TexasPropertyTaxGlossary
Advaloremtax taxbaseduponvalue
Administrative appeal collectivelyreferstotheinformalhearingandappraisalreviewboard(ARB)hearingduringthepropertytaxappealprocess.The administrativeappealsmustbeexhaustedbeforeapropertyownercanfileajudicialappeal(lawsuitinstatedistrictcourt).
Appeal seeprotest
Appraisal anopinionofvalue,typicallyprovidedbyanindependentthirdparty.Texasappraisaldistrictsdevelopanopinionofvalueforallrealestate, businesspersonalproperty,andmineralswithinthecountyatleasteverythreeyears.
Appraisal reviewboard (ARB) theappraisalreviewboardconductspropertytaxprotesthearingsforappealsnotresolvedattheinformalhearing.Inmostcounties,ARB hearingsareconductedbythree-memberpanelstopreparearecommendationforthefullappraisalreviewboard.Thepanel recommendationsareformallyaffirmedatperiodicmeetingsofaquorumoftheappraisalreviewboard.Theappraisalreviewboardis technicallyindependentoftheappraisaldistrict.However,sincetheboardofdirectorsoftheappraisaldistricthiresappraisalreviewboard members,theappraisaldistrictpaysandsupervisesARBmembers,andanattorneycontrolledbytheappraisaldistrictguidestheappraisal reviewboardonlegalmatters,theappraisalreviewboardisnotcompletelyindependentoftheappraisaldistrict.
Appraisedvalue thevalueuponwhichpropertytaxesarecalculated.Bothrealpropertyandbusinesspersonalpropertycanbepartiallyortotallyexempt.The homesteadexemptionisanexampleofapartialexemptionforrealproperty.Thefreeportexemption,whichappliestoinventorykeptinthe stateforalimitedperiodoftime,isanexampleofacompleteexemption.
Appraiser onewhovaluesproperty.Appraisersvaluerealestate,businesspersonalproperty,art,jewelry,mineralinterestsandothertypesofproperty
Assessment comparables sometimesknownasassessmentcomps,theseareassessedvaluesforpropertieswhicharecomparabletothesubjectproperty.Factors thatmakeapropertycomparableincludepropertytype,location,size,ageandcondition.
Business personal property tangiblepersonalpropertyusedfortheproductionofincome.Businesspersonalpropertyistaxableatthesametaxrateasrealpropertyin Texas.Examplesofbusinesspersonalpropertyincludeinventory,officeequipment,officefurniture,heavyequipment,trucksandcars.
Central appraisal district(CAD)
anorganizationthatcompilesaninventoryofpropertywithinthecountyandvaluesitperiodicallyusingmassappraisal.Typesofproperty listedincluderealproperty,businesspersonalpropertyandminerals.Thecentralappraisaldistrictischargedwithmaintainingdetailed informationforthepropertiesandadministeringexemptions.Mostappraisaldistrictsdonotsendtaxbills;theiractivitiesarelimitedto determiningmarketvaluesandappraisedvalueswhicharesubmittedtotaxentitieswhoprepareandmailtaxbills.EachTexascountyhas anappraisaldistrictortheactivityisoutsourcedtoanotherappraisaldistrict.
Chiefappraiser chiefadministrativeofficerofacentralappraisaldistrict.
Comparables alsoknownascomps.Informationonpropertieswhicharesimilarwithregardtofactorssuchaspropertytype,location,size,yearbuiltand condition.Forpropertytaxmatters,comparablesareusedbothforthesalescomparisonapproachandunequalappraisal.
Costapproach oneofthethreegenerallyacceptedapproachestovaluingrealestate.Preparingacostapproachforrealestateinvolvesestimatingthe replacementcostoftheproperty,subtractinganallowanceforalltypesofdepreciationandaddingthemarketvalueoftheland.Thesumof thedepreciatedreplacementcostandlandvalueistheindicationofmarketvalueviathecostapproach.
