Property Tax Consultant Review: Katie's Flash Cards
- Given the value and tax rate, calculate the taxes:
Value/100 * Rate = Taxes
- Given the taxes and value, calculate the tax rate:
Taxes divided by Value/100 = Tax Rate
- Given the taxes and tax rate, calculate the value:
Taxes/Rate = Value/100
- Intangible Personal Property:
May NOT be perceived by the senses; cash, accounts receivable, stocks, goodwill, trusts, customer listings, contracts, copyrights, permits, software
**NOT TAXABLE AS PERSONAL PROPERTY
- Appraised Value:
Market Value determined by applying accepted appraisal methods, complying with UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP). Same or similar methods and techniques will be used with same or similar kinds of property
- Market Value: Section 1.04
Price at which a property would transfer for cash under market conditions IF:
For sale in open market with reasonable time to find a purchaser
Both parties know all the uses/purposes and any restrictions of its use
Both parties seek to maximize gains and neither can take advantage of the other
- Taxable Value:
Amount determined AFTER deducting the amount of any applicable partial exemptions
- Depreciation
Loss of usefulness/value due to physical deterioration, functionality or economic conditions. Can be from any cause.
DIFFERENCE BETWEEN COST AND VALUE
- Income producing Personal Property
Property NOT permanently attached to real estate and other assets such as:
Inventory Furniture M&E Vehicles Improvements Accounts Receivable Cash, Goodwill Customer Contracts
- Taxing Unit
Any county, city, town, school district, special district, junior college, hospital district or any other political unit of this state authorized to impose an ad valorem tax
- Special Use Appraisal: Chapter 23
Qualified open space land devoted to:
Agricultural Use Timberland Recreational Use Wildlife Management Scenic Land Park Land Airport Land Open Space Land
NOT AN EXEMPTION
- Income Approach
Estimate of market value based on the monetary returns that property can be expected to produce. Best suited to COMMERCIAL property. Also known as the CAPITALIZATION method
- Income Approach to Value
NLA or NRA Net Leaseable Area OR Net Rentable
+ PGI Potential Gross Income
+ SI Secondary Income
- V & C Vacancy & Collection Loss
____________________________________________
= EGI Effective Gross Income
- OE Operating Expenses
____________________________________________
= NOI Net Operating Income
/ CAP Rate Capitalization Rate
____________________________________________
= TOTAL VALUE
- Cost Approach
Estimate of market value based on current cost to reproduce/replace less depreciation plus land value. Preferred on NEWLY CONSTRUCTED property.
Cost - Depreciation + Land = VALUE
- Comparable Sales/Market Approach
Estimate of Market value using sales of comparable properties. Adjustments made to subject property for age, size, amenities and characteristics. Used in MASS APPRAISAL by district for properties within the same assigned area.
- Tax Situs: Chapter 21
Only one category, place where it is taxable
Location on January 1
Where it is “normally” located on January 1, even if temporarily moved
Place where it returns between uses
Principal place of business or owner’s residence. May NOT always be corporate headquarters
- Duties of Tax Assessor/Collector
Calculation of the tax rate
Preparation and mailing of tax statements
Collection of property taxes
- Correction of Appraisal Role: Section 25.25c
Chief Appraiser can correct the record for any of the previous 5 YEARS due to:
Clerical errors
Multiple Appraisals
Inclusion of property that does not exist in the form or at the location described
Not owned as of January 1
- Clerical Error: Section 25.25c
An error that:
Results from a mistake or failure in writing, copying, transcribing, entering or retrieving computer data, computing or calculating
Prevents a tax roll from accurately reflecting a finding or determination made by the chief appraiser, ARB or assessor
*** NOT resulting from a mistake in judgement or reasoning in the making of the finding or determination
- Types of Depreciation
Physical Curable: age, decay, wear
Physical Incurable: cost to cure estimated to be GREATER than value resulting
Functional Curable: poor design, hindered function, technology outdated
Functional Incurable: cost to cure would be GREATER than value resulting
Economic or External Obsolescence: market forces
- Correction Error on Appraisal Roll: Section 25.25d
PRIOR to delinquency date, owner or Chief Appraiser can file a motion with ARB to correct an error that resulted in an incorrect appraised value. Error must make value EXCEED by more than ONE THIRD the correct value. Owner must still pay late-correction penalty of 10 PERCENT of taxes on CORRECTED value.
