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In Texas, all property is considered taxable, unless it is exempt by state or federal law.  Does that mean you have to pay property tax on a leased vehicle?

Leased Vehicles for Personal Use

Leased vehicles produce income for the leasing company and are in turn,  taxable to the leasing company.  In many leasing contracts, companies require their lessees to reimburse them for taxes assessed on the vehicles.

Are There Any Exemptions?

Texas does exempt leased vehicles that are not held for the primary purpose of income production by the lessee.

These vehicles include passenger cars or trucks with a shipping weight of not more than 9,000 pounds and leased for personal use. Personal use would mean using the vehicle more than 50 percent of its use (based on mileage) for activities that do not involve the production of income.

How Do I Qualify?

To qualify for the exemption, you must timely file an affidavit with the leasing company. You may print the Lessee’s Affidavit of Primarily Non-Income Producing Vehicle Use form or get it from your particular leasing company.

To receive the exemption, the leasing company must file a Lessor’s Application for Personal Use Lease Automobile Exemptions application with the county appraisal district where the property is located before April 30 of each year.

The exemption application should contain all vehicles that are used primarily for personal use. If the leasing company does not file the application timely, the vehicle is not exempt for that year.

Make sure to follow up with your leasing company to check if everything is proceeding for that year correctly!

 

ENROLL TODAY In the Property Tax Protection Program™

Your property taxes will be aggressively appealed every year by the #1 property tax firm in the country. If your taxes are not reduced you PAY NOTHING, and a portion of the tax savings is the only fee you pay when your taxes are reduced! Many FREE benefits come with enrollment.

It’s important to have a foundation of the property tax basics before you file a property tax appeal.

Property taxes are local taxes. Your local officials value your property, set your tax rates and collect your taxes. However, state law governs how the process works. You can play an effective role in the process if you know your rights, understand the remedies available to you and fulfill your responsibilities. We’ve outlined the Texas property tax basics for you in this quick read.

Your most important right as a taxpayer is your right to protest to the appraisal review board (ARB). You may protest if you disagree with any of the appraisal district’s actions concerning your property. You may discuss your objections about your property value, exemptions and special appraisal in a hearing with the ARB, an impartial panel of your fellow citizens. Most appraisal districts will informally review your protest with you to try to resolve your concerns. Check with your district for details.

Be sure to file your notice of protest by May 15 or no later than 30 days after the appraisal district mailed a notice of appraised value to you, whichever date is later. Note that it is 30 days after mailing the notice, not its receipt. If you are an off-shore worker or on full-time military duty, you may be entitled to file a late protest.

The property tax basics consist of three levels to the property tax appeal process: the informal hearing, typically with an appraiser in a cubicle, the Appraisal Review Board (ARB), then appealing to the state district court.

Appraisal Review Board

An ARB is a group of citizens authorized to resolve disputes between taxpayers and the appraisal district. The appraisal district’s board of directors appoints ARB members. The ARB also decides issues that a taxing unit may challenge about the appraisal district’s actions. In taxpayer protests, it listens to both the taxpayer and the chief appraiser. The ARB determines if the appraisal district has acted properly, nevertheless, they often side with the appraisal district.

Once the ARB rules on your protest, it will send you a written order by certified mail. If you are dissatisfied with the ARB’s findings, you have the right to appeal its decision to the state district court in the county in which your property is located. You should consult with an attorney to determine if you have a case. Within 45 days of receiving the written order (when you sign for the certified mail, in other words), you must file a petition for review with the district court.

Binding Arbitration

As an alternative to filing an appeal in state district court, a property owner is entitled to appeal through binding arbitration an appraisal review board order determining a protest concerning the appraised or market value of real property if:

  1. the appraised or market value, as applicable, of the property as determined by the order is $1 million or less; and
  2. the appeal does not involve any matter in dispute other than the determination of the appraised or market value of the property.

To apply for binding arbitration, you must file a request within 45 days, just as with filing a lawsuit.

Due to the arbitrary and inconsistent nature of the property tax appeal process, it’s best to protest annually. A study performed by O’Connor & Associates of 43,000 clients in Harris County that had protested 5 or more consecutive years with us, generated on average a 13% reduction in property taxes each year. The average savings was $653 per year.

 

ENROLL TODAY In the Property Tax Protection Program™

Your property taxes will be aggressively appealed every year by the #1 property tax firm in the country. If your taxes are not reduced you PAY NOTHING, and a portion of the tax savings is the only fee you pay when your taxes are reduced! Many FREE benefits come with enrollment.

If you’ve ever wondered how your appraisal district got your value so wrong, watch this quick video of Patrick O’Connor explaining the process the appraisal districts use to “value” Texas real estate.

Suggestion: you might want to print this to read offline.

Pat O’Connor:

Why would you want to consider protesting? Well, let me tell you.

The appraisal districts use these massive models to value tens of thousands or hundreds of thousands of properties at a time, and the values aren’t reliable, you know?

They’re all over the place. Some are high, some are low. You just don’t know until you look at the individual property, and the sale for that area, whether you’re high, or low, or in the middle.

So, that’s why you need to protest. They don’t know, and you don’t know until you really look at it. The fact is, this isn’t my guess of what’s going to happen.

The fact is that two out of three property tax protests are successful in the state of Texas according to about 2 million protests in the year 2016.

So, two out of three are successful, so go ahead and protest. The appraisal district uses this process that is just unreliable.

The deadline is May 15th. Make sure you protest and protest both market value and unequal appraisal.

If you want to find out if you’re fairly taxed, go to the Texas Fairness Checker at cutmytaxes.com. That’s cutmytaxes.com. It is free and only takes one or two minutes, and you’ll find out if you’re fairly taxed or not. Thanks for watching.

ENROLL TODAY In the Property Tax Protection Program™

Your property taxes will be aggressively appealed every year by the #1 property tax firm in the country. If your taxes are not reduced you PAY NOTHING, and a portion of the tax savings is the only fee you pay when your taxes are reduced! Many FREE benefits come with enrollment.

Let us know below if you plan on appealing your property taxes this year!

Currently, the state of Texas is facing an issue that has given educators and lawmakers sleepless nights: school finance reforms. Again, lawmakers are looking to deliberate further on this matter in their upcoming January session.

Lawmakers and educator agree the system used to fund public schools in Texas needs an overhaul. However, for a while, legislators have clashed over the best way to solve this problem.

In fact, during their last session, legislators held a special meeting that also included experts whose role was to chart the way forward. Their findings will be released sometime this December.

In an ideal situation

Based on recent projections, public schools in Texas expect about $55.4 billion in 2019, a substantial increase compared to 2010’s allocation of $44 billion. However, funding per student will decrease by close to 6.3 percent.

That means property owners will have to cough out a little more to finance the 2019 budget. Consequently, each school’s revenue from property tax will increase by 55.5 percent, while the government will only contribute about 35 percent to fill in existing gaps.

Local legislators and school board members aren’t happy with the turn of events. They feel the government should bear most of the burden, update its share formula and get rid of recapture.

To distribute wealth equitably, districts with a substantial amount of the revenue from property tax should disburse extras back to the government. That way, the money can be given to underdeveloped schools.

Source of additional funding

Most of the discussion during the January session will revolve around the state’s source of additional funding. Some legislators support the imposition of a ceiling on government spending to eliminate the need for property tax that funds operation and maintenance of schools.

Alternatively, legislators feel there are other options that can be explored such as consumption tax or eliminating tax loopholes.

Potential bottlenecks

Although legislators are hell-bent on fixing this mess permanently, there are numerous obstacles along the way. For instance, a bill that would see more money going to public schools stalled in the previous session. House and Senate could not see eye to eye on issues such as vouchers and funding for kids with a preference for homeschooling or private schools.

This issue might crop up once again in 2019, but parents and schoolchildren can only hope that new legislator will sort out this mess amicably. That said, representative and senators are busy pre-filling potential bills before the January session begins and it is likely challenges might arise.

A poor amendment to the school reform bill might kill the anticipated changes, but there is room for optimism. Hopefully, positive reforms will take place because legislators made promises and taxpayers will hold them accountable.

Wrapping Up

Funding for public schools is often a challenge for the government. It certainly isn’t easy for the state of Texas, especially because legislators can’t agree on the way forward. The last few years haven’t been easy for public schools, but 2019 looks promising.

The Texas school funding system is amongst the major causes of concern in at present. A state commission has already been created, which is tasked to come up with suggestions about how the public education’s funds can be increased systematically. Currently, Texas is ranked 36th in terms of education spending, with the National Education Association estimating that the state spent $10,456 per student in the 2017-2018 financial year. Undoubtedly, the schools are lowly financed, a factor which has negatively affected the overall education system. The 2019 legislative period was meant to address the funding issue, a resolution of which promised to increase the school funding. That notwithstanding, the prioritizing of property tax in the same period is a competing preeminence, which will undoubtedly affect the anticipated funding.

