Slides PTC & Senior Review

Chapter 1: Terminology

• Section 1.04

  • Terminology

    • Property: means any matter or thing capable of private ownership

    • Real Property: land, improvement, mine/quarry, mineral in place, standing timber, or estate/interest

    • Improvement: a building, structure, fixture, or fence erected on or affixed to land;

    • Personal Property: property that is not real property.

    • Tangible personal property: means personal property that can be seen, weighed, measured, felt, or otherwise perceived by the senses, but does not include a document or other perceptible object that constitutes evidence of a valuable interest, claim, or right and has negligible or no intrinsic value.

    • Intangible personal property: means a claim, interest (other than an interest in tangible property), right, or other thing that has value but cannot be seen, felt, weighed, measured, or otherwise perceived by the senses

    • Market value: means the price at which a property would transfer for cash or its equivalent

    • Appraised value: means the value determined as provided by Chapter 23 of this code.

    • Assessed value: means, for the purposes of assessment of property for taxation, the amount determined by multiplying the appraised value by the applicable assessment ratio

    • Taxable value: means the amount determined by deducting from assessed value the amount of any applicable partial exemption

    • Partial exemption: means an exemption of part of the value of taxable property.

    • Taxing unit: means a county, an incorporated city or town (including a home-rule city), a school district, a special district or authority

    • Tax year: means the calendar year

    • Assessor: means the officer or employee responsible for assessing property taxes

    • Collector: means the officer or employee responsible for collecting property taxes for a taxing unit by whatever title he is designated

    • Possessory interest: means an interest that exists as a result of possession or exclusive use or a right to possession or exclusive use of a property and that is unaccompanied by ownership of a fee simple or life estate in the property. However, ‘‘possessory interest’’ does not include an interest, whether of limited or indeterminate duration, that involves a right to exhaust a portion of a real property.

    • Conservation and reclamation district: means a district created under Article III, Section 52

    • Clerical error: means an error: 

      • (A) that is or results from a mistake or failure in writing, copying, transcribing, entering or retrieving computer data, computing, or calculating; or 

      • (B) that prevents an appraisal roll or a tax roll from accurately reflecting a finding or determination made by the chief appraiser, the appraisal review board, or the assessor; however, ‘‘clerical error’’ does not include an error that is or results from a mistake in judgment or reasoning in the making of the finding or determination.

    • Comptroller: means the Comptroller of Public Accounts of the State of Texas. 

• Section 1.07

  • Delivery of Notice: 1.07(a)An official or agency required by this title to deliver a notice to a property owner may deliver the notice by regular first-class mail

• Section 1.08

  • When a property owner is required by this title to make a payment or to file or deliver a report, application, statement, or other document or paper by a specified due date, his action is timely

• Section 1.111

  • (a)On the written request of a property owner, an appraisal office or an assessor or collector shall deliver all notices, tax bills, and other communications relating to the owner’s property or taxes to the owner’s fiduciary.

  • (b)To be effective, a request made under this section must be filed with the appraisal district. A request remains in effect until revoked by a written revocation filed with the appraisal district by the owner. 

Chapter 5: State Administration

• Glenn Hegar (Texas Comptroller of Public Accounts)

Chapter 6: Local Appraisal

• Different appraisal districts (e.g., Tarrant, Harris) operate under state guidelines.

Chapter 11: Property Tax Exemptions

• Types of Exemptions:

  • Mandatory and Total

    • 100% Disabled Veterans

    • Surviving spouses of military personnel killed in action

  • Mandatory but Partial

    • General Homestead Exemptions:

      • General Homestead - School District

      • General Homestead- FM Road or Flood Control

      • Over 65 - School District

      • Disabled Persons - School District

      • Disabled Veterans

      • Disabled Veterans with Charitable Housing

  • Local Option and Partial

    • General Homestead - Cities, Counties, School Districts, Special Districts

      • Cannot be less than $5,000 or more than 20% of the value

    • Over 65 - Cities, Counties, School districts, Special Districts

      • Cannot be less than $3,000 - no max limit

  • Exemption Limitations

    • Limitations on Value Increases: The Appraised Value equals the LESSER of the Market Value or 10% of Last Year’s Appraised Value

Chapter 21: Situs Rules

• Situs: Refers to the location where a property is taxable.

  • BPP is mobile and can be in different taxing units throughout the year.

  • Cannot be taxed in more than one county.

  • Different than Interstate Allocation

• Four Rules for Situs: Establishes where property is taxable.

  • Step 1: Location on January 1 must be established.

