Auditors add $375 million to Hamilton County tax rolls
Since Tennessee required local governments to audit the taxable property held by private businesses, Hamilton County has found $375 million worth of inventory previously left off the tax rolls.
"Before a federal judge mandated the audits, we would send a schedule to area businesses to fill in with what tangible real property they had," Bill Bennett, Hamilton County property assessor, said.
"They sent it back and we entered it in the computer. Every year they were supposed to let us know if they bought new stuff and what property had depreciated. It was the honor system," he said.
Appraisal:
Personal tangible property is appraised at 30 percent of its market value.
The 30 percent of the market value is then multiplied by the property tax rate, now 2.7652 to determine the amount of taxes owed.
On property valued at $30,000, the taxes would be $829.56.
Source: Hamilton County Office of Assessor
The honor system was the problem for a federal judge who ruled in favor of a group of Tennessee-regulated agencies, such as railroads, airlines, water, electric and telephone utilities, in their 1997 lawsuit against the state. The agencies were routinely audited by the state while private companies were self-monitored, Bennett said.
"The state audited the personal property - that's anything in an office that's not nailed down, the computers, the chairs, the art on the walls, the tables, lamps, filing cabinets and the vehicle you drive for business - of these companies," Bennett said. "They said it was unfair that other businesses got by on the honor system, they wrote down what they wanted to."
In 1997 Hamilton County hired Tax Management Associates, a North Carolina-based company with a Chattanooga office, to perform the audits.
The company discovered errors in more than 52.7 percent of the 3,267 audits performed since they were hired, company officials said.
"What they are really saying is that over half of the people that report, out of the 12,000 or so businesses in Hamilton County, they found errors of additional amounts that were not reported," Bennett said.
Bennett said the taxable value of the property TMA found translates to an additional $3 million to $4 million in tax dollars for the county.
The audits are performed in cycles. The county recently awarded another six-year contract to Tax Management Associates for an estimated $265,000. The 30-year-old company, with an office in Nashville, has performed audits in 85 of Tennessee's 95 counties, Bennett said.
The amount varies based on the number of businesses actually audited, Bennett said, adding that the number changes because businesses come and go. The threshold for an audit is $100,000 worth of personal property.
The contract was competitively bid, Bennett said.
