Property Tax Opinions Released in 2004

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Tax records remain evidence of delinquency even after rebuttal.

The property owner was sued for delinquent taxes. The taxing unit introduced the delinquent tax roll as proof of the taxes owed. An officer of the property owner testified that the property was not acquired until after the January 1 lien date and had been acquired, clear of all liens, in bankruptcy. The trial court ruled in favor of the taxing unit and against the property owner.

On appeal, the property owner claimed that the taxing unit had failed to prove that the property owner was personally liable for the delinquent taxes. The property owner also argued that it had successfully rebutted the taxing unit's tax records.

The court of appeals stated that the tax records presented prima facie proof of the delinquency. Though the court questioned whether the property owner's evidence was sufficient to rebut this presumption, the court held that the tax records continued to be evidence of the delinquency even after rebuttal. The court of appeals noted that the trial court was empowered to find facts based on the evidence presented, could choose to believe or disbelieve that evidence, and could determine the credibility of the evidence. Because of this power, the court of appeals held that the trial court had sufficient evidence to render judgment in favor of the taxing unit.

Income method of appraisal requires use of comparable data from other properties.

During a value protest, the property owner sought to testify to the value of his property based on actual rental information involving the property. The appraisal district objected to the property owner's ability to testify as an expert on market rent rates, and the trial court prevented the property owner from testifying.

On appeal, the court of appeals held that the property owner had not adequately briefed the alleged errors regarding the exclusion of the testimony and had not established his ability to testify in the trial court. The trial court's ruling was thus sustained.

However, in a footnote, the appellate court noted that the Tax Code requires that the chief appraiser consider comparable rental rates and comparable expense and other data in valuing property under the income approach. Though the Tax Code imposes this duty on the chief appraiser, the appellate court implied that this duty to use comparable property information is also imposed on the property owner and his experts at trial.

Failure to timely provide notice of use of a business record prevents its use to prove tax delinquency.

However, because the taxpayer failed to raise a similar objection to the use of an affidavit by another taxing unit, that taxing unit was allowed to use the affidavit and recover on the delinquency. The court of appeals also confirmed that the use of a business record to prove up delinquent taxes is proper.

When the amount of delinquent taxes is properly rebutted, taxing authorities must produce additional evidence of application of any payments and amount of taxes owed.

In a delinquent tax suit, the taxing units made a prima facie case showing a tax delinquency and the amount of such delinquency. With such case, the proper application of payments was presumed. However, the property owner presented evidence that specific instructions had been made as to how to apply tax payments that had been made.

The court of appeals held that, once the taxpayer rebutted the presumption that the taxing authorities correctly applied the payments, the presumption disappealed and the taxing units were required to present further evidence showing proper application of the payments. Since the taxing units presented no further evidence, the court held that was no evidence that the amount the taxing authorities contended were owed was correct. Judgment was therefore rendered for the taxpayer that no delinquent taxes were owed.

The time to pay a tax refund runs from when the taxing unit approves the refund and not from when the appraisal district takes action that results in the refund.

The court also held that actual notice of the loss of exemption excuses the failure of the appraisal district to send formal notice of the loss. The taxpayer defaulted on an abatement agreement, and the taxing units informed the owner of the default and loss of exemption. However, the appraisal district allegedly failed to send the required notice of the loss of exemption. The taxpayer did not raise the lack of notice issue until more than a year later. The court of appeals held that, because the owner had actual notice, the lack of written notice did not violate due process rights and the administrative protest of the lack of notice was too late.

Who owns the improvements on leased land at a municipal airport?

The court of appeals noted that improvements normally becomes part of the land unless there is an understanding between the landowner and lessee that the improvements will not be annexed to the land or there is evidence that the improvements are personalty with the right of removal remaining in the tenant. In this particular case, the land lease provided that ownership of the improvements would be vested in the municipality upon completion.

Therefore, the court held the improvements to also be exempt.

A taxpayer's redemption of his property after a delinquent tax sale reinstates liens against the property that existed at the time of the sale.

Though recognizing the long-standing rule that foreclosure of a superior lien (such as a tax lien) wipes out inferior liens (such as a mortgage), the majority of the appellate court held that the taxpayers' title and interest was restored to the same condition it was at the time of the sale; i.e., the lien was reinstated. One of the justices disagreed and would have held the mortgage lien extinguished.

Taxing units may not sue taxpayers on allegations of fraud involving property appraisal.

The taxing units claimed that their fraud and conspiracy claims were brought under common law and were not tax claims. However, the court of appeals noted that the damages sought by the taxing units would be measured by the tax rates and omitted values, thus bringing the case under the Tax Code. The court of appeals held that the taxing units only remedy was under Section 41.09 of the Tax Code, which allows taxing units to protest to the review board valuations of a category of property.

