What Is Intangible Value
Intangible value is the worth assigned to non-physical business assets like goodwill, brand reputation, customer lists, operating agreements, or trained workforce. On a property tax assessment, assessors sometimes attempt to bundle intangible value into the land or building valuation, which inflates your assessed value beyond what you should actually pay tax on.
Why Assessors Overreach on Intangible Value
Most states exclude intangible value from property tax assessments. Florida, Texas, and many others specifically prohibit taxing goodwill or business value separately from real property. However, assessors regularly slip intangible components into their valuations using the income approach or by inflating comparable sales data.
For commercial properties, this happens most often with:
- Restaurants, hotels, and retail locations where customer loyalty is factored into the sale price
- Medical or dental practices where patient relationships drive value
- Businesses with exclusive contracts or licenses that increase land value artificially
- Properties in desirable locations where "location premium" actually reflects business operations, not real property
When a comparable sale includes a business transfer, the sale price often bundles real property value with intangible business value. An assessor using that sale without adjustment overstates what the land and building alone are worth. This is a critical point to raise at board of review hearings.
Spotting Intangible Value in Your Assessment
Request the assessor's appraisal methodology and comparable sales list. If the assessment ratio in your county is 85 percent of fair market value and your building was appraised at $500,000 while similar non-operating properties sold for $350,000 to $380,000, the difference likely includes intangible value.
Comparable sales used by assessors should be adjusted when they involve operating businesses. A restaurant property that sold for $600,000 may justify only $400,000 to $425,000 for the real property itself. The remaining $175,000 to $200,000 represents the business, recipes, customer base, and reputation, not taxable real property.
How to Challenge Intangible Value at Board of Review Hearings
- Obtain the assessor's appraisal report and identify sales of comparable non-operating properties in your area
- Document any business-related components in the comparable sales the assessor cited. If a sale included equipment, inventory, or customer lists, request a breakdown
- Present your own appraisal using the sales comparison approach with properties sold without business operations attached
- Reference your state's property tax statute. Most state constitutions and tax codes explicitly exclude intangible property from taxation
- If the income approach was used, demonstrate how it conflates business profitability with real property value
Common Questions
Can assessors tax goodwill or business reputation?
No. Nearly all states prohibit it. However, they often do anyway by burying it in the comparable sales or income calculations. That's why you need to audit their work carefully and challenge it at the board of review.
What if the assessor says the high valuation is just "location"?
Location does affect real property value, but only the location itself. If a restaurant location is worth more because of high foot traffic and established customer flow, that premium belongs to the business operation, not the real estate. Find comparable land or buildings in the same area that sold without an operating business attached to establish true property-only value.
How is this different from Fair Market Value?
Fair Market Value is what a buyer willing to pay and a seller willing to sell would agree to for the entire property as it operates. That includes intangible value. Assessable value should exclude intangible components and reflect only the real property. This is why Going Concern Value is often overstated in assessments.