By: Otto, et al. (Senate Sponsor - Williams) H.B. No. 3454

(In the Senate - Received from the House May 1, 2009; May 6, 2009, read first time and referred to Committee on Finance; May 26, 2009, reported adversely, with favorable Committee Substitute by the following vote: Yeas 14, Nays 0; May 26, 2009, sent to printer.)

COMMITTEE SUBSTITUTE FOR H.B. No. 3454 By: Williams

A BILL TO BE ENTITLED

AN ACT

relating to the determination of the value of property for ad valorem tax purposes, including appeals of appraisal review board orders determining protests of property value determinations, and the use of certain values by school districts in adopting tax rates.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 6.411(c), Tax Code, is amended to read as follows:

(c) Except for communications described by Section 41.66(f)(3), this [This] section does not apply to communications that do not discuss the specific evidence, argument, facts, merits, or property involved in a hearing currently pending before the appraisal review board or to communications between the board and its legal counsel.

SECTION 2. Section 6.43, Tax Code, is amended to read as follows:

Sec. 6.43. PERSONNEL. (a) The appraisal review board may employ legal counsel as provided by the district budget or use the services of the county attorney and may use the staff of the appraisal office for clerical assistance.

(b) The appraisal review board may not employ or retain a person to serve as legal counsel for the board if the person serves as legal counsel for the appraisal district or chief appraiser. This subsection does not prevent the appraisal review board from using the services of the county attorney as authorized by Subsection (a).

SECTION 3. Section 23.01, Tax Code, is amended by amending Subsection (b) and adding Subsection (c) to read as follows:

(b) The market value of property shall be determined by the application of generally accepted appraisal methods and techniques. If the appraisal district determines the appraised value of a property using mass appraisal standards, the mass appraisal standards must comply with the Uniform Standards of Professional Appraisal Practice. The same or similar appraisal methods and techniques shall be used in appraising the same or similar kinds of property. However, each property shall be appraised based upon the individual characteristics that affect the property's market value, and all available evidence that is specific to the value of the property shall be taken into account in determining the property's market value.

(c) Notwithstanding any provision of this subchapter to the contrary, if the appraised value of property in a tax year is determined under Subtitle F, the appraised value of the property as finally determined under that subtitle is considered to be the appraised value of the property for that tax year. In the following tax year, the chief appraiser may not increase the appraised value of the property unless the increase by the chief appraiser is reasonably supported by substantial evidence when all of the reliable and probative evidence in the record is considered as a whole. If the appraised value is finally determined in a protest under Section 41.41(a)(2) or an appeal under Section 42.26, the chief appraiser may satisfy the requirement to reasonably support by substantial evidence an increase in the appraised value of the property in the following tax year by presenting evidence showing that the inequality in the appraisal of property has been corrected with regard to the properties that were considered in determining the value of the subject property. The burden of proof is on the chief appraiser to support an increase in the appraised value of property under the circumstances described by this subsection, not on the property owner.

SECTION 4. Sections 23.013, 23.014, and 23.24, Tax Code, are amended to read as follows:

Sec. 23.013. MARKET DATA COMPARISON METHOD OF APPRAISAL. (a) If the chief appraiser uses the market data comparison method of appraisal to determine the market value of real property, the chief appraiser shall use comparable sales data and shall adjust the comparable sales to the subject property.

(b) A sale is not considered to be a comparable sale unless the sale occurred within 24 months of the date as of which the market value of the subject property is to be determined, except that a sale that did not occur during that period may be considered to be a comparable sale if enough comparable properties were not sold during that period to constitute a representative sample.

(c) A sale of a comparable property must be appropriately adjusted for any change in the market value of the comparable property during the period between the date of the sale of the comparable property and the date as of which the market value of the subject property is to be determined.

(d) Whether a property is comparable to the subject property shall be determined based on similarities with regard to location, square footage of the lot and improvements, property age, property condition, property access, amenities, views, income, operating expenses, occupancy, and the existence of easements, deed restrictions, or other legal burdens affecting marketability.

Sec. 23.014. EXCLUSION OF PROPERTY AS REAL PROPERTY. Except as provided by Section 23.24(b), in [In] determining the market value of real property, the chief appraiser shall analyze the effect on that value of, and exclude from that value the value of, any:

(1) tangible personal property, including trade fixtures;

(2) intangible personal property; or

(3) other property that is not subject to appraisal as real property.

