Friday, September 18, 2015

Texas Property Tax Protests


I’m going to discuss unequal appraisals, which are hardly ever used by homeowners and frequently used by commercial properties.  I’ll include some points that I’ve learned from being a property tax arbitrator since 2005.

Always check the boxes “Value is over market” & “Value is unequal compared with other properties” on the Notice of Protest form that you receive.  This gives you two ways to win.  If you do not check the unequal box, you are not entitled to use it if you have to go further in your appeal.  At this point you will have gone before the appraiser at the Central Appraisal District and you were not satisfied and so you then went before the Appraisal Review Board, which set the value, and again you were not satisfied.  There are two choices from here; District Court or Arbitration.  Court will probably require an attorney and will run several thousand dollars.  Arbitration has a new fee schedule as of September 2015.
Residence homestead
$500,000 or less
$ 450

Residence homestead
More than $500,000
$ 500

Not residence homestead
$1 million or less
$ 500

Not residence homestead
More than $1 million but not more than $2 million
$ 800

Not residence homestead
More than $2 million but not more than $3 million

An arbitrator has been trained and has qualifying documentation to be on the arbitration registry.  Texas Tax Code Chapter 41A gives property owners, meeting certain criteria, the option of requesting binding arbitration as an alternative to filing an appeal of an appraisal review board (ARB) decision to State district court.  All proceedings must comply with Comptroller Rule 9.804 and they demand a fair and impartial treatment of property owners, agents, and appraisal districts alike to ensure that the arbitration is successful.  The hearings are normally held in a library, or office in your district, or can be conducted by teleconference once after the exchange of information.  The hearing has a set time, when you and the district are available, and normally will run one to two hours or less. Ask for House Bill 201 from the District if you have not already received a copy from your initial hearing. These are the only sales the CAD will be allowed to use.

A few years ago, a site on Loop 610 sold for a confirmed $77 million, using the equity approach, it was reduced to $31 million.  Office buildings, apartments, and land tracts are receiving reductions using uniform and equal approach, simply by proving from the tax rolls that other similar properties are valued at less.

The Texas Constitution provides that taxation shall be equal and uniform.  Section 42.26 (a) of the Texas Property Tax Code sets forth the “Remedy for Unequal Appraisal”.   A property owner is entitled to relief on the grounds that a property is appraised unequally, unless the CAD appraiser establishes that: “The appraised value of the property is equal to or less than the median appraised value of a reasonable number of comparable properties appropriately adjusted."  Note that there are three approaches that may be used but the former statement is the most frequently used.”

Comparable properties are usually considered to be properties that are similar in quality and quantity.  Assemble a list of properties similar to your property along with their assessed values.  Most counties have a website where you may research properties in your area that are similar to yours and the assessed value.  Go to the advanced search and run your subdivision or street, etc.  Make adjustments for differences between these similar properties and your property.  For homes, consider features such as age, building size, site improvements, and land size. Realtors in your market can help with what may be considered reasonable contributory dollar adjustments, pool, patio etc.  It is best to use comparable properties that are the most similar to your property and require the least number of adjustments. For commercial properties, the process is the same.  Remember to get the median of the properties, 9 should be a good number, arrange in order and take the median #5 as the assessed value to use in your evaluation.

The equity approach may be used along with your market value approach.  If you remember to check both boxes, you will have two chances to establish what is a fair value. Protesting is not easy but you again have two ways to win. For example, if your tax rate is 3% and you are protesting a CAD value of $450,000 and you say it should be $400,000, but the arbitrator rules $430,000, you forfeit your filing fee, but you reduced you tax bill by $20,000 which is a $600 savings.  If the arbitrator rules $420,000, you win back all but $50 (State fee) of your filing fee and you saved $900 off your tax bill.

It is worth a look to see if other similar properties are assessed lower than yours. Read the tax codes and comptroller rules to help prepare for protesting.  If necessary, consult an attorney familiar with the process.  The Appraisal District has the burden of establishing value by a preponderance of evidence.  If this is not possible, then the protest is decided in favor of the property owner.

Continue to watch this blog for more information.

Richard A. Skotak
Arbitrator #32020647007

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