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The House Committee on Ways & Means met on March 13 to take up and consider bills related to the ad valorem appraisal appeals, appraisal review board membership, and agricultural and open-space land exemptions.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing, but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

HB 279 was laid out as pending business during the hearing, voted out (10-0)

 

HB 380 (Geren) Relating to the authority of a district court to hear and determine certain ad valorem tax appeals.

  • Geren – HB 380 clarifies that district courts have the final jurisdiction on all matters concerning taxation on a property owner. Under this bill, if an appraisal review board makes the claim that a property owner fails to exhaust administrative remedies, the court can remand the prop test back to the board and provide the property owner the opportunity to cure their failure to exhaust administrative remedies. The board shall then grant them a hearing on the protest to address the substantive issues brought by the property owner. In addition, if both the property owner and the appraisal review board agree, the parties may waive remand and allow the court to determine the appeals on the merits.
  • Identical to HB 2653 from 85th and 165 from 85th special. Both passed out of ways & means but ran out of time.
  • Noble – Specifically this would go to a district judge, not a county court at law, correct?
    • Yes.

 

Brent South, Texas Association of Appraisal Districts – Against

  • Under current law, property owners must have exhausted administrative remedies before they can appeal to district court; That means they must have filed a timely protest, highlight what they want to be fixed, and must appear before an appraisal review board
  • This bill would allow the property owner to go directly to district court before exhausting administrative remedies, the bill also allows property owners to add to their protest
  • There is no deadline for this process under HB 380
  • Ultimately, this would do away for the need for deadlines, could do away with the ARB all together
  • Current Tax Code already provides a remedy for this type of situation

 

Karen Evertson, Travis Central Appraisal District – Against

  • This proposed bill cannot coexist with section 42.09 of the Tax Code, which states one must exhaust administrative remedies
  • District courts do not have original jurisdiction on these matters
  • When an administrative body has been given original jurisdiction, the court cannot act on the requests until the court with original jurisdiction has heard the matter
  • If a district court receives a claim where the administrative body has not addressed the issue, they lack subject matter jurisdiction
  • In the absence of subject matter jurisdiction, the district court must dismiss the matter
  • The court has no authority to order the parties to do anything under this proposal
  • Burrows – What about procedural problems with the original hearing, is the exemption comprehensive, and if there are any procedural denials in the original process, does that allow every opportunity for someone to go to district court?
    • Tax Code 41.45(f) says that if a property owner is denied a hearing to which they are entitled, they have the right to take it to district court
  • Burrows – My concern is that, if you go to district court and you have had problems with procedure in exhausting administrative agencies, are the courts able to cure that from testimony?
    • They would go through the litigation process, my position is yes
  • Burrows – Reiterates, if a litigant shows up in district court claiming they have been denied procedural due process, code would allow the court to dig into that and waive the exhaustion requirement because they were precluded from doing so in the review process?
    • Does not apply to 41.45(f); yes, I believe a court can dig into why they were denied their administrative due process
  • Chair – I want to make sure the courts can look into why the ARB did not allow you to exhaust your administrative process
    • I believe 41.45(f) allows for that.
  • Wray – So we heard that ordinarily you get your notice of appraised value, you file your protest, you go the ARB, and then you possibly have the right to seek arbitration or file a district court appeal; under this statute, can someone skip all of that and just file a district court suit?
    • Yes, this has no time limits
    • Someone can skip the administrative process and claim they were denied this years ago
  • Wray – Philosophically, is there anything wrong with that?
    • Yes, it is in violation of what this legislature has created our property tax system to do
  • Wray – But they still have that available, if a property owner wanted to choose the ARB route, they can still do that
    • No, because the legislature has put timelines
  • Wray – But if you are sophisticated enough and wanted to wait 2 years to file a district court law suit, you could do that too; It is just another avenue, right?
    • Except that is in complete violation of what the legislature has said the Tax Code is supposed to do
  • Wray – But the current legislature has the prerogative to change this law
    • They could, but not with the existence of 42.09
  • Wray – The bill is written also infers the jurisdiction
    • The legislature cannot create subject matter jurisdiction for the court where it does not exist
  • Wray – Why not?
    • Separation of powers; a court cannot act unless it has authority to do so
    • This bill does gives them the authority, 42.09 tells them they do not have it
  • Wray – Would you agree with me that the legislature has the power to change the other statute that you are referencing?
    • Yes
  • Bohac – What if the conflicting portion of the law was struck, would you be okay with the bill?
    • In a general sense, yes
  • Bohac – What if we put some language in the bill that the protest had to be timely filed?
    • Not exclusively, because there is more to jurisdiction than time
  • Rodriguez – How would this affect the appraisal district’s ability to certify the appraisal bill?
    • The whole point of our system is to give our taxing unit some certainty. By allowing this constant recirculation back to what the value is, we don’t allow our taxing units to have certainty on their local value
  • Rodriguez – And that uncertainty would impact local jurisdictions’ budget?
    • Absolutely
  • Martinez Fischer – Can you explain the unlimited possibility of time people have to come back and re-protest?
    • Currently, a property owner has multiple options to address their problem with the appraisal review board
    • There is no time limit in which a property owner can go back and say procedural steps were not followed by the appraisal board during this process and go straight to the district court
  • Martinez Fischer – Can you suggest where in the legislation we could help define this? And are we setting up a double standard when it comes to people’s ability to protest their taxes?
    • Our current tax system is set up so that anyone can come in and talk to the appraisal district about their property, It doesn’t cost them anything but time.
    • This system is saying that if large corporations think “we messed up,” they can file a lawsuit; this creates an unfair advantage to corporate citizens while standard property owners won’t have the funds or fiscal responsibility to file a lawsuit
  • Martinez Fischer —What do you think this will do to our judicial court system by way of court administration, particularly in areas where they may be only one district judge that rotates around the region?
    • If people are allowed to go straight to district court without taking administrative steps, it will overwhelm the district court system
  • Burrows – From what I understand, we have an administrative system that has a large preference for driving everybody through which claims proceed which don’t and can get relief; This bill would essentially depart from that philosophy, is that a fair way to describe the debate?
    • Yes, beyond the philosophical preference, you would have to change your statutory scheme
  • Burrows – So the question we’re faced with is whether the administrative procedure is working for large-scale or not?
    • Correct
  • Martinez Fischer – If this matter is in district court, are you able to avail yourselves of the discovery tools & evidentiary options?
    • My understanding is there is nothing in HB 380 that prohibits the discovery process
  • Martinez Fischer – My point is that if we’re in district court at any time, then we will have all the tools and supports available in court, this will be a real controversy that will be litigated; don’t want administrative processes inserted into the court system
    • We no longer practice under the normal civil litigation rules
    • If we clear the subject matter jurisdiction hurdle, I don’t see anything that would prohibit discovery requests and response
  • Martinez Fischer – I don’t want to put administrative processes in a courtroom where a judge has to work out how to apply existing procedures, if you could give this some thought and get back to us
    • Yes sir

