NEW CONSTRUCTION ASSESSMENTS

Appealing the Assessment on Newly-Built Commercial Property

Year-one assessments on new construction lean almost entirely on cost-new figures — and that's exactly where over-assessment hides. A practical guide for owners and developers in MI, IN, and OH.

THE STARTING POINT

Why New Construction Gets Over-Assessed in Year One

When a brand-new commercial building hits the assessment roll, the assessor usually has only one approach available: cost. Income approach is impossible without operating history, and sales-comparison support is thin for recently-completed buildings. So the value gets built up from Marshall & Swift cost manuals and the construction documents on file at the building department — frequently with no depreciation, no entrepreneurial-incentive trim, and no recognition that cost-new is not the same as market value.

The wedge between cost and market opens up fast. Tenant improvements that exist to land a tenant rarely add dollar-for-dollar resale value. Soft costs — design fees, financing, contingency — were necessary to build but no buyer would pay full dollar for them. Pre-stabilization vacancy reduces real cash flow but rarely shows up in the assessor's first valuation. The International Association of Assessing Officers standards explicitly call for the cost approach to be tested against market evidence, but in mass appraisal that test rarely happens at the property level.

That makes year one the most valuable appeal year of the entire hold period. The number set in the first roll becomes the baseline for every future trending update, every reappraisal cycle, and every comparable in the assessor's new-construction file. Owners who rely on their construction property tax appeal window get the cleanest reset available.

Cost-new at 100% rarely reflects what a buyer would pay

TI allowances and soft costs inflate basis without adding market value

Pre-leasing and lease-up risk get glossed over in mass appraisal

The year-one number compounds into every future assessment cycle

For the broader primer on commercial valuation, see our commercial property tax assessment guide. For evidence-gathering specifics, the appeal evidence guide shows what a tribunal-ready package looks like.

Developer and tax consultant reviewing year-one new construction property tax assessment documents

WHERE THE NUMBER GOES WRONG

Four Cost-Approach Pitfalls Assessors Make on New Builds

The cost approach is defensible when it's done with full IAAO discipline. In year-one mass appraisal, the discipline often slips — and these are the four places it slips most consistently.

Cost-New at 100%

Marshall & Swift figures get applied without entrepreneurial-incentive trim or soft-cost reconciliation, treating total project cost as if it were a buyer's check at closing.

TI / Build-Out Double-Counted

Tenant improvement allowances get added on top of base building cost — even though TI is a leasing inducement that rarely adds dollar-for-dollar market value to the underlying real estate.

Pre-Stabilization Vacancy Ignored

Mass-appraisal models value the building as-if-stabilized at countywide average occupancy, ignoring actual lease-up timing, concessions, and free-rent periods sitting in the rent roll.

FF&E Bundled With Real Property

Furniture, fixtures, equipment, and intangibles get rolled into the real property value instead of being assessed separately on the personal property roll, inflating the real estate base.

THE COST BASIS LAYERS

What's Actually in Your New-Construction Cost Basis

Total project cost looks like one number on the construction loan draw, but it's really five distinct layers — and only some of them belong in the real property assessment.

Hard Costs

Site work, structure, shell, MEP, and finishes. The portion that most cleanly maps to a market-value cost approach — and even here, depreciation and obsolescence eventually apply.

Soft Costs

Design, engineering, permits, financing, legal, and developer fees. Necessary to deliver the building, but a buyer paying market value would not write a check that fully replicates these.

Tenant Improvements

Build-out allowances delivered to tenants as part of leasing. Their value depends entirely on the lease economics, not on the dollars actually spent — and they rarely transfer at face value to a new owner.

FF&E and Intangibles

Furniture, fixtures, equipment, and going-concern intangibles. Should be assessed separately as personal property in every state we work in, not bundled into real property value.

Entrepreneurial Incentive Wedge

The gap between project cost and what a buyer would actually pay for the finished asset. In a soft submarket this wedge can be negative, and the cost approach should be reconciled downward to recognize that.

BEFORE YOU FILE

What to Gather Before a Year-One Appeal

Year-one cases are evidence-heavy, but the documents you need mostly already exist. Pull these together before filing — most of them are sitting in the construction loan file or with your architect and GC. For a broader evidence framework, see our property tax appeal evidence guide.

