COST - 2015
Property Tax Workshop
Is it Possible to Get Uniformity in
Property Taxation?
Council On State Taxation
COST - 2015
Property Tax Workshop
Jim Popp, Partner, Popp Hutcheson, PLLC
Council On State Taxation
Polling Question 1
Have you ever filed a protest or appeal based on an
equal and uniform claim other than in Texas?
1. Yes.
2. No.
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Council On State Taxation
Polling Question 2
If you have used an equal and uniform remedy in a
state other than Texas was it effective?
1. Yes.
2. No.
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Council On State Taxation
Poll Question 3
How any of you are used the Texas Equal &
Uniform Remedy in a protest or appeal?
1. Yes.
2. No.
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Council On State Taxation
Poll Question 4
Are any of you are familiar with a state that
has a more effective equal and uniform
remedy than Texas?
1. Yes.
2. No.
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Council On State Taxation
Poll Question 5
Is anyone familiar with any attempts in a
state other than Texas to pass an equal and
uniform remedy?
1. Yes.
2. No.
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Council On State Taxation
Equal and Uniform
• Summary:
– Equal and Uniform Standards
– Federal Court Decisions on Equity
– The Texas Equity Remedy
• Possible Model for the Nation?
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Council On State Taxation
Equal and Uniform
Standards
• 14th Amendment of US Constitution:
– Due Process and Equal Protection under the
Law.
• State Constitutions:
– Generally mirror the language of the 14th
Amendment.
• State Statutes and Tax Codes:
– Large variations between states; most provide
ineffective remedies for equal taxation.
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Council On State Taxation
Some Comments form
Federal Court Decisions
• Nashville Railroad v. Browning, 310 U.S.
362 (1940)
• Allegheny Pittsburg Coal Co., 488 U.S.
336 (1989)
• Nordlinger v. Hahn, 505 US 1 (1992
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Council On State Taxation
WHAT DOES IT MEAN
IN YOUR STATE??
• May only challenge if exceed market value even
if valued differently.
• May only be challenge based on a sales ratio
study of a sample of properties compared to the
subject.
• May only be challenge based on a sales ratio
study of a category of properties compared to
the subject.
• May only be challenge based on a comparison
of tax comps to the subject.
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Council On State Taxation
FORCES AT WORK
•
•
•
•
•
•
HOMEOWNERS
TAXPAYERS
TAX PROFESSIONALS
OVER 65
POLITICIANS
MEDIA
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Council On State Taxation
The Texas Remedy
• Texas Experience with Equity Remedy
– Texas Constitution
– Old Equity Statute - Section 42.26 (a)(1)&(2)
– New Equity Statute - Section 42.26 (a)(3)
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Council On State Taxation
The Texas Remedy
• Texas Constitution
• Article VIII, Section 1: “(a) Taxation shall
be equal and uniform.”
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Council On State Taxation
The Texas Remedy
• Old Tax Code Remedy 42.26 (a)(1) & (2)
• 42.26 (a): “The district court shall grant
relief on the ground that a property is
appraised unequally if the appraisal ratio
of the property exceeds by at least 10
percent the median level of appraisal of:
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Council On State Taxation
The Texas Remedy
(1) a reasonable and representative
sample of other properties in the appraisal
district; or
(2) a sample of other properties in the
appraisal district consisting of a reasonable
number of other properties similarly situated
to, or of the same general kind or character
as, the property subject to the appeal.”
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Council On State Taxation
The Texas Remedy
• Old remedy was rarely used by property
owners because:
• Too Many Properties to Analyze: use of
the
word
“sample”
suggests
the
requirement of a statistically significant
number of properties
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Council On State Taxation
The Texas Remedy
• Old remedy was rarely used by property
owners because:
• Too Expensive: determining the “appraisal
ratio” requires a property owner to retain
an expert witness to prepare full market
value appraisals on a large number or
“sample” of properties
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Council On State Taxation
The Texas Remedy
• Old remedy was rarely used by property
owners because:
• Too Hard to Prove:
the level of
subjectivity in market value appraisals
made unequal appraisal very hard to
prove
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Council On State Taxation
The Texas Remedy
• New Statute – Meaningful Equity Remedy
• 42.26 (a)(3) was added to the Code in
1997 – Senate Bill 841 “Tax Payer’s Bill of
Rights”
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Council On State Taxation
The Texas Remedy
• 42.26 (a)(3): “The district court shall grant
relief on the ground that a property is
appraised unequally if the appraised value
of the property exceeds the median
appraised value of a reasonable number
of comparable properties, appropriately
adjusted.”
