The Comptroller of Public Accounts adopts new §§9.4301 - 9.4317, concerning new Subchapter L, Procedures for Protesting Comptroller Property Value Study and Audit Findings, to replace §§9.4301 - 9.4313, with changes to the proposed text of §§9.4303, 9.4304, 9.4306, 9.4307, 9.4309, 9.4310, 9.4314, and 9.4315 as published in the November 19, 2010, issue of the Texas Register (35 TexReg 10183). The adoptions of §§9.4301 - 9.4317 and repeal of §§9.4301 - 9.4313 are, in part, the result of a rule review of Texas Administrative Code, Title 34, Part 1, Chapter 9, Subchapter L, conducted by the comptroller. The rule review was performed pursuant to Government Code, §2001.039 and resulted in a determination that the reasons for initially adopting §§9.4301 - 9.4313 continue to exist. Sections 9.4301 - 9.4317 are being adopted, and §§9.4301 - 9.4313 repealed, to provide added clarification to and improve efficiency of the protest process.

The agency received written comments from various businesses and individuals. Their comments and the agency's responses are as follows.

The agency received a written submission from an individual writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. Citing Texas Government Code, §403.302(d), the commenter stated that it is "unclear whether the final decision issued by the deputy comptroller on a jurisdictional defect or insufficient grounds for objection is a final determination of a protest that can be appealed to district court," that, "[a]s a result the comptroller has the ultimate say on whether a petition contains jurisdictional defects or raises sufficient grounds for objection, and the petitioner has no adequate recourse when it disagrees with the comptroller's determination," and that "[t]his problem is exacerbated by the language in proposed rule 9.4309(a) that a petition 'may be rejected by the division director without further review.'" The commenter continued to express concern that the proposed rule gives the comptroller "the privilege to pass on the merits of its opponent's case before allowing the matter to proceed to any neutral hearing." The commenter stated that the "provision . . . needs to be changed to ensure that a neutral party makes the ultimate decision" and suggested "either requiring the deputy comptroller to follow the ALJ's proposed decision, or specifically allowing judicial review of the comptroller's determination that a petition contains a jurisdictional defect or raises insufficient grounds of objection." The agency disagrees with these comments. Government Code, §403.303 expressly vests the comptroller with authority for final decisions. Additionally, Government Code, §403.303 governs the right of appeal to protest a comptroller determination and the rules do not abridge any such right. No change was made in response to these comments.

The agency received a written submission from an individual writing on behalf of Baker Botts, L.L.P., stating that the language in §9.4301(6) should be removed and "replaced with language consistent with the governing statutes and with the applicable SOAH and Comptroller decisions." The commenter stated that §9.4301(6) is inconsistent with the language of Government Code, §403.302(a) that "'[t]he study shall determine the taxable value of all property and of each category of property in the district.'" The agency disagrees. The commenter's interpretation would contradict and render meaningless the statutory provision under Government Code, §403.303(a) limiting property owner protests to property owners whose property is "included in the study." The commenter stated that "[b]y providing that property is not included in the study by virtue of any calculations made pursuant to §403.302(d), the proposed language would also violate §403.302(a)'s requirement that the study determine the 'taxable value' of the district's property." The agency received a written submission containing similar comments from an individual writing on behalf of Texas Taxpayers and Research Association (TTARA), stating that the definition of an eligible property owner should be amended "to provide that appeal is available to any owner of property with a tax liability of over $100,000 if the PVS results in a value on such property that is different from local value as reported to the commissioner, in either the preliminary or the amended preliminary certification of study findings." The agency disagrees with these comments. Property is not included in the study by virtue of a statutory deduction from market value. The commenter writing on behalf of Baker Botts, L.L.P., referencing a recent proposal for decision issued by SOAH and an order of the comptroller, also stated that the proposed language "contradicts not only the plain language of the governing statutes, but also SOAH's and the Comptroller's interpretations of those statutes." The agency disagrees. The comptroller's order referenced by the commenter expressly states that SOAH's decision was "not adopted for purposes of the Comptroller's final Decision on this matter and is not to be relied upon for precedential value." Government Code, §403.303 expressly vests the comptroller with authority for final decisions. No change was made in response to these comments.

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also commented that §9.4301(8) and §9.4305(e) effectively end appraisal district protests and noted that "it is sometimes important to the CAD to be able to vindicate itself, even though the ISD may not be interested in a