Equal and Uniform Taxation * Not in Texas!

Report
Equal and Uniform Taxation –
Not in Texas!
Presented By:
Alvin Lankford
Chief Appraiser Williamson CAD
Appraisal District 101
Texas State Law provides for the establishment
of appraisal districts within each county. The
appraisal district is responsible for appraising
property in the district for each taxing unit that
imposes ad valorem (property) taxes on
property within the district. The appraisal
district is a political subdivision of the State of
Texas.
• ALL appraisals are done at 100% of Market
Value as of January 1 of the tax year
•
Texas Property Tax Law’s
2 Basic Principles
 Article 8, Section 1, Texas
Constitution
◦ All taxable property should be
taxed in proportion to its market
value.
◦ All taxable property should be
taxed in an equal and uniform
manner.
Market Value per Texas Property Tax
Code

Market Value – The price at which a
property would transfer for cash or its
equivalent under prevailing market
conditions if:
◦ Exposed for sale in the open market with a
reasonable time for the seller to find a purchaser.
◦ Both the seller and the purchaser know of all the
uses and purposes to which the property is
adapted and for which it is capable of being used
and of the enforceable restrictions on its use
◦ Both the seller and purchaser seek to maximize
their gains and neither is in a position to take
advantage of the exigencies of the other.
Market Value per Common Sense
What is the property worth?
 What would the property sell for?

How is market value obtained by
the Appraisal Districts?
Sales!
Seems simple but it is not simple in Texas!
 Texas is one of only 5 states that do not
require sales disclosure when buying or
selling real estate.

◦ Texas is the only one of the 5 that local
governments are funded primarily using
property taxes.
Non – Sales Disclosure States
Why would anyone want to tell the
government about the price they
paid?

“It’s a privacy issue”
◦ That would make sense but….
◦ Websites now display home sales
How do Appraisal Districts Obtain
Residential Home Sales?

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No MLS Access
Utilizing websites
Sending Sales Questionnaires
Realtors and Brokers
Property owner provided
Appraisal Districts obtain 80-90% of ALL residential sales
This large sample of sales creates a fairly accurate appraisal
of most homes
◦ The average appraisal is typically 98-100% of the sale price or
actual market value in most metropolitan counties

However, Million Dollar plus homes do not report on MLS
or any other source
◦ The owners of these high value homes typically pay less in
proportion to their market value because of the lack of
information
Pays Property Taxes on 70% - 80%
of Market Value
Pays Property Taxes on 98% 100% of Market Value
How do Appraisal Districts Obtain
Commercial Property Sales?
Paid Services such a Co-Star and Loop Net
 Sales Questionnaires
 Realtors and Brokers


Appraisal Districts only obtain 20-30% of
ALL Commercial Sales.
◦ Because of the lack of information large
Commercial Properties see appraisals at 50-70%
of their actual market value.
Pays Property Taxes on
50% - 70% of Market
Value
Lack of Sales Disclosure Creates
Unequal Appraisal

Remember the first basic principle in the
Tax Code?
◦ All taxable property should be taxed in
proportion to its market value.
◦ Large Commercial property is NOT taxed in
proportion to its market value
 Residential pays taxes at 98-100% of their market
value (with the exception of high value homes)
 Large Commercial pays taxes at 50-70% of their
market value
How do we correct this?

Full Sales Disclosure
◦ Allows for sales information to be shared
with the Appraisal District on large
commercial properties and high value homes
(ex: $1MM+ homes)
◦ Creating a fair playing field for values
Real Property Values for Texas

https://www.youteube.com/watch?v=TTQ
-ksLrdPo
It Gets Worse….
Large Commercial starts out with a lower
value in relation to their market value
 Yet, Legislation written in 1997 (by a
property tax attorney who works for
large commercial property owners: Jim
Popp www.property-tax.com ) created a
loophole that allows for continued
reductions in appraisals of large
commercial properties.

Remember the 2nd Basic Principle?
“All taxable property should be taxed in
an equal and uniform manner.”
 The 1997 legislation added language to
section 41.43 and 42.26 of the tax code
dealing with equal and uniform.

