Print 🖨

The Senate Committee on Property Tax met on March 5 to take up and consider SB 955 relating to taxing unit challenges, SB 956 relating to corrections on rendition statements, and SB 1006 relating to the business personal property threshold.

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.

 

SB 955 (Bettencourt) Relating to the matters that a taxing unit is entitled to challenge before an appraisal review board.

  • Bettencourt – SB 955 prevents a taxing unit from challenging an ARB in the manner we saw with the City of Austin; this challenge was inappropriate
  • There were individual organizations that acted on behalf of the taxpayers that challenged the taxing unit on commercial values in Travis County; this was dismissed by the trial court and affirmed by the 3rd Court of Appeals, court noted that the taxing unit did not exhaust all administrative remedies
  • We will do many things to fix the tax code and this is one of them; cannot have taxing units walking into ARBs seeking to lose in order to file suit
  • 3rd Court of Appeals wrote that City of Austin decided to forego the administrative determination of the challenge and deprived the district of jurisdiction & constitutional challenge is a transparent attempt to debate issues of policy which are the prerogative of the legislature rather than the judiciary
  • Refile of SB 1906 from last session, seeks to remove ability of single taxing unit from challenging entire category of property in the district

 

Debbie Cartwright, Texas Taxpayers and Research Association – For

  • Basic premise of tax code was that there should be a separation of politics and influence on appraisals
  • As ARBs were new entities at creation, provision that allows taxing units to challenge was put in as a check on power, designed for very specific reasons such as exclusion of property, improper granting of exemption, etc.
  • Also included being able to challenge level of appraisal, this has led to mischief from the taxing units and removal would benefit the code
  • Provisions in the Tax Code prohibit taxing units from hiring an appraiser because of the recognition that this is the work of the appraisal district
  • By allowing challenge of appraisal level it allows taxing unit to challenge the appraisal
  • Challenges cost taxpayers thousands in legal fees, appraisal districts have had to defend themselves
  • Provisions in law ensure appraisals are proper: Property Value Study, Methods & Assistance Program, provision that allows Taxing Units to request performance audits, and taxing units may file suit in district court alleging appraisal districts are breaking the law
  • HB 955 would prevent political gamesmanship taxing units have used in recent years
  • Bettencourt – Multiple ways to do this right, but the way to do it wrong is to go to the ARB and seek to lose to spur judicial challenge
    • Lack of evidence in the Travis County case was a significant problem

 

Michael Henry, Ryan LLC – For

  • Tax Code already contains provision prohibiting taxing unit from engaging an appraiser, no reason not to pass HB 955
  • Other remedies exist, this is an important correction

 

SB 955 left pending

 

SB 956 (Bettencourt) Relating to the correction of an ad valorem tax appraisal roll and related appraisal records.

  • Bettencourt – Business personal property is difficult to value, currently required by April 15; taxpayers should be allowed to correct errors on rendition statements as with tax returns
  • Permits property owner or chief appraiser to correct error in value of personal property that is a result of an error or omission in a rendition statement
  • Changes apply only to motions to apply correct an appraisal roll on or after the effective date
  • Refile SB 1847 passed by the Senate last session

 

Michael Henry, Ryan LLC – For

  • Every year we run into instances where simple errors are made in rendition statements leading to severe overvaluing and significant increase to tax liability
  • Typically not noticed until the Fall & often an out-of-state taxpayer
  • Unless the error is more than 33 & 1/3% there is no remedy in Tax Code to correct mistakes
  • HB 956 would provide the remedy and targeted to very limited subset of taxpayers; excludes those who did not timely file, those who filed a hearing and had a protest, and those who had an informal hearing and value was established by written agreement
  • Bettencourt – In your practical experience you saw people trying to file rendition after rendition before the deadline
    • In my experience, the most common occurrence doesn’t become apparent until the tax bills are issued and property is over-taxed
    • Remedy is very targeted to very select group of taxpayers

 

SB 956 left pending

 

SB 1006 (Bettencourt) Relating to the exemption from ad valorem taxation of income-producing tangible personal property having a value of less than a certain amount.

  • Bettencourt – Under current law, taxpayers with less than $500 in business personal property do not have to pay taxes on the property; limit was set in 1995 & exception was created because cost was deemed to high and greater than tax due on the property
  • Have been trying to raise the exemption for several sessions, raising the exception from $500 to $2,500 to reflect modern appraisal cost
  • Essentially a property tax time relief for small business owners
  • LBB estimate cost to state of $2 million/year & would be offset by savings from not needing to collect small amounts
  • Refile of SB 730 from last session that passed the Senate

 

Dale Craymer, Texas Taxpayers and Research Association – For

  • SB 1006 is very simple, $500 threshold was set over 25 years ago and $2,500 is appropriate
  • In addition to savings by small businesses, there is also a significant compliance savings
  • Would suggest extending this to all tangible personal property, but likely not ready to deal with multi-billion fiscal note
  • There is a similar threshold set for mineral interests, would encourage revisiting this threshold as well
  • Hinojosa – We haven’t changed the $500 benchmark for some time, cost to enforce and collect property tax at this level is more expensive than revenue collected
    • Yes, property tax associated with $2,500 property is roughly $60, cost to various entities to collect this exceeds this
  • Bettencourt – On the $2,500, the actual incremental would be around $50 because we already have a $500 exemption
  • Bettencourt – Texas is a major taxer of business personal property, 37th out of 50 states in the nation
    • Yes, roughly 10 that don’t tax any business personal property, most also don’t tax inventory which is a sore spot for Texas as well

 

SB 1006 left pending

 

Committee adjourned