Property tax, or ad valorem tax, is a fact of life for people and businesses in Texas. As one of the few states in the United States without income tax, Texas counties rely on property tax as a source of revenue to pay for local services. The counties use the money collected as property tax to pay for public schools, libraries, playgrounds, city streets, county roads, police, fire protection, emergency medical service and many other services.
There are two types of property taxes that that county taxing units collect, real property tax and business personal property tax (‘BPP”). The Tex. Tax Code §1.04 defines real property as: (a) land; (b) an improvement; (c) a mine or quarry; (d) a mineral in place; (e) standing timber; or (f) an estate or interest, other than a mortgage or deed of trust creating a lien on property or an interest securing payment or performance of an obligation in one of the previous five categories of properties. BPP is the tangible personal property that is owned by a business in production of income. Tex. Tax Code §1.04(5) defines tangible personal property as property that can be seen, weighed, measured, felt, or otherwise perceived by the senses, but does not include a document or other perceptible object that constitutes evidence of a valuable interest, claim, or right and has no negligible or intrinsic value. Examples of tangible personal property, or business personal property,
A taxing unit for a county will set the value for taxable property in the county each year. The value set by the taxing unit is based on the market value of the property for the year. 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 a position to take advantage of the exigencies of the other. See Tex. Tax Code §1.04(7). If a property owner disagrees with the assessed value of his or her property, the Tex. Tax Code provides a process by which the property owner may appeal the assessed value.
The first step is for the property owner to appeal to the taxing unit’s appraisal review board. If a property owner is protesting the appraised value of real property then she has until May 15th to file the Notice of Protest (Form 50-132) or the 30th day after the date that notice to the property owner was delivered to the property owner, whichever is later. See Tex. Tax Code §41.44. After the protest has been received, the appraisal district with set a date for a formal hearing with three members of the appraisal review board, a staff appraiser, and the property owner or their agent. At the hearing, the property owner will be allowed to present evidence to support their arguments on the market value of the property. The decision of the hearing is final but a property owner has options to appeal the decision
A property owner has three avenues to appeal the decision of the appraisal review board. The first option is to appeal the decision in district court. A property owner has 60 days from the date they receive the order from the appraisal review board to file a petition with the district court. The second option is binding arbitration A property owner must file a request for binding arbitration with the taxing unit no later than the 60th day after they receive the order from the appraisal review board. The last option is to request a hearing with the State Office of Administrative Hearings (“SOAH”). A property owner must file a request for a SOAH hearing with the taxing unit no later than the 60th day after they receive the order from the appraisal review board. All three options have their strengths and weaknesses with no method seen as the preferred one.
A property owner that fails to file a protest with the county taxing unit loses the right to appeal the appraised value. Texas courts have uniformly held that a taxpayer who fails to pursue and exhaust his administrative remedies cannot seek judicial review of the appraised amounts and cannot challenge the appraised amounts. See Gen. Elec. Credit Corp. v. Midland Cent. Appraisal Dist., 826 S.W.2d 124, 125 (Tex.1992) (per curiam). A failure to comply with property Tax Code requirements, such as not protesting the initial valuation before the appraisal review board, deprives the reviewing district court of jurisdiction. See KM-Timbercreek, LLC v. Harris Cty. Appraisal Dist., 312 S.W.3d 722, 728 (Tex. App. 2009).
If a property owner is sued for property taxes owed the property owner is severely limited in the defenses that they can raise. Tex. Tax Code §42.09 provides the exclusive affirmative defenses that a property owner may raise in a suit for delinquent tax. Under Tex. Tax Code § 42.09 non-ownership of the property on which the tax was imposed on January 1 of the year for which the tax was imposed; or that the property was not located within the boundaries of the taxing unit claiming the tax are the only two defenses a taxpayer can raise. A property owner is not allowed to challenge the appraised value of the property in a delinquent tax suit. See Tex. Tax Code §42.09.
The preceding paragraph really underscores the need for a taxpayer to protest the appraised value of their property be it real or BPP if they believe the value is too high. Without appealing the appraised value, it severely limits the arguments that a taxpayer can make and can potentially create a large financial problem for the taxpayer.
Freeman Law works with tax clients across all industries, including manufacturing, services, technology, oil and gas, financial services, and real estate. State and local tax laws and rules are complex and vary from state to state. As states confront budgetary deficits due to declining tax revenues and increased government spending, tax authorities aggressively enforce state tax laws to recapture lost revenues.
At Freeman Law, our experienced attorneys regularly guide our clients through complex state and local tax issues—issues that are frequently changing as states seek to keep pace with technology and the evolution of business. Staying ahead requires sophisticated legal counsel dedicated to understanding the complex state tax issues that confront businesses and individuals. Schedule a consultation or call (214) 984-3000 to discuss your local & state tax concerns and questions.