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On May 24th, the Texas Senate approved Senate Bill 2’s Property Tax Rollback and Automatic Election Provision, as an amendment to House Bill 4180. The “Property Tax Reform and Relief Act” (PTRRA) would require voter approval via special elections before local governments could raise property taxes by at least 5% (currently, this rollback rate is 8%). The bill, passed in an 18-12 vote and drafted in large part by Paul Bettencourt (R – District 7), was designed to “bring transparency and simplification” to the property tax appraisal process in the state of Texas. Property holders were polled and a majority of the respondents agreed that there is a need for property tax reform. The problem is there is also a need for an increase in property taxes: currently there is a budget shortfall of about $6 million dollars and over half of the revenue generated from property taxes funds the public school system.

The bill was drafted as a result of over 50 hours of public testimony from taxpayers which showed several years of double-digit increases in property tax bills on residential and commercial real estate. It includes language that that would require the following provisions: 1) An appraisal district to keep an online database with projected tax liability for it residents, 2) The name of the effective tax rate to be changed to “no-new-revenue” tax rate, 3) Change the notice requirements assigned to appraisal districts and taxing authorities; 4) Alter the way taxing units could challenge the appraised value of a type of property at an Appraisal Review Board (ARB) Hearing.

Standing in opposition to the bill are the local governments in Texas who greatly depend on the revenue generated from property tax bills. Also, Democrats feel that the state cannot afford to reduce the property tax rollback rate from 8% to 5% because of the existing state budget shortfall. Simply put, this is bad budgetary timing for Texas Republicans and, as a result, there is a chance that the bill will be unpopular in House. The Texas House of Representatives consist of 150 members, comprised of 95 Republicans and 55 Democrats and the sitting governor of the state, Greg Abbott, is also a member of the Republican party.

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The bill allows for tax information to be easily accessed using modern technology through the online database and the posting of tax rates on the taxing jurisdiction’s websites in lieu of mailings and newspaper publications. Residents will be able to search the online database for properties by address and owner name and find information such as proposed tax rates, current rollback and “no-new-revenue” tax rates and estimated tax liability under those rates, and detailed information about public hearings pertaining to the proposed tax rate. Additional information such as historical and proposed budgets, tax rates, and the most recent financial audit would also be included.

The bill would require taxing districts to calculate and report to the comptroller the no-new-revenue rate and the rollback rate. School districts would be required to do the same while maintaining the same state and local revenue per weighted student that the district received during the prior school year. Taxing authorities in the non-school districts would be required to certify (via an officer/employee) that the tax rates were calculated using values on its tax rolls before a tax rate could be adopted.

The taxing authority could not adopt a tax rate until the chief appraiser of the each district was in compliance with the bill’s technology provisions and would be barred from holding a public hearing on the tax rate until the 14th day after such compliance. Taxpayers have the ability to file an injunction from the collection of taxes within 15 days of the adoption of the tax rate and would not be required to pay taxes while the action was still pending.

Of the four provisions referenced in the second paragraph, the fourth, which alters the way challenges can be made to the ARB, may be the one that is the most beneficial to tax payers. After the 2017 tax year, the taxing authority will no longer be able to challenge the finding of the appraised value of a category of property (not a specific parcel) at an ARB hearing. For appraisal districts in a county with at least 1 million residents, the ARB must create a panel to hold protest hearings on properties appraised for $50 million or more and that was also commercial real or personal property, real or personal property of a utility, manufacturing real or personal property, or a multifamily residential real property. A qualifying property owner, after making the request, would be entitled to a hearing of a special ARB panel for a protest filed on or after January 1, 2019.

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Supporters feel that the proposed changes would provide taxpayers with necessary information and allow them to take part in determining how taxes are levied against them by the taxing authority in their district. A central theme of these changes is to allow for the creation of an ARB board which creates oversight in the process but taxpayers must and are encouraged to act on their own behalf.

Another benefit that the bill offers is the ability to allow each individual taxpayer to determine what is best for their property and financial situation. After reviewing a public database each taxpayer can make an informed decision as to whether they should proceed with their protest.

A downside to the proposed bill is that there is no automatic special election or hearing because a tax rate increase is done. The taxpayer must a) protest the no-new-revenue rate after receiving notice, b) object to the chief appraiser’s tax assessment on their property and not be penalized for not paying it while the hearing was pending, and c) allow the ARB’s findings to be final and not subject to appeal by the taxing unit because it felt that the appraisal was not “high-enough” to allow for higher assessments in their district.

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Mike FritzFritzbu-state-local-tax real-property-taxfinancial-due-diligencedevelopment-due-diligencerichardsonatlantanashvillememphis

Vice President, Property Tax

Last updated on September 4th, 2019 at 04:15 pm

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