Have a Freeport Exemption Denial? We can help!

 In CASE STUDIES

In the State of Texas, the Freeport Exemption is a business personal property tax exemption which can affect the taxable value of various types of property detained in Texas for a short period of time (175 days or less, or turning roughly twice a year) to be transported out of Texas. The exemption is calculated to determine the property taxes saved based on the taxing jurisdictions that grant the exemption. The Freeport application has to be filed by April 30th of each year with the local appraisal district. Once the district receives the application, they analyze all of the documentation submitted to determine if you are eligible, and at that point will either approve or deny your application.

Every year, thousands of applications are received and approved or denied based on the ability of the taxpayer to provide sufficient evidence to the appraisal district in support of their exemption application. Many businesses across the state file these applications annually and have no problem meeting the appraisal district’s criteria. However, a change in accounting methodology, business model and/or facility usage can throw a wrench into a company’s ability to maintain their annual exemption.  We had one client find out how that could be the case.

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When your Freeport application goes wrong.

In the summer 2015, we had a potential client contact us because their Freeport Exemption was denied by the appraisal district. They knew appealing their denial was time-sensitive and they only had 30 days from the date of the denial letter to protest. During our brief conversation, they conveyed to us that they believed the denial was due to a transcription error and that they thought it would be an easy fix. They reached out to us in hopes that our professional expertise would guarantee the exemption would be granted.  We requested a copy of the original application and all supporting documentation so that we could review what was presented to the appraisal district.

After receiving the documentation, we noticed that there was more than a simple transcription error on the client’s part. We discovered not only that the supporting documentation did not clearly match the data on the application filed, but also found out that once the numbers were reworked, they no longer met the terms to qualify for the exemption. All of a sudden, we found ourselves back at square one.

Kurz Group works hundreds of Freeport applications each year all across the State of Texas, and our property tax consultants know that the documentation requirements from the appraisal districts can be strict. We also know that the easier it is for the appraisal district to match the financial statements to the application, the quicker we see an exemption approval. For this client, it was fighting an uphill battle. The client’s Freeport application not only encompassed a distribution facility, but also included an overflow warehouse next door. Because of that, the financial statements and calculations associated with the application had to reflect both locations. Quickly we began to realize that their application was not consistent in methodology when reporting their inventory and cost of goods sold to the appraisal district.

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The result of an approved Freeport Exemption?

Ultimately it came down to us reworking their application entirely. We contacted the client to get a working knowledge of their documentation and a better understanding of their accounting methods. Also, understanding their industry and what factors influence their cost of goods sold helped us explain to the appraisal district why we appealed the application denial and reworked their application that was originally submitted.

For the client, a denial letter could have meant almost $700,000 in taxes. By contacting Kurz Group and utilizing our real estate tax appeal expertise, we were able to achieve an approved Freeport exemption that saved them over $500,000 in taxes. The charts below show the effect of the exemption on both the property value and taxes due.

Should you ever find your company in the position where you think you have run out of options in getting an exemption approved, call the experts – your property tax consultants – to step in, handle your property tax appeal and see your exemption to the finish line. Read our Q&A to learn more about Freeport Exemption on our blog now!

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