2010 Truth-In-Taxation County Auditors Institute...1 2010 Truth-In-Taxation County Auditors Institute May 5, 2010 Dennis Hart Linebarger Goggan Blair & Sampson LLP TRUTH-IN-TAXATION

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2010 Truth-In-Taxation

County Auditors Institute May 5, 2010

Dennis Hart Linebarger Goggan Blair & Sampson

LLP

TRUTH-IN-TAXATION LAWS

Texas Constitution and Property Tax Code Chapter 26 requirements have two purposes:

1.  To make taxpayers aware of tax rate proposal and

2.  to allow taxpayers, in certain cases, to rollback or limit tax increase.

FOUR GUIDING PRINCIPLES

1.  Taxpayers’ right to know of property value increases and estimated taxes.

2.  Unit’s obligation to calculate and publish rate before adoption.

3.  Unit’s obligation to publish notices and hold hearings regarding increases.

4.  Voters’ right to call for a tax rate rollback election.

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IMPORTANT DATES IN TRUTH-IN-TAXATION

May 1 Chief appraiser sends notices of appraisal value.

April 30 Chief appraiser certifies estimate of taxable values (city, county, ISD).

July 20 ARB approves appraisal records. July 25 Chief appraiser certifies approved

appraisal roll. Aug. 7 Unit publishes tax rate notices. Aug. thru Unit adopts its budget. Sept. 29 Must adopt tax rate by Sept. 29 or 60 days

after receiving roll, whichever is later. Oct. 1 Assessor mails tax bills.

WATER DISTRICTS

•  Water Code Sec. 49.107(g) exempts special districts created by Water Code Sec. 49.001 (not navigation, port authority, or certain conservation or reclamation districts) from Tax Code Secs. 26.04, 26.05 & 26.07.

•  Must follow Water Code Sec. 49.236, requiring public hearing on proposed rate and publishing hearing notice.

NEW TAXING UNITS

•  Did not levy in 2009; tax in 2010.

•  No sales tax in 2009. •  Not required to comply

with TNT rate calculations.

•  Comptroller recommends similar hearing notices to inform taxpayers.

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SMALL TAXING UNITS

•  Sec. 26.052 states a small taxing unit is one that adopts a tax rate of 50 cents or less per $100 and imposes taxes of $500,000 or less.

•  Simplified tax rate notice process to publish effective/rollback rates and other notices.

EFFECTIVE TAX RATE

The effective tax rate is a rate that raises about the same total revenue as last year on properties taxed in both years.

2009 2010

EFFECTIVE TAX RATE

Prior Year’s Taxes less

Taxes on Property Lost in 2010 divided by

Adjusted 2010 Taxable Value

X $100

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EFFECTIVE TAX RATE (ETR) WORKSHEET

Line 1: 2009 total taxable value at calculation time

•  Include most adjustments •  Sec. 25.25(d) not

subtracted •  2009 court ordered value

loss reflected •  Include values with 65/

disabled ceilings •  Include TIF values.

ETR WORKSHEET CONT.

Line 2: 2009 taxable value of 65 or older or disabled homesteads with tax ceilings (if adopted 65/older or disabled tax ceiling in 2010, do not use this line until 2011).

Line 3: 2009 adjusted taxable value 1.  Units with tax ceilings,

Line 1 minus Line 2. 2.  Other units, Line 1.

Line 4: 2009 total adopted tax rate.

ETR WORKSHEET CONT.

Line 5: Court ordered value loss. 1.  Only decisions on 2009

values. 2.  2009 ARB values minus

court decisions on 2009 values.

Line 6: 2009 taxable value adjusted for court-ordered reductions.

Line 7: 2009 value of property de-annexed after January 1, 2009.

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ETR WORKSHEET CONT.

Line 8: 2009 taxable value lost for first-time exemptions.

