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Texas Property Tax Code Chapter 21 - O'Connor and Associates

Texas Property Tax Code

Texas Property Tax Code
2006 Edition
Texas Comptroller of Public Accounts


The Texas Property Tax Code (TPTC) contains statues regulating the assessment, taxation, exemptions, appeal options, hearing procedures for Texas property tax appeals, judicial appeals for Texas property taxes, timely payment of Texas property taxes, and penalties for late payment of property taxes. The TPTC covers all counties in Texas and does not vary from county to county. Each county has an appraisal district which estimates the market value (assessed value) for real and personal property in the county.

Articles on appealing your property taxes and obtaining exemptions are available in this site. This and the preceding paragraph were prepared by O’Connor & Associates and the Texas Property Tax Code is determined by the legislature and compiled by the Texas Comptroller.


Note: Please follow the links at the beginning or end of this chapter to return to either the previous chapter or to proceed to the next chapter or to the Table or Contents.

Chapter 11C | Table of Contents | Chapter 22A

Title 1. Property Tax Code
Subtitle D. Appraisal and Assessment

Chapter 21. Taxable Situs

Sec. 21.01. Real Property.
Sec. 21.02. Tangible Personal Property Generally.
Sec. 21.021. Vessels and Other Watercraft.
Sec. 21.03. Interstate Allocation.
Sec. 21.031. Allocation of Taxable Value of Vessels and Other Watercraft Used Outside This State.
Sec. 21.04. Railroad Rolling Stock.
Sec. 21.05. Commercial Aircraft.
Sec. 21.055. Business Aircraft.
Sec. 21.06. Intangible Property Generally.
Sec. 21.07. Intangibles of Certain Transportation Businesses.
Sec. 21.08. Intangibles of Certain Financial Institutions.
Sec. 21.09. Repealed.

[Sections 21.10 to 21.20 reserved for expansion]

Sec. 21.01. Real Property

Real property is taxable by a taxing unit if located in the unit on January 1, except as provided by Chapter 41, Education Code.

Amended by 1993 Tex. Laws, p. 1527, ch. 347, Sec. 4.10; amended by 1997 Tex. Laws, p. 373, ch. 165, Sec. 6.74.

Cross References:
Real Property defined, see Sec 1.04(2)
Jurisdiction to tax real property, see Sec. 11.01.

Notes:
Normally, the appraisal district's determination of situs will be presumed valid by a court. However, where the taxpayer proved the county could not determine its boundary line, and the property was on the line, the burden was on the taxing entities to show the property was in their boundaries. Oake v. Collin County, 692 S.W.2d 454 (Tex. 1985).

Real estate may be taxed only by the state in which it is located. Great Southern Life Ins. Co. v. City of Austin, 111 Tex. 1, 243 S.W.2d 778 (Tex. 1922).

A city is authorized by statute to levy a tax against all properties within its corporate limits on January 1. Property owners whose property was judicially deannexed from the city in August could not prorate their taxes to pay only a percentage of the total yearly property taxes on their property equal to the number of days the property was within the city. If property is annexed into a city's corporate limits after January 1, that property cannot be taxed for that year. Moreover, only the legislature may determine prorations from property taxes. City of Heath v. King, 705 S.W.2d 812 (Tex. App.-Dallas 1986).

The question of tax situs is factual and dependent on the situation in each case. Lawson v. City of Groves, 487 S.W.2d 439 (Tex. App.-Beaumont 1972).

When a gas well is located in one school district, but the royalty interests from the well appertain to land located in two school districts, the school district is entitled to levy property taxes against the royalty interest based upon the location of the real property to which the royalty interest appertains. Each school district may only tax the royalty income on royalty interests that appertain to real property located in the school district. Where there is a pooling agreement with provisions for pooling the royalties from oil or gas produced anywhere on the leased land on the basis of acreage, the pooling agreement has the effect of vesting all of the lessors with joint ownership of the royalty. In this case, the school districts may each tax half of the royalty interests. If the royalty interests owners are not joint owners, however, then each school district would tax the appraised value only on those royalty interests located in its school district boundaries. Op. Tex. Att'y Gen. No. DM-490 (1998).

When a municipality annexes territory within a rural fire prevention district, the territory remains part of the district for receiving services and paying taxes unless the city acts to remove the territory from the district. Op. Tex. Att'y Gen. No. JM-605 (1986).

A city's withdrawal from a rural fire prevention district is effective for tax purposes on January 1 of the year following withdrawal. No election by voters of the city is required to confirm or accomplish withdrawal of the city from a district. A statute authorizing a bond issue and providing the means for its repayment constitutes part of a contract with bondholders that may be enforced by bondholders. Op. Tex. Att'y Gen. No. JM-453 (1986).

The taxing power of a rural fire prevention district survives the incorporation of its property into a municipality. Op. Tex. Att'y Gen. No. JM-400 (1985).

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Sec. 21.02. Tangible Personal Property Generally.