  • Step 2: Determine normal location of property.

  • Step 3: Identify the property's return location between usages.

  • Step 4: Assess owner's principal place of business.

Business Personal Property

• Any property that is not real property.

• Movable items of property that are not permanently affixed to, or part of the real estate

  • Use Items

  • Inventory

  • Supplies

  • Owned

  • Leased

  • Consigned

• Freeport

  • An exemption from taxation

  • Only applies to Inventory

  • Annual application required

  • Must leave the state within 175 days

  • Application due by April 30

  • Aircraft parts allowed 730 days

  • Inventory must turn 2.09 times per year

• Rendition Basics:

  • Filing required by April 15 annually, with extensions available. Property Owner can request a 30 Day extension.

  • Must include a good faith estimate of property value.

  • If the Market Value is less than $20,000, the rendition is limited.

  • If the property owner’s business is less than 50 employees, the opinion of value on the rendition can be based on Federal Income Tax returns.

  • Penalties for late/no filing(10%) or fraudulent filings(50%) of determined value.

Chapter 23: Appraisal Methods and Procedures

CAD must appraise same and similar kinds of property using the same and similar methods and techniques.

However, each property must be appraised based on its individual characteristics.

• 23.0101 Three Main Approaches: The chief appraiser shall consider all three in determining property value but, must only use the most appropriate.

  • Cost Approach: Estimates reproduction cost, useful for special-use properties.

    • Best used for Special Use Properties, Historic Properties, and New Construction

  • Sales Comparison Approach: Values based on sales of similar properties

    • Best used for residential Properties and Owner Occupied Commercial Properties

  • Income Approach: Based on the property's capacity to generate income

    • Primarily used for revenue-generating properties.

• Special Appraisal

  • Inventory - 23.12

  • Dealer’s Inventory

    • Dealer's Motor Vehicle Inventory - 23.121

    • Dealer's Heavy Equipment Inventory - 23.1241

  • Oil & Gas Interests - 23.175

  • Appraisal of Wildlife Management Use - 23.521

  • Appraisal of Timberland - Subchapter E

  • Appraisal of Recreational, Park, and Scenic Land - Subchapter

  • Appraisal of Public Access Airport Land - Subchapter G

  • Appraisal of Restricted-Use Timberland - Subchapter H

  • Agricultural Appraisal

    • Texas allows for a property to be appraised based on the use of the property instead of the market value of the property when the property owner uses the property for agricultural purposes.

      • 2 Main Types of Ag Land

        1. Ag Use - 1-d

           • Requires agriculture to be the property owner's primary occupation.

           • Annual application required.

           • Requires the property owner to be an individual.

        2. Open Space - 1-d-1

           • No income, occupation, or profit requirements.

           • Reapplication only required when ownership changes or the Chief Appraiser sends a request for application.

           • Allows individuals and corporations to own property.

Chapter 25 - Corrections

• 25.21 Omitted Property

  • Omitted from the "Appraisal Roll"

  • 5 previous years for Real Property

  • 2 previous years for Business Personal Property

• 25.25(b): Allows the Chief Appraiser to correct: Anything Any Year

• 25.25(c): Up to 5 Previous Years

  1. Clerical Error

  2. Multiple Appraisal

  3. Not in the form or at the location as described on the appraisal roll

  4. Incorrect Ownership

• 25.25(d): Substantial Error

  • Non-Homestead Properties: Must prove the property is 1/3 over-appraised

  • Homestead Properties: Must prove the property is 1/4 over-appraised

    • Cannot have finalized a 41.41 protest in the same year

    • 10% Penalty if successful

    • Filing Deadline January 31 - before the delinquency date

Chapter 26: Assessment

• Tax Calculation Formula

  • ([Appraised Value - Exemptions]/100) * Tax Rate

  • (Taxable Value/100) * Tax Rate

Chapter 31: Collections

• Taxes are due on January 31st

Chapter 32: Tax Liens & Personal Liability

• Texas attaches a Tax Lien on every taxable property January 1 of each

  year.

• If taxes are not paid, taxing entities can foreclose on and sell the property on the courthouse steps in a tax auction.

Chapter 33: Delinquency

• Delinquency Date Exceptions: Taxes are due before February 1

  • < Jan 10 = Jan 31 deadline

  • > Jan 10 = 1st of next month to allow 21 days

  • If tax bill includes previous years, then deadline = next Jan 31 that allows at least 180 days

• Penalty & Interest

Chapter 34: Tax Sales and Redemption

Chapter 41: Protests

• What can be protested?