Sec. 23.24. FURNITURE, FIXTURES, AND EQUIPMENT. (a) If real property is appraised by a method that takes into account the value of furniture, fixtures, and equipment in or on the real property, the furniture, fixtures, and equipment shall not be subject to additional appraisal or taxation as personal property.

(b) In determining the market value of the real property appraised on the basis of rental income, the chief appraiser may not separately appraise or take into account any personal property valued as a portion of the income of the real property, and the market value of the real property must include the combined value of the real property and the personal property.

SECTION 5. Subchapter D, Chapter 23, Tax Code, is amended by adding Section 23.522 to read as follows:

Sec. 23.522. TEMPORARY CESSATION OF AGRICULTURAL USE DURING DROUGHT. The eligibility of land for appraisal under this subchapter does not end because the land ceases to be devoted principally to agricultural use to the degree of intensity generally accepted in the area if:

(1) a drought declared by the governor creates an agricultural necessity to extend the normal time the land remains out of agricultural production; and

(2) the owner of the land intends that the use of the land in that manner and to that degree of intensity be resumed when the declared drought ceases.

SECTION 6. Section 26.04, Tax Code, is amended by adding Subsection (d-1) to read as follows:

(d-1) This subsection applies only to a school district. Notwithstanding Subsections (a), (b), and (c), on receipt of the estimate of the taxable value of property in the district under Section 26.01(e):

(1) the assessor for the district shall:

(A) determine an estimate of the values specified in Subsection (a) for the district using the estimated value provided under Section 26.01(e); and

(B) submit an appraisal roll to the governing body of the district showing an estimate of each item of information specified by Subsection (b), using the estimated values provided under Section 26.01(e) and determined under Paragraph (A); and

(2) an officer or employee designated by the governing body of the school district shall calculate the effective tax rate and the rollback tax rate for the district using the estimates described by Subdivision (1).

SECTION 7. Section 26.05, Tax Code, is amended by adding Subsection (a-1) to read as follows:

(a-1) This subsection applies only to a school district. The governing body of the school district shall adopt a tax rate for the current tax year before the later of September 30 or the 60th day after the date the estimate of the taxable value of property in the district is received under Section 26.01(e) using the values estimated under that section and Section 26.04(d-1).

SECTION 8. Section 41.66(f), Tax Code, is amended to read as follows:

(f) A member of the appraisal review board may not communicate with another person concerning:

(1) the evidence, argument, facts, merits, or any other matters related to an owner's protest, except during the hearing on the protest; [or]

(2) a property that is the subject of the protest, except during a hearing on another protest or other proceeding before the board at which the property is compared to other property or used in a sample of properties; or

(3) a factual or hypothetical situation that is substantially similar to a situation that is the subject of the protest, except during the hearing on the protest.

SECTION 9. Section 41A.01, Tax Code, is amended to read as follows:

Sec. 41A.01. RIGHT OF APPEAL BY PROPERTY OWNER. As an alternative to filing an appeal under Section 42.01, a property owner is entitled to appeal through binding arbitration under this chapter an appraisal review board order determining a protest filed under Section 41.41(a)(1) concerning the appraised or market value of [real] property if:

(1) the property qualifies as the owner's residence homestead under Section 11.13; or

(2) the appraised or market value, as applicable, of the property as determined by the order is $1 million or less[; and

[(2) the appeal does not involve any matter in dispute other than the determination of the appraised or market value of the property].

SECTION 10. Section 41A.03(a), Tax Code, is amended to read as follows:

(a) To appeal an appraisal review board order under this chapter, a property owner must file with the appraisal district not later than the 45th day after the date the property owner receives notice of the order:

(1) a completed request for binding arbitration under this chapter in the form prescribed by Section 41A.04; and

(2) an arbitration deposit [in the amount of $500,] made payable to the comptroller in the amount of:

(A) $500; or

(B) $250, if the property owner requests expedited arbitration under Section 41A.031.

SECTION 11. Chapter 41A, Tax Code, is amended by adding Section 41A.031 to read as follows:

Sec. 41A.031. EXPEDITED ARBITRATION. (a) A property owner is entitled to an expedited arbitration if the property owner includes a request for expedited arbitration in the request filed under Section 41A.03 and pays the required deposit.

(b) An expedited arbitration must provide for not more than one hour of argument and testimony on behalf of the property owner and not more than one hour of argument and testimony on behalf of the appraisal district.

(c) The comptroller shall adopt rules and processes to assist in the conduct of an expedited arbitration.

