Texas Property Tax Update Archive

Updated september 2018

Active Owner Participation Enhances Property Tax Reductions

Property taxes are not a fixed expense.  Many owners employ property tax lawyers and consultants to handle their property taxes. However, owner participation should not end there. Active management with attention to property taxes can achieve significant savings.

Experience has proven that a team of owners, property tax lawyers and consultants and in some instances appraisers is the most effective approach. Owners, asset managers, tax managers, and controllers are of course the most knowledgeable about their properties and their businesses. Their active participation and sharing of knowledge is beneficial. They can provide information concerning the individual characteristics of the property. They can also provide a real world perspective to the market for sales/purchases and for the leasing process.

In addition, owners should consider the effect of normal business practices on property taxes including: appraisals performed for nonproperty tax purposes, purchase price allocations, how reserves are treated, accounting techniques used for IRS purposes, tenant improvements and leasing commissions, etc.

Active management will enhance tax savings.

Greg Hart
Popp Hutcheson, PLLC
American Property Tax Counsel (APTC)

Updated june 2018

Don’t Let Assumption from the Business World Increase Your Property Tax Burden

Real estate business assumptions do not necessarily apply to property taxes. Market value for property taxes is different from market value in the business world. It is important to remember that the purchase price or construction costs of a property are rarely equal to market value for property tax purposes.

Financial considerations are different in the business world than the property tax world. Financing or purchase appraisals are rarely based on a market value standard for property tax purposes. In addition, the business value component of real estate is excluded for property taxes as it is intangible and therefore, not taxable.

Appraisal districts give great weight to actual cash flow and actual operating statements. However, market value determinations for property taxes should consider market-based cash flows and that operating statements might not reflect market conditions as of the January 1 valuation date.

Finally, an owner may challenge if a property’s tax value is unequal in comparison to the tax value of comparable properties

Greg Hart
Popp Hutcheson, PLLC
American Property Tax Counsel (APTC)

Updated March 2018

The Protests Are Coming! The Protests Are Coming

In April and May, Appraisal Districts will mail Notices of Appraised Value which set forth the taxable value of a property. It is important to note that these notices are sent only to the last known address in possession of the District and only if the value increases over last year or a notice is requested in writing.

A taxpayer may contest the taxable value by filing a Notice of Protest with the Appraisal Review Board for the District by May 15 (new deadline for 2018) or within 30 days of delivery of the Notice of Appraised Value.

A taxpayer may protest that the taxable value of the property exceeds the market value of the property. Market value is determined on a fee simple basis.

In addition, a taxpayer may protest based on equality and uniformity that the taxable value exceeds the median taxable value of a reasonable number of comparable properties appropriately adjusted

 
Greg Hart, Esq., CMI
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

Updated December 2017

Tax Payment & Late Challenge Deadlines

Taxing entities throughout Texas have been adopting tax rates and sending out tax bills. Taxpayers should be conscious of the deadline to pay taxes and to file late protests if possible. 

It is the taxpayer’s responsibility to pay all of the uncontested taxes by January 31, 2018. The taxpayer is required to pay by this date regardless of whether a tax bill was sent or received. The taxes, if delinquent, will incur penalties and interest. Failure to pay in a timely manner may result in the court losing jurisdiction in any pending property tax litigation for that year. January 31, 2018 might also be your last chance to protest 2017 values. 

A taxpayer who has not previously had a 2017 protest heard for their property and who has not reached an agreement with the Appraisal District regarding the same, may still file a late protest. A taxpayer in this circumstance may protest that the District’s assessment exceeds the correct value by more than one third. If the taxpayer is successful in seeking a reduction, a late-correction penalty of 10% must be paid on top of the remaining tax liability for filing late. 

Greg Hart
Pop Hutcheson PLLCPop Hutcheson PLLC
American Property Tax Counsel (APTC)

 

UPDATED SEPTEMBER 2017

Protecting Your Property Tax Rights After Hurricane Harvey

Severe flooding, storm surge, and punishing winds from Hurricane Harvey continue to cause widespread property damage across Southeast and Central Texas. Governor Greg Abbott has declared 54 Texas counties disaster areas, including some of the state’s most populous counties, such as Harris, Montgomery, and Bexar.[1] Undoubtedly, Harvey’s unprecedented destruction will affect property values for many Popp Hutcheson clients. By taking the following steps, property owners can help ensure fair property tax assessments in the wake of the storm, thus preventing further loss.

DEMAND REAPPRAISAL
Texas law allows for reappraisal of property damaged in a disaster area. Tex. Tax Code §23.02. When requested by a city, county, school district, or other taxing unit, an appraisal district must reappraise all property damaged in a disaster if the affected region is declared a disaster area by the Governor. For reappraised property, taxes are prorated for the year. Taxing units assess taxes before the date of the disaster at the property’s market value as of January 1, while taxes for the remainder of the year are assessed at the reappraised value. This can result in substantial tax savings.

Unfortunately, reappraisal must be authorized by a taxing unit. It is not something that property owners can compel. Taxing units requesting reappraisal, moreover, must pay all costs involved. These costs and the potential decrease in tax revenue can be a disincentive for taxing units. Accordingly, property owners should contact their elected city council members, county commissioners, and school board representatives to demand reappraisal. Involving state legislators in the call for reappraisal can also be effective.  Without the support of taxing units, reappraisal will not occur.