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Council On State Taxation
Opposition?
• Property tax bill with far-reaching consequences
had hidden beginning
• Tax Law Leads to Towering Savings for Big
Building Owners
• Bills aim stop school tax give backs caused by
lower property values
• City Blames State of Texas for Inequities in
Commercial Property Taxing
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Council On State Taxation
Opposition?
• Texas Is Losing Out on Millions of Dollars Thanks to Its
Defective Property-Tax System
• Property Lawsuits Skyrocket in Bexar County
Commercial owners exploit tax system
• Property tax loophole could drive down values, appraiser
says
• Large companies turn to courts for tax relief
• Transparency would help restore fairness to the state tax
system
• Does Texas hamstring appraisers?
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Council On State Taxation
ELIMINATION OF THE EQUITY
REMEDY:RESULTS
• It would take away a taxpayers constitutional right to equal and
uniform taxation;
• It would result in a significant property tax increase for property
owners;
• It would remove the only method to correct mistakes on the part of
chief appraisers that result in unfair tax treatment;
• It would allow chief appraisers to engage in “sales chasing” in which
chief appraisers value a property at the sales price but do not
change the value of comparable property;
• It will allow taxing units a stealth increase in taxes without raising tax
rates;
• It will reduce business investment in Texas by reducing taxpayer
confidence in appraisal district accountability.
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Council On State Taxation
EQUITY FACTS
IF IT’S NOT BROKEN DON’T FIX IT.
• The system works just fine as Texas is 37th in state and
local tax burden per capita and 11th in business
environment,
• All litigation reduction concerns could be offset by the
grant of a $2750 additional homestead exemption,
• Their contentions can be substantively addressed by
simply requiring that equal and uniform valuations be
performed using generally accepted appraisal
techniques
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Council On State Taxation
EQUITY FACTS
THERE IS NO SHIFT FROM RESIDENTIAL
TO COMMERCIAL
• Single family residences comprised 44.7% of total
taxable value in 2004 and now in 2013 they comprise
43.08% of total taxable value,
• Residential taxable values have increased by 61% since
2004 while business values have increased by 95%
• Property tax levy has increased by 46% from 2004 to
2013
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Council On State Taxation
EQUITY FACTS
LAWSUIT REDUCTIONS ARE SMALL PART OF BIGGER
TAX REDUCTION PICTURE
• Lawsuit reductions in 2013 were $8.5 billion or 2% of the
total reductions granted and only 0.04% of a reduction
from the total statewide appraisal roll,
• Total reductions from the appraisal roll for exemptions,
appraisal cap, and ag-use were $451 billion in 2013;
• Homestead and appraisal cap deductions were $180
billion in 2013;
• Ag use appraised value deductions were $215 billion in
2013.
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Council On State Taxation
EQUITY ONLY FOR
HOMEOWNERS
• UNCONSITUTIONAL
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Council On State Taxation
The Texas Remedy
• New remedy is more efficient because:
• Compares “Appraised Values” Not
“Appraisal Ratios”
– the statute does not require an independent
determination of market value; simply use the
current value on the appraisal roll.
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Council On State Taxation
The Texas Remedy
• New remedy is more efficient because:
• Requires “Reasonable Number” of Comps
Not a “Sample”:
– the number of comps used will vary
depending on the number of comps to the
subject property.
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Council On State Taxation
The Texas Remedy
• New remedy is more efficient because:
• Adjustments Are Similar
Comparison Approach:
to
Sales
– the comps should be adjusted to the subject
for differences in physical characteristics
(location, size, condition, access, and any
legal restrictions on use).
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Council On State Taxation
Polling Question 6
• Do you think the Texas remedy should be a model
for the nation?
1. Yes
2. No
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Council On State Taxation
OBTAINING & PROTECTING EQUAL
AND UNIFORM REMEDY
• DEVELOP ALLIES IN THE LEGISLATURE
• RETENTION OF A LOBBYIST
• PROPERTY
TAX
PROFESSIONAL
TRADE
ORGANIZATION
• TRADE GROUPS AS ALLIES
• POLITICAL ACTION COMMITTEE
• TAXPAYERS INVOLVEMENT IN THE LEGISLATIVE
PROCESS:
• WORKING WITH YOUR OPPOSITION
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Council On State Taxation
Questions?
Jim Popp, Popp Hutcheson, PLLC
• (512) 473-2661
• [email protected]
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Council On State Taxation