Questions and Answers on the Rendition Penalty

Though the time is rapidly approaching for business owners to file their 2005 personal property renditions, many owners are just now experiencing one of the fall-outs from the 2004 rendition season: rendition penalty notices and bills.

In revising the rendition provisions of the Texas Property Tax Code in 2003, the Texas Legislature added penalties for failing to file a rendition or for filing a false rendition. The potential imposition of penalties was a key component of the revisions, as annual renditions were technically required previously but often ignored because of the lack of any repercussion for the failure to file.

The threat of penalties did in fact spur a greater number of rendition filings. Because of this influx of renditions, some appraisal districts experienced delays in providing value notices and handling subsequent appeals. In some cases, hearings on business personal property value protests were not held until the fall of 2004, well after the remainder of the appraisal roll had been approved.

With the appraisal districts having completed their value determinations and protests for 2004 renditions, several chief appraisers have now turned to the enforcement provisions of the rendition statute; i.e., the imposition of penalties against individual property owners.

Only recently, some property owners have started receiving notices and bills imposing penalties under the Tax Code for either failing to render or failing to timely render. With the receipt of these notices and bills, several questions have arisen relating to the penalties. The question-and-answer summary below is an effort to answer some of the questions that taxpayers and consultants may have regarding these penalties.

Who collects the penalty?

Under the Tax Code, the chief appraiser is authorized to impose and collect the penalty.

If the chief appraiser is supposed to collect the penalty, then why did I receive a bill from the county tax assessor?

Though the chief appraiser is supposed to collect the penalty, he or she often will not have the resources or established procedures to bill and collect the penalty. This is especially the case in larger counties where the chief appraiser normally does not collect taxes. Thus, the chief appraiser may contract or enter into an agreement with a third party to perform the billing and collection duties. Naturally, the most likely candidate for such a third party would be the county tax assessor, who already has in place a mechanism to send tax bills to every taxpayer in the county. If you receive a rendition penalty notice from the county tax assessor, it is likely because the chief appraiser has assigned the collection duties to that office. If you receive a penalty bill from someone other than the chief appraiser or a recognized tax assessor (for example, a company claiming to collect the penalty), you should check with the appraisal district to be certain that the billing company is authorized to collect the penalty.

How much is the penalty?

The rendition statute provides for two types of penalties relating to the filing of a business personal property rendition form. A 10 percent penalty applies if the property owner fails to timely file a rendition form. An additional 50 percent penalty may apply if it is determined that the property owner filed a false rendition. Any penalty bills being received now are likely for the 10 percent penalty. If the chief appraiser intends to seek the 50 percent penalty, he or she should be sending a notice of such penalty and not an actual bill.

Who gets the penalty funds?

The chief appraiser is allowed to retain a portion of any penalty, not to exceed 20 percent, to defray costs of collection. The remainder is distributed proportionately to the taxing units which assess taxes on the property involved. If the chief appraiser has arranged for a third party to collect the penalty, then all or a large portion of the 20 percent is likely to go to the collector.

Why wasn't the rendition penalty included on my property tax bill?

The State Comptroller has stated that, under the Tax Code, only certain information is allowed to be contained within a tax bill. As the rendition penalty is not currently one of the allowed items, the Comptroller said that the rendition penalty could not appear on the tax bill. In other words, a separate bill for the rendition penalty had to be issued.

But why am I receiving the penalty bill so late?

Because of the delays caused by the influx of personal property renditions and protests in the first year under the new filing provisions, certification of many business personal property accounts was delayed. In some cases, these certifications would not have occurred until after other 2004 tax bills had already been mailed. Additionally, there may have been some delays in determining which accounts should have the penalty imposed and in determining how the penalty would be collected or who would do the collection. Also, there could have been a conscious desire to separate the tax bill from the penalty bill to avoid any confusion.

I don't think that I should be charged the penalty. Should I contact the tax collector?

No. The tax collector's role is really that of a collection agency. The collector has no control over the imposition of the penalty or the waiver of the penalty. If you disagree with the penalty, then you must seek a waiver from the chief appraiser. A complaint to the tax collector will not substitute for a properly filed waiver request to the chief appraiser.

What is the deadline for seeking a waiver?

