Property Tax Alert: Texas

August 2003

The 78th Texas Legislative regular session is complete and a number of important amendments have been added to the Property Tax Code. This memorandum will highlight the bills that affect your property tax liability and will explain how Rash plans to comply with the law.

SB 340: An Act Relating to the Rendition and Appraisal of Property

The Property Tax Code has always required a taxpayer to file an annual rendition (a return) statement listing all business personal property located in an appraisal district. But the tax code had no provision to penalize a taxpayer who failed to file such a rendition. As a result, many taxpayers did not file. Rash & Associates has taken the position that renditions should be filed and therefore has always filed on your behalf. Chief appraisers have, unsuccessfully in the past, lobbied the legislature to “put teeth” into the property tax code and penalize non-filers. During this session, the appraisal districts were successful in getting passed and signed Senate Bill 340 regarding filing of renditions. This law generally becomes effective on January 1, 2004.

The most important provisions of SB 340 include the following:

• The assessment of a 10% penalty of the total tax imposed on the property for failure to render or failure to supply supporting data to an appraiser’s request.
  
  
• The assessment of an additional 50% penalty of the total tax imposed on the property if, determined by a court, the taxpayer committed fraud or tried to evade taxation.
  
  
• The definition of a rendition includes property owner name and address, description and category of property, description and quantity of inventory, the physical location or situs of the property, and the owner’s good faith estimate (opinion of value) or the historic cost new and acquisition year.
  
  
• The appraisal district’s right to ask for supporting evidence for the rendered value. The taxpayer must comply within 21 days of receipt of the district’s request.
  
  
• The appraisal district’s right to create an omitted property account for 2002 and 2003 from the 2004 rendition.

Because the appraisal districts have the right to request supporting material for a rendition, and with the provision of penalties, Rash & Associates must receive your Texas asset listing or financial records no later than April 1 in order for us to ensure compliance with these new statutes. A detailed analysis of SB 340’s provisions follows on subsequent pages.

HB 703: An Act Relating to Property Located in More Than One Appraisal District

Under Sec. 6.025 of the Property Tax Code, property in “overlapping” appraisal districts is to be assessed by “each district at the same value.” Unfortunately, most appraisal districts have failed in reaching equal values. This failure was due in measure to the lack of direction in the code to determine which district’s assessment actually reflected the market value of a property. HB 703 was added to clarify the prevailing assessment and to aid the appraisal districts in getting to the “same value.”

The chief appraisers in each district are to decide on a joint value for a property by May 1 of the tax year. If they are unable to arrive at an agreed upon value by May 1, they are required to enroll on their records the lowest proposed assessment. If the assessment is challenged administratively (at the appraisal district) or judicially and the value is lowered, the chief appraiser of the district in which the assessment was reduced is required to notify all other appraisal districts as to the results of the protest. The lowest value must be placed on each districts’ appraisal rolls.

Details of SB 340: An Act Relating to the Rendition and Appraisal of Property and How Rash & Associates Plans to Comply with the Law

SB 340 requires that all owners of tangible personal property used for the production of income, or all managers who have a fiduciary responsibility to the property (i.e., Rash & Associates), must file a rendition.

A rendition, as outlined above, must include five specifics: (1) the property owner’s name and address; (2) a description of the property by type of category; (3) a listing of all inventory, if applicable, described by type with an estimate of quantity; (4) the property’s physical location or taxable situs; and (5) the owner’s good faith estimate of value, or a listing of the property’s historical cost new and the year of acquisition.

SB 340 does not define what a good faith estimate is. We assume it is equivalent to an opinion of value, which we have historically filed with appraisal districts.

SB 340 allows districts to request additional information about the rendered value. This supporting data must identify the property and summarize the physical and economic characteristics of the rendered value. Beyond these general guidelines it does not specify the nature of that information. It would seem that audited financial reports and/or asset lists would satisfy the requirement, but is unclear if anything less then these items is satisfactory. If a district asks for supporting data, we have 21 days from the time of receipt to comply.

Both renditions and supporting data are confidential.

Failure to file a rendition or to respond to a district’s request for additional data can result in a 10% penalty of the total amount of tax imposed on the property for the applicable tax year. The same penalty applies for late filings and late responses. The chief appraiser imposes and collects the penalty, and can also waive the penalty upon written request accompanied by supporting documents. The chief appraiser is under no obligation to waive the penalty, but his denial to do so is subject to appeal. An important incentive to note is that the chief appraiser, if he imposes a penalty and denies its waivers, can keep up to 20% of the penalty to defray collection costs.

If a property owner fails to file a timely rendition or supporting data, resulting in a penalty, and files a protest under Sec. 41.41 (the protest provision in the Property Tax Code), the burden of proof rests on the owner’s shoulders at the protest hearing.

Failure to file or to file timely may result in a 10% penalty, but if a court determines that a property owner attempted to evade taxation or filed a fraudulent rendition, as well as altering, destroying, or concealing records, the court can impose a 50% penalty on the total amount of tax imposed on the property for the tax year in question.

The filing deadline did not change from January 1 through April 15. But SB 340 does allow for an extension to May 15, which may be granted upon written request. If the taxpayer needs additional time, the chief appraiser may grant an additional 15 days upon written request showing good cause.

The requirement to file renditions and supporting data is unchanged. Documents can either be hand delivered or mailed through the United States Postal Service on or before the deadline. SB 340 does allow for electronic filing. The rules for electronic filing, as well as the forms for paper filing, are under the control of the comptroller’s office. We’ve been in touch with the comptroller and they have not determined the manner or form of either electronic or paper filing. Their deadline for these rules is December 1.

An appraisal district may use the information on a 2004 rendition to pick up omitted property for 2002 and 2003. An amnesty provision in SB 340 allows the taxpayer to file a 2003 rendition, in the form and manner of the now proscribed 2004 filing, by December 1, 2003; to avoid the assessment of omitted property in previous years. Of course, this potentially will result in additional assessment for tax year 2003.

Please contact Rash & Associates for more information.