Summary of 2005 Property Tax Legislation

During the 2005 legislative session, more than 175 bills were introduced that would have made changes relating to Texas property tax laws, including significant reductions in school property taxes as part of school financing. As with the various school financing proposals, most of the proposed property tax bills died with the adjournment of the legislature. Of the 175 bills introduced, less than 40 were eventually approved by both the House of Representatives and the Senate and forwarded to the Governor for consideration. The Governor vetoed three of the bills and allowed one bill to become law without his signature. All remaining bills were signed.

The following summarizes the majority of the changes that result from the new legislation, categorized by the general nature of the change. The categories in which we have divided the new law changes are as follows:

Administrative
Consultants
Delinquent Taxes
Exemptions
Omitted Property
Privacy
Protests
Rendition
Tax Zones
Valuation

Administrative [return to index]

HB 1984 (effective Jan. 1, 2006) - The law requires that value notices include the percentage increase or decrease in appraised value between the current year and the 5th preceding year. The law also requires that tax bills include additional information, including the percentage increase or decrease in appraised value and taxes between the current year and the 5th preceding year. Compare to SB 18, which adds additional information for a tax bill. Status: Signed by Governor.

HB 2382 (effective July 1, 2006) - The law requires a newly appointed chief appraiser to obtain training in administrative, procedural and legal issues within one year of his or her appointment. The requirement would only apply to chief appraisers appointed after July 1, 2006. Status: Signed by Governor.

HB 2491 (effective Sept. 1, 2005) - The law provides for revision to various sections of the Tax Code. The law allows a taxing unit to adopt early payment discounts for taxes even if the taxing unit does not collect its own taxes. However, the law provides that, if another taxing unit collects the discounting unit's taxes, the collecting unit may charge an additional fee for sending separate bills and administering the discounts. Also, the law provides that, if the county tax assessor collects the discounting unit's taxes and the discounting unit's policy is different from the county's policy, the county assessor may terminate the collection contract with the discounting unit. Other revisions are explained in other sections of this summary. Status: Signed by Governor.

HB 2926 (effective immediately) - The law provides for listing of a bidder at a tax sale as the owner of the property for tax purposes even if the bidder does not provide a certificate of no tax delinquency within six months of the tax sale. Status: Signed by Governor.

SB 18 (effective immediately) - The law provides additional notice and hearing requirements relating to the adoption of annual tax rates. For non-school taxing units, two public hearings would be required before the adoption of a tax rate the exceeds the lower of the rollback rate or the effective rate. The law would also change rollback petition guidelines ro provide that only 7 percent of registered voters must sign a rollback petition if the property taxes for the taxing unit are $5 million or more. The current requirement of 10 percent would be retained for other units. The law also requires that a tax bill include information regarding appraised values, tax rates, taxes, and percentage change on real property for the 5 preceding years. The law relating to tax rate adoption is effective for the 2005 tax year unless a taxing unit adopts its tax rate prior to the effective date of the statute. For those adopting an early tax rate, the law would go into effect in 2006. Status: Allowed to become law without Governor's signature; Gov. Perry complained that "the bill does not provide enough taxpayer protections to help end hidden tax increases by valuation."

SB 286 (effective Jan. 1, 2006) - This law requires both elected and appointed public officials to receive training regarding open meetings and public information laws. Status: Signed by Governor.

SB 567 (effective immediately) - The law requires that a notice of public hearing to increase the property tax rate include certain additional information. The additional information would include: the percentage difference in the amounts budgeted in the prior year and the current year for maintenance and operations, debt service, and total expenditures; the total appraised value and total taxable value of property in the taxing unit for the previous and current year; and the total appraised value and total taxable value of new property in the taxing unit for the previous and current year. Status: Signed by Governor.

SB 580 (effective immediately) - This law requires that the county tax assessor-collector create a homestead tax escrow account upon the request of a disabled veteran or certain recipients of military awards. Under prior law, the assessor could but was not required to create an escrow account for a taxpayer. The new bill requires the escrow creation in this limited circumstance. Status: Signed by Governor.