Because the taxing units had not pursued an administrative remedy prior to filing the lawsuit, the appellate court ordered the dismissal of their lawsuit.

An error in reporting value on a personal property rendition is not a clerical error.

Though the case seems to imply that the taxpayer filed a 25.25(d) protest, the timing indicates that the protest was actually a 25.25(c) motion seeking a correction based on the alleged clerical error in the rendition.

However, the court of appeals held that including incorrect information from another employee is not an error in transcribing or calculating or otherwise which would make the error a clerical error subject to correction under 25.25(c).

Notice of delinquency must be sent to owner to impose interest and penalty.

In this delinquent tax case, the property owner claimed that interest and penalties should be cancelled due to the failure of the taxing units to send the required notice of tax delinquency to the owner.

The taxing units claimed that they had sent the notices to a partner in the owner and produced evidence showing that the recipient had held himself out as the owner and as a partner in the ownership entity. The appraisal district records reflected that the recipient was the owner and that he had claimed to be the owner.

However, the taxpayer's evidence showed that the recipient had been only a limited partner with not management authority and had not ownership interest in the property itself.

The court of appeals held that the delinquency notices to the non-owner were insufficient to allow the imposition of interest and penalties, and cancelled the interest and penalties portion of the delinquent taxes.

The ten percent homestead valuation cap applies to the residence homestead as a single unit, i.e., the land together with improvements, and not separately to the land value and the improvement value.

In one year, the appraisal district had increased the value of the residence, but applied the 10 percent increase to the total value of the homestead. Because the appraisal district had not increased the land value but only increased the improvement value, the property owner claimed that his cap value should be lower. The homeowner's position was that the land value should remain unchanged, while the improvement value should be calculated separately with a 10 percent cap.

The court of appeals rejected the argument, explaining that a residence homestead consists of the residence with the land. The court thus reasoned that the property contemplated by Section 23.23 of the Texas Tax Code regarding the 10 percent homestead value cap is the unitized property consisting of the land and improvements and not the separate components of the homestead.

Notice provisions relating to a tax sale are for the benefit of the taxpayer and not for the benefit of the governmental entity or third parties.

The court of appeals held that, because the notice and other provisions regarding the sale are for the benefit of the taxpayer and because the later deed holder was not the taxpayer, it could not raise the issue of defective notice in an attempt to void the sale.

Though the case dealt with a federal tax lien, the same or similar issue might arise with regard to property tax foreclosures.

Franks v. Woodville I.S.D.

A property owner has two years to file a claim for excess proceeds of a delinquent tax sale, but need not obtain the court's determination of that claim within the two-year period.

In this case, a person claiming ownership filed within the two-year period, but did not obtain an order of the court regarding the proceeds. The taxing units then claimed that they were entitled to the excess funds due to the lapse of time, arguing Section 34.03 provides for transfer of excess funds to the taxing units if no one establishes entitlement to the proceeds within the two-year period. The trial court agreed.

However, the court of appeals held that the two-year limitation is the period in which a claim must be filed with the court and not the period in which an actual determination and order must be obtained from the court.

Trevino v. Frio County

Let the buyer beware at delinquent tax sales. In this case, the purchaser at a tax sale lost his purchase price and the title to the property.

After the tax sale was held void and the credit union awarded the property, Trevino sue the taxing authorities to recover his $6,600 paid at the tax sale. Though Trevino pleaded unjust enrichment, he withdrew that claim due to a procedural problem in the trial court. Subsequently, the trial court awarded judgment for the taxing entities and Trevino appealed.

On appeal, the court ruled that the basis of Trevino's claims (unjust enrichment and inconsistent judgment based on the prior credit union lawsuit) were not preserved for appeal. The appellate court affirmed the judgment, leaving Trevino with neither the property nor the money.

In a concurring opinion, one appellate justice pointed out that Trevino essentially stepped into the shoes of the delinquent tax judgment debtor and thus any interest he could have acquired was subject to the credit union's pre-existing lien. The justice also noted that, though Trevino failed to discover the credit union lien prior to purchasing the property, he is presumed to have had notice of the recorded lien under law.

Cordillera Ranch, Ltd. v. Kendall County Appraisal District

Each individual owner in a wildlife management cooperative must independently satisfy activity requirements relating to his own land to qualify for agricultural valuation.

To obtain wildlife management designation and thus agricultural valuation under Section 23.51 of the Tax Code, a land owner is required to conduct at least three of seven specified qualifying activities on his property. The parties stipulated that individually the owners could not meet this test. However, such activities were apparently being conducted on land included in the cooperative.

The appellate court held that qualification could not be determined based on the cooperative's actions or based on the land included in the cooperative as a whole, but that each owner must show that his individually owned land meets the qualification test. Therefore, denial of agricultural valuation was affirmed.

