Hotel property owners qualify for a large property tax exemption for most of 2020. Texas statutes provide for a partial exemption (Texas Tax Code 11.35) after a disaster declared by the Texas governor. Governor Gregg Abbott declared all 254 counties of Texas a disaster area on March 13, 2020, due to Covid-19 / Coronavirus. The amount of exemption is based on the level of damage.

2 Property Tax Appeal in 2020 for Hotel?

Hotels have been devestted by Covid-19. Occupancy is only 5 to 10% at most hotels. This is not even enough to cover the costs of staying open such as staff. Hotel owners are likely to request mortgage payment abatement or deferral. Exemption Application

The hotel property tax exemption application will proceed separately from the normal property tax protest. Routine property tax protests will be filed by the May 15 deadline. The application for the partial property tax exemption is due about May 26 (105 days after March 13 when governor declared all of Texas a disaster area because of Covid-19).

Hearing Process

The appraisal district can accept, modify or reject the hotel property tax exemption application, much like a homestead exemption application. The owner can appeal if the exemption is denied. If the property owner and appraisal district cannot agree, an appraisal review board (ARB) meeting is scheduled. The ARB hearing can be appealed to district court, just like a typical value dispute.

Judicial Appeal for Exemption

The percentage of the total value exempted will range from 15% to 100%, depending on the level of damage to the hotel. The options are 15%, 30%, 60% and 100%. This amount of exemption applies to land and improvements for real estate, as well as business personal property. This exemption applies to the value after the “other protest”; the normal protest on value.

Example for Hotel

Luxury hotel is valued at $5 million and reduced to $4.5 million at ARB and $3.5 million during judicial appeal. The partial exemption is granted for 60%, due to hotel revenues dropping by 80 to 90%. The 60% exemption would exempt $2.1 million, leaving only $1.4 million taxable. The taxable amount was reduced by 72% between the normal appeal and the partial exemption, for 80% of the year. The first 20% of the year (72 days Jan 1 to Mar 12/365~20%), taxes are based on $3.5 million (judicial appeal value).

Summary for Hotel Property Tax Exemption Example

Initial Noticed Value      : $5.0 million
ARB Value                        : 4.0
Judicial Appeal               : 3.5 [Appraised Value for Jan 1 to March 12]
After 60% Exemption     : $1.4 million [Appraised Value March 13 to December 31]

The hotel property tax exemption is applied for a portion of the year: March 13 to December 31. The property would be taxed based on $3.5 million (judicial appeal number) from January 1 to March 12 and taxed based on appraised value of $1.4 million during March 13 to December 31, 2020. The property is taxed on an appraised value of $3.5 million for 20% of the year and $1.4 million for 80% of the year.

The exemption is cancelled on January 1, of the following year (2021 in this case). Any lingering impact of Covid-19 would be considered based on January 1 value for tax year 2021.

It does not appear residential properties have yet been effected. However, it is early to say whether housing values will be impacted. There is a substantial opportunity to reduce property taxes for owners of Texas hotels tragically impacted by Covid-19.

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