SB 692 (effective immediately) - This law sets the maximum amount that a county tax assessor can charge a river authority to collect taxes on behalf of that authority. A previous conflict in legal language made the amount of charge uncertain. The purpose of the new law is merely clarification. Status: Signed by Governor.

SB 898 (effective Sept. 1, 2005) - The law requires that a tax bill be sent to both the property owner as shown on the tax roll and the owner's authorized agent. It also adds omitted property to those properties on which a tax lien is extinguished upon transfer with a tax certificate showing no taxes due. The original owner of the omitted property would remain liable for taxes, but the taxing unit's lien could not be enforced on the property. The law also provides that the owner of property at the time that it was omitted from the tax roll is personally liable for the omitted taxes, even if he no longer owns the property. Status: Signed by Governor.

SB 1203 (vetoed) - The law allows a designated agent to receive tax refunds if the taxpayer designates the agent to receive the refund. It also provides that late granted homestead exemptions and corrections under Section 25.25 are automatic and do not require the filing of a refund application. Status: Vetoed by Governor.

SB 1652 (effective Sept. 1, 2005) - The law cleans up various sections of the Tax Code. Among the revisions, the law changes the Tax Code provisions regarding timeliness of actions by mail to provide that action is timely if it is mailed by or on the deadline date. Though most appraisal districts and tax collectors consider action timely if mailed on the deadline date, the Tax Code's current language could be interpreted that mailing must occur before the deadline. The law also requires that an appraisal district board of directors must every two years develop a plan for the reappraisal of all property in the county with a public hearing held on such plan. The law also allows the comptroller to issue or approve publications relating to appraisal of property and administration of taxes. The publications approved could be from professionally recognized organizations. Currently, the comptroller is required to issue certain publications. This law makes it optional. Other revisions are discussed elsewhere in this summary. Status: Signed by Governor.

Consultants [return to index]

HB 2491 (effective Sept. 1, 2005) - The law provides for revision to various sections of the Tax Code. The law provides that an authorization for a fiduciary to receive tax notices remains effective until revoked in a written statement filed with the appraisal district. Other revisions are discussed elsewhere in this summary. Status: Signed by Governor.

Delinquent Taxes [return to index]

HB 2254 (effective Sept. 1, 2005) - The legislation would reduce the penalty for late payment of a homestead tax installment by the elderly and disabled from 12 percent to six percent. Status: Signed by Governor.

HB 2438 (effective immediately) - The law would also require the filing of a tax lien on the manufactured housing to be effective and require the satisfaction of all tax liens before transmitting title to the housing. Status: Signed by Governor.

HB 2491 (effective Sept. 1, 2005) - The law provides for revision to various sections of the Tax Code. Among the revisions are additional requirements relating to transfers of tax liens, including the redemption and payment rights of a first lienholder on property subject to a transferred tax lien. The law provides that a tax lien is superior to property association liens and reversionary interests in the property. The law allows a tax collector to enter into an installment payment arrangement with a taxpayer relating to any taxing unit for which the collector collects taxes; previously such an agreement could only be entered into for taxing units collecting their own taxes. The law allows the tax collector to recover attorney fees in certain tax warrant cases. The law provides for reduced notice requirements in a delinquent tax case where the delinquency exceeds the value of the property or the taxes have not been paid for at least 10 years; the relief in the lawsuit would be limited to foreclosure and no personal liability judgment. The law requires that a tax bill or delinquent tax notice threatening a lawsuit for collection contain language to inform elderly and disabled homesteaders that they may be entitled to postpone tax collection procedures. The law allows a taxing unit contracting with a collection attorney to expedite the imposition of the collection penalty on delinquent taxes due on personal property; the penalty (up to 20 percent) could be imposed as early as 60 days after delinquency; a notice of the penalty would have to be delivered 30 to 60 days before imposition of the penalty. The law would prohibit the withdrawal of a deposited condemnation award unless the party seeking to withdraw the deposit provides a tax certificate showing no delinquent taxes and, if the entire property is condemned, a tax receipt showing prorated payment of the current year's taxes. The law would make the Secretary of State an agent for service for nonresident lienholders in delinquent tax lawsuits. Other revisions are discussed elsewhere in this summary. Status: Signed by Governor.

