Category Archives: eminent domain taxes

Join Me for Easements and Rights of Way in Montana

easements-and-right-of-wayWhen easements and rights of way are condemned causing an occupant to move or modify the use of personal property, state and federal procedures apply. Learn more about who is eligible for relocation benefits and the top 5 categories of relocation benefits within state regulations and Federal Uniform Act. Find out what you can do as an eminent domain attorney, appraiser, or right-of-way professional that will improve the results of your work.

Please join me The Seminar Group’s upcoming seminar on Easements and Right of Way, Friday, November 18, 2016,  Missoula, MT.  You can register here.

What an Accomplished Eminent Domain Attorney Can’t Live Without

Why can’t one very accomplished eminent domain attorney from Portland live without business relocation services?

When I first encounter an established attorney and I explain my services to them, they naturally feel resistant to the thought of adding new elements to their already successful practice. I was reminded of this common reluctance a few weeks ago when Jill Gelineau, a highly recognized eminent domain attorney with Schwabe, Williamson and Wyatt in Portland, introduced me at the Eminent Domain CLE.

Jill described how when she first met me, she had been successfully practicing eminent domain law for more than 22 years and was sceptical of the need for my services. She went on to say that now, after working with me for 7-8 years, I’ve become indispensable to her cases and she doesn’t know how she ever practiced without me.

A Common Theme
If you’re like many attorneys, you may feel that you have a good understanding of the Uniform Act and its relocation guidelines, and the displacing public agency is likely being very cooperative at this time, in the early stages of the process. As such, you may not see the need for my services. This has been a common theme among many eminent domain attorneys—who are now steady clients.

Your knowledge of the URA and the relocation guidelines is certainly necessary. My work is not meant to replace your knowledge, but instead to enhance it with firsthand experience foreseeing relocation costs that will be incurred, fitting the costs into the URA’s reimbursable categories, and anticipating possible denials of claims to pre-empt denials and gain their approval for reimbursement. These are some aspects of the expertise that I bring to the table.

What an Accomplished Eminent Domain Attorney Can’t Live WithoutConnecting the Dots
Here are several ways that my eminent domain business relocation services can help your practice.

My intimate knowledge of the Uniform Act (URA) and its relocation guidelines are an important part of the relocation process. My role is to connect the dots between all of the relocation issues and the Uniform Act requirements. My work can enhance your knowledge with firsthand experience in using the URA and its processes as a tool for relocation planning.

Planning a relocation before costs are incurred, foreseeing and estimating relocation costs that will be incurred, and estimating their eligibility and non-eligibility for reimbursement based on the URA, are some of the ingredients to a successful relocation. This work is paramount for the owner’s decision making and to develop a relocation plan, which often helps to improve operations at a new location.

Many of my fees for business relocation work are eligible reimbursable costs to the business, unlike attorney fees.

Improved Results
Having worked with attorney Jill Gelineau at Schwabe, Williamson and Wyatt now for 7-8 years and so many other attorneys across the country, I can tell you that while your practice may certainly be successful right now, there is always room for continuous improvement.

As a Business Relocation Consultant I can work alongside your efforts as part of your eminent domain team and enable you to offer unique services that will set you apart from the competition. The partnership can bolster your firm’s equity and potential clients will take notice of the added value. Most practitioners do not provide these services, but the benefits to your clients are extensive. My services allow you to form a more complete package to your clients than any other attorney.

Make Way for the California Bullet Train: Relocation Preplanning

Make Way for the California Bullet Train Relocation PreplanningHave you heard about the new California Bullet Train? The California High-Speed Rail Authority is acquiring thousands of acres of land in the Central Valley of California to make way for the new train.

Its an area with high unemployment rates and for some owners, the financial opportunity to settle and move on is a welcome one. But for many others, its a challenging time and an emotional process. Some of the local Fresno business owners are finding the initial offers to be extremely low and nowhere near the replacement value.

Relocation preplanning is of the utmost importance in this situation. The businesses being displaced by the train will become eligible to incur and receive reimbursements for relocation costs, but only after the public agency has completed their analysis. At that time, they determine each business eligibility for relocation benefits.

