Taxpayer Remedies in the Texas Property Tax Appraisal Process Addison, Texas October 4, 2017 TAPS 2017 Seminar John Brusniak Brusniak Law PLLC 13155 Noel Road, Suite 1850 Dallas, Texas 75240 (972) 250-6363 john@txtax.com @TxPropTaxAtty

THE PROPERTY TAX How did we get here?

THE PROPERTY TAX

THE PROPERTY TAX Sign here, King…

THE PROPERTY TAX Paying it Forward

Equalization & Break from the Old THE PROPERTY TAX Equalization & Break from the Old

THE PROPERTY TAX Business as Usual

THE PROBLEM Texas Constitution – ALL real property and all tangible personal property shall be taxed at its market value Texas Property Tax Rates are HIGH and GROWING From 2008 to 2016, Houston’s combined tax rate went from $2.52 / $100 to $2.65 / $100 – 5% increase From 2008 to 2016, Dallas’ combined tax rate went from $2.50 / $100 to $2.72 / $100 – 9% increase

THE PROBLEM Assume a $500,000 30-year mortgage @ 2.7% Total Interest $230,076

THE PROBLEM Assume a $500,000 taxable value for a property. Assume no increases in value for 30 years. Assume a 2.7% tax rate that never increases. Per Annum taxes would be $13,500 Total taxes paid in 30 years $405,000

THE PROBLEM 254 Texas Counties 253 Texas Appraisal Districts (Potter and Randall Counties share) Each its own fiefdom

Meet Your Chief Appraiser THE PROBLEM Meet Your Chief Appraiser

THE PROBLEM HOW DO YOU ATTACK THE PROBLEM? Market Value Equity Exemptions / Abatements Special Valuations

How the Tax Appraiser Sees Your Home

How You See Your Home

How You Present Your Home

MARKET VALUE Appraisal vs. Mass Appraisal Texas Central Appraisal Districts are tasked with valuing millions of properties as of Jan 1st each year. The appraisal concepts discussed earlier are applied to many properties simultaneously. This process includes standardized procedures and statistical modeling.

MARKET VALUE Texas Legal Standard of Market Value “Market value” means the price at which a property would transfer for cash or its equivalent under prevailing market conditions if: Exposed for sale in the open market with a reasonable time for the seller to find a purchaser; Both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions on its use; and Both the seller and purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other.

MARKET VALUE

MARKET VALUE

MARKET VALUE

MARKET VALUE

MARKET VALUE

EQUITY Constitution requires taxation to be Equal and Uniform.

EQUITY Appraised Value of Comparable Properties appropriately adjusted. Reasonable Number

EXEMPTIONS General Exemption Qualifications Non-Profit Entity Must own and use Property “Exclusive” or “Primary” Must meet precise Statutory Definition Only Complimentary Ancillary Uses Allowed Up to 3 years Active Construction

EXEMPTIONS Must find authorization in the Texas Constitution (or Federal Constitution) Must have specific Statutory Authorization Most are not self-executing Must dot all the “i’s” and cross all the “t’s” Types Property Not Held for the Production of Income Implements of Husbandry Churches Schools Governmental Property (Used for governmental purposes) Charitable Institutions YMCAs

FREEPORT Interstate Freeport Inventory Acquired or Imported into Texas For purposes of assembling, storing, manufacturing, processing or fabricating by the Importer Exported from Texas within 175 Days (Exclusions: Oil, Natural Gas, Petroleum Products) Intrastate Freeport Inventory For purposes of assembling, storing, manufacturing, processing or fabricating by the Importer Exported from Texas or transported to another location in Texas within 175 Days (Exclusions: Oil, Natural Gas, Petroleum Products, Aircraft, Dealer’s Motor Vehicle Inventories, Dealers’ Vessel and Outboard Motor Vehicles, Heavy Equipment Inventories, Retail Manufactured Housing Inventories) May not be detained in a location owned by the owner of the inventory

