What Commercial Property Owners Need to Know About the Use of AI in Property Tax

New technology is constantly being introduced into the market, more rapidly than ever. How do you know which of these trends are worth paying attention to, which may disrupt the established way of doing things, and which will fade away?

At RTC we make it our mission to stay on top of the latest trends to help commercial property owners understand how these innovations impact the property tax process, from assessments to tax bills. Let’s take a look at artificial intelligence, big data, and the use of the latest technological advancements in commercial real estate and property taxes.

What is artificial intelligence (AI)?

As computer science becomes more integral to our lives, artificial intelligence and big data have developed as major fields within tech. Computers are particularly good at being able to run through large volumes of data to pick up patterns and pinpoint information to help solve problems. Artificial intelligence is a field that combines data collection and analysis with programming that provides a layer of “intelligence” to help computers learn how to problem solve at scale. Computers can take on massive workloads of data analysis and provide insight and solutions to help businesses and municipalities complete tasks more strategically and in much less time.

Some AI is quite simple, for example, chatbots that are programmed to deliver a few ‘canned’ responses to a set amount of customer service requests. Other AI can be leveraged to make strategic business decisions, detect fraud in financial transactions, and even allow for self-driving vehicles. 

How is AI being used in property tax?

There are several AI tax software options that help taxing municipalities manage day-to-day work. This includes the ability to extract key tax data automatically from large volumes of paperwork, check for annual changes in the tax code and apply as needed, classify and sort documents, and send out notices. 

These advances allow taxing municipalities to cut down on clerical errors, reduce response times, and lower administration costs that would typically be passed along to the taxpayers. 

AI software can also be used to better predict tax revenues and could help local governments to set tax rates that more accurately reflect budgetary needs. This could keep tax rates closer in line with the changing needs of the municipality and potentially cut back on large, unexpected tax rate increases because of budgetary oversights or inaccurate forecasting.

AI software is also being used to reduce tax fraud, which is a benefit to commercial property owners. When other property owners are not paying their fair share of real estate taxes, it raises rates for everyone and creates an unequal financial burden on property owners that are paying their taxes in good faith.

How is AI being used in property assessments?

AI is being utilized in many aspects of property assessment. Big data analysis allows assessors to review photos of properties to confirm the accuracy of assessor-scored quality classes, which cuts down on the time needed for physical review. AI can automatically extract information from the photos to provide data that can be used for quality classification purposes.

AI can also allow for better real-time data mining of constantly changing market values. At RTC we always recommend that commercial property owners grieve their taxes annually. One of the many reasons for this is that the assessment cycle moves much slower than the real estate market. 

Assessments are often based on outdated value information. If assessors were able to base their valuations on more accurate data, there is less chance of a property being over-assessed. AI also provides the potential for assessors to reappraise large volumes of properties in a shorter period. This could allow for more frequent and potentially more accurate assessments.

The nature of the tax system will continually render it slower than the real estate market, so there will always be variables that make it crucial for property owners to grieve their assessments. However, it would be helpful for property owners overall to receive more accurate assessments. The more that assessed values are fair across municipalities, the less chance there is of unnecessary tax rate increases.

What Could the Future Look Like?

In the future, tax disputes could be resolved more quickly. Property tax consultancies will continue to work with commercial property owners to grieve their taxes and reduce their assessments. The taxing municipality will never have the kind of data or insight that an owner has about their own property, especially when it comes to income and expense information. 

However, with the time-saving and data processing benefits that AI provides to taxing municipalities, it may speed up response time for property tax grievance decisions and for municipalities to issue tax refunds.

The use of AI in the property assessment and tax process looks to provide benefits overall for both taxing municipalities and property owners. RTC will keep tracking developments in this space and continue to provide updates for property owners to stay informed about any impacts to their taxes. If would like to discuss how we can help you lower your commercial property assessment and reduce your property taxes, please get in touch with us today for a free consultation.

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