(a) Except as provided by Subsection (b) and Sections 21.021, 21.04, and 21.05, tangible personal property is taxable by a taxing unit if:

(1) it is located in the unit on January 1 for more than a temporary period;

(2) it normally is located in the unit, even though it is outside the unit on January 1, if it is outside the unit only temporarily;

(3) it normally is returned to the unit between uses elsewhere and is not located in any one place for more than a temporary period; or

(4) the owner resides (for property not used for business purposes) or maintains his principal place of business in this state (for property used for business purposes) in the unit and the property is taxable in this state but does not have a taxable situs pursuant to Subdivisions (1) through (3) of this section.

(b) Tangible personal property having taxable situs at the same location as real property detached from a school district and annexed by another school district under Chapter 41, Education Code, is taxable in the tax year in which the detachment and annexation occurs by the same school district by which the real property is taxable in that tax year under Chapter 41, Education Code. For purposes of this subsection and Chapter 41, Education Code, tangible personal property has taxable situs at the same location as real property detached and annexed under Chapter 41, Education Code, if the detachment and annexation of the real property, had it occurred before January 1 of the tax year, would have changed the taxable situs of the tangible personal property determined as provided by Subsection (a) from the school district from which the real property was detached to the school district to which the real property was annexed.

(c) Tangible personal property has taxable situs in a school district that is the result of a consolidation under Chapter 41, Education Code, in the year in which the consolidation occurs if the property would have had taxable situs in the consolidated district in that year had the consolidation occurred before January 1 of that year.

(d) A motor vehicle does not have taxable situs in a taxing unit under Subsection (a)(1) if, on January 1, the vehicle:

(1) has been located for less than 60 days at a place of business of a person who holds a wholesale motor vehicle auction general distinguishing number issued by the Texas Department of Transportation under Chapter 503, Transportation Code, for that place of business; and

(2) is offered for resale.

Acts 1979, 66th Leg., p. 2247, ch. 841, § 1, eff. Jan. 1, 1982. Amended by Acts 1983, 68th Leg., p. 1908, ch. 353, § 2, eff. Jan. 1, 1984; Acts 1989, 71st Leg., ch. 534, § 5, eff. Aug. 28, 1989; Acts 1993, 73rd Leg., ch. 347, § 4.11, eff. May 31, 1993; Acts 1997, 75th Leg., ch. 165, § 6.75, eff. Sept. 1, 1997; Acts 2005, 79th Leg., ch. 412, § 8, eff. Sept. 1, 2005.

Cross References:
Tangible personal property defined, see Sec. 1.04(4) & (5).
Jurisdiction to tax tangible personal property, see Sec. 11.01.
Tangible personal property in state less than 175 days, see Sec. 11.01.
Interstate allocation of value, see Sec. 21.03.
Vessels, see Sec. 21.021.
Protest of situs, see Sec. 41.42.

Notes:
The term "temporary" in section 21.02(a) must be applied in its ordinary meaning since it lacks a statutory definition. As such, the language is clear and unambiguous in that property is taxable in a taxing unit if it is located in the unit on January 1 for more than a limited time. Moreover, determining the location of a property's taxable situs requires looking back in time to where it was situated in the preceding year as opposed to looking at events after January 1. This is appropriate given that the certainty of where transient property will be located in the future is unpredictable. Patterson-UTI Drilling Co. LP, LLLP v. Webb County Appraisal Dist., 2005 WL 2438804 (Tex. App. - San Antonio Oct 5, 2005).

An exporter that detains goods in a warehouse while awaiting overseas export is entitled to a property tax exemption under the Commerce Clause and the Equal Protection Clause of the United States Constitution. Taxation would prevent the federal government from speaking with one voice in its regulation of commercial relations with foreign governments. Vinmar, Inc. v. Harris County Appraisal District, 947 S.W.2d 554 (Tex. 1997).

Neither the Import-Export Clause nor the Commerce Clause prevent ad valorem taxation of goods imported into a Texas county and that never leave the state, despite the fact that the goods are still "in transit" in the county that imposes the tax. Diamond Shamrock Refining and Marketing Co. v. Nueces County Appraisal Distr., 876 S.W.2d 298 (Tex. 1994).

Sec. 21.02 codifies the so-called "mobilia" rule, stating that movable personal property has situs at the domicile of its owner, unless it has acquired situs of its own by more or less permanent presence somewhere else. Davis v. City of Austin, 632 S.W.2d 331 (Tex. 1982).

As a general rule, courts will presume that an appraisal district's determination of jurisdiction to tax under ch. 11 and of situs under this section are correct. To rebut this presumption, the taxpayer must present evidence that the property has not acquired situs in the jurisdiction and the taxpayer is not domiciled there, or that the property has acquired situs outside the tax authority's boundaries, or that a statute directs the property be taxed elsewhere. Otherwise, the presumption becomes conclusive. Davis v. City of Austin, 632 S.W.2d 331 (Tex. 1982).

In a case where a taxpayer asserted that its principal place of business was outside Texas, the court found that "principal place of business" in Sec. 31.02(4), Tax Code, means "principal place of business in this state." Melton Truck Lines v. Gregg County Appraisal District, 864 S.W.2d 137 (Tex. App.-Texarkana 1993, no writ).

