Summary of 2003 Property Tax Legislation

Numerous revisions and amendments to the Texas Tax Code were made during the 2003 legislative session. The following summarizes the majority of those changes, categorized by the general nature of the change. The categories in which we have divided the new law changes are as follows:

Administrative
CHoDOs
Consultants
Delinquent Taxes
Exemptions
Overlapping Jurisdictions
Omitted Property
Privacy
Rendition
Valuation
Proposed Constitutional Amendments
Enabling Legislation

Administrative

HB 390 - In counties with less than 500,000 in population, captured real property value corresponding to the portion of tax increment that the taxing unit has agreed to pay into a tax increment fund for a reinvestment zone is not considered new property value for the purpose of calculating tax rates. Effective date: January 1, 2004.

HB893 - The chief appraiser is required to certify the results of a tax appeal lawsuit no later than 45 days after the judgment becomes final. The chief appraiser is irrebutably presumed to comply with this provision. [This amendment is important in expediting the payment of any tax refunds resulting from the appeal.] Effective date: September 1, 2003.

HB983 - Appraisal districts are allowed to obtain criminal history records for employment applicants from the Texas Department of Public Safety. Effective date: Current.

HB2043 - The chief appraiser may only submit for election to the appraisal district board of directors those names which were timely submitted to him. Taxing units must submit their votes for directors by December 15. Effective date: Current.

HB2073 - A hospital district with a maximum tax rate of 75 cents must schedule an election to raise the tax rate if a petition is filed by either 100 registered voters or 15 percent of registered voters, whichever is less. Effective date: Current.

HB2148 - Restrictions or conditions on tax payment checks, which attempt to limit the amount of delinquent taxes, interest or penalties to less than the amount stated on a delinquent tax bill, are void unless authorized by other law. Effective date: Current.

HB3075 - A taxing unit is allowed to invest in a project of a municipal development corporation located outside the boundaries of the taxing unit. Effective date: Current.

HB3540 - When a tax collector for one taxing unit collects taxes for other taxing units, the governing body of the taxing unit by which the collector is employed is responsible for approving refunds of erroneous tax payments for all taxing units if the refund is in excess of $2,500. Effective date: September 1, 2003.

SB200 - If voters in a hospital district, which is located in a county with more than 2,000,000 in population and a tax rate of 75 cents or less, approve the issuance of bonds for hospital improvements, the property tax revenues for repayment of the bonds will be applied as a payment of current debt for purposes of calculating the rollback tax rate. Effective date: Current.

SB353 - Taxing units in Mexican border cities with populations less than 230,000 may opt out of Tax Increment Financing zones. Effective date: Current.

SB392 - A water district which raises taxes no more than 8 percent above the prior year's amount need not comply with notice requirements imposed on other taxing units and do not subject themselves to tax rollback elections. Effective date: September 1, 2003.

SB671 - The comptroller will apply a margin of error of five percent in determining local value. Appraisal districts are required to provide the comptroller with sales information. If the comptroller determines that a school district's values are too low, the comptroller may audit the appraisal district and recommend changes. If the appraisal district does not implement the recommendations, a board of conservators will be appointed by local judges to assume operation of the appraisal district. Effective date: Current.

SB726 - Appraisal districts are subject to the same purchasing and contracting requirements as cities. Effective date: Current.

SB902 - An appraisal district may contract with a depository bank for a period of two years after soliciting bids and then may extend the contract for an additional two-year period. Effective date: Current.

SB1833 - Agreements between the chief appraiser and property owners for electronic communications must include the owners' email address. Appraisal districts shall deliver notices of appraised value by email if requested by a taxpayer whose property includes 25 or more accounts. Electronic versions of all forms are required to be made available. Effective date: January 1, 2005 (January 1, 2006 for counties with populations 500,000 or less).

CHoDOs

Consultants

SB276 - The Board of Tax Professional Examiners is extended through September 1, 2015. The five-member board must include a citizen with no connection to tax practice. License holders are required to take continuing education classes. The board is required to adopt policies to allow for citizen complaints against license holders. The sanction of probation is allowed. Effective date: September 1, 2003.

SB287 - The Texas Commission of Licensing and Regulation is reduced from six members to five members. One member must be from the public and have no connection to tax practice. Effective date: Current.

SB853 - A person soliciting a homeowner to obtain a tax refund for a fee must disclose the name of the appraisal district or taxing unit in writing prior to executing a contract for those services. Violation of this provision is actionable under the Deceptive Trade Practices-Consumer Protection Act. Effective date: September 1, 2003.

SB1452 - Appraisal district employees and appraisal review board members may face criminal penalties for violation of the prohibition against ex parte communications. The violation is a Class C misdemeanor. The prohibition does not apply to discussions not involving specific properties, evidence, facts or merits of a matter pending before the appraisal review board, or communications between the review board and its legal counsel. Effective date: September 1, 2003.