Exempt for: •  January 1, 2010 •  Total or partial •  No Freeport, “goods-in-transit” value •  No new tax abatement value •  Increased original exemption – not

lowered – use difference between original exempted and increased exempted amount.

Line 9: 2009 taxable value lost for special appraisal

First qualified

ETR WORKSHEET CONT.

•  January 1, 2010 •  1-d or 1-d-1, timber,

recreational/scenic or public access airport appraisal

•  2009 market value minus •  2010 productivity or

special appraised value.

ETR WORKSHEET CONT.

Line 10: Total lost value Line 7 + Line 8 + Line 9 Line 11: 2009 adjusted taxable value

Line 6 - Line 10 Line 12: Adjusted 2009 taxes

(Line 11 X Line 4) / $100 Line 13: Taxes refunded for prior

years •  Tax Code Sections

25.25(b), (c), 31.11 •  Applies to 2008 & prior

year refunds only.

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ETR WORKSHEET CONT.

Line 14: Taxes in TIF for 2009 •  TIF taxes paid into fund. •  If no 2010 captured appraised value in TIF, enter zero.

Line 15: Adjusted 2009 taxes with refunds

Line 12 + Line 13 - Line 14.

Second Part of Equation Line 16: Total 2010 certified taxable value

A.  2010 certified values: includes 65 or older or disabled taxable values

B.  County: Railroad rolling stock values C.  Pollution control exemption value: Check

with attorney G.  2010 captured appraised value in TIF zone

(do not include new property listed in Line 21)

H.  Total 2010 value A + B - C - D

ETR WORKSHEET CONT.

Line 17: Total value of properties under protest or not included on certified appraisal roll.

2010 taxable value of properties under protest:

•  5% (10%) or less total value -  Two values: CAD’s & taxpayer’s

Use taxpayer’s value •  2010 value not increased,

estimate taxpayer wins •  Value increased, use 2009 value

or value if taxpayer wins •  Always use lower value

ETR WORKSHEET CONT.

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Line 18: Enter 2010 taxable value of 65/older or disabled homesteads with tax ceilings. (If adopted 65/older or disabled tax ceiling in 2010, do not use this line until 2011.)

Line 19: 2010 total taxable value Line 16E + Line 17 - Line 18 Line 20: 2010 value of annexed property

1.  Annexed after January 1, 2009 2.  Real & personal property

ETR WORKSHEET CONT.

Line 21: 2010 taxable value of new improvements and new personal property located in new improvements 1.  New building or structure after 1/1/09; 2.  Transportable structure erected on

land not held for sale or temporary; 3.  New addition to existing improvement; 4.  New personal property in new building; 5.  Plats, water, sewer, drainage line,

paving; 11.   Expiring or terminated tax abatement;

and 12.   Does not include:

•  New mineral interest •  Omitted property.

ETR WORKSHEET CONT.

Line 22: Total adjustments to 2010 taxable value

Line 20 + Line 21 Line 23: 2010 adjusted taxable value

Line 19 - Line 22 Line 24: 2010 effective tax rate

Line 15/Line 23 X $100 Line 25: County’s total 2010 effective tax

rate: Add all county rates on Line 24.

ETR WORKSHEET CONT.

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2010 ROLLBACK TAX RATE

Two Components:

•  Maintenance & Operations Rate (M&O): Utilities, salaries, day-to-day operations

•  Debt Service Rate: Repay bonds, debt secured by property taxes

ROLLBACK CALCULATION

M & O Tax Rate: 1.  Take adjusted 2009 value, 2.  Multiply by 2009 M&O rate, 3.  Divide by adjusted 2010 taxable

values, 4.  Multiply by $100, 5.  Multiply by 1.08 to get

maximum (rollback) operating rate.

SPECIAL PROVISIONS: 1.  Criminal Justice Mandate -

Counties 2.  TIF taxes 3.  Transferring a function 4.  Pollution control 5.  Enhanced Indigent Health

Care costs.