Sufficient nexus, not to constitute an unconstitutional constraint on interstate commerce, exists between a taxpayer's trucks and the taxing unit and state where the taxpayer's trucks travel the highways, enjoying governmental benefits and protections. In addition, the tax was duly apportioned, and it did not discriminate against interstate commerce. So, there was no violation of the United States Commerce Clause. Id.

Crude oil found in seventeen oil tanks was located in a county with enough permanence to become part of the general mass of property within the boundaries of the taxing entity. Thus, the oil acquired situs under Sec. 21.02(1). Exxon Corp. v. San Patricio County Appraisal Dist., 822 S.W.2d 269 (Tex. App.-Corpus Christi 1991, writ denied).

Taxpayer whose property is being taxed in two counties must exhaust his administrative and legal remedies in each county. Due process rights are not violated by the fact that there is no single forum in which situs issues may be resolved. Taxpayer does not waive constitutional issues where he first exhausts administrative remedies. General Electric Credit Corporation v. Midland Central Appraisal District, 808 S.W.2d 169 (Tex. App.-El Paso 1991), aff'd in part, rev'd in part 826 S.W.2d 124 (Tex. 1992).

Evidence of the number of days spent in the taxing jurisdiction was sufficient for a holding that property had acquired a "permanent" situs in that jurisdiction. "Permanent" means "more or less permanent for the time being." Tax situs is a fact question and must be determined on a case-by-case basis. Rockdale Independent School District v. Thorndale Independent School District, 681 S.W.2d 225 (Tex. App.-Austin 1984, writ ref'd n.r.e.).

Under Tax Code Section 1.04(3), subsection (A), a travel trailer that has been permanently affixed to land is an improvement and is taxable as real property. Under subsection (B), a travel trailer is also an improvement and taxable as real property if the owner of the trailer owns the land on which it is located. It is not relevant under subsection (B) whether or not the travel trailer has been affixed to land. Subsection (B) is intended to expand rather than restrict the universe of structures taxable as improvements. Whether a travel trailer may be taxed as personal property will depend not only on whether the governmental body has complied with the procedural requirements of Section 11.14, but also whether the constitution permits its exemption from taxation. Op. Tex. Att'y Gen. No. JC-282 (2000).

Travel trailers that have been affixed to rented land are personal property, but are not exempt as personal property not used to produce income. Imposing property taxes on these travel trailers that have paid sales taxes and motor vehicle registration does not constitute double taxation. Determining if a particular piece of personal property has become an improvement depends on the intent of the owner as evidenced by the mode and sufficiency of annexation. The appraisal district must determine if the attachment is permanent, subject to the property owner's right to protest to the appraisal review board. Long-term placement of travel trailers on lots of land owned by another person results in separate taxable interests, but not two separate interests in real property. A trailer attached to a leased lot, while an improvement to real property, generally will remain the property of the person leasing the lot from the trailer park. Such a trailer is taxable to the lessee of the lot, but as personal property rather than real property. Op. Tex. Att'y Gen. No. JC-150 (1999).

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Sec. 21.021. Vessels and Other Watercraft .

(a) A vessel or other watercraft used as an instrumentality of commerce (as defined in Section 21.031(b) of this code) is taxable pursuant to Section 21.02 of this code.

(b) A special-purpose vessel or other watercraft not used as an instrumentality of commerce (as defined in Section 21.031(b) of this code) is deemed to be located on January 1 for more than a temporary period for purposes of Section 21.02 of this code in the taxing unit in which it was physically located during the year preceding the tax year. If the vessel or watercraft was physically located in more than one taxing unit during the year preceding the tax year, it is deemed to be located for more than a temporary period for purposes of Section 21.02 of this code in the taxing unit in which it was physically located for the longest period during the year preceding the tax year or for 30 days, whichever is longer. If a vessel or other watercraft is not deemed to be located in any taxing unit on January 1 for more than a temporary period pursuant to this subsection, the property is taxable as provided by Subdivisions (2) through (4) of Section 21.02 of this code.

(c) This section applies solely to a determination of taxable situs and does not apply to a determination of jurisdiction to tax under Section 11.01 of this code.

Added by 1983 Tex. Laws, p. 1908, ch. 353, Sec. 3.

Cross References:
General situs provisions, see Sec. 21.02.
Jurisdiction to tax, see Sec. 11.01.
Vessel or other watercraft used as an instrumentality of commerce defined, see Sec. 21.031(b).
Special purpose vessel or other watercraft not used as an instrumentality of commerce defined, see Sec. 21.031(b).
Allocation form, see Rule Sec. 9.4033.

Sec. 21.03. Interstate Allocation.

(a) If personal property that is taxable by a taxing unit is used continually outside this state, whether regularly or irregularly, the appraisal office shall allocate to this state the portion of the total market value of the property that fairly reflects its use in this state.

(b) The comptroller shall adopt rules:

(1) identifying the kinds of property subject to this section; and

(2) establishing formulas for calculating the proportion of total market value to be allocated to this state.

Amended by 1991 Tex. Laws (2nd C.S.), p. 29, ch. 6, Sec. 14.

