Market Value vs. Book Value
Market value may be less than or more than book value. For example, the value of a 3-month-old computer may be one-half of the initial acquisition price. The book value based on IRS tax per IRS depreciation schedule would be 95% of cost based on a 60-month depreciation schedule. Other examples of items whose market value may decline sharply after being placed in service include cars, linens and bedding at motels, phone systems, copiers, and furniture.

Other Valuation Issues
Inventory shall be valued at the price for which it will sell as a unit to a purchaser who would continue the business. Due to issues such as pilferage, obsolescence, and damage, the market value of inventory may be less than the book value of the inventory. The assessed value of the furniture, computers, and equipment should be the price for which it could be sold.

Issues for Appraisal Districts
Although appraisal districts lobbied aggressively to insure this bill passed, it poses many challenges and issues for appraisal districts. The first challenge is how to process a large number of renditions. Then, the appraisal districts will have to decide whether to aggressively request additional information if the owner gives market value instead of providing a fixed asset listing (property description, year of acquisition, and acquisition cost). The appraisal districts will also have to decide how much consideration to give the owner's estimate of market value, particularly if it is sharply below the appraisal district's assessed value.

At least one chief appraiser believes the new rendition requirements may delay certification since appraisal districts must wait to receive the renditions before mailing notices of assessed value. The higher level of renditions will impose additional challenges for appraisal district staff in up-front processing and will likely require additional protest hearings. Appraisal districts are generally leanly staffed and will have to be creative and effective to handle a likely meaningful increase in business personal property renditions and appeals.

Practical Considerations for Property Owners
One nettlesome issue for owners of small amounts of business personal property is whether the penalty for not rendering is incentive enough to render. Consider the following example: Bob owns a small business and has business personal property reasonably worth $5,000. It is assessed for $5,000. The annual personal property taxes, based on a 3% tax rate, are $150. The penalty for not rendering is $15. Should Bob make sending the rendition form to the appraisal district a priority above working with his customers, seeking new customers, and working with his staff?

Owners of business personal property who either are not on the tax rolls or whose property is grossly under-assessed will have to decide whether to render. It is clear that the law requires owners to render and there is now a 10% penalty if you do not render; the amnesty provision provides a modest incentive to render. Consider the following example: Charlie owns a wholesale distribution business with $995,000 in inventory and $5,000 in furniture and equipment. However, Charlie's current BPP assessment is $100,000 and annual taxes are $3,000. If he does not render he will likely pay annual taxes of $3,000 and a 10% penalty for a total of $3,300. If Charlie does render, his business personal property taxes will increase to $30,000 per year. It is clear that owners of business personal property are required to render and that there will be a 10% penalty for not rendering starting in 2004. Whether owners render will depend partly on their records, risk tolerance, and corporate culture.

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