Delinquent Taxes

HB335 - Persons are prohibited from bidding on real property at a tax foreclosure sale unless they present to the sheriff a certificate from the tax office verifying that they owe no delinquent taxes in that county. One person may not bid at a tax foreclosure sale on behalf of another person. Sales in violation of these provisions are void. Effective date: September 1, 2003.

HB3419 - In counties with populations in excess of 3,000,000 and with the approval of the county commissioners court, peace officers charged with the sale of property seized to satisfy delinquent taxes may enter into agreements with auctioneers for the disposal of the property. The agreements must be approved in writing by the tax assessor for each taxing unit holding a tax lien on the property. Sales proceeds are distributed in the following order: (1) to the expenses of the auctioneer; (2) to the peace officer for costs and expenses of the sale; (3) as necessary to pay costs of storing property pending sale and for advertising the sale; (4) to the court clerk for issuing the warrant; and (5) to the tax units for taxes, interest and penalties. The county commissioners are allowed to designate a location other than the courthouse for the sale. The commissioners may authorize the sale to be conducted over the internet. The bill also authorizes a taxing unit to seize improved and unimproved property for delinquent taxes if the property has been abandoned for more than one year. The property will be presumed abandoned if no lawful act of ownership occurs on the property. Effective date: Current.

HB3504 - The elderly and disabled may abate collection of delinquent taxes on their homesteads and abate foreclosure proceedings by delivering a copy of an affidavit to the officer conducting the foreclosure and the tax assessor requesting the foreclosure sale or to the chief appraiser or the attorney representing the taxing unit at least five days prior to the foreclosure sale date. The abatement lasts until 181 days after the person no longer owns and occupies the homestead, except that the abatement shall continue on behalf of the surviving spouse when the elderly or disabled person dies. Effective date: September 1, 2003.

SB173 - Persons serving in the armed forces during a war or national emergency are allowed to pay their property taxes late without penalty. The deadline for the late payment is 60 days after (1) the person's military discharge, (2) the person returns to Texas for 10 consecutive days, (3) the person returns to non-active reserve duty status, or (4) the war or national emergency ends, whichever is earliest. Effective date: Current.

SB725 - If a taxpayer's tax payment is late due to an error by the taxing unit or appraisal district, the taxpayer must pay the tax within 21 days of learning of the error to avoid penalties. The waiver of interest by the taxing units is discretionary. Effective date: September 1, 2003.

SB850 - A taxing unit is allowed to adopt regulations to reject contractual bids from taxpayers who are delinquent in property tax payments to the taxing unit. Effective date: September 1, 2003.

Exemptions

HB1117 - If a county claims the right to operate a county road over a taxpayer's property, the property comprising the roadway is exempt. However, if the person successfully contest the county's claim and eliminates the roadway use, then all previously exempted taxes are revived against the property owner. The revived taxes may not be collected until the collecting taxing unit obtains a certificate from the county that it has ceased use and maintenance of the road. Effective date: September 1, 2003.

HB1223 - This bill provides that homestead exemptions are not lost if the owner is absent for a period of less than two years but intends to return and live in the home or if the owner is absent because the owner is either outside the United States on military duty or in a nursing home or similar type facility. Effective date: Current.

HB2147 - The deadline for filing a late homestead exemption application is one year after the delinquency date for taxes assessed against the homestead. Effective date: Current.

HB2383 - Government property leased to or used by a religious organization for religious worship may be granted an exemption from taxation, with the religious organization granted the right to apply for the exemption as if it were the owner of the property. Effective date: January 1, 2004.

HB2416 - The exemption for property under construction is extended from three years to five years for most organizations that would qualify for such an exemption, including charitable organizations, religious organizations, and schools. However, this extension only lasts until January 1, 2006, when the period is rolled back to three years. The bill also provides that no rollback tax will apply if the property is changed to a use providing housing and related services for the elderly without regard to their ability to pay. Effective date: Current.

HB3546 - See discussion concerning CHoDOs.

SB658 - The tax exemption granted to leased vehicles is made permanent. Effective date: Current.

SB948 - The county commissioners court is granted authority to adopt exemptions and exercise taxing power for hospital districts. The hospital district's directors are denied any authority in tax matters. Effective date: September 1, 2003.

SB1652 - When a state college or university uses a portion of its property for private purposes and part for public purposes, the public portion will remain exempt. This bill is in response to an attorney general opinion and court opinions holding that university land must be used solely for public purposes or the entire property loses its public exemption. For example, if a university leased a portion of a building to someone for a private purpose, the entire building would no longer be exempt from taxes. The bill allows the same allocation of the exemption granted to private concerns, such as charitable organizations. Effective date: Current.

