2004 ARB Law Changes
Laws Address Membership, Conduct, Protest Areas
Appraisal review boards (ARB) will face some new law changes when they meet for their 2004 hearings. These new or amended statutes affect members’ conduct before hearings commence and how the ARB determines a protest. ARBs should always resolve taxpayer and taxing unit disputes quickly, fairly and according to current tax laws.
The Property Tax Division’s (PTD) 2003 Texas Property Tax Law Changes contains all property tax law changes from the Texas Legislature’s 78th Regular Session. It is available on the Comptroller’s Web page at www.window.state.tx.us/taxinfo/proptax/law03/ or by calling the PTD’s technical assistance at 1-800-252-9121.
The Texas Legislature amended Tax Code Section 6.41 to delete restrictions on the size of an ARB based on county population. Effective January 1, 2004, the appraisal district board of directors may appoint the number of ARB members that the directors consider appropriate, with a minimum of three ARB members.
For 2004, the size of an ARB may change, with either fewer or more members than in past years. The ARB will need to review its written hearing procedures to see if a decrease or increase in its size will affect any current procedures.The appraisal district board may decide to change the number of ARB members annually.
ARB member conduct
New Tax Code Section 6.411 provides a penalty for an ARB member, chief appraiser or appraisal district employee who talks to or corresponds with any of the parties involved in a hearing outside of the hearing process on specific evidence, argument, facts, merits or property involved in a hearing pending before the ARB. Such a communication violates Tax Code Section 41.66(f). Effective September 1, 2003, the offense is punishable as a Class C misdemeanor.
This penalty, however, does not apply to communications between the ARB and its legal counsel or to other communications between the ARB and the chief appraiser.
ARB members should not talk or write to the chief appraiser, appraisal district employee, another ARB member or property owner about a protest hearing before the hearing begins. Once a hearing begins and parties are present, then communications should begin. Each ARB member must sign a sworn affidavit that the member has not communicated about the property outside the hearing. If the ARB member cannot sign the affidavit, the ARB member cannot hear the protest on that property.
Even if an ARB member doesn’t sign the affidavit, if he or she has communicated outside the hearing with another ARB member, chief appraiser or appraisal district staff, the ARB member could be guilty of a Class C misdemeanor.
This penalty, however, doesn’t apply if an ARB member talks to a property owner outside of a hearing. The ARB member, however, cannot sign the sworn affidavit and cannot participate in that property owner’s hearing.
The penalty also does not apply to discussions with the ARB’s attorney and other communications with the chief appraiser. Other communications would include meeting arrangements, training and general information that does not apply to a specific protested property or protesting property owner.Protest areas
Other Tax Code changes affect issues that may come before the ARB or that the ARB should be aware.
Section 6.025. This section addresses properties appraised by two or more appraisal districts. Effective January 1, 2004, it requires that when the chief appraisers do not agree to one appraised value for an overlapping property, then each appraisal district shall enter in the appraisal records the lowest appraised or market value determined by the chief appraisers.
If an ARB’s decision or other action reduces that value, then the chief appraiser notifies the other chief appraisers who must reduce the value on all related appraisal rolls.
Section 11.13. Effective June 18, 2003, a qualified homeowner does not lose his or her homestead exemptions if the homeowner does not establish a different principal residence, intends to return and occupy the residence and is temporarily absent for a period of less than two years.
The law excludes homeowners in military service or in a facility providing services related to health, infirmity or aging. These individuals may be away from the home longer than two years and still keep the homestead exemption.
Sections 11.18 through 11.30. Certain organizations may receive a total exemption of their incomplete improvements to land or buildings during the property’s development stage. Such property may now be exempt for a period of five years, rather than three years, in the same manner as incomplete improvements for qualified charitable, religious and educational organizations.
This law change applies to Section 11.18, charitable organizations; Section 11.184, primarily charitable organizations; Section 11.19, youth development associations; Section 11.20, religious organizations; Section 11.21, private schools; Section 11.23, miscellaneous organizations; and Section 11.30, non-profit water or wastewater service corporations.
On January 1, 2006, the period for this exemption reverts back to three years.
Chapter 22. Effective January 1, 2004, an owner’s estimate of value on a rendition form may be considered at the ARB protest hearing, but it is inadmissible in court or a Section 25.25 hearing. If the property owner fails to respond to a chief appraiser’s request for additional information or to render prior to the ARB hearing, the burden of proof to establish the property’s value shifts to the property owner at the ARB hearing. (See the article on renditions.)
Section 23.23. Effective January 1, 2004, when the appraisal district calculates a new improvement value for a residence homestead with a value limitation, a “new” improvement does not include a replacement structure for a structure that was rendered uninhabitable or unusable by a casualty, mold or water damage.
Sections 23.012 and 23.014. Beginning for 2004 tax appraisals, when using the income method, the chief appraiser must consider comparable rental income or the gross earnings capacity of a property, or both, in estimating a property’s appraised value.
The chief appraiser also must consider historical trends, current supply and demand affecting those trends and possible competition from similar properties. The chief appraiser must exclude from the market value of all tangible real property the value of intangibles, such as goodwill, and of tangible personal property, including trade fixtures, located at the real property.
Finally, the Texas Legislature amended Section 41.43 regarding standards used when a property owner files a protest of unequal appraisal. The law provides that the appraisal district has the burden of proof in an ARB hearing on unequal appraisal.
The ARB must determine an unequal appraisal protest in favor of the protesting party unless the appraisal district establishes:
- the property’s appraisal ratio is equal to or less than the median level of appraisal of a reasonable and representative sample of other properties in the appraisal district or a sample of properties similar to the subject property or
- the property’s appraised value is equal to or less than the median appraised value of a reasonable number of comparable properties.
This provision deals with a property owner who is claiming “my value’s right but everyone around me is lower.” While a vast majority of protests to the ARB are about over-appraisal, the ARB has a duty to decide disputes about unequal values.
The Appraisal Review Board Manual - 2004 Edition that the Comptroller will release this spring will include these new law changes. The PTD uses the Manual as the instruction book for the Comptroller’s ARB Training Seminars conducted annually. The PTD will mail each appraisal district enough copies of the Manual for each ARB member and one for the appraisal office.