ROLLBACK RATE CALCULATIONS CONT.

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ALL TAXING UNITS CALCULATIONS Debt service tax rate: 1.  2010 debt payments 2.  Less 2009 excess debt tax collections 3.  Divide by 2010 anticipated collection

rate 4.  Equals 2010 adjusted debt 5.  Divide adjusted debt by 2010 total

taxable values 6.  Less 2010 captured TIF value, and 7.  Multiply by 100 8.  Equals 2010 debt service rate.

ROLLBACK RATE CALCULATIONS CONT.

ADDITIONAL SALES TAX RATE First Year

Units that adopted sales tax in August or November 2009 or in January or May 2010:

1. Use Comptroller’s estimate of taxable sales for previous four quarters.

2. Hospital created after 9/1/01 in counties 75,000/less may levy sales tax without reducing tax rate.

Estimated sales tax revenue = Estimated taxable sales X sales tax rate X .95

Estimated sales tax revenue divided by 2010 total taxable value (x 100) =

Sales tax adjustment rate

(Subtracted from effective & rollback rates)

ADDITIONAL SALES TAX RATE CONT.

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SECOND YEAR SALES TAX ADOPTED BEFORE AUGUST 2009

Use actual last four quarters of additional sales tax revenue and divide by 2010 taxable value (x 100) =

Sales tax adjustment rate

(Subtracted from rollback rate only)

For a taxing unit’s historical summary of monthly local sales and use tax allocation payments, contact or view:

TEXAS COMPTROLLER

800-531-5441, ext. 34530 Web site:

www.window.state.tx.us/taxinfo/local/ Under “Allocation Payment Detail.”

REQUIRED NOTICES AND HEARINGS FOR TAXPAYER INFORMATION

Notice of Effective Tax Rate contains: 1. Statement of Increase/Decrease 2. Schedule A, unencumbered fund

balances 3. Schedule B, 2010 Debt Service 4. Schedule C, Sales Tax 5. Schedule D, Criminal Justice Mandate 6. Schedule E, Transfer of Department,

Function or Activity 7. Schedule F, Enhanced Indigent Health

Care

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•  Small unit has special notice

•  All units adopt tax rate at meeting.

•  If applicable, tax bill includes statement with sales tax savings.

REQUIRED NOTICES AND HEARINGS FOR TAXPAYER INFORMATION CONT.

NOTICE OF EFFECTIVE TAX RATE

Comptroller Prescribed Form Notice format and wording:

•  At least 8-point type or larger recommended

•  May publish at same time as Notice of Public Hearing.

1.  Assessor calculates effective and rollback rates.

2.  Assessor reports rates to governing body.

3.  Assessor publishes effective and rollback rates, but not small taxing units.

4.  Governing body complies with TNT laws.

5.  Governing body determines if proposed rate may trigger special notices and public hearings.

STEPS DETERMINING WHETHER TO PUBLISH NOTICES AND HOLD MEETINGS

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If proposed rate does not exceed the lower of rollback rate or effective rate: •  Governing body posts open

meeting notice for regular meeting.

•  Governing body adopts rate as separate agenda item.

•  Governing body adopts 2-part rate for M&O & debt service.

STEPS DETERMINING WHETHER TO PUBLISH NOTICES AND HOLD MEETINGS CONT.

If 2010 proposed tax rate exceeds lower of effective or rollback tax rate, unit must publish notice and hold public hearings, except small units.

The governing body plans a calendar of events. (Comptroller’s Office will publish planning calendar in the 2010 TNT Guide later this month)

STEPS DETERMINING WHETHER TO PUBLISH NOTICES AND HOLD MEETINGS CONT.

Local Government Code Chapters 102 and 111 for county/city budget adoption

In 2008 new public notice requirements for cities and counties that propose budgets that raise property tax revenues. Vote on tax increase in budget separate from budget adoption and requirement to post proposed and adopted budgets on Web.

