After Rendition: Now What?

April 15 has come. Except for those property owners requesting an automatic filing extension until May 15 or those property owners with pending exemption applications, the mandatory rendition forms should be at or on their way to the applicable appraisal district.

However, the filing of the rendition form is only the first step in the valuation of business personal property in Texas.

Though the chief appraiser is not required to accept the information included in a property owner's rendition form, the appraisal district is prohibited from placing a value on or sending a notice of value to a property owner until the deadline for filing a rendition form has passed. This means that property owners who filed by April 15 can now expect to receive value notices. Property owners who received a filing extension should not receive a value notice until after they file their rendition forms or May 15, whichever is earlier.

Presumably, the Legislature intended that the chief appraiser would rely upon the information that is included in a property owner's rendition in determining the taxable value of the owner's property. However, there is no requirement for this. And the Tax Code provides methods by which the chief appraiser can obtain information in addition to that included on the rendition form.

If the property owner rendered an estimate of market value, then the new mandatory rendition law allows the chief appraiser to request additional information from the property owner relating to that value estimate. Section 22.07(c) provides that "[t]he chief appraiser may request, either in writing or by electronic means, that the property owner provide a statement containing supporting information indicating how the value rendered ... was determined."

The property owner's statement must include at least the following:

1. a summary of information sufficient to identify the property, including:
   1. the physical and economic characteristics relevant to the opinion of value, if appropriate; and
   2. the source of the information used;
2. the effective date of the opinion of value;
3. an explanation of the basis of the value rendered.

The statute provides that a business with 50 employees or less may base its estimate of value on the depreciation schedules used for federal income tax purposes.

Two questions have come up regarding this provision. First, is the chief appraiser required to accept a value based on the federal depreciation schedules if the property owner is a business with 50 employees or less? And second, is a business with more than 50 employees prohibited from using a valuation methodology based on federal depreciation schedules?

The answer to both questions is "no."

There is no requirement in the rendition statute that the chief appraiser accept the owner's estimate of fair market value, regardless of the methodology used by the owner. So, while a small business owner may render a value based on federal depreciation schedules, the chief appraiser can determine and notice his own value based on a different methodology.

Also, there is nothing that prohibits any business, regardless of size and number of employees, from rendering a value based on federal depreciation schedules. The only requirement for determination of the estimate is that the estimate of value must be made in good faith. Therefore, if the owner in good faith believes that a value based on federal depreciation schedules represents a reasonable determination of and methodology for determination of value, then the property owner can use this method for estimating value.

In the event that the chief appraiser subsequently claims that the value estimate was not made in good faith, then the small business owner probably has an immediate defense since the statute specifically allows him to use this methodology. Whether a larger business owner, without further support, could make the same claim is uncertain.

If a chief appraiser requests supporting information for the estimate of value, then the property owner must provide the information required by the statute within 21 days after receipt of the request. Failure to timely provide the information results in the same penalties as if the property owner has not timely filed a rendition in the first place.

If a request for supporting information is received, does the property owner have to turn over his books and records to the chief appraiser? Not necessarily. If the property owner can provide the information required by the statute (as shown above) without providing books and records, then the property owner does not need to provide any additional information. For example, if the property owner has an appraisal of the property, then the appraisal might be sufficient to comply with the information requirements.

The new rendition statute only provides for an information request by the chief appraiser if the property owner renders a value instead of the historical cost and acquisition year. However, a property owner choosing the historical cost option might still find himself faced with a form of information request.

Pre-existing law, which was not changed by the new legislation, allows the chief appraiser or his representative to enter a business for inspection of the personal property. Section 22.07(a) of the Tax Code provides for such an inspection so that the chief appraiser can "determine the existence and market value of tangible personal property used for the production of income and having taxable situs in the district."

The only restriction on such an inspection is that it must be done during normal business hours or at a time mutually agreeable to the chief appraiser and the person in control of the business.

Of course, such an inspection is available to the chief appraiser regardless of the method of rendition (value estimate or historical cost) used by the property owner.

If you have any questions about the contents of this article, please contact the GPD Property Tax Section at propertytax@gpd.com.