What Is Going Concern Value
Going Concern Value is the premium added to real property when it operates as an active business, including the value of equipment, inventory, customer relationships, and operational systems. It differs from the land and building alone. In property tax assessment, assessors sometimes try to capture this business value as part of the property assessment, which can inflate your tax bill significantly.
Why Assessors Include It
Many assessors bundle going concern value into the real property assessment, particularly for commercial properties, restaurants, hotels, and retail locations. A restaurant building might be assessed at $500,000 as real estate, but the assessment could jump to $650,000 if the assessor adds going concern value for the operating business. This practice is problematic because property taxes should apply to real property only, not the intangible value of running a business.
At the Board of Review hearing, this becomes a critical distinction. You can challenge whether the assessed value reflects only the property itself or whether it improperly includes business goodwill and operational value.
How It Affects Your Assessment
Going concern premiums typically inflate assessments by 15% to 40% depending on the property type and local assessor practices. Hotels, gas stations, and established retail businesses see the highest premiums. When you compare your assessment to comparable sales data, the inflated value becomes obvious. A similar property that sold for $400,000 should not be assessed at $520,000 unless the going concern component justifies the difference.
During a Board of Review hearing, you can argue that:
- The assessment exceeds comparable sales prices for similar properties
- The Fair Market Value should reflect what a buyer would pay for the real property, not the business operations
- Going concern value belongs to the business owner, not the real estate itself, and therefore should not be taxed as part of the property
- The assessment ratio (percentage of market value) is artificially inflated by business value assumptions
Appraisal Methods and Going Concern
Professional appraisers use three approaches to value property: cost, market, and Income Approach. The Income Approach is where going concern value sneaks in most often. An assessor using the Income Approach calculates value based on what the property generates in revenue. A small hotel generating $200,000 annually might be valued at $1.2 million using income capitalization, but much of that value is the business operation, not the real estate.
Challenge this by providing evidence that comparable properties (similar hotels in your area that actually sold) went for less. If comparable sales show properties selling at 0.6 times annual gross revenue, but your assessment assumes 1.2 times, you have strong grounds for appeal.
Exemptions and Going Concern
Some jurisdictions allow exemptions for certain business-related values. Manufacturing properties, agricultural operations, and some commercial enterprises may qualify for exemptions that exclude going concern value. Check your local jurisdiction's rules. If your property qualifies for an exemption, the Board of Review may be improperly including going concern value that should be excluded.
Common Questions
- Can I refuse to include going concern value in my assessment? You cannot refuse it, but you can appeal it. File a formal appeal with your Board of Review and present evidence that the assessment exceeds Fair Market Value. Comparable sales data is your strongest tool.
- How do I prove going concern value is inflating my assessment? Compile at least three comparable sales of similar properties in your area that sold within the past 12 months. If those properties sold for less than your assessed value, the difference suggests improper inclusion of going concern value.
- Does going concern value apply to residential rental properties? Rarely. Going concern value primarily affects commercial businesses like restaurants, hotels, gas stations, and retail stores. Residential properties are assessed on real estate value alone unless they operate as something other than a residential rental.