House Committee Substitute for Senate Bill 2: Property Tax Payer Empowerment Act of 2017

Summary

Under current law, taxing jurisdictions begin their budget process by calculating their “effective” tax rate—the tax rate that would raise the same amount of property tax revenue as their previous year. This automatically adjusts the tax rate down as property values increase. If a jurisdiction adopts a tax rate that will raise more than 8% above the “effective rate,” voters have 90 days to gather signatures of as much as 10 percent of the registered voters in the district to call for an election on the tax rate. If the election is successful, the tax rate is “rolled back” to no more than an 8 percent increase.

Jurisdictions rarely adopt the “effective” rate. Instead, they commonly adopt higher tax rates that take advantage of rising values and generates increased tax collections. Clearly, it is not rising values that drive property taxes higher—it is the fact that taxing jurisdictions are adopting higher and higher tax rates.

The House Committee Substitute for Senate Bill 2:

  • Creates a “real-time” tax notice that tells property owners the amount of their tax bill based on their final value and on the tax rates jurisdictions are proposing to adopt,
  • Informs taxpayers of the time and location of local budget and tax rate hearings so they can make their voices heard;
  • Requires all taxing jurisdictions to make available an Internet website that provides basic tax and budget information;
  • Strengthens oversight of proposed tax rate calculations,
  • Requires the state’s five largest counties to create “special appraisal review board panels” of experts to review values of certain high-dollar properties, but
  • Makes no changes to the current 8 percent rollback threshold in current law, nor does it make any changes to current petition requirements.

The Details

Tax Rate Calculations. The “effective tax rate” is renamed to what it is—the “no new revenue” rate. Any tax rate above that is one that raises new revenue for the jurisdiction.[1] Jurisdictions will have to use Comptroller-prescribed forms to calculate their baseline tax rates, and certify that they number are correct. All forms will be made public.

Tax Rate Notices. Under current law, appraisal districts provide an estimate of property taxes on the property appraisal notice. This estimate is based on the current year’s preliminary appraised value and last year’s tax rates. This erroneously implies that rising values drive property taxes higher, and provides taxpayers with no information about the revenue decisions jurisdictions make that drive up tax bills.

Under CSSB 2, appraisal districts will mail out preliminary value appraisals in April, as they currently do, but without a misleading tax estimate. Property owners may challenge disputed values. By August 7, after values are final, appraisal districts will notify property owners that a real-time estimate of their taxes is available on an Internet webpage maintained by the appraisal district, which will show the:

  • Current appraised and taxable value of their property,
  • The amount of tax that would be due on that property at each jurisdiction’s “no new revenue” tax rate,
  • The amount of tax that will be due on their property at the tax rate each jurisdiction proposes to adopt,
  • The difference in their property tax bill at the proposed rates for each jurisdiction compared to their tax bill at the “no new revenue” rates
  • The date and location of the public meeting at which each jurisdiction proposes to adopt its tax rate.

Property owners may request a hardcopy of the webpage be mailed to them.

Transparency. Taxing units will be required to maintain Internet websites that provide basic information about their budgets, tax rates, and public hearings so that property owners can be involved in the policy decisions that impact their communities and their taxes.

Taxpayer Protections.  CSSB 2 provides that jurisdictions must complete and post their rate calculations 14 days in advance of adopting their tax rate. Jurisdictions must certify that the numbers and calculations are correct. Taxpayers may seek injunctive relief to prevent the adoption of tax rates and the collection of taxes if certification and posting requirements are not met.

Rollback. The Senate-passed version of SB 2 included a provision lowering the rollback rate to five percent. A draft House committee substitute that adjusted rollback rates, along with election and petition requirements was considered in committee, but was not adopted. There are no provisions affecting rollback, elections, or petitions in the adopted House committee substitute bill.

Experienced Review Panels. Under CSHB 2, the state’s 5 largest counties will create special Appraisal Review Board panels of individuals with specific professional experience to hear appeals of certain types of complex properties valued more than $50 million. This will save property owners and appraisal districts money by more readily resolving cases that might otherwise go to district court. Many appraisal review board members already have the required expertise—this provision simply requires they be assigned to the more complex cases.

[1] The Constitution requires that any new value be excluded from the rollback limit—effectively allowing jurisdictions automatic revenue increases as growth brings new construction.

SB2 amendment will not apply to counties with annual budgets under $10 million: Texas counties with budgets under $10 million

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