Cross References:
Jurisdiction to tax, see Sec. 11.01.
Property exempt under federal law, see Sec. 11.12.
Guidelines for allocation, see Rule Sec. 9.4033.

Notes:
Where personal property is used to carry goods or passengers in interstate or foreign commerce, the normal rule that a full tax on the property by the state of the owner's domicile or home port is valid under the U.S. Constitution does not always apply. First, the property or the taxpayer must have some substantial contact with the taxing state, as required by Sec. 11.01. Second, where two or more states have enough contact with the property to levy taxes on it, then each state must apportion its tax by taxing a portion of the value proportionate to the property's use or presence in the state. Standard Oil Co. v. Peck, 342 U.S. 382 (1952); Braniff Airways, Inc. v. Nebraska State Board of Equalization, 347 U.S. 590 (1954); Japan Line Ltd. v. County of Los Angeles, 441 U.S. 434 (1979).

Vehicles moving both intra and interstate will normally have a tax situs under Sec. 21.02 at their owner's principal place of business in the state. Taxing units in which the headquarters is located may tax value proportionate to all use in the state, not just use in those taxing units. Greyhound Lines, Inc. v. Board of Equalization for Fort Worth, 419 S.W.2d 345 (Tex. 1967).

Interstate allocation of business aircraft was not permitted as a late correction to an appraisal roll, as also held in decisions by the Harris County appellate courts. WB Summit Properties, Inc. v. Midland Central Appraisal District, 122 S.W.3d 374 (Tex. App.-El Paso 2003, no pet. h.).

Failure of the taxpayer to show entitlement to interstate allocation for its aircraft at the time of rendition precluded the allocation. In addressing whether the aircraft was commercial rather than business in nature, the court held that to be entitled to allocation as a commercial aircraft the aircraft's operator must be a "certificated air carrier" rather then the aircraft itself.. SLW Aviation, Inc. v. Harris County Appraisal District, 105 S.W.3d 99 (Tex. App.-Houston [1st Dist.] 2003, pet. denied).

Tax Code Section 21.055 implies that a taxpayer who seeks allocation of value must provide information showing entitlement to allocation at the time of rendition. Further, the Court cited Rule 9.4033(e): "a property owner who is entitled to an allocation of property must file a rendition form that provides enough information necessary to . . . permit the chief appraiser to apply an allocation formula. . ." The language in Section 25.25(c)(3) refers to property that does not have any physical location in Texas through the entire year. The section does not permit a change in the appraisal roll for interstate allocation of the value of personal property. The Court expressly overruled its prior decision in Himont U.S.A. Inc. v. Harris County Appraisal District, 904 S.W.2d 740 (Tex. App.-Houston [1st Dist.] 1995, no writ). Harris County Appraisal District v. Texas Gas Transmission Corp., 105 S.W.3d 88 (Tex. App.-Houston [1st Dist.] 2003, pet. filed).

Section 25.25(c)(3) was not a proper remedy for the allocation of aircraft value because the property owner stipulated that the aircraft existed at the location and in the form described on the appraisal roll. It could not use the allocation provision of Section 21.03 to prove that the aircraft was not located in the appraisal district to correct a prior year roll. By failing to file timely a protest, the taxpayer waived its right to allocation for prior years. Kellair Aviation Co. v. Travis Central Appraisal District, 99 S.W.3d 704 (Tex. App.-Austin 2003, pet. denied).

The taxpayer must follow statutory procedures for allocation of value to apply. The owner waived constitutional entitlement to interstate allocation by failing to protest before the appraisal review board. The aircraft was located in the district on January 1 of each year in question, and the taxpayer did not challenge the description of the property on the appraisal rolls. The aircraft value therefore could not be allocated for prior years. A & S Air Service, Inc. v. Denton Central Appraisal District, 99 S.W.3d 340 (Tex. App.-Ft. Worth 2003, no pet.)

The appraisal district did not establish that Tax Code Section 21.05 was exempting property in violation of the null-and-void clause. The statute establishes a method of valuation rather than an exemption from taxation. Tex-Air's equal protection challenge to Section 42.29 was rejected. Tex-Air Helicopters, Inc. v. Galveston County Appraisal Review Board and Galveston Central Appraisal District, 76 S.W.3d 575 (Tex. App.-Houston [14th Dist.] 2002, pet. denied).

Taxpayer sought relief under Section 25.25 regarding the value of an airplane for 1991 through 1995. 1991 and 1992 were not properly before the court since protests were filed, but dismissed when taxpayer did not appear for the hearing. 1994 and 1995 were not properly before the court either since protests were filed and written settlements executed. No protest was pursued for 1993. However, since the parties stipulated to the form and location of the airplane as described in the appraisal, Section 25.25(c) provided no relief for 1993. Allocation of value cannot be corrected using Section 25.25(c). Aramco Associated Company v. Harris County Appraisal District and Harris County Appraisal Review Board, 33 S.W.3d 361 (Tex. App. - Texarkana 2000, pet. denied).