  • Section 41.03: Taxing Units / Jurisdictions (Deadline before June 1st)

    1. Exclusion of a property

    2. Granting of an Exemption

    3. Determination of Special Use Appraisal

    4. Failure to identify the taxing unit

  • Section 41.41: Taxpayers (Deadline on or before May 15th or 30 days after the Delivery of Notice)

    • Reasons

      • Market Value

      • Equal and Uniform Valuation

      • Inclusion of a property

      • Denial of an Exemption

      • Determination of Special Use Appraisal

      • Identification of a taxing unit

      • Determination of Ownership

      • Determination of a Change in Use

      • Any other action adversely affecting the property owner.

  • Section 41.411: Failure to Give Notice

    • A taxpayer can protest the failure of the CAD or the ARB to deliver a required notice.

    • Notice is considered delivered when it is deposited in the mail.

    • It is presumed that notice was delivered, however the presumption is rebuttable.

    • Filing Deadline January 31 - before the delinquency date

  • Section 41.43(b): Three Tests of Equity

    • Two Appraisal Ratio Tests

      • The appraisal ratio of the subject must be greater than the median of...

        1. The appraisal ratio of a reasonable and representative sample of other properties in the appraisal district.

        2. The appraisal ratio of a reasonable number of other properties similarly situated to, or of the same general kind or character as, the subject property.

      • Section 41.43(b)(3): The appraised value of the subject is greater than a…

        1. Reasonable Number

        2. Comparable Properties

        3. Appropriately Adjusted

• Who can file a protest?

  • A Property Owner

  • A New Property Owner

  • A Person claiming an interest

  • A Lessee

  • An Agent representing any of the other filers

• How and where is a protest filed?

  • A protest must be in writing, but can be on any form.

  • A protest is sufficient if it:

    1. Identifies the owner

    2. Identifies the property

    3. Gives an indication of dissatisfaction

  • Some CAD's and ARB's allow for electronic filing of protests.

• Hearings

  • Scheduling Hearings

    • Notice of hearing must be sent 15 days prior to the date of the hearing.

    • Preferential scheduling before agents and other owners

  • Attending an ARB Hearing

    • By Affidavit

    • In Person

    • By Telephone

    • By Representative

  • Postponements

    • One-time free reschedule if not represented by an agent

    • Unlimited reschedule for "good cause"

    • Unlimited reschedule if the chief appraiser consents

    • If the hearing does not start within two hours of the scheduled time

    • Scheduled in another county and can prove the other CAD sent notice first

    • If the ARB reassigns a hearing to another panel without the consent of the owner/agent

    • CAD fails to deliver requested evidence timely

    • If a hearing is missed, reschedule request can be made within 4 days and granted if good cause is shown.

• Evidence Inspections

  • If requested more than 14 days before a scheduled hearing, the CAD must deliver any evidence they intend to present at the hearing to the owner/agent.

  • Evidence requested timely, but not delivered timely is inadmissible in a

    hearing.

  • However, the rule does not apply to rebuttal evidence.

Determination of Value

• The burden of proof is on the CAD by a Preponderance of the Evidence

  • If the CAD fails to meet the Burden - the case should be determined in favor of the taxpayer!

Hearing Procedures 41.66

• Three Post ARB Remedies

  • SOAH

  • District Court

  • Binding Arbitration

    • LIMITATIONS ON APPEAL: ONLY properties that are the property owner's residence homestead or that the ARB determined a value of less than $5,000,000 can be appealed through Binding Arbitration

    • DEADLINE: within 60 days from the receipt of the Board Order

    • ADVANTAGES:

      • relatively inexpensive

      • opportunity to settle

      • can recover filing fee if successful

      • relatively quick resolution

      • value cannot be raised

      • virtually no discovery

Chapter 42: Judicial Review

Value

• Price = Cost = Value

• 4 types of Value

  • Market

  • Appraised

  • Assessed

  • Taxable

• Other Types of Value

  • Business Value

  • Exchange Value

  • Fair Value

  • Insurable Value

  • Investment Value

  • Liquidation Value

  • Public Interest Value

  • Use Value

• Factors of Value

  • Four interdependent factors of value.

    • Utility

    • Scarcity

    • Desire

    • Effective Purchasing Power

  • All four factors must be present for a property to have value.

Bundle of Rights

• SLUGER

  • Sell

  • Lease

  • Use

  • Give Away

  • Enter/Exit

  • Refuse to do anything

• Government Restrictions on the Bundle of Rights

  • Leased Fee(Landlord): The Landlord receives the money (rent) and holds the Leased Fee Estate.