HB 3101 (effective Sept. 1, 2005) - The law requires the payment of all delinquent taxes (plus current year taxes for plats filed after Sept. 1) before a plat or replat of property may be filed. Status: Signed by Governor.

SB 644 (effective immediately) - Section 34.015 of the Tax Code provides that a purchaser at a tax foreclosure sale cannot owe delinquent taxes to the county in which the foreclosed property is located or any municipality or school district located in such county. This new law limits this restriction to counties with a population of 250,000 or more and to lesser populated counties where the county commissioners adopt the restriction. Status: Signed by Governor.

SB 1587 (effective Sept. 1, 2005) - The law requires that a notice of intent to foreclose a transferred tax lien be provided to the holders of all recorded liens on the property to be foreclosed. Status: Signed by Governor.

Exemptions [return to index]

HB 312 (effective Sept. 1, 2005) - The law potentially eliminates the rollback tax on timber land in three situations: (1) if the sole reason for the change of use determination was the property owner claiming the land as part of his residence homestead; (2) if the property is owned by a qualifying religious organization that converts the land to a qualifying exempt religious purpose within five years; or (3) if the land is owned by a not-for-profit cemetery association which has not previously dedicated more than five acres for cemetery use in the prior five years, is less than five acres in area and in an unincorporated area of a county with less than 100,000 population, is dedicated for cemetery use, and is adjacent to an existing cemetery of more than 100 years in age. These exceptions were previously added to the rollback provisions for agricultural and open space land. Status: Signed by Governor.

HB 2080 (effective immediately) - The law provides that a license to occupy a unit in a tax-exempt retirement community is not a taxable leasehold. Status: Signed by Governor.

HB 2491 (effective Sept. 1, 2005) - The law provides for revision to various sections of the Tax Code. The law requires that religious organizations seeking a waiver of delinquent interest and penalty must pay the tax and qualify the property for exemption within one year of acquisition; the waiver would still remain discretionary with the taxing unit. The law requires that a tax bill or delinquent tax notice threatening a lawsuit for collection contain language to inform elderly and disabled homesteaders that they may be entitled to postpone tax collection procedures. The law requires that homestead exemption application forms include a place for the applicant to include his or her date of birth. Failure to provide the birthdate would not be a basis for denying a standard homestead exemption, but could be for denying an elderly homestead exemption. If the applicant does provide the information, then the appraisal district is supposed to grant the elderly exemption in the year after the applicant turns 65 without the necessity of the applicant filing a later application for the elderly exemption. Other revisions are discussed elsewhere in this summary. Status: Signed by Governor.

HB 2702 (effective immediately) - The law provides that a portion of a rail facility, highway project, toll project, or the Trans-Texas Corridor that is leased to a private entity for commercial uses would not be exempt from ad valorem taxes. Note that the law does not provide that the property be appraised as a taxable leasehold of exempt property, but instead that the property is not exempt. Status: Signed by Governor.

HB 3016 (vetoed) - The law provides that certain surplus drug supplies (primarily relating to drugs for use in the event of bioterrorism and disasters) in the state on January 1 for only a temporary period of time would be excluded from appraised value as economic obsolescent property. A temporary period of time would be less than 60 days, but would be measured by the average number of days in inventory for the entire prior year. The amount of surplus could not exceed 10 percent of the owner's inventory. The owner's rendition must included sufficient information to show entitlement to the surplus exclusion. Status: Vetoed by Governor.

HB 3240 (effective Jan. 1, 2006) - The law allows a homestead exemption for the beneficiary of a court-created trust if the beneficiary has the right to occupy the property as his principal residence. Status: Signed by Governor.