 

Robert Myers, Property Tax Lawyer – For

  • The idea of ARBs as citizen panels has eroded over the past 40 years
  • Appraisal districts choose, train, and house the review boards, which means even a sophisticated taxpayer doesn’t have a lot of luck when they go in front of the ARB
  • If someone goes to the ARB without the aid of an attorney or professional, and then files a lawsuit in district court, the lawsuit will become a plea of the jurisdiction; this has become endemic in district court
  • There are still time limits; they don’t change
  • HB 380 presumes that a taxpayer has begun the administrative process and meaningfully availed themselves of that process before going to district court
  • All 380 does is state the district court has subject matter jurisdiction over any ground of protest the taxpayer could have, and if the administrative remedies failed, then the judge can abate the proceeding and send the taxpayer back to the ARB to present their complaint to them
  • In an ideal world, being referred to the ARB would be the end of the lawsuit; but if it isn’t, then it comes back to the district court, and there would be no more subsequent complaints about subject matter jurisdiction
  • Burrows – If the standard was something more like a meaningful attempt to move through the process rather than exhausting all administrative remedies; are we more concerned with checking all the boxes rather than making a good-faith attempt at the process? Is there a way to steer people into the process without them getting tossed out for forgetting a minor technical requirement?
    • I think that is an ideal concept, this process is not easy without the aid of a professional
  • Burrows – I would assume you would agree with me that from a policy perspective we still want to steer people to go through the process somehow, but what you’re concerned about is that people should have their day in court?
    • Correct, HB 380 cannot be read to confer jurisdiction on the court if you have not availed yourself of the administrative process
  • Burrows – It sounds like the standards are being applied by the courts that were the most concerned
  • Wray – I am a little concerned about somebody that possibly might wait for however long the statute of limitations is, and then for the very first time, file a lawsuit to district court without ever taking administrative route; In your opinion, this bill does not allow that?
    • HB 380 cannot be read to allow that type of situation
  • Wray – In your opinion, is there an existing case law that would suggest that would not be allowable?
    • Not only case law, but also statutory law
  • Wray – In the Tax Code, there are various deadlines that are designed to allow local taxing units to adopt the budget in the fall so that they can plan their fiscal year; you’re saying there is also other law that will not allow taxpayers to come into the district court years later?
    • The bill does not have that effect
  • Wray – In your opinion, does the bill need any modifications to ensure things like that don’t happen?
    • At the end of the day, if the taxpayer is simply able to avail themselves of all the remedies that they’re guaranteed under the Tax Code, where is the harm?
    • We are trying to get the tax bill correct, the way that the system stands now is a little unfair, especially to the unsophisticated taxpayer
  • Martinez Fischer – Taking a lawsuit against a public entity, if they are not going to file a plea to the jurisdiction, then I wouldn’t have those lawyers for my public entity; how is that so violative of what you do on your side of the aisle?
    • There is a big distinction between my practice and the interests that are at stake, and the rights of a property owner; I think anytime a taxpayer is called upon to fight the government, they’re by definition at a disadvantage
  • Martinez Fischer – You said that in district court, the judge may abate the case and send it back; does the judge have discretion?
    • The judge can remand it back to the ARB
    • After that process is over, if the taxpayer is still unsatisfied, it comes back to the same district court, and there will then be no jurisdictional challenges
    • Another part of the bill says that with the approval of court, you can waive that process and the parties will be presumed to have exhausted their administrative remedies. So, you don’t have to go back if you don’t want to, but it’s all in the judge’s discretion
  • Bohac – What about the argument that HB 380 prevents jurisdictions from certifying the tax roll within enough time?
    • It does not change the time deadlines for when you can appeal

 

Rep. Geren closes

  • One witness suggested removing the appraisal districts altogether, I have other legislation filed for that

 

HB 380 left pending

 

HB 1745 (Geren) Relating to the authority of a property owner or owner’s agent to bring suit to compel an appraisal district, chief appraiser, or appraisal review board to comply with a procedural requirement applicable to an ad valorem tax protest.

