Leaders' Edge

Michigan Tax Tribunal and MACPA partner to create a service opportunity for tax and valuation professionals

CPAs can play a critical role in impacting the bottom line for their clients in the area of property tax assessment.

Once residential and commercial property owners receive their tax assessment notice and feel they have a legitimate dispute, they have a small window to appeal it locally to their Board of Review. If they are dissatisfied with the Board of Review’s conclusion, property owners can petition the Michigan Tax Tribunal. This is where CPAs can have a significant impact on their clients’ success.

The Michigan Tax Tribunal, a multi-disciplinary administrative tax court with exclusive jurisdiction for property tax matters, receives approximately 8,000 petitions for tax assessment reviews each year. Ninety percent relate to property tax. The Tribunal also has jurisdiction over final assessments concerning income tax; sales, use, and withholding taxes; single business tax; officer liability for taxes; motor fuel tax; tobacco products tax; and estate tax.

“We work to provide citizens with the opportunity to resolve state and local tax disputes at a fair and impartial hearing,” said Michigan Tax Tribunal Judge Judith Trepeck, CPA. “We base our decisions on the evidence presented, but unfortunately, citizens often appear before the Tribunal without the proper evidence to support their claim.”

This is where the CPA comes in. The Tax Tribunal hopes a higher level of CPA involvement will improve the process and outcome for citizens. As a result, the Tribunal has formed a partnership with the MACPA to increase awareness of this opportunity and to educate CPAs on the process.

CPAs can assist clients who have a property tax assessment dispute, whether residential or commercial, by helping them understand the intricacies of how assessments are determined. CPAs can also represent them in a small claims hearing or help them to prepare for an entire tribunal hearing. From understanding a tax assessment notice to gathering the proper supporting documentation for an appeal before the Tribunal, CPAs have the necessary tax procedure experience and knowledge to determine whether the property tax assessment amounts are appropriate.

The Tribunal consists of two divisions. The Entire Tribunal (ET), which is a hearing division defined by the real and personal property amount in contention, hears larger cases. The ET runs like a court: representation is generally by an attorney and is conducted under trial rules. The second is the Small Claims Division (SC), which handles the following:

SC hearings are approximately 30 minutes, informal and designed for non-legal professionals. They are heard by a Tribunal member or an administrative law judge. Tribunal members include one CPA, one appraiser, one assessor, two lawyers and two at-large members. The Tribunal typically hears a case 12 to 18 months following the petition process. According to Judge Trepeck, taxpayers do get some relief from the appeals process in a majority of cases.

In SC hearings, petitioners bear the burden of proof and they must present substantiating evidence for their claim in order to have measurable success before the Tribunal, i.e. independent appraisals and records of comparable properties that have recently sold.

The Tribunal frequently receives unsubstantiated documentation like real estate listings, which do not necessarily represent true cash value or market value, and refinancing appraisals, which carry less weight than an independent appraisal in an appeal to the Tribunal. As a result, CPAs assisting or representing clients in tax assessment disputes should not assume that the evidence supplied by the client will satisfy the burden of proof during a Tribunal appeal. In addition, the evidence must be submitted AND served to the opposing party no later than 14 days before the hearing. The petitioner and representative, if applicable, will have an opportunity to consult with the opposing party.

The Tribunal’s decision is not final. In SC hearings, if the petitioner disagrees with the decision of the administrative law judge or other hearing officer, a rehearing or reconsideration before a judge of the Tribunal can be requested. If the petitioner disagrees with the opinion of the judge, he/she can go to the Court of Appeals.

“It’s really been challenging and a lot of fun,” said Echelbarger. “Whether representing a client who owns residential or commercial property or testifying on behalf of a municipality, there is a tremendous opportunity and a true value for CPAs to assure that the taxes being paid are fair.”

Grand Rapids CPA Dennis Echelbarger has presented to the Tribunal from the other side – on behalf of municipalities. In several cases involving low-income housing, property investors challenged the tax assessment asserting that the purchase price of the property, which was bought for investment purposes, far-exceeded the actual value. As a result of Echelbarger’s testimony on behalf of his clients before the Tribunal, the judges sided in part with the municipalities because while the assertion that the purchase price and the value were not commensurate, the tax benefit incentives for low-income housing provided to the investors should have been considered in assessing the cash value of the property.

Learning the Process
Judge Trepeck, the current CPA Tribunal member, said that while there has always been a CPA member, until now, there has never been an emphasis on the contributions CPAs can make on appeals. Through their partnership, the Tribunal and the MACPA are designing CPE programs to educate CPAs about client service opportunities in the area of property tax disputes and the appeals process.

Victoria Enyart, Assessor Level IV, a former Tribunal judge and Midwest Property Tax Leader at John Bernard LLC in Royal Oak, presented Michigan Property 101 at the MACPA's Small Practitioners Conference. The session was well-attended and continues to spark member inquiries about this service area.

A newly developed CPE session titled CPA Tax Appeal Representation — The Tax…The Practice and Procedure will be offered on November 2 in Novi and on December 7 in Grand Rapids. Session attendees will receive a certificate of completion for the course (this is not a certification) and eight hours of CPE credit. The first half of the program will focus on tax specific issues followed by an overview of the procedures and practice in appeals and concludes with a summary and demonstration on the application of technical and procedural issues in tax appeals.

Marketing a New Service
In the coming months, Judge Trepeck suggests one way for CPA tax practitioners to promote tax dispute services to clients is to develop a marketing piece and mail it along with client tax preparation packets. “Such a marketing piece would let clients know you can help them with more than income taxes. The information should describe the assessment notice that the taxpayer should expect to receive in February and what to do with the information,” explained Judge Trepeck.

Her suggestion is aligned with customer service tips from The CPA Marketing Toolkit, which explains how CPA firms who anticipate, meet and exceed client expectations surpass their competition, generate more referrals and enhance client retention.

The Toolkit advises, “By exceeding clients’ expectations as a matter of course, you can create a loyal following … Your clients will come to expect the level of service you provide and to rely on it. They will have little reason to even consider taking their business elsewhere.”

Whether expanding the services your practice provides or reviewing the services you already offer, tax dispute services may be one more way to strengthen your client base.