Listed below are 2018 decisions and opinions concerning various property tax issues. The list does not include all opinions and decisions concerning property tax. The summaries are provided by the Comptroller's office as a public service intended solely as an informational resource. The summaries are not intended as substitutes for or interpretations of the opinions and decisions summarized and should not be relied upon as such. The information provided neither constitutes nor serves as a substitute for legal advice. Questions regarding the meaning or interpretation of any information included or referenced herein should, as appropriate or necessary, be directed to an attorney or other appropriate counsel.
The Texas Supreme Court decided three issues under the Texas Property Tax Code: (1) the interpretation of Subsection (b) of Section 25.25 concerning a determination of ownership...that does not increase the amount of tax liability; (2) whether an agreement between a chief appraiser and a property owner under Section 1.111(e) may be voided if induced by fraud; and (3) whether a purported owner challenging ownership as reflected on the appraisal roll is entitled to attorney's fees under Section 42.29.
The Court determined that, because a person's tax liability exists independently of the appraisal roll or tax bill and arises out of actual ownership, the restriction against increasing "the amount of tax liability" under Section 25.25(b) refers to an increase in the appraised value of a property that would increase the corresponding tax liability attached to the property, and is not interpreted to mean an increase in any person's tax liability.
The court also held that the terms of an agreement under Section 1.111(e) do not and cannot determine actual ownership as a legal matter, and that the validity of a Section 1.111(e) agreement may be subject to attack on the basis of fraud, even if the agreement is not otherwise subject to review or rejection.
Lastly, the court held that, because Subsection (b) of Section 25.25 involves neither a motion nor a determination by an appraisal review board, recovery of attorney's fees under the relevant portion of Tax Code Section 42.29 does not apply to Subsection (b) of Section 25.25 but rather applies to motions under Subsections (c) and (d) of Section 25.25.
In this landmark decision, the Texas Supreme Court held that article VIII, section 1(b) of the Texas Constitution – which provides that property "shall be taxed in proportion to its value" – does not mean "market value." As a result, the "legislature is 'free to adopt the mode of ascertaining the value of any class of property by such method as it might deem best.'"
The two issues in this ad valorem tax case concern the constitutionality of a method for appraising the value of heavy equipment – natural-gas compressors – as well as the taxable situs for this equipment.
The Galveston County appraisal district challenged the constitutionality of Tax Code Section 23.1241, the state law that applies to leased heavy equipment owned by dealers and "requires appraisal based on the lease revenue the compressors generated during the previous tax year divided by twelve." Compressors that are used by the owners themselves are appraised for tax purposes based on their market value as of January 1.
The appraisal district argued Tax Code Section 23.1241 violates the Article VIII constitutional requirements that taxation "shall be equal and uniform" under section 1(a) and that property "shall be taxed in proportion to its value" under section 1(b).
"The county argues," the court wrote, "that for constitutional purposes, 'value' under article VIII, section 1(b) means the actual market value a willing buyer would pay a willing seller for the compressors at issue." In reviewing the text of this constitutional provision and its own case law dating back to 1907, the Texas Supreme Court held that neither required the legislature to tax only on market value. In quoting from its decision in Mo., K. & T. Ry. Co. of Tex. v. Shannon, the court wrote that section 1(b) "would seem to leave the Legislature free to adopt the mode of ascertaining the value of any class of property by such method as it might deem best." 100 S.W. 138, 144 (Tex. 1907).
The county also argued that the statute's "divide-revenue-by-twelve formula" violated the "equal and uniform" provision "because other compressors-those owned rather than leased by their users-are still taxed based on their market value." The supreme court saw "no argument" why the legislature's creation of two "different tax classes" regarding the same property – "[t]hose who own compressors for their own use and those who own them to lease out " – was impermissible.
On the issue of taxable situs for the compressors, the high court reversed the court of appeals' decision and held Tax Code Section 21.02(a) is "a default rule determining taxable situs for tangible personal property generally" and does not control the taxable situs of the compressors covered by Tax Code Section 23.1242. Rather, "sections 23.1241 and 23.1242 are read to create a comprehensive statutory scheme containing its own taxable-situs rules." As a result, the business location and storage yard to which the inventory of compressors was assigned was deemed to be the taxable situs for the compressors at issue.