  • Geren – Currently have no remedy for taxpayers when an appraisal district violates a procedural right
  • Violations negatively affect taxpayers’ ability to present their appeal case
  • HB 1745 provides taxpayers a legal remedy when their procedural rights are violated or ignored by decision makers

 

Brent South, Texas Association of Appraisal Districts – Against

  • Bill would allow a limited suit to compel compliance with procedural requirements
  • Would allow owner or their agent to sue the ARB, the review board, appraisal district, or chief appraiser
  • Concerned by how broad the bill’s language is; uncertain of what is entailed by procedural requirement
  • Recommend the bill strike agents from being a part of the suit
  • Bill does not allow any time for appraisal district to cure the issue before the suit is filed; would like to see a notice of intent to sue before the suit gets filed
  • Believe there needs to be a deadline before the suit gets filed
  • Continual change of appraisal roll means taxing units don’t get a chance to go back and re-adopt their tax rates
  • Concerned about attorney’s fees being awarded to the owner or the agent but not to the appraisal district
  • Martinez Fischer – Because of uncertainty of what procedural requirements are, when the pleading goes to a judge, the judge doesn’t even know what it’s about?
    • That’s correct, with no discovery allowed and no knowledge of what the procedural requirement is, that should be tightened up
  • Martinez Fischer – There is language pertaining to going into a courtroom and not being able to use or reference a document, like the rules of discovery aren’t going to apply; do you know if these ideas are coming from the same people?
    • I believe they’re coming from the tax consultants
  • Martinez Fischer – Talk to me about bearing the risk; why should taxpayers quit the bill for the appraisal bill so that my appraiser and their lawyers go to court? Should they prevail, why shouldn’t taxpayers be reimbursed?
    • Anytime we have to go to district court to defend ourselves, it is ultimately the taxpayers who have to pay that cost
  • Martinez Fischer – Do you know if the same people who would be proponents of this HB have also been able to register their thoughts on HB 2, where this would fit in nicely?
    • I believe they would be better suited to answer that
  • Wray – There are various vehicles like this in Texas statute for the quick resolution of issues, this no-discovery concept and the scheduling of a hearing at the earliest possible date is meant to control the cost of this proceeding; what kind of discovery do you anticipate in the event of a failed notice of a hearing?
    • There needs to be a mechanism to allow us to cure the issue prior to the lawsuit
    • If there is a true issue, we fix it; if we had a mechanism to fix these in the bill, a majority would get fixed before they have to go to that level
  • Wray – Are the stakeholders receptive to adding this cure element in the bill? As a prerequisite to filing a lawsuit?
    • Yes
  • Wray – Would you agree that since these are relatively easy issues, the lack of discovery is an important mechanism to control the costs of these kinds of proceedings?
    • I think not knowing what the term ‘procedural requirement’ means is problematic
    • If we were to narrow the bill to have more specific items, that might help
  • Wray – If that broad term was narrowed down to a more specific list, then you would feel better about the lack of discovery?
    • I think it would help
  • Wray – In regard to the attorney’s fee section, would you feel better about it if it were more discretionary on the part of the judge?
    • Our position is that it should be two-ways or nonexistent
  • Bohac – If you give attorney fees to the appraisal districts, wouldn’t they have no incentive to cure the problem?
    • I don’t think so; we would rather cure the problem as opposed to having to go to court altogether

 

Debra Bawcom, Texas Association of Property Tax Professionals – For

  • Agree with South’s concerns and the recommendation to remove agents from the ability to file suit
  • Have seen some cases where the ARB refuses to act on an application that was filed for exemption or special use appraisal; there are no remedies for the property owner to force the appraiser to act on that application, but this bill would allow them to do that
  • There are times where an appraisal district refuses the taxpayer’s right to reschedule their hearing; this bill would solve lack of remedy for the taxpayer in this situation
  • Martinez Fischer – Some of the things you describe as procedural errors are seen in HB 2. Why are we not evaluating this proposal in the greater context of appraisal reforms there?
    • This bill points out the specifics of these issues and the need for its application
  • Martinez Fischer – I think these ideas should be imported into the larger idea of HB 2.
  • Martinez Fischer – Do you think a property owner would have the resources to hire you or one of your colleagues, but not the resources to pay for discovery?
    • I don’t know that. We want to make this efficient and affordable
    • If we want to extend to every homeowner, we need to recognize that they need the ability to quickly and efficiently go to court to remedy a procedural error
  • Martinez Fischer – Would you approve of this being sent to a Justice of the Peace?
    • I’m not as familiar with their jurisdiction
  • Martinez Fischer – It seems to me that if someone wants to be anywhere else but the ARB, maybe they can be given a forum with the Justice of the Peace, where you have to get permission from the judge to do discovery, so that would actually fit wholly with this idea
    • I can definitely discuss that with my association

 

