Outsourcing Business Personal Property Compliance

The following is a case study of the financial benefit of outsourcing personal property tax compliance.

Background

Client’s current property tax department responsibilities include the following:

• File business personal property (BPP) tax returns
• Manage fixed assets and equipment logs
• Track and review assessment notices as compared to filed returns
• Appeal assessments (as necessary)
• Track and pay BPP tax bills and compare to filed returns
• Manage audits (auditor meetings, audit data extraction, and audit defense)
• Retrieve and review SOX documentation

Estimated Current Counts

• 3,000 BPP accounts
• BPP tax bill payments
• 100 ongoing audits
• Estimated $160 Cost Per Return

Business Case

The current BPP staff comprises three full-time analysts and one full-time tax manager.  The team’s primary responsibility is to distribute the 3,000 BPP tax returns expediently to meet statutory deadlines.  The staff is unable to address critical activities such as reviewing the asset classifications, identifying the ghost assets (i.e., items listed on the equipment logs but no longer available), addressing obsolescence issues, maximizing classification benefits, and disputing audit matters.  The turnover in this group has been significant over the past two years, resulting in production gaps and time spent sourcing and training new staff.

Outsourcing

The initial objective is to consider the viability of outsourcing based on the cost/benefit outcome.  This includes outlining the scope of service and finding service providers capable of meeting statutory requirements and business objectives.  The goal is to allow key individuals to focus on core business activities and minimize the BPP tax costs and to allow the outsourcing group to capitalize on the opportunities permitted by statute.

The Solution

• Craft the desired scope of services
• Create a request for proposal (RFP) detailing the specific service requirements
• Determine a provider through the RFP and interviews, based on fee and scope of services (with the lowest fee not the determinant)
• Engage an outsource provider

Considerations

• Estimated timeframe of implementation
• Cost associated with implementation
• Seamlessness of the transition from in-house staff to the provider; supply the return history (one to three years) and fixed asset logs
• Ability of the provider to determine the correct asset classification and depreciation to mitigate liability

Please contact Hilco’s Property Tax Advisory for an analysis of your Personal Property and/or Real Property outsourcing benefits. 

Benefits

• Elimination of late filing fees
• Elimination of ghost assets
• Correct depreciation allocations based on state statutes, eliminating over-reporting
• Minimal staff time

Conclusions

The research suggests that the proposed outsourcing is operationally, technically, and financially feasible, and offers distinct business benefits to the company.  Therefore, it is recommended that the company consider this approach.

Hilco’s Property Tax Advisory practice is the sole outsourcing provider for a number of clients.  It offers clients a strategic cost-savings opportunity for managing their non-core business, allowing the client to focus on its core business activities.  This enables businesses to devote 100% of their time and resources to meet financial goals and minimize overhead costs.

For more information please contact:

Frank Lima
847-849-2962
flima@hilcoglobal.com