- TX Constitution, Article VIII
Authorizes property taxation to fund Texas counties, cities, schools and special districts. ALL real and personal property is taxable unless specifically exempted by Federal law or state constitution
- Appraisal Districts
1979 adoption of Texas Property Tax Code created appraisal districts (254 counties in Texas but only 253 appraisal districts because Randall/Potter share a district)
100% market value appraisals and NO assessment ratios
- Life Cycle of a Market Area
Growth
Equilibrium (Stability)
Decline
Revitalization
- Factors of Value
Principles of:
Substitution
Supply & Demand
Balance
Conformity
Competition
Anticipation
Contribution
Change
When all align, property has HIGHEST & BEST use
- Phases to Property Tax Calendar
Appraisal: January - May
Equalization/Administrative (Remedy): May - July
Assessment (Judicial Review): July - September
Current Collection: October - January
- Appraisal Phase: (January - May)
Discovery - duty of the district (Section 25.02)
Listing - recording of ownership, property type and characteristics
Estimates Value - appraisal date of January 1 and must be generally accepted methods
Required Notices - sent April 1 for homestead properties, May 1 or sooner for all other properties
- Equalization Phase: (May - July)
Chief Appraiser submits appraisal role to the ARB by May 15 (Section 25.01)
Property owners file appeals by May 31 or 30 days after notice was delivered, whichever is later (Section 41.44)
Informal and formal hearing process, ARB can order changes (Section 25.25)
ARB certifies appraisal role when all protests have been heard (Section 26.01) by July 25
- Assessment Phase: (July - September)
Taxing entities receive certified appraisal rolls
Local jurisdictions adopt budgets
Tax rates adopted, appraisal role becomes tax roll
Assessor mails tax bills (Sept. - Nov.)
Some taxpayers dispute their ARB rulings and appeal to district court for Judicial Review
- Collection Phase: (October - January)
Local jurisdictions collect on tax bills, most mailed by October 1
Tax payments due by January 31, become delinquent on February 1
- Equal and Uniform Taxation
Included in the 1845 Texas Constitution
- Homestead Exemption
Enacted in 1932 during depression era collapse of property values
- Economic Life
Time period an improvement is expected to contribute to the TOTAL VALUE of the property
- Effective Age
Age in years based on condition/utility of the improvement
- Property
Any matter or thing capable of private ownership
REAL PROPERTY: land, an improvement, mine or quarry, a mineral in place, standing timber, an estate or interest
PERSONAL PROPERTY: any property that is NOT real, can be tangible or intangible
- Methods for Reproduction Cost
Index: Original Cost + % Increase of construction costs to current date
Square Foot: Cost per Sq. Foot of recently built comparable applied to subject
Unit In Place: All costs per unit multiplied by number of units overall
Quantity Survey: All components analyzed & all costs are totaled. *** Most detailed and accurate
- Replacement Cost
Cost using current materials and modern building standards
- Reproduction Cost
Cost to get an exact duplicate using materials and methods in use at the time of original construction
- Ex Parte Communication: SECTION 6.411
Prohibited between the Chief Appraiser and ANY member of an ARB. Applies to discussing specific evidence, argument, facts, merits or property involved in a hearing pending before the ARB
Protest of Inequality of Appraisal: SECTION 41.43
Burden of proof is on DISTRICT to show:
Appraisal ratio is at MARKET AVERAGE of whole district
Appraisal ratio is equal to MEDIAN of specific sample (i.e. neighborhood)
Appraised value is equal to or less than median of reasonable number of comparables appropriately adjusted
- Gross Rent Multiplier
Estimate of market value using a property’s gross RENTS.
Multiplier is derived from interest and risk rates common to the area.