HOMESTEAD Mandatory Homestead Exemptions County $3,000 School District $25,000 Disabled or over 65 $15,000 Completely Disabled Veteran 100% Partially Disabled $5,000-$12,000 Permissive Homestead Exemptions All Taxing Units give Homestead Minimum $5,000 Maximum 20% Disabled Minimum $3,000

Limit on Annual Increases in Taxable Value 10% HOMESTEAD EXEMPTIONS Limit on Annual Increases in Taxable Value 10%

HOMESTEAD EXEMPTIONS Tax Freeze Mandatory School District taxes paid in year of disability or 65 Discretionary All other Taxing Units Percentage Freeze may be carried to new home

HOMESTEAD EXEMPTIONS Tax Deferral Affidavits Statutory Injunction 5% 181 days after no longer homestead

TAX INCENTIVES Abatements Property Redevelopment and Tax Abatement Act Texas Economic Development Act Economic Development Agreements Tax Increment Financing Districts

SPECIAL VALUATIONS ALLOWED Agricultural Land Open Space Land Timber Land Recreational, Park and Scenic Land Public Access Airport

Land in Carrollton, TX Market Value $2,742,351 Ag Value $7,354 Tax on Market $65,262.16 Tax on Ag Value $175.01

EXAMPLE #2 Land in Collin County, Texas: Market Value $2,400,348 Ag Value $7,615 Tax on Market $55,208.00 Tax on Ag Value $175.15

EXAMPLE #3 Land underlying Colonial Country Club – Fort Worth: $37,570 per acre ($977 tax dollars) Land underlying Dallas Country Club: $36,110 per acre ($921 tax dollars)

WHY Valued at either their agricultural productivity value OR Restricted Use Value

BASIC AGRICULTURAL VALUE FORGET IT! Must be an actual farmer and get more than half of your annual income from farming Annual Application

OPEN SPACE, LAND, AND TIMBER LAND VALUE Welcome Everyone! Corporations! Partnerships! Everyone! No minimum income requirements Once an application is granted, it stays in effect until the property sells, the use changes, or the chief appraiser asks for a reapplication

HOW DO I GET IN ON THE FUN? OPEN SPACE AND TIMBER Apply Everything triggers off of January 1 Property must have been in agricultural use for the prior five years in urban areas OR five out of seven years in rural areas In the year prior to application, property must have been used to the level of intensity for agricultural properties in that county All types of animals allowed…except raising horses for recreational use All types of crops

BAD NEWS CHANGE OF USE Rollback Tax: Current year value goes to market Back assessment on the differential between market value and special value +7% interest Cannot challenge market values at time of rollback

EXCEPTIONS Acquisition of conversion of use to: Government Nonprofit cemeteries in counties with less than 100,000 people Use of a portion as a homestead Private school Religious Use Certain low-income housing Certain housing for the elderly

WILDLIFE MANAGEMENT Have to do three of the following in relation to indigenous wild animals: Habitat control Erosion control Predator Control Providing supplemental water Providing supplemental food Providing shelter Making census counts to determine populations Also: preserving endangered species and certain conservation or restoration projects MUST HAVE BEEN IN OPEN SPACE LAND TO QUALIFY

KILLING THE GOLDEN GOOSE Number One Cause: Inattentiveness Fences down Dirt bike riding No weed control No watering Not Farming

RECREATIONAL, PARK, AND SCENIC USE Simple Primary use: golf courses Deed restrict property to recreational park and scenic use for ten years Valued a flood plain or significantly reduced values Penalty for violation: five year rollback + 7% interest

Public Access Airport Property Must be privately owned and used by public for “airport purposes” Landing, parking, shelter, or takeoff of an aircraft Accommodation of individuals engaged in the operation, maintenance, or navigation of an aircraft Accommodation of aircraft passengers in connection with their use of aircraft or airport property 5 acres minimum Deed Restricted

Informal Negotiations Appeals to the Appraisal Review Board REMEDIES Informal Negotiations Appeals to the Appraisal Review Board

REMEDIES Arbitration State Office of Administrative Hearing District Court

QUESTIONS?