Contact Comptroller’s Local Government Assistance Div. (800) 531-5441, ext. 3-4679 for budget questions.

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NOTICE OF PUBLIC HEARING ON TAX INCREASE

The notice must contain the following information:

•  Proposed tax increase percentage

•  Hearing date, time and place for each hearing

•  Officials’ vote on proposed rate •  Comparisons of taxes on

average home.

PUBLISHING REQUIREMENTS

1.  Must be at least quarter page ad in standard/tabloid size newspaper.

2.  Must appear 7 days before first hearing.

3.  Cannot appear in classified/ legal section.

4.  Must have 24-point type or larger headline.

5.  Must follow Tax Code Sec. 26.06 wording.

NOTICE OF PUBLIC HEARING ON TAX INCREASE CONT.

LEGAL NEWSPAPER •  Devotes 25 percent or more to

general interest items; •  Published at least once a week; •  Published regularly for at least

12 months before notice is placed; and

•  Entered as second class mail in county where published (same as periodicals).

NOTICE OF PUBLIC HEARING ON TAX INCREASE CONT.

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INTERNET WEB SITE OR TV

•  Post Notice of Public Hearing on Web site 7 days before first hearing and continue until second hearing.

•  Publish notice as 60-second notice if free access to TV for 7 days, 5 times a day between 7 am & 9 pm before first hearing.

•  Web hearing notice must contain substantially same information in published notice.

•  Requirement does not apply to taxing unit that cannot comply due to electronic or mechanical failure or other circumstances beyond unit’s control.

•  If unable to comply a property owner cannot file injunction restraining collection.

NOTICE OF PUBLIC HEARING ON TAX INCREASE CONT.

PUBLIC HEARINGS REQUIREMENTS

•  Hold on weekdays, not public holidays.

•  Open Meeting Law requires posting open meeting’s notice.

•  Must have quorum of governing body.

•  Public may present their views. •  Announce date, time, place for

adopting rate, 3 to 14 days after second hearing.

Notice of Tax Revenue Increase

•  Same type, size, placement as public hearings notice.

•  Print after each public hearing but before rate adoption.

•  Wording required by Tax Code Sec. 26.06.

•  Post Notice of Tax Revenue Increase on Web site 7 days before meeting to adopt rate.

•  Publish as 60-second notice if free access to TV for 7 days, 5 times a day between 7 am & 9 pm before meeting to adopt rate.

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MEETING TO ADOPT TAX RATE

•  Open Meeting Law requires posting open meeting’s notice.

•  Open Meeting Law requires adoption as separate item on agenda.

•  Adopt rate 3 to 14 days after second hearing.

•  Adopt rate 7 to 14 days after second hearing if Web site or TV notices required.

•  Most Counties & general law cities required to adopt budget first.

•  Adopt as official action. •  Adopt rate in two parts:

 M&O rate & debt service rate (Include county judge as quorum for county adoption.)

MEETING TO ADOPT TAX RATE CONT.

Tax Code Section 26.05(b): Counties, cities and special districts (not water districts) that adopt rate above the effective rate must:

•  Take a record vote on ordinance, resolution or order adopting rate using special language in the motion to adopt.

•  Include special language in the ordinance, resolution or order using larger type if increasing operating taxes.

•  Include the special language in a notice on the home page of the unit’s Web site if increasing operating taxes.

ALL TAXING UNITS

Tax Code Section 26.05(a) states rate must be adopted by:

1.  September 29 or 2.  60th day after taxing unit

received appraisal roll (whichever is later).

Failure to adopt within time period results in adopting either the effective rate or last year’s rate, whichever is lower.

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What if governing body does not follow procedures or does not comply in good faith with truth-in-taxation procedures?

Any taxpayer can obtain an injunction prohibiting unit from collecting taxes if filed before unit delivers substantially all bills.

Dennis Hart

Linebarger Goggan Blair & Sampson, LLP

[email protected]