When the issue is allocation of value, and not excessive appraisal, attorney fees may not be granted to the prevailing property owner. Tex-Air Helicopters v. Harris County Appraisal District, 15 S.W.3d 173 (Tex. App.-Texarkana 2000, pet. denied).

When appraising railroad rolling stock, an appraisal district must correct its failure to grant an interstate use allocation under Section 25.25 (c)(3) - "property was not in the location shown on the appraisal roll." Failure of the taxpayer to render its property does not foreclose the use of Section 25.25. The filing of such a rendition is permissive and not mandatory, notwithstanding the statutory language contained in Section 22.01. Himont USA v. Harris CAD, 904 S.W.2d 740 (Tex. App.-Houston [1st District] 1995). (This decision was overruled by Harris County Appraisal District v. Texas Gas Transmission Corp., 105 S.W.3d 88 (Tex. App.-Houston [1st Dist.] 2003, pet. filed) noted above.)

Appraisal district was correct in denying interstate allocation to taxpayer. Taxpayer has no right to allocation unless he proves that his property has acquired situs in another state. This out-of-state situs may be established either by proving that the property travels throughout the state along fixed and regular routes or by proving that a substantial number of the taxpayer's vehicles are habitually employed within the other state on irregular routes. Jet Fleet Corporation v. Dallas County Appraisal District 773 S.W.2d 744, (Tex. App.-Dallas 1989, no writ).

Where a taxpayer's personal property continually moves in and out of the state during the tax year, but does not acquire a taxable situs in another state or country, federal law does not require an allocation of value. The Texas Constitution requires the full value of such property to be appraised for taxation. Section 21.03 is null and void since it permits an allocation to property that has left the boundaries of the state even if it is not exposed to the taxing jurisdiction of another state. Texas Gulf Shrimp Co. v. Aransas County Appraisal Review Board, 707 S.W.2d 186 (Tex. App.-Corpus Christi 1986, writ ref'd n.r.e.).

In developing an apportionment formula, the taxing authority must adopt a formula which taxes substantially the full value of Texas-domiciled corporations after taxation by other jurisdictions is taken into account. Op. Tex. Att'y Gen. No. H-1281 (1974).

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Sec. 21.031. Allocation of Taxable Value of Vessels and Other Watercraft used Outside this State.

(a) If a vessel or other watercraft that is taxable by a taxing unit is used continually outside this state, whether regularly or irregularly, the appraisal office shall allocate to this state the portion of the total market value of the vessel or watercraft that fairly reflects its use in this state. The appraisal office shall not allocate to this state the portion of the total market value of the vessel or watercraft that fairly reflects its use in another state or country, in international waters, or beyond the Gulfward boundary of this state.

(b) The appraisal office shall make the allocation as follows:

(1) The allocable portion of the total fair market value of a vessel or other watercraft used as an instrumentality of commerce that is taxable in this state is determined by multiplying the total fair market value by a fraction, the numerator of which is the number of miles the vessel or watercraft was operated in this state during the year preceding the tax year and the denominator of which is the total number of miles the vessel or watercraft was operated during the year preceding the tax year. For purposes of this section, "vessel or other watercraft used as an instrumentality of commerce" means a vessel or other watercraft that is primarily employed in the transportation of cargo, passengers, or equipment, and that is economically employed when it is moving from point to point as a means of transportation.

(2) The allocable portion of the total fair market value of a special-purpose vessel or other watercraft not used as an instrumentality of commerce is determined by multiplying the total fair market value by a fraction, the numerator of which is the number of days the vessel or watercraft was physically located in this state during the year preceding the tax year and the denominator of which is 365. For purposes of this section, "special-purpose vessel or other watercraft not used as an instrumentality of commerce" means a vessel or other watercraft that:

(A) is designed to be transient and customarily is moved from location to location on a more or less regular basis;

(B) is economically employed when operated in a localized area or in a fixed place; and

(C) is not primarily employed to transport cargo, passengers, and equipment but rather to perform some specialized function or operation not requiring constant movement from point to point.

(c) A vessel or other watercraft used as an instrumentality of commerce or a special-purpose vessel or other watercraft not used as an instrumentality of commerce that is used outside this state and is in this state solely to be converted, repaired, stored, or inspected is presumed to be in interstate, international, or foreign commerce and not located in this state for longer than a temporary period for purposes of Sections 11.01 and 21.02.

(d) If the allocation provisions of this section do not fairly reflect the use of a vessel or other watercraft in this state, an alternate allocation formula shall be utilized if the property owner or appraisal office demonstrates that:

(1) the allocation formula specified in this section is arbitrary and unreasonable as applied to the vessel or watercraft; and

(2) the formula or indication of use proposed by the property owner or appraisal office more fairly reflects the vessel or watercraft's use in this state than that specified in this section.

(e) To receive an allocation of value under this section, a property owner must apply for the allocation on a form that substantially complies with the form prescribed by the comptroller. The application must be filed with the chief appraiser for the district in which the property to which the application applies is taxable before the approval of the appraisal records by the appraisal review board as provided by Section 41.12 of this code.

(f) The comptroller shall promulgate forms and may adopt rules consistent with the provisions of this section.

