b'TACOs Take on Texas Tax QuestionsBY BRIAN SCHAEFFER, RANDALL DALLY AND RON HINKLEIs Property Tax in Texas a De Facto rates. The Property Tax Reform and Relief title: (1) the Appraisal ofIncome Tax? Act of 2019 had four main goals: (1) lower Real Estate published byThis question is heard throughout the rollback rate from 8% to 2.5% for the the Appraisal Institute; (2)the Lone Star State, particularly among largest taxing units in the state; (2) require the Dictionary of Real Es- Brian Schaeffer Randall Dally Ron Hinklecommercial property owners/business an automatic tax ratification election if tateAppraisalpublishedoperators. So, whats the answer? Tech- the rollback rate is exceeded, eliminating by the Appraisal Institute; (3) the Uni- rub. How is market value determined?nically, the answer is, No. thepetitionrequirementintheprior formStandardsofProfessionalAp- Isittheincomemethod,marketTexas does not have a state income statute; (3) make information about the praisalPracticepublishedbyThe method or cost method? Once a valuetax.Tofundlocalgovernmentsand tax rates proposed by local taxing units Appraisal Foundation; and (4) a publi- has been assigned, can your businessschools, Texans pay property tax rates more accessible to property owners, and cation that includes information related protest a high value? Sure. To do this,that are among the highest in the coun- more timely; and, (4) make it easier for to mass appraisal. youmustsupplyyourbooksandtry. Residential and commercial prop- property owners to express their opin- Whatstheproblemthen?Many recordsthereby supporting the asser-erty owners are informed of these rules ions about proposed tax rates to local homeowners figured out that taxable tion that the income method of prop-when they acquire land, a home and/or electedofficialsbeforetaxratesare rates mean very little if the value of the erty tax assessment is really an incomea business in the state. adopted. propertyrisesexponentially.Ifa tax. In the protest, you may be informedWhy has the relationship with some Atthesametime,theLegislature $300,000 home is taxed at 3% thats an that many of your business expensesappraisal districts and their constituents adopted language in the Tax Code that annual bill of $9,000. But if the home aredeemedunacceptable(soundsturned cold, if not downright hostile? In states, Appraisal methods and tech- value increases to $330,000 the bill goes more like an income tax audit). As an al-2019, the Texas Legislature enacted limits niques included in the most recent ver- up to $9,900the maximum annual ternative to protesting on your own, youon how much residential tax revenue sions of the following are considered cap. The local taxing entity can claim can hire a tax mitigation company tocould increase (10% annually), and fur- generally accepted appraisal methods they held the rate, while in fact reap- fight your increase, and they more thanthermore placed annual caps on applied and techniques for the purposes of this ing a $900 windfall. likely will get you some relief. TheseOn the commercial side, it is truly the companies work on contingent fees asWild West. Thesepropertiesmaybe a percentage of the tax they save you. Allsubject to caps on rates, but there are no in all, you are still going to pay more. Itscaps on values. A commercial property just a question of how much more.valued at $300,000 last year could be ar- What can be done to slow down thebitrarilyvaluedat$600,000ormore income method train, and diffuse thetoday, thus at least doubling the tax bill; image of Texas as having a de facto in-it doesnt matter that the rate is capped. cometax?TradeorganizationslikeHow can some appraisal districts justify TACO, in conjunction with many otherannual commercial property tax increases state trade organizations and economicof 100-300% when no specific changes developmentgroups,areaskingforhave occurred in the business operations consideration of two common-senseyear-over-year? Are the increases largely approachestocommercialpropertydue to a shift to taxing businesses under taxes, as follows:the income method? Perhaps. Does that WorkwiththeTexasLegislaturemean its equivalent to an income tax? It and/orComptrollersoffice(throughdepends on who you ask. legislation if necessary) to create indus-TheTexasComptrollerandTexas try-specific streamlined Profit & LossConstitution require appraisal districts Statements. These documents wouldto assess the maximum taxes from a recognize typical income and expensesbusiness entity based on market value. that businesses in a given field of oper-The Texas Comptroller enforces this by ation incur, and the reports would beurgingappraisaldistrictstousethe submitted to appraisal districts undermost effective methodology. Theres the penalty of perjury. This is fair to thebusiness as it should give a reasonablyaccurate financial picture of the busi-ness, and it keeps the appraisal districtfrom just guessing at business values. Itstill does not mean variables cant beapplied and protests cant be waged, butit mitigates most actions.Work with the Texas Legislature to cre-ate annual caps on commercial propertytaxes, preferably in the range of 10%. Thiswould allow businesses to budget for rea-sonable increases in the large businessline item known as property tax. Thiswould give commercial property ownersthe same protection land/home propertyowners have on rising appraisals.This would go a long way to addressthe question of whether property tax as-sessedundertheincomemethodistruly just another high tax in a state thatdoes not have an income tax. Targetingandtaxingbusinessincomeswhilelargely ignoring business expenses, (in-cluding property tax) furthers the beliefthat property tax in Texas is a de factoincome tax. We can do better and work-ing together we will address this issue.Brian Schaeffer is executive direc-tor and CEO of the Texas AssociationofCampgroundOwners(TACO),Randall Dally is president of TACO;and Ron Hinkle is TACOs legislativeconsultant.WCM14 -February 2021 Woodalls Campground Management'