*** Used primarily on RESIDENTIAL property that is NOT owner occupied
- Alternate Assessment Date
Auto dealers successfully lobbied in 1993 to have their inventory assessed on SEPTEMBER 1 rather than January 1.
Now available for ALL business types.
Must apply prior to AUGUST 1 for the upcoming tax year and it remains in effect until revoked or changed
- Metes and Bounds
Method of land description that identifies a parcel by specifying its shape and boundaries
- Lot and Block System
System for the legal description of land that refers to the parcels lot and block numbers found on recorded maps and plats of subdivided land
- Types of Leases
Gross: landlord pays ALL expenses
Modified Gross: tenant pays utilities; all other expenses are shared
Single Net: tenant pays utilities and either property taxes or insurance
Double Net: tenant pays utilities and both property taxes and insurance
Triple Net: tenant pays utilities, property taxes, insurance and maintenance
Absolute Net: tenant pays ALL expenses
- Bundle of Rights: SURGED
Sell
Use
Rent
Giveaway
Enter
Do Nothing
- Right to Protest: SECTION 41.41
Property Owner can protest before ARB:
Appraised Value
Unequal Appraisal
Inclusion on Records
Denial of Exemption
Denial of Special Use Appraisal
Taxing Units on Appraisal Roll
Ownership of the property
Change in use of land
Any other action adversely affecting the owner
- Protest of Failure to Give Notice: SECTION 41.411
Failure of Chief Appraiser OR ARB to provide or deliver ANY notice the owner is entitled to.
CAD has burden of proof to show proper delivery
- Types of Ownership Interest
Fee Simple: most complete and absolute ownership in real estate. Owner has the “Bundle of Rights”
Leased Fee: the fee simple interest encumbered by a lease
Leasehold Interest: interest held by the tenant
- Dispute Resolution
3 Options to appeal an ARB ruling:
Binding Arbitration: Appraised value is $1M or less. Must file request with 45 DAYS of receipt of board order
State Office of Admin Hearing (SOAH): 30 DAYS to file after board order
Texas Courts: to file after the board order
- Chapter 1: General Provisions
Section 1.04: Definitions
Section 1.07: Delivery of Notice Statute
Section 1.111: Representation of Property Owner (FID)
Section 1.08: Timeliness of Action by Mail
Section 1.06: Effect of weekend or Holiday
- Chapter 11: Taxable Property and Exemptions
Section 11.3: Residential Homestead
Up to 20 acres
Partial Exemption
Temporary Absence
Section 11.43: Application for Exemption
Due by April 30
- Chapter 22: Renditions and Other Reports
Section 22.01: Rendition General Reports
Section 22.03: Report of Decreased Value
Section 22.07: Inspection of Property (only BPP)
Section 22.23: Filing Date (April 15); extension date of May 15
Section 22.24: Renditions and Report Forms
- Chapter 23: Appraisal Methods and Procedures
Section 23.01: Appraisals Generally
Section 23.23: Limitation on Appraised Value of Residence Homestead
- Chapter 25: Local Appraisal
Section 25.19: District must send notice of appraised value
Section 25.21: Omitted property
Back Taxed 5 years for Real/Commercial; 2 years PP
Section 25.25: Correction of Appraisal Roll
Once roll is certified, can NOT be changed unless property is omitted
Chief Appraiser can change anything as long as it doesn’t increase value
Clerical error up to 5 years
- Chapter 31: Collections
Reviews how taxes are collected
- Chapter 41: Local Review
Reasons to Protest
Section 41.41: Right of Protest
Market Value determination
Unequal Appraisal
Inclusion of owner’s property on appraisal roll
Denial of Exemption
Not appraised for special use
Taxing Units
Ownership
Change of use for special use appraisal
Any action that adversely effects property owner
- Chapter 41: Local Review (Continued)
Reasons to Protest
Section 41.411: protest of failure to give notice
Section 41.43: protest of determination of value or inequality of appraisal
Section 41.44: notice of protest by May 30 OR 30 days from latest notice
Section 41.45: hearing of protest
Section 41.46: notice of certain matters before hearing
Section 41.66: Hearing procedure
- Chapter 42: Judicial Review
Steps to take
