In many states including Texas, if a property trades, the purchase price becomes the new assessment. Clearly this is not fair or equitable because properties which did not sell remain unchanged or are not raised to the level of the property which sold. A property tax appeal was filed calming unequal appraisal in 1998. This appeal ultimately ended up in the Fourteenth Court of Appeals in 2001. After hearing the position of the Harris County Appraisal District and United Investors Realty Trust the court ruled in favor of the Taxpayer. The court upheld Section 42.26 (d) of the Texas Property Tax Code, which says; “The district court shall grant relief on the ground that a property is appraised unequally if the appraised value of the property exceeds the median appraised value of a reasonable number of comparable properties appropriately adjusted.”

After the United Investors case some appraisal districts believed that taxpayers could only get relief based on an unequal appraisal appeal through litigation. The Legislature sought to clarify this issue in 2003 through Section 41.23. Protest of Inequality of Appraisal paved the way for taxpayers to seek relief administratively.

Today appeals based on unequal appraisals are universally accepted by Texas appraisal districts. However, there still remain technical interpretations of the calculations of “median value.” For the most part appeals based on unequal appraisal are an effective means for taxpayers to limit tax liabilities and secure fair and equal assessments.

Unequal Appraisal

The Texas Apartment Association (TAA) has announced publicly, and have discussed in hearings, their intention to strengthen Section 23.01(e) of the Texas Property Tax Code (The Code).  Originally passed by the Texas Legislature in 2009, this law was intended to prevent appraisal districts from revaluating properties if the value was reduced either by the Appraisal Review Board (ARB) or through property valuation litigation.  It was agreed that a valuation could be raised the following year by the chief appraiser if “substantial evidence” exists to justify an increase.

A debate ensued to define the term “substantial evidence.”  Taxpayers, appraisal districts, and ARBs sometimes disagreed as to what constituted “substantial evidence.”  To end the debate TAA is pursuing changes to Section 23.01(e) by placing the burden of proof on the chief appraiser and requiring “Clear and Convincing Evidence.”

It is my opinion that the TAA will be successful in altering Section 23.01(e) during the 2013 Session.  The effect on commercial and residential taxpayers will be stability of the assessments and taxes for two years unless the chief appraiser has “Clear and Convincing Evidence,” such as the sale of the property.  There is the potential for the creation of inequitable assessments on like properties which have their values raised while one property’s value is reduced by 23.01 (e).  The Code does have existing provisions for appeals based on equity issues. Therefore the comparable properties would have a remedy available to them.

Proposed Legislation Likely to Pass In 2013