Yes. In many jurisdictions, intangible costs such as software, engineering, and consulting services are explicitly excluded from personal property taxes. The key is to document and support the adjustment—something DMA specializes in.
For companies with capital-intensive assets—such as in manufacturing, data centers, utilities, and renewable energy—overvaluation of personal property is a common but avoidable cost. Many industrial taxpayers unknowingly include non-taxable assets in their fixed asset records. These hidden costs artificially inflate assessments across a company’s portfolio, often resulting in avoidable tax liabilities that span multiple jurisdictions and tax years.
- What Are Embedded Intangibles in Property Tax?
- Why Embedded Intangibles Lead to Overassessment
- Industries and Operations Most Affected by Embedded Intangibles
- How to Identify and Exclude Embedded Intangibles from Property Tax
- Why Clients Trust DMA with Embedded Intangible Reviews
- Real-World Impact (Client Spotlight)
- Embedded Intangibles FAQs
- Request a Property Tax Review
What Are Embedded Intangibles in Property Tax?
Embedded intangible assets (sometimes called embedded non-taxables) are non-physical components that are built into or bundled with a taxable asset, such as equipment or machinery. Though they are part of the property being assessed for taxation, they often do not contribute to its fair market value—and in many jurisdictions, they may be excluded from property tax assessments.
Embedded intangible assets typically fall into one of three categories:
- Freestanding intangible assets, such as trademarks and licenses
- Embedded software, often bundled with equipment (e.g., firmware, control systems)
- Embedded indirect costs, including engineering, design, warranties, and financing interest
If not identified and excluded, these embedded elements can be included in the assessed value, potentially inflating your property tax liability.
Why Embedded Intangibles Lead to Overassessment
Many companies overpay on personal property tax because their asset records don’t distinguish between taxable equipment and the non-taxable costs embedded within it. Here’s why these values are often included—and what makes them difficult to remove.
Cost-Based Assessments Are Overinclusive by Default
Most assessors rely on the cost approach—capitalized cost minus straight-line depreciation. But this doesn’t account for what portion of that cost is non-taxable, like software or consulting.
Tangible and Intangible Costs Are Often Blended
Asset records typically don’t isolate software, consulting, or engineering costs. When a $5M asset includes $750K of embedded intangibles, it’s still entered into fixed asset schedules at $5M—and taxed as such.
Jurisdictions Vary—But Few Take Proactive Measures
Even when a jurisdiction excludes intangibles by statute, most do not proactively adjust for them. States like California and Colorado, for example, may require third-party studies, collaboration with assessors, or very detailed documentation to accept embedded intangible removal. Assessors are unlikely to revise assessments based on assumptions.
Unless you actively extract these values and defend their exclusion, you’ll overpay on taxes—often for years.
Industries and Operations Most Affected by Embedded Intangibles In Property Tax
Organizations operating in complex, high-investment environments are particularly vulnerable to overassessment from embedded intangibles—especially when assets are customized, automated, or built to specification.
Facilities under construction, undergoing near-term expansion or major modernization, or involved in high-tech operational upgrades, are also strong candidates for an embedded intangible review.
Examples of high-risk industries and operations include:
Manufacturing
Custom-built automation systems, capitalized integration services, and proprietary production lines (e.g., food and beverage, pharmaceutical, pulp and paper)
Data Centers
Server racks bundled with internal-use software, environmental monitoring systems, warranties, and cybersecurity infrastructure
Utilities & Telecommunications
Transmission and generation assets with SCADA systems, embedded IP, and multijurisdictional scrutiny
Distribution & Warehousing
High-tech conveyor systems, robotics, warehouse automation, and software-driven logistics equipment
Energy & Infrastructure
Grid interconnection assets, control systems, and engineering-heavy buildouts
Identifying And Excluding Embedded Intangibles From Property Tax
As part of our broader assessment review process, DMA’s embedded intangibles study helps clients identify and support the removal of non-taxable cost elements from their personal property tax base. The result: lower valuations, reduced tax liabilities, and audit-ready documentation to back it up.
Our process includes:
- Detailed asset and invoice analysis to uncover potential embedded intangibles
- Collaboration with internal stakeholders—from plant to procurement—to verify data
- OEM/vendor contract review to substantiate cost segregation
- State-specific legal and valuation research to support defensibility
- Documentation preparation for pre-filing adjustments, appeals, or audit defense
Once non-taxable components are clearly identified and documented, we help clients integrate these findings—whether before renditions are filed, during informal discussions with assessors, or in support of a formal appeal.
Why Clients Trust DMA To Uncover Embedded Intangibles
Embedded intangible costs are among the many issues that DMA identifies and evaluates during our comprehensive property tax assessment review. Whether you’re leading tax strategy at the corporate level or managing plant-level operations, DMA’s team brings the technical expertise and on-the-ground fluency to align tax outcomes with the economic reality of your assets.
Our consultants work closely with internal tax teams, engineers, plant managers, and procurement to understand how capitalized costs are structured—and to isolate non-taxable components that may be hiding in your property’s assessed value. Backed by credentialed valuation experts and decades of jurisdictional experience, we deliver more than insight—we provide audit-ready documentation and defendable tax positions.
Here’s what sets DMA’s embedded intangibles studies apart:
- ASA-credentialed consultants with valuation expertise
- Deep industry specialization in capital-intensive operations including manufacturing, utilities, energy, and tech
- Jurisdiction-specific knowledge across the U.S.
- Audit-ready reporting and assessor engagement support
- Performance-based assessment review fees aligned to results
DMA doesn’t just uncover potential savings—we stand behind our findings and help clients defend their position at every step.
Client Spotlight: Embedded Intangibles Review
Manufacturing Facility | Tulsa, OK
$11M
MARKET VALUE REDUCTION
“They worked with our engineers to understand our manufacturing processes… and due to their expertise, we are enjoying some significant tax savings.”
FAQ: What Clients Ask About Embedded Intangibles
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While actual figures vary by asset type and jurisdiction, DMA studies often find 10–25% of capitalized project value consists of potentially non-taxable embedded costs. These findings are based on studies performed for clients across manufacturing, tech infrastructure, and utilities—validated through assessor feedback and successful appeals.
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Pre-filing is ideal. But DMA can support post-filing appeals, audit defense, and amended returns.
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We rely on fixed asset records, invoices, OEM/vendor quotes, engineering data, and interviews. DMA leads the process with minimal lift from your team.
Complex Property Tax Expertise
You may be paying property taxes on value that doesn’t belong in your assessment. DMA can identify and support the removal of these costs—backed by deep valuation expertise and assessor-tested processes.
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