Truth-in-taxation is a concept embodied in the Texas Constitution that requires local taxing units to make taxpayers aware of tax rate proposals and to afford taxpayers the opportunity to roll back or limit tax increases. 1 Property owners have the right to know about increases in their properties' appraised value and to be notified of the estimated taxes that could result from the new value. 2
Creating a budget and adopting a property tax rate to support that budget are major functions of a taxing unit's governing body. This is accomplished by following truth-in-taxation requirements to ensure the public is informed of any increases. The type of taxing unit determines its applicable truth-in-taxation requirements.
If certain taxing units fail to comply with the hearing, notice or tax rate adopting process in good faith, a property owner in the taxing unit may seek an injunction to stop the taxing unit from sending tax bills until it convinces the district court that it has complied with the law. 3 A property owner must act to enjoin collections before the taxing unit delivers substantially all of its tax bills. 4 This injunction process does not apply to cities, counties, small taxing units or water districts. 5
By providing this information, the Comptroller's office provides technical assistance and not legal advice. Taxing units should consult legal counsel for questions about the meaning of statutes, notice and hearing requirements and other matters that are unclear in the law.
Generally, the governing body must take the following actions:
The taxing unit must identify its needs and draft a budget to meet those needs. 6 To assist the taxing unit in this process, the chief appraiser prepares and certifies an estimate of the taxable value of property in that taxing unit to the tax assessor by April 30 (unless the date falls on a weekend or holiday). 7 To determine the amount of property taxes necessary to fund that budget, the taxing unit must decide:
Truth-in-taxation requires most taxing units to calculate two rates after receiving a certified appraisal roll from the chief appraiser - the effective tax rate and the rollback tax rate. 8 The type of taxing unit determines which truth-in-taxation steps apply.
The effective tax rate enables the public to evaluate the relationship between taxes for the prior year and for the current year, based on a tax rate that would produce the same amount of taxes if applied to the same properties taxed in both years. 9
Although the actual calculation can become more complicated, a taxing unit's effective tax rate is a calculated rate generally equal to the last year's taxes divided by the current taxable value of properties that were also on the tax roll last year. 10 The resulting tax rate, used for comparison only, shows the relation between the last year's revenue and the current year's values.
The rollback tax rate is a calculated maximum rate allowed by law without voter approval. 11 Most taxing units calculate a rollback tax rate that divides the overall property taxes into two categories - M&O and debt service. 12
With the exception of school districts, the rollback tax rate provides the taxing unit with about the same amount of tax revenue it spent the previous year for day-to-day operations, plus an extra eight percent increase for operations and sufficient funds to pay debts in the coming year. 13
School districts add four cents to the lesser of the compressed operating tax rate or the effective M&O rate to get their highest M&O rate. They then add the debt rate to get the final rollback tax rate. 14 To calculate the effective M&O rate, school districts should consult the Texas Education Agency.
For all taxing units, the debt rate portion of the rollback tax rate is the current year's debt payments divided by the current year's property values. 15 The debt rate may rise as high as necessary to cover debt expenses.
Most taxing units are required to publish their calculated effective and rollback tax rates or mail them to each property owner. School districts must publish a notice before their public hearings as required by the Education Code. 16 Counties and cities must meet publishing requirements in the Local Government Code. 17 Water districts must comply with requirements defined in the Water Code. 18 Small taxing units are allowed to file one simplified notice before adoption of a tax rate in compliance with Tax Code requirements or, if they are cities or counties, follow the notice requirements in the Local Government Code. 19 All other taxing units are required by the Tax Code to publish multiple quarter-page notices regarding the public hearings and before the meeting scheduled for the vote to adopt a tax rate. 20
After publishing the required notice, taxpayers must have the opportunity to express their views on tax increases at hearings. 21 The type of taxing unit determines the hearing requirements.
Small taxing units have no public hearing requirement. 22 School districts and water districts hold one public hearing. 23 All other taxing units must hold two public hearings. 24 A quorum of the governing body must be present at all hearings. 25 All public hearings and public meetings must be open to the public and follow Texas Open Meetings Act requirements. 26
A taxing unit other than a water district must adopt its tax rate before Sept. 30 or by the 60th day after the taxing unit receives the certified appraisal roll, whichever date is later. 27
If a taxing unit misses the deadline, the governing body must ratify either the effective tax rate or last year's tax rate, whichever is lower, as the adopted tax rate before the fifth day after establishing that tax rate. 28
If a taxing unit other than a school district adopts a tax rate that exceeds the rollback tax rate, voters in the taxing unit may petition for an election to limit the tax increase. 29 A school district must automatically hold a tax rate ratification election (TRE) if the trustees vote to adopt a tax rate that exceeds the rollback tax rate. 30 A successful election limits the taxing unit's current tax rate to the rollback rate. 31
In 2015, the Texas Legislature passed House Bill 855, which requires state agencies to publish a list of the three most commonly used Web browsers on their websites. The Texas Comptroller’s most commonly used Web browsers are Google Chrome, Microsoft Internet Explorer and Apple Safari.