May/June 1999 -- page 2
- On this page:
- Texas Attorney General Rules on Property Tax and Open Records
- Comptroller Begins Work on 1999 Property Value Study
- Companies May Request State Tax Refunds for 1998 School Taxes
- School Districts Ask About PVS Audits
- On Page 1:
- 1998 School Property Taxes: Who Paid and How Much?
- Rylander Reports: TexPool Hits $11.1 Billion in Invested Funds
- Comptroller Schedules Seminars on Truth-in-Taxation, New Laws
This year, Texas Attorney General John Cornyn issued two opinions dealing with property taxation -- one related to the property value study and another on setting local tax rates. He also issued an informal letter ruling on state economic tax refunds under Chapter 111, Subchapter F, of the Tax Code.
Property value study
In Opinion No. JC-0002 issued February 24, 1999, the attorney general answered questions about Education Code Section 42.257 adjustments to the Comptroller's property tax findings for a school district.
The Comptroller's Property Tax Division (PTD) conducts an annual study to determine the total taxable value of property in each school district. The Comptroller assumed this function in 1991 when it took over the functions of the State Property Tax Board (SPTB). The opinion was requested to determine whether a local lawsuit in Dickinson Independent School District (ISD) would require any adjustments to the SPTB study findings for the years in which the lawsuit resulted in a value lower than the one established by the county appraisal district.
Houston Lighting & Power Company sued the school and appraisal districts, asserting that its power plant value as determined by the appraisal district was too high. In each year in question in the lawsuit, the SPTB found the power plant's value was lower than that of the appraisal district. In 1994, the lawsuit resulted in the power plant's value being $215 million -- more than the SPTB's finding in the property study but less than the appraisal district had determined. Dickinson ISD requested that the study finding value for the plant be adjusted according to the lawsuit.
Attorney General Cornyn in his decision clarified that Section 42.257 required no adjustment to the taxable value reported to the education commissioner, based on the value reported by the SPTB. Section 42.257 requires the Comptroller "to adjust its taxable property value findings for that year consistent with the final determination of the appraisal appeal" only if the final determination of the appeal "results in a reduction in the taxable value of property that exceeds five percent of the total taxable value of property in the school district for the same tax year determined under Subchapter M, chapter 403, Government Code." In the Dickinson ISD case, the value set by the SPTB was lower than the court's value. Thus, according to the attorney general's opinion, no adjustment was necessary because the appeal did not result in a reduction of taxable value of property in the school district as found by the SPTB and as reported to the education commissioner.
Tax hearings and notices
Attorney General Cornyn also issued a March 1 opinion interpreting Property Tax Code Section 26.05. In Opinion No. JC-0009, the attorney general determined that Section 26.05(d) -- requiring public notice and hearing of intended property tax increases by political subdivisions -- is constitutional.
The opinion explained that Section 26.05(d), like the Texas Constitution, requires public notices and a public hearing if the current year's proposed total taxes exceeds the previous year's total taxes by any amount. Section 26.05(d), however, does not require calculation of an effective tax increase as Article VIII, Section 21, of the Constitution does.
In rendering the opinion, the attorney general ruled that Article VIII, Section 21, is a limitation on the Texas Legislature's full power to levy and to authorize the levy of property taxes as well as a limitation on the taxing authority of political subdivisions. While the Constitution limits the Legislature's power, the opinion stated that it does not prohibit the Legislature from enacting laws that provide additional limitations on the power to tax. Tax Code Section 26.05(d) limits local taxation power and requires public notices and a public hearing by a political subdivision regardless of whether the increase includes new improvements or new territory.
The opinion noted that the Tax Code section requires public notices and hearings in more cases than the Constitution would. Because there is a strong presumption of validity that laws are constitutional and because the Constitution does not have an express or implied prohibition on legislative action, the opinion found that Section 26.05(d) is valid.
Open records ruling
On January 28, 1999, Attorney General Cornyn issued an informal letter ruling -- Open Records Letter Ruling OR99-0252 -- about the public disclosure of a refund amount under Tax Code Chapter 111, subchapter F, "Tax Refund for Economic Development."
A request to the Comptroller's office asked the agency to disclose the names of taxpayers who applied for refunds under the program, the refund amount calculated for each taxpayer, and the location by county of these taxpayers.
The attorney general's informal letter ruling held that, of these specific records, the only portion that must be withheld is the refund amount. The attorney general considered that the Comptroller derives the refund amount in the course of an "examination." Under Tax Code Section 111.006(a)(2), all information secured, derived, or obtained by the Comptroller during the course of an examination is confidential. Since the submission of a request for a refund is considered an examination [see also OR Letter 96-2203 (1996)], the information on the refund amount paid to an individual under Chapter 111, subchapter F, is not subject to disclosure under the Open Records Act.
