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Texas Property Tax Issues Reviewed
General sessionsGeneral sessions at the 42nd Institute on Property Taxation/Comptroller’s Property Tax Division 22nd Annual Conference included a look at legislative issues for the 77th Texas Legislature, water rights, geographic information systems, and residence homestead appraisal limitations. The Austin conference, held October 30-31, 2000, was the joint effort of the Lyndon B. Johnson (LBJ) School of Public Affairs, the State Comptroller’s Property Tax Division (PTD), and property tax associations.
The program included two general sessions and concurrent workshops on a variety of property tax and management issues. Highlights of some of those sessions and workshops appear below.
e-Texas
Deputy Comptroller Billy Hamilton kicked off the conference with an overview of the Comptroller's e-Texas program. For more about e-Texas, see the Comptroller's Web site at <www.e-texas.org>.Listening
Dr. Steven A. Beebe from the Department of Speech Communication, Southwest Texas State University, spoke on the power of effective listening. Dr. Beebe pointed out barricades to effective listening in the property tax field, where communicating is so vital. Those barricades included suffering from information overload, deciding a topic is not interesting, becoming wrapped up in personal concern, being diverted by outside distractions, criticizing the way a message is delivered, and unchecked emotions.Geographic information systemsHe provided steps to achieve effective listening, including awareness of competing messages, action to focus and control emotions, importance of nonverbal messages, improvement in listening skills, and empathy.
Stan Reid, Financial Data Project Director for the Texas Association of Counties, and Sean Moran, STRATMAP Coordinator for the Texas Natural Resources Information System, addressed the important developments in geographic information systems (GIS) for appraisal districts. They updated the attendees about the progress of the state's digital orthophoto quadrangles (DOQs), to be completed statewide by August 31, 2001, except for some possible soil maps. The information will be available to county appraisal districts (CADs) on CDs, which store 650 megabytes of data.Legislative issuesFor more information about state resources available, the following sources were provided: <www.StratMap.org>, <clear.tamu.edu>, and <www.county.org/cip>. Or, contact Stan Reid at 512/478-8753 and Sean Moran at 512/475-2314.
At the Tuesday morning opening session, panelists from various property tax groups stated their expectations for the upcoming legislative session.Water rightsLee County Chief Appraiser Roy Holcomb, who serves as President of the Texas Association of Appraisal Districts, noted that appraisal districts would like to see full sales disclosure to assist districts with appraising property. He suggested that CADs would be agreeable to implementing such a program in stages, starting with residential property and raw acreage. Holcomb noted these other areas for possible changes, including: extending the filing deadline for the disabled veteran's exemption; extending the award of depository contracts from two years to four years; amending the timberland rollback provision to allow that changing timberland to be the owner's homestead does not trigger a rollback tax; clarifying that Section 25.25(d) for one-third over-appraisals does not apply to open-space land rollbacks; providing for waiving penalty and interest on a tax bill if the appraisal district does not correct a mailing address; and requiring full and accurate renditions for income-producing personal property.
Dale Craymer, representing the Texas Taxpayers & Research Association, stated that the taxpayer association did not plan to be very active this coming session in property taxes, as long as there was a reasonable balance between taxation and services. He stated that redistricting would take most of the Legislature's time and energy. One area that his association is working with, and hopes will not take legislative action, is the pollution control equipment exemption. He believed that the Texas Natural Resource Conservation Commission, in working with interested parties, would adopt a more stringent set of guidelines in identifying pollution control property.
Dallas City Tax Assessor-Collector Jayne Morrell, representing the city viewpoint, basically wanted to see the Texas Legislature "leave us alone." She did point out that a recent Wall St. Journal news article about Dallas' home sales prices and appraisal district values illustrated the disadvantages of Texas not being a "full sales disclosure" state. She stated that this appraisal tool was not available to appraisal districts. She also noted that legislative changes in the last session to Tax Code Chapter 34 needed work. She would like to see the resale of seized properties handled the same as foreclosures for delinquent taxes.