 

Effect of Prioritizing Property Tax Relief

The Texas school funds are obtained from two major sources; the state revenue and property tax. It, therefore, goes without saying that the perceived increment in the funding would be achieved by increasing both the state financing and the property tax revenue. That notwithstanding, the current legislative priority that is seemingly being addressed first is how to reduce the property Taxes in the State. In as much as the Tax relief would be immensely beneficial to the locals, there is the growing concern that the legislators have not addressed a viable substitute source of funds for the required funds. Even more alarming is the fact that, without such alternative sources of funds, the funding for the public schools will even be lower. Therefore, the situation is bound to be worse.

 

Viable Options to Increase the School Funding

Proponents of the property tax relief continue to table alternative options, whose viability is yet to be ascertained. One such method is the requirement of the state to fund the deficit obtained from lowering the property taxes. In as much as this may look like a viable idea at face level, it is worth noting that it would translate to the increased state budget, and may even cause the state to run on a deficit. Further, the proponents argue that the state revenue obtained from sales tax and oil and gas production is bound to increase in the coming years, and therefore expect the additional income to be used to supplement the school funding. While the notion might be true, opponents argue that oil and natural gas are commodities that greatly fluctuate, thus cannot be relied upon to form a stable base of funding. For instance, the oil and natural gas production dipped by 40 percent between 2006 and 2016, and therefore cannot be relied upon.

 

It is evident that the Texas school funding required immense adjustments, judging from its low national rank and funding per student. However, the reforms are threatened by the prioritization of the property tax relief, which would translate to the further decline of the public school funding. Property taxes and state funds are the two major sources of funds in public schools, the decline of which would make the schools more disadvantaged and in a worse crisis. While proponents of property tax relief have attempted to come up with ideas of offsetting the discrepancies, opponents continue to poke holes into the ideas, questioning their viability.

In Chippewa County, the biggest property taxpayers include Walmart, a petroleum and natural gas exploration company, a health care system, family-owned footwear and general merchandise company, and a sand mine.

Below are the top 10 property taxpayers of Chippewa County, Wisconsin, with data from the county treasurer’s office, by way of the Chippewa Herald.

  1. EOG Resources

A Fortune 500 company and the successor to the Enron Oil and Gas Company, EOG Resources is the biggest property taxpayer in all of Chippewa County. It is an American-owned petroleum and natural gas exploration firm based in Houston, Texas.

In 2017, EOG Resources paid $728,460.62 in property taxes in Chippewa County. The company owns six parcels of land worth a combined total of $34.3 million. Its most valuable parcel is a frac sand processing plant worth $33.5 million.

  1. Walmart

The second-highest property taxpayer is Walmart. Its Walmart Supercenter, located on Lake Hallie’s Commercial Boulevard, is worth more than $14 million. Walmart paid $251,039.30 on the property.

The multinational retail corporation has 99 retail units in Wisconsin. This includes 83 Supercenters, 4 Discount Stores, 2 Neighborhood Markets, and 10 Sam’s Clubs.

  1. Marshfield Clinic

Marshfield Clinic, which was founded by six local physicians in 1916, is a health care system with hospitals, clinics, laboratories, and facilities in northern, western, and central Wisconsin. Marshfield Clinic paid $231,826.54 in taxes for its six properties, worth a combined $11.9 million, in Chippewa County.

One of these properties, Marshfield Clinic Chippewa Falls Center, is located near St. Joseph’s Hospital. It is a multi-specialty clinic offering care in family medicine and numerous specialities.

  1. Mason Companies

Founded in 1904, Mason Companies has been selling boots and other footwear in Chippewa Valley for over a century. On top of footwear, the family-owned company now also sells apparel and general merchandise online and via mail order catalogs.

In Chippewa County, there are 12 properties owned by Mason Companies. It paid $206,58.09 in taxes for the properties, which are worth a combined $9.7 million.

  1. Phillips Properties

Phillips Properties, a property management company based in Eau Claire, paid $182,257.76 in taxes for properties worth an assessed $8.2 million. The parcels are located on White Avenue, near the Chippewa Valley Regional Airport.

  1. WOW Logistics

WOW Logistics is a distribution services company based in Neenah, Wisconsin. Its storage facility in Chippewa Falls sits on land worth $8.5 million, for which the company paid $181,023.56 in taxes.

  1. Adobe Rentals of Chippewa Falls

Adobe Rentals of Chippewa Falls paid $169,754.84 in taxes for the 38 properties it owns in Chippewa County. The properties are worth a combined value of almost $8 million.

  1. Chippewa Sand Company

The Chippewa Sand Company, which has a site near the city of Bloomer, paid $166,996.87 in taxes. Its property is worth $8.6 million.

  1. River Country Co-op

For its 18 properties worth a combined $8.725 million, River Country Co-op paid $156,246.30 in property taxes.

  1. Premium Waters

Premium Waters, a home and office bottled water company, owns 13 properties worth $7.3 million. It paid Chippewa County $155,669.40 in taxes.

 

It’s the season for going over your property tax bills. Anita Campbell, Chief Appraiser for the Ector County Appraisal District in Texas and Odessa American columnist, has the answers to some of the most common concerns about property taxes, tax statements, and exemptions.

Receiving your 2018 property tax statement

By now, you should have your hands on your 2018 tax statement. The exception is if a mortgage company pays your tax from an escrow account.

In Ector County, property owners receive a tax statement for each property they own. The property tax bills include the amounts for each taxing entity with jurisdiction in the location of the property. The Ector County Appraisal District generates the bills.

According to the Texas Property Tax Code, the validity of the tax and your responsibility for payment are not affected by your “failure to receive” the tax statement. This is not acknowledged as a valid excuse for missing your tax payments. Unfortunately, if you are not able to pay your tax on time because you did not receive the statement, the Ector County Appraisal District will be unable to waive the interest and penalty fees.

If, by now, you have yet to receive the property tax bill for the properties you own, contact the Ector County Appraisal District to avoid paying additional fees. Under Texas law, unpaid property taxes can result in foreclosure, tax suits, and court costs. Ector County holds several auctions each year to sell properties for which the property taxes were left unpaid.

If you have not paid your 2018 property taxes by February 1, 2019, they will be considered delinquent and will begin to accrue interest and penalty fees. In February, the interest and penalties will be at 7 percent. The additional fees will increase with each month that the property taxes are unpaid.

If your property taxes are still unpaid by July 1, you will receive 38 percent in interest, penalty, and attorney fees.

Tax amount and valuation of property

Your 2018 property tax is computed based on the taxable value of the property stipulated in the appraisal notice you received in April/May and the tax rate assumed by each taxing identity in September. The deadline for protesting the valuation of a property or the assessment of a late filing fee is May 31.

The Ector County Independent School District adopted a tax rate that was approved by voters during the tax ratification election on November 6. This means that the tax statements that were mailed in October hold true. There will be no corrected statements with a reduced Independent School District tax rate.

Residential homestead and other tax exemptions

You may be eligible for a residential homestead exemption if you own your home and have used it as a principal residence since January 1, 2018. If you already have the residential homestead exemption and are over 65 years old or disabled, you may be eligible for an additional exemption. If you qualified for the over 65 or disabled exemption, you can also opt to pay for your taxes in four installments.

Veterans with a service-connected disability are also qualified for additional exemptions. The deadline for processing late 2016 and 2017 exemptions and applying the tax savings to your 2018 taxes is February 1, 2019.

 

The Chief Appraiser of the Atascosa Central Appraisal District in Texas has announced that some property owners should expect to receive a letter requesting an update on information for their 1-D-1 (Open Space) Agricultural Use Appraisal.

Updating information on Agricultural Use Appraisal

According to the Pleasanton Express, Chief Appraiser for the Atascosa Central Appraisal District Michelle Cardenas said that the property owners who will be receiving requests to reapply are those who have held their 1-D-1 (Open Space) Agricultural Use Appraisal since before 2006. The District is reportedly sending out requests for updated applications to approximately 1,710 property owners in Pleasanton.

Cardenas also said that the Atascosa Central Appraisal District is working on updating its records and needs the most current information on some properties with the Agricultural Appraisal. The updating of records was prompted by the latest Methods and Assistance Program Review conducted by the Texas State Comptroller of Public Accounts Property Tax Assistance Division.

During the most recent review of the Atascosa Central Appraisal District’s records, it was found that certain properties that had been receiving the 1-D-1 (Open Space) Agricultural Use Appraisal prior to 2006 had outdated information with the District. In some cases, the application was not on file with the District at all.

To make sure that the Atascosa Central Appraisal District complies with State requirements on these forms, the District is mailing out the requests for current information as soon as possible.