KEEP THE APPRAISAL DISTRICT INFORMED
Information about the extent of damage will help appraisal districts in any reappraisal effort for tax year 2017 and in appraising the property for future tax years. Without this information, appraisal districts will be left to guess whether damage was sustained and, if so, what the extent may be. It is important that detailed records concerning the damage and cost of repair be kept. These records should track the loss at the specific location corresponding to the appraisal district’s account number. They need to show the state of the property before and after the disaster, and the actual expenses incurred in remedying the loss. It is particularly important for businesses electing a September 1 inventory appraisal date to be diligent in recording their loss as of that date. Generally, the more specific and detailed the records, the better they will be in supporting a request for reducing the appraised value.

PREPARE TO PROTEST 2018 VALUES
Considering the extent of unprecedented damage caused by Harvey, it is unrealistic to expect appraisal districts to arrive at accurate appraised values for tax year 2018. Property owners should be prepared to protest their 2018 appraised values armed with records detailing the damage sustained and cost of repair. The protest process will allow further time for appraisal districts to work with property owners in reviewing the scope of damage and in adjusting appraised values accordingly.

[1] As of August 28, 2017, Governor Abbott has declared the following counties disaster areas: Aransas, Atascosa, Austin, Bastrop, Bee, Bexar, Brazoria, Brazos, Burleson, Caldwell, Calhoun, Cameron, Chambers, Colorado, Comal, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Guadalupe, Hardin, Harris, Jackson, Jasper, Jefferson, Jim Wells, Karnes, Kerr, Kleberg, Lavaca, Lee, Leon, Liberty, Live Oak, Madison, Matagorda, Montgomery, Newton, Nueces, Polk, Refugio, San Jacinto, San Patricio, Tyler, Victoria, Walker, Waller, Washington, Wharton, Willacy, and Wilson.

Daniel Smith
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

UPDATED JULY 2017

2017 Texas Legislative Session Summary

The 2017 Texas Legislature adjourned on May 29. The major story line is that no significant changes to property taxes passed. There were 326 bills filed related to property tax and 27 passed; none of which were significant.

The primary property tax focus going into the session was the work of the Senate Select Committee on Property Tax, chaired by Senator Paul Bettencourt of Houston. Senator Bettencourt held hearings around the state to gather testimony.

The conclusions of the committee were proposed in SB 2. They included Appraisal Review Board improvement, truth in taxation changes involving a lower rollback rate, election to approve tax increases and increased taxpayer awareness of the process.

The Senate approved SB 2 but the bill encountered resistance in the House on the rollback and election provisions. Ultimately, the ARB improvement and taxpayer awareness provisions were included as part of SB 669 which passed the House. However, the Senate refused to concur because SB 669 as it passed the House did not include the provisions to lower the rollback rate and election to approve tax increase and the bill died. There is speculation that a special session may be called on these issues.

The other major issue of the session was proposed HB 27. This bill, supported by the Texas Comptroller and some appraisal districts, addressed the so-called ‘dark store’ issue. The bill would have modified generally accepted appraisal techniques and instead mandated the valuation of property based upon its use. There was significant opposition to the bill from taxpayers. Although the bill was voted favorably from the House Ways and Means Committee it was never heard on the floor of the House; therefore, failing to pass. There is speculation that this issue will appear again in a possible special session or in the 2019 session.

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Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

UPDATED DECEMBER 2016

Property Tax and the Legislature

On January 13, 2017, the Texas Legislature will convene for its biennial, 180 day regular session. As in years past, there will be hundreds of property tax bills introduced.

Particular focus this session will be on SB 2 by Senator Paul Bettencourt. SB 2 was introduced in response to the work of the Senate Select Committee on Property Tax which held hearings across the state during the interim.

The most significant proposed changes are increased authority of the Comptroller over the property tax process including appraisal manuals which appraisal districts must use to value property, moving the tax calendar up, the composition of ARB of elected officials from taxing entities, the creation of special ARB panels with more experienced or educated members and changing the rollback rate to 4% with a mandatory election to approve anything greater.

A renewal of the challenge to the equal and uniform remedy is expected. Last session, a bill was passed clarifying that an equal and uniform remedy was subject to generally accepted appraisal techniques. Taxpayers are strongly opposed to any further changes to this very useful remedy.

A bill to simplify the discovery process in property tax lawsuits will be introduced. This bill will make lawsuits more efficient and assist in the resolution of lawsuits. 

Jim Popp
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated September 2016

Tax Payments Requirements & Late Tax Challenges

Taxing units throughout Texas are adopting tax rates and sending tax bills. Taxpayers should consider tax payment requirements and potential last opportunities to contest their taxes.

Taxpayers must be vigilant to avoid missing payment of a tax bill. All taxpayers receive a school and county bill and, if located within such, a city or special district bill.  Tax bills are sent to the “most recent address in possession” of the appraisal district whether current or not. Failure to send or receive a bill does not affect a taxpayer’s liability. It is the taxpayer’s responsibility to pay all taxes with or without a bill.

Taxes must be paid by January 31, 2017 and will, if delinquent, incur 1% per month interest, and up to a 12% penalty and a 15% attorney collection fee. Payment is recommended by postmarked, certified mail, return receipt.

Some taxpayers are questioning why they did not contest their valuations last spring. There may still be an avenue of protest. A taxpayer under certain limited circumstances may still protest prior to the delinquency date their valuation if their value exceeds the correct value of the property by more than one-third. 

Jim Popp
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated June 2016

Senate Select Committee on Property Tax Reform and Relief 

Senate Select Committee on Property Tax Reform and Relief chaired by Senator Paul Bettencourt, held six hearings around the State with 100 to 500 people in attendance. The Committee’s purpose is to study the property tax process, including the appraisal system, and to recommend ways to promote transparency, simplicity and accountability by all taxing units.