  • Leasehold(Tenant):The tenant holds the property (in exchange for rent) and therefore has the Leasehold Estate.

    • The Leasehold Estate:

      -Estate for Years

      -Estate for a Period of Time

      -Estate at Will

      -Estate at Sufferance

Subject Analysis

• Identify the Land

• Site Analysis: land should always be analyzed as if vacant

• Highest and Best Use

  • Physically Possible

  • Legally Permissible

  • Financially Feasible

  • Maximally Productive

• The Cost Approach:

  • Land + RCNLD(Reconstruction Cost New Less Depreciation) = Total Cost Value

    • Depreciation

      • Physical Deterioration

        • wear and tear

        • can be curable or

          incurable

      • Functional Obsolescence

        • flaw in materials, design, or structure

        • can be curable or incurable

      • Economic Depreciation / External Obsolescence

        • negative external influences

        • typically incurable

      • Age/Life Comparisons:

        • How does the age of the property compare to the life of the property?

          • Actual Age vs. Effective Age

          • Economic Life vs. Useful Life

          • Remaining Economic Life vs. Remaining Useful Life

• The Sales Approach

  • Determine Elements of Comparison

    • Size

    • Condition

    • Amenities

    • Views

    • Time of Sale

    • Legal Restrictions

  • Determine Appropriate Adjustments

• The Income Approach

  • Basic Assumptions:

    • A dollar in the future is worth less than a dollar today

    • Value depends directly on income

    • Value varies with the number of income-generating periods

    • Value varies with risk

  • Positives:

    • Income potential is primary

    • Enough data to lead to credible results

  • Negatives

    • Income estimates are weak

    • Data does not lead to a cap rate

    • Owner-Occupied properties are predominant

    • Other considerations besides income are prevalent

  • Rental Income:

    • Rent

    • Market Rent

    • Contract Rent

    • Excess Rent Effective Rent

    • Deficit Rent

    • Percentage Rent

    • Overage Rent

    • Potential Gross Income

    • Vacancy and Collection Loss

    • Stabilization

    • Other Income/Secondary Income

    • Effective Gross Income

  • Expenses

    • Allowable vs. Not Allowable

    • Fixed vs. Variable

  • Net Operating Income (NOI)

    • Effective Gross Income - Operating Expenses = NOI

  • Direct Capitalization Formula

    • Potential Gross Income(PGI)

      -Vacancy and Collection Loss(V&C)

      + Secondary Income(SI)

      =Effective Gross Income(EGI)

      -Operating Expenses(OE)

      =Net Operating Income(NOI)

      /CAP Rate

      =Value

PTC Requirements

• Who does NOT have to register?

  • POA

  • Attorney

  • Lessee

  • Employee

  • Public Employee

  • Broker/RE Salesperson

  • CPA

  • Person Assisting

  • RE Appraiser

• Preliminary Requirements:

  • Completed Application

  • HS Diploma

  • 18+

  • Passed Test

  • Paid Fees

  • Completed 40 classroom hours

• Prohibited Acts

  • A Senior Property Tax Consultant may not supervise more than 10 property tax consultants unless each additional consultant has more than six months of experience

  • Cannot file a protest without the approval of the property owner

  • May not falsify a document

  • May not file a protest on a single-family home without authorization from the property owner or another person authorized to sign on behalf of the property owner

  • May not solicit by assuring a specific outcome

  • May not maintain a website that appears to be a government website

  • Must identify the company of the consultant prominently on the homepage of the consultant’s website

  • May not destroy, erase, or remove client records for at least 3 years following the date of the last action taken or service performed on behalf of the client.

• TDLR Code of Ethics

  • Shall not plan, scheme, or arrange the evasion of the rules

  • Shall not lend their registration to another person

  • Shall use reasonable care in the supervision of other persons

  • Shall not engage in any activity that constitutes dishonesty, fraud, or gross incompetence

  • Shall promptly report any known violation

  • Shall cooperate fully with an investigation

  • Shall not offer anything of value with the intent of influencing a public

    employee

  • Shall not contract or accept compensation for services not performed

  • Shall not knowingly engage in false advertising

  • Shall not knowingly furnish inaccurate, deceitful, or misleading information

  • Shall not reveal confidential information

  • Shall not state or imply representation of a person or firm that is not in fact someone represented

  • Shall not solicit or advertise the promise of a specific out come

    *without prior analysis

• Phases of the Property Tax Calendar

  1. Appraisal

  2. Equalization

  3. Assessment

  4. Collections