Property Tax Issues for Construction Work In Progress: Minimizing Property Tax on CWIP

A critical consideration for developers of real property is the property tax treatment of partially-completed properties. Projects with construction activity are able to report construction-work-in-progress costs (CWIP) on the project balance sheet to capitalize those costs. However, various states take different approaches as to valuation of CWIP on active projects for ad valorem property tax purposes, which provides a significant challenge for property developers and their tax advisers.

There is a lack of uniformity among taxing jurisdictions as to how partially-built properties must valued by the tax assessor on the assessment dates. While most states apply a fair market value standard, other jurisdictions specify a market value-in-use standard on the date of the assessment; still others authorize local assessors to assign a taxable value to properties under construction but do not provide authoritative guidance to the assessors on how to perform the valuation.

Developers and their tax advisers should be aware of capitalization strategies, and whether capitalized costs are included in the tax basis for property tax assessment purposes. Additionally, developers should be abreast of the jurisdiction's approach to separately assessing CWIP, and should review their work-in-progress costs prior to reporting to avoid unfavorable property tax treatment.

Listen as our experienced panel of expert property tax professionals provides a thorough and practical guide to states' approaches to property tax assessments of developments in progress.

1. State/Local approaches to valuing Developments under construction/work-in-progress (WIP)
2. Timing issues in assessments
3. Constitutional issues and challenge opportunities
4. Steps to determine assessment standards

The panel will discuss these and other key topics:

• What are the various state approaches to valuing and assessing property tax on construction-work-in-progress (CIP)?
• How do the three approaches to value – cost, sales comparison and income – apply to CWIP?
• What strategies and avenues are available to developers to challenge tax assessments on CWIP?

Learning Objectives

After completing this course, you will be able to:

• List various major states' approaches to assessing property tax on partially-completed real property development projects
• Identify capitalization strategies to properly classify CWIP costs
• Determine the options for proper reporting of repair and overhaul costs
• Recognize options for excluding costs from CWIP in various jurisdictions

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Basic knowledge of taxation.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.