In a press release, Cardenas said that the Atascosa Central Appraisal District apologizes for any inconvenience that the request may cause the District’s property owners. The Chief Appraiser also noted that Appraisal District staff are ready to assist property owners who may have questions about the reapplication process.

1-D-1 (Open-Space) Agricultural Use Appraisal

Guidelines from the Texas Comptroller of Public Accounts state that applications for 1-D-1 (Open-Space) Agricultural Use Appraisal are to be filed with the Chief Appraiser before May 1st. Late applications may be filed up to midnight prior to the day when the appraisal review board approves appraisals for the year. This usually takes place in July.

Once an application for agricultural appraisal is approved, a new application will only be required when eligibility ends, if there is a change in land ownership, or if there is a request for a new application from the  Chief Appraiser. Approved late applications will be charged a penalty amounting to 10 percent of the difference between the tax imposed on the property and the tax that would be imposed on the property if it were taxed at market value.

Atascosa Central Appraisal District property inspections

Atascosa Central Appraisal District handles appraisals for all real and business personal property in Atascosa County, Texas. It conducts property appraisals based on the Texas Property Tax Code as well as the Uniform Standards of Professional Appraisal Practices (USPAP).

The Atascosa Central Appraisal District has also announced that its Field Appraisal staff is in the process of inspecting properties for the 2019 appraisal year. The process is ongoing in the following areas: Lytle, Poteet, Charlotte, Somerset, Jourdanton, and Pleasanton.

The Professional Golfer’s Association of America (PGA) is leaving its headquarters in Palm Beach County, Florida and moving to Frisco, Texas, Time’s #1 “Best Place to Live in America” for 2018.

According to the PGA of America, the move is part of an innovative public-private partnership between the association and the City of Frisco. The agreement includes the construction of a 600-acre mixed-use development worth an estimated public-private investment of more than $500 million.

Under the terms of the deal, two PGA Championships, two Women’s PGA Championships, and possibly a Ryder Cup are to be hosted in Frisco.

There will be two championship golf courses, a short golf course, a clubhouse, a 45-hole practice area, an Omni resort with 500 rooms and a 127,000-square-foot conference center, Class AA office spaces, a retail village, parks, trails, and open spaces. The upscale development will be open to golfers, as well as to the public.

The PGA of America’s Northern Texas Section will also move to the new PGA headquarters in Frisco. The technologically advanced new headquarters of the PGA of America will be built on Rockhill Parkway and Legacy Drive. Hunt Realty Investments is master planning the 2,500 acres on which the 600-acre development will sit.

The PGA of America estimates that the partnership will have an economic impact worth more than $2.5 billion over the next two decades. This number includes the economic effects of the golf course, the new conference center, and tournaments. The association will initially employ a minimum of 100 workers at the Frisco headquarters.

The partnership supporting the construction of the new PGA Frisco headquarters was made possible by the Frisco City Council, the board of trustees of the Frisco Independent School District (FISD), and the Economic and Community Development Corporations of the City of Frisco. For the project, the PGA of America is parenting with Omni Stillwater Woods (OSW), a joint venture by Omni Hotels and Resorts with Stillwater Capital and Woods Capital.

OSW will spend $455 million to buy the land and build the resort, conference center, golf courses, retail spaces, and parking facilities. The PGA of America will spend $30 million to build the association’s 100,000-square-foot headquarters and education facility. The public-private partnership agreement requires the City of Frisco and the City’s Independent School District to contribute no more than $35 million toward building the public facilities.

The City of Frisco and the Frisco Community Development Corporation (FCDC) will each invest $13.3 million, while the FISD will contribute $5.8 million. On top of its $2.5 million contribution, the Frisco Economic Development Corporation will also invest $14.3 million over 15 years for the association’s headquarters relocation, tournament incentives, and job creation.

The City of Frisco will publicly own the clubhouse, golf courses, practice areas, and related public facilities. More than 300 high school golfers from the FISD will practice weekly at the facility.

OSW will operate the clubhouse and golf courses. It will pay a rent of $100,000 a year to the City of Frisco. The lease will increase by two percent after five years.

Taxes are always a hot button issue with people around the nation. Of course, property taxes play a major role in the government and economy of the state of Texas. With property tax assessments being mailed out to landowners, 2019 is certainly going to bring some surprises.

Appraisals from the county appraisal districts (CADs) throughout Texas are really the basis for how much property owners can expect to pay on their yearly property taxes. A lot of things influence property tax assessments and tax rates, but there may be some overall trends throughout the nation that play an even larger role.

Home Prices on the Rise

One of the major indicators of a home’s value is, of course, the price at which it is sold. You can also take a look at home prices in certain areas to approximate the value of comparable homes. A report by the Home Buying Institute has suggested that home prices throughout the nation are rising by an average of 8.1 percent. This is particularly true for places like Dallas, Texas.

What this says to homeowners and property owners, however, is that values are increasing. This also means that appraisals are also going to see an increase. More houses are becoming more valuable, and this increase may correlate to higher property tax assessments.

Tax Rates Rising Too?

According to the Texas Tribune, the state has the 46th-highest property tax totals in the nation. Property tax is a major business in Texas, but there is also another business that has started cropping up in recent years. Property tax loans have started to become commonplace throughout many areas in Texas.

Of course, part of this could be attributed to the rise in property values, but it could also signal an increase in tax rates. Because Texas does not levy any personal income taxes, most governmental institutions rely heavily on the money earned from property taxes. In some cases, that means they could be willing to increase the tax rate to earn more money.

Improving Economy

On the whole, the economy is making strides throughout the state of Texas and the nation. More jobs are being created and more people are finding ample work. Again, this may correlate to a combination of higher property values, higher tax assessments, and higher tax rates.

Of course, the increases are always going to be regional. There are some localities that are struggling more than others even within the state boundaries. Rural areas might not be as well-off as urban areas.

In any event, the forecast for 2019 is one that should see higher property taxes. Areas with economic progress and higher home values are naturally going to see increased tax assessments and tax rates.

It’s important to prepare yourself for these increases if you live in an area with higher property prices. You may also want to keep an eye on tax rates from the various taxing units (e.g. counties, cities, school districts, etc.). You can speak out against rises in tax rates by attending meetings and council sessions.

ENROLL TODAY In the Property Tax Protection Program™

Your property taxes will be aggressively appealed every year by the #1 property tax firm in the country. If your taxes are not reduced you PAY NOTHING, and a portion of the tax savings is the only fee you pay when your taxes are reduced! Many FREE benefits come with enrollment.

According to many economists, how a government imposes taxes is just as important as how much it collects.  This is true with the Margin Tax in place.

Where Does Texas Rank?

The website Tax Foundation tries to seek more attention to this fact by publishing the State Business Tax Climate Index, to compare the usefulness of tax policies between the states, in order to promote growth and business investments.

The most current rating Texas achieved is in the 15th position. We are not on the best list, but we aren’t on the worst list either…

According to the Tax Foundation, taxation is unavoidable, but the particulars of the tax structure matters. As per individual records, states that follow a sensible tax system will attract more new businesses and will stay on a clear path for economic and employment growth. For example, states like New York and New Jersey with huge taxation amounts rank the lowest. But Wyoming and Alaska, without income taxes, ranks among the highest.

Margin Tax

Margin taxes in Texas are ranked among the highest in the nation and are a major contributor to our ranking. They are levied based on a company’s gross receipts, or the revenue made by the company in the last financial year. Economists are primarily against margin taxes, as they are not based on pure profits or total income. Businesses that are losing money may actually end up paying taxes.

Lawmakers, in an eagerness to evade income taxes, have chosen to revamp the little franchise tax charged by Texas for doing business.

The government allows bookkeepers (accountants) to calculate a company’s margin. Accountants usually find one that generates the least amount of tax. The margin tax, however, didn’t turn up with the expected mass amounts of money but instead created budget shortfalls. Several attempts were made to eradicate margin tax, but lawmakers do not want to replace the income lost.

Texas taxpayers who own a business pay 100 percent value of the inventory (most states don’t tax on inventory), putting a big burden to the retail business owners.

Taxation is unavoidable, but how taxation is done, and on what MATTERS. Texas property tax system is broken and seriously needs an overhaul, which doesn’t seem to be on the horizon anytime soon, unfortunately.

ENROLL TODAY In the Property Tax Protection Program™

Your property taxes will be aggressively appealed every year by the #1 property tax firm in the country. If your taxes are not reduced you PAY NOTHING, and a portion of the tax savings is the only fee you pay when your taxes are reduced! Many FREE benefits come with enrollment.

Every homeowner knows that property taxes are a pain and they need to be dealt with accordingly, but what many do not know are the reasons WHY protesting is so important and why it should be done every year for best results.

Here are 10 reasons:

1) Appraisal district values are not reliable. The average error rate for houses in Harris County is 14%.