SB 1652 (effective Sept. 1, 2005 except implements of husbandry provision effective Jan. 1, 2006) - The law cleans up various sections of the Tax Code. The law clarifies that machinery and equipment are included among "implements of husbandry" exempt from taxes. The law also provides that motor vehicles located at a wholesale auctioneer on January 1 for less than 60 days and held for resale do not have taxable situs at the auctioneer's address, and that the auctioneer need not render such vehicles. The law extends the deadline for a late veteran exemption application to one year after the delinquency date of assessed taxes; previously if the veteran paid the taxes, the deadline could have been one year after the tax payment. Other revisions are discussed elsewhere in this summary. Status: Signed by Governor.

Omitted Property [return to index]

SB 898 (effective Sept. 1, 2005) - The law adds omitted property to those properties on which a tax lien is extinguished upon transfer with a tax certificate showing no taxes due. The original owner of the omitted property would remain liable for taxes, but the taxing unit's lien could not be enforced on the property. The law also provides that the owner of property at the time that it was omitted from the tax roll is personally liable for the omitted taxes, even if he no longer owns the property. Status: Signed by Governor.

Privacy [return to index]

SB 541 (effective Sept. 1, 2005) - This law prohibits an appraisal district from posting on the internet a photograph, sketch, or floor plan for an improvement to real property if the improvement is designed for human residence. An exception is for aerial photographs showing at least five separately owned buildings. The new law was promoted by taxpayers concerned that including the information about their residence or vacation home created a security concern by providing too detailed information to potential burglars or others. Status: Signed by Governor.

Protests [return to index]

HB 182 (effective Sept. 1, 2005) - The law creates Chapter 41A of the Tax Code and allows certain property owners to use binding arbitration in lieu of a lawsuit in contesting appraised or market value. The arbitration process could only be used for real property with a value of $1 million or less as determined by the review board order being appealed. The demand for arbitration would have to be filed within 45 days of receipt of the review board notice determining the administrative protest, and the property owner would have to pay a $500 deposit to cover expenses of the arbitration process. Status: Signed by Governor.

HB 2491 (effective Sept. 1, 2005) - The law provides for revision to various sections of the Tax Code. The law provides for a procedure by which a taxpayer may cause his litigation expert deadline to be the same as the appraisal district's deadline. The taxpayer would be required to make a written settlement offer within 120 days of filing his appeal, request alternative dispute resolution (for example, mediation or arbitration, and designate one basis of appeal (either appraised value or equitable taxation). Upon doing so, both the taxpayer and the appraisal district would have the same expert deadline for that appeal basis. If the taxpayer also appeals on the non-designated basis, his expert deadline on that basis would continue to be governed by the normal rules which normally provide that a taxpayer is required to provide his expert information before the appraisal district. Though the taxpayer could appeal on both appraised value and equity, he could only designate one basis and not both for the purpose of expediting the appraisal district's expert deadline. Other revisions are discussed elsewhere in this summary. Status: Signed by Governor.

SB 828 (effective Jan. 1, 2006) - The law allows for late value protests by off-shore drillers and active armed services members in certain situations. A late protest would have to be filed prior to the delinquency of the taxes. Status: Signed by Governor.

SB 1351 (effective Sept. 1, 2005) - The law also creates Chapter 41A of the Tax Code (see HB182 above) and allows certain property owners to use binding arbitration in lieu of a lawsuit in contesting appraised or market value. The arbitration process could only be used for real property with a value of $1 million or less as determined by the review board order being appealed. The demand for arbitration would have to be filed within 45 days of receipt of the review board notice determining the administrative protest, and the property owner would have to pay a $500 deposit to cover expenses of the arbitration process. Status: Signed by Governor.

Rendition [return to index]

HB 809 (effective Jan. 1, 2006) - The law allows an individual to exclude from a business personal property rendition all passenger cars or light trucks used for both business and personal purposes. Note that the legislation does not expressly provide for an exemption for the vehicles, but merely allows for the vehicles to not be declared on a rendition. Status: Signed by Governor.