Representing the school district viewpoint, Round Rock School District Deputy Superintendent/Chief Financial Officer Mike Jolly reminded the audience that school districts were the best customers of appraisal districts. He noted that the legislative change to allow school districts to change their fiscal year to July 1 needs amending in dealing with required publication notices for the budget and tax rate hearing.
Legislative liaison Sue Glover, Texas Association of Counties, addressed the concerns on property value losses by both urban and rural counties. She noted that counties have grave concerns about any additional property tax exemptions. She also noted that the Legislature needs to address the problems with mobile home tax liens and the continuing problem with overlapping appraisal district properties.
State Senator Bill Ratliff from Mt. Pleasant and State Representative Talmadge Heflin from Houston responded to some of these property tax concerns. Senator Ratliff currently serves as Chair of the Senate Finance Committee. Representative Heflin is a member of the House Appropriations and Ways and Means Committees.
Both Senator Ratliff and Representative Heflin addressed full sales disclosure as an area that needs careful review and discussion. Senator Ratliff raised questions as who would enforce compliance with full sales disclosure and the privacy issue.
In most of the other areas, Senator Ratliff did not see any opposition, most would probably be unopposed. He gave consideration to extending the disabled veterans' exemption deadline, clarifying the property seizure laws, extending the length of depository contracts, amending the timberland rollback statute, and mobile home tracing for tax liens.
State Senator J. E. "Buster" Brown from Lake Jackson noted that by the year 2010, Texas will have a 15 percent shortage of water, representing a $40 billion loss to the Texas economy. Senator Brown is Chair of the Natural Resources Committee and instrumental in the passage of Senate Bill 1 on the management, development, and delivery of water. He addressed groundwater management districts and river authorities and the tools that local water planners need to handle Texas growing water demands.Homestead value limitationCraig Pederson, Executive Administrator for the Texas Water Development Board, addressed the marketing of water. With supply and demand, he sees a seller's market to sell or lease water to the highest bidder. The value of water, he noted, is directly related to the availability of existing water rights.
The complicated market of water deals was one area addressed by Dr. Charles Gilliland of the Real Estate Center at Texas A&M University. He noted the recent 72,000-acre water deal in Roberts County to sell water at $275 per acre to the City of Amarillo and what it entailed to put such a deal together.
San Antonio Attorney Russell Johnson with Bracewell & Patterson spoke on the City of San Antonio's water demands and problems associated with the groundwater recapture law.
Three panelists addressed the 10-percent cap on residence homestead appraisals. Lee County Chief Appraiser Roy Holcomb, Harris County Chief Appraiser Jim Robinson, and Houston Attorney Robert Mott with Perdue, Brandon, Fielder, Collins & Mott reviewed issues that have evolved from the 1997 constitutional amendment. Tax Code Section 23.23 sets out the maximum increase for a residence homestead value at 10 percent per year since the last reappraisal of the residence homestead. The panelists noted that prospective buyers need to be informed by realtors and title companies of the change in home value when homesteads with value limitations are sold. Holcomb encouraged appraisal districts to be proactive in informing homebuyers about how this law works.Concurrent workshops
The conference program included workshops on 18 different property tax and management topics. Highlights from some of those workshops follow.Agricultural appraisal issues
A panel of four chief appraisers and a private consultant discussed current issues involving productivity appraisals of agricultural land and timberland. Chief Appraisers Elaine Chaney (Bandera County), Mike Amezquita (Cameron County), David Luther (Jasper County), Huey Stanley (Dallam County), and Steve Kyzar (property tax consultant) each described the nature of agricultural activities and special appraisals in their areas of the state.Public property and charitable organizationsA large part of the session focused on the continuing practice of property owners dividing larger parcels of agricultural land into smaller tracts. Participants agreed that in many instances owners of these smaller tracts are applying, either individually or as a group, for qualification under wildlife management provisions. The chief appraisers shared instances of particular challenges involved in evaluating new wildlife applications on smaller, subdivided tracts.
Luther gave an analysis of the new exemption for implements of husbandry relative to implements used in the production of timber in Jasper County. He stated that, although he and other East Texas chief appraisers might have differing views on how to apply the statute, issues involving the exemption will probably have to be determined by Texas courts. At the time of the conference, several lawsuits had been filed in state district court in at least one East Texas county.
