The Florida Non-Homesteaded Real Property Tax Assessment Increase Cap and the Form DR-430: When to File?

Nicholas Gangemi – Florida homeowners are familiar with the homestead property tax exemption. This includes protection provided by the “Save Our Homes” amendment passed in 1995, which provides homesteaded residences with a cap on annual tax assessed value increases. In 2008 Florida extended this protection to non-homesteaded/commercial real property with Amendment 1, which provides a 10% annual cap. While market turmoil following the amendment’s passage initially rendered it widely irrelevant, the continuing recovery of real property markets and subsequent boom of commercial property in Florida blew the dust off the non-homesteaded assessment cap.

With commercial properties being widely owned by legal entities, the Florida legislature sought to ensure that a change in ownership or control of an entity owning real property would constitute a transfer as to allow for a full reassessment. Whereby the transfer of ownership of a piece of real property itself is recorded by means of a deed in the public records, which serves to provide notice to the property appraiser, the change of ownership or control of a legal entity may remain publicly silent. As such, the Florida Department of Revenue Form serves to mandate notice to the property appraiser when an unrecorded change of ownership or control of a non-homesteaded property occurs.

The penalties associated with failing to complete a Form DR-430 when necessary are not insignificant if a property in question enjoyed the benefits of the 10% cap; failure to comply results in the payment of any taxes avoided plus 15% interest along with a 50% additional penalty, and the property appraiser is authorized to file tax liens. However, not much guidance is provided as to when the completion of a form is necessary. Specifically, the form defines “change of ownership or control” as, inter alia, “[a] cumulative transfer of control, or of ownership of more than 50%, of the legal entity that owned the property when it was last assessed at just value.” When considering the complexities of certain commercial real estate transactions and towering legal entity organizational structures, what should be a tight standard really amounts to a shockingly vague guideline; the answer to the “when to file?” question is not a clear one.

Greenberg Traurig’s Burt Bruton and Marvin Kirsner provided introspective guidance to entities owning Florida real property that may become involved in transactions requiring the filing of a Form DR-430. The “change in ownership or control” standard may seem straightforward when considering the ownership or control of a property-owning entity. However, what remains blurry is the extent that changes in ownership or control of upper-level entities, indirect to the parcel itself, in a relevant organizational structure, constitute a change in ownership or control as defined by the form. Even mere structural reorganization, without modification to the top-level parent entity/entities, may seemingly trigger the Form DR-430 requirement—a worrisome proposition to organizations looking to maintain a 10% cap.

As noted above, the penalty of a failure to file a Form DR-430 rests on any benefit conferred by the 10% cap. In theory, if a property’s tax assessed value appraisals were not limited by the cap (its assessed value increased by less than 10% each year of ownership), the filing of, or failure to file, a form should go without consequence; the property should already be fully assessed. However, as Burton and Kirsner posit, filing a form, including when unnecessary and/or in the absence of a prior cap, may provoke the property appraiser to conduct a more detailed reassessment of the property (CITE). Subsequently, a surprise increase in the property’s assessed value may follow even though the 10% cap was not previously in play.

While a attempts to clarify the DR-430 standard, questions posed by complex organizational structures remain. Considering the murkiness of the Form DR-430 requirement, absent more specific clarification or relevant case law, what Florida voters intended as an extension of the “Save Our Homes” tax assessment increase cap protection to non-homesteaded properties wields as a double-edged sword.

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