The focus of the invited and public testimony was on ways to improve appraisal district performance and limit taxing unit revenue growth.

There were a number of specific concerns raised about appraisal districts but overall the comments were favorable. The emphasis was primarily on ways to improve ARB ability and accountability.

Much of the Committee’s attention was focused on the issue of increasing property tax revenues. The direction seems to be on lowering the truth in taxation limit from the current 8% and the possibility of a revenue cap.

Jim Popp provided testimony with the following observations:

1. Preserve the current equal and uniform remedy,
2. Create a State Property Tax Board,
3. Improve the transparency and accountability of truth in taxation,
4. Eliminate the ability of a taxing unit or chief appraiser to sue a taxpayer,
5. Eliminate the ability of an appraisal district in a law suit to increase a taxpayer’s value above the ARB value
6. Continue efforts to improve taxpayer’s belief in the fairness of the ARB.

Jim Popp
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated March 2016

Resolution of Complex Valuation Cases

A recent Texas property tax lawsuit involving the Circuit of the Americas (COTA) and the Travis Central Appraisal District illustrates the difficulties and ultimately the successes that taxpayers and appraisal authorities can have in the valuation of complex properties. The gap in valuation approaches is made apparent from the tax authorities’ three year combined value of $900 million and the final settled value of $353 million.

COTA is the only Formula One (F1) track in the country, and it was built specifically to accommodate the F1 race and its international fan base. The appraisal district’s initial valuations were based on the actual construction costs of the facility. The resolution reflected consideration of the external obsolescence indicated by both the track’s performance and its lack of feasibility absent significant governmental support. The resolution also reflected the contractual value of the race sanction agreements, which should be construed as intangible income streams.

This case is proof that although taxpayers and tax authorities may have widely divergent approaches on a complex valuation issue, by working together they can resolve differences.

Jim Popp
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated December 2015

City of Austin Challenge to Constitutionality of Property Tax System

The City of Austin filed a lawsuit against the Travis Central Appraisal District challenging the constitutionality of the Texas property tax system. If successful, the lawsuit would significantly impact property owners in Texas.

Under the Texas Property Tax Code, a taxing unit like the city may bring a challenge contesting the level of appraisal of a category of property before the Appraisal Review Board and subsequently the district court. The city has challenged the level of appraisal for commercial properties and vacant land, alleging that these categories are under-appraised by some 42 percent. As confirmed by the district court, the city is required to name as parties to the lawsuit roughly 11,000 owners of property in these categories and have these owners served with process.

In addition, and of great significance, the city included in the challenge a claim alleging that the property tax system was unconstitutional because of the effect of the equal and uniform remedy. (The city had previously alleged that the system was unconstitutional because of lack of sales disclosure but later dismissed this claim).

Popp Hutcheson, on behalf of several property owners, filed a plea to the jurisdiction arguing that the city did not have standing to challenge the constitutionality of the system. The court agreed. The court further ruled that the city presented insufficient evidence to the Appraisal Review Board to support its challenge and dismissed the city’s lawsuit on this additional ground.

The City Council has voted to continue its challenge and has filed a motion for new trial.

Jim Popp
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated September 2015

Tax Payments Requirements and Late Tax Challenges

Taxing units throughout Texas will soon be adopting tax rates and sending tax bills. Taxpayers should consider tax payment requirements and potential last opportunities to contest their taxes.

Tax payments: Taxpayers must be vigilant to avoid missing payment of a tax bill. All taxpayers receive a school and county bill and, if located within such, a city or special district bill. Tax bills are sent to the “most recent address in possession” of the county appraisal district whether current or not. Failure to send or receive a bill does not affect a taxpayer’s liability. It is the taxpayer’s responsibility to pay all taxes with or without a bill.

Taxes must be paid by January 31, 2016 and will, if delinquent, incur 1% per month interest, and up to a 12% penalty and a 15% attorney collection fee. Payment is recommended by postmarked, certified mail, return receipt.

Final Protest Opportunity: Some taxpayers are questioning why they did not contest their valuations last spring. There may still be an avenue of protest.

A taxpayer may still protest their valuation if the taxable value exceeds the correct market value of the property by more than 33%. To do so, you must prior to February 1, 2016, (1) file the motion for correction with the Appraisal Review Board of the Appraisal District and (2) pay your 2015 taxes.

This so called one-third error approach may not be used if the value was set as a result of a protest hearing or as a result of a written agreement with the chief appraiser. If successful under this approach, there is a penalty of ten percent of the amount of tax ultimately determined.

Jim Popp
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated June 2015

The 84^th Texas Legislature has adjourned and it was a successful session for Texas property taxpayers.

Tax Relief

• The homestead exemption for school taxes was raised from $15,000 to $25,000 effective for the 2015 tax year.
• The franchise tax rates were reduced by 25%.
• The vote necessary for a taxing unit to adopt a rate in excess of the effective tax rate was set at 60% of the members of the governing body.

 Favorable Property Tax Legislation

• HB 2083 by Chairman Darby addressed the numerous appraisal district and newspaper complaints about the equal and uniform statute. It provides that an equity appraisal must be performed by the use of generally accepted appraisal techniques and that a property owner has a right to offer an opinion of market value and equity value.
• SB 593 by Watson enhances the process for the settlement of lawsuits. It provides that a party to a lawsuit is entitled to a settlement conference or alternative dispute resolution. In addition, an appraisal district may not require as a condition of a settlement conference that a taxpayer waive a right provided in the code.
• SB 1760 by Creighton raised the interest rate on refunds as a result of the resolution of a lawsuit to 9.5%.

