Texas Unfair Business Property Assessments: Excessive Appraisal v. Unequal Appraisal
Texas has no income tax, so over 50 percent of all state and local tax revenue comes from property taxes. Article VIII, Section 1, of the Texas Property Tax Code Section 42.26 specifies that property taxes must be "equal and uniform." However, when your business property's market or appraised value decreases, the county does not automatically reduce your tax obligation. Business owners who have extensive personal and real property may face large tax bills annually, and these can cause substantial financial burdens.
Texas law gives business property owners the right to protest their taxes annually. With persistence, this can reduce the property tax burden for your business.
The attorneys at Brusniak Turner Fine LLP represent Texas business owners to reduce their real and personal property taxes, from filing the initial protest through the appeals process in the District Court. Our aggressive attorneys can litigate your case at any level to ensure that your taxes are "equal and uniform" as required by law, whether you are a small business owner or operate a Fortune 100 company.
One reason business property owners can appeal their property taxes is excessive appraisal. This is when your property's appraised value on the appraisal district rolls exceeds the amount allowed by law. Appraisal districts must list your property on the appraisal rolls at 100 percent of market value.
For taxation purposes, market value is the amount the property would sell for in the open market as of January 1 each year. One high or low sale does not indicate that overall market values have risen or fallen.
As the business property market decreases, you may pay more than you should. A county tax appraiser may assess recently sold properties at or near their sales price, while the appraised market value of other properties remains unchanged. Over time, this creates a disparity in property taxes between similar properties. If your business property shows a higher market value on appraisal rolls than similar properties, you can seek relief by protesting your property taxes through the process allowed by Texas law.
Market value is subjective. So, to determine the market value of your property, you hire your own experts to prove that your business property has an excessive appraisal, and the appraisal district hires theirs to prove that the amount on the appraisal rolls is correct. With business properties, market value may be impacted by things like potential use and the number of similar properties in the area. The Appraisal Review Board or the District Court must determine which proposed market value most closely represents the property's value on the open market. The District Court may also decide that neither appraisal is correct and may assign a different market value to your property.
If the District Court determines that the appraised value is excessive, the property owner is entitled to a reduced market value on the appraisal roll.
Unequal Business Property Appraisal in Texas
A Texas business property owner can also protest the property taxes on the basis of unequal appraisal. Even if the business property's appraised value does not exceed its market value, the property owner can file a protest if it is believed the property is taxed differently than comparable properties, especially if the difference exceeds ten percent of the median level of appraisal.
You will need to know the appraised value of comparable properties to make the case that your business property has an excessive appraisal. You can do this two ways:
- You can pay for professional appraisals on a statistical sample of similar properties. This method, however, may cost tens of thousands of dollars. The Uniform Standard of Professional Appraisal Practices requires appraisers to analyze income and expense information when they determine market value of a property, but they may not be able to access this confidential information for similar properties. This makes it harder for a business property owner to meet the burden of proof.
- You can use the Appraisal District's appraisal roll. This method does not require the business property owner to prove the correct appraised value of the property. Instead, the business property owner makes the case that the property has an excessive value by using the information on the appraisal roll to show that similar properties are taxed at a lower rate. The business property owner will have to account for differences between the properties that increase or decrease the appraised value -- like location, age of buildings, lot size, and condition. Once the business property owner makes these adjustments, he or she can determine the statistical median tax rate. Texas law gives them the right to be taxed at this rate.
The Property Tax Code states that the business property owner must use a "reasonable number" of comparable properties when determining an unequal appraisal, but does not specify what a "reasonable" number is. The code also requires the comparable properties to be "appropriately adjusted" but does not give any definition to this term, leaving it open for debate, and thus requiring an experienced business property tax attorney in Texas to review your case and represent you.
Although the Texas Constitution requires taxation based on market value, the Court of Appeals of Texas, Houston (14th District), ruled in Harris County Appraisal District (HCAD) v. United Investors Realty Trust,
If a conflict exists between taxation at market value and equal and uniform taxation, equal and uniform taxation must prevail.
Hiring an Experienced Business Property Tax Attorney in Texas
If your business is paying excessive or unequal property taxes on real or personal property, contact the experienced attorneys at Brusniak Turner Fine LLP today. Whether you own a small business or operate a Fortune 100 company, our dedicated attorneys can guide you through the process of protesting your real or personal property taxes from filing the first protest through appealing to the District Court. Texas law requires "equal an uniform" taxes for your business, and we will fight until your taxes reflect that amount.
If you have questions about a business property tax protest in Texas or if you are ready to file, contact our office today at (214)-295-6095.