The Comptroller's office may release the names, address, and county information about taxpayers who requested a refund and may inform a requestor whether a taxpayer's request for a refund is granted or denied. An additional letter ruling from the attorney general's office would be required to disclose any details about the basis for an individual taxpayer's refund. This open records letter ruling should not be relied upon in any other situation other than refunds under Tax Code Section 111.301.
Contributing to this article: Anna Grassini
The Comptroller's Property Tax Division (PTD) is gearing up for producing its 1999 Property Value Study (PVS) of taxable wealth of Texas school districts and the level and uniformity of property tax appraisals by county appraisal districts.
Texas Government Code Section 403.302 requires the Comptroller to conduct an annual study to estimate the total taxable value of all property within each school district. The state's distribution of state school aid depends in part on these study findings.
Property Tax Code Section 5.10 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.
The school district study and the appraisal district study are jointly referred to as the Comptroller's Property Value Study. For the 1999 study, the PTD plans some minor refinements to improve the study's accuracy and efficiency.
Beginning with crop year 1997, PTD will use Marshall & Swift Valuation Guide's estimates for arriving at agricultural fencing costs for each Texas county. Section 66, under Farm and Ranch Fencing, of the Guide provides base fencing costs.
PTD staff will use the basic costs from the Guide and apply various additions and deductions to bring the cost estimates in line for each county. Listed in Section 66 of the Guide is a deduction between 5 to 20 percent for "Quantity Deductions."
Many counties have "typical" fencing constructed by the landowner rather than an outside contractor. PTD staff also will use Section 99 of the Guide, a deduction called "Arbitrary Adjustments," which ranges from 15 to 30 percent for "amateur workmanship." Section 99 also contains local multipliers that bring cost factors in line for various parts of the state.
Marshall & Swift's Help Desk--available by calling 1-800-544-2678--notes that an appraiser also should deduct from 8 to 12 percent for contractor overhead and profit when landowners are the typical builder.
An example of estimating fence costs per linear foot for building one mile of wire mesh fence would be as follows:
Estimating Fence Costs
Base cost for low cost wire mesh on steel posts $2.30 Add for wooden posts 0.30 Subtotal $2.60 Deductions: Quantity deductions - 15 % 0.39 Amateur workmanship - 25 % 0.65 Contractor profit and overhead - 10 % 0.26 Local multiplier of .86 - 14 % 0.36 Total Deductions 1.66 Estimated per linear foot costs for one mile of fence $0.94 per linear foot or $4,963.20 per mile
NOTE: The calculation above is an example. Costs for a specific county may vary. The PTD will continue to use fence costs per mile, along with average pasture size and estimated useful life of fences for an area, in arriving at fence costs per acre each year.
Agricultural contract payments
One of the most significant provisions of the Federal Agriculture Improvement and Reform Act of 1996 was the establishment of production flexibility contract payments. Interested landowners and producers were required to enroll lands in the program during a sign-up period in the summer of 1996. Once they enrolled their lands, the owners and producers are allowed to plant any crops (other than fruits and vegetables) or leave land idle while continuing to receive payments through 2002. The Farm Service Agency provided guidelines for allocating payments between owners and their tenants.
Based on county data supplied by the Farm Service Agency, the PTD's Land Studies Section will include production flexibility contract payments as income in calculating productivity values for agricultural lands. As in past years, PTD staff will not include conservation reserve program (CRP) payments as income in these calculations.
The PTD's Utility Section will no longer require appraisal districts to report real property on the utility data reports. The PTD will test real property based on data that the PTD staff will obtain directly from the utility companies.
The PTD's Minerals Section has refined the mineral study's sample selection process. The refinement will improve and streamline the process for an early start, decrease the time spent on data manipulation, and allow more time for appraisal work.
The current method required a random selection of one-third of the samples from the previous year to appraise them ahead of time. That process, however, caused unforeseen difficulties in validating the one-third and selecting the remaining two-thirds' samples.
The PTD minerals staff is reviewing the guidelines of selecting exception properties for ways to include higher valued properties in the study. The current definition of an exception is a property that has 20 percent or more of the total value of the school district in which it is located. The PTD staff appraisers are looking at the possibility of lowering the threshold to less than 20 percent, so that about one-third of the mineral properties are exceptions. These properties will then be used as samples.
Most of the exception properties are units or unique leases that require a concentrated effort. PTD staff will give these properties early attention to alleviate the bottle neck in work and improve the quality of the appraisal.
