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Property Tax Appeals Process

property tax appeal personal property tax deductionThe complete property tax appeals process consists of three steps:

  • Informal hearing
  • Appraisal review board (ARB) hearing (aka Board of Equalization)
  • Judicial appeal (litigation), binding arbitration or State Office of Administrative Hearings (SOAH)

The process may be resolved at either of the first two steps. For example, a protest resolved satisfactorily at the informal hearing does not proceed to the appraisal review board (ARB) hearing stage. In fact, a property value which is agreed to at the informal hearing cannot be further protested to the ARB or through litigation.

However, if a property tax protest is continued through the informal stage to the ARB stage, the owner may choose to continue it, but a judicial appeal is not required. The property owner may stop the property tax process at any one of the three stages if he is satisfied with the result.

Informal Hearing

The term “informal hearing” aptly describes the first step in the protest process. Some counties require the informal hearing to be conducted before the time of the appraisal review board hearing. For example, in Dallas County, if you show up at the scheduled protest time, you will be directed to the appraisal review board hearing without an opportunity to have an informal hearing. Therefore, you need to inquire as to the timing of the informal hearing process in your county.

Other counties, such as Harris County, schedule an informal hearing before the appraisal review board hearing. From a practical perspective, this is often done to reduce the number of hearings the appraisal review board is required to perform. ARB hearings are more expensive to perform than informal hearings since they require more personnel.

The appraiser who performs the informal hearing may or may not have set the assessed value for your property. In smaller counties, the appraiser who sets the value also conducts the informal hearing. In larger counties, such as Harris and Dallas Counties, it is not practical for the person who set the assessed value for a particular property to perform the informal hearing, so the person performing the informal hearing typically has not valued the property and probably has not seen it.

Portions of the property tax protest process are arbitrary. One such arbitrary element is the skill and experience of the appraiser performing the informal hearing; he or she may have very limited training and experience or may have been performing hearings for twenty years.

Practical Tip: Do not assume that the appraiser holding your hearing is a valuation expert.

The informal hearing allows the property owner an opportunity to present evidence explaining why he believes the property is overvalued or why it is not assessed on a uniform and equal basis. If the protest is for another purpose, such as an exemption, pertinent evidence may also be presented. The informal appraiser will consider the evidence presented by the property owner and typically counter with information he has available regarding market value for the subject property. In most large counties, staff appraisers are provided a file with market data and information on the subject property immediately before the hearing.

Unequal Appraisal – Texas Versus Other States

Texas is likely to be the only state that formally addresses unequal appraisal based on statutes. However, appraisal district appraisers in many states will consider unequal appraisal, also known as equity, to be fair.

Many appraisal districts have been reluctant to consider appeals based on the uniform and equal concept. They often report that the uniform and equal presentation is not in an acceptable format. For example, one county states that the only way to protest under uniform and equal is to present a ratio study, even though this does not appear to be consistent with the requirements of the Texas Tax Code. Therefore, although it is appropriate to present information based on uniform and equal, be forewarned that it may not receive serious consideration during the informal hearing.

An informal hearing typically lasts only 10 to 20 minutes. You may be required to wait up to several hours before the hearing process, although most hearings begin within 15 to 30 minutes of the scheduled time. The informal hearing can be a brief and effective mechanism to achieve a modest change in the assessed value of your property. The appraiser performing the informal hearing for the appraisal district often has limited latitude and cannot make significant changes without obtaining approval. If you are asking for a large change (perhaps over 10 percent of the assessed value), be prepared with incontrovertible data supporting your position.

Rules on appeals vary from state to state. You may protest the assessed value of your property annually in Texas. Some property owners find this the most effective way to minimize their property taxes. Remember, if you agree to an assessed value at the informal hearing, you have completed the property protest process for the year. However, you may protest value in subsequent years whether or not the assessed value increases.

Appraisal Review Board Hearing

If a property owner is not satisfied with the assessed value offered by the staff appraiser at the informal hearing, he may continue the appeal to the next level. The next level is often termed the appraisal review board or the board of equalization. An offer made to settle the protest at the informal hearing is not guaranteed at the ARB hearing, which may conclude with a value higher or lower than the assessed value offered at the informal hearing. The ARB hearing typically occurs the same day as the informal hearing. However, you may be required to wait an hour or two after the informal hearing before the start of the appraisal review board hearing. ARB timing depends on a number of factors, including the type of property, county and volume of appeals.

The appraisal review board hearing is often conducted before a three-member appraisal review board panel. It also includes an appraiser from the central appraisal district, a clerk or recording officer from the appraisal district, and, of course, the property owner or his agent.