David Kaplan, Texas Association of Property Tax Professionals – For

  • Great that appraisal district representatives met with us, intending to work with them, but we are running out of time & notified that we would be working on legislation
  • Strongly support HB 1745, believe the bill is bringing needed oversight to several aspects of the property tax process
  • Most appraisal districts make a good effort to comply with requirements of Tax Code, but those efforts are not universal; current law does not have a way for a taxpayer to compel an ARB to give them their rights
  • Efforts by legislature to change this are being frustrated by ARBs refusing to grant those rights; example is a bill filed by Rep. Murphy that required appraisal districts to allow property owners to use A/V equipment in the hearing room, but many ARBs refused to allow this
  • HB 1745 addresses this problem by allowing taxpayers to address district court and seek an order that requires ARBs to follow the law
  • Often deliberations are not done orally
  • ARBs do not hear protest hearings in random panels, they send people to specific panels based on desired outcomes
  • There are several instances of appraisal review boards or appraisal districts showing no incentive to provide remedies
  • HB 1745 is very specific on the procedural requirements, pertains to rights under Chapter 41 of the Tax Code or those established by ARB rule
  • Summary procedure is appropriate to allow taxpayers to do something about the issue without having a case on the merits; simple proceedings to compel fair hearings
  • As for attorneys fees, taxpayers do not need the threat of attorneys fees just because they want to protest their appraisals; needs to be an incentive for ARBs and districts to do this right
  • There is nothing in the law that a property owner can do to make sure that rights are enforced
  • Burrows – In American law we start with the presumption that nobody should get these fees to disincentivize litigation, correct?
    • Sure
    • There is an attorneys fees provision for failure to provide a hearing, this is something we can talk about
  • Martinez Fischer – Important to have things like A/V equipment available for use, but I don’t agree that we should take up the time of a district judge to watch closely for missing A/V equipment, has to be another place this can be solved
    • Legislature decided this was a right the property owner and there should be a way to enforce it
  • Martinez Fischer – Someone is going to need to make the call: Comptroller office could play a heavy role in appraisals or a JP is equipped to handle these sort of disputes
    • Some JPs will be up to this, but many of them are not attorneys and will have difficulty applying the law to the facts
  • Martinez Fischer – They handle things like amounts in controversy up to $10k, they handle evictions, etc. I don’t see how JPs wouldn’t be equipped to handle this or couldn’t be trained to do so
  • Martinez Fischer – If you get the sense that people you are negotiating with are not expeditiously handling this, would like you to notify me personally; would help inform my decision on how to vote and my opinion on how people are acting
  • Martinez Fischer – Does see the issue, but judges need the capacity and space to do their job, instead of overwhelming docket system; would like someone from court administration to testify on the effects
    • Hopefully it would not be necessary to go to the judge
  • Martinez Fischer – If it was not necessary, we would not need this; our job as legislators is to make laws for use and not as trade bait or to encourage compliance; you felt it necessary to have a proposal, my hope is that if it does pass it is used
    • My hope is that someone would be able to use the equipment they have a right to
  • Martinez Fischer – This states there would be a special proceeding on a procedural point, worried about how often it is utilized and the effect on the docket system

 

Rep. Geren closes

  • I share Rep. Martinez Fischer’s concern about overloading the docket and JP’s might be appropriate for this, but there are abuses by ARBs; Tarrant County may be one of the worst & constituents are ignored, evidence is denied
  • Standalone bill to address a specific problem, problem that I’ve had many complaints over from the people of Tarrant County
  • Martinez Fischer – Want to ensure process works similarly for all taxpayers, would ask you to think about how this process is administered locally, but controlled centrally; can put more responsibilities on the Comptroller, they are in constant communication with appraisal districts
    • Would appreciate this, but all appraisal districts don’t work they same way, some are good actors and some are not
  • Martinez Fischer – I think there is some merit to speaking with the Comptroller about this

 

HB 1745 left pending

 

HB 794 (King, Phil) Relating to the repeal of the additional ad valorem taxes imposed as a result of certain changes in the use of open-space land appraised as agricultural land.

  • CS laid out
  • King – Can give property tax owners a significant tax cut & give taxing units an increase in revenue, CS will have not fiscal note
  • Seeking for a way to get property to its highest & best use
  • Two ways to keep land exempt from paying full appraised value, first is through constitutional ag exemption for family-owned ranches and farms, HB 794 does not affect these
  • Second way is open space properties wherein the owner is not using land as primary source of income, mostly commonly qualified for with livestock, etc.
  • After open space valuation was created, huge tax claw back was added in 1979; problem now is that whenever use of open space property is changed, the property owner must pay a full 5 years back property tax @ full appraised value and 7% annual compounded interest which adds another 40% to the property tax bill
  • No justification exists for the claw back on undeveloped property, an excessive penalty that prevents properties from timely advancing to highest & best use
  • Claw back is often worked into deal & can often see only $600k out of $1m deal for instance; often leads to properties sitting unused
  • Also see issues where the property transfers to family member upon death of original owner & the owners are forced to sell
  • Local governments are concerned they will lose the lump sum, but they don’t get to budget for this money & not the best use of funds
  • They also do not factor in the increased property tax and sales tax proceeds from actual use
  • CS took school districts out of the equation, did not want to confuse the issue with school finance & wanted to remove the fiscal note
  • No fiscal impact on state, will be an impact on local governments
  • Many bills filed on this issue & time to fix this
  • Bohac – What was the public policy reason for doing this in the past?
    • Local governments were likely looking for a way to address the double-digit inflation on property and generate revenue, now with low interest rates and inflation it is impractical
  • Bohac – You will hit capital gains either way

 