2) State law requires you protest to obtain the appraisal district’s evidence.

3) You need to check the appraisal district’s detailed information regarding the size, grade, condition and level of remodel for your house. There are some errors for most houses.

4) Most property tax protests are successful. A 10% reduction for a $200,000 house would typically generate savings of about $500.

5) The property appeal process is arbitrary, depending on the appraiser and the appraisal review board panel. In some years when you have limited evidence, you obtain a great reduction.

6) The appraisal district’s evidence often supports a reduction. Since appraisal districts target 100% of value for houses, and error rates are about 14%, half of all houses are over-taxed.

7) Even if your value is below market, you can protest based on an unequal appraisal if your neighbors have a more favorable level of assessment.

8) Homeowners and small business owners pay more than their fair share of property taxes, and the burden is increasing with time. They subsidize the property taxes of trophy properties.

9) Mega-properties such as Greenway Plaza are often assessed at 50 to 70% of market value, versus 100% for houses.

10) Appraisal districts cater to owners of $100 million-plus properties because they know they face a fierce battle if they have the courage to attempt to fully value these buildings. Only by protesting in volume will homeowners send a clear message that all property should be assessed fairly.

 

ENROLL TODAY In the Property Tax Protection Program™

Your property taxes will be aggressively appealed every year by the #1 property tax firm in the country. If your taxes are not reduced you PAY NOTHING, and a portion of the tax savings is the only fee you pay when your taxes are reduced! Many FREE benefits come with enrollment.

The primary duty of the Taxpayer Liaison Officer (TLO) is to resolve conflicts between the appraisal district and the taxpayers.

Important responsibilities associated with the Taxpayer Liaison Officer are:

 

ENROLL TODAY In the Property Tax Protection Program™

Your property taxes will be aggressively appealed every year by the #1 property tax firm in the country. If your taxes are not reduced you PAY NOTHING, and a portion of the tax savings is the only fee you pay when your taxes are reduced! Many FREE benefits come with enrollment.

How To Read Your Texas Property Tax Bill

As a property owner, it is essential to understand how to read a property tax bill.  Doing so will help you learn more about the way your property taxes are calculated and will ensure that you pay the correct amount on time.

 

Property Tax Bill Explained

To find out if you are being fairly assessed, take at look at our Fairness Checker  on CutMyTaxes.com.  Its free and needs no personal information.

If you are a business owner in Texas, you must appeal business personal property tax every year. Business personal property values are reassessed each year in Texas.

“Collecting more taxes than is necessary is legalized robbery.”

These words of wisdom, spoken by the 13th president of the United States, Calvin Coolidge, still ring true in today’s society for homeowners and business owners.

Robbery may seem like a harsh word, but what would you say if someone tried to sell you one-year-old motel sheets for 90% of the original cost? Based on the appraisal district’s depreciation schedule, this is a fair deal.

Most people would not consider this a fair deal and either reject the offer or request a lower price. This should be the same thought process when the appraisal district overassesses your business personal property (BPP).

Texas law requires business owners to report BPP, personal property used for the production of income, to the appraisal district for assessment and taxation. Although there are no criminal penalties for not complying with the law, there is a penalty of 10% of the taxes. For example, if you have a BPP account assessed for $100,000, your annual BPP taxes are $3,000, based on a 3% tax rate. The 10% penalty for this BPP account would be $300 ($3,000 times 10% equals $300).

The huge range of assessed value for business personal property makes obtaining substantial property tax reductions highly probable.

It is not unusual for the range of assessed value for BPP accounts for similar properties to vary by 5,000%! For example, furniture and computers for companies within the same office building sometimes vary from $1 to $50 per square foot. Market value and unequal appraisal are two options for appealing BPP assessments. Given the inequity in BPP assessments and the subjectivity of valuing BPP, property owners have a high probability of success when properly prepared for a BPP assessment appeal. Protest both market value and unequal appraisal.

How To Appeal Your Business Personal Property Tax?

To appeal business personal property tax, you can either use the Comptroller’s form or send a letter to the appraisal review board (ARB) on or before May 15th of each year. The protest letter to the ARB should identify the property and the reason for your protest (section 41.44d of the Texas Property Tax Code).

Tips:

When sending a notice of appeal to the ARB, also send the appraisal district a House Bill 201 request. House Bill 201 refers to section 41.461 of the Texas Property Tax Code that allows property owners to obtain a copy of any evidence the appraisal district plans to use at the ARB hearing 14 days before the hearing. This request prohibits the appraisal district from using any information that was not provided to the property owner 14 days before the ARB hearing.

Market Value, Book Value & Comptroller Schedule

Three popular options for describing value for BPP are market value, book value, and the Comptroller’s schedule. To appeal business personal property tax, you must first understand how the tax code reads. Market value is defined in section 1.04(7) of the Texas Property Tax Code that reads as follows:

“Market value” means the price at which a property would transfer for cash or its equivalent under prevailing market conditions if:

    • (a) exposed for sale in the open market with a reasonable time for the seller to find a purchaser,
    • (b) Both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions on its use, and
    • (c) Both the seller and the purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other.

Let’s compare the differences in value resulting from using market value, book value and the Comptroller’s schedule. The BPP for a typical motel room includes items such as bedding, linens, window air-conditioning unit, towels, and a television. Based on market value, after one year, these types of items could probably only be sold for 10% to 30% of the original cost. Book value, based on federal depreciation schedules, indicates a value of 80% of the purchase price after one year. The Texas Comptroller’s schedule for BPP for motels has an eight-year life with 10% depreciation for the first seven years. Hence, the Comptroller schedule indicates one-year-old hotel furnishings are worth 90% of their original purchase price. This is clearly inconsistent with the market value for these items.

Inventory

There are a number of controversial issues related to how inventory is assessed. These include shrinkage, damage, functional obsolescence, and economic obsolescence. For example, what is the market value of merchandise returned during the week after Christmas on January 1st (the effective date for valuation)? Since returned merchandise has usually been opened, damaged, missing parts or may be an unpopular item, it is worth less than the cost in many cases. Market value is relevant in determining the assessed value for inventory for Texas BPP taxes.

Preparing A Summary For Your Hearing

The following is an example list you can compile of your BPP item categories and your opinion of value for each.

Item Quantity Average Age Market Value
Computers 10 3 $4,000
Desk 10 12 $2,400
File Cabinet 20 7 $600
Total $7,000

The appraisal district would prefer to see a fixed asset listing, which includes the original cost and date of acquisition for every asset purchased. However, a fixed asset listing is not required. This is good news for small businesses that do not maintain a fixed asset listing.

What is Unequal appraisal

Assessed values for BPP accounts often range from ten-times to fifty-times on a per square foot basis for companies in the same industry. For example, real estate brokerage offices, which have 10,000 square feet of office space, may have assessments ranging from $10,000-$500,000. It seems unlikely that the computers and furniture in one brokerage office are 50 times as valuable as those in a competitor’s firm on a per square foot basis.

Appraisal districts tend to accept the assessed value rendered by property owners. Many large companies render using fixed asset listings. Appraisal districts use the cost basis information and the Comptroller’s schedule to calculate the “market value” for the property. The valuations for these rendered accounts tend to grossly distort the actual value of these properties.

Property owners who do not render have values on the lower end of the range of value. While it seems intuitive that appraisal districts would penalize owners who do not render by sharply increasing their assessed values, the practice is the opposite. Appraisal districts tend to reward property owners who do not render by leaving their assessed values at modest levels. This creates a disincentive to render. It also unequally taxes property owners who render with a fixed asset listing. Meanwhile, these factors have caused a high degree of dispersion in BPP assessed values. This is just another reason to appeal business personal property tax annually.

How To Appeal Business Personal Property Tax On Unequal Appraisal

Contrary to popular belief, it is possible to appeal business personal property tax utilizing unequal appraisal, a concept that is fairly new. Most property tax consultants and large property owners have not considered or utilized unequal appraisal regarding BPP. Appraisal districts are resistant to the concept of appealing BPP based on unequal appraisal. (It is inappropriate to tax property owners who render using a fixed asset listing at the highest level, based on utilizing the Comptroller schedule, when allowing property owners who do not render very lean levels of assessment.)

Preparing an appeal based on an unequal appraisal for BPP is simple and straightforward. First, start by obtaining information on the assessed value, and amount of office space/manufacturing or warehouse space for property owners similar to the subject property owner. This is typically done by using companies with the same Standard Industrial Code (SIC) as the subject property owner. You can obtain this information by sending an open records request to the appraisal district. When appealing, research the assessed value for your competitors. Compile data regarding the assessed value and building area for the subject and comparable accounts into a summary:

Unequal appraisal analysis for XYZ manufacturing

 

Account
Number
Assessed
Value
Square
Feet
AV
PSF
65432
(subject)
$100,000 $10,000 $10
12345 $50,000 20,000 $2.5
23678 $45,000 15,000 $3
32186 40,000 10,000 $4
45618 $50,000 10,000 $5
89157 $150,000 10,000 $15

Median level of assessment equals $4 per square foot.

