The Commercial Real Estate Network Issue 1, 2011 : Page 54
In the Workplace Paul Pennington pp ennington@p ep ennington.com Mr. Pennington’s expertise is based on 30 years of experience and includes all types of real and per-sonal property appeals and experience in property tax litigation support. His jurisdictional respon-sibilities include properties located in Louisiana and Texas. A Graduate of The University of Northern Colorado (1976), he is a licensed Senior Property Tax Consultant and a Texas Real Estate Broker. property tax BasIcs for BUIldIng oWners I n Texas, the second largest operating ex-pense after debt service is property taxes. And, since the majority of property taxes are passed through to tenants, it’s ex-tremely important to control them – particu-larly in today’s competitive market. Texas tax rates are high because of our property tax system. Since we have no state in-come tax, property taxes are the primary finan-cial resource for the operations of government. Annual valuations are determined by local appraisal districts and taxes are levied and col-lected by counties, cities and school districts. Since tax valuations can be contested annually, property owners and managers should know that the Texas Constitution sets out five basic rights in regards to property taxation: 1 Taxation must be fair and equitable. 2 All tangible property must be taxed based on its current market value. Proper-ties receiving exemptions and agricultural valuations are excepted from this rule. 3 All property is taxable unless exempted by state and federal law. 4 Taxpayers have a right to reasonable notice of increases in the appraised value. 5 Each property in a county must have a single appraised value. Building owners/managers should un-derstand the meanings of fair and equitable taxation and the concept of market value for property tax purposes. determine the property’s current fee simple market value, as required by the Texas Prop-erty Tax Code. on the docket UnIform and eqUal Through court decisions and legislation, the issue of fair and equal taxation, also known as uniform and equal appraisal, has been deter-mined to mean that a taxpayer’s property should be assessed at the median level of appraisal in relation to other like and comparable properties. Thus, if an office property sells and an appraisal district raises the value to the sales price, while leaving surrounding comparable properties at lower values, an appeal based on uniform and equal appraisal would be possible. With the exception of a recent sale or a property under construction, the market val-ue on office buildings is generally determined by using the income approach to value. Typi-cally, a pro-forma is used to determine mar-ket rental rates, vacancies, operating expenses and capitalization rates. Court rulings and the Texas Property Tax Code state that cur-rent market information must be used in this process, not historical data. Using this data, the appraisal district and/or the taxpayer will The Texas property tax calendar is divided into four phases: JanUary 1 -may 15 the appraIsal phase • The appraisal district collects information to appraise properties for the current tax year • Administer exemptions and special appraisals • Update property records • Taxpayers file personal property renditions and appraisal districts set valuations based on those filings • Notices of appraised values are mailed to taxpayers may 15 -JUly 25 the eqUalIzatIon phase (the admInIstratIve remedy) • The tax roll is submitted to the Appraisal Review Board (ARB) • Taxpayers file protests 54 the ne t w ork | mar2011
