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What can Business Owners and Texas Property Tax Payers really expect for the 2020 tax year?

April 20, 2020 at 10:20 AM
by Adam Welchman - Director

The Covid-19 Pandemic has brought with it concerns over property tax assessments and liability to taxpayers. After addressing the immediate questions of “Are we allowed to operate”, “How can we operate”, and “What can we do to generate revenue”, the longer term concerns start coming to the surface for many businesses fortunate enough to remain afloat. The same is true for residential homeowners and commercial property owners attempting to pay or collect rent/mortgage. One of those concerns for many of us are, “What about the property taxes and how are we going to pay them”? There’s often a fine line between black & red financial numbers, but the Covid-19 shutdown just drew a big fat line in the sand.

Appraisal District Actions:

The buzz in the property tax industry from the beginning was if and how the appraisal districts would reappraise property tax accounts for the 2020 tax year. The answer to that question was received loud and clear through a collaborative stance and message by the CAD’s. Talk to nearly any of the 253 appraisal districts and you’ll likely receive a message similar to this one from the Harris County Appraisal District website: State law sets January 1 as the appraisal date for all Texas appraisal districts. Your value was already determined by local market data as of January 1, 2020, and your value notice was likely in the mail by mid-March. Changes in your market value caused by the current health crisis will be taken into consideration as of January 1, 2021. What is the underlying message? To me, it means too bad, so sorry, get ready for another assessment increase. And that’s been just what we have seen with early value notices.

Realism of Tax Relief:

Many property tax professionals speculated early on whether Texas Tax Code 11.35 - Temporary Exemption for Qualified Property Damaged by Disaster, would apply in the case of the Covid-19 shutdown. . I mean after all, the resulting disaster checks many of the boxes required to meet the qualifications of the exemption. I.e., qualified property means property that consists of: (A) tangible personal property used for the production of income; (B) an improvement to real property; or (C) a manufactured home as that term is defined by Section 1201.003 (Definitions), Occupations Code, that is used as a dwelling, regardless of whether the owner of the manufactured home elects to treat the manufactured home as real property under Section 1201.2055 (Election by Owner), Occupations Code; (2) is located in an area declared by the governor to be a disaster area following a disaster; (3) is at least 15 percent damaged by the disaster, as determined by the chief appraiser under this section; and (4) for property described by Subdivision (1)(A), is the subject of a rendition statement or property report filed by the property owner under Section 22.01 (Rendition Generally) that demonstrates that the property had taxable situs in the disaster area for the tax year in which the disaster occurred.

With that said, the Texas Attorney General recently published an opinion on the matter.

The short answer of the summary is, it is his opinion the aforementioned exemption would only apply to a physical damage created by a disaster. However, the law does not specify or mention physical damage. So, what can be done to experience some level of tax relief? Read the Approach to Value Reduction, below.

CAD Announcements & Anticipated Posture:

The appraisal districts have all but shut down their buildings to public access. Notices posted on-line and mailed to tax consultants communicate their intent for a no contact interaction for 2020. Most, if not all informal and formal appeals will be conducted over web conference, email and phone as of 5/1/2020. During the informal protest stage, each appraiser will be fielding tens of thousands of appeals in the major districts. Many more than usual. If the CAD’s are to certify the tax roll by July 25, 2020 that means appraisers will have to work through accounts at record speed. Typically, from our experience, when districts are faced with limitations of data and time, the informal negotiation phase tends to emulate the mass appraisal methodology they employ to assess all property. The resulting practice usually equates to most of the reduction offers being immaterial in nature. They just don’t have the time to delve into the details. With a large volume of accounts being pressed through the pipe, many accounts will receive no reduction and move right into the formal appeal with the Appraisal Review Board. What position do we anticipate from local ARB’s? To take a phrase directly from my daughter in her kindergarten class circa 2010, “Cut, copy, paste. Cut, copy, paste. That’s all we do dad”. Translation, the same thing over and over. A Rubber Stamp. The next option for any value reduction would come way of Binding Arbitration or Lawsuit.

Approach to Value Reduction

Taxpayers need a strong approach to value reduction, every year, but especially in 2020. Every cost reduction to help offset revenue loss caused by the Covid-19 shutdown is one step closer for businesses getting back to where they left off.

Protesting your account and pointing to the negative effect of the Pandemic will not be enough to achieve the assessment reduction you deserve. You’ll need data, hard evidence and a proven strategy. You can contact Vantage One Tax Solutions to get started. Although we agree with some of our counterparts in terms of the 11.35 rule, the principal cause to achieve the exemption can be equally effective when applied to the market value of your property. This application can be applied to all real estate and personal property including inventory. The districts regularly look into the current tax year for real estate sales, rental rates and income, irrespective of whether they fall back to the January 1 assessment date law. So will Vantage One. With that said, our consultants will continue to work with our in-house appraisal department to blend generally accepted appraisal methods into our valuations for 2020 while considering the 11.35 exemption on our client's behalf.

We are all in this together, is something you will not be hearing from the appraisal districts, so it is important to know that we are here for you. Call us today 972-991-2210.