Assessed value per square foot times 10,000 ft.² for subject property = $40,000. This supports a 60% reduction. The tax savings would be $1,800 based on a 3% tax rate, (3% x $60,000).

When Should You Appeal?

You should appeal business personal property tax annually on market value and unequal appraisal. To effectively appeal on these two options, research unequal appraisal based on assessment comparables on the appraisal district’s website and evaluate the market value of your BPP. After reviewing both the unequal appraisal and market value options, determine your primary focus for appealing your BPP account. If neither market value nor unequal appraisal provides a basis for appealing your property taxes, you can, therefore, withdraw the notice of protest or just skip the hearing.

Tips For Your Hearing (Informal & ARB)

Informal hearing

ARB hearing

In Summary:

You can obtain a FREE evaluation of your BPP that will show your potential tax savings. Don’t take the appraisal district’s guesstimate of your value! Request Your Free Evaluation Today.

Do you know what Unequal Appraisal is and how it can help you in your fight for fair taxes?

*Its ok! We didn’t either at first! 🙂

unequal appraisal in property taxes

Background of Unequal Appraisal

During the 1997 legislative session, major changes were made to the Texas Property Tax Code. One of the reforms was the right to appeal property taxes based on unequal appraisal. Harris County Appraisal District chose to VIGOROUSLY OPPOSE this provision of the tax code. (SHOCKER!)

Appealing based on unequal appraisal is BENEFICIAL because it allows an owner to reduce the taxes even if the property is assessed for much less than the market value.

In the past, appraisal districts wanted a VERY COMPLICATED process to hear cases of unequal appraisal which was EXTREMELY EXPENSIVE to prepare. The new approach also made judicial appeals financially feasible and effective.

Why Aren’t Properties Assessed Equally to Begin With?

You may be wondering why properties aren’t assessed equally.

Some reasons include:

  1.  Data errors
  2.  Focusing only on recent sales
  3. VARIATIONS in the informal and ARB hearings.

Since the appraisal district tracks over 1.4 million real property accounts in Harris County, it is unrealistic to expect all of the data to be accurate.

At this point, you are probably thinking “This sounds great! How can I use it to my advantage?”

First and foremost: File An Appeal Annually.
According to the Texas Comptroller, last year 2/3 of appeals were successful. 

**On the Notice of Protest form, you must select a reason(s) for your appeal. Be sure to check the boxes for both market value and unequal appraisal.

Here’s what to do to prepare for your hearing:

  1. Prepare for your hearing(s) by gathering the comparable home sales in your area. If you own a commercial property, you will need to create an income analysis. In addition, review the assessment for your property as well as the assessments for competing or similar properties.
  2. Consider the level of assessment for approximately 5 to 15 similar properties and summarize the data in a spreadsheet.
  3. To determine negotiating parameters, begin with setting the lower limit (of assessed value) that is reasonable to request and conclude by setting the highest level of assessment you will accept for the year under appeal (without continuing the appeal process to the ARB and judicial appeal level).
  4. You should present information on both market value and unequal appraisal at the informal, and, if necessary, ARB hearings.

*Here is a link for a Universal Protest Form.*

Are you a victim of unequal appraisal? LET US KNOW IN THE COMMENTS BELOW.  Also, check out our PROPERTY FAIRNESS CHECKER! It’s FREE!

Harris County Appraisal District (HCAD) is over-taxing flooded property owners by 50 to 100%.

tax law

HCAD is NOT valuing these flooded properties accurately.

They are not following mandatory requirements of the Tax Code and the Texas Department of Licensing and Regulation.

HCAD and the Appraisal Review Board (ARB) are not considering market evidence in valuing flooded homes, grossly overtaxing Texans at their time of greatest need. 

Both HCAD and the ARB are overtly ignoring the law.  HCAD appraisers are testifying that the HCAD has not developed an opinion of market value.  Despite evidence from the HCAD appraiser that their valuation does not meet basic requirements, ARB panels are ratifying the HCAD value in a breath-taking display of raw power and force.

The appraisal district and the ARB appear to be ignoring all evidence at hearings.  In our opinion, it is clear the process is a sham after 1 or 2 hearings.

The ARB has also imposed a rule they will not consider any evidence of market value unless the property owner provides bids of repair costs.

This requirement violates the law and is denying owners of flooded properties a fair hearing.

Over the past 2 days, Patrick O’Connor, President of O’Connor, attended the HCAD disaster reappraisals on behalf of some of our clients alongside our team of tax agents. He was there to testify as an appraiser as well as act as an agent. We filmed at least 15 hearings believing upfront (and as it turned out, correctly) that HCAD would not act according to the law.  The recording of one of the hearings is available for you here.

Ten plus O’Connor team members have attended the disaster reappraisal hearings, and to a person, each is stunned HCAD and the ARB are so boldly ignoring the law, and over-taxing flooded property owners by 50 to 100%.  If HCAD were a private business, this would be price gouging.

For your reference, Texas Tax Code Sec. 23.02.  REAPPRAISAL OF PROPERTY DAMAGED IN DISASTER AREA. (a) The governing body of a taxing unit that is located partly or entirely inside an area declared to be a disaster area by the governor may authorize reappraisal of all property damaged in the disaster at its market value immediately after the disaster.

Pay also special attention to Sections 23.01 APPRAISALS GENERALLY; Sec. 23.0101. CONSIDERATION OF ALTERNATE APPRAISAL METHODS; and Sec. 23.001 COST METHOD OF APPRAISAL.

HCAD’s position is to take the property value as of January 1, 2017 less the costs to repair. They are not using a recognized method to value flooded properties.

Tax Code Sec. 23.001 COST METHOD OF APPRAISAL,  requires the appraisal district (CAD) shall (emphasis added) make any appropriate adjustment for physical, functional, or economic obsolescence. Economic obsolescence occurs when the value of a property decreases due to external factors in the neighborhood or immediate area.

Wouldn’t you consider the flooding of thousands of homes and parts of town to be economic obsolescence?

The comparable sales of flooded properties in those areas certainly support economic obsolescence, yet HCAD is absolutely ignoring that factor.

Comment below and let us know what you think. Are you as outraged as we are?

Business owners in Texas must render business personal property (BPP).

There are business owners that do not render business personal property in Texas. Since 1981, the Texas Property Tax Code has required owners of business personal property (BPP) to file an annual rendition.

However, until 2003 when the Texas Legislature revised the law, there were no penalties for not filing a rendition for BPP. Consequently, most owners of business personal property did not file annual renditions.

Since the law was revised, in addition to the annual tax, owners of BPP must pay a 10% penalty if they do not file an annual rendition. In addition, the burden of proof at the ARB hearing also changes from the appraisal district to the property owner if the property owner does not render business personal property.

Are there criminal penalties for not rendering?

There are criminal penalties for knowingly filing a fraudulent rendition. There are no criminal penalties for not filing a rendition.

Who must file a BPP rendition?

Anyone who owns tangible personal property used for the production of income is required to render business personal property annually. Renditions must be filed by April 1 for personal property owned on January 1.

Is it difficult to file a BPP rendition?

Completing the forms for a BPP rendition is not a difficult task. The portion that may be difficult is deciding whether to render business personal property and determining the market value of your property.

Owners of BPP with a market value of less than $20,000 can file a rendition by simply reporting the name and address of the property owner, a general description of the property by type or category, and the physical location of the property. Owners of BPP may also provide an opinion of market value. A copy of the Comptroller’s rendition form for BPP can be obtained here: Texas BPP Rendition Form 50-144.

Owners of BPP with a market value of greater than $20,000 must file a rendition including the name and address of the property owner, a description of the property by type or category, information on inventory, the location of the property and either: the property owners good faith estimate of market value of the property or, at the option of the property owner, the historical cost when new and the year of acquisition of the property (Texas Property Tax Code 22.01). Accountants, tax consultants and appraisal district staff refer to “the historical cost when new and the year of acquisition of the property” as the fixed asset listing.

The market value of Business Personal Property

The Texas Property Tax Code defines market value as the price at which a property would transfer for cash or its equivalent under prevailing market conditions if:

Market value can also be described as: “the amount you could sell the property for,” and “value in exchange.”

Appraisal districts typically use depreciation schedules to calculate market value of BPP. This approach generally overstates the value. For example, the schedule used by appraisal districts to value a desk chair that costs $100 would indicate a value of $90 for the chair after one year.

The following are the estimated values for common BPP based on the comptroller’s schedule:

How to develop a good faith opinion of market value for BPP

There are a variety of sources for generating an opinion of value for BPP which include:

Should I provide a good faith opinion of market value or a fixed asset listing?