Theres a big problem with this; its not until the public agency has completed their analysis that they actually explain the relocation benefits to the business owners. As a result, most businesses dont begin planning their relocation until the analysis is complete. By that time, the businesses are usually either obliged to plan their relocation around what the public agency has already determined, or they have to appeal those decisions.

From the point of view of a well-trained eye, it appears that the people in the path of the high-speed rail are in a perfect position to preplan their relocation. It seems that only a few property owners have been contacted by the public agency so far, but that the rail path is well defined.

The law in California allows owners to charge the state up to $5,000 for their own property appraisal after receiving the state’s initial offer. If the business owners wait for the states offer, it becomes too late to pre-plan the relocation. Waiting uses up unnecessary time and resources and the results of waiting are uncertain. When you wait, the only remaining option is to attempt to undo what would likely have been prevented with preplanning.

Preplanning creates an increased amount of time for evaluating and making critical decisions. It gives business owners a chance to properly evaluate potential replacement properties, and understand how relocation benefits will and will not assist with making a potential replacement property functional for the business.

During an eminent domain process like the California bullet train, there can be a lot of misleading information or assumptions made about what the relocation benefits will and will not provide. With the right preplanning, you can avoid the misinformation that usually causes the process to derail and veer off in a direction that can be costly to your business. It will help you ensure that your decisions will be made based on the actual facts of the relocation benefits. Preplanning grants more time and knowledge of the process, which opens up more business relocation options.

Proper preplanning sets the stage for your actual relocation, saving you out of pocket expenses because of a rushed move, lack of choices, and excessive key employee time spent on the relocation. Its the best way to formulate a plan and make use of relocation benefits to minimize business downtime.

Most importantly, preplanning gives a business the opportunity to guide the public agencys decision-making process as they determine the eligible relocation benefits. Preplanning a business relocation refers to planning before the business has received their notice of eligibility for relocation benefits and before the public agencys offer has been made on the real property.

For businesses and individuals located in the path of the train line who have not yet been contacted, the preplanning window is open and now is the time to act. This is a fleeting opportunity for businesses. Preplanning empowers business owners with informed knowledge that will enable them to take positive action. The difference between taking advantage of the preplanning stage and missing that opportunity can be the difference between real business savings of both money and efficiency vs. expensive business hardship and stress.


Partial Taking, Cost-to-Cure, and Relocation When Using Eminent Domain

Partial-Taking,-Cost-to-CurHave you heard about the most recent eminent domain case in Nashville? The City of Nashville plans to take a portion of Greyhound’s bus terminal property for their Division Street Extension project with the use of eminent domain.

The City has offered to purchase the portion of property for $870,400. The area of the taking is a parking lot, which appears to include approximately 22 parking stalls with typical landscaping, sidewalks, and lighting. No structures are included in the taking. An article about the project can be found here.  The City’s project can be reviewed at:

This property taking offers good examples of the need to analyze each component of the eminent domain taking, both combined and individually. The criteria used in this example is based on the Federal Uniform Relocation Assistance and Real Property Acquisition Policy Act (URA).

Those components include:

  • The value of property taken
  • The damages to the remaining property
  • A cure for the damages
  • Relocation of the business occupant and landlord

Property Value
The property value will be determined by the real property appraiser who will likely consider the three methods of valuation. These include:

  • Comparison of recent sales
  • Replacement value (value of land plus cost to build improvements, including depreciation)
  • Value based on income (income as if the property were leased to a tenant)

The real property appraiser will also evaluate the damages, if any, that are caused to the remaining portion of the real property. Damages apply only to the real property and not to the business occupying the property. This may include the loss in the property’s value because of having inadequate parking after the taking. The owner is entitled to the value for damages, or, the cost to cure those damages, whichever is less. The amount would be included within the real property purchase offer.

A cost-to-cure consultant will analyze the damages and prepare possible designs and costs to solve, or cure, the damages to the remaining property.

In this particular case, let’s say the only cure is to construct an elevated parking structure on the remaining property to replace the lost parking. Let’s say it costs $500,000 to construct. The City’s offer to purchase would have to include $500K for damages or cost to cure in their purchase offer for the owner to build the structure without dipping into their own pockets. If that amount were not included in the offer, the property owner would have to argue for that amount with the use of the cost-to-cure documentation and the real property appraiser’s calculation of damages.