 Unfavorable Property Tax Legislation that did not Pass

A successful legislative session is measured as much if not more by what did not pass. Despite early warning signs of efforts to pass unfavorable items, the following did not pass and no other unfavorable bills passed.

• Several bills would have eliminated the equity remedy. None of these bills received a committee hearing.

• There was some discussion and one bill that would have changed the award of attorney fees in litigation allowing an appraisal district to receive attorney fees or making the award permissive. They did not pass.

• An amendment was offered providing for an appraisal cap on all property. Appraisal caps, as all studies have shown, are ineffective tax relief measures and contrary to equal and uniform taxation. The amendment was withdrawn.

Jim Popp
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated March 2015

Texas Property Tax Update 2015

The Texas Legislature is currently in session and the two most important property tax issues are challenges to the current equal and uniform remedy and property tax relief.

Equal & Uniform

As reported previously, appraisal districts and taxing units are working to either eliminate or limit the equal and uniform remedy. This remedy provides for equity based on a comparison of tax comps rather than a ratio study.

SB 280 and SB 1084 would destroy the equity remedy and are not taxpayer friendly.

SB 280 requires that comparable properties be located in the county, that for purposes of a protest, noticed values rather than values changed at the ARB should be used, and that for purposes of a lawsuit, ARB values rather than settled values should be used, and that a taxpayer is entitled to relief only if the equity value is 10% greater.

SB 1084 would provide that the equity statute should only be used by homeowners, that business properties would use ratio studies for equity and that if an appraisal district prevails in a lawsuit the district receives attorney fees.

HB 2083 and SB 773 are taxpayer friendly.

These bills would attempt to improve the equity statute by requiring that an equity appraisal be performed using generally accepted appraisal techniques.

Tax Relief

The Senate leadership announced a comprehensive tax relief package. Homeowners would receive $2.5B in relief based on a new homestead exemption of 25% of the median home value in the state. Businesses would receive $1.5 in relief by lowering the franchise tax rate and another $1B in relief by raising the franchise revenue exemption from $1M to $4M.

Jim Popp
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated December 2014

Texas Update December 2014

On January 13, the Texas Legislature will convene for its biennial legislative session. The session will be effected by new Chairs of Senate Finance and Ways & Means, a new Lt. Governor and many new members. In addition, the specter of a district court ruling that the funding of Texas school finance is unconstitutional will be on the minds of all. There will be several hundred property tax bills introduced and many changes. It is likely that the primary property tax focuses will be on the following:

• Many members campaigned on property tax relief. The most frequently discussed approaches are levy increase limits and a homestead based on a percentage of the average home in the county.
• The equal and uniform remedy is under attack by many chief appraisers and taxing units. They are asking for changes ranging from outright elimination to tying the remedy to generally accepted appraisal techniques.
• There is some discussion of eliminating the Comptroller’s biennial ratio study and replacing it with a more focused audit procedure.
• There is also support for moving the property tax functions from the Comptroller’s Office and the licensing functions from TDLR to a newly formed state agency.

Jim Popp, Esq. 
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated September 2014

Constitutional Right to Equal & Uniform Taxation under Attack

The first sentence of the Texas Constitution article related to taxation states that “all taxation shall be equal and uniform” In 1997, the Texas Legislature passed a statute that provides that a taxpayer is entitled to relief if their tax value exceeds the median tax value of comparable properties. This provision has proven very effective and many taxpayers have avoided unfair valuations and tax increases because of this statute.

Last legislative session, two bills were introduced to repeal this provision. They were defeated. Now the attack on the statue has been renewed with increased vigor. Appraisal districts and taxing units have hired a lobbyist to attempt to convince the legislature to eliminate the statute. Newspaper articles suggest that the equity statute is shifting taxes from commercial property to homeowners and that it is an unfair loophole enjoyed by big taxpayers to achieve unreasonable deductions through litigation.

The facts tell a different story:

• No shift from homes to commercial property has occurred as the relative share of total value has remained constant over the last ten years.
• Deductions attributable to litigation are negligible compared to total value and other types of deductions such as homesteads and ag-use.
• The Texas system is fair as indicated by its 37th rank in per capita total taxes and 11th rank in favorable business environment.

Taxpayers should work together to avoid changes to the equity statute in order to preserve their constitutional rights and to avoid the tax increases and unfair appraisal practices that elimination of the equity statute would engender.

Jim Popp, Esq.
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated June 2014

Tax Payments Requirements & Late Tax Challenges

• A taxpayer may appeal the decision to district court by filing a petition within 60 days of receipt of the order determining protest.
• A taxpayer may file an appeal to the State Office of Administrative Appeals (SOAH) if the property is valued at more than $1 million. The notice of appeal with a $1500 filing fee must be filed with the chief appraiser within 30 days of receipt of the order.
• A taxpayer may appeal to binding arbitration if the property is a residence homestead or valued at less than $1 million. The request for arbitration and a $500 fee must be filed with the appraisal district within 45 days of receipt of the ARB order.

Jim Popp, Esq.
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated September 2013

Tax Payments Requirements & Late Tax Challenges

Taxing units throughout Texas are adopting tax rates and sending tax bills. Taxpayers should consider tax payment requirements and potential last opportunities to contest their taxes.