Homesteadcap alimitationontheincreaseinassessedvaluebutnotmarketvalueforhomesteads.Thislimitationappliesonlytohomesteadsandnotto secondresidences,homesownedforinvestmentoranyothertypeofrealproperty,personalpropertyorminerals.Thelimitationis10%per year,timesthenumberofyearsasthepropertywaslastreappraised,plusthemarketvalueofimprovementsaddedsincethepropertywas lastappraised.(Improvementsdonotincludemaintenance.)Forexample,considerahomewhichwasappraisedlastyearat$100,000and hasbeenreappraisedinthecurrentyearat$150,000.Sincethehomewasappraisedoneyearagoandnoimprovementshavebeenmade, theappraisaldistrictcanincreasethemarketvalueto$150,000.However,theassessedvalueforthepurposesofcalculatingpropertytaxes canonlybeincreasedtoamaximumof$110,000.Considerasecondexample:ahomewaslastreappraisedfiveyearsagoat$100,000. Duringtheinterim,theownerhasmade$20,000inimprovements(itemsotherthanmaintenance).Theappraisaldistrictestimatesmarket valueforthecurrentyearat$200,000.Theassessedvalueiscappedat$170,000or(($100,000XfiveyearsX10%)+$100,000+$20,000).
Homestead exemption apartialexemptionofpropertytaxesinTexasforownersofaresidence.QualificationsincludeowningthehouseonJanuary1andlivingin thehouseonJanuary1ofthetaxyearinquestion.Inmanyjurisdictions,thebenefitofahomesteadexemptionispropertytaxesarereduced byapproximately20%.However,homesteadexemptionsvaryfromtaxentitytotaxentity.Homeownersmustapplyforahomestead exemption.Itisnotnecessarytoapplyannuallyoncethehomesteadexemptionhasbeenapproved.However,ifthechiefappraiserrequests anewapplication,thehomeownermustrespondtomaintaintheirhomesteadexemption.
Incomeanalysis theprocessofperformingtheincomeapproachorasummaryoftheresearchandcalculationsperformedduringtheincomeapproachto valuerealestate.
Income approach oneofthethreegenerallyacceptedapproachestovaluingrealestate.Theincomeapproachcanbeperformedusingeitheradirect capitalizationapproachoradiscountedcashflowanalysis.Thedirectcapitalizationapproachismostfrequentlyappliedduringpropertytax appealsforincomepropertiesinTexas.Incomepropertieswouldincludeapartments,officebuildings,retailcenters,andindustrialproperties
whicharetotallyorpartiallyleasedtothirdpartiestoproduceincome.Stepsintheincomeapproachincludeestimatingmarketrent,market ,otherincome,operatingexpensesandacapitalizationrate.Effectivegrossincomeisdefinedasgrosspossiblerentforallspaceat acancy,plusotherincome.Effectivegrossincomeminusoperatingexpensesequalsnetoperatingincome.Netoperating income(NOI)dividedbythecapitalizationrate(caprate)istheindicationofvalueforthepropertyviatheincomeapproach.
Income statement asummaryoftherevenues,operatingexpenses,depreciation,interestandnetoperatingincomeforabusinessorparcelofrealestate.
Informal hearing thefirststepofthepropertytaxprotestprocess.Theadministrativehearingscollectivelyincludetheinformalhearingandanappraisal reviewboardhearing.Duringtheinformalhearing,thepropertyownerorpropertytaxconsultantmeetswithanappraiseremployedbythe centralappraisaldistrict.Theowner/consultantandtheappraisertradeinformationandattempttonegotiateasettlement.Iftheinformal hearingresultsinanagreement,thereisnoappraisalreviewboardhearingforthepropertyandtheassessedvalueisfinalfortheyear
Intangible personal property propertywhichisneitherrealpropertynortangiblepersonalproperty.Intangiblepersonalpropertycan’tbeseen,felt,weighed,ormeasured. Includesitemssuchascontracts,stocks,bonds,patents,digitalrecordings,businessenterprisevalueforanoperatingbusiness,and accountsreceivable.
Judicialappeal propertyownersmayfileajudicialappeal,oralawsuitinstatedistrictcourt,iftheyarenotsatisfiedwiththeresultobtainedattheappraisal reviewboardhearing.
Marketvalue theamountofmoney,inUSdollars,whichcouldbeobtainedforpropertyexposedtothemarketforareasonableperiodoftime,whereboth partiesareknowledgeableregardingallpossibleusesanddefectswiththepropertyandneitherpartyisunderduresstoconsummatea transaction.
