Texas Property Tax Updates
This update highlights recent developments affecting commercial property taxation in Texas. It reflects analysis prepared by an APTC member firm based on conditions at the time of publication.
The last two quarters produced several appellate decisions affecting jurisdictional disputes, tax collections, appraisal roll corrections, and taxpayer remedies under the Texas Property Tax Code. While none of these cases represent a dramatic shift in Texas property tax law, they reinforce several recurring themes: courts continue to strictly enforce administrative procedures, narrowly construe correction remedies under Section 25.25 of the Texas Tax Code (the “Tax Code”), and distinguish between substantive tax disputes and procedural challenges.
1. Jurisdictional Issues Are Still Alive and Well
Following the Texas Supreme Court's decisions in Texas Disposal Systems Landfill, Inc. v. Travis Central Appraisal District and Oncor Electric Delivery Co. NTU, LLC v. Wilbarger County Appraisal District, some practitioners questioned whether Texas courts would continue treating failures to exhaust administrative remedies as jurisdictional defects. Two recent appellate decisions suggest the answer is yes. While the Supreme Court clarified that certain statutory limitations affect the scope of judicial review rather than a court's jurisdiction, Texas courts continue to enforce the fundamental requirement that taxpayers first proceed through the administrative process established by the Tax Code before seeking judicial intervention.
In Harris Central Appraisal District v. Park on Westview Apartments, LP, the property owner alleged that Harris Central Appraisal District failed to comply with various statutory appraisal and notice requirements and that no protest concerning the property's value had ever been heard by the appraisal review board. Rather than pursuing relief before the ARB, the taxpayer filed suit directly in district court and sought a judicial determination of value. The First Court of Appeals held that the district court lacked subject-matter jurisdiction because the taxpayer never obtained an ARB order and therefore failed to exhaust its administrative remedies. The court emphasized that appraisal review boards retain exclusive original jurisdiction over valuation disputes and that Section 41.411 of the Tax Code provides the specific administrative remedy when a property owner alleges a failure to receive required notice. The court expressly rejected the taxpayer's argument that Texas Disposal Systems and Oncor eliminated exhaustion requirements, explaining that both Supreme Court decisions presupposed the existence of an ARB order and addressed only the permissible scope of judicial review after the administrative process had been completed.
The Fort Worth Court of Appeals reached a similar conclusion in Tarrant Appraisal Review Board v. MidCon Compression, L.L.C. There, the taxpayer filed a protest seeking waiver of penalties and interest. The ARB scheduled and conducted a hearing, which was held via affidavit, but the taxpayer later complained that procedural deficiencies prevented it from receiving the hearing to which it was entitled. Rather than pursuing the ordinary appellate remedies provided by Chapter 42, the taxpayer sought a court order compelling the ARB to conduct another hearing under Section 41.45(f) of the Tax Code. The court rejected that effort and held that Section 41.45(f) authorizes a court to compel an appraisal review board to conduct a hearing only when no hearing has occurred at all. Once a hearing has been conducted, complaints regarding procedural defects, notice issues, evidentiary rulings, or other alleged irregularities must proceed through the appellate review process established by the Tax Code. The court concluded that district courts do not possess jurisdiction to order a second ARB hearing simply because a taxpayer disputes the manner in which the first hearing was conducted.
While recent Supreme Court decisions have limited the use of jurisdictional challenges, lower courts have not interpreted these decisions as eliminating the longstanding rule that appraisal review boards possess exclusive original jurisdiction over property tax protests. In other words, a taxpayer generally must still obtain an ARB order, exhaust available administrative remedies, and follow the procedures prescribed by the Tax Code before a district court acquires jurisdiction to hear the dispute. Courts remain willing to dismiss cases when taxpayers attempt to bypass that process altogether.
2. Chapter 25 Corrections Remain a Narrow Remedy
Texas appellate courts continued to narrow the practical reach of Tex. Tax Code § 25.25(c) through another installment in the long-running series of cases involving J-W Power Company. The latest decisions, J-W Power Co. v. Frio County Appraisal District and J-W Power Co. v. Wise County Appraisal District, follow several similar opinions issued by courts across Texas in limiting the circumstances under which appraisal rolls may be corrected under Section 25.25(c) of the Tax Code.
The underlying facts are largely the same in each case. J-W Power leased natural-gas compressors that qualified as Dealer's Heavy Equipment Inventory ("DHEI"). After the Legislature amended the Tax Code in 2011, DHEI generally became taxable in the county where the inventory was maintained rather than in the county where a particular compressor happened to be physically located. Nevertheless, numerous appraisal districts continued appraising individual compressors as business personal property. J-W Power challenged those appraisals through Chapter 41 protests, lost before the appraisal review boards, and did not pursue judicial review. Years later, after the Texas Supreme Court confirmed the validity of the DHEI statutory scheme, J-W Power attempted to revisit the issue through motions to correct the appraisal rolls under Tex. Tax Code § 25.25(c).
Although the Texas Supreme Court previously held that these Chapter 25 claims were not barred by res judicata, the courts of appeals have continued to interpret the available relief narrowly. In both the Wise County and Frio County cases, the courts emphasized that Section 25.25(c) exists to correct objective errors appearing on appraisal rolls, not to provide taxpayers with a second opportunity to litigate valuation, situs, or taxability disputes that could have been pursued through a timely protest and appeal.