Taxpayers must be vigilant to avoid missing payment of a tax bill. All taxpayers receive a school and county bill and, if located within such, a city or special district bill. Tax bills are sent to the "most recent address in possession" of the appraisal district whether current or not. Failure to send or receive a bill does not affect a taxpayer's liability. It is the taxpayer's responsibility to pay all taxes with or without a bill.

Taxes must be paid by January 31, 2014 and will, if delinquent, incur 1% per month interest, and up to a 12% penalty and a 15% attorney collection fee. Payment is recommended by postmarked, certified mail, return receipt.

Some taxpayers are questioning why they did not contest their valuations last spring. There may still be an avenue of protest. A taxpayer under certain limited circumstances may still protest prior to the delinquency date their valuation if their value exceeds the correct value of the property by more than one-third.

Jim Popp, Esq.
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

 

Updated June 2013

Legislative Update

The Texas Legislature recently completed its biennial session. There were 278 bills filed related to property taxes and 58 passed. It was a very positive session for taxpayers. Some highlights of new provisions are as follows:

• Appointment of ARB members in counties over 120,000 in population by a district court judge rather than the appraisal district board of directors;
• Creation of model hearing procedures by the Comptroller's office for use by all appraisal review boards;
• Implementing a taxpayer complaint process in the Comptroller's office;
• Requiring chief appraisers to be registered professional appraisers;
• Permitting removal of an ARB member for repeated bias or misconduct;
• Allowing the filing of a lawsuit and recovery of attorney fees to obtain a refund;
• Changing the appraisal district's burden of proof to clear and convincing to raise a value;
• Requiring random assignment of ARB panels;
• Providing that jurisdiction in a property tax appeal to district court is in rem;
• Allowing award of attorney's fees for certain exemption lawsuits;
• Authorizing use of SOAH appeals on a statewide basis.

 

Updated March 2013

Texas Legislature Considers Property Tax Legislation

The Texas Legislature is currently in session through May 31 during which it will consider approximately 300 property tax bills.
With bill filing still under way, the most significant bill filed is SB 585 by Mike Villarreal. The bill proposes numerous improvements to appraisal review boards (ARBs) and to protest and lawsuit procedures. They include:

• Uniform model procedures for appraisal review boards;
• Compilation of complaints concerning ARBs by the Comptroller;
• Appointment of ARBs and removal of members for cause in large counties by the local administrative district judge;
• Requires scheduling of ARB hearings for a time certain for taxpayers;
• Allows a taxpayer to request up to 20 hearings be held on the same day;
• Requires random assignment to ARB panels;
• Clarifies that a lawsuit may contain multiple properties;
• Provides for in rem jurisdiction in a lawsuit;
• Provides that testimony offered at an ARB is not admissible in court.

 

Updated December 2012

Constitutionality of Texas School Finance System at Issue: Again

Once again the constitutionality of the school finance system is being challenged in court by two-thirds of the state's 1026 school districts. These include both property rich and property poor districts. This is the sixth challenge of the system since 1984. School districts are funded in part by local property taxes and in part by funds from the state.

The constitution requires an "efficient system of public free schools." The meaning of this has been a constant source of litigation. In 1989, the Supreme Court ruled the system flawed stating that children must be "afforded a substantially equal opportunity to have access to educational funds."

In 2005, the court ruled that the legislature by imposing a local property tax rate cap of $1.50 per $100 of local value had created a statewide property tax which is impermissible under the constitution.
The trial has lasted over two months. It is on recess until January when it is expected to last another month.

 

Updated September 2012

Tax Payments Requirements & Late Tax Challenges

Taxing units throughout Texas will soon be adopting tax rates and sending tax bills. Taxpayers should consider tax payment requirements and potential last opportunities to contest their taxes.

Tax payments: Taxpayers must be vigilant to avoid missing payment of a tax bill. All taxpayers receive a school and county bill and, if located within such, a city or special district bill. Tax bills are sent to the "most recent address in possession" of the county appraisal district whether current or not. Failure to send or receive a bill does not affect a taxpayer's liability to pay the tax. It is the taxpayer's responsibility to pay all taxes with or without a bill.

Taxes must be paid by January 31, 2013 and will, if delinquent, incur 1% per month interest, and up to a 12% penalty and a 15% attorney collection fee. Payment is recommended by postmarked, certified mail, return receipt.

Final Protest Opportunity: Some taxpayers are questioning why they did not contest their valuations last spring. There may still be an avenue of protest.

A taxpayer may still protest their valuation if the taxable value exceeds the correct market value of the property by more than 33%. To do so, you must prior to February 1, 2013, (1) file a motion for correction with the Appraisal Review Board of the Appraisal District and (2) pay your 2012 taxes.

This so called one-third error approach may not be used if the value was set as a result of a protest hearing or as a result of a written agreement with the chief appraiser. If successful under this approach, there is a penalty of ten percent of the amount of tax ultimately determined.

 

Updated March 2012

Appraisal Districts mail Notices of Appraised Value during April and May which set the taxable value of a property.

It is important to note that these notices are sent only to the last known address in possession of the District and only if the value increases over last year.

A taxpayer may contest the taxable value by filing a Notice of Protest with the Appraisal Review Board for the Appraisal District by May 31 or within 30 days of delivery of the Notice of Appraised Value, whichever is later.

A taxpayer may protest that the taxable value of the property exceeds the market value of the property. Market value is determined on a fee simple basis, which considers market, rather than actual, rent, expenses and vacancy.

A taxpayer may also protest based on equality and uniformity that the taxable value exceeds the median taxable value of a reasonable number of comparable properties appropriately adjusted.

