Property Taxes in Disaster Areas and During Droughts
If requested by a federal, state, or local government emergency management authority, a chief appraiser must provide information and assistance pertinent to disaster mitigation or recovery, including assisting in the estimation of damage from an actual or potential disaster event (Tax Code §6.053).
When requested by a local taxing unit, an appraisal district is required to complete a reappraisal as soon as practicable of all property damaged in a disaster if the area is declared a disaster area by the Governor (Tax Code §23.02). The appraisal record must include the date of the disaster; the appraised value of the property after the disaster; and if the reappraisal was not authorized by all taxing units in which the property is located, an indication of the taxing units to which the reappraisal applies.
The local taxing unit requesting the reappraisal must pay all the costs involved. If more than one taxing unit requests the reappraisal, all requesting taxing units share the costs based on the proportion of taxes imposed in the affected locality in the preceding year.
For reappraised property, the taxes are prorated for the year the disaster occurred. The local taxing unit assesses taxes prior to the date the disaster occurred based on the market value as of Jan. 1. Beginning on the date of the disaster and for the remainder of the year, the taxing unit applies its tax rate to the reappraised market value of the property.
Tax Code §11.135 provides that a property owner may continue to receive the homestead exemption on the structure, land, and improvements when the residential structure is rendered uninhabitable or unusable by a casualty or by wind or water damage while the owner constructs a replacement structure on the land.
The owner may not establish a different principal residence for which the owner receives a homestead exemption during that period and the owner must intend to return and occupy the structure as the owner’s principal residence.
To continue receiving the exemption, the owner must begin active construction of the replacement qualified residential structure or other physical preparation of the construction site. The active construction or other physical preparation must begin no later than one year after the owner ceases to occupy the former residential structure. A property owner must notify an appraisal office within 30 days after the date that the eligibility for continuation ends (34 TAC §9.416). The continuation cannot be for more than two years.
If the owner sells the property prior to completing the replacement qualified structure, the property owner is subject to additional taxes and interest.
If a residence homestead is rendered uninhabitable or unusable by a casualty or by wind or water damage, the replacement structure owned by an individual who is 65 years of age or older or disabled may continue to receive a limitation on school taxes (Tax Code §11.26) and a limitation on taxes imposed by counties, municipalities and junior college districts (Tax §11.261).
However, the replacement structure will be subject to an increase in tax if:
- the square footage of the replacement structure exceeds that of the replaced structure as that structure existed before the casualty or damage occurred; or
- the exterior of the replacement structure is of higher quality construction and composition than that of the replaced structure.
Tax Code §23.23 provides for the limitation on the appraised value of residence homesteads to 110 percent of the appraised value for the preceding tax year plus the market value of all new improvements to the property. If an improvement is a replacement structure for a structure that was rendered uninhabitable or unusable by a casualty or by wind or water damage, then the structure is not considered a new improvement.
If the replacement structure exceeds the square footage of the original structure or the exterior of the replacement structure is of higher construction quality and composition than the original structure, then the replacement structure is considered a new improvement and is taxed accordingly. Beginning in tax year 2014, a replacement structure is not considered a new improvement to the extent necessary to satisfy square footage or the quality and composition of the exterior requirements of a disaster recovery program administered by the General Land Office that is federally funded.
Tax Code §23.522 provides that the eligibility of land for open space appraisal does not end because the land ceases to be devoted principally to agricultural use to the degree of intensity generally accepted in the area if: (1) a drought declared by the Governor creates an agricultural necessity to extend the normal time the land remains out of agricultural production; and (2) the owner intends to resume the use the land in the manner and to the degree of intensity at the end of the declared drought.
Chief appraisers and tax assessor-collectors may waive certain penalties for failing to file or timely file a declaration or tax statement for motor vehicles, dealer’s heavy equipment, or retail manufactured housing inventory (Tax Code §23.129). A chief appraiser or collector may waive a penalty only if the taxpayer’s failure to file or timely file the declaration or statement was a result of a disaster or an event beyond the taxpayer’s control destroyed the taxpayer’s property or records. The taxpayer must file a written application for the waiver not later than the 30th day after the date the declaration or statement was required to be filed and the taxpayer must otherwise be in compliance with Tax Code Chapter 23.
Under Tax Code §26.08, if a school district adopts a tax rate that exceeds the rollback tax rate, the registered voters of the district determine whether to approve the adopted tax rate at an election. When a school district needs to increase expenditures because of a disaster (including a tornado, hurricane, flood, or other calamity) and the Governor has requested federal disaster assistance for the school district’s area, an election is not required to approve the tax rate for the tax year after the disaster. This does not include a drought.
Homeowners and some small businesses whose property is damaged in a disaster and are located in a designated disaster area may pay their taxes in four installments pursuant to Tax Code §31.032. For small businesses, this includes real and personal property that is owned or leased by a business entity that has gross receipts under a threshold adjusted by the Comptroller.
The installment payments apply to taxes imposed on the property by all taxing units on the tax bill before the first anniversary of the disaster. The property owner must pay at least one-fourth of the taxes before the Feb. 1 delinquency date and provide notice that the person will be paying the remaining taxes in installments. The remaining payments are due before April 1, June 1 and Aug. 1, without any penalty or interest. If an installment payment is missed, the owner faces a 6 percent penalty and also must pay interest at 1 percent for each month of delinquency.