What to Render and What Not to Render - Part 2

Previously, we addressed the issue of what type of business personal property is specifically not subject to rendition under the new mandatory rendition law. (See previous article.)

However, there are other categories of taxable personal property that might not need to be included on a rendition form.

Special valuation inventory, such as motor vehicles, vessels, heavy equipment, etc., are not valued based on a January 1 value of existing property. Instead, these categories of retail inventory property are valued based on prior year sales. The comptroller's form provides that such property should not be included on the rendition form because the property value should have already been reported on other required forms.

Additionally, Section 23.24 of the Tax Code provides that, if real property is appraised by a methodology that takes into account the value of the associated personal property, then the personal property is not subject to additional taxation as personal property. Based on this statute, some appraisal districts do not include a separate personal property account with some business real property. Such businesses could include apartments, hotels, nursing homes, etc. where the personal property is an integral part of the special use operation of the business at that location.

Because of this special valuation provision, some appraisal districts have taken the view that such personal property should not be rendered. (See letter from the Dallas Central Appraisal District.) While such view is not supported by the language of the rendition law, a property owner who follows the written instruction of the appraisal district in not rendering personal property should be safe against the imposition of any rendition penalty in the event the appraisal district changes its position at a later date.

However, unless there is written instruction not to render from the specific appraisal district where the property is located, the personal property should be rendered, even if the business real and personal property are appraised together under Section 23.24. A taxpayer should not rely on written communication from one appraisal district in making a decision on what to render in another appraisal district.

There are, of course, other items of personal property that should not be included on a rendition form. Such exclusions are not based on any specific statement in the rendition statute or any specific written instruction from the comptroller or appraisal district. Instead, these exclusions are based on the general nature of what is and is not subject to taxation in Texas and mistakes that we have previously encountered in reviewing taxpayer rendition forms.

A taxpayer should only render tangible personal property used for the production of income. This is what is required to be rendered, and all that is required to be rendered. There is no requirement to render or disclose intangible property, non-income producing property, or items comprising real property (such as real property improvements), absent a specific request by the chief appraiser.

A taxpayer should render only the property he owns as of January 1 of the tax year to which the rendition applies. For example, if property was owned in 2003 but was no longer owned on January 1, 2004, or if property was acquired after January 1, 2004, then the property should not be included as part of the 2004 rendition. The valuation date for property tax purposes is January 1. Nothing in the rendition law changes that valuation date.

A taxpayer should render only property taxable in the jurisdiction for which the appraisal district is responsible. A taxpayer should not render in a single county all property owned by the business unless all of that property is actually taxable in that county. Each branch or office of a business should normally render in the county in which that branch or office is located.

Property that is normally located at out-of-state branches or offices should not be rendered in Texas. A taxpayer should not render in Texas property that is only temporarily located in Texas. Also, the Tax Code provides in Section 11.01(d) that personal property not located in Texas during the preceding year and on January 1 of the tax year is not taxable. Therefore, if there is property that normally would be located in Texas, but was out of state during the entirety of 2003 and still not returned to Texas by January 1, then the property is not taxable in Texas and is not subject to rendition.

The same item of property should not be rendered at more than one location. For example, property normally located at one Texas branch might temporarily be located at another Texas branch on January 1. The property should not be rendered at both locations. Normally, the situs for the property would be the location to which it normally returns. So, if the property is rendered in the normal-return location, it should not be rendered in the temporary location as well.

Of course, if there is any question about whether a particular piece of property should be rendered or not, then it might be wise to go ahead and render it. If the property is omitted from a rendition and it subsequently is determined that it should have been included in the rendition, then the property owner could be subject to the rendition penalties imposed under the statute.

But a review of personal property items and their location as of January 1 with careful consideration of what should be rendered and where it should be rendered (and if it should be rendered) could save the taxpayer both the potential penalties and the imposition of unwarranted taxes based on a higher than necessary value.

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