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EDUCATIONAL INFORMATION

 

PROPERTY TAX SYSTEM IN ALABAMA

Alabama’s annual equalization plan uses a four-year equalization cycle. In the first year, a county establishes a “base year” consisting of a construction cost index and a land valuation schema (rural large and small tract land schedule, residential base lot values, commercial land values and industrial land values were applicable). During the four-year equalization cycle, each county is required to conduct a field review of 100% of the parcels in the county, in increments of 25% of the parcels annually. At the end of the four-year cycle, each county is required to “reset” the base year values. Annually, the Department of Revenue uses two sales ratio studies in each county to determine the need for a reappraisal (Base Year Test Ratio—acceptable parameters: overall county wide median level of appraisal between 85% and 105% of market value) and evaluate the level of appraisal for ad valorem tax collections (Equalization Ratio—acceptable parameters: valuation zone median level of appraisal between 98% and 102% of market value; county wide coefficient of dispersion not greater than 20).

With the advent of reappraisal, "in house" appraisers, and an increasing interest in equity, the Board of Equalization has become a review agency for property owners who wish to challenge the certified market value and resulting assessment of their property.

By law the certified market value is prima facie correct for assessments (Code 40-7-71). Values fixed by the Tax Assessing Official may be changed by the Board of Equalization only when there is an error in assessment or when a property owner can prove that the appraised value is not based on the property's fair and reasonable market value. The ability to determine if proper appraisal and assessment methods are being employed is essential. The following section provides an overall understanding of the definition of value, the appraisal process, and the assessment process. It is believed that familiarity with this material will help Boards of Equalization to be better prepared to review protest of value.

Market Value of Real Property

Fair and reasonable market value is the basis of assessment of properties for ad valorem taxation in the State of Alabama. Market value is the amount that a property would bring if exposed for sale on the open market in a sale between a willing seller and a willing buyer, both aware of the uses of the property.

"Mass Appraisal" is the method used to appraise property for ad valorem tax purposes and after sufficient collection of market value data, analysis, application, correlation, and review, the "value" estimated reflects the "probable selling price" of the property.

The Alabama Appraisal Manual establishes the method, standards and procedures for the valuation of land and improvements in Alabama. The market data or sales comparison approach is used to establish land values, the cost approach is generally used in the valuation of improvements (i.e., buildings), and the income approach values property according to its income producing capability.

Follow this link for more information:  http://revenue.alabama.gov/advalorem/plan_for_equalization.pdf

Excerpt from the State Department of Revenue Property Tax Division website (April 30, 2016)

DEFINITION OF MARKET VALUE

The Appraisal Institute, the leading educational authority in the world on the appraisal profession, in the 12th Edition of The Appraisal of Real Estate defines market value as follows:

“The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.”

 

TAXPAYER’S RIGHTS

Code of Alabama 1975, Title 40, Section 40-3-19 states “At such sitting (Board of Equalization) the property owner may appear in person, or by agent or attorney, and produce evidence in support of objections, if any, to any assessment or valuation heretofore made, and it shall be the duty of the county board of equalization to examine under oath any complaining property owner and to examine any other witnesses under oath as to the fair and reasonable market value of the property of such owner…”

JOHN STANLEY & ASSOCIATES TAX APPEAL SERVICES, LLC by “Authorization to Represent” is acting as an agent/advocate for the owner (s), an owner, or any person who holds an interest in the property that obligates (a lease, contract, etc.) the person to pay taxes imposed on a property in the State of Alabama.