JWB C.S.H.B. 2201 75(R)BILL ANALYSIS WAYS & MEANS C.S.H.B. 2201 By: Stiles 3-26-97 Committee Report (Substituted) BACKGROUND Section 42.08, Tax Code (Forfeiture of Remedy for Nonpayment of Taxes), requires a taxpayer to pay taxes on property that is subject to an appeal before the delinquency date in order to proceed to a final determination of the appeal. The amount of taxes that must be paid can be either: 1) The amount of taxes due on the portion of the taxable value of the property that is not in dispute or the amount of taxes imposed on the property in the preceding year, whichever is greater; or 2) the amount of taxes due on the property under the order from which the appeal is taken. Last year the Texas Supreme Court found a portion of Section 42.08, Tax Code, unconstitutional in Rockwall County CAD v. Lall, 924 S.W.2d 686 (Sup. 1996). The court held that the requirement to pay an amount of taxes equal to the previous year's taxes or forfeit the right to appeal is a violation of open access to courts. One significant effect of this ruling is that property owners can defer payment of a substantial portion of their property tax liability with no penalty or interest by appealing their assessed valuation, regardless of the likelihood of a successful appeal. The Texas Supreme Court decision recognized that the reasonableness of a statutory prepayment requirement for property tax appeals must be measured against other alternatives available to the legislature. PURPOSE This bill conforms property tax law to Texas Supreme Court decision in Rockwall County CAD v. Lall, by deleting the requirement that taxpayers pay the taxes imposed on the property in the preceding year in order to proceed to a final determination. The bill also imposes a penalty for bringing appeals in bad faith; limits the amount of attorney's fees that can be awarded in an appeal decision under sections 42.25 and 42.26; and allows appraisal districts to be awarded attorney's fees in cases where the appraisal district prevails in court. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1.Amends Sections 42.08(b) and (c), Tax Code (Forfeiture of Remedy for Nonpayment of Taxes), as follows: (b) Requires the taxpayer to pay the lesser amount of taxes due on the portion of value not in dispute or the amount of taxes due under the order from which the appeal is taken; removes language found unconstitutional by the Supreme Court. (c) Makes nonsubstantive language changes. SECTION 2.Amends Section 42.29, Tax Code (Attorney's Fees), to reduce the amount of attorney's fees a property owner may be awarded in an appeal to the court under Section 42.25 (Remedy for Excessive Appraisal) or 42.26 (Remedy for Unequal Appraisal) to $5,000; deletes current provision allowing $15,000 or 20 percent of the total amount by which the property owner's tax liability is reduced, provided that it does not exceed the total amount by which the liability is reduced; provides that an appraisal district that prevails in an appeal may be awarded reasonable attorney's fees not to exceed $5,000 if the amount of taxes due exceed the property owner's claim by more than $5,000. SECTION 3.Amends Subchapter B, Chapter 42, Tax Code, by adding Section 42.30. PENALTY FOR APPEAL BROUGHT IN BAD FAITH. (a) Authorizes the court to penalize a property owner who is found to have brought an appeal in bad faith; allows penalty to be on behalf of each taxing unit but provides that the penalty cannot be more than five percent of the amount of taxes due to each taxing unit. (b) Provides that the penalty in Subsection (a) is in addition to other penalties in this title; provides procedure for the assessor for each taxing unit to add the amount of the penalty to the taxing unit's bill for the property; provides due date for the penalty; specifies that the penalty constitutes a lien on the property that was the subject of the appeal. SECTION 4.Amends Section 42.42, Tax Code (Correcting Supplemental Tax Bills), by amending Subsections (b) and (c) and adding Subsection (d). (b) Makes nonsubstantive language changes. (c) Provides for the penalties imposed on delinquent taxes to be included on a supplemental tax bill. (d) Adds a provision for a property owner to receive a supplemental tax bill if he/she did not pay any portion of their taxes on the property because the court found payment would constitute an unreasonable restraint on the owner's right of access to the courts; requires the payment of interest but not penalties. SECTION 5.Provides for existing law to continue after the effective date for appeals filed before the effective date; provides that Section 4 amendments apply to penalties and interest on ad valorem taxes that accrue on or after the effective date; prior law remains in effect after the effective date for the purpose of calculating penalties and interest that accrued before that date. SECTION 6.Emergency clause for immediate effect. COMPARISON OF ORIGINAL TO SUBSTITUTE The only difference between H.B. 2201 and C.S.H.B. 2201 is the substitute is worded for immediate effect.