Tax Assessment Slashed By More Than 70 Percent
Client: Leading U.S. Producer of Foam Tableware
Challenge: Develop Accurate Assessment of Unique, Highly Specialized Assets
An attorney for a private company that manufactures foam tableware for food-service customers was engaged to appeal a county's tax assessment of personal property. To make the appeal, the attorney asked AccuVal to provide a fair market appraisal of equipment in one of its U.S. manufacturing plants. The attorney noted, however, that fewer than 20% of such appeals are ultimately successful.
AccuVal Approach
An AccuVal professional with experience appraising machinery used in the plastics industry began by reviewing the county's statutes defining fair market value. Later, when the plant's assets were inspected, it was observed that many of the extrusion and thermoforming lines were unique and of proprietary design. To competently analyze the highly specialized equipment, hours were spent with plant engineers reviewing drawings, production information and product applications. This information was then leveraged when conducting market research so that equipment capabilities were properly communicated to market participants including original equipment manufacturers, used equipment dealers, end users of plastics equipment and engineering companies.
Because the equipment was highly specialized, there were no comparable sales from which to draw a fair market value conclusion. Furthermore, AccuVal research showed that the market for the assets was limited due to its special nature. It was concluded that fewer than five companies worldwide could use production capacity of this type. Additionally, should purchasers be identified on the secondary market interested in purchasing the specialized machinery, the amount they would be willing to pay would be substantially impacted by the lack of support for repair and replacement parts and the very high cost of deinstallation, match marking, palletizing and transporting of the machinery to another location.
The absence of market transactions made the application of the market approach to estimating value unreliable; therefore, AccuVal relied on the cost approach. The key to providing accurate appraisal conclusions using the cost approach is properly estimating and supporting reductions made for all factors of depreciation including physical, functional and external obsolescence. Further complicating the engagement was the need for valuation conclusions estimated with three difference effective dates.
Bottom Line: Tax Assessment Cut By As Much As 73%
AccuVal provided lengthy expert testimony before four members of the county's assessment commission. Following testimony and cross-examination, the commission agreed with AccuVal's findings and reassessed the company's assets, cutting the tax burden by 73% the first year, 72% the second year and 69% in the third year.
The AccuVal AdVantage™
Tax expertise. In-depth knowledge of a wide variety of machinery. The ability to accurately estimate the value of specialized assets. Detailed documentation. Effective communication skills under intense scrutiny. That's The AccuVal AdVantage™ at work.
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