Overlapping Jurisdictions

Omitted Property

Privacy

HB2819 - A victim of family violence, which resulted in a Class A misdemeanor or felony conviction, may exclude his or her identity from the appraisal roll. Effective date: Current.

Rendition

Valuation

HB1082 - The bill also allows telecommunication providers and persons regulated by the Railroad Commission, the Federal Surface Transportation Board or the Federal Energy Commission whose property runs through more than one county to appeal a review board determination to the district court of any county in which the property is located. Effective date: September 1, 2003.

HB1460 - In using the income approach to value, the chief appraiser is required to analyze comparable rent information to estimate the potential gross income of the property, to analyze comparable operating expenses to estimate operating expenses of the property, to analyze comparable data to estimate a capitalization or discount rate, and to base future income and expense projections on clear and appropriate evidence. He is required to exclude from the valuation the effect of tangible personal property including trade fixtures, intangible personal property, and other property not subject to appraisal as real property. Effective date: January 1, 2004.

HB2726 - An owner of inventory may waive the right to be valued under special inventory valuation provisions. Effective date: January 1, 2004.

HB3607 - The chief appraiser may not consider income due the owner of land under hunting or recreational leases in calculating the average annual net income for wildlife management land. Effective date: January 1, 2004.

SB340 - For the purpose of the 10 percent per year limitation on value increases for homesteads, the replacement of a structure that was rendered uninhabitable or unusable due to casualty or mold or water damage is not treated as a new improvement. For purpose of the cap, the last year in which the property was appraised prior to the casualty or damage is considered to be the last year of appraisal. If the replacement structure includes a significant improvement over the previous structure, then the replacement structure is considered a new improvement to the extent of that improvement. This provision applies to the appraisal of the homestead regardless of when the casualty or damage occurred. Effective date: January 1, 2004.

SB480 - No agricultural rollback tax will be imposed when a change of use occurs as the result of a transfer from the state or its political subdivisions or a state economic development corporation located in a city with a population of 1,000,000 or more to a third party for purposes of economic development. To qualify for the rollback exemption, the comptroller must certify that the economic development is anticipated to deposit into the state's general fund in the next two years at least 20 times the amount of rollback taxes which would be lost. The comptroller will conduct an audit at the end of the two years to determine if the project did deposit at least 20 times the amount of rollback taxes. If not, the chief appraiser is to issue a rollback tax notice. Effective date: Current.

SB1646 - Timber valuation will be calculated by the Texas price per ton of large pine saw lumber, small pine saw lumber, pine pulpwood, hardwood saw lumber, hardwood pulpwood, and other time production, based on the East Texas timber-growing region as determined by the U.S. Forest Service. Expenses will be based on what a prudent manager would spend. The base capitalization rate is the higher of the Farm Credit Bank of Texas rate plus 2 1/2 percent or the prior year's rate. If the rate equals or exceeds 10 percent in an initial year of valuation, this base capitalization rate applies. In subsequent years, the capitalization rate is determined by averaging the current year and the four prior years rates. Effective date: January 1, 2004.

Proposed Constitutional Amendments

HJR16 - If approved by a vote of the governing body of a taxing unit or by the petition and vote of the residents of a taxing unit, the school district property tax freeze provided to the elderly would be extended to include taxes assessed by a county, city or junior college district. The tax freeze would also apply to disabled persons.

HJR21 - The school district property tax freeze provided to the elderly would be extended to the disabled.

HJR51 - The redemption period for delinquent tax foreclosures on mineral interests would be extended from six months to two years.

HJR55 - A religious organization that currently owns a place of worship may obtain an exemption on undeveloped land held for the purpose of expansion or construction of a new place of worship, provided that the undeveloped property does not produce any revenue. Also, property owned by a religious organization that is leased to another person for use as a school would be exempted.

SJR25 - The provision allowing local taxation of travel trailers would be repealed except where personal property is substantially affixed to the land.

Enabling Legislation

HB217 - This is the enabling legislation for HJR21 if it is approved by voters. The law would take effect on January 1, 2004.

HB1125 - This is the enabling legislation for HJR51 if it is approved by voters. The law would take effect on January 1, 2004.

HB1278 - This is the enabling legislation for HJR55 if it is approved by voters. The law would take effect on January 1, 2004. The bill also provides that undeveloped property contiguous to the property on which the place of worship is located may be exempted for a maximum period of six years. Noncontiguous property may be exempted for three years. A rollback tax would apply to the property if it is transferred. The rollback would not apply if it was transferred as a sale of right of way, through condemnation, to the state, or to another religious organization which qualifies the property for religious purposes in the year of transfer.

SB510 - This is the enabling legislation for SJR25 if it is approve by voters. The bill provides that the law takes effect on September 1, 2003, subject to approval of the constitutional amendment by voters.