Construction draw schedule and final cost certification — the actual-cost reality your assessor's M&S figures should be reconciled against

Cost segregation report — the cleanest way to separate hard costs, soft costs, TI, and FF&E into their proper categories

Bank appraisal performed for the construction loan — an independent third-party valuation already exists for most projects

Pre-leasing schedule and rent roll as of the assessment date — documents lease-up risk that mass appraisal misses

Tenant improvement budgets and concession schedules — proof that TI dollars don't translate dollar-for-dollar to market value

TIF / abatement documentation and the underlying full-value assessment letter — needed for both year-one defense and post-abatement protection

Comparable new-construction sales in the submarket — sales-comparison evidence to anchor the income approach the assessor couldn't run yet

STRATEGIC TIMING

Why Year One Is the Cheapest Year to Appeal

Skipping the first-year filing is the single most expensive decision an owner of new construction can make. The number set on year one becomes the baseline that every future trending update, reappraisal, and over-assessed comparison rolls forward from — and most state caps explicitly do not protect new value the way they protect existing value.

01Year-one number becomes the baseline for every future reappraisal cycle

02Compounding effect: one inflated year-one assessment costs you every year of the hold

03Michigan Proposal A cap does not apply to additions or new value placed on the roll

04Ohio triennial vs reappraisal year impact — newly-built buildings get scrutinized first

05Indiana 3% commercial property tax cap interacts with assessed value, not market value

06TIF and abatement coordination — the unprotected number is what survives once incentives roll off

07Partial-year proration mechanics vary state by state and routinely create year-one timing traps

THE STRATEGIC CHOICE

Appeal in Year 1 vs. Wait Until Stabilization

The temptation to wait is real — operating history is thinner in year one, and TIF or abatement may be masking the immediate cash impact. But the math on waiting is brutal once you trace what the year-one baseline does over a full hold period.

Appeal in Year 1

Reset the assessment baseline before it compounds across the hold

Lock in cost-approach corrections while construction documents are fresh

Force pre-stabilization vacancy and lease-up risk into the assessor's number

Strip TI / FF&E / soft-cost double-counting before it solidifies as comparable evidence

Protect the post-abatement assessment, not just the abated tax bill

Save every year of the hold — not just the year you finally got around to filing

Wait Until Stabilization

Year-one number becomes the rolling baseline for every future reappraisal

Cost-new figures harden into 'comparables' for new construction across the submarket

Pre-stabilization vacancy disappears from the record once the building leases up

TI / FF&E / soft-cost bundling gets re-applied year over year by mass appraisal

Abatement masks the problem until it rolls off — and then the unprotected number arrives

Years of overpayment compound, and the eventual appeal has to fight a hardened number

STATE-BY-STATE BREAKDOWN

How Each State Treats New Construction

The state mechanics that drive a year-one assessment differ meaningfully across our footprint. Understanding which lever applies to your property is the first step toward a clean year-one filing.

Michigan: The State Equalized Value jumps with new construction, and the Proposal A cap explicitly does not apply to additions or new value placed on the roll. The taxable value of the new portion is set at full SEV — meaning the number the assessor produces from cost-new figures is the number you start paying tax on, uncapped. The Michigan State Tax Commission guidance and our uncapping page walk through how additions interact with the cap, and Tax Tribunal filings in Michigan are due May 31.

Ohio: Ohio operates on a six-year reappraisal cycle with a triennial update in between. New construction gets scrutinized in the year it's placed on the roll, and the cost-approach number set then becomes the comparable for the next reappraisal. File a complaint with the Board of Revision by March 31 of the following tax year — appeals in a reappraisal year carry slightly different evidence weight than triennial-update years, and timing the filing matters. Our broader Ohio property tax appeals page covers the BOR-to-BTA path.

Indiana: Indiana's 3% commercial tax cap is calculated against gross assessed value, so a year-one over-assessment shows up as a higher tax bill even when the circuit-breaker cap engages. Trending and annual adjustments compound the year-one figure forward. File with the local assessor or PTABOA within 45 days of the assessment notice — our Indiana PTABOA guide and Indiana property tax appeals overview cover the full process.

State-by-state mechanics for appealing a new construction commercial property tax assessment

Assessors lean almost entirely on the cost approach for brand-new buildings because there is no operating history yet to support an income approach and few comparable sales of recently completed buildings to anchor a sales comparison. Marshall & Swift cost-new figures get applied without much depreciation — sometimes none at all — and tenant-improvement allowances, soft costs, and entrepreneurial incentive get layered on top. The result is an assessment that looks like total project cost rather than market value, which is the very gap our assessed value vs. market value primer addresses. A year-one free property tax review is the cleanest way to test whether your first assessment matches what the building could actually sell for today.

Yes — and the year-one window is by far the most valuable opportunity you have. Michigan lets newly-finished commercial properties file with the Tax Tribunal by May 31, Ohio opens a Board of Revision complaint period until March 31, and Indiana gives you 45 days from the assessment notice. Waiting a year means paying a full cycle of inflated taxes and letting the cost-new number become the rolling baseline for every future reappraisal. Our 2026 property tax deadlines guide and appeal process walkthrough cover exactly when and how to file in each state.

Generally, no — at least not in the way assessors typically include them. Tenant-improvement allowances are a financing inducement that rarely adds dollar-for-dollar market value, and personal property items like furniture, fixtures, and equipment should be assessed separately on the personal property roll, not bundled into real property. When an assessor lists total project cost (hard + soft + TI + FF&E) as the assessed value, the cost basis is overstated by the soft-cost and personal-property layers. Our discussion of how assessors handle these line items in the assessor methodology guide explains where the wedge between cost and market value usually opens up.

Only partially. Proposal A caps annual increases in taxable value at the lower of 5% or inflation, but the cap explicitly does not apply to additions or new value placed on the roll. When you finish new construction in Michigan, the value of the new building is layered onto your taxable value as an addition that bypasses the cap, and your State Equalized Value jumps to reflect the cost-new figure the assessor uses. Our Proposal A explainer and uncapping guide walk through this exception in detail and show why a year-one appeal is the only practical reset.

Mass-appraisal models tend to value newly-built commercial buildings as if they are stabilized at typical market occupancy, even when actual occupancy is zero or pre-leasing covers only a fraction of the rentable area. That mismatch can be substantial: a 100,000-square-foot new office that opens at 30% pre-leased is generating roughly a third of pro-forma NOI, but the assessor may be valuing it as if it were 90% leased. The argument mirrors the vacancy-adjusted income approach we walk through for partially-occupied buildings, and a strong year-one filing pushes the assessor to recognize lease-up risk rather than glossing over it.

TIF and abatement programs generally only reduce the tax bill, not the underlying assessed value — and once the abatement period ends, you inherit whatever assessment was sitting on the roll the whole time. That makes it especially important to challenge an inflated year-one assessment even when an abatement is currently masking the impact, because the unprotected value is the one that compounds for the rest of your hold period. Our coverage of why commercial property taxes increase explains how this trapdoor opens once incentives roll off, and coordinating the appeal with your Ohio Board of Revision or Michigan filing protects the post-abatement number too.

Year-one cases tend to move faster than mature-property appeals because the evidence package is mostly construction documents that already exist — draw schedules, GC contracts, M&S reconciliations, pre-leasing schedules, and any bank appraisal performed for the construction loan. From filing to resolution, expect three to six months for an Ohio Board of Revision complaint, three to six months for Indiana PTABOA filings (longer if escalated to the IBTR), and six to eighteen months for Michigan Tax Tribunal cases. Our appeal timeline guide breaks down each phase, and the cap rate guide explains the income-approach inputs that frame the reset target.

RELATED RESOURCES

Keep Going on New-Construction Appeals

Construction Property Tax Appeals — The property-type page on new builds

Property Tax Appeal Process — Step-by-step in MI, IN, and OH

Property Tax Appeal Evidence — What a tribunal-ready package looks like

2026 Property Tax Appeal Deadlines — Filing dates by state

Michigan Uncapping — Proposal A and the new-value exception

Ohio Board of Revision — How to file your year-one complaint

SELECT YOUR STATE

Find Your State's Appeal Process

Property tax appeal procedures vary by state. Choose your state below for a detailed guide to the appeal body that handles your commercial property tax appeal.

Michigan

Tax Tribunal

Michigan's statewide tax appeal body. Strict May 31 / July 31 filing deadlines depending on property type.

Michigan Tax Tribunal

Ohio

Board of Revision

Ohio's county-level first step for property tax appeals. March 31 filing deadline every year.

Ohio Board of Revision

Indiana

PTABOA

Indiana's county Property Tax Assessment Board of Appeals. Form 130 filed within 45 days of notice.

Indiana PTABOA

Commercial property tax appeal background

JUST BUILT OR JUST STABILIZED?

Lock In the Right Year-One Assessment

We review newly-built commercial assessments at no upfront cost — across multifamily, office, industrial, retail, medical, and special-purpose property types in MI, IN, and OH. Contingency-based: no fee unless we lower your assessment.

Government building representing the year-one new construction property tax appeal process