Scott Norman, Texas Association of Builders – For

  • Have seen many bills filed on this issue
  • Members would be glad to get anywhere close to 7%, do not understand why local governments should be entitled to that rate when it is not present anywhere in the market

 

Don Allen, Greater Fort Worth Builders Association – For

  • Here to support any relief on these taxes that the legislature can provide
  • Claw backs and rollback taxes added $500 to $2,500 per lot, equates to housing price of $3,000 to $15,000 per lot
  • Often difficult to make the deals work & have had to drop or revisit
  • Taxes are often very high as prior owners do not know to protest appraisals, see many appraisals that are way out of proportion with actual value

 

Frank Murphy, Wynne Jackson – For

  • Presents statistics on properties under contract in the last several years, calculated $5.2 million in rollback taxes which equates to roughly $36 million in additional in housing costs
  • See many who do not protest as they do not know, assessed values for rollback purposes are 50% higher in unincorporated areas over incorporated areas
  • Murphy – Are you talking about the differential between the market value and the ag exemption?
    • No, talking about the absolute assessed value
  • Murphy – So after the sale? You’re saying people don’t pay attention to assessed value due to the ag exemption?
    • Yes
  • Rollback taxes also have the impact of making land less affordable or limiting development
  • Appraisal district often fail to rollback on a timely basis, home buyers can be hit by this years later, with delayed rollbacks homeowners are often the only party left to deal with it
  • Encourages thinking about expanding this to establish deadline for triggering rollback

 

Vance Ginn, Texas Public Policy Foundation – For

  • Reduces burden on taxpayers overall & prevents government overreach
  •  We also like the introduced version that repealed this entirely, but understand the changes

 

Marvin Jolly, Texas Realtors – For

  • Bill is a strength for future homeowners, helps with affordable housing, and can help taxing entities see a larger tax base by removing development gridlock

 

Rep. P King closes

  • Impacts more than developers and builders, taxes add to base prices of houses
  • CS does not have a fiscal impact for the state, but there is a local impact; would suggest that impact would be eaten up by increased property and sales tax due to increased & quicker development
  • Burrows – I think this makes sense, might be some in the audience who are willing to put numbers together
    • Agrees, Comptroller and LBB do not provide these types of dynamic models

 

CS withdrawn, HB 794 left pending

 

HB 1743 (King, Tracy O.) Relating to the additional ad valorem tax and interest imposed as a result of a change of use of certain land.

  • T King – I support rollback, trade off of valuing land on productivity and helps to keep speculators out
  • In the 1970s, a piece of ranchland saw a difference of $250 between ag value and market, but now ag value is roughly $100/acre and the market value might be $3,000; rollback is based on a much larger difference
  • HB 1743 changes rollback from 5 years to 3 years, interested rate from 7% to 5%; everything else is untouched, does not change eligibility requirements
  • Burrows – What is your concern fi the Committee decides to do away with all of this? What is the impact to open-space land?
    • Ag and rural community is concerned that it would encourage people to take land out of ag and wildlife use; our goal it to protect the ag and wildlife use of land

 

No public testimony

 

Rep. T King closes

  • Hadn’t anticipated that question, but there is another part that I can get back to you
  • Rodriguez – Generally when we sell a piece of formerly ag use land, generally the buyer pays?
    • Those who change use are supposed to pay, but often factored into the price

 

HB 1743 left pending

 

HB 1409 (Ashby | et al.) Relating to the qualification of land for appraisal for ad valorem tax purposes as timber land or restricted-use timber land.

  • Ashby – Have a CS, would seek to protect against land improperly appraised for timber production, seeks to protect this land from being wrongfully changed to market value
  • Passed a protection for open-space land last section, does the same thing for timberland
  • Clarifies that fire breaks and buffer areas are necessary, accommodates right of way for transmission lines, etc.
  • Rollback taxes exist for 5-year period, but these taxes should never have been assessed against some timber land in the first place

 

Wayne Pflugger – For

  • Provides examples of timber land having a transmission line passing through & appraisals on that portion being switched to market value due to lack of growth
  • Also see this situation for oil & gas production where appraisal is changed on drill sites, etc. although surface owner gets no benefit
  • Murphy – Do some counties allow these exceptions? And some don’t?
    • Yes, it started in a few counties, trying to curtail this before it spreads
  • Murphy – Say a transmission line is placed across the property, the owner is compensated correct?
    • Yes, but also seeing issues where transmission lines have stood for decades on timber land and just now being re-appraised
    • Owners are compensated, can be savvy enough to incorporate liability provisions for appraisals changing, but many not; question of just compensation

 

Rep. Ashby closes

  • Timber stands are long-term investments, compensation for transmission line, etc. is one-time payment for damages when the true cost is destruction of the long-term investment
  • Trying to keep the system set up where designation is stable until use changes

 

CS withdrawn, HB 1409 pending

 

HB 97 (Rodriguez) Relating to the eligibility of land for appraisal for ad valorem tax purposes as qualified open-space land.