A written waiver request must be sent to the chief appraiser by the 30th day after the date the taxpayer receives notification of the imposition of the penalty.

What can be considered in determining an application for waiver?

In considering a waiver request, the chief appraiser can consider (1) the person's compliance history with respect to paying taxes and filing reports; (2) the type and nature of the property involved; (3) the type, nature, and sophistication of the business for which the property is rendered; (4) the completeness of the person's records; (5) the person's reliance an any advice from the appraisal district; (6) any change in appraisal district policy that might have affected how the property was rendered; and (7) any other factor the chief appraiser considers relevant.

What recourse do I have if the chief appraiser refuses to grant a waiver?

If the chief appraiser refuses to grant a waiver, that refusal can be appealed to the appraisal review board. Presumably, the review board's action could then be appealed to district court.

Am I required to pay the penalty pending the final determination of my waiver request?

The Tax Code does not provide any requirement that the rendition penalty be paid during the pendency or as a prerequisite to an administrative appeal. This does not mean that the appraisal district might not provide its own interpretation requiring such a prepayment, but the appraisal district is not supposed to engraft any additional restrictions and limitations on a taxpayer's right of protest than found in the Tax Code. Unlike other protests involving value or clerical errors, the penalty waiver protest does not indicate that compliance with Section 42.08 is a prerequisite to determination of a protest. Even if Section 42.08 did apply, it would appear that nonpayment could satisfy the statute as the taxpayer is essentially contesting application of the penalty; i.e., the amount not in dispute is zero.

What if I do not pursue a waiver or an administrative and judicial protest of the denial of a waiver?

A taxpayer who fails to seek and pursue a waiver of the penalty is likely stuck with the liability. It is possible that a property owner could be prohibited from presenting any defense against the imposition of the penalty in any subsequent court action to collect the penalty, even if the penalty was improperly imposed. Theoretically, it is possible for a 25.25(c) clerical error protest to be pursued at a later date. However, such a protest could not be used to obtain a waiver, only to correct the records for an improperly imposed waiver, such as when the rendition has been timely filed.

When is the deadline to pay the penalty?

There is no deadline provided in the Tax Code for payment of the penalty. Therefore, under the Tax Code as it currently exists, according to the State Comptroller, the penalty never becomes delinquent. However, theoretically, the payment is due upon receipt of the penalty bill.

Do any interest or collection penalty provisions of the Tax Code apply to the rendition penalties?

No. The State Comptroller has pointed out that the interest and penalty provisions of the Tax Code only apply to taxes and do not apply to the rendition penalty.

Will a lien be imposed on my property for the penalty?

No, the rendition law does not provide for any such lien. The State Comptroller has also indicated that there is no lien attached to the property under the Tax Code for the penalty. Liability for the penalty, however, will continue to be an obligation of the property owner.

Why should I pay the penalty?

Payment of the penalty is a legal obligation of the property owner. Enforcement could be obtained through a civil suit by the chief appraiser against the property owner. Though no interest or collection penalty applies under the Tax Code, it may be possible that prejudgment and postjudgment interest, attorney fees, and/or court costs could be imposed against the property owner through a civil judgment. Also, if a civil judgment is obtained, then that judgment might create a lien on the property owner's real property, even though the penalty was originally assessed against personal property.

What is the penalty for failing to file a rendition?

If a property owner fails to file a rendition, then at a minimum a penalty of 10 percent of the total amount of taxes assessed against the property for that year is imposed. This is the penalty for failing to timely file a rendition.

What if I filed a rendition, but did not file a statement with additional information requested by the chief appraiser?

After a property owner files a rendition form, the chief appraiser may request additional information from the property owner in support of the rendition. Failure to provide the requested information is considered a failure to file the rendition. So, the 10 percent penalty at a minimum would apply.

What if I filed my rendition, but I filed it late?

If the rendition is late, the 10 percent penalty should apply. The penalty is for failing to timely file the rendition.

I did not file a rendition, but I did file a value protest. During that protest, I provided all of the information that I would have provided if I had filed a rendition. Isn't that good enough?

The penalty is for failing to timely file a rendition. If no rendition was timely filed, the fact that the same information was eventually provided to the appraisal district does not prevent the imposition of the penalty. However, it may form the basis for seeking a waiver of the penalty.

