ManufacturingA five billion dollar energy company based in the Midwest engaged the personnel of Swartz + Associates, Inc. (SAI) to review the business personal property, machinery and natural resources valuation for two of their locations.

The client had previously handled all reviews internally, but due to our expertise in this area (one of our specialists spent 10 years with an energy company overseeing the property tax function), they decided to allow our specialists to review two mountain state properties.

The client felt they had a very good handle on the reporting methods of filing to the respective counties. SAI personnel toured the facilities, met with the plant managers and carefully reviewed the client’s methodology.

After completing our walk-thru of the facility and gathering detailed information about significant capital purchases for the calendar year, we met with county personnel to discuss the valuation methods and the taxability of certain components reported as personal property. Based upon our review, we were able to identify an alternative method of determining market value for heavy machinery based upon sales of machinery in the secondary market.

These sales supported a lower value of equipment than the traditional “Cost Approach” previously employed. Additionally, we identified large capitalizations which were ultimately determined to be associated with the real property or did not add value for business personal property tax purposes.

Total tax savings to the client for the two locations exceeded $600,000 annually.