Preparing for Texas Property Tax Appeals
Texas Property Tax Appeal Deadline Moved to May 15th
Aimed at streamlining the Texas property tax appeals process, Gov. Greg Abbott signed HB 2228 into law on June 1, 2017. Effective January 1, 2018, the new legislation has moved the property tax assessment appeal deadline from May 31st to May 15th, or within 30 days after a notice of appraised value was mailed to you — whichever is later.
The Texas Assessment and Appeals Process
Assessed Values and Tax Rates
Like many assessment jurisdictions across the US, Texas has an annual reappraisal cycle with counties reassessing properties at market value as of January 1. The state uses the Standard Appraisal Institute definition of market value, which is the price at which an asset would trade between a willing buyer and seller in an open market where there is no duress or ulterior motives. No ratio or caps are applied – so theoretically the tax roll reflects full market value.
Tax rate decisions are controlled by a variety of local entities. Annual property taxes can be estimated by multiplying a property’s market value by the combined city, school, and county tax rates. In Texas, this total rate usually hovers around 2.5%.
The most difficult part of the Appraisal District’s equation is estimating market value. Appraisal Districts appraise property at market value using standard appraisal methods, analyzing rent and expenses as well as comparable sales. However, Texas does not require that purchase prices be disclosed or that property owners submit income and expenses data prior to an appeal. After an appeal is filed, an owner may be compelled to disclose financial data through the informal and formal appeal processes.
The Appraisal District System
Until the early 1980s, each taxing jurisdiction (city, school, and county) was responsible for assessing the properties within their individual boundaries. This was a highly inefficient system because properties were valued by multiple appraisers often resulted in wildly varying values.
In 1981 the Appraisal District system was created through legislative efforts. Each county is now a single Appraisal District responsible for establishing market value for every property in that county. Appraisal Districts are reviewed every other year by a state agency to ensure compliance.
Tax Appeal Deadlines
Assessment value notices are issued in April and property owners have until May 15, 2018 or 30 days after the date of notice to file an appeal, whichever is later.
The Appeal Process
There are three levels of appeal in Texas. Most Appraisal Districts utilize informal hearings with the goal of coming to an agreement on value. During these meetings, property owners will provide rent rolls, income and expense statements, and market data to support their opinion of value. Conversely, the appraiser presents their data and basis for determining market value. Often the appraisers will use this new data from the property owner to make adjustments in the valuation model.
If a value is agreed upon at an informal hearing, both sides sign a settlement form, and the value is set for the year. However, if an agreement is not reached, the appeal moves on to the Appraisal Review Board (ARB). At these formal hearings, a panel of three independent citizens hears both sides of the case and issues a decision based on the evidence.
Litigation is the final option if the property owner does not agree with the decision of the ARB. During litigation, it is common for the market value argument to be waived in favor of an equal and uniform appeal – see explanation below. Most cases are settled prior to trial.
How Equal and Uniform Differs from Market Value Appeals
The Texas Constitution provides that taxation must be equal and uniform. A property owner may appeal on the grounds 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. Properties that have recently sold may be likely candidates for this type of appeal if the purchase price is higher than the assessed value because market value is irrelevant.
A Real World Example
Altus Group represents a large pension fund that invested in a multi-building 3,000,000+ square foot industrial park in Texas. The purchase price was approximately $180,000,000. The Appraisal District proposed a value of $153,000,000 for the year in question. Altus appealed the noticed value and achieved a reduction at the Appraisal Review Board resulting in a value of $136,000,000. A lawsuit was filed and subsequently settled at a final value of $128,000,000, based on the equity. Total tax savings for the client were approximately $785,000. The success was attributable to diligent review of similar property values under the Equal and Uniform provision in the Texas Tax Code. Market value was not considered in the settlement.
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Jennifer KeierleberKeierleberbu-state-local-tax real-property-taxdevelopment-due-diligencefinancial-due-diligencerichardsonDirector, Property Tax
Last updated on September 4th, 2019 at 05:28 pm