Most property owners will fare better by providing an opinion of market value instead of a fixed asset listing. If you send the appraisal district a fixed asset listing, they will use the Comptroller’s valuation schedule to calculate the market value of the various items. This will frequently indicate a value two to three times higher than the actual market value of the property. In our opinion, it is best not to provide a fixed asset listing.

Valuing inventory

There is some discount from your cost basis that is appropriate when valuing inventory. Factors that should be considered include:

Clothing and computers are two examples of inventory that can be worth less than its cost basis. Let’s assume the recent fad for women’s clothing was electric blue shirts. However, six months have passed, and there is virtually no demand for electric blue shirts.

The rapid pace of technological change means computers that were cutting edge six months ago may be old news today. While it may be difficult to value both the electric blue shirts and the six-month-old computers, reasonable people would agree their market value is less than their cost basis six months ago.

Should you render business personal property?

Assume the following example:

You own a small manufacturing company. Your assessed value for BPP has been approximately $100,000 for the past five years. The lowest possible number you could render business personal property is $1 million. If you don’t render, your annual BPP property taxes are $3,300 ($100,000 times 3%; plus a 10% penalty for not rendering). If you do render, your initial BPP assessed value will likely be $1 million. You can appeal using unequal appraisal, a relatively new approach. Further, if you render business personal property this year for $1 million, it is likely the appraisal district will set your initial assessed value in future years at $1 million or higher. Based upon an assessed value for your BPP of $1 million, your BPP taxes would be $30,000 ($1 million times 3%).

Consider another example:

You operate a one-person consulting firm. Your BPP includes a 10-year-old desk, two five-year-old-file cabinets, a two-year-old computer and a four-year-old printer. The total market value of these assets is perhaps $1,000. Your assessed value last year was $1,000. If you render business personal property, you follow the law and avoid the 10% penalty ($3 based on 10% of $30).

Clients often struggle when trying to decide whether or not to render business personal property. In practice, a number of property owners choose not to render either because rendering would sharply increase their property taxes or because the penalty for not rendering seems insignificant compared to the hassle of rendering.

In Summary:

  1. The law in Texas states that owners of business personal property (BPP) used for the production of income must render.
  2. The penalties for not rendering include paying a 10% penalty and the burden of proof shifts from the appraisal district to the owner at the Appraisal Review Board (ARB) hearing.
  3. The process of completing rendition forms is fairly simple when market value is estimated.
  4. Decisions about whether to render business personal property and calculating market value can be complicated.
  5. Most owners will fare better by providing an opinion of market value on their rendition rather than providing a fixed asset listing.

Why O’Connor? 

Simple – we literally wrote the book on business personal property rendition, valuation, and appeals.

Receive a Free Copy of Pat’s BPP Book

Have you ever wondered what happens AFTER you’ve filed your property tax appeal? How exactly does the hearing process work, and who makes the ultimate decision on value?

Here is a detailed explanation of WHY HCAD’s current approach so WRONG. You can review the Tax Code and the Appraisal Standards to confirm for yourself.

In an effort to bring as many answers as possible to property owners, and be transparent regarding the property tax system, here’s an inside look at an actual disaster re-appraisal hearing of a residential property flooded by Hurricane Harvey in Harris County, Texas.

Patrick O’Connor himself was representing this property in an effort to set the stage (and educate) the appraisal district. We have included the transcription below the video if you don’t feel like watching the entire hearing.

*Fast-forward 2.5 minutes into the video to get to the juicy stuff!

Suggestion: you might want to print this to read offline.