 

Updated December 2011

Supreme Court Upholds Margins Tax Offset to Property Taxes

In 2006, the Legislature passed sweeping property tax reform legislation. They reduced the maximum school tax rate from 1.5% to 1% and created a property tax relief fund. To pay for the local property tax relief, the legislature replaced the franchise tax which applied only to corporations with a margins tax which applied to all entities that enjoyed state liability protection. The margins tax has fallen short of offsetting the lost property taxes and has faced several court challenges. In a recent challenge, the Supreme Court ruled that the margins tax was not an income tax on natural persons which requires voter approval. This ruling opens up the ability of the legislature to expand the margins tax to offset the property tax relief deficit. There are, however, several other challenges to the tax. This ruling is important to property taxpayers because one alternative to offset the margins tax deficit is to raise property tax rates.

 

Updated September 2011

Legislative Update

The recently concluded legislative session proved favorable to taxpayers. There were 289 property tax related bills filed, and 57 were passed and sent to the governor.

The highlights of the session for taxpayers are as follows:

• Made attorney fees recoverable for a taxpayer in a State Office of Administrative Hearings appeal proceeding;
• Expanded taxpayer hearings at SOAH to Collin, Denton, Fort Bend, Montgomery and Nueces counties;
• Prevented the dismissal of a protest or lawsuit filed in an incorrect owners name;
• Enhanced the credibility of Appraisal Review Boards by limiting who may provide them continuing education courses, who may comment on the courses, and who may serve as ARB attorney;
• Provided a new notice and protest process for the imposition of a rendition penalty;
• Required attorneys hired by a third party to give notice of the engagement to the property owner.

There were no significant bills passed which were unfavorable to taxpayers.

 

Updated June 2011

Legislative Session Favorable to Taxpayers

The recently concluded legislative session proved favorable to taxpayers. There were 289 property tax related bills filed, and 57 were passed and sent to the governor.

The highlights of the session for taxpayers are as follows:

• Made attorney fees recoverable for a taxpayer in a State Office of Administrative Hearings appeal proceeding;
• Expanded  taxpayer hearings at SOAH to Collin, Denton, Fort Bend, Montgomery and Nueces counties;
• Prevented the dismissal of a protest or lawsuit filed in an incorrect owners name;
• Enhanced the credibility of Appraisal Review Boards by limiting who may provide them continuing education courses, who may comment on the courses, and who may serve as ARB attorney;
• Provided a new notice and protest process for the imposition of a rendition penalty;
• Required attorneys hired by a third party to give notice of the engagement to the property owner.

There were no significant bills passed which were unfavorable to taxpayers.

 

Updated March 2011

Legislative Update

The Texas Legislature is currently meeting in its biennial, 180 day, session. Although the large budget deficit, and redistricting, will occupy most of the legislators’ time, there have been a large number of property tax bills filed. The focus on bills filed so far includes the following:

• Reducing the cap on increases in appraised value for homesteads (currently 10% per year);
• Instituting a cap on appraised value of commercial property;
• Exempting additional property, including veterans and homesteads;
• Changing the interest paid on refunds;
• Enhancing electronic transfer of information;
• Selection of appraisal district board and ARB members;
• Improving taxpayer remedies; and
• Changing open space eligibility.

Legislative information including bills may be found at Texas Legislature Online at www.capitol.state.tx.us
Bills may be searched by author, bill number or subject.

 

Updated December 2010

Legislative Update

The 82nd Texas Legislature convenes in Austin on January 11, 2011 facing two very major issues: redistricting and an estimated $20 million plus budget shortfall. However, property taxes as always will be a focal point of discussion. Last session, over three hundred property tax bills were filed. The following are some of the significant issues under discussion:

Appraisal Caps: Property taxes continue to be a very unpopular tax. This is so even though they have grown no faster than sales tax or income tax. A frequent expression of this unpopularity is bills introduced to place a cap on increases in appraised value. This occurs despite numerous studies which demonstrate that appraisal caps are not an effective method for controlling property tax growth.

State Influence on Local Property Tax Practice: The constitution was amended last session to allow greater state rather than local control over property tax practices. Currently, the state has no authority to direct local appraisal districts. It is expected that legislation will be introduced to provide more state directive on appraisal practices.

Property Tax Professional Ethics: A Houston property tax consultant was recently fined $800,000 for violation of the Texas Deceptive Trade Practices Act. It is expected that legislation will be filed in response to this which strengthens the ethics provisions of the tax consultant licensing act and addresses tax consultant alleged activities involving barratry and the unauthorized practice of law.

 

Updated September 2010

Property Tax Appeals to the State Office of Administrative Hearings

In 2009, the Texas Legislature adopted a new remedy for appeals after an ARB decision. A property owner may appeal to the State Office of Administrative Hearings. (SOAH) The SOAH appeal process is a three year pilot program limited to 3000 total appeals in Bexar, Cameron, E Paso, Harris, Tarrant and Travis counties. It is available to real and personal property (but not minerals or industrial) with an ARB value in excess of $1,000,000. The SOAH appeal is an alternative to an appeal to district court and there is no appeal of a SOAH decision.

SOAH will conduct the hearings in the counties in which the property is located. The hearings will be conducted by an administrative law judge and will typically be three hours in length. There is no civil procedure discovery. Discovery is limited to the exchange of documents to be used at the hearing. Expert testimony must be reduced to writing and included in the exchange. The exchange is 10 days before the hearing. The Rules of Evidence do not apply. However, a judge may consider hearsay, the qualifications of witnesses and other restrictions on admissibility in assigning weight. The loser pays the costs. The costs of an appeal include the $300 filing fee and an hourly fee for the judge's time at $100 per hour. SOAH has estimated that the typical cost will be about $2000.

