CHAPTER 4
Taxation
Once the appraisal review board approves the appraisal records, the chief appraiser prepares an appraisal roll for each taxing unit. An appraisal roll lists all the taxable property within the unit's boundaries. The appraisal district's job is then finished for the current year. It has, at least in theory, provided a set of equal and uniform property values for the use of all local taxing units.
4.1 The local taxing unit's role
The elected officials of each taxing unit adopt tax rates annually, generally in August or September. Several taxing units may tax your property, and all nonexempt property in the state is taxed by a county and school district. You also may pay taxes to a city or to special districts such as hospital, junior college or water districts. The tax roll is created when tax rates are applied to appraised values.
After receiving the appraisal roll, each governing body must decide what services they will provide in the coming year and determine how much money it will need to do so.
4.1.1 A local government's budget determines tax rate
As a taxpayer, it is important for you to understand how government spending affects the size of your tax bill. Changes in property values may affect your tax bill, but they do not necessarily increase or decrease the total amount of taxes paid to a taxing unit; that is determined by the taxing unit's budget.
Total taxes collected increase only when government spending increases. Truth-in-taxation laws give you a voice in decisions affecting your property tax rates.
The taxing unit must identify its needs and prepare a budget to meet them. To assist the taxing unit in this process, the chief appraiser prepares and certifies to the tax assessor-collector, by April 30, an estimate of the taxable value of property within that taxing unit. The taxing unit then must decide how much property tax revenue is necessary to fund that budget and, based on current year's values, what tax rate is needed to produce that amount. The taxing unit also must determine the tax revenue it will need to pay its long-term debt.
The taxing unit must hold a public hearing on the proposed budget, and publicize its date, time and location. The proposed budget must be made available for your inspection. Generally, the governing body must set the public hearing for a date after the 15th day of the month following the month in which the budget is prepared, but before the date on which taxes will be levied by the taxing unit. If the taxing unit has a website, it must post its proposed budget there.
If your city or county proposes a budget that will require more property tax revenue than in the preceding year, it must include the amount of the proposed increase in its public notice of the budget hearing. This also must appear in large type on the cover page of the budget. The governing body must vote on the budget separately from its vote on the tax increase.
4.1.2 Local governments must calculate an effective tax rate
Beginning in early August, most taxing units take the first step toward adopting a tax rate by calculating and publishing the effective and rollback tax rates. School districts may choose to adopt a tax rate before the adoption of a budget. The chief appraiser of its appraisal district must have certified to the school district's tax collector an estimate of the school district's taxable property value.
The effective tax rate is the rate your local government needs to generate about the same amount of revenue it received in the year before on properties taxed in both years. If property values rise, the effective tax rate will go down, and vice versa. The actual tax rate, however, depends on the budget adopted by the governing body, whether it is a commissioners court, city council, school board or board of directors of a special purpose district.
The rollback rate, by contrast, would provide cities, counties and special districts with about the same amount of tax revenue it spent in the previous year for day-to-day operations, plus an extra 8 percent increase for operating expenses and sufficient revenue to pay its debts in the coming year. The rollback rate for school districts authorizes an additional four cents.
Most taxing units must publish their effective and rollback rates in a local newspaper. If you believe that the taxing unit did not calculate and publish these rates or other required information in good faith, you can ask a district court to stop the taxing unit from adopting a tax rate until it complies with the law.
If your local government wants to increase its property tax rate above the lower of either the effective rate or rollback rate, it must publish a quarter-page notice in a local newspaper alerting you of special public hearings. The public hearings allow you to voice your opinions about the proposed tax increase and ask questions of the governing body. Before the hearing's end, the governing body must set a date, time and place for the tax rate's formal adoption. The taxing unit then must publish another quarter-page ad announcing the meeting to adopt the tax rate.
If you believe that your taxing unit has failed to comply in good faith with these requirements, you can ask a district court for an injunction to stop tax collections until the taxing unit complies with the law. You must do this before the tax collector has mailed a large portion of the tax bills.
4.2 Limiting a tax increase
If your local taxing unit adopts a tax rate higher than the rollback rate, you may petition for an election to reduce the tax rate to the rollback rate. If your school district adopts a tax rate above the rollback rate, you do not have to petition for an election, because the law requires the school district to hold an election to ratify the adopted rate. A rollback election is not required in a school district, however, if the tax rate increase is intended to pay for responses to a natural disaster.
Your petition calling for the local government to hold a tax rate rollback election must:
- use specific legal wording;
- be signed by at least 7 or 10 percent of the registered voters in the taxing unit, depending on whether the adopted tax rate raises more or less than $5 million for maintenance and operations taxes; and
- be presented to the taxing unit's governing body within 90 days after it adopts the tax rate.
Once your governing body receives a petition and finds that it is valid (or fails to act within the time allowed), it must order an election to be held on a date not less than 30 nor more than 90 days after the last day on which it could have acted to approve or disapprove the petition.
If a majority votes in favor of the tax rollback, the tax rate is reduced to the rollback rate immediately. For school districts, if a majority votes against ratifying the school district's adopted tax rate, the school district's trustees must adopt a rate not exceeding the rollback rate.