The Comptroller of Public Accounts adopts new §§9.4301 - 9.4313, concerning procedures for protesting preliminary findings of taxable value, with changes to the proposed text as published in the November 14, 2008, issue of the Texas Register (33 TexReg 9199). The new rules will replace §9.109, which sets out the current procedures for protesting the preliminary findings of taxable value. The new rule(s) were developed, in part, because the comptroller will refer hearings on protests of the preliminary findings to the State Office of Administrative Hearings (SOAH), beginning in 2008. The current rule did not provide for such a referral. New procedures were required to conform comptroller procedures with SOAH procedures and processes and ensure a smooth, efficient referral and a fair hearing. The rules clarify the language and evidence that must be included in a petition to sufficiently state the grounds for objection to preliminary findings. The current rule is difficult for the public to use because it is lengthy and covers several different, but related, topics. The new rules break the longer rule down into shorter rules that each address a specific topic. The new rules govern the entire protest process. Among the matters that are addressed are; how and when to file a petition, extensions of time, what constitutes good cause for submitting evidence after the deadline, the burden of proof, how and when a protest will be referred to SOAH for hearing, the notice of hearing, issuance of a scheduling order, the exchange of evidence after referral to SOAH, the administrative law judge's powers and duties, how the hearing will be conducted, evidentiary rules, notice of the administrative law judge's proposed decision, exceptions to the proposed decision, and when the decisions become final.

During the proposed period, several comments were received and considered by the comptroller.

Comments on §9.4307(e) were received from James F. Ramsey, Ed Kliewer III, George Scott Christian for the Texas Taxpayer and Research Association (TTARA), Robert Mott, and Vance Liston. The commenters objected to subsection (e), which concerns action by the agency on an insufficient protest petition. Under the proposed rule, the division manager may determine that a protest petition does not meet the statutory and administrative rule requirements that apply to a petition protesting the preliminary findings. The commenter's objection was that the division manager should not be given the authority to reject a petition for an insufficient statement of the protest grounds, which is defined as a specific statement of the reasons for each change sought by the petitioner and the documentary evidence that supports each requested change. The commenters suggested that the authority to determine the sufficiency of a petition should be vested in a third party, such as an administrative law judge or hearing examiner. One commenter stated that if the manager retained the authority to reject petitioner, an appeal to the comptroller or an administrative law judge should be permitted. (Presumably, the commenters refer to an Administrative Law Judge (ALJ) employed by SOAH.) The agency declined to make the suggested changes because it is not unprecedented for the authority to reject an appeal of an agency's actions or decision to reside with the agency whose actions or decisions are being appealed. To address the commenter's concerns, however, the agency changed the subsection (e) to provide more distance between the property value study and the individual making the decision. The rule provides for the comptroller or comptroller's designee to determine if a protest petition is sufficient and provides for exercise of discretion in making the decision.

James F. Ramsey, Vance Liston, and Ed Kliewar commented that the notice requirements in §9.4307(g) are vague and should be clarified. In addition, they objected to the requirement that the petitioners certify that notice has been delivered as required and suggested that the certification state that notice was mailed to the required parties. The agency agreed and clarified that a copy of the petition must be delivered to each affected party. The certification of delivery was changed to certification that a copy of the petition was mailed to each affected entity.

George Christian commented for TTARA that §9.4309(a) should be changed to make the referral to SOAH a ministerial, non-discretionary function. The comptroller declined to make the change because the comptroller by statute does not have the discretion to refuse to provide a hearing. Government Code, §403.303, gives school districts and taxpayers a right to a hearing on the entity's protest.

Robert Mott commented that the examples of a sufficient statement of grounds for the protest in §9.4307(f) should include a statement that they are advisory only and not binding on the ALJ. If this statement is not included, the commenter stated that the examples, particularly paragraphs (3) and (4), should be edited. The commenter stated that the example of documentary evidence in paragraph (3), in which the petitioner contends that a property was sold under duress, is not obtainable. The commenter stated that an executor would not swear that property was sold under duress because they "are liable for that kind of thing." The agency disagreed because agency appraisers have obtained these statements. The commenter objected also to the example in paragraph (4) of documentary evidence that personal property is included in the sale of real property. The example was a list, attached to the real property deed, of the items of personal property included in the sale price and the value of each. The commenter stated that this list is "virtually never done by real estate agents because they cannot get a commission on the sale of personal property." The comptroller does not agree that most real estate brokers misrepresent the basis on which their commissions are calculated, and did not make the change. The agency did not add the suggested language because the rule states that the paragraphs are examples, which is a self-explanatory term. Addition of the suggested language is therefore unnecessary, and would be redundant.

Robert Mott commented that §9.4305 should be changed to place the authority to determine if an extension of time should be granted with hearing examiners because the manager should not have this authority. The commenter noted that past hearing examiners have found for the petitioner over the division's objections. The agency declined to make the suggested change, but changed subsections (d) and (f) to provide for extensions of time to be granted or denied by the director of the Property Tax Assistance Division. This change addresses the commenter's concern that the division manager is too close to the Property Value Study to make a fair decision.

The commenter stated that §9.4310(c)(5) and (7) should be deleted from the grounds on which the ALJ may dismiss a petition. The commenter stated that dismissal for failure to certify that notice was delivered was a trap for small districts. The commenter stated that dismissal because amended preliminary findings were filed does not make sense and the ground should be deleted or made very narrow. The agency declined to make the suggested changes because the ALJ is not required to dismiss on these grounds, and were the division to make a motion to dismiss on any of the grounds listed, the subject party would have an opportunity to present its argument against dismissal. The commenter stated also that §9.4311(e), which defines the comptroller's burden of proof, should be deleted because it does not correctly state the comptroller's burden. The agency deleted the provision.

The comptroller corrected an error in §9.4308(c) by deleting the word "mediation." The inclusion of mediation in the subsection was inadvertent and appeared to provide both a settlement conference and mediation, instead of providing petitioners with a choice to request either mediation or an informal conference before proceeding to a hearing. A change in the name of the comptroller division that is charged with conducting the Property Value Study occurred after publication of the proposed rules. To accommodate the change, the comptroller added a definition of "division" to §9.4301 and renumbered all paragraphs that follow 9.43.01(5). Specific references to the division's name were deleted from §9.4303 and §§9.4305 - 9.4312.The comptroller also deleted an unnecessary sentence concerning the means by which the manager may provide written approval to file protests through electronic transmission from §9.4307(d)(4) and corrected a grammatical error in subsection (f)(4) changing "than" to "that."

The new rules are adopted under Government Code, §403.303, which requires the comptroller to adopt procedural rules governing the conduct of the protest hearing.

The new rules implement Government Code, §403.303, which concerns protests of the comptroller's preliminary certification of school district total taxable property value.