Currently, there have been less than twenty filings statewide. SOAH has already scheduled these hearings for fall. There are many unanswered questions about SOAH and it will be interesting to determine how effective this process may be.

 

Updated June 2010

Consider a Lawsuit for Further Property Tax Savings

Taxpayer protests are currently underway throughout Texas with a target completion date of July 26. For taxpayers dissatisfied with the result of the administrative hearing at the appraisal review board (ARB), the only recourse is to file a lawsuit in district court.

There are several prerequisites to the filing of a lawsuit. The taxpayer must file a protest and appear and offer evidence at the ARB. In addition, the taxpayer must not agree to a value either implicitly at the ARB hearing or explicitly with a written sign-off agreement.

The most common grounds for litigation are: 1) the taxable value of the property exceeds the fee simple market value of the property excluding any business value, or 2) the taxable value of the property is unequal in comparison to the taxable value of comparable properties.

The deadline to file a lawsuit is 60 days after receipt of the appraisal review board order determining the taxpayer's protest. This order will be mailed by certified mail to the owner's last address of record or to the owner's tax representative.

Most property tax lawsuits are resolved through the settlement process without a trial.

 

Updated March 2010

New Notices of Appraised Value

Appraisal Districts will mail, during April and May, Notices of Appraised Value which set forth the taxable value of a property. It is important to note that these notices are sent only to the last known address in possession of the District and only if the value increases over last year or a notice is requested in writing.

A taxpayer may contest the taxable value by filing a Notice of Protest with the Appraisal Review Board for the District by May 31 or within 30 days of delivery of the Notice of Appraised Value.

A taxpayer may protest that the taxable value of the property exceeds the market value of the property. Market value is determined on a fee simple basis, which considers market, rather than actual, rent, expenses and vacancy.

In addition, a taxpayer may protest based on equality and uniformity that the taxable value exceeds the median taxable value of a reasonable number of comparable properties appropriately adjusted.

 

Updated December 2009

A Last Chance to Challenge 2009 Property Taxes May Still Be Available

Property owners throughout Texas have received their 2009 tax bills, which are due on January 31, 2010. Although property tax valuations are generally protested before May 31 of the tax year and become final if not protested, relief may still be available.

Pursuant to Section 25.25(d), Tax Code, if an owner's tax value exceeds the correct value by more than one-third, the owner may file a motion with the county Appraisal Review Board prior to February 1, 2010 to request a value change.

However, this remedy is only available if the owner 1) did not file a protest on the property for the current tax year, or 2) the owner protested the property but did not present evidence at the administrative hearing. Further, the owner must pay the taxes on the property prior to the due date. There is also a late correction penalty of 10% of the taxes finally due.

In addition, if a property owner is dissatisfied with the decision on this type of protest, the property owner may file a lawsuit in district court to contest the decision.

 

Updated September 2009

Property Tax Bill Payment Guidelines

Taxing units throughout Texas will soon mail 2009 property tax bills after adopting tax rates ranging generally from 2% to 3% of taxable value.

Taxpayers must be vigilant to avoid missing payment of a tax bill. All taxpayers receive a school and county bill and, if located within such, a city or special district bill. Tax bills are sent to the "most recent address in possession" of the county appraisal district whether current or not. Failure to send or receive a bill does not affect liability. Also, most tax bills are sent to agents rather than to the taxpayer. It is the taxpayer's responsibility to pay all taxes with or without a bill.

Taxes must be paid by January 31, 2010 and will, if delinquent, incur up to 1% per month interest, 12% penalty and 15% attorney collection fee. Payment is recommended by postmarked, certified mail, return receipt.

 

Updated June 2009

Recent Legislative Changes to Property Taxes

The Texas Legislature adjourned on June 1 after considering 355 bills related to property taxes and passing 58 of them. It was an extremely active property tax session. The following are some of the more significant changes:

A taxpayer may now file an appeal from the ARB for properties over $1,000,000 in value to the State Office of Administrative Hearings (SOAH). This is a pilot program in five counties and will be limited to the first 3000 appeals filed. It is an alternative to an appeal to district court with no allowance for appeal from SOAH to district court.

A property owner that prevails in a lawsuit filed under Section 25.25 will be entitled to attorney fees under Section 42.29

The deadline for the filing of a property tax lawsuit is changed from 45 to 60 days after receipt of the ARB order.

If the value of a property is lowered by agreement, ARB decision or lawsuit, the value may not be increased in the next year unless the chief appraiser has substantial evidence supporting the increase.

If the chief appraiser determines the appraised value of real property using the income approach, the appraised value must include the value of both the real property and the personal property in the account.

The Comptroller's property value study of school districts will be conducted every two years rather than every year and the Comptroller will conduct a performance audit of the appraisal methodology and operations every two years.

 

Updated March 2009

Legislative Update on Property Taxes

The Texas Legislature is currently meeting for its biennial five month legislative session. Last session approximately 300 property tax bills were introduced and 59 were passed by the Legislature. It appears that 300 property tax bills will be introduced again this year.

The primary areas of focus are as follows:

• Change the equal and uniform remedy based on requests of appraisal districts to limit its usefulness as a remedy for taxpayers;
• Change the Property Value Study performed by the Comptroller to a performance audit of appraisal districts;
• Provide for more effective monitoring of the licensing of appraisal district personnel and tax consultants;
• Provide for simplification of the truth-in-taxation process relating to determination of the effective tax rate;
• Value residence homesteads on their use value as a home rather than on highest and best use;
• Provide an alternative remedy to district court through an appeal to a state hearing's examiner.