◦ This language though innocuous at first glance
has changed the manner in which equal and
uniform appraisal is protested.
The Text of The Equal and Uniform
Law being taken advantage of

ARB Protest Section
◦ 41.43 (b) (3) – the appraised value of the
property is equal to or less than the median
appraised value of a reasonable number of
comparable properties appropriately adjusted.

Lawsuit Section
◦ 42.26 (a) (3) – the appraised value of the
property exceeds the median appraised value
of a reasonable number of comparable
properties appropriately adjusted.
Let’s Break It Down…..

“Median Value” – The value of the middle
property when values are arrayed from smallest
to largest.
◦ Properties must be “equal to or less than” the median
per the law.
◦ Example:
Adjusted Comparable Values
Median
$
40,000,000
$
37,500,000
$
35,000,000
$
30,000,000
$
27,500,000
$
25,000,000
$
20,000,000
Let’s Break It Down…..
“Reasonable Number of Comparable
Properties” - Who defines what a
reasonable number is? What does
“comparable” mean? – There is no
guidance given on either.
 “Appropriately Adjusted” – Who decides
what is “appropriate”

The Deterrence of Litigation
You may ask yourself…”Why don’t
Appraisal District’s fight these values at
court?”
 CAD is liable for attorney’s fees for the
other side if the property is reduced at all
in court
 Commercial Property Owner is NOT
liable for CAD attorney’s fees at all
 These fees penalize appraisal districts for
trying to hold a fair value.

The Deterrence of Litigation

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Attorney’s Fees
Sec. 42.29.
.
(a) A property owner who prevails in an appeal to the court under Section
42.25 or 42.26, in an appeal to the court of a determination of an appraisal
review board on a motion filed under Section 25.25, or in an appeal to the
court of a determination of an appraisal review board of a protest of the
denial in whole or in part of an exemption under Section 11.17, 11.22,
11.23, 11.231, or 11.24 may be awarded reasonable attorney’s fees.
The amount of the award may not exceed the greater of:
(1) $15,000; or
(2) 20 percent of the total amount by which the property owner’s tax
liability is reduced as a result of the appeal.
(b) Notwithstanding Subsection (a), the amount of an award of attorney’s
fees may not exceed the lesser of:
(1) $100,000; or
(2) the total amount by which the property owner’s tax liability is reduced
as a result of the appeal.
The Shrinking Value of Large Commercial
Examples of Equal and Uniform
Abuse
•Cost = $200 Million
•Travis CAD Appraised Value = $111 Million
•Equal and Uniform Lawsuit Adjusted Value = $98
Million
•Paying Property Taxes on 48% of original cost
Examples of Equal and Uniform Abuse

JW Marriott Hill Country Resort and Spa &
San Antonio
•Cost = $600 Million
•2011 Appraisal = $150 Million
•Under Equal and Uniform Lawsuit Every Year….
•Paying taxes on 25% of their cost to construct
Examples of Equal and Uniform Abuse
Towers at Williams Square in Las Colinas (Dallas Area)
•Sold in 2012 for $226 Million
•Equal and Uniform Litigate Value = $147 Million
•Paying Property Taxes on 65% of Sale Price
Link to E&U Articles
Here is a link to articles that have been
written in local newspapers throughout
the State
 http://bit.do/WCAD

Texas Association of Appraisal
Districts Focus
Minimize the impact of this law and
increase the FAIRNESS!
 Point One: For the median calculation
of adjusted comparables use:

◦ Use Value at time of Appraisal Notice for all
comparables during ARB (Appraisal Review
Board) hearings
◦ Use ARB Determined Value during Litigation
Texas Association of Appraisal
Districts Focus

Point Two: Go back to the Texas
Constitution and use “All taxable
property should be taxed in proportion
to its market value.”
◦ Never more than 10% below the Market Value
 Stated another way: The greater of (1) median or
(2) value that is equal to market less 10%
Other Needed Legislative Changes
No attorney’s fees unless more than 10%
over median value
 Or, attorney fees calculate from the last
official offer from the appraisal district
instead of the ARB determined value

What Can You Do?


Talk to your Legislators!
This is a FAIRNESS issue it is not about taxes
Contact Information

Alvin Lankford
◦ 512-931-7811
◦ [email protected]

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