(g) A vessel or other watercraft to be used as an instrumentality of commerce or a special-purpose vessel or other watercraft not to be used as an instrumentality of commerce that is under construction in this state is presumed to be in interstate, international, or foreign commerce and not located in this state for longer than a temporary period for purposes of Sections 11.01 and 21.02.

(h) Tangible personal property in this state is presumed to be in interstate, international, or foreign commerce and not located in this state for longer than a temporary period for purposes of Sections 11.01 and 21.02 if the owner demonstrates to the chief appraiser that the owner intends to incorporate the property in or attach the property to an identified vessel or other watercraft described by Subsection (c) or (g).

Added by 1983 Tex. Laws, p. 1908, ch. 353, Sec. 3; amended by 1991 Tex. Laws (2nd C.S.), p. 29, ch. 6, Sec. 15; amended by 2001 Tex. Laws, p. 215, ch. 117, Sec. 1.

Cross References:
Situs of special purpose vessels and vessels used as instrumentalities of commerce, see Sec. 21.021.
Interstate allocation of value, see Sec. 21.03.
Jurisdiction to tax, see Sec. 11.01.
Property exempt under federal law, see Sec. 11.12.
Application form for allocation of vessels and other watercraft, see Rule Sec. 9.4033.

Notes:
Under the U.S. Supreme Court's decision in Japan Line Ltd. v. County of Los Angeles, 411 U.S. 434 (1979), transitory vessels which are owned by a foreign domiciliary and fully taxed in the foreign country may not be taxed by a state, even on an apportioned basis.

Shrimping boats are not vessels or other watercraft under Sec. 21.031. Where a taxpayer's personal property continually moves in and out of the state during the tax year, but does not acquire a taxable situs in another state or country, federal law does not require an allocation of value. The Texas Constitution requires the full value of such property to be appraised for taxation. Texas Gulf Shrimp Co. v. Aransas County Appraisal Review Board, 707 S.W.2d 186 (Tex. App.-Corpus Christi 1984, writ ref'd n.r.e.).

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Sec. 21.04. Railroad Rolling Stock.

(a) A portion of the total market value of railroad rolling stock that is appraised as provided by Subchapter B of Chapter 24 of this code is taxable by each county in which the railroad operates.

(b) The portion of the total market value that is taxable by a county is determined by the provisions of Subchapter B of Chapter 24 of this code.

Amended by 1983 Tex. Laws, p. 4823, ch. 851, Sec. 9.

Cross References:
Central appraisal of rolling stock, see Secs. 24.31 - 24.40.
Rendition by railroad, see Sec. 22.05.
Railroad rendition model application, see Rule Sec. 9.3031.
Interstate allocation formulas, see Rule Sec. 9.4005.
Addition of values to tax roll, see Sec. 26.09(b).
Taxation of railroad property, see art. VIII, Sec. 5, Tex. Const.

Notes:
Section 21.055 implies that a taxpayer who seeks allocation of value must provide information showing entitlement to allocation at the time of rendition. Further, the Court cited Rule 9.4033(e): "a property owner who is entitled to an allocation of property must file a rendition form that provides enough information necessary to . . . permit the chief appraiser to apply an allocation formula. . ." The language in Section 25.25(c)(3) refers to property that does not have any physical location in Texas through the entire year. The section does not permit a change in the appraisal roll for interstate allocation of the value of personal property. The Court expressly overruled its prior decision in Himont U.S.A. Inc. v. Harris County Appraisal District, 904 S.W.2d 740 (Tex. App.-Houston [1st Dist.] 1995, no writ). Harris County Appraisal District v. Texas Gas Transmission Corp., 105 S.W.3d 88 (Tex. App.-Houston [1st Dist.] 2003, pet. filed).

When appraising railroad rolling stock, an appraisal district must correct its failure to grant an interstate use allocation under Section 25.25 (c)(3) - "property was not in the location shown on the appraisal roll." Failure of the taxpayer to render its property does not foreclose the use of Section 25.25. The filing of such a rendition is permissive and not mandatory, notwithstanding the statutory language contained in Section 22.01. Himont USA v. Harris CAD, 904 S.W.2d 740 (Tex. App.-Houston [1st District] 1995). (This decision was overruled by Harris County Appraisal District v. Texas Gas Transmission Corp., 105 S.W.3d 88 (Tex. App.-Houston [1st Dist.] 2003, pet. filed) noted above.)

Sec. 21.05. Commercial Aircraft

(a) If a commercial aircraft that is taxable by a taxing unit is used both in this state and outside this state, the appraisal office shall allocate to this state the portion of the fair market value of the aircraft that fairly reflects its use in this state. The appraisal office shall not allocate to this state the portion of the total market value of the aircraft that fairly reflects its use beyond the boundaries of this state.

(b) The allocable portion of the total fair market value of a commercial aircraft that is taxable in this state is presumed to be the fair market value of the aircraft multiplied by a fraction, the numerator of which is the product of 1.5 and the number of revenue departures by the aircraft from Texas during the year preceding the tax year, and the denominator of which is the greater of (1) 8,760, or (2) the numerator.