Okay, maybe I didn't strictly comply with the rendition filing requirement. But, isn't the chief appraiser picking on me by imposing the penalty?

Maybe or maybe not. The Tax Code indicates that, if a rendition is not timely filed, then the chief appraiser "shall" impose the 10 percent penalty. However, there is an exception to automatic imposition of the penalty. The Tax Code provides that the chief appraiser "may waive the penalty ... if the chief appraiser determines that the person exercised reasonable diligence to comply with or has substantially complied with the requirements" of rendition. This provision is found in the waiver statute, Section 22.30, and implies that the chief appraiser may decide on his own not to impose a penalty. Some chief appraisers may choose to impose the penalty on all late-filers or non-filers; others may choose not to impose the penalty at all. The most likely case for being "picked on" or for an unfair imposition of the penalty would be those situations where the chief appraiser chooses to impose the penalty in some situations, but not to impose the penalty in other similar situations. However, once the penalty is imposed, the taxpayer must pursue administrative remedies, including filing the written waiver request with the chief appraiser, appealing any refusal to the appraisal review board, and pursuing any denial in court.

Could there be additional penalties for failing to file a rendition?

Possibly. At least one appraisal district has expressed the view that the failure to file a rendition could result in the imposition of the 50 percent penalty. The 50 percent penalty is imposed for (1) filing a false rendition with intent to commit fraud or evade tax or (2) altering, destroying, or concealing a record, document, or thing, or presenting a fraudulent information to the chief appraiser, or engaging in fraudulent conduct for the purpose of affecting the outcome of an investigation, determination, or appraisal district proceeding. Apparently, the appraisal district believes that failing to file a rendition, with the intent to evade taxes, could be considered the concealment of information or other fraudulent conduct. This is a very liberal reading of the statute. Whether the appraisal district's position is correct or not would have to be decided in a future court action.

Is there a penalty for filing a false rendition?

Yes. There is both a tax penalty and a potential criminal penalty.

What is the possible punishment for a false rendition?

In addition to the 50 percent tax penalty, a false rendition subjects the filer to a Class A misdemeanor or a state jail felony under Section 37.10 of the Penal Code. Section 37.10 is tampering with a governmental record. The most likely offense would be knowingly making a false entry in a governmental record. The offense is normally a Class A misdemeanor, which is punishable by a fine not to exceed $4,000 and/or confinement in jail not to exceed one year. If the violator is determined to have acted with intent to defraud or harm another, then the offense is a state jail felony, which is punishable by confinement in state jail for a minimum of 180 days and a maximum of 2 years. The violator may also be fined up to $10,000.

When does the 50 percent penalty apply?

If it is determined that the property owner filed a false statement or report with intent to commit fraud or evade taxes, or if the person alters, destroys or conceals records or presents altered or false records to the chief appraiser in connection with an inspection, investigation or other proceeding, then the additional 50 percent penalty applies. Note that this is an additional penalty, so the maximum penalty could be 60 percent.

Who enforces the additional penalty?

The statute provides that enforcement will be in a proceeding initiated by the district or county attorney on behalf of the appraisal district.

Who determines liability for the additional penalty?

A court should make the final determination as to whether the additional penalty applies, so any notice regarding imposition of the 50 percent penalty at this time should not be in the form of a bill.

Can the 50 percent penalty be waived?

Yes. The chief appraiser may waive the 10 percent penalty, the 50 percent penalty, or both upon the written request of the property owner, with supporting documentation. The chief appraiser might also choose to waive the penalty on his own determination of substantial compliance.

If I do not pay the penalty, will it eventually just disappear?

With no lien, no interest, no collection penalty, etc., the taxpayer might decide to delay payment as long as possible. However, it is unclear when a taxpayer's liability for a rendition penalty might disappear, if ever. The Tax Code places a limitations period of four years on personal property taxes and 20 years on real property taxes; i.e., a suit for delinquent taxes must be filed within these time periods or the taxes will be presumed paid. But the rendition penalty is not a tax, so these limitations might not apply. The Texas Civil Practice and Remedies Code provides various limitations periods for different types of causes of action. However, most of these limitations do not apply to the state or political subdivisions. Thus, it is possible that a taxpayer's liability for a rendition penalty will never expire.

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