Tax Glossary

The world of property taxes can be quite confusing to the  taxpayer. To assist you with some of the technical property tax terms, we have incorporated this Glossary.

Actual Cash Value: Usually synonymous with market value, appraised value or full cash value. Represents a taxing jurisdiction’s estimate of the price a property will bring on an open market before application of assessment ratios or percentages. This value may or may not be indicated on a tax statement. Some taxing jurisdictions have altered the definition to include no extraneous conditions or speculative considerations.

Ad Valorem: Latin for “according to value”.

Appraisal: An estimate of value. In ad valorem taxation use, it usually means the area’s stated market or actual cash value estimate.

Assessment: The actual valuation levied against a property in dollar terms. In most jurisdictions this represents a percentage of the actual cash value found by multiplying an assessment ratio by the actual cash value. Some jurisdictions have adopted annual or full cash value as the assessment to eliminate confusion. Term is synonymous with assessed value.

Assessment Base: The total assessment or assessed value of all properties within a taxing jurisdiction. The proposed budget is divided by the assessment base to arrive at the tax rate.

Assessment Lien Date: The date at which the Assessor assesses property. A property is usually assessed at its condition or status as of the assessment lien date each year.

Assessment Ratio: Usually the percentage applied to actual cash or market value to arrive at the assessment. May be used in connection with ratio studies to determine the common or actual assessment level and the actual ratio may or may not be applied to the market value.

Assessor: A person who actually places the amount of assessment against a property. May consist of one person or a Board of Assessors. In some jurisdictions he may be called Property Appraiser, Assessment Administrator, Auditor or Chairman of the Board of Assessors.

Base Year: A year adopted by a taxing jurisdiction as a base for valuation, meaning all properties are valued as of the selected year whether constructed before or after the base year. A degree of equalization is achieved by this method and there is a recognizable trend to adopt this method by legislation.

Board of Equalization: A group of individuals sitting usually once a year to hear property assessment protests. Most have broad powers. May be called Board of Tax Review, Board of Appraisers/Assessors or Tax Commission. Most states have local Boards and provide for appellate Boards at the state level.

Common Level of Assessment: The actual level of assessment as determined by ratio studies. Usually represents the median percentage of assessment to actual values. The common level may or may not be applied voluntarily by a taxing jurisdiction.

Cost Approach: An approach to Value applied by estimating the replacement or reproduction cost of improvements, less estimated accrued depreciation, plus the estimated market value of the land. Weight applied to this approach varies according to type of property.

Equalization Factor: A term broadly applied and interpreted. This term usually means a factor when multiplied by an existing assessment will “equalize” the assessments with the common level of assessment usually determined by a ratio study. The factor may be used by a jurisdiction to factor all assessments to the legal or stated level; or may be used by a board of equalization to factor an excessive assessment down to the common level.

Income Approach: An approach to value applied by considering the income producing capabilities of a property. Methods vary greatly among tax jurisdictions. While most jurisdictions do not apply this approach initially, many will consider some type of income analysis upon assessment protest.

Intangible Personal Property: Property which is personal in nature but not physical such as franchises, trademarks, good will, etc. This type property is assessed by some taxing jurisdictions.

Mass Appraisal: A method of appraising a great number of properties (see Reappraisal Program).

Market Data Approach: An approach to value predicted upon a comparison of actual sales transactions with necessary adjustments for pertinent differences.

Market Value: See Actual Cash Value.

Percentage Levy: Rather than calculate percentage assessments and tax rates, some jurisdictions apply a percentage to the market or actual cash value appraisal, with the resulting assessment representing taxes.

Personal Property: Typically refers to movable property not permanently affixed to the real estate. When state law provides for personal property assessments, this is usually assessed under different appraisal techniques.

Property Tax Consultants:  Persons or firms who represent property taxpayers in negotiations and appeals before assessors, appeal boards, and other appellate agencies.  Also referred to as property tax representatives, property tax agents, and property tax analysts.

Ratio Study: A comparison of actual values as evidenced by sales to existing assessments. Determines the common level or ratio of assessment as opposed to the stated level of ratio of assessment.

Real Estate: This is the land, appurtenances and all structures erected thereon. Usually used synonymously with real property.

Real Property: This includes real estate and all the rights to inherent in ownership of real estate. Usually the basis for valuation by taxing jurisdiction.

Reappraisal Program: A program undertaken by a taxing jurisdiction to revalue and reassess all properties within its boundaries. Usually conducted by a private appraisal firm specializing in mass appraisal techniques. Used synonymously with revaluation and reassessment programs.

Reassessment: The revaluation and reassessment of a single property or a group of properties.

State Assessment Board: Most states provide for a statewide governing agency to function as a coordinating agency to local taxing jurisdictions. This agency usually provides sales ratio studies and other assistance and oftentimes provides an appellate remedy for excessive property taxation. May be called State Board of Taxation, State Tax Commission, State Board of Equalization, State Assessment Commission, etc.

Stated Ratio: The ratio of assessment to actual cash values which are stated to be applied to properties within a taxing jurisdiction. This may or may not equal the common level of assessment.

Tangible Personal Property: Property which is personal in nature meaning movable items not permanently affixed to and part of real estate, and which is susceptible to the senses. Most taxing jurisdictions assess this type property and their methods vary greatly. Interpretations as to what is real property versus personal property also vary greatly among taxing jurisdictions.

Tax Burden Factor: A factor when multiplied by the market or actual cash value produces the amount of property taxes. Used as a guide for tax estimates and for comparing tax structures among different tax jurisdictions. Calculated by multiplying the common level ratio of assessment, if known, by the tax rate. If the common level is not known, the stated ratio is used.

Unitized Assessment: The method of assessing a group of property components as one item without regard to the specific value of the component.