Massappraisal aprocessusedtovaluerealestatewhenitisnotpossibletoperformanindividualappraisalforeachproperty.Theprocessusuallyinvolves compilingdataregardingthephysicalcharacteristicsofthepropertyandmarketdatasuchasrentalrates,vacancyrates,expenserates, otherincome,capitalizationrates,costdataandcomparablesalesdata.Valuationsarecalculatedusingdataforeachsubjectpropertywith themarketdata.Statisticalprocessesincludingregressionanalysisareperformedtodevelopanestimateofvalueforeachproperty.Thisis theprocesstypicallyusedbyappraisaldistrictsinTexastoestimatethemarketvalueforrealestate.
P&L profitandlossstatement.Seeincomestatement.
Personal property propertywhichistangibleyetisnotrealproperty.InTexas,thetypicalbasisfordifferentiatingbetweenrealpropertyandpersonalpropertyis whetheritisattachedtotherealproperty.Forexample,arefrigeratorisnottypicallyconsideredattachedtorealestate.However,alight fixture,plumbingfixture,carpetorvinyltilewouldtypicallybeconsideredattachtotherealestate.Examplesofpersonalpropertyinclude automobiles,boats,guns,clothes,householditems,tools,officesupplies,officefurniture,officeequipmentandinventory.Personalproperty usedfortheproductionofincomeistaxableinTexas,atthesametaxrateappliedtorealestate.Personalpropertynotusedinthe productionofincomeisnottaxableinTexas
Propertytax thetaxcalculatedbymultiplyingtheappraisedvaluetimesthetaxrateforataxentity.Theappraisedvaluemaybedifferentfromthemarket valueiftheitemispartiallyortotallyexemptorsubjecttoahomesteadcap.
Propertytax consultant onewhorepresentspropertyownersinpropertytaxmatters,generallyregardingmarketvaluedisputes.Otherservicesperformedbytax consultantsincluderenditionsofbusinesspersonalproperty,exemptionsandcombiningorseparatingtaxaccounts.
Propertytax valuationdate January1istherelevantdateforvaluingpropertyforpropertytaxpurposesinmostcircumstances.Thisismeaningfulifapropertysuffers eitherphysicaloreconomicdamagejustbeforeorjustafterJanuary1.Forexample,afirewhichsubstantiallydamagesabuildingon December30willallowtheownerasubstantialreductioninthesubsequentyear’spropertytaxes.However,afireonJanuary2wouldnot affectthecurrentyear’svalueforpropertytaxpurposes.Marketorpropertyspecificforcescouldcauseeconomiclosses.Forexample,ifthe priceofoilfellto$10perbarrelpriortoJanuary1,itwouldclearlyhaveanaffectonthevalueofrealestateinHoustononJanuary1. Similarly,ifarealestateownerlearnedinmid-Decemberthatthetenantwhooccupies80%ofanofficebuildinghasfiledforbankruptcyand willbeleavinginseveralmonths,themarketvalueofthebuildingismateriallyimpacted.
Protest propertyowner’srighttoappealorobjecttoanactionofthechiefappraiser,appraisaldistrictorappraisalreviewboardthatappliestoor adverselyaffectsthepropertyowner.Mostpropertytaxprotestsrelatetothemarketvaluedeterminedbytheappraisaldistrict.Other protestsarefiledregardingunequalappraisal,exemptions,agriculturalvaluationandavarietyofotherissues.Propertyownerscanappeal annuallyonmarketvalueandunequalappraisalregardlessofwhethertheappraisaldistrictchangesthemarketvalue.
Protest deadline May15isthetypicaldeadlineforfilingapropertytaxappealinTexas.However,thedeadlineistechnicallythelaterofMay15or30days aftertheappraisaldistrictmailsanoticeofappraisedvalue.(Itis30daysafterthedatetheappraisaldistrictsmailsthenoticeofappraised value.Itisnot30daysafterthepropertyownerreceivesthenotice.)Ifthepropertytaxprotestdeadlinefallsuponaholidayorweekend,the deadlineisextendeduntilthefollowingworkday.Propertytaxprotestsareconsideredtimelyfiledifmailedbyfirst-classmaildepositedin themailonthedeadlineday
Realestate land,improvementstotheland(buildings),amineorquarry,minerals,standingtimberandanyestateorinterestinthepreviouslymentioned property
Rentroll asummaryofthetenantsforarealestateproperty.Mostrentrollsincludefieldsofdatasuchasthenameofthetenant,amountofrent, amountofspace,suitenumber,leasestartdate,leaseterminationdateandotherincomeifapplicable.
