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TEXAS PROPERTY TAX TRENDS

By Paul Pennington

SECTION ONE

I. OVERVIEW OF TEXAS PROPERTY SYSTEM

A) The Texas Property Tax Code provides for all taxable property to be appraised at its market value as of January 1.

B) * "Market value" means the price at which a property would transfer for cash or its equivalent under prevailing market conditions if:

(a) exposed for sale in the open market with a reasonable time for the seller to find a purchaser;

(b) both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions on its use; and

(c) both the seller and purchaser seek to maximize their gains and neither is in aposition to take advantage of the exigencies of the other.

* Section 1.04(7)

II. THE APPEAL PROCESS (ADMINISTRATIVE REMEDY)

A) Filing a timely real and personal property rendition. Pursuant to the 1995 Taxpayers' Rights, Remedies & Responsibilities;

"A rendition is a form you may use to report the taxable property you own on January 1 to the appraisal district. The rendition identifies, describes and gives the location of your taxable property. You also may give your opinion of your property's value on the rendition form, but it isn't required. Business owners must report a rendition of their personal property.

* advantages

- If you file a rendition, you are in a better position to exercise your rights as a taxpayer.

· Your correct mailing address is on record so taxing units will send your tax bills to the right address. · Your opinion of your property's value is on record with the appraisal district. The chief appraiser or the appraisal review board must send you a notice of appraised value if either one puts a higher value on your property than the value you listed on your rendition.

* deadline - File your rendition with the appraisal district after January 1 and no later than April 14.

The chief appraiser may extend the deadline to April 30 if you show good cause for needing an extension."

III. INFORMAL APPEALS (DATES VARY DEPENDING ON JURISDICTION):

A) A property owner in Texas has the right to file an appeal of a property tax assessment if he/she feels the valuation is in excess of the property's market value.

B) Typically, after an appeal has been filed, a property owner or their agent is given the opportunity to discuss and hopefully resolve the dispute informally with an appraisal district staff appraiser. If an appeal cannot be resolved at this level, the taxpayer will be given an opportunity to appeal the assessment to the appraisal review board.

C) Filing a protest:

* "1. File a written protest .

The appraisal district has protest forms available, but you need not use an official form. A notice of protest is sufficient if it identifies the owner, the property that is the subject of the protest and indicates that you are dissatisfied with a decision made by the appraisal district. < 2. File your notice of protest by May 31 or no later than 30 days after the appraisal district delivers a notice of appraised value to you, whichever date is later."                                                             

* 1995 Taxpayers' Rights, Remedies & Responsibilities

IV. FORMAL APPEALS (THE ARB):

A) So, what are ARB's and what ground rules govern them? The Texas Property Tax Code requires each county to have an appraisal district and to establish an appraisal review board. ARB's may vary in size; however, the Property Tax Code does give guidelines. The code requires that ARB's have a least three members and, depending on the county's population, they may have as many as 45 members.ARB members are appointed by the appraisal district board of directors and serve terms of two years, with the terms beginning the first of each year.

B) WHO CAN SERVE ?

1) The Property Tax Code does have some restrictions on eligibility of board members. These restrictions deal mainly with conflicts of interest, nepotism, and residency requirements. The code does not require, however, members have even a general knowledge of either real or personal property appraisal methods.

2) The code does provide for the compensation (per diem) of ARB members. The amount varies from county to county. The Dallas Central Appraisal District, for example, pays its ARB members a maximum of $150.00 per day. The Collin Central Appraisal District, on the other hand, pays its ARB members $96.00 per day, plus one meal.

V. ARB's - THEORY vs. PRACTICE :

A) THEORY

1) In theory, the ARB is to function as an independent board that reviews evidence and arguments from both the appraisal district staff and the taxpayer or his agent. Then, after reviewing the evidence and testimony, it should make a fair decision as to the market value of the property in question.

B) PRACTICE

1) Unfortunately, in the real world, some ARB's tend to side with the staff the majority of the time.

2) In general terms, the very idea that a group of citizens who are hand-picked, trained and paid by the appraisal district can be expected to dispense fair and impartial rulings toward taxpayers is ludicrous. Human nature would suggest that, normally, employees tend to perform in a manner that pleases their employer. In this case, the appraisal district is the employer and the board member is the employee.

3) The Legislature, recognizing this problem, recently amended the property tax code (41.66) to state that "the appraisal review board may not consider any appraisal district information on a protest that was not presented to the appraisal review board during the protest hearing." This amendment was designed to prevent the board members and staff from discussing an appeal before or after an appeal hearing.

VI. EXAMPLES OF EVIDENCE TO BE USED BEFORE THE ARB :

A) Under the current system the appraisal district assessment stands correct until it is proven otherwise by a taxpayer or his agent. Thus, the burden of proof is placed squarely on the shoulders of the taxpayer.

B) The code states in 41.45(b) that "the property owner initiating the protest is entitled to an opportunity to appear before the ARB to offer evidence or arguments."

C) EVIDENCE DEFINED

· Appraisals (Real Estate and Personal Property)

· Purchase Price

· Asking Price

· Historical Offers

· Capitalization of the Income Stream

· Comparable Sales

· Environmental Studies

· Balance Sheets

· Depreciation Schedules

D) DOUBLE STANDARDS

· It's a bad appraisal

·The appraiser is a "low ball" or "bad" appraiser

· Your client manages the property poorly

· The asking price is too low

· We're assessing everybody else the same way

· Bank/F.D.I.C./R.T.C. sales are distress sales not market sales

VII. OPTIONS AVAILABLE AFTER ADMINISTRATIVE REMEDY

A) LATE APPEALS

1) Section 25.25(C) (3)
Property does not exist in the form or location described on tax roll.

2) Section 25.25(D)
Property over assessed by more than 33.3%, carries 10% late correction penalty.

3) Section 25.25(H)
Carries no penalty, requires joint motion between chief appraiser and property owner.

B) LITIGATION

1) After an unsuccessful appeal to the appraisal review panel, the taxpayer should evaluate the possibility and cost-effectiveness of litigating. At this state of the game the advantage suddenly swings to the taxpayer. The appraisal district loses its home court advantage of appointing its people to decide valuation appeals.

VIII. IMPORTANT TEXAS TAX DATES :

NOTICE OF LITIGATION WITH APPRAISAL DISTRICTS:
Within 15 days of receipt of the ARB Order Determining Protest.

FILING SUIT:................Within 45 days of receipt of the ARB Order

TAX RATES SET:..........Generally September-October

TAX BILLS MAILED:....Generally October-November

JANUARY:.....................Assessment Date January

JANUARY 31:................Last day for payment of taxes
before they become delinquent for
property litigation for property
subject protest.

JANUARY 31:..................Last day to file motion to correct an incorrect appraisal

APRIL 15:.............................................Rendition Due Date

TAX ROLL CERTIFICATION:......................Generally July-August

TEXAS PROPERTY TAX TRENDS

SECTION TWO

XI. Overview Trends in 1995 Tax Rolls (Metroplex Example)

AREA PROPERTY VALUES

Change in certified taxable property values for 1995 in percent

A. Dallas County

B) COLLIN COUNTY

C) DENTON COUNTY*
Denton County

D) ROCKWALL COUNTY   

*No city or school districts available.
SOURCE: Dallas, Collin, Rockwall and Tarrant appraisal districts The Dallas Morning News

F) Ten year history of Dallas Central Appraisal District (See Exhibit A).

TEXAS PROPERTY TAX TRENDS

SECTION THREE

X. EMERGING PROPERTY TAX ISSUES