SECTION 12. The heading to Section 41A.06, Tax Code, is amended to read as follows:

Sec. 41A.06. REGISTRY AND INITIAL QUALIFICATION [QUALIFICATIONS] OF ARBITRATORS.

SECTION 13. Section 41A.06(b), Tax Code, is amended to read as follows:

(b) To initially qualify to serve as an arbitrator under this chapter, a person must:

(1) have completed at least 30 hours of training in arbitration and alternative dispute resolution procedures from a university, college, or legal or real estate trade association;

(2) have been licensed or certified continuously during the five years preceding the date the person agrees to serve as an arbitrator, as:

(A) [be licensed as] a real estate broker or salesperson under Chapter 1101, Occupations Code;

(B) [, or be licensed or certified as] a real estate appraiser under Chapter 1103, Occupations Code; or

(C) a certified public accountant under Chapter 901, Occupations Code; and

(3) agree to conduct an arbitration for a fee that is not more than 90 percent of the amount of the arbitration deposit required by Section 41A.03.

SECTION 14. Chapter 41A, Tax Code, is amended by adding Section 41A.061 to read as follows:

Sec. 41A.061. CONTINUED QUALIFICATION OF ARBITRATOR; RENEWAL OF AGREEMENT. (a) The comptroller shall include a qualified arbitrator in the registry until the second anniversary of the date the person was added to the registry. To continue to be included in the registry after the second anniversary of the date the person was added to the registry, the person must renew the person's agreement with the comptroller to serve as an arbitrator on or as near as possible to the date on which the person's license or certification issued under Chapter 901, 1101, or 1103, Occupations Code, is renewed.

(b) To renew the person's agreement to serve as an arbitrator, the person must:

(1) file a renewal application with the comptroller at the time and in the manner prescribed by the comptroller;

(2) continue to meet the requirements provided by Section 41A.06(b); and

(3) during the preceding two years have completed at least eight hours of continuing education in arbitration and alternative dispute resolution procedures offered by a university, college, real estate trade association, or legal association.

(c) The comptroller shall remove a person from the registry if the person fails or declines to renew the person's agreement to serve as an arbitrator in the manner required by this section.

SECTION 15. Section 41A.07, Tax Code, is amended by adding Subsection (e) to read as follows:

(e) Notwithstanding any other provision of this section, an arbitrator selected or appointed to arbitrate an appeal under this chapter regarding property other than real property must be licensed as a certified public accountant under Chapter 901, Occupations Code.

SECTION 16. Section 41A.08(b), Tax Code, as added by Chapters 372 (S.B. 1351) and 912 (H.B. 182), Acts of the 79th Legislature, Regular Session, 2005, is reenacted and amended to read as follows:

(b) The parties to an arbitration proceeding under this chapter may represent themselves or, at their own cost, may be represented by:

(1) an employee of the appraisal district;

(2) an attorney who is licensed in this state;

(3) a person who is licensed as a real estate broker or salesperson under Chapter 1101, Occupations Code, or is licensed or certified as a real estate appraiser under Chapter 1103, Occupations Code; [or]

(4) a property tax consultant registered under Chapter 1152, Occupations Code; or

(5) an individual who is licensed as a certified public accountant under Chapter 901, Occupations Code.

SECTION 17. (a) Sections 6.411 and 41.66, Tax Code, as amended by this Act, apply only to an offense committed on or after the effective date of this Act. For purposes of this subsection, an offense was committed before the effective date of this Act if any element of the offense occurred before that date. An offense committed before the effective date of this Act is covered by the law in effect when the offense was committed, and the former law is continued in effect for that purpose.

(b) Sections 41A.01, 41A.03, 41A.07, and 41A.08, Tax Code, as amended by this Act, and Section 41A.031, Tax Code, as added by this Act, apply only to an appeal through binding arbitration under Chapter 41A of that code that is requested on or after the effective date of this Act.

(c) Section 41A.06, Tax Code, as amended by this Act, applies only to a person who initially qualifies to serve as an arbitrator under Chapter 41A, Tax Code, on or after the effective date of this Act.

(d) Section 41A.061, Tax Code, as added by this Act, does not affect the eligibility of a person who is included on the registry list of qualified arbitrators on the effective date of this Act to continue to remain on that registry list before the date on which the person's license or certificate under Chapter 901, 1101, or 1103, Occupations Code, expires unless renewed.

SECTION 18. This Act applies only to the appraisal of property for a tax year beginning on or after the effective date of this Act.

SECTION 19. This Act takes effect January 1, 2010.

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