The property owner (landlord) and the business occupant will be entitled to relocation benefits that may apply for moving personal property and reconfiguring their operations caused by the property taking as long as those items were not paid by the City as part of the cost to cure or elsewhere in the real property purchase.

Let’s say that Greyhound can no longer operate at this location with the loss of parking. This would entitle Greyhound to relocation benefits for moving to a replacement site. If the property is appraised as a non-special use property, relocation benefits would likely cover the costs to move, reinstall, substitute, or abandon personal property such as:

  • Seating, counters, computer systems, phone systems, paging systems, scheduling systems, and other items classified as personal property.

If the real property was appraised as a special use property—in other words, it’s a bus depot and cannot reasonably include another use—many of those items listed as personal property above may be valued with the real property because those items would normally be included in the purchase and sale of a bus depot. As a result, they would then not be eligible for relocation benefits. Instead, they would be valued as part of the real property, which means they may add value to the real property, but will include a depreciated value, or they may add no value with no actual payment for them. This is not a good scenario for the business when this or similar functioning personal property is needed at a replacement property.

For best results, the identification of personal property should be prepared through collaboration among the real property appraiser, a qualified relocation consultant, the tenant, and the property owner. Without this collaboration, chances are strong that someone, including the public agency, will lose and someone will be unjustly compensated.

Now let’s explore a notion and say that because of the nature of this business, it’s determined to be a utility facility. Included in the URA’s definition of a utility facility is any transportation system. The URA goes on to say that a utility facility may be privately, publicly, or cooperatively held. In my opinion, a bus depot should qualify as a transportation system and therefore should qualify as a utility facility within the regulations.

Utility facilities are eligible for relocation benefits in a significantly different manner than a business. According to the URA, relocating a utility facility includes, in part, the displacing public agency acquiring the necessary right of way on a new location, moving, and constructing the replacement facility that has the functional equivalency of the existing facility.

If this Utility Facility notion proves to be correct, Greyhound would be entitled to a new bus depot and property with no out of pocket costs.

In order to get the acquisition and relocation right, the condemning public agency, the property owner, and the tenant, must have qualified people to analyze the issues and facts, and prepare the necessary reports and documentation.

Because these situations are similar to any other buyer/seller scenarios, there is typically a team of specialists representing the public agency and another team representing the property owner and/or tenant. The people within each team need to work together to understand the facts and sort them into the proper categories as briefly described above.

Having the analysis performed by eminent domain experts is the best way for your team to prevail in an acquisition or relocation dispute.

Eminent Domain and What That Means for Your Taxes

Eminent Domain and TaxesAs the tax season begins, it’s a good time to remind you and your clients that relocation payments from federal funded projects that use eminent domain to acquire private property are not considered income, and acquisition payments are treated as a capital gain, which can be deferred by a 1033 exchange.

The Federal Uniform Relocation and Acquisition Act (URA) states that relocation payments are not considered income on a federally funded project. My clients and their tax preparers frequently report weak support regarding this URA statement. Because this frequently causes inconsistent treatment of payments by tax preparers, I’ve been prompted to research the issue, not as a tax person but as a relocation consultant, in order to find support for the tax preparer when dealing with relocation payments, and to assist my clients with relocation planning decisions.

My article, Eminent Domain Acquisition Payments, Relocation Payments, and Taxes, outlines the results of my research in more detail here. See here. Involuntary Conversions.

Once it is understood how to handle the relocation payments, sometimes the next hurdle is to identify relocation payments or separate relocation payments from acquisition payments. This dilemma can occur when a dispute resolution process or trial is used to settle a case where fixtures are included, or when a case is a combination of acquisition and relocation issues. These processes often lump things together making it difficult to identify whether the resulting payment was part of relocation or acquisition. They can also inadvertently limit ongoing relocation benefits.

If you are in the process of preparing for a dispute resolution or trial, I can assist you by preparing language to include in a settlement agreement, preparing clarifying check-sheets, and providing other materials to help identify relocation payments. I can also assist you with preserving rights to ongoing relocation benefits.