  • Rodriguez – Many small farmers have had problems obtaining ag valuation
  • HB 97 specifies that fruit and vegetable production is ag use, directs tax appraisers to consider type of production to determine degree of intensity, Comptroller collaboration with stakeholders to develop guidelines for farms less than or equal to 10 acres
  • Does not seek to increase open land valuation, but seeks to include those that should have been included
  • This is my 3rd session filing this bill, important for my district

 

Judith McGeary, Farm and Ranch Freedom Alliance – For

  • Problem across the state, shares examples of small farmers in different areas that could not obtain ag valuation due to differing county guidelines; counties do not have guidelines for mixed vegetable production
  • Some are successful by working with press or attorneys, but many do not understand they should protest or don’t have resources to protest
  • There is concern over very small acreage and “opening the floodgates,” this activity is already happening @>350k parcels under 10 acres; counties are doing this, but not in any clear or fair manner
  • HB 97 makes this more fine-tuned than existing statute
  • Fiscal note is high, but is due largely to counties inventing an issue with numerous small plots that doesn’t exist
  • Burrows – Are you suggesting counties are preaching doom and gloom to kill a bill?
    • Would never suggest this
  • Also need to consider that this land pays less in taxes, but also receives less in services

 

Scott Snodgrass, Self – For

  • Would like to see Texas lead the way on this as urban agriculture is growing, this is one way we could support this
  • Can produce more per acre & have larger impact with smaller parcels, but still not get ag valuation; very easy to see the difference & Comptroller guidelines will help

 

Skip Connett, Green Gate Farm – For

  • Shares experience of struggling to get ag exemption for Bastrop farm; Bastrop had a 20-acre threshold to meet production limits, but not reflective of reality of growing, had to protest the valuation
  • Vegetable production needs to be included & include organic productions methods, minimal acreage standards need to be specified & can differ based on crop, appraisers and other involved agencies need to share researcher and get educated about organic farming

 

Rep. Rodriguez closes

  • Bill is about fairness and consistency, is familiar with a farm that needed to shut down due to the tax burden

 

HB 97 left pending

 

HB 1937 (Goldman) Relating to a franchise or insurance tax credit for low-income housing developments.

  • Goldman – Presents statistics on poverty-level housing, Texas has very high rental rates & many cannot afford
  • Many cannot afford to work & live in their communities
  • Low income tax credit passed under Reagan was passed to give developers an incentive, states that do not utilize the credits lose them; Texas is not using all of the 4% credit available to it
  • HB 1937 proposes to change the 4% program by creating a state match for affordable workforce housing
  • No immediate fiscal note
  • This bill was introduced last session and passed Senate, but ran out of time to reach the House

 

Alex Johnson, InState Partners – For

  • 8 of the top 25 least affordable cities to live in are in Texas, many local newspapers have run stories about high hours needed to afford rent
  • Bill creates a state match for 4% federal program that will draw in more private and federal dollars to the state to create more units and hopefully alleviate some affordable housing issues
  • Credit will not kick in for 3 years, applications must filter TDHCA, projects must be built and filled before developers get credits
  • Units must be mixed development
  • Other states have created new programs (Oklahoma, Nebraska, Colorado, etc.)
  • Communities see large additional investment and benefits to community wellness
  • Shaheen – I’m familiar with the 9%, what role would the cities and counties play in approvals?
    • It follows the same structure as now, infrastructure is already in place and TDHCA can assume ownership of program
  • Shaheen – So a city or county can submit a letter in favor, but cannot submit letters in opposition; need to look at ability of city or county to communicate disapproval, though not something this bill addresses

 

HB 1937 pending

 

HB 1978 (Harris) Relating to the repeal of the additional ad valorem taxes imposed as a result of certain changes in the use of agricultural or open-space land.

  • Harris – Shares anecdotes of situations experienced in his business practice where families lose ag exemption and are surprised by very high taxes; can disrupt inheritance, sales, etc.
  • This bill goes beyond that aspect, looking forward to work with other authors
  • Burrows – Number of bills shows this is an issue people are contending with

 

Marvin Jolly, Texas Realtors – For

  • Absolutely in support of repeal of these taxes, regardless of if this is on change of use or sale
  • Provides history of these taxes, legislature instituted the current system of 5 years & 7% in the 1970s, but interest rates have changed since then
  • Small homeowners are essentially victims of systematic equity theft, opportunities exist for homeowners when land is acquired at more reasonable cost, local communities will have a higher tax base from increased development

 

HB 1978 left pending

 

HB 1525 (Burrows) Relating to the administration and collection of sales and use taxes applicable to sales involving marketplace providers.

  • Burrows – E-commerce has grown significantly in recent years, large retailers allow individuals to easily sell products through their marketplace
  • HB 1525 clarifies sales and sue tax obligations for owners and operators of electronic sales, agreed to by key stakeholders
  • Defines marketplace, marketplace seller, and marketplace providers, requires provider to collect sales tax, and sources consumption at location purchaser takes possession of the item

 