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HCAD Appraiser: Okay, so Panel, being as this is a disaster re-appraisal hearing, we did notate on our evidence that the property had about a half a foot of flooding, so we calculated that into the two story height of the building, which by our calculations, meant the percentage damage was twenty percent. We took that with the replacement costs new of the improvements at $1,214,629 … estimated the repair cost $242,926 … used that to come to our new calculated improvement value of $415,899 … which brought the … including the certified land value, to $640,774.
HCAD Appraiser: Now, again, we didn’t have any actuals, in terms of the repair costs, so we did have to estimate that based on our disaster calculation here at half a foot of flooding with two story height on this particular home which, again, brought to twenty percent. Now, again, I just want to stress that this is an estimate, because we don’t have actuals for this particular home.
HCAD Appraiser: That’s where we got our overall value for $640,774 on this particular property.
ARB Member: Any questions? Alright. Does anyone have any questions for the appraiser?
Pat O’Connor: Yes, quite a few actually.
ARB Member: Okay, go ahead.
Pat O’Connor: Could you tell us about your licensing. Are you licensed as an appraiser?
HCAD Appraiser: Yes.
Pat O’Connor: Could you tell us about your licensing and training?
ARB Member: Sir, we’re gonna stick to the evidence that he presented. That’s what you have questions to ask, okay. Is there anything in his testimony that you have questions about? We’re not gonna get into his … his training, or his education, or his background. Alright? So, we’re gonna stick to the evidence. If you have questions for that, you can proceed. If you don’t, then we’re ready for your testimony.
Pat O’Connor: The tax code requires that you prepare an appraisal, a mass appraisal. If you’re doing a mass … I’m not sure if you’ve done a mass appraisal or an individual appraisal, but if you’re doing a mass appraisal, the code requires that you do a mass appraisal in compliance with standard 6.
Pat O’Connor: I have a copy of Standard 6 here for everyone.
ARB Member: Mr. Connor, I know these are special hearing, and I’m gonna give you the opportunity to present some evidence; but I’m gonna tell you something. We’re not gonna have an hour and two-hour hearings on each one of these hearings. So, if you wanna give evidence, then we’ll listen to it; but I’m gonna start holding the hearings to a certain time to get through the stack. Do we understand each other?
Pat O’Connor: The first hearing to really get into this complex subject will take about an hour. I don’t see…
ARB Member: I’m not gonna listen to a hearing for an hour. I’m not. I’m not.
Pat O’Connor: With all due respect, this is a completely new subject.
ARB Member: I understand that, but it does not take an hour to do one hearing.
ARB Member: Please proceed.
Pat O’Connor: My team and I’ve spent five to ten thousand hours researching
ARB Member: I understand, sir. I don’t have the time to spend an hour on the hearing. I’m just telling you that we’re not gonna do it. So, I suggest that you please do your pertinent information that you want us to hear, and then we’ll proceed further.
Pat O’Connor: Please explain, and this isn’t between you and me. This is an issue that I have a concern that Harris County Appraisal District did not complete a mass appraisal. Just to be direct and private remains sort of neutral toned about it, and if you’re not the right person to address this, I’d be happy for you to bring someone else in …
ARB Member: Okay. Mr. O’Connor, I’m not going into this. I asked you if you had any questions for the appraiser with the evidence that he gives. Please ask those questions, and if you don’t have any … I’m not gonna go through this. I’m not gonna go through all the tax code. He gave his presentation. I want you to give your presentation and your evidence. So, please proceed with that.
ARB Member: I’m not going to … I’m not gonna spend an hour on this stuff. I’m not, so please proceed; and then if you’re not happy with that, you can appeal.
Tonya Felix: Ma’am the intention is not to spend an hour. Our intention is to present our evidence. It does pertain to the subject property. Initially, we would like to present … We are gonna take a little bit of time … The issues that we’re gonna present up front, they apply to all of those properties, so we will…
ARB Member: I’m not gonna talk about mass appraisals. We’re talking about how the district … He gave his presentation … Please proceed.
Tonya Felix: If a mass appraisal was used to come up with the value of the subject property, then it is relevant to this hearing.
ARB Member: It’s not.
Tonya Felix: I’m a licensed attorney. I’m familiar with the tax code…
ARB Member: That’s fine.
Tonya Felix: It is relevant, and the law says that we can protest, and we have the ability to present evidence relevant to the subject property.
ARB Member: I am here. This panel is here, to hear your evidence on your properties, of the property, if it got flooded or damaged. That’s what we’re here for.
Tonya Felix: And that is exactly what we are doing.
ARB Member: But, I’m not gonna go through that, and so I’m just telling you right now we’re not gonna do it. So, please proceed if you have any questions concerning his evidence that he testified to. Okay? Then, ask his questions. If not, proceed with your testimony and give us your evidence.
Pat O’Connor: Please give an oral mass appraisal of how you value this property and other flood properties.
HCAD Appraiser: Well, I get the question that you’re trying to ask, in terms of normally how would we use mass appraisal to determine that; but what we did was, we have work-up that we had that was worked up in 2008 to come to … and I know you’re familiar with this, so I know I’m not saying anything that you don’t already know …
HCAD Appraiser: We came to a general insurance report that we’ve used, and worked up back in 2008. In determining that, that’s how we use this. So, that is our method in disaster reappraisal, for using mass appraisal, as you wanna call it. This is what we used to mass … use mass appraisal for all Mobile’s properties. So, based on the story of the property, based on what we estimated the level of flooding to be, we came to a percentage that I went over in my disaster calculation.
Pat O’Connor: The mass appraisal for the cost approach, of course, involves land value plus replacement costs.
HCAD Appraiser: Not in terms, and since we’re talking about the tax code, and specifically when it deals with disaster reappraisal, that has to do with improvement costs based on the level of damage at the time that the government declared that that was a disaster, on August 23.
HCAD Appraiser: So, based on the factors of how much flooding it had, and the story, we come to a percentage that we calculate out, and that only has to deal with the improvements.
Pat O’Connor: Since you’re referencing the tax code, I’m familiar with that section. It’s 23.02.
HCAD Appraiser: That’s what I said. I said…
ARB Member: Okay. Gentlemen. I’m gonna state this. It’s the last time I’m stating it. If you have specific questions about his evidence and testimony, as his questions. If not, proceed with your evidence and your testimony. I’m not gonna listen to this back and forth.
Pat O’Connor: What … How did you estimate repair of costs?
HCAD Appraiser: We estimated the repair costs, again, based on the story height and what we estimated to be the flood depth, and we came to a percentage that we calculated for the replacement cost
ARB Member: And that was in his testimony.
HCAD Appraiser: Which was in my testimony, again.
Pat O’Connor: What’s the data source?
HCAD Appraiser: It was a general insurance report that we developed back in 2008. I’m saying the same things over and over.
Pat O’Connor: And what type of repairs does it include?
ARB Member: Mr. O’Connor…
Pat O’Connor: It’s a relevant question
HCAD Appraiser: I’ve answered your question more than once. I said the feet of flooding…
ARB Member: Mr. O’Connor…
HCAD Appraiser: Combined with the story height gave us a percentage, an actual percentage damage. So, again, I’m referencing that these are estimated based on this specific information. We don’t have actuals because we’re not the property owner, so that’s the same thing in terms of when we’re estimating repair costs for if this house just experienced normal deterioration. If we don’t have actuals, we have to use something to come to an estimated level.
HCAD Appraiser: So, if you have actual repair costs, I would be more than happy to include that in the replacement cost in this building, but this is the way we have to do it. So, to answer your question in terms of how we came to mass appraisal, feet of flooding combined with the story height, gave us a percentage … estimated percentage damaged, which gave us our estimated replacement costs for this particular building, which we included with the certified land value; and yes, we can do that in the event of a disaster reappraisal.
Pat O’Connor: Did you consider economic obsolescence or economic depreciation?
HCAD Appraiser: I’ve answered the question.
ARB Member: You have.
Pat O’Connor: That’s a different question. That’s ….
ARB Member: Mr. O’Connor
Pat O’Connor: That’s at the heart of the matter here, ma’am.
ARB Member: No, no it isn’t.
Pat O’Connor: Yes ma’am, it is.
ARB Member: No it isn’t. If you wanna us estimates in testimony of what the damage was to your specific properties, we’ll be happy to look at them; and we’ll adjust accordingly, okay? But, we need that information. If the district doesn’t have anything … I’m not speaking for them, but if they don’t have anything … They gave us what they think the value should be. This is the sheet they gave us. They said that’s what the value should be. Okay, I want to hear your evidence. I wanna see your evidence of what the cost to repair, or what the damage was to subject properties.
ARB Member: That’s what I’m here for. That’s what this panel is here for, and that’s how we’re gonna proceed.
Pat O’Connor: Okay. I’m happy to provide that, while I do want to protest in the strongest possible terms, the tax code does allow us to cross-examine. The issues aren’t resolved, and this is a matter where … that is new to all of us … but, I will go ahead and present my evidence.
Pat O’Connor: The first thing I will start with is information on the types of depreciation. There are three types of depreciation. Depreciation is part of the cost approach, and the three types of depreciation are …
Pat O’Connor: Physical, which is a gradual wearing away of property.
Pat O’Connor: Functional. An example of functional depreciation would be not having a bathroom that en keeps the house, or not having enough bathrooms in the house, includes not having air conditioning, having a torn ceiling tile. Those would be examples of functional depreciation.
Pat O’Connor: Economic depreciation is also called external obsolescence. The terms are interchangeable, and it’s a change in value from a source outside the property. So, if someone was underneath a landing flight near an airport, that house would be worth one that didn’t have that impact. If someone lived next to a slaughtering house or another property, that would have an impact; and if you look at the issue of, is there an impact to buying a house on, effectively September 1, before it’s even been dried out, 2017, there’s a reasonable question as to whether or not there is a reduction on value.
Pat O’Connor: We did that study in October and November of 2017.
ARB Member: We need another copy. I think you might as well hand us all your evidence on this property at once. I’m not gonna piece meal it, so get all your evidence together for us.
Pat O’Connor: Okay, but I would suggest this will make it harder to…
ARB Member: You’re supposed to do this before hearing. Reference of median … we need another copy. Reference of median …
Second ARB Member: Right there
ARB Member: You have one. I gave you one.
Second ARB Member: Oh okay.
Pat O’Connor: So, I believe the beginning point is to look at the definitions for depreciation.
ARB Member: You’ve already gone over those.
Pat O’Connor: So, this…
ARB Member: I’m gonna give you a little longer. I’m gonna give you ’til 9:15 to get through all this for this first hearing. We’ve already been on it for like thirty minutes.
Pat O’Connor: Ma’am you can read an arbitrary guideline if you want. I’m just trying to do the right thing…
ARB Member: I understand but I …
Pat O’Connor: So we can have the information of value for this property owner.
ARB Member: It would be more prudent to get to the actual information that you have for this particular hearing.
Tonya Felix: All of the information we’re presenting is relevant to the subject property, to all of the subject properties on this docket today, so we would like to take a little bit more time…
ARB Member: You’ve got ’til 9:15
Tonya Felix: It is going to…
ARB Member: You’ve got ’til 9:15
Tonya Felix: Alright, well the law says that we have the opportunity to present our…
ARB Member: Yes you do, but it’s not unlimited time. Proceed.
Pat O’Connor: Economic obsolescence is the least understood type of depreciation, and the cost approach is the most difficult approach to value. It’s more difficult than the income approach. It’s more difficult than the sales comparison approach. In addition to having three different kinds of depreciation, you have both physical … you have both curable and incurable.
Pat O’Connor: Curable depreciation would be something like Harvey, where there’s a cost to fix it, and you can fix it.
Pat O’Connor: Incurable would be something like a house built without bathrooms. That’s very difficult to cure, something like that.
Pat O’Connor: The economic depreciation that occurs, occurs because people do not want to own that house that was previously flooded. So, go to the Property Analytic Survey. This was conducted in October and November, and our effective date basically says the first week of September, so if anything we’re feeling at the beginning of September, then they were later.
Pat O’Connor: This is showing a meeting and discount, page 3, for houses that have been repaired of 11 and 14%, and showing a discount of unrepair houses for 61-65%. It probably took over 1000 hours of work to conduct this survey, and I’d like to tell you what was done, but what I’m gonna do instead go to the survey, which begins … The page is not numbered but it’s the first page that has a bar graph like that.
Pat O’Connor: The first question is … Would you be less likely to purchase a house if the seller indicated it had flooded on the Texas seller disclosure form? Ninety-one percent said “Yes”. This is in October/November, shortly after, and it’s after our valuation date; and you may or may not be aware, but if you sell a home in Texas, unless you’re a banker or an executor, you must supply the Texas Seller Disclosure Form. It’s mandatory, and if there’d been flooding, and this part is not as clear … The flooding is not of the home. The flooding is of the property. If you look at the form, it refers to the property, so if water comes halfway from the street to your home, your property flooded, and you have to check the box.
Pat O’Connor: The next question addresses that, and sixty-seven percent said that it’s more important that it flooded than [inaudible 00:18:40] the flooding. Next one is, would you buy a home that flooded? Harvey’s own is what I intended it to mean here, under any circumstance. Seventy-seven percent said “No”.
Pat O’Connor: Then you get into the discounts that are appropriate. People had a number of different opinions in different cases, but the basic bone of contention between us and the appraisal district is this … We believe, if someone were to buy a flooded house, there’s an adjustment in addition to the cost to repair it. So, I’ve asked you to sort of work with me in this thought experiment for just a second.
Pat O’Connor: Imagine it’s a week after Harvey, when we’re doing our valuations, and a friend comes to you … actually not a friend, just say someone comes to you and they say, “Hey, I heard about this house that flooded. Before Harvey, it was worth $200,000, and we figured it out to the penny, it’s gonna cost $50,000 to repair. Would you pay $150,000 for it?”
Pat O’Connor: That’s really the question we’re trying to address here. If not, why not? There’s two reasons people would not pay the $150, 000 for a house in that case. The first is that it may not be worth $200,000 when it’s finished. We’re seeing about a 10-15% differential, and [inaudible 00:20:06] this will diminish over 2-5 years; and one of the studies I’ve given you has information on a number of studies, and it shows that these effects do diminish. But, as of this time, there is a difference in value.
Pat O’Connor: The other one is the profit incentive, and people do not buy flooded homes just to break even. People who buy flooded homes and other investment properties, do it to make a profit, and the normal profit margin is in the range of about 25-35%. That’s what people do. I’ve done this myself. I’ve bought about a hundred and eighty properties. I still own about sixty of them that I’m trying to sell one way or another, and that’s our typical margin. We’re able to buy properties that trustees sell for the 30% discount.
Pat O’Connor: You may not agree with me that 30% is an appropriate discount off the value of a home forthwith because that’s what an investor will pay.
Pat O’Connor: Did you give out the Chronicle article?
Tonya Felix: Yes
Pat O’Connor: One of the Chronicle articles you may have seen already has a reference to dimes on the dollar … if you saw that article. So, we’re not asking for dimes on the dollar. We’re asking you to take a look at the data; and so basically, maybe I’m trying to do too technical approach, but the issue again, in summary, is, the appraisal district, in my opinion, is not considering the impact on value beyond the repair costs. I do not believe that that fully accounts for all [inaudible 00:21:36] in value that occurs.
Pat O’Connor: So, why do I say that? If you’ll go to the packet that looks like this. Just stay on the front page for a second, and I’ll explain my handwritten notes.
ARB Member: Okay.
Pat O’Connor: Then we can look at some of the detail behind it, and I actually numbered the pages. Remember how much easier that makes it.
Pat O’Connor: On the first page, when we looked at sales compared to HCAD’s certified value. So, believe or not, we’re trying to work within HCAD’s construct of working off the certified value, so we’re comparing the sales prices of homes that flooded to the certified 2017 value. What we saw, for a sample that’s included that’s in the same area is a 31% reduction. I’m sorry, 39% reduction.
Pat O’Connor: So we’re multiplying the pre-flood value by 61%, 100% minus 39%, and that generates a value of $534,000. From that, I would deduct $30,000 for remediation, because the homes that sold have not had issues … I’m sorry … The homes that sold have had sheetrock removed, carpet removed. Most of them have mold certificates. They’ve been dried out, and from the numbers I’ve seen, it’s numbers like $10,000 for a smaller house to $30,000 for a larger house.
Pat O’Connor: If you don’t agree with my numbers, pick what number you think is reasonable, but it really does cost money, and we’re looking at market values here. We’re not looking at how much [inaudible 00:23:14] do it yourself if you did it. Again, you may or may not agree on that, but my opinion, we’re looking at market value. You’re to sell this property, what would someone consider paying for the property, based on the condition that they would also have to trash it out, including the sheetrock, carpet, drying it out with all those fans, and then mold remediation mold certificate.
Pat O’Connor: So, it’s 534 minus 530, call it $505, 000. The second ones, I looked at the improvements on the properties that sold, and we subtracted out the HCAD values. I know you’re all familiar with that method, so we simply, for these properties, took the sales price of the properties, we deducted the HCAD 2017 certified value, and then we … I think the value in the range of $16/sq ft is reasonable based on that data. When you do the math, and I’m gonna round to the nearest thousand unless anyone prefers more numbers, but it’s $336,000 for the improvements, and notice for the certified land value, if I have it right is $231,000. That’s roughly $567,000. Again, I’m deducting $30,000 for the remediation, so I’m at $504,000 on the median reduction approach. I’m at $537,000 on the per square foot approach.
Pat O’Connor: If you’ll turn to the next page, this is information on, I can’t see the number, but these are sales in that general area. For whatever reasons, there’s more Ds and Cs. There’s a couple at the bottom that are As, and if you look at those two comps, there’s a column that’s a little bit to the…
ARB Member: We’re not looking at equity on this. We’re only looking at market.
Pat O’Connor: This is market Ma’am. These are the sales.
ARB Member: Yeah, but these are … Go ahead. You’ve used up your time. You’ve got about ten minutes.
Pat O’Connor: Maybe I’m not being clear, but these are comparable sales. All these properties sold, and this is not an unequal appraisal analysis. There’s, I mean the one good news perhaps, is there’s not gonna be an unequal appraisal presented. These are comparable sales in the area of the subject, and this shows the value, the 2017 certified value; and it’s showing that on median, the sales price is 39% lower than the 2017 certified value. So, if you look at the top one, the sales price was $142,000 versus a certified value of about $290,000 I think. $280,000/$290,000. So, these are comparable sales. For the eight properties, the sales price per square foot is in the range of $16 a square foot.
Pat O’Connor: The subject property was built in 1982. The item 2 sales, one’s an A, one’s an A- and they were built in ’80 and ’82, so they’re very similar in terms of the age. They are a lot smaller, so if anything, that would indicate a lower price per square foot for the subject. The subject is 5,600 square feet, and it’s seemingly much larger. I’m not taking any adjustment for that 3,400 and 3,200 square feet for the two sales.
ARB Member: The problem that I see with this report … None of this report tells me anything about the property, if they flooded, if they didn’t flood, what was wrong with them, what the condition was, so you can give me a median from this market. What I’m interested in is trying to determine, help determine the value of this property at. For disaster reappraisal is what damage did this property have, specific property have, and what evidence do you have to support that? That’s what I’m looking for. That’s what the panel’s looking for.
Pat O’Connor: Well, I’m excepting HCADs level of flooding is the evidence of the level of flooding, and I’m working from that to value the property.
ARB Member: Do you have any estimates it cost to repair?
Pat O’Connor: Most of our clients did not provide us any estimates for cost to repair, but it’s the appraisal’s job to value property.
ARB Member: See, I understand your argument, but this issue isn’t about an argument. This is about evidence and what you can support, what the damage was, and the cost of repair. That’s what we’re looking for.