Eminent Domain Fact Delivery has Impact on Judge’s Decision

Eminent Domain Fact Delivery has Impact on Judge's DecisionI recently read this article, Caltrans’ Highway 101 Overpass Condemnation Case Ends in a Slip Decision by Brand Kuhn. This is an eminent domain lawsuit that I have been following for several years.

In cases of eminent domain, I can’t stress enough the importance of how the case is presented. The way that the facts are delivered makes a significant impact on the judge’s decision.

As an analogy, eminent domain trials are a lot like the reality competition shows that are so popular on television these days, like The Amazing Race and Dancing With the Stars. Two very talented competing teams go up against one another and apply their knowledge, skills, and resources to put on their best performance. After 20 days of performing – in this case the performance is the trial – the judge or jury scores the two teams based on the performances that they gave.

The scores are the result of how well the story was told while meeting specific criteria and facts in an eminent domain case. Protecting the client’s interests – requires the most compelling case possible; to produce the best results, the value of engaging expert eminent domain representatives to be part of your team to present cannot be underestimated.

Take a moment to read Brad’s article if you have any questions on this matter or other eminent domain and condemnation matters you want to discuss, please let me know.

Eminent Domain Acquisition Payments, Relocation Payments, and Taxes

The case of  Karen Y. Nielsen v. Commissioner of Internal Revenue provides the answers we need to understand how income taxes apply to eminent domain acquisition and relocation payments.  As an eminent domain relocation consultant, not a tax advisor, I’ve prepared the analysis below based on the information from this case.  This analysis and suggestions are for a typical acquisition of private property and relocation of a resident, business, non-profit, or farm located within a public project using eminent domain and federal funds to acquire property.

This case indicates that:

  • The acquisition payments made for just compensation of real property may be taxable as a capital gain or deferred by use of IRC section 1033.
  • Relocation payments are not considered income and not taxable.

That seems very clear and simple. However, the key is to separate real property acquisition payments from relocation payments. It will be important to work with the public agency making the payments to clarify the type of payment being made.

Moreover, it’s important to identify and properly classify movable fixtures (personal property) from non-movable fixtures (real property). It’s preferable to do this before the move and before relocation payments are made.  I’ve spent a great deal of time making these distinctions for relocation planning purposes by analyzing the characteristics of installed equipment to compare them to various states’ methods for distinguishing between personal property and real property.  Now, as we see, this task is equally important for tax planning within the relocation planning.

Below are my suggestions for recognizing and separating acquisition payments from relocation payments.

Acquisition Payments (Just Compensation) – Payments for the items listed below appear to be taxable as a capital gain but may be deferred by use of IRC 1033:

  • Real property including; land, buildings, and other improvements including; driveways, utilities, well, septic system, landscaping, etc.
  • Fixtures (non-movable)

Relocation Payments – Payments or reimbursements made for the items below should be non-taxable to the displaced resident or business. The items listed are major categories within the Federal Uniform Relocation and Acquisition Act, which are eligible for reimbursement or payment.  (Another time, I’ll expand on these categories and their sub-categories in more detail)

 Resident (homeowner or tenant)

  • Moving and reinstallation of personal property, storage, and other moving related costs
  • Replacement Housing Payment or Price Differential payment
    • Amount by which the cost of the comparable replacement dwelling exceeds the acquisition amount of the displacement dwelling
  • Increased interest on the replacement dwelling
  • Expenses incidental to the purchase of the replacement dwelling
  • Other remedies within the Housing of Last Resort

Business or Farm (property/business owner, landlord business, business tenant, non-profit, farm)

  • Fixed Payment, also known as the In-Lieu Payment
  • Moving Costs including 16 line items of eligible reimbursable costs
  • Reestablishment Costs Including 7 line items of eligible reimbursable costs
  • Related Eligible Expenses including 3 line items of eligible reimbursable costs

Separating eminent domain payments by the categories described above will help you plan your tax obligations. This work will also help you properly plan your relocation and help you receive proper and timely relocation payments, when prepared before you move.

The above discussion is my opinion as an eminent domain and relocation consultant.  I recommend consulting a tax advisor prior to relying on this information for tax purposes.  I would be pleased to discuss these matters in more detail with you as a displaced person, your tax advisor, legal counsel, or your displacing public agency.