A Match Made in Heaven? Fixed Assets Managers and Property Tax

Posted by Traci WheelercloseAuthor: Traci Wheeler Name: Traci Wheeler
Email: traci@redmoonsolutions.com
Site: http://blog.redmoonsolutions.com
About: Traci is a member of the executive leadership team and leads our sales and marketing efforts at Red Moon Solutions. She has over ten years of software business experience serving small and large clients in a variety of industries.See Authors Posts (120) on Aug 31, 2010 | 0 comments

A month or so ago at the IPT conference in Phoenix, I had the pleasure of meeting Mindy McLees, a senior property tax manager in the LA office of Moss Adams LLP.

During our lunchtime conversation, I learned that Mindy’s background was primarily in dealing with property tax matters, while I shared that my background was primarily around fixed asset management.  Mindy mentioned a paper she co-wrote some time back regarding using fixed asset software to simplify property tax compliance. Curious as to whether the article was still relevant, she offered to share it with me.  With a mixture of property tax consultants, practitioners and software vendors participating in our conversation at the table, there was some disagreement as to the effectiveness of this proposition. I’ve finally had a chance to read Mindy’s paper: Using Fixed Asset Systems to Manage Taxes.  In the article, Mindy drives home the fact that fixed asset management systems are often under-utilized, particularly given a significant investment in property, plant and equipment.  She goes on to say that companies willing to take the time to implement policies and procedures for coding fixed asset additions for property tax purposes can then share that data between fixed asset and property tax groups, creating peace, efficiencies and allowing for significant property tax savings.  I agree with Mindy’s suggestion to use property tax codes within a fixed asset system to flag assets and group them into the appropriate property categories, i.e. exclusions, leases, and obsolete property.  We currently have clients, using our Fixed Assets Manager, who have taken the time to come up with a process and then utilize FAM’s user-defined fields to implement property tax codes, finding it very effective.

Mindy provides a great example in her paper, wherein she shows the benefit of a reclassification exercise utilizing property tax codes within a fixed asset system. It resulted in a tax savings of $70,000 dollars on an asset portfolio consisting of $93,000 in cost!!  You can imagine the tax savings your company might expect on an even larger portfolio of personal property.

The disagreement around this methodology at IPT centered on the fact that companies with property tax filings in many jurisdictions might not find this process as effective as purchasing a true property tax software package.  I do agree that larger organizations or companies with more complex filings would benefit from the consulting and software packages offered by vendors such as Advantax and Tax Compliance, Inc.  However, with tight budgets and limited resources, utilizing a fixed asset system to improve the process is far better than maintaining reclassification spreadsheets in Excel! It will also create a lot less friction between the fixed asset group and the property tax professionals.  You might even reduce some assessments and save some money, too.

To receive a copy of Using Fixed Asset Systems to Manage Taxes, you can contact me, Traci Wheeler, at traci.wheeler@redmoonsolutions. I would be happy to send you a copy.