By: Jule Sexson – Manager, Property Tax
Multifamily property owners and investors in Marion County, Indiana should brace for large increases in 2023 assessed values. Marion is one of the handful of larger Indiana Counties that assesses property values in arrears. The 2023 values are available online, and while many classes of commercial real estate saw slight trending increases (or even decreases,) our analysis indicates multifamily assessments on average are increasing in the range of 20% – 40% across all districts. While the Indianapolis multifamily market remains strong, this is yet another year where we are anticipating unprecedented increases in assessed values for this class of properties, particularly in the downtown market. Keeping this in mind, as well as Indiana’s nuanced assessing system, we strongly advise working with local property tax experts to ensure all property tax reducing strategies are considered.
Indiana Statute requires that the true tax value of a real property regularly used to rent or furnish residential accommodations for periods of thirty days or more, and has more than four rental units, to be valued at the lowest valuation of the three approaches: 1) cost approach, 2) sales comparison, and 3) income capitalization approach. Property owners may believe their property to be fairly assessed or even under assessed based on a subject property sale or income, but that may not be the case based on Indiana Statute.
There are several amendments to the assessment of multifamily rental properties that will be effective for January 1, 2024 assessments. Notably, the assessor must annually perform a valuation using all approaches referenced above and report to the taxpayer each of the values determined. Cost schedules must be applied without adjustments such as modifiers and trending factors. Additionally, the assessor will have the burden of proof in providing that the assessment is correct. This update is significant due to the recent changes in the 5% burden shifting rule, that other commercial property classes will have to overcome, which no longer requires the assessor to bear the burden in providing evidence that “exactly and precisely concludes” to the assessment for increases over 5% from the previous year. One point of clarification is that these changes and assessing guidelines are specific to rental properties (excluding low-income housing). Additional considerations are needed for mixed-used properties that may have retail or other property classes not subject to these guidelines.
Invoke Tax Partners has created a national network of property tax talent designed specifically to allow commercial real estate owners and investors the luxury of knowing that their assets are handled by localized personnel across the nation. Our Indiana team has decades of experience working with multifamily properties across Indiana and in Marion County. If you are a multifamily property owner in the Indianapolis area, contact our Indiana office to begin discussing your 2023 tentative assessed value and proactive appeal strategies. It is not too soon to begin working with a property tax consultant ahead of the June 15, 2024 appeal deadline in securing value reductions for 2023 assessments and prior to tax bills being mailed in April of 2024.