Shortly after the Maverick County Commissioners' Court approved effective and rollback tax rates and adopted a tax rate for 2016, the county tax assessor discovered that $3 million in sales tax revenue was excluded in the calculation of the 2016 rollback tax rate. The formula prescribed in the Tax Code had been correctly applied, but the numbers used in the calculation were erroneous. Upon discovering this error, the tax assessor immediately notified the Commissioners' Court, which, in turn, rescinded the 2016 adopted tax rate, but did not adopt a new tax rate. Because Maverick County failed to timely adopt a tax rate, and since the county's 2016 effective tax rate was lower than the 2015 adopted tax rate, Maverick County's 2016 effective tax rate became the 2016 adopted tax rate. The Maverick County Commissioners' Court ratified the 2016 adopted tax rate, but the previously adopted 2016 rollback tax rate remained unchanged, despite the discovery of the calculation error.
On December 22, 2016, Ethelvina Felan filed a petition seeking an election to roll back the tax rate and on February 21, 2017, Felan filed a petition for writ of mandamus and injunction seeking to compel Maverick County officials to properly calculate the 2016 rollback tax rate and hold a rollback election. Maverick County filed a plea to the jurisdiction and motion for summary judgment on the grounds that Felan failed to timely file an injunction pursuant to Tax Code section 26.04(g), thus depriving the court of jurisdiction to consider the claims. The trial court denied Maverick County's pleas to the jurisdiction and summary judgment and granted summary judgment in favor of Felan.
The San Antonio court of appeals reversed the trial court's order and dismissed Felan's underlying lawsuit for lack of jurisdiction. It held that Tax Code §26.04(g) is the only statute that provides standing to challenge the miscalculation of the rollback tax rate:
In the instant case, Felan's complaint rests on the miscalculation of the rollback tax rate. Absent a recalculation of the rollback tax rate, Felan could not allege or establish the 2016 adopted tax rate exceeded the 2016 rollback tax rate. As a result, Felan's only cause of action against Maverick County and its officers is provided by section 24.06(g), and her exclusive remedy was the ability to seek an injunction prohibiting Maverick County from adopting the tax rate. Standing under section 24.06(g), however, requires the taxpayer to file the injunction prior to adoption of the tax rate. By her own admission, prior to the County's adoption of the tax rate, Felan knew about the miscalculation and that the temporary injunction was the proper avenue in which to challenge the miscalculation, but she chose not to act. Because Felan failed to comply with section 24.06(g), which was her exclusive remedy for challenging Maverick County's miscalculation of the rollback tax rate, the trial court was without jurisdiction to hear her claims.
Opinion No. KP-0215 (PDF)
(Sept. 24, 2018)
Re: Whether a municipality is authorized to adopt a residential homestead property tax exemption that establishes a floor for the exemption in an amount greater than $5,000, and, if not, whether an appraisal district may disregard or modify the exemption (RQ-0242-KP) (PDF)
The Attorney General set forth the following conclusion in his summary:
Subsection 11.13(n) of the Tax Code provides that if a municipality adopts a tax exemption percentage that produces an exemption of less than $5,000 when applied to a particular residence homestead, the individual is entitled to an exemption of $5,000 of the appraised value. Because article VIII, section 1-b(e) of the Texas Constitution and the Legislature establish a legislatively-defined floor for the exemption in an amount of $5,000, a court would likely conclude that a home-rule municipality lacks authority to increase the floor above $5,000. Municipalities desiring to increase the homestead exemption must do so by raising the tax exemption percentage, up to twenty percent, as authorized in the Constitution.
The Legislature charged the chief appraiser with determining an individual's right to a property tax exemption, and the Commission of Licensing and Regulation prohibits appraisers from engaging in an official act that violates the law. If a taxing unit adopts an unlawful exemption, the appraiser maintains both a legal and ethical duty to determine that the exemption is inapplicable to the extent it violates the law.
Opinion No. KP-0192 (PDF)
(April 23, 2018)
Re: Procedures regarding reappraisal of property after a disaster (RQ-0188-KP) (PDF)
The Attorney General set forth the following conclusion in his summary:
Pursuant to subsection 23.02(c) of the Tax Code, a taxing unit authorizing a disaster reappraisal must pay the appraisal district all the costs of making the reappraisal. Appraisal districts may not capitalize on a disaster by requesting additional funds from taxing units for expenses the appraisal district would incur regardless of the disaster. To the extent that an appraisal district incurs additional costs resulting from a disaster reappraisal, it may require participating taxing units to fund those extraordinary expenses.
Section 25.19 of the Tax Code requires a chief appraiser to deliver a written notice to the owner of each property that was reappraised in the current tax year. The Legislature made no exception to this requirement for disaster reappraisals conducted pursuant to section 23.02 of the Tax Code. Thus, a court would likely conclude that a chief appraiser must provide notice to a property owner of a reappraisal when the owner's property value decreases as a result of the disaster reappraisal.
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