Abbott signs property tax appraisal bill
Law raises transparency for homeowners, caps collection rate increases without vote
Texas homeowners will have tools they’ve never had before under legislation Gov. Greg Abbott signed into law on Wednesday.
Starting next year, property appraisers statewide will have to revamp appraisal notices and create online real-time tax notices with clearer information for homeowners that show them who is trying to raise their taxes and where and when to fight it.
“For the first time ever, you will be shown exactly which local taxing entity is asking you for more money,” said Texas House Speaker Dennis Bonnen, a Brazoria Republican who has spent years trying to demystify the appraisal notices required by Texas law.
Of all the reforms signed into law through Senate Bill 2, the change that will affect the most people is likely the new notice requirements, said Dale Craymer, president of the Texas Taxpayers and Research Association. Craymer said appraisal notices now are like mysterious “black boxes” that even seasoned tax experts would have trouble fully understanding.
Currently, millions of Texans are fighting the annual increases in the appraised value of their homes, yet few ever show up to the board hearings where school districts, cities, counties and other governments are actually setting the tax rates that increase their tax bills.
In testimony before the Senate earlier this year, Jennifer Rabb, director and fellow of the McNair Center for Entrepreneurship and Economic Growth at Rice University, showed that in the five largest counties, more than 800,000 people challenged their appraisals in 2016, yet in the five counties combined, fewer than 30 people showed up at rate hearings to try to stop tax hikes.
The problem is that most people don’t know there are actually two systems at play, said State Rep. Dustin Burrows, R-Lubbock. While most taxpayers pay close attention when appraisal districts set the value of a property, far fewer are focused on the decisions by those local governments to set the tax rate.
“Somewhere between 75 and 85 percent of people who showed up to appraisal districts to protest their values thought they were protesting their tax rates,” said Burrows, a key House author of the tax reform legislation.
Bonnen said SB2 addresses that misunderstanding. He said people will still get appraisal notices in the spring that they can challenge. But now in the summer they will also get real-time tax notices that will show them the tax rates that are being set by local governments, and how they will affect the tax bill. The notices will include clear information on how to fight those increases and links to allow people to instantly send comments about the rates to the elected officials responsible.
Those changes, however, have largely been overshadowed by debate over more controversial provisions in the tax reform package that place limits on how much local governments can increase property tax collections from year to year.
The law bars cities and counties from increasing property tax collections more than 3.5 percent in any year without a vote by the public. School districts would be capped at 2.5 percent. While those provisions won’t lower taxes, they will reduce the dramatic increase in local property taxes many homeowners in high growth areas have been feeling in Texas.
Currently, local governments can increase collections by 8 percent before the public can petition for a rollback election. Houston is under different rules because of a voter referendum and can only go to 4 percent. Under the bill Abbott signed Wednesday, all voters would get an automatic election in November if a city or county tries to go over 3.5 percent.
If the 3.5 percent cap had been in place in 2017, more than half of Texas cities would have been unaffected by the cap. According to Texas State Comptroller Data, of the 1,040 cities in Texas, 218 had not increased the effective rate from 2016 to 2017. Another 307 had increases, but were less than 3.5 percent where the Legislature is proposing to cap cities now. That left 515 cities that did increase taxes my 3.5 percent or more.
Senate Bill 2, authored by State Sen. Paul Bettencourt, R-Houston, also addresses the appraisal review process when homeowners challenge their appraisals. Those changes include requiring more training for appraisal review board members, eliminating appraisal review board meetings on Sundays, and requiring appraisal districts to use manuals issued by the Texas Comptroller to standardize methods.
Major victory for GOP
Getting any property tax reform passed through the Legislature is seen as a major political victory for Abbott and others who struggled for years to pass any major reforms. On Wednesday at a news conference announcing the bill signing, Lt. Gov. Dan Patrick, a Republican who presides over the Senate, reminded reporters he’s been fighting for 16 years in politics for reforms like these. In 2017, after similar tax reforms failed to pass in either the regular session or in a subsequent special session, Bonnen said he considered quitting the Texas Legislature altogether.
Bonnen said that failure may have been for the best because the reforms in the bill Abbott signed into law are far more significant than those lawmakers debated in 2017.
Abbott stressed that SB2 is part of a broader tax relief effort. On Tuesday, Abbott signed a school finance bill into law — HB 3 — that commits $5 billion toward buying down school property taxes. Abbott said SB2 is a protection to make sure those reduced taxes don’t creep right back up over a few years, as has happened with past property tax reforms.
Under the school finance bill, school property tax rates will be reduced by an average of 8 cents per $100 of a home’s value in 2020 and by 13 cents in 2021. For the owner of a $200,000 home, that would amount to a decrease of about $160 in 2020.
What isn’t in the tax reform packages is a proposed sales tax increase that Abbott, Patrick and Bonnen pitched this spring in order to make deeper cuts to property taxes. But that proposal ran into roadblocks in both the Texas House and Senate and never passed.
On Wednesday, Abbott didn’t fully commit to bringing the issue back for the next Legislature, but said if “voters are adamant that they want to see property taxes reduced even more,” then yes the sales tax swap would come back again.