Contact Us Today! (972) 712-1515

"The Blog"

Texas' Taxing Times

Posted by Darryl V. Pratt | Jun 04, 2020 | 0 Comments

Texas' Taxing Times

​How changes to the Texas property tax law may impact you, and how COVID-19 plays a role this season.

Property taxes are big news in Texas. Last year, property taxes were a primary focus of the 86th Legislature, and Gov. Greg Abbott deemed property tax relief so important that he declared it an emergency item.

The 2019 legislative session produced significant modifications to tax law. Here's a rundown on the most noteworthy changes affecting taxpayers in 2020, along with a look at how fallout from the COVID-19 pandemic may complicate the taxpayer's position.

Removing the Veil

Property taxes are not only big news, but they are also confusing, particularly given the "Texas two-step" appraisal and assessment process. After an appraisal district values a property, taxing entities separately tax that property based upon the final determined value. For a single property, a taxpayer may owe five or more taxing entities spread among three assessors' offices. Understanding the ultimate tax liability for such a property can be a monumental task for taxpayers.

Senate Bill 2 addressed the confusion and promoted transparency and truth in taxation, earning it the title of "The Texas Property Tax Reform and Transparency Act of 2019." Each appraisal district is now required to maintain a website with useful information that allows taxpayers to better understand their tax bills. The website must include the three pertinent tax rates summarized in the table below (the names of which Senate Bill 2 also revised for clarity). Additionally, appraisal districts will calculate the effect that each taxing entity's proposed rate would have on its overall tax collection and include an estimate for any proposed increase's effect on a $100,000 home. Finally, the websites must provide the date and location of public hearings to address concerns with any proposed increases.

 Revenue Increase Limits

In addition to transparency, lawmakers fought to create some avenue of property tax relief. What ultimately passed between Senate Bill 2 and House Bill 3 was a limit on tax revenue increases by jurisdiction. This restricts the amount that taxing entities can increase revenues through tax rate setting.

Beginning in 2020, most taxing entities will have a maximum revenue increase limit of 3.5% year over year. To adopt a tax rate that increases revenue over 3.5%, that taxing entity must call an election for approval. This new cap is significantly lower than the prior law, which allowed for up to an 8% increase in tax rates year over year without voter approval. Junior college districts, hospital districts and other small taxing units including those with tax rates of 2.5 cents or less per $100 of valuation retain their 8% permitted increase. (For clarity, this article expresses tax rates in dollars per $100 of assessed value.)

Relief from school district taxation falls under a separate calculation, which was revised by House Bill 3. For the 2019-2020 school year, maintenance and operations (M&O) rates will be compressed by 7%. For school districts with a Tier 1 $1.00 M&O rate, the rate drops by 7 cents to 93 cents on the dollar.

For 2020-2021, local school district rates will compress by an average of 13 cents, based on statewide property value growth exceeding 2.5%. The M&O rate caps will vary across school districts, and the Texas Education Agency will publish all maximum compressed rates.

Other Relevant Procedures and Policies

While tax system demystification and revenue increase limits were the major reforms, lawmakers enacted many administrative and procedural changes as well. Administrative process changes now prohibit value increases at an Appraisal Review Board (ARB) hearing, add ARB member training requirements, and create special ARB panels to hear protests for complex properties. Additionally, the business personal property rendition date moved to April 15.

In a win for those litigating appraised values, the state revised Section 42.08 of the property tax code, allowing a taxpayer to pay less than the full amount of tax on a property with pending litigation. Previously, if the final property value from a lawsuit resulted in a tax burden exceeding the amount originally paid, the taxpayer incurred delinquent penalties and interest on the remaining amount owed. The revision removes the taxpayer's risk for attempting to discern where a litigated value may settle by eliminating the possibility of penalties and interest on the additional tax due.

Uncertain Times

Despite changes enacted in the 2019 Legislative Session, at least some of those reforms are on hold as the state and its communities respond to the coronavirus pandemic. Gov. Abbott's Mar. 13 disaster declaration allows cities, counties and special districts to use the old 8% threshold on revenue increases rather than the new 3.5% limit.

Further, the governor has the authority to change deadlines during a disaster. As of Mar. 19, Texas had suspended in-person Appraisal Review Board hearings and may extend that suspension into the normal administrative protest season.

Rapid developments may continue to disrupt the property tax assessment and appeal process in 2020. How the disaster will ultimately affect the 2020 property tax cycle remains to be seen, but the recent changes enacted in law will shape the property tax process in Texas for years to come.

For more detailed information on property tax law changes, please refer to the 2019 Texas Property Tax Code, additional resources on the Texas Comptroller's webpage, and consult with a property tax professional.

Conclusion

You have invested a lot of time in making your business a success, and it is difficult to think about relinquishing ownership or control of it. Nevertheless, planning is critical in creating a lasting legacy for your family. We can help you put a plan in place that helps you successfully pass your business on to the next generation and ensures that you have a financially secure retirement. Contact our office today at (972) 712-1515 to set up a meeting to discuss this timely topic. 

About the Author

Darryl V. Pratt

With almost twenty-five (25) of experience as a dual-licensed Attorney and Certified Public Accountant, Darryl V. Pratt has practiced law in all areas of corporate and business law, non-profit law, estate planning, probate, guardianship, asset protection planning, bankruptcy (Chapters 7, 13 and 11), real estate, and taxation.

Comments

There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

DISCLAIMER Pratt Law Group, PLLC (PLG) has prepared the material on this web site, for informational purposes only; it does not constitute legal advice. Further, the material on this site does not create, and receipt does not constitute an attorney-client relationship. The information here is not intended to substitute for obtaining legal advice from an attorney. No person should act or rely on any information in this site without seeking the advice of an attorney. Members of the law firm of PLG are licensed to practice in various courts and jurisdictions; attorneys are specifically licensed to practice in state courts that are enumerated on their individual attorney profiles. We also have affiliations in particular cases with attorneys licensed in additional states. PLG does not offer any guarantee of case results. Although we are extremely proud of our excellent track record, past success does not guarantee success in any new or future case or client matter. This web site is considered advertising by the State Bar of Texas under the applicable law and ethical rules. The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. Only those attorneys who state they are Board Certified in their profiles on this website are Board Certified. All other attorneys are not Board Certified. Darryl V. Pratt is the attorney responsible for this site. The principal office of PLG is 2591 Dallas Parkway, Suite 505, Frisco, Texas 75034. Please note that the transmission of an e-mail inquiry itself does not create an attorney-client relationship. PLG cannot serve as your counsel in any matter unless you and our firm expressly agree in writing that we serve as your attorney. You should also be aware that the Statute of Limitations (the deadline imposed by law within which you may bring a lawsuit) may have expired or may severely limit the time remaining for you to file any potential claims you may have. Time is of the essence. If you believe you have a possible legal case, it is important that you seek out legal advice as soon as possible.

Menu