Sales comparison approach oneofthethreegenerallyacceptedmethodstovaluingrealestate.Thefirststepistocompileinformationonsalesofcomparable properties,sometimesreferredtoascomps.Theappraiserconsidersfactorssuchasdateofsale,propertytype,size,age,conditionand locationwhendeterminingwhichcomparablesalestoutilize.Afterselectingcomparablesales,theappraisermakesadjustmentsforfactors suchaschangesinmarketcondition,conditionsofsale(i.e.distresssale),propertyrightsconveyed,age,size,locationandcondition.The finalstepistodetermineanindicationofvalueforthesubjectpropertyusingtheadjustedvaluescalculatedforthecomparablesales.
Sales comparables thesearealsoknownassalescomps.Dataregardingsalesofpropertiessimilartothesubjectproperty.Fieldsofdatacompiledinclude factorssuchasdateofsale,propertyaddress,seller,buyer,saleprice,squarefeet,yearbuilt,conditionandnotes.Seealsosalescomparison approach
Share-CAD terminologyusedtodescribeapropertythatisvaluedbytwoappraisaldistricts.Thisoccurswhenpropertylieswithintheboundariesofa taxentitywhichstraddlesacountylineandthetaxentityhaschosenthecentralappraisaldistrict(CAD)outsideofthesubjectproperty countytovalueparcelswithinthetaxentity.Appraisaldistrictsarerequiredtoacceptthelowestassessedvalueestablishedinanyofthe
property
appraisaldistrictsforashare-CADproperty.Thelowestassessedvaluecanbegeneratedbyitsnoticevalue,aninformalhearing,an dhearingorajudicialappeal.
ealestate,businesspersonalpropertyormineralinterestsbeingvaluedorreviewedforunequalappraisal
Taxingentity acity,county,schooldistrict,hospitaldistrictoranyotherpoliticalunitofthestateauthorizedtoimposepropertytaxes.
Taxrate theproportionoftheappraisedvaluewhichmustbepaidtotaxingentitiesannually.Theappraisedvaluemaybelowerthanthemarketvalue becauseofeitherexemptionsorthehomesteadpropertytaxcap.Manypropertiesaresubjecttotaxesfromfiveto10taxentities. Customarypracticeistorefertothetotaltaxrateforalltaxentitiesas“thetaxrate”.Considerthefollowingexample:ahomesteadhasa marketvalueof$100,000,ahomesteadexemptiontotaling$20,000anda3%taxrate.Annualpropertytaxeswouldbe$2,400or (($100,000-$20,000)X3%).
Unequal appraisal occurswhenthemarketvalueforapropertyexceedsthemarketvalueestablishedbytheappraisaldistrictforcomparablepropertiesafter makingreasonableadjustments.Unequalappraisalsometimesoccurswhenpropertiesareselectivelyreappraisedfollowingtheir acquisition.Inothercasesitoccursbecausetheappraisaldistricthasinaccuratedataforapropertyorsubmarket.Itcanalsooccurwhen theappraisaldistrictreappraisesthemarketvalueforonlyaportionofpropertiesinanarea.Propertyownerscanappealbothmarketvalue andunequalappraisalannuallyinTexas.
Yourpropertytaxeswillbeaggressivelyprotestedeveryyearbyoneof thelargestpropertytaxconsultingfirms.Ifyourtaxesarenotreduced youPAYNOTHING,andaportionofthetaxsavingsistheonlyfeeyou pay when your taxes are reduced! Many FREE benefits
enrollment.
PropertyTaxLocations
HoustonOffice (Corporate) 2200NorthLoopWest, Suite200Houston,TX77018
713-686-9955
DallasOffice (Byappointmentonly) 12300FordRd.,Suite#414 Dallas,TX75234
972-243-9966
ChicagoOffice (Byappointmentonly) 75ExecutiveDrive, Suite349,Aurora,IL60504
708-630-0944
SanAntonioOffice (Byappointmentonly) 8632FredericksburgRdSte105 SanAntonioTX78240
210-226-0829
NewYorkOffice (Byappointmentonly) 70EastSunriseHwy,Suite500 ValleyStream,NewYork11581 934-203-9917
AtlantaOffice (Byappointmentonly) 4751BestRoad,Suite316 CollegePark,GA30337
770-835-4126