The most significant issue involved the statute's "multiple appraisals" provision. J-W Power argued that because it had filed DHEI declarations and made required tax prepayments in the inventory county, the compressors were necessarily being appraised there and therefore were subject to multiple appraisals when another county separately assessed the same compressors as business personal property. The courts rejected that broad view. Instead, they held that a taxpayer must show actual duplication on appraisal rolls. Filing declarations, submitting monthly statements, or making DHEI prepayments is not enough. Relief is available only if the evidence establishes that the same property was actually appraised by two appraisal districts during the same tax year.
As a result, J-W Power obtained only limited relief. In the Wise County case, the court found only one compressor that appeared on appraisal rolls in multiple counties during the same tax year. Likewise, in the Frio County case, the court concluded that most of J-W Power's evidence showed nothing more than preliminary DHEI filings and prepayments. Only two compressors, Units 3678 and 3681 during tax year 2016, were shown to have been appraised by both appraisal districts, entitling J-W Power to correction of the appraisal rolls as to those units alone.
The courts also rejected J-W Power's attempts to invoke Tex. Tax Code § 25.25(c)(3), which permits correction when property does not exist in the "form or location" described on the appraisal roll. J-W Power argued that because the compressors should have been taxed as DHEI in the inventory county, they did not exist in the proper "location" on the appraisal rolls of the counties where they were physically located. The courts disagreed, holding that "location" refers to physical location, not taxable situs, and that "form" refers to the physical nature of the property rather than how it should have been taxed. Because the compressors physically existed in the counties where they were listed and were correctly identified as personal property, Section 25.25(c)(3) offered no relief.
Taken together, the J-W Power decisions demonstrate an emerging judicial consensus that a motion to correct pursuant to Section 25.25(c) is a very limited remedy. While taxpayers may use the statute to correct genuine clerical or objective appraisal-roll errors, courts are increasingly unwilling to allow it to serve as a substitute for a missed Chapter 41 protest or appeal.
3. Personal Liability for Taxes Exists Even Without an Enforceable Tax Lien
In Williams v. County of Denton, the Fort Worth Court of Appeals clarified a distinction between enforcing a tax lien and enforcing a taxpayer's personal liability for taxes.
The case involved delinquent taxes assessed against manufactured homes. The taxpayer argued that the taxing authorities failed to timely record tax liens with the Texas Department of Housing and Community Affairs as required by Section 32.03 of the Texas Tax Code. According to the taxpayer, the failure to perfect those liens prevented the taxing authorities from collecting the taxes. The court disagreed.
Relying on the Texas Supreme Court's decision in Willacy County Appraisal District v. Sebastian Cotton & Grain, the court reiterated that property tax liability arises from ownership itself. Section 33.41 of the Texas Tax Code expressly authorizes a taxing unit to pursue either foreclosure of a tax lien, enforcement of personal liability, or both.
Because the taxing units sought only a personal judgment and did not seek foreclosure of the manufactured homes, the absence of an enforceable lien was largely irrelevant. The court held that the lack of a recorded lien did not eliminate the taxpayer's personal obligation to pay delinquent taxes.
The court also rejected the taxpayer's argument that he qualified as a bona fide purchaser under Tex. Tax Code § 32.03(b), noting that he failed to plead or prove the elements necessary to establish that status.
Taxpayers cannot assume that defects in lien perfection eliminate underlying tax liability. Even where a lien is unenforceable, taxing units may still pursue a personal judgment for delinquent taxes.
4. Creative Loopholes? Sovereign Citizens?
Two recent appellate decisions serve as a reminder that Texas courts continue to reject creative attempts to avoid property taxes through theories untethered to the Texas Constitution and Tax Code.
In Solari v. Comal Appraisal District, taxpayers argued that their residential property was exempt from ad valorem taxation because it was held under Texas land patents. According to the property owners, the patents did not expressly reserve taxing authority to the State and therefore rendered the property immune from taxation. The Austin Court of Appeals rejected that argument, explaining that ownership interests and sovereign powers are distinct concepts. A land patent conveys title to property, but it does not surrender the State's constitutional authority to tax property located within its borders. The court reaffirmed that all real property in Texas is taxable unless specifically exempted by constitutional or statutory authority, and that no such exemption exists for land conveyed through a land patent. The court also dismissed claims against the appraisal review board because Tex. Tax Code § 42.21(b) expressly prohibits petitions for review against appraisal review boards.
Likewise, in Garber v. Cooper Independent School District, a taxpayer attempted to avoid delinquent property taxes through a series of arguments commonly associated with sovereign citizen movements. Among other things, the taxpayer claimed to have renounced his citizenship, asserted that he was a "living man" distinct from the legal name appearing in court records, and contended that he had transferred ownership of his property to a private owner. The Texarkana Court of Appeals was unmoved. Rather than addressing the underlying theories, the court focused on ordinary procedural rules, holding that the taxpayer had waived his jurisdictional challenge by filing numerous pleadings addressing the merits and seeking affirmative relief before filing a special appearance. The court ultimately affirmed the judgment for delinquent taxes and rejected the taxpayer's remaining complaints.
Taken together, these cases demonstrate that Texas courts remain unwilling to entertain unconventional theories designed to circumvent property tax obligations. Whether framed as a land-patent exemption, a challenge to governmental authority, a distinction between an individual and a "living man," or other sovereign-citizen concepts, courts continue to hold that property tax exemptions and defenses must be grounded in actual constitutional or statutory authority.
As appraisal districts and taxpayers continue to navigate increasingly complex procedural issues, these cases demonstrate that Texas appellate courts remain focused on adherence to statutory remedies and procedural requirements while still recognizing fundamental due process concerns when warranted.
Kendal Carnley
Gray Winston
Member Firm, American Property Tax Counsel
For guidance on how these developments may apply to your property or portfolio, please contact the APTC representative listed above.