Cooke County Tax Appraisal District v. Teel

When a review board determines it has jurisdiction over a protest and issues an order on a protest, a court obtains jurisdiction if the taxpayer timely files an appeal of that order. Failure of the appraisal district to object to the review board's jurisdiction waives any jurisdictional claim in the administrative proceedings.

The taxpayer subsequently appealed the review board order to district court, which granted agricultural appraisal. On appeal, the appraisal district claimed a lack of jurisdiction because of the passage of all deadlines relating to the original agricultural application. The court of appeals noted the review board's determination of jurisdiction over the protest and the lack of any jurisdictional challenge by the appraisal district at the administrative stage. Because the taxpayer appealed the order within 45 days of receipt, the trial court also had jurisdiction to consider the protest.

The appraisal district also claimed that the appeal to district court was also untimely. Repeated attempts to deliver the review board order to the taxpayer had been made, but the taxpayer had moved from the address to which delivery was attempted. The district claimed that the taxpayer had constructive notice of the review board decision four months prior to the eventual delivery of the order to the taxpayer's attorney.

Because the Tax Code provides that the 45-day window to file a judicial protest commences when the property owner receives written notice of the order, and because it was conceded that the lawsuit was filed within 45 days of the eventual receipt of written notice, the court of appeals held that the judicial protest was timely and the court had jurisdiction to determine the appeal.

Marina Landing II Joint Venture v. State of Texas

Taxing units may not assert a defense of sovereign immunity against a taxpayer's claim of lack of notice.

At the appellate level, the taxpayer and the governmental entities advised the court that it was undisputed that the taxpayer was denied due process because it did not receive proper notice of the tax foreclosure trial and sale. The taxing authorities also condeded they were not entitled to sovereign immunity against the taxpayer's due process constitutional claim. The parties moved that the matter be remanded to the trial court for further proceedings.

In granting the parties' joint motion, the court of appeals agreed that a governmental entity is not entitled to assert sovereign immunity as a defense when a party alleges it has been deprived of property without due process.

Attorney General Opinions

Section 6.025 means what it says.

However, the Attorney General refused to address the issue of whether Section 6.025 is constitutional because that issue was not presented in Harris County's request. A request on behalf of the Dallas Central Appraisal District questioning the constitutionality of the overlapping jurisdiction valuation statute is pending with the Attorney General's office.

No extensions allowed on TIFs.

Collecting taxing unit determines availability of early payment discount.

Questions answered regarding elderly/disabled homestead tax freeze.

Tax refunds for retroactive travel trailer exemption not allowed.

However, the Attorney General's opinion indicates that neither the amendment nor any legislation requires or allows school districts to refund property taxes received from travel trailer owners for the 2002 and/or 2003 tax years. The opinion does indicate that those owners who refused to pay the tax assessment might benefit since the property on which the assessment was made is now exempt. The opinion also indicates that there may be a narrow window of opportunity (until January 1, 2005) for the Legislature to authorize school tax refunds.

Homestead absence time restrictions imposed by Section 11.13(l) of the Property Tax Code do not apply retroactively.

Prior law imposed no specific time limits on a person's temporary absence from a homestead. With the change in law, at least one appraisal district wanted to apply the restrictions to the 2003 tax year. The attorney general stated that this would result in a retroactive application of the statute, and no such restroactive application was allowed.

This attorney general opinion clarifies numerous issues relating to the execution of tax warrants for delinquent taxes.

Real property seized through a tax warrant must be turned over to the tax assessor. However, personal property is only required to be turned over to the tax assessor if the warrant specifically states.

If personal property is seized, then the executing officer must make an inventory of the property seized.

Unless the warrant provides otherwise, there is no time limit by which the sale of seized property must occur. The officer who seized the property is responsible for the sale and for distributing the proceeds of the sale.

Roads and streets dedicated by a developer to a governmental unit remain taxable to the developer until the governmental units actually accepts the dedication.

An individual member of a governing body has no authority to accept a dedication of streets. In the particular question presented, the attorney general determined that a single county commissioner could not unilaterally accept a dedication. Such a dedication must be accepted by action of the county commissioners court.

A tax abatement agreement between a property owner and a governmental entity may not be amended retroactively to apply to a prior tax year.

The attorney general said that such a retroactive amendment would violate provisions of the Tax Code that require a property owner to qualify for any exemption as of January 1 of the tax year in issue. The attorney general indicated that there is no law providing for a post-January 1 change in the qualification requirements. The attorney general also indicated that a retroactive abatement modification would be in violation of the Texas Constitution, which prohibits the forgiveness of debt by the government, since the property tax liability had already been incurred.