(c) During the time in which any commercial aircraft is removed from air transportation service for repair, storage, or inspection, such aircraft is presumed to be in interstate, international, or foreign commerce and not located in this state for longer than a temporary period for purposes of Section 11.01 of this code.

(d) A certificated air carrier shall designate the tax situs of commercial aircraft that land in Texas as either the carrier's principal office in Texas or that Texas airport from which the carrier has the highest number of Texas departures.

(e) For purposes of this subchapter, a commercial aircraft shall mean an instrumentality of air commerce that is:

(1) primarily engaged in the transportation of cargo, passengers, or equipment for others for consideration;

(2) economically employed when it is moving from point to point as a means of transportation; and

(3) operated by a certificated air carrier. A certificated air carrier is one engaged in interstate or intrastate commerce under authority of the U.S. Department of Transportation.

Added by 1989 Tex. Laws, p. 1752, ch. 534, Sec. 6.

Note:
The Commerce Clause of the United States Constitution requires an allocation of property moving in interstate commerce. A taxpayer that flew helicopters between Texas and Louisiana and oil rigs in international waters had only to show that it could be subject to taxation in another state. Appraisal Review Board of Galveston County, Texas v. Tex-Air Helicopters, 970 S.W.2d 530 (Tex. 1998).

Interstate allocation of business aircraft was not permitted as a late correction to an appraisal roll, as also held in decisions by the Harris County appellate courts. WB Summit Properties, Inc. v. Midland Central Appraisal District, 122 S.W.3d 374 (Tex. App.-El Paso 2003, no pet. h.).

Failure of the taxpayer to show entitlement to interstate allocation for its aircraft at the time of rendition precluded the allocation. In addressing whether the aircraft was commercial rather than business in nature, it held that the aircraft's operator must be a "certified air carrier" for the commercial status to apply. SLW Aviation, Inc. v. Harris County Appraisal District, 105 S.W.3d 99 (Tex. App.-Houston [1st Dist.] 2003, no pet.).

Section 25.25(c) was an improper method of seeking the commercial aircraft interstate allocation found in Section 21.05. As reasoned in the Texarkana court in Aramco Associated Co., the legislature has given property owners two specific procedures to challenge the appraised value on appraisal rolls under Chapters 41 and 42 and under Section 25.25(d). The legislature placed restrictions on the right to challenge the appraised value in both procedures. Broadly construing "location" to permit a challenge under Section 25.25(c)(3) to the allocation of appraised value would be contrary to the legislative scheme. Gunn v. Bexar County Appraisal District, 71 S.W.3d 425 (Tex. App.-San Antonio [4th Dist.] 2002, pet. denied).

The appraisal district did not establish that Tax Code Section 21.05 was exempting property in violation of the null-and-void clause. The statute establishes a method of valuation rather than an exemption from taxation. Tex-Air's equal protection challenge to Section 42.29 was rejected. Tex-Air Helicopters, Inc. v. Galveston County Appraisal Review Board and Galveston Central Appraisal District, 76 S.W.3d 575 (Tex. App.-Houston [14th Dist.] 2002, no pet. h.).

Determining the status of personal property based on the property's use over the preceding tax year is consistent with Chapter 21, which provides methods of appraisal. If an aircraft, during the preceding year, was primarily engaged in the transportation of cargo, passengers, or equipment for others for consideration; was economically employed when it was moving from point to point as a means of transportation; and was operated by a certificated air carrier, then the aircraft qualified as a commercial aircraft. Section 21.05 does not provide for an exemption but provides the method of allocating to Texas the portion of a commercial aircraft's fair market value that fairly reflects its use in Texas. First Aircraft Leasing, Ltd. v. Bexar Appraisal District, 48 S.W.3d 218 (Tex. App.-San Antonio 2001, pet. denied) and Fairchild Aircraft, Inc. v. Bexar Appraisal District, 47 S.W.3d 577 (Tex. App.-San Antonio 2001, pet. denied).

When the issue is allocation of value, and not excessive appraisal, attorney fees may not be granted to the prevailing property owner. Tex-Air Helicopters v. Harris County Appraisal District, 15 S.W.3d 173 (Tex. App.-Texarkana 2000, pet. denied).

Tax Code Section 21.05 is constitutional and is not a tax exemption in violation of Article VIII, Section 2 of the Texas Constitution. Section 21.05(a) is a valid legislative act under the clause contained in Article VIII, Section 1, which states that property shall be taxed in proportion to its value, which shall be ascertained as may be provided by law. Other court cases decided since the 1986 Corpus Christi Court of Appeals decision in the Aransas County case strongly suggested that the reasoning behind the Aransas County case should not be followed. Other courts have held a distinction between determining taxable value and granting a tax exemption, including the appellate decision in Tarrant Appraisal District v. Colonial Country Club and the Texas Supreme Court decision in Enron Corp. v. Spring Independent School District. Simply because a portion of property goes untaxed does not necessarily follow that a tax exemption results. When a taxpayer claims a particular provision is an exemption, courts construe the provision narrowly and will not allow an exemption to arise by implication. Section 21.05 is a valuation statute rather than an exemption statute, since both Chapters 21 and 23 are contained in Subtitle D, Appraisal and Assessment. Tex-Air Helicopters, Inc. v. Appraisal Review Board of Galveston County and Galveston Central Appraisal District, 940 S.W.2d 299 (Tex. App.-Houston [14th District] 1997).

