Attorney General Opinions
Rulings Address Property Taxes and Related Areas
Texas Attorney General Greg Abbott issued two recent opinions on property tax issues—one on the optional tax freeze for homeowners who are disabled or 65 years of age or older and the other on tax discounts for early property tax payments. He also issued two opinions that may assist some people involved in property tax administration.
Optional tax freeze
Opinion No. GA-0222 held that Texas Constitution Article VIII, Section 1-b(h), authorizes a home-rule city’s governing body to call an election to adopt a tax freeze for homeowners who are disabled or 65 years of age or older by official action on its own motion and without a petition from the city's voters. It also said that a tax freeze adopted by a home-rule city may not be repealed by an election called by the city’s voters by petition.
The opinion also found that Article VIII, Section 1-b(h), does not permit a county, city or junior college district to use the year prior to the year the freeze is adopted as the base tax year for the tax freeze. In other words, the tax freeze is based on taxes for the year in which the tax freeze is adopted.
The July 30 opinion was in response to requests from Texas Senator Frank Madla, Intergovernmental Relations Committee Chair, and Texas Representative Robert E. Talton, Urban Affairs Committee Chair, on implementing the new optional tax freeze, also called a tax limitation. They asked three questions:
- whether the home-rule city’s governing body may call an election to approve or disapprove of a tax freeze without a voter petition;
- whether a tax freeze implemented by a home-rule city may be repealed by an election initiated by voter petition and if so, by what procedure; and
- whether a city that has adopted a tax freeze may use a year prior to its adoption as the tax base year.
Adoption by election. The opinion reviewed whether Article VIII, Section 1-b(h) that allows a governing body to implement a tax freeze by “official action” includes the authority for the governmental body to call for a binding election on its own motion, rather than on a proper petition from voters.
It stated that the Texas Election Code Section 3.004(b) authorizes governing bodies of certain municipalities to call a local election and that such a governing body's call for an election by order, resolution or other binding measure undoubtedly would constitute “official action.”
The opinion said: “Had the framers intended to deny a governing body the authority to call a tax freeze election without a voter petition, article VIII, section 1-b(h) could have been worded to that effect. ... But by using the phrase ‘official action’ without limitation or qualification, article VIII, section 1-b(h) authorizes a governing body to call for a tax freeze election independent of the alternative petition process.”
No repeal by election. The attorney general found that Article VIII, Section 1-b(h), was silent with respect to the authority to repeal an adopted tax freeze by election initiated by voter petition.
The opinion reviewed provisions for home-rule charters for enacting ordinances by election through a voter petition, known as the initiative process. The opinion stated that the power of initiative is limited by its very nature: "When the people exercise their rights and powers under the initiative provisions of a city charter they are acting as and become in fact the legislative branch of the municipal government."
Since Article VIII, Section 1-b(h), provides that the governing body may not repeal or rescind a tax limitation, the opinion held that the voters in an election through the initiative process, acting as the municipality's legislative branch, do not have authority to repeal or rescind a tax freeze.
Base year. The third question was whether a city may use the year prior to the enactment of the ordinance to establish the tax freeze.
On January 13, 2004, the Pasadena city council enacted an ordinance implementing Article VIII, Section 1-b(h), by freezing homestead taxes using 2003 records if permitted by the Texas Constitution, but if it did not, by using 2004 records.
Abbott found that Tax Code Section 11.261(b) directly answered the question and precluded the use of a year prior to implementation as the base tax year. The opinion said:Generally, the base tax year will be the first tax year in which a taxpayer qualifies a residence for the specified homestead exemption, although a different rule may apply should the amount of taxes imposed decline. In any event, the base tax year may not be the tax year preceding the tax year in which the freeze was adopted.
Early payment discount
Opinion No. GA-0225 issued August 3 ruled that a school district may not offer an early payment discount to its taxpayers if the school district contracts with a county for tax collection services and the county does not offer early payment discounts for county taxes.
Senator Jeff Wentworth, Senate Jurisprudence Committee Chair, requested the opinion on behalf of Bexar County and Alamo Independent School District.
Since 1986, the county has been the tax collector for the school district by interlocal agreement. In September 2003, the county discontinued its early payment discounts for county taxpayers and mailed tax statements that did not offer an early payment discount to either county or school district taxpayers. The school district wanted to continue offering the discounts.
The opinion reviewed Tax Code Section 31.05(a) that authorizes the governing body of a taxing unit that collects its own taxes to adopt early payment discounts. The second sentence of Section 31.05(a) provides that a discount adopted by the collecting taxing unit will apply to taxes collected for another tax unit, provided the non-collecting unit also adopts or authorizes the discount.
The school district suggested that the first sentence of Section 31.05(a) meant a taxing unit that has the “authority” to collect its own taxes whether they actually collect their own taxes or contract for others to do so. The attorney general disagreed and held that a "taxing unit that collects its own taxes" means a taxing unit that actually collects its own taxes. The opinion stated:We must assume that a "taxing unit that collects its own taxes" in the first sentence and a taxing unit that "collects taxes" in the second sentence both mean a taxing unit that literally collects taxes....Further, although the first sentence does not authorize a taxing unit that does not collect its own taxes to adopt an early payment discount, that authority may be found in the terms of the second sentence. The second sentence allows a taxing unit that does not collect its own taxes to adopt the discount, provided the taxing unit that collects the tax has adopted the discount for its own taxes. Section 31.05(a)'s plain language does not authorize a taxing unit that does not collect its own taxes to offer an early payment discount when the collecting unit that collects the taxes does not offer a discount.
The school district asked if its interlocal agreement may require the county to provide the district’s taxpayers with the discount, even though the county no longer offered it to its own taxpayers.
The opinion held that the Interlocal Cooperation Act authorizes one local government to contract with another to perform "governmental functions and services . . . that each party to the contract is authorized to perform individually." It said that the Act does not authorize a local government to contract for services it is not authorized to perform individually. It concluded: “Consequently, because the Tax Code does not authorize a non-collecting tax unit to offer a discount unless its tax collecting unit offers a discount, an agreement under the Interlocal Cooperation Act may not provide to the contrary.”
Abbott also released two other opinions that may be of interest to those elected officials in a similar situation.
Opinion No. GA-0224 ruled that an individual may not simultaneously serve as a member of the board of directors of a water improvement district and as a trustee of an independent school district when the two districts have overlapping boundaries.
The July 30 opinion held that the common-law doctrine of incompatibility would apply. It said that the water district may have directory or supervisory powers for school property located within its boundaries. Such power might raise a conflict of discretion or duty for health, quarantine, sanitary and other regulations for the person serving as both a school trustee and water district board member. It referred to earlier opinions that stated “[i]f two districts with overlapping geographical jurisdictions each have the power of taxation ... the potential for conflict is insurmountable.”
Opinion No. GA-0228 on August 5 found that current statutory requirements in the Property Code appear to prohibit a county clerk’s recording of an electronically generated record or a copy of such a record, including an electronically generated signature or notary public seal or a faxed document. It said that a county clerk who refuses to accept an electronically generated real estate filing is not liable for civil penalties under Property Code Section 11.004(b).
The opinion found nothing in the federal E-Sign Act or in the Texas Uniform Electronic Transactions Act of the Business and Commerce Code to require a county clerk to accept real estate filings that contain electronic signatures or notary public seal.