SB 1652 (effective Sept. 1, 2005) - The law cleans up various sections of the Tax Code. The law provides that motor vehicles located at a wholesale auctioneer on January 1 for less than 60 days and held for resale do not have taxable situs at the auctioneer's address, and that the auctioneer need not render such vehicles. Other revisions are discussed elsewhere in this summary. Status: Signed by Governor.

SB 2491 (effective Sept. 1, 2005) - The law revises various sections of the Tax Code. The law provides that the penalties imposed for a late or fraudulent rendition filing become party of the taxes assessed against the property and are secured by a lien on the property to the same extent as the taxes. The law also provides that the tax collector pay the chief appraiser 5 percent of the collected penalties to cover administrative costs relating to the penalty determination and certification. Status: Signed by Governor.

Tax Zones [return to index]

HB 525 (effective Sept. 1, 2005) - The law authorizes municipalities to create homestead preservation districts, homestead land trusts, and homeowner land banks to promote affordable housing, including protecting existing homestead of low and moderate income homeowners. Land owned by a homestead land trust would be exempt from taxes. The law also allows land subject to foreclosure for delinquent taxes to be sold to a land bank without going through a public foreclosure if the property is unimproved, the delinquent taxes exceed the market value as set forth in the tax judgment, at least six years of taxes are delinquent, other taxing units agree, and the property owner does not object. If the property owner objects, then the property would be foreclosed in the normal manner at a public sale. If the property owner does not object, then he would have no liability for any deficiency resulting from the sale to the land bank. Status: Signed by Governor.

HB 2653 (effective immediately) - The law allows for the creation of tax increment financing zones for bus and rail transportation projects. Status: Signed by Governor.

SB 356 (effective Sept. 1, 2005) - The law allows a municipality with a population of more than 1.9 million to create an urban land bank and provides that properties scheduled for tax foreclosure may be sold to the land bank by private sale under certain conditions. Status: Signed by Governor.

SB 771 (effective immediately) - The law provides that the presence of vacant or underused non-residential structures during the past 12 years periods of time can form the basis for creation of a reinvestment zone under the Tax Code. Status: Signed by Governor.

SB 833 (vetoed) - The law requires that certain tax increment financing zones include affordable housing and that a portion of the taxes collected be used to construct such housing. The requirement only applies to zones created in 2005 or later and served by a rail transportation project in counties with a population of more than 800,000 and less than 1.4 million. It appears that the law will only currently apply to Travis County since it is the only county with a qualifying population size. Status: Vetoed by Governor.

SB 1205 (effective immediately) - The law allows for the creation of multi-jurisdictional library districts with the power to levy property taxes on all property located in the district if approved by voters. Status: Signed by Governor.

SB 1413 (effective Sept. 1, 2005) - The law allows a county to designate a Brownfield area (an area needing environmental cleanup) as a reinvestment zone and to grant tax abatements to owners based on remediation of the environmental problems. Status: Signed by Governor.

SB 1730 (effective immediately) - The law allows a municipality or county collecting hotel tax to hold an election to allow the use of ad valorem taxes to finance a venue project, such as a sports arena or convention center. Status: Signed by Governor.

Valuation [return to index]

HB 2438 (effective immediately) - The law allows the owner of manufactured housing to elect to have the home treated and appraised as real property for tax purposes. Once elected to be treated as real property, the owner could not elect to convert the property back to personal property without the consent of the taxing units. If treated as real property, the tax lien for taxes assessed on the housing would also attach to the land upon which the housing sits. If treated as personal property, the housing lien would only attach to the manufactured housing and not the land. Status: Signed by Governor.

HB 2491 (effective Sept. 1, 2005) - The law provides for revision to various sections of the Tax Code. The law requires the chief appraiser to categorize property qualifying for open-space valuation based on the use and characteristics of the property. (See SB 760 below.) The law also requires that an appraisal district consider conservation restrictions imposed on habitat preserve property in determining the value of such property. Other revisions are discussed elsewhere in this summary. Status: Signed by Governor.

SB 760 (effective Jan. 1, 2006) - The law requires the chief appraiser to categorize property qualifying for open-space valuation based on the use and characteristics of the property. Status: Signed by Governor.