The three members who form the ARB typically come from a larger appraisal review board, which is technically independent of the central appraisal district. In most counties, members of the panel are rotated to minimize their relationship to each other. The level of experience of the ARB members varies dramatically. Some have essentially no real estate experience while others are RealtorsTM, commercial brokers, or developers.

As a practical matter, most ARB members have limited real estate experience and training. However, they do undergo a four-hour training process mandated by state law before they can perform ARB hearings.

Both ARB members and the property owner or his agent take an oath at the beginning of the hearing. The oath for the ARB members indicates that they agree that they have not discussed the property with each other or with members of the central appraisal district staff before the hearing. The property owner/agent’s oath requires that they present information which they believe is accurate.

The steps in the ARB hearing include the following:

  1. Oaths
  2. Description of the property
  3. Presentation of evidence by property owner
  4. Questions from ARB members
  5. Presentation of evidence by CAD appraiser
  6. Questions from ARB members
  7. Rebuttal by property owner
  8. Decision by the ARB

After a brief description of the property, the owner presents evidence regarding their value. The property owner may also present evidence as to why he thinks the property is not assessed in a uniform and equal manner. Be forewarned that some appraisal districts are not inclined to consider evidence regarding a uniform and equal protest. However, you should present such evidence if you are considering a judicial appeal following the ARB hearing. The ARB members are given a chance to ask the owner/agent questions. The CAD appraiser is then allowed to present evidence regarding his opinion of the value for the subject property.

For most properties, the ARB hearing lasts 15 to 20 minutes. There are exceptions for large properties and complex situations. However, in many cases you will not be allowed to present evidence for more than 5 to 10 minutes regarding your property. After the property owner or his agent presents evidence, the appraiser for the central appraisal district often presents evidence or discusses why he believes some or all of the evidence presented by the property owner is not appropriate. The members of the ARB often ask the property owner or staff appraiser questions regarding the information they presented or their opinion of value. The ARB members then make a decision.

ARB / Board of Equalization Rules Vary State by State

ARB hearing guidelines vary from state to state. The information is reliable in Texas. However, the rules and processes vary state to state. In addition, in practice, the rules and procedures vary county to county.

The ARB’s decision is presented to the property owner or agent at the hearing in Texas. The decision is subject to ratification by the full ARB (up to about 200 members in large counties) although it is highly unusual for the full panel not to ratify the decision of a three-member ARB panel. The official notice of the ARB hearing is typically mailed two to four weeks after the hearing.

Either the property owner or the chief appraiser who represents the appraisal district can appeal the result of the ARB hearing. (Tax entities cannot appeal.) In practice, a chief appraiser seldom files a judicial appeal of an ARB decision. The property owner (or his agent) has up to sixty days from receipt of the ARB hearing result to file a judicial appeal.

Judicial Appeal

A judicial appeal is the third and final step in the property tax appeal process. Very few protest hearings result in a judicial appeal. For example, there are about 350,000 protests annually in Harris County but only about 4,200 judicial appeals.

Texas Property Tax Parcels, Protests and Lawsuits

Total Parcels in Texas in 2015 19,154,000
Property Tax Protests 1,335,075 6.97%
Lawsuits / Judicial Appeals 9,553 0.05%

Hence, only seven percent of assessed values are protested and 0.05 percent continues to the judicial appeal. These are statewide numbers for Texas in 2015.

Appeals Double over 25 Years

The statewide average for 1998/1999 was 2.86 percent of assessed values protested and a judicial appeal filed for 0.009 percent of accounts, according to data provide by the Texas Comptroller of Public Accounts. Hence, the portion of accounts protested has more than doubled over 25 years. The volume of accounts litigated increased fivefold, from 0.009 percent to 0.05 percent.

Issues to consider when deciding to file a judicial appeal are the potential tax savings versus the cost of the appeal. Tax savings may apply only to the year(s) litigated or may extend to future years. If you believe significant tax savings will result through the judicial appeal, you should contact an attorney to discuss the time and costs involved.

Determining Whether You Should Protest

Protest property taxes when a reduction is likely. This will vary from state to state. ARBs granted reductions to sixty-nine percent of the protests in 2015 in Texas, for all types of property (real, personal and mineral). (This is the most recent data available at the time of writing.)

Personal property valuations are likely to exceed market value if you render using cost. If you rendered with cost for personal property, your taxable value likely exceeds the market value. The exceptions could be: 1) inventory that can be sold at cost and 2) physical work-in-progress (as in manufacturing).

Determining whether to protest mostly involves contrasting the potential property tax savings versus the cost to appeal. The cost could include an appraisal, staff, a tax consultant and an attorney. Most tax consultants offer a contingency fee option with no cost unless they reduce your taxes.