Kerry Barton, Comptroller’s Office – Resource

  • Provided members with a PowerPoint presentation on HB 1525
  • Have worked with many of the stakeholders & will continue to in implementation, marketplace platform providers are in a new role for sales that are technically not theirs, looking to address their concerns
  • There are some conversations that could allow small marketplace providers out of this set up if they have, have been talking to some stakeholders to address concerns through rulemaking
  • Shaheen – So Uber Eats is a service, is this taxable?
    • Provide a similar service to what Amazon provides to third party sellers
  • Shaheen – If I buy something online I’m charged Texas sales tax correct?
    • Not necessarily, a lot of these types of issues are being addressed state-by-state
    • Wayfair court decision ruled that Texas could require remote sellers to begin to collect Texas sales tax
    • Amazon unfortunately is not the best example as it was already located in Texas, likewise many other large retailers
    • We now have the ability to require retailers not in Texas to collect taxes
  • Shaheen – Based on my presence in Texas?
    • Yes
  • Shaheen – For sales of goods?
    • And some services, allows collection for things not otherwise taxable
    • Tax is always due, buyer always had the obligation to pay use tax, but Comptroller did not have the resources to collect
  • Shaheen – Responses have given me some comfort, don’t want to create new taxes on services
    • Uber Eats is selling food through their platform
  • Shaheen – Are they selling food or the delivery?
    • Food is ordered & delivery service is part of that, Uber Eats actually pays restaurants tax due on taxable items
  • Shaheen – My main concern is that we are not creating any new taxes on services
    • Correct, this bill is administrative and does not expand sales tax base
  • Guillen – How do you collect tax if they are buying from some other country?
    • If sales are through marketplace platforms, then the platform can begin collecting taxes on those sales
    • Complements Wayfair as it would be difficult for Texas to enforce against all discreet sellers, but can involve marketplace providers
    • Basically, speeds up compliance by making marketplace providers responsible for collecting the tax and state only needs to track one or two collectors
  • Guillen – What percentage of sales go through these platforms?
    • More than 50% probably based on research, many sell through multiple channels
  • Guillen – If I am in Rio Grande City Texas & I buy something through Amazon, how much tax do I pay?
    • If you’re buying from Amazon then you pay state & local tax, Amazon collects base don where they ship the item
    • If the sales are by a third party seller selling on their platform, then no taxes are collected, bill would have Amazon begin collecting on all those third party sales as well
    • Have spoken with Ebay, Etsy, Wal Mart, Google, etc.
  • Guillen – So instead of changing rate based on location, this bill provides a standard?
    • No, that is a different bill

 

Casey Mock, Amazon – For

  • Working on this type of legislation in 30+ states currently, Amazon is heavily involved in Texas & allows sellers, etc. to sell to other states and countries through the platform
  • Amazon collects tax on third party sales in 9 states with current laws
  • Customers and sellers are confused about tax requirements, HB 1525 provides clarity on this issue & prevents state from expending unnecessary resources to collect taxes
  • HB 1525 will level playing field for all retailers
  • Guillen – What percentage of internet sales come from platforms like yours?
    • Can only speak to our own, half of our sales are through the Amazon marketplace

 

Dale Craymer, Texas Taxpayers and Research Association – For

  • Bill is not new taxes, but collects taxes that are lawfully due currently; levels playing field between online retailers and brick & mortar stores

 

John Krohl, Avenu Insights – For

  • HB 1525 levels the playing field, Comptroller has had a very inclusive approach

 

HB 1525 left pending

 

HB 2153 (Burrows) Relating to a single local use tax rate as an alternative to combined local use tax rates for computing the amount of local use taxes remote sellers are required to collect and to the allocation of tax revenue collected at that rate.

  • Burrows – Follows Wayfair decision, Texas has thousands of different taxing units with differing local rates that could make collection burdensome
  • HB 2153 will provide simplified option for remote sellers to collect, based on average local rate @1.75%

 

John Krohl, on behalf City of Humble – For

  • City likes the bill & understands why Comptroller is taking this option, also avoids possible litigation
  • Might be more effective to maybe go to a destination rate rather than blended rate, but this is quite difficult at the moment

 

HB 2153 left pending

 

HB 1188 (Hefner) Relating to the appraisal of land for ad valorem tax purposes as qualified open-space land following a transfer between family members.

  • Hefner – Eases burden on open-space land transfer between family members by exempting them from re-application for ag valuation
  • Only affects requirement for new application for ownership changes between family members, specifies that must be in second degree by affinity or third degree by consanguinity
  • Provides for a motion to be filed to change appraisal roll, property owner has burden to prove that use has not changed and has not transferred between family members
  • Guillen – So it allows individuals to not have to renew ag exemption if they are receiving land from a family member after they pass away or similar?
    • Correct, there is a timeline and a small penalty to protect against this running rampant

 

HB 1188 left pending

 

HB 1970 (Hefner) Relating to the additional tax imposed on land appraised for ad valorem tax purposes as qualified open-space land if a change in use of the land occurs.

  • Hefner – Applies to rollback fee, changes rollback fee year threshold from 5 to 2 years
  • A lot of bills are similar, would like support for ours or would support other measures that move

 

HB 1970 left pending

 

HB 1802 (Bohac) Relating to the deadline for filing a request for binding arbitration of certain appraisal review board orders.

  • Bohac – Property owners have two options for appealing appraisal, can pursue in district court or pursue arbitration for property below $5m within 45 days of ARB order determining property value
  • District court deadline is 60 days & two deadlines is confusing for property owners; HB 1802 changes arbitration deadline from 45 days to 60 days

 

Michael Henry, Ryan LLC – For

  • Don’t want to make this a solely Harris issue, but for tax year 2018, there were 4290 request for arbitration, 50% filed in Harris County
  • Supports standardizing deadlines

 

HB 1802 left pending

 

HB 1703 (Shaheen) Relating to the eligibility of a person to serve on the appraisal review board of an appraisal district.