For any questions about the changes to the 1999 PVS, please contact Tim Wooten, Area Manager, Property Value Study, at 1-800-252-9121, extension 5-9838. In Austin, call 305-9838.
Contributing to this article: Glenn Walters, Sharon Hersh, Orfa Davis
The Texas Tax Code provides for state tax refunds for economic development. Some Texas property owners may be eligible to receive refunds on their state sales and use taxes and franchise taxes for paying local school taxes.
Sections 111.301 to 111.304 of the Code address state tax refunds to qualified property owners who entered into property tax abatement agreements after January 1, 1996 with a city or county, but not a school district. A property owner may apply for a refund of state taxes for the school taxes paid, if the owner's business payroll increased at least $3 million (specific to property in Texas) or the abated property's appraised value increased by at least $4 million. The maximum refund is the lesser of the school taxes paid or the amount of net sales and use tax and net franchise tax paid in the tax year the refund is claimed. The total for all refunds collectively may not exceed $10 million, the amount made available by the Texas Legislature.
Property owners with tax abatement agreements entered into on or before January 1, 1996 are not eligible for these state refunds.
State law requires that the Comptroller adopt rules on this process for these state refunds.
Effective March 16, 1999, the State Comptroller amended the tax abatement refund rule. Most of the changes to Comptroller Rule Section 9.105 clarified terms and addressed refund application changes. The amendments included the following:
- Added the definitions for "entered into" and "initial base comparison year;"
- Added the base comparison year and base comparison year's appraised value to the statement from the chief appraiser;
- Clarified that the city and/or county official certify that the tax abatement agreement has been filed with the state;
- Provided that copies of the Texas Workforce Commission returns for the year the tax abatement agreement is entered into, as well as the tax year refund is being applied for, be attached to the refund application; and,
- Changed the refund application form for the above items.
"Entered into" is defined as the same as executed. A tax abatement agreement is entered into when the appropriate governing body has approved the agreement and all parties have signed and dated the agreement.
"Initial base comparison year" is the calendar year in which the tax abatement agreement is entered into.
1997 tax refunds
Tax year 1997 was the first year that companies could apply for reimbursement of school taxes paid on a property that received a county or city abatement but not a school tax abatement. Companies had to file their refund applications before August 1, 1998.
Of the 16 individual refund applications received for 1997 taxes, the State Comptroller's office approved 13 applications. Ten companies received total refunds of $4,886,663 to reimburse them for paying 1997 school taxes. The names of all the individual companies that applied and whether their refund requests were approved or denied are public information. Any refund amounts, however, are confidential.
1998 tax refunds
Companies wanting a refund of their 1998 school taxes must submit a refund application to the State Comptroller before August 1, 1999. The refund application form is available by calling 1-800-252-9121, and choosing number 4. In Austin, call 305-9999.
The form is also available on the agency's Window on State Government website. Property tax forms on the agency's internet site are at Property Tax Forms Online. The last form listed at this site is Application for Refund of State Taxes Paid by Person Owning Certain Abated Property.
Tax Code Section 312.005 requires a taxing unit to file with the Comptroller a copy of any tax abatement agreement (and any additional information that the Comptroller requests) before April 1 of the year following the execution of the agreement. The abatement agreement must be on file with the Comptroller before the Comptroller may act upon a refund application.
If you have questions about the refund program, please call Patricia Bailey at 1-800-252-9121, extension 3-4416. In Austin, call 463-4416.
The Comptroller's Property Tax Division (PTD) receives questions about how independent school districts (ISDs) may request an audit of their certified property value study (PVS) findings. PTD has seen a substantial increase in audit requests -- from 34 audit requests for the 1996 study to 137 requests for the 1997 certified findings.
School districts must request an audit in writing. A letter of request signed by the superintendent or designated agent of the school district meets the request requirement. In the case of an agent appointment, the request should include a letter appointing the agent and be signed by the school district's superintendent. Only one audit request for an ISD will be accepted for a defined period.
All audit request letters should include documentation required to conduct the audit. The PTD will acknowledge any audit request timely received without evidence but will not grant the audit until the school district submits the required evidence. Documentation includes:
- amended report of property value;
- recaps reflecting the audit request date;
- certified affidavit from chief appraiser reflecting audit request date; and
- any court documentation, such as judgments and court orders.
School districts must request audits before October 1 of the year following the year of the study. Audit requests must be postmarked no later than September 30, according to Comptroller Rule Section 9.5071.
The PTD may extend the deadline for submitting the request, if the school district can show good cause for the deadline extension.
Contributing to this article: Catherine Kilgore