The Texas Government Code in Section 403.302 requires the State Comptroller to conduct an annual study to estimate the total taxable value of all property within each school district. This requirement is of primary importance because the state's distribution of several billion dollars in school aid depends in part on the Comptroller's findings.Property Classifications
As a part of this annual study, the code also requires the Comptroller to:
- use sales and generally accepted auditing and sampling techniques, and
- test the validity of taxable values and presume that appraisal roll values are correct when values are valid.
The Comptroller's test of "the validity of the taxable values assigned to each category of property by the appraisal district," as required by the Government Code, is accomplished by constructing a statistical margin of error about the Comptroller's estimate of value in each component school district. Values are presumed "valid" when they are within the error margin or when they are within an assigned tolerance range.
Section 5.10 of the Property Tax Code requires the Comptroller to determine annually the level and uniformity of property tax appraisals in each appraisal district by using data collected in the annual school district study discussed above. The school district study required by the Government Code and the appraisal district study required by Section 5.10 of the Property Tax Code are jointly referred to as the Comptroller's Property Value Study.
In Texas, state education aid is based in part on the per pupil wealth of a school district. The commissioner of education uses the Comptroller's estimates of taxable value to calculate the state funds each district receives.
Taxable value is the estimated property wealth of each school district for state funding purposes. It equals the market value of all property in a district, minus certain exemptions and deductions. The Comptroller's estimated taxable value reflects deductions for state-mandated homestead and disabled veterans' exemptions. Deductions also arise from reinvestment zones, freeport exemptions, productivity appraisal of qualified agricultural lands, the school tax ceiling for over-65 homeowners, and other state mandated exemptions.
In addition to estimating the wealth of each district, the Comptroller annually estimates the level and uniformity of property tax appraisals in each appraisal district. The level of appraisal shows whether the district has appraised typical properties at 100 percent of the legally required level (normally the market value). The uniformity measures indicate whether the appraisal district is appraising property uniformly within a category or from one category to another.
Under the Government Code, the agency must certify the preliminary findings of taxable value for each district before February 1 of the year following the year under study. The agency delivers the findings to districts and also certifies them to the commissioner of education. Districts that wish to protest their preliminary value findings must do so, by Comptroller rule, within 40 days after the date of preliminary certification.
The Comptroller must publish the findings of the appraisal district study and distribute copies to all appraisal districts and members of the Legislature. Although the Property Tax Code does not give appraisal districts the right to appeal study findings, the Comptroller allows appeals of level and uniformity measures in an effort to enhance fairness and accuracy.
School districts and appraisal districts submit protests in March. Staff reviews the data from each protesting district to correct clerical errors and other problems. Most protests are resolved during this informal process and do not require a formal hearing before a hearing examiner.
In May, Comptroller hearing examiners hear the remaining unresolved protests. After this process, districts may file exceptions to the hearing examiners' proposed decisions. Final reviews of the proposed decisions, based on the written exceptions, occur in June. How the findings of the Property Value Study are used in the school funding formula to determine state aid is described in Chapter 42 of the Education Code. If you have questions about state aid or the funding formula, contact the Texas Education Agency at 512/463-9238.
The Government Code and the Property Tax Code require the Comptroller to develop ratios and value estimates for property categories and to combine information on the various property categories into overall estimates.
The property categories generally studied are listed below.
The Comptroller has the discretion to group properties into any other category or subcategory necessary for the efficient and accurate completion of the Property Value Study.
A. Real Property: Single-family, Residential B. Real Property: Multifamily, Residential C. Real Property: Vacant Lots and Tracts D/E. Real Property: Acreage, Market Value and Farm and Ranch Improvements D1. Real Property: Acreage, Productivity Value F1. Real Property: Commercial G. Real Property: Oil, Gas and Other Minerals J. Real and Tangible Personal Property: Utilities L1. Personal Property: Commercial
There are several property categories for which the Comptroller does not develop ratios or value estimates. These categories are included in the study at the taxable value reported by the district. Districts may appeal these categories' reported values if they are inaccurate.
An explanation of the methods used in the school and appraisal district studies appear in the next sections.