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Sec. 21.055. Business Aircraft.

(a) If an aircraft is used for a business purpose of the owner, is taxable by a taxing unit, and is used continually outside this state, whether regularly or irregularly, the appraisal office shall allocate to this state the portion of the fair market value of the aircraft that fairly reflects its use in this state. The appraisal office shall not allocate to this state the portion of the total market value of the aircraft that fairly reflects its use beyond the boundaries of this state.

(b) The allocable portion of the total fair market value of an aircraft described by Subsection (a) is presumed to be the fair market value of the aircraft multiplied by a fraction, the numerator of which is the number of departures by the aircraft from a location in this state during the year preceding the tax year and the denominator of which is the total number of departures by the aircraft from all locations during the year preceding the tax year.

(c) This section does not apply to a commercial aircraft as defined by Section 21.05.

Added by 1999 Tex. Laws, p. 3720, ch. 970, Sec. 1, amended by 1999 Tex. Laws, p. 5098, ch. 1481 , Sec. 7.

Cross References:
Commercial aircraft, see Sec. 21.05.

Notes:
Tax Code Section 21.055 implies that a taxpayer who seeks allocation of value must provide information showing entitlement to allocation at the time of rendition. Further, the Court cited Rule 9.4033(e): "a property owner who is entitled to an allocation of property must file a rendition form that provides enough information necessary to . . . permit the chief appraiser to apply an allocation formula. . ." The language in Section 25.25(c)(3) refers to property that does not have any physical location in Texas through the entire year. The section does not permit a change in the appraisal roll for interstate allocation of the value of personal property. The Court expressly overruled its prior decision in Himont U.S.A. Inc. v. Harris County Appraisal District, 904 S.W.2d 740 (Tex. App.-Houston [1st Dist.] 1995, no writ). Harris County Appraisal District v. Texas Gas Transmission Corp., 105 S.W.3d 88 (Tex. App.-Houston [1st Dist.] 2003, pet. filed).

Property Tax Code Section 21.055, added by the Texas Legislature in 1999 concerning the taxation of business aircraft, applied to the taxation of business aircraft for the 1999 tax year, but not for tax years 1995 through 1998. Op. Tex. Att'y Gen. No. JC-180 (2000).

Sec. 21.06. Intangible Property Generally.

(a) Except as provided by Sections 21.07 through 21.09 of this code, intangible property is taxable by a taxing unit if the owner of the property resides in the unit on January 1, unless the property normally is used in this state for business purposes outside the unit. In that event, the intangible property is taxable by each taxing unit in which the property normally is used for business purposes.

(b) Depositing intangible property with an agency of the state pursuant to a law requiring or authorizing the deposit is not using it for a business purpose at the depository.

Cross References:
Intangible personal property defined, see Sec. 1.04(6).
Jurisdiction to tax intangible personal property, see Sec. 11.02.
Transportation intangibles, see Sec. 21.07.
Savings and loan intangibles, see Sec. 21.08.
Insurance company intangibles, see Sec. 21.08.

Notes:
Securities could have a situs where they were used in a business, apart from their owners' domicile, if the legislature so provided. Great Southern Life Ins. Co. v. City of Austin, 112 Tex. 1, 243 S.W. 778 (Tex. 1922).

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Sec. 21.07. Intangibles of Certain Transportation Businesses.

(a) A portion of the total intangible value of a transportation business whose intangibles are appraised as provided by Subchapter A of Chapter 24 of this code is taxable by each county in which the business operates.

(b) The portion of the total value that is taxable as provided by Subsection (a) of this section is determined by the provisions of Subchapter A of Chapter 24 of this code.

Acts 1979, 66th Leg., p. 2248, ch. 841, § 1, eff. Jan. 1, 1982. Amended by Acts 1983, 68th Leg., p. 4823, ch. 851, § 10, eff. Aug. 29, 1983.

Sec. 21.08. Intangibles of Certain Financial Institutions.

(a) The taxable situs of intangible property owned by an insurance company incorporated under the laws of this state is determined as provided by Article 4.01, Insurance Code.

(b) The taxable situs of intangible property owned by a savings and loan association is determined as provided by Section 89.003, Finance Code.

Acts 1979, 66th Leg., p. 2248, ch. 841, § 1, eff. Jan. 1, 1982. Amended by Acts 1999, 76th Leg., ch. 62, § 7.89, eff. Sept. 1, 1999.

Cross References:
Jurisdiction to tax, see Sec. 11.02.
Types of insurance companies, see art. 4.01, Insurance Code.
Types of savings and loan associations, see Texas Savings & Loan Act (art. 852a, Sec. 11.09).

[Sections 21.10 to 21.20 reserved for expansion]

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Chapter 11C | Table of Contents | Chapter 22A




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