griffin Pipe is entitled to summary judgment. Conversely, if common law fixtures are not included, then the district court properly denied summary judgment in this case.

The court ultimately found that the broad language of the Iowa Legislature allowed for interpretation and that the leading case law supported exemption of fixtures and other machinery used in manufacturing.

(1) If a party has failed to plead, appeal, or otherwise proceed as provided by these rules or as required by the tribunal, then the party may be held in default by the tribunal on motion of another party or on the initiative of the tribunal. A party placed in default shall cure the default as provided by the order placing the party in default and file a motion to set aside the default accompanied by the appropriate fee within 21 days of the entry of the order placing the party in default or as otherwise ordered by the tribunal. Failure to comply with an order of default may result in the dismissal of the case or the scheduling of a default hearing as provided in this rule.