 

Updated December 2008

The Texas Legislature And Property Taxes

The Texas Legislature will convene on January 13, 2009 for its biennial five month legislative session. Each year, several hundred property tax bills are introduced. During the year and one half interim between sessions, House and Senate special committees examined property tax issues. Some of the primary property tax issues for 2009 raised by the committees and by others are as follows:

Change the method of appointment of ARB members from appointment by the Appraisal District Board to another method.

Authorize the Comptroller to adopt rules and monitor use of generally accepted appraisal techniques by Appraisal Districts.

3. Change the Property Value Study performed by the Comptroller to an audit of performance of appraisal districts relating to appraisal methodology.

Provide for more effective monitoring of the licensing of appraisal district personnel and tax consultants.

Provide for simplification and clarification of the truth-in-taxation process relating particularly to determination of the effective tax rate.

Provide a statewide office of property tax counsel to hear and respond to citizen complaints about the property tax process.

Avoid changes by appraisal districts to the current effective property taxpayer remedies particularly with regard to equal and uniform.

 

Updated September 2008

Tax Payments Requirements & Late Tax Challenges

Taxing units throughout Texas will soon be adopting tax rates and sending tax bills. Taxpayers should consider tax payment requirements and potential last opportunities to contest the taxes.

Tax payments: Taxpayers must be vigilant to avoid missing payment of a tax bill. All taxpayers receive a school and county bill and, if located within such, a city or special district bill. Tax bills are sent to the "most recent address in possession" of the county appraisal district whether current or not. Failure to send or receive a bill does not affect liability. Also, most tax bills are sent to agents rather than to the taxpayer. It is the taxpayer's responsibility to pay all taxes with or without a bill.

Taxes must be paid by January 31, 2009 and will, if delinquent, incur up to 1% per month interest, 12% penalty and 15% attorney collection fee. Payment is recommended by postmarked, certified mail, return receipt.

Final Protest Opportunity: Some taxpayers are questioning why they did not contest their valuations last spring. It may not be too late if: (1) you did not protest during the regular protest period or (2) you protested but withdrew the protest.

These taxpayers may still protest their valuation if the taxable value exceeds the correct market value of the property by more than 33%. To do so, you must prior to February 1, 2009, (1) file the motion for correction with the Appraisal Review Board of the Appraisal District and (2) pay your 2008 taxes.

A second less useful remedy allows taxpayers to file a motion for any of the prior five years to correct clerical errors, multiple appraisals or the inclusion of property on the appraisal records that did not exist in the form or location described in those records.

 

Updated June 2008

Consider a Lawsuit for Further Property Tax Savings

Taxpayer protests are currently underway throughout Texas with a target completion date of July 26. For taxpayers dissatisfied with the result of the administrative hearing at the appraisal review board (ARB), the only recourse is to file a lawsuit in district court. Since most lawsuits result in settlement, taxpayers should consider this as another potential avenue for tax reductions.

There are several prerequisites to the filing of a lawsuit. The taxpayer must file a protest and appear and offer evidence at the ARB. In addition, the taxpayer must not agree to a value either implicitly at the ARB hearing or explicitly with a written sign-off agreement.

The most common grounds for litigation are: 1) the taxable value of the property exceeds the fee simple market value of the property excluding any business value, or 2) the taxable value of the property is unequal in comparison to the taxable value of comparable properties.

The deadline to file a lawsuit is 45 days after receipt of the appraisal review board order determining the taxpayer's protest. This order will be mailed by certified mail to the owner's last address of record or to the owner's tax representative.

Challenging property taxes through litigation has proven successful for many Texas taxpayers.

 

Updated March 2008

Recent Cases Effect Rights at the Administrative Level

There have been several recent cases which effect taxpayer's rights and procedures at the administrative level. With the May 31st protest deadline approaching, taxpayers should consider the impact of these cases.

Verbal Agreements at the ARB Hearing: The Court held that a verbal agreement between a property owner and the appraisal district is binding and that a taxpayer may not subsequently appeal the ARB determination to district court. The verbal agreement consisted of the taxpayer offering an opinion of value and the district stating that they agreed with the value.

Tax Consultant May Sign Fiduciary Authorization: The Attorney General stated that if a taxpayer designates a tax consultant as authorized to act on the taxpayer's behalf, the tax consultant may sign the fiduciary authorization to appear at the ARB.

Equal & Uniform Must Address Entire Property: The Court held that a taxpayer under equal & uniform could not challenge only the land and not the improvement but must challenge the entire property.

New Owner Entitled to Protest: The Court held that a purchaser prior to the protest deadline is entitled to protest the property.

 

Updated September 2007

A Last Chance To Challenge 2007 Property Taxes May Still Be Available

Property owners throughout Texas are currently receiving 2007 tax bills, which are due on January 31, 2008. Although property tax valuations are generally protested before May 31 of the tax year and become final if not protested, relief may still be available.

If an owner's tax value exceeds the correct value by more than 33%, the owner may file a motion with the county Appraisal Review Board prior to February 1, 2008 to request a value change.

However, this remedy is only available if the owner 1) did not file a protest on the property for the current tax year, or 2) the owner protested the property but did not present evidence at the administrative hearing. Further, the owner must pay the taxes on the property prior to the due date.

Further, if a property owner is dissatisfied with the appraisal review board decision, the property owner may file a lawsuit in district court to contest the decision.