This workshop panel of five addressed two areas: public property used by private companies and charitable organizations and the constitutional amendment by HJR 4. Chief Appraisers Art Cory (Travis County) and Pete Islas (Hays County) addressed the public property and charitable exemptions in their respective counties.Filing forms electronicallyAustin Attorney Judy Hargrove with the firm Linebarger, Heard, Goggan, Graham, Pena & Sampson told chief appraisers to determine whether or not property is taxable based on two requirements: (1) who is the owner of the property and (2) what is the use of the property. If the property owner is the state or a political subdivision, a chief appraiser must ask if the property's use is one that the state or political subdivision has the statutory authority to carry out. If the property's use is not one that the state or political subdivision has authority to carry out, then the property is taxable to the state or political subdivision.
If the state or political subdivision has the statutory authority to perform a function, and allows a private individual or company to carry out the function, then the property is taxable as a leasehold. Tax Code Section 25.07, however, allows for property to continue to be exempt if it is leased for a specific statutory purpose. Hargrove reminded appraisal districts that a court of appeals ruled that land held by a political subdivision for resale (no matter its current use) is exempt from property taxes.
Attorney Lee Vickers with the law firm Overstreet, Winn & Edwards emphasized that appraisal districts have conflicts about taxing the state or political subdivisions. The general consensus seems to be that one taxing unit should not tax another unit. He advised that chief appraisers use common sense when reviewing property owned by the state or political subdivision to determine the property use, to decide if the use is minimal or exclusive, and to look for legislation that may exempt the property. He pointed out that property need not be exclusively used as public property to be taxable, only a portion may be exempt as public property under Tax Code Section 11.11. He stressed that property owned by the state or political subdivision may be exempt, taxed partially to the state or political subdivision, or taxed partially as a leasehold.
Sandy Griffith, also an Austin attorney with the firm Linebarger, Heard, Goggan, Graham, Pena & Sampson reviewed House Joint Resolution (HJR 4), that now allows more non-profit organizations to qualify for the charitable organization exemption. Because the constitution no longer requires an organization to be a "purely public charity," but one that engages primarily in public charitable functions, she noted that organizations that once did not qualify for an exemption may now qualify. For example, she said that most Masonic Lodges did not exclusively perform one of the functions listed in Tax Code Section 11.18 to qualify for an exemption. Masonic Lodges performed one or several functions listed in that section, but none were exclusive, and the lodges had social functions that disqualified them from exemption. Under the new constitutional amendment, she stated in her opinion that the Masonic Lodges may perform those social functions along with the required function(s) in Section 11.18 and qualify for the charitable organization exemption.
Larry Davis, Valuation Analyst with the Harris County Appraisal District (HCAD), explained the problems, benefits, and opportunities available in supporting the electronic interchange of forms and applications with property owners. Tax Code Section 1.085, effective January 1, 2000, provided that appraisal districts may accept forms and applications electronically based a written agreement between the chief appraiser and the property owner.Over-65 tax deferralsDavis stated that the benefits gained in providing adequate support for electronic exchange included lower resource costs, compressed time required to update records and convert raw data reports into usable information, and better customer service.
His handout pointed out that most appraisal districts have the resources to accept some form of electronic filing, with Web sites and e-mail offering convenient interfaces. While security concerns exist, Davis found that so do the means to protect electronic communication.
Davis spoke about HCAD and its joint Exxon/Harris CAD vehicle data exchange project as a first pass at standardized data exchange. He said that HCAD knew what data format to expect; Exxon knew what data description to expect in return.
Attorney Bruce Medley, with the law firm Perdue, Brandon, Fielder, Collins & Mott, discussed tax deferrals for over-65 homeowners. Tax Code Section 33.06 provides that a homeowner age 65 or older may defer or abate the taxes on the residence homestead.Medley reviewed some technical aspects of the law and calculation of the interest on the delinquent taxes before, during, and after the tax deferral or abatement.
Contributing to this article:
Carolyn Kyzar, Debbie Wheeler, Dan Wilson