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40. I own a small accounting business. In completing my personal property return, there are
questions on page 1 of the return about leased equipment. On January 1, my business is
in possession of a leased copy machine and a leased postage mailing machine. In
reviewing the lease agreement, it states each machine is being leased for one year and at
the end of the lease the machines will be returned to the leasing company. Who is
responsible for reporting and paying the property taxes on these leased office machines?
The personal property rule has a section (50 IAC 4.2-8) on leased equipment. Leased equipment
is defined as being either a capital or operating lease. A “capital lease” is defined as lease in
which title (ownership) to the asset will transfer at or before the end of the lease to the lessee.
These types of leases contain a purchase option and title can transfer at the end of the lease.
These can include a sales type lease, direct financing lease, and leveraged leases. An “operating
lease” is typically a short-term lease in which the leased equipment will remain the property of
the leasing company at the end of the lease. Based upon the information included in the
question, this would meet the definition of an “operating” lease since the lease term is one (1)
year. In the case of an operating lease, the lessor/leasing company that leases the equipment is
the party responsible for reporting and paying the property taxes. The leasing company will
report this leased equipment in the pools using the Form 103. In addition, the leasing company
will file Form 103-O, Schedule 1. The accounting business (lessee) will need to complete Form
103-N, Schedule I. The purpose of filing the Form 103-N is to disclose that you are in possession
of these two leased items and that the leasing company/lessor is the owner of this equipment.
41. I have personal property in my possession that does not belong to me, but I do not want
to report this to the assessor because I don’t want the owners to have to pay taxes on it
either. Could I get in trouble for this?
The Department’s rules state that the person in possession of the personal property is liable for
the taxes on the property unless he establishes that the property is being assessed and taxed in
the name of the owner, or the owner is liable for the taxes under a contract with that person
and that person files a correct Form 103-N If the person in possession refuses to establish this,
the assessor could estimate the value of the personal property and place that assessment on
the person in possession. (See 50 IAC 4.2-2-4 for more information on this topic.)
42. I timely filed my business personal property return on May 15. However, on June 25, I
received a Form 113/PP from the county assessor advising me that my assessment was
increased from $128,200 to $142,000. The county provided an explanation of this change,
but I do not agree with it. What can I do? Can I appeal this change?
Yes, you can appeal this change in assessment to the county property tax assessment board of
appeals (PTABOA). This notice of appeal must be filed not later than forty-five (45) days after
the date of the Form 113/PP with the township assessor (if any) or the county assessor.
Instructions for completing this notice of appeal can be found at the top of the Form 113/PP.