If you’ve ever asked a Texan why his or her state is so great, you know that the answers can be as vast and diverse as a trip from Houston to El Paso, or Brownsville to Amarillo. From its natural beauty and rich culture to its vibrant economy, the lone star state never seems to run out of admirable qualities. One Texas perk that often goes unnoticed is our lack of a state income tax. Though most appreciate the government keeping its hands off Texan’s hard earned money, the state’s legislature has crafted other mechanisms for taxing residents to balance its budget.
One tax that practically no Texas landowners can escape is the ubiquitous property tax. Article 8 of the Texas Constitution lays out the authority and basic guidelines for taxing the lands of Texas. Generally speaking, it is not the State itself that levies these taxes, but rather local taxing agencies such as school districts, county governments, municipalities, and water districts. Once these agencies set their yearly budgets, it is up to County Appraisal Districts, or CAD’s, to appraise all the property in its jurisdiction and set the tax rate accordingly. While the property owner plays no direct role in the land appraisal process itself, the Texas Property Tax Code provides individuals with powerful tools for challenging appraisals they feel are unjustly high.
The challenge of a tax appraisal, known as a formal protest, begins with Chapter 41 of the Property Tax Code. The provisions found in this chapter give the taxpayer the authority to file a notice of protest of their property appraisal with the Appraisal Review Board (ARB). The ARB is a group of citizens appointed to handle the protest process and, if warranted, adjust the appraised value of the land in question. When the ARB receives notice of a protest, it has a statutory duty to provide notice of two hearings to the landowner. The first hearing is called an informal hearing, and it is conducted by staff member of the local appraisal district. If the staff member agrees with the taxpayer’s assessment of the appraisal, then the protest can be resolved at the informal level. If no agreement can be reached, the taxpayer must proceed to a second formal hearing before the ARB. This is the property owner’s last opportunity to present his or her case before the ARB makes a final determination and issues a standing order on the appraisal.
Once the ARB issues a final order, the taxpayer is considered to have exhausted all his administrative remedies. This may seem like the end of the road, but with an experienced Texas attorney, the fight is far from over. Although the Tax Code tries to delegate the tax appraisal protest to the administrative level, several ARB decisions can be appealed to a district court having jurisdiction over the land in question. These appealable decisions include any failure of the ARB to provide a hearing required by statute, any failure to provide proper notice of said hearing, and the appeal of a final order on an appraisal protest issued by an ARB after a formal hearing. This appeal process takes the ultimate appraisal decision out of the hands of the ARB and places it in the hands of a judge or jury.
Although a judicial appeal may be the only option for a taxpayer unhappy with the outcome of an administrative protest, it is still important to note the benefits as well as the drawbacks to litigation. A taxpayer first needs to know that, as with any litigation, a case in district court may require more time and expenses than administrative remedies. Second, if the taxes from the original appraisal become due during the appeals process, the taxpayer must pay the full disputed amount or risk having the case dismissed. Third, even if a taxpayer is successful in overturning an action by the ARB, there is no guarantee that the result will be exactly what the taxpayer had in mind.
On the plus side, a district appeal can result in several positive outcomes for a taxpayer’s protest. The potential for litigation often gives both parties a large incentive to reach a reasonable settlement in a timely fashion. Thus, the simple act of filing the district suit is sometimes enough to spur meaningful negotiations. Even this does not prove true, a taxpayer can still take actions to compel negotiations in the form of mediation or arbitration. In the unlikely event that a settlement is not reached and a trial is necessary, a taxpayer can still find solace in knowing that the ultimate appraisal decision will come not from the Appraisal Review Board, but from an impartial judge or jury residing within the same property-taxing district as the taxpayer.
While the likelihood of a successful tax protest depends largely on the facts of each individual case, it is important for Texas property owners to know their legal options and feel protected in the event of a wrongful appraisal. An experienced attorney can assist in navigating the procedures of a protest and ensure that any given property has the best opportunity to receive a just and fair appraisal.
Matthew McDonough, Attorney
San Antonio Office
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