No house, no property taxes?

Last week five homeowners in the Madison, Wisconsin area completely lost their homes because of flood waters. Many other homes were affected by flood waters, but these were completely destroyed. The homeowners think they shouldn't have to pay their full property tax bills, but the taxing authorities say that the law requires them to pay.

Property tax bills are based upon a property's value as of January 1, regardless of the value of the property today. And although I feel badly for the homeowners who lost their houses, I understand the logic behind the laws. There has to be a uniform way of assessing taxes and making taxpayers pay accordingly.

If you've ever built a house, you know that taxpayers sometimes win this game. You might have a very low tax bill for a year because the house wasn't completed and therefore the value at the time of assessment was low. Even if your house is finished later in that year, you still pay the low tax bill because of the timing.In order to be fair, the taxing authorities have to stick with the house's value on one date. If they were to start making adjustments for people because of things that happened throughout the year, it would be a nightmare. What about the person who made major improvements to their house? Should the assessor step in halfway through the year and jack up the tax bill? What if a fire damaged your house during the year? Should your tax bill be lowered because the house is worth less due to fire damage?

You can see what an administrative problem this would cause if taxpayers could request adjustments to their tax bills throughout the year. So while I feel sorry for the people who lost their houses, it only seems fair that the rules be applied equally to them as they are to everyone else.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.