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Enroll in the Property Tax Protection Program

Chances are many owners have not heard of a substantial error appeal before.

If the property has a substantial error, then the tax code supports owners to file a late appeal.  Instead of the May 15th deadline, the new deadline would be January 31st of the following year!

sub error appeal

What is it?

Owners may be asking then, what qualifies as a substantial error?

You should never be overtaxed!  If anything, owners should be a bit undertaxed.

If you’re overtaxed by more than one-third, there’s a substantial error. 

You can file a substantial error correction appeal (25.25d) provided it is filed by the tax delinquency date. This is typically Jan. 31 of the following year.

This substantial error occurs with many commercial properties as well as properties that have seen a natural disaster such as flooded properties or properties that have previously flooded.

Within 15 days after a substantial error motion is filed, the Appraisal District will review the property valuation. If the Appraisal District finds an error and the taxpayer agrees to the District’s recommended value, then a Joint Motion can be filed and no further action is required by the taxpayer.

However, if the Appraisal District does not agree that an error has been made or the taxpayer does not agree to the Appraisal District’s recommended value, then the ARB will schedule a hearing on the substantial error motion.

The ARB will hold a hearing on the substantial error motion in the same manner as a regular protest hearing. Substantial error hearings are generally held in March after the taxes for the year are due.

If the ARB cannot find at least a 25% error in the appraised value, then no change can be made.

If the ARB does make a change under this type of motion, the taxpayer must pay a late-correction penalty equal to 10% of the amount of taxes as calculated on the basis of the corrected appraised value. The penalty applies only if a change in the value is made by the ARB. I would recommend paying the taxes in full on the noticed value in case the motion is denied.

How can homeowners qualify?

For property which has been substantially over-assessed, owners can appeal through January 31 by filing a motion to correct an appraisal error for the current tax year (form 50-230).

To qualify for a 2525d property tax appeal, the property must be at least one-third over-assessed. An easier way to think of it is the error must be at least 25% of the market value of the property as determined by the Appraisal District.

A property cannot file a 2525d appeal if:

  1. The property owner or his agent attended an ARB hearing; or
  2. Agreed to an assessed value

If you’ve missed the recent deadline to file your property tax appeal, and you believe that your property may have a substantial error, then proceed to your appraisal district’s website to fill out the property tax appeal form. We have included a Universal Form below if you would like to file by mail. The deadline is Jan 31st of the following year.

Universal Form to File an Appeal

In addition to filling out the appeal form, also include a short, handwritten note requesting the Hearing Evidence Package. Click here to use a template for this.

This package will contain valuable information on how your property is being assessed, which allows you to determine if you’re being fairly taxed or not.

If you’d like to find out sooner rather than later if you’re being fairly assessed or not, visit the Texas Fairness Checker. It’s free and you’ll find out if you’re being fairly assessed in under 2 minutes.