  • CS laid out
  • Shaheen – Currently, members serving 3 terms must sit out for 1 year before being able to run again
  • HB 1703 changes this by making members ineligible after their 3 terms end, essentially a term limit
  • Some members are sitting for very long periods on ARBs, questions arise over whether this is proper or undermines integrity of the system
  • CS removes bracket, originally had bracket for counties about 550k, but current law has a bracket for 120k and CS tacks to that

 

Michael Henry, Ryan LLC – For

  • ARB members are appointed for 2 years terms, can serve for up to 6 years and then must sit out; observing the same set of people serving for 10 or 12 years
  • Looking to reseed ARBs with newer members not as familiar with district with improved perception of non-bias
  • ARB should be independent appraiser

 

CS withdrawn, HB 1703 left pending

 

HB 1704 (Shaheen) Relating to the eligibility of a person for appointment as an arbitrator in a binding arbitration of an appraisal review board order.

  • Shaheen – There is currently a sit-out period for those who have served as arbitrators who have served the district or the ARB
  • Reduces sit-out from 5 years to 2 years;
  • Previous legislature raised ceiling for non-homestead arbitration from $3m to $5m and increased sit-out period reduced available arbitrators, HB 1704 seeks to reduce increased waiting period and timelines due to previous action

 

Michael Henry, Ryan LLC – For

  • Increase in arbitration value has increased number of applications filed, 5 year sit out period diminished number of potential arbitrators when demand was increasing
  • Sit out period is warranted, and 2 years makes sense
  • Ryan LLC is still working out arbitrations from 2018 tax year despite expecting valuations from 2019 soon

 

HB 1704 left pending

 

HB 2338 (Noble) Relating to the exemption from the taxes imposed on the sale, use, or rental of a motor vehicle for certain motor vehicles used for religious purposes.

  • CS laid out
  • Noble – Seeks to amend tax code to clarify definition of motor vehicle use for religious purposes and remove redundant language
  • Current definition is cumbersome and confusing for religious organizations trying to determine if sale, rental, or use qualifies
  • CS removes the words “or other person” to avoid confusion

 

HB 2338 left pending

 

HB 1254 (Murphy) Relating to the eligibility of land secured by a home equity loan to be designated for agricultural use for ad valorem tax purposes.

  • Murphy – Repeals portion of Tax Code in conflict with state constitution; Tax Code has provision prohibiting using ag properties as collateral for home equity loans, should have been addressed in 2017 when constitutional amendment was passed
  • HB 1254 repeals the provisions & ensures state law matches the state constitution

 

John Fleming, Texas Mortgage Bankers Association – For

  • Clean up language, should have caught this last session when working on constitutional amendment

 

Marvin Jolly, Texas Realtors – For

  • Bill is in line with spirit of voter referendum in 2017

 

HB 1254 left pending

 

HB 614 (Murphy) Relating to the additional tax imposed on land appraised for ad valorem tax purposes as agricultural, open-space, or timber land if the land is sold or diverted to a different use.

  • Murphy – Another bill about the claw back provision for property, had lots of good testimony on this concept earlier
  • Looking to eliminate the 7% penalty, essentially a punitive measure for paying taxes
  • Dynamic fiscal note could shed some light on this

 

Scott Norman, Texas Association of Builders – For

  • For every $1k you raise the minimum home price, 22k are priced out of homeownership, many negatively impacted by imposition of this tax & appreciate anything that can be done to reduce burden

 

Frank Murphy, Wynne Jackson, Dallas Builders Association – For

  • On the interest rate, has equated to 20%+ on total tax bill and can range higher per property, interest is very significant component associated with tax bill
  • Taxing entities also do not have certainty to forecast, no consideration for how revenue is treated through rollbacks & reducing rollbacks should not have impact

 

Marvin Jolly, Texas Realtors – For

  • Could help developers, provide more affordable housing, and remove gridlock; in favor of interest component and decreasing rollback period

 

Rep. Murphy closes

  • When we designed this bill, we left the taxes for all the jurisdictions & only addressed the penalty
  • Has a fiscal note, but maintains spirit of what we’re trying to do
  • In the Tax Code, says that interest penalties do not apply in sales to political subdivisions or the state of Texas; trying to get a deal for private buyers as good as public buyers

 

HB 614 left pending

 

HB 2179 (Wray) Relating to the grounds for imposing certain sanctions on certain persons for engaging in certain conduct in connection with the appointment of members of or the functions of appraisal review boards.

  • Wray – ARB members can be removed for cause under Tax Code, evidence requirement is clear & convincing evidence
  • Lowers evidence bar to preponderance of the evidence, clarifies that evidence that would warrant removal of ARB member can be discussed with administrative judges in certain cases
  • No need for clear & convincing standard to remove bad actors

 

Paul Pennington, Citizens for Appraisal Reform – For

  • Provides history of administrative judge appointments and ARB member removal process
  • Murphy – To understand some of the process, are there a lot of these cases that can’t meet the evidentiary standard?
    • Homeowners will not have evidence of repeated bias or misconduct from one appeal, clear & convincing evidence is high from this aspect
  • Murphy – So they don’t even rise to being adjudicated in some form?
    • Have a case currently where a response was not received
  • Murphy – Was looking for statistics on how many proceed to final resolution
    • Appraisal districts might have examples of someone being removed, but I have not heard instances of member being removed for misconduct
    • Legislature recognized this issue in 2015, but standard was too high
    • No remedies exist for many property owners now, this is giving them a remedy

 

Rep. Wray closes

  • Burrows – Trying to think of other instances with clear & convincing standard, punitive damages, child custody, etc.?
    • I think child custody is correct
  • Burrows – Seems rare to have this standard
    • It is rare, also not well defined

 

HB 2179 left pending

 

Committee adjourned