Using a Certified Appraiser to Review Your Equipment Can Reduce Your Tax and Insurance Liabilities
By Kevin Brewster, Brewster Machinery Sales, Inc.
The COVID-19 pandemic has cast a pall over a large segment of the US economy, including the manufacturing sector. While the government had made significant efforts to buoy the economy and support American workers through a variety of business loan programs and stimulus payments, the fact remains that this has required an enormous amount of spending. At some point, the government will be forced to generate revenue by raising taxes. The pandemic has also forced equipment dealers to slash their prices on new equipment by as much as 30% or more.
For manufacturers, this raises the issue of equipment valuation. Assessment records aren’t always accurate, and the pandemic has led to an environment in which municipal and state authorities, as well as the federal government, will be looking to increase revenue. Equipment condition, depreciation and quality ratio have a direct impact on reducing annual tax liability. At the same time, current market prices affect how capital equipment is valued for property tax purposes. Lower prices lead to a lower valuation and tax basis. Moreover, companies that own significant equipment must protect their assets with insurance, and that also necessitates an understanding of the real replacement value. Lower valuations lead to lower insurance costs, and in the pandemic-battered economy, every dollar saved is a boost to businesses.
Every year, manufacturers save millions of dollars by reducing property tax liability through the Value Adjustment Board petition process. A certified machinery appraiser can value your equipment according to the relevant standards for the type of equipment being appraised and ensure that the current market conditions are taken into account.
Certified equipment appraisers must adhere to a body of ethical standards and procedures defined by the Appraisal Standards Board (ASB) of The Appraisal Foundation (TAF). These protocols are laid out in The Uniform Standards of Professional Appraisal Practice (USPAP), the official guidance document published by the TAF. Following the savings & loan debacle in 1989, Congress adopted the USPAP to deal with the wreckage. The USPAP is revised every two years in order to address business and legal changes.
Using a certified appraiser is always a wise course of action, as they are professionals with both high ethical standards and significant expertise in valuing assets across industries ranging from the automotive, metalworking, plastics and injection molding sectors to video and audio production, forestry, woodworking and more. Services such as collateral valuation, verification and inspection for loans can save manufacturing companies from making ill-advised investments.
For example, a Collateral Verification Inspection Report includes photographs, serial number verifications, owner data verification, and observations on general condition. It may be a rare treat to attend a live auction in these difficult times, but fortunately online auctions have become big business over the past few years.
Online auctions are easy to catalogue, set up, advertise and run, but before any of these steps are taken the auction house commissions an appraisal. For both the auction house and the customer, it makes good business sense to understand the condition and value of the equipment. With the quarantine and
travel bans we have endured over the past few months, it’s a challenge to purchase equipment that can’t be inspected in person under power. Sometimes a video of the machine just isn’t enough.
Today more than ever, retaining a certified equipment appraiser to inspect and value a machine on your behalf is the smart thing to do. For small assignments, an appraiser typically submits a report from three to seven days from inspection, with larger assignments taking up to 14 days. It’s a relatively small period of time that can have a big payoff in terms of savings and security. Using a certified equipment appraiser can help companies save money and avoid expensive mistakes, and this is more important than ever in today’s challenging climate.