Appealing Real Property Tax Assessments by Rachelle Ann C.

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Taxpayers should not be surprised when they receive notices for audit or assessments for taxes from their local governments units (LGUs). Just like the Bureau of Internal Revenue (BIR), LGUs also have the authority to conduct tax audit and issue deficiency tax assessments for taxes that they administer and impose, usually for local business taxes and the real property tax. The real property tax (RPT) is a levy on real properties, such as land, buildings, machinery and other improvements affixed or attached to real properties not specifically exempted under the law. It accrues on the 1st of January and is payable in one or four equal installments. RPT installment payments must be made on or before the end of each quarter, making the first installment due on or before March 31. Unlike national taxes which are fixed at uniform rates nationwidei.e., 30 percent for income tax and 12 percent for value-added tax (VAT)RPT rates vary per locality as it is fixed by the provincial or city council. The rates, however, must be within the ceiling prescribed under the law. The Local Government Code (LGC) has set a minimum rate of 0.25 percent (0.5 percent for cities) and maximum rates of 1 percent for provinces and 2 percent for cities and municipalities. A taxpayer may receive an assessment for new properties declared with the local assessor or for a revised assessment arising from a revaluation of property values. Most LGUs also issue individual tax bills stating the exact amount of the annual RPT due, the amount of quarterly instalments and the due date to remind taxpayers of their annual obligations. An assessment may also be issued if the LGU alleges that the taxpayer failed to declare certain properties and pay the RPT, hence, the delinquency tax and the applicable penalty. When you receive an RPT assessment, you would probably ask the following questions. Is the amount of RPT assessed correct? Is there a possibility for its reduction or cancellation? Am I supposed to pay this? Is there a deadline for its payment? If I were not satisfied with the assessment, do I have a right to protest? Correctness of RPT assessment. The correctness of the assessment hinges on several factors. Do I really own these properties? Are these properties still existing and being used? Were these properties valued correctly and classified accurately? Was the assessment conducted in accordance with the law? Is the local government unit (LGU) authorized to issue an assessment?

Knowing these pieces of information, the taxpayer may ascertain the correctness of the amount by recomputation of the tax due, as follows: RPT due = fair market value (FMV) X assessment level x tax rate Assessment level is a percentage assigned to different classifications of real propertiesi.e. residential, commercial, industrial or special. This is based on the applicable ordinance in the locality where the property is situated. FMV is defined as the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy. It must be the value of the property prevailing in said locality and may be based on the taxpayers sworn statement or latest tax declaration. Properties acquired by purchase are generally valued at the purchase price. The evaluation with regard to the correctness of the assessment would determine the taxpayers next courses of action. Taxpayers who feel aggrieved over the assessment are entitled to protest or appeal for the reduction or cancellation of the assessment. This right is solely vested on either the owner or the beneficial user of the subject properties. Payment under Protest. One peculiarity with the RPT, which most taxpayers remember, is that a protest cannot be initiated unless the tax assessed is paid first. Please n ote that this is applicable only if the issue is anchored on the correctness, reasonableness or excessiveness of assessment, hence, considered a question of fact. In such case, taxpayers contesting the assessment are mandated by law to pay under protest. Pursuant to Section 231 of the RPT Code, no protest shall be entertained unless the taxpayer pays the tax without prejudice to a subsequent adjustment depending upon the final outcome of the appeal. Payment under protest is not necessary when an issue challenges the very authority and power of the municipal, city or provincial assessor or treasurer in taxing a property, it being a question of legality. Dispute may already be raised directly to the trial court. The significance of payment under protest was best illustrated in a Supreme Court (SC) decision (NAPOCOR v. Province of Quezon) where the issue involved a question of fact on Napocors claim on realty tax exemption. It was NAPOCORs position that the issue of their exemption is merely a legal issue. The court however noted that there are also facts required to be confirmed to conclude the validity of the exemption. Hence, being a question of fact, the protest was denied, considered premature and rendered without any effect for direct filing of appeal with the Local Board of Assessment Appeals

(LBAA) without first paying under protest the RPT due. Appeals Process. Treasurers level. After payment and ensuring that the tax receipts were annotated by the treasurer with the words "paid under protest", taxpayer may file a protest to the treasurer in writing within 30 days from payment. Treasurer shall decide on the protest within 60 days from receipt. LBAA level. Upon local treasurers denial of protest or failure to act upon it, taxpayer may still file a verified petition with the Local Board of Assessment Appeals (LBAA_ within 60 days from such denial or receipt of the notice of assessment from the local assessor. The law does not warrant filing of motion for reconsideration before the local assessor (Callanta v. Office of the Ombudsman). The LBAA shall decide the appeal within 120 days from receipt. CBAA level. If taxpayers still feel dissatisfied and aggrieved with the decision of the LBAA, the law provides another remedythe filing of appeal within 30 days from receipt of the decision to the Central Board of Assessment Appeals (CBAA), which shall decide the case within 12 months from date of receipt. Said decision shall become final and executory after the lapse of 15 days from the date the copy of the decision is received by the taxpayer. CTA level. In case of CBAAs adverse ruling or action, taxpayer may elevate the matter to the Court of Tax Appeals (CTA). It is critical to comply with the timelines provided for filing the protests or appeal. Elementary is the rule that the perfection of an appeal within the prescribed period therefor is both mandatory and jurisdictional. Note, however that it is equally important to decide who should file the protest. In another SC decision (FELS Energy, Inc. v. Province of Batangas), appellant received an RPT assessment on the power barges that it is leasing to NAPOCOR on August 7, 1995. In a letter dated September 7, 1995, lesseeNAPOCOR sought reconsideration of the assessment. Motion was denied on September 22, 1995. On August 26, 1996, the LBAA rendered a resolution denying the petition for being filed out of time, thus, considered barred by prescription because the protest was filed by the lessee and not by the owner of the property. Apellant was precluded from questioning the correctness of the assessment, or from invoking any defense that would reopen the question of its liability on the merits.

The right to appeal is a privilege of statutory origin, meaning a right granted only by the law, and not a constitutional, natural or inherent right. It only follows that taxpayers may avail of such opportunity upon strict compliance with the rules prescribed by the law itself. Hence, It is best to seek a consultant to ensure that correct decisions are made on when and where to protest, the nature of the protest that will be lodged and the procedures that should be followed.