Abstract
This article demonstrates the difference between incorrect assessment practices used by numerous states and more correct methodologies when assessing firms that use leased assets. The Western States Association of Tax Administrators (WSATA) method of assessing properties that use leased assets in their ongoing business operations results in duplicate or even triplicate valuation, which in turn causes excess assessment and payment of property taxes. Although the method for including operating lease assets into the appraisal process tries to properly value the leased property, the current methods espoused by WSATA and typically adopted by taxing jurisdictions across the country are incomplete and result in excess assessment. Appraisers sometimes fail to determine whether leased assets have already been valued and assessed by the local assessor. There is a failure to account for the basic financial economics consistently, which requires appraisers to simultaneously adjust the Weighted Average Cost of Capital (WACC) when they adjust the firm's Net Operating Income (NOI) if the firm uses leased property in its business operations. There is a failure to recognize that the WSATA valuation approach violates GAAP rules for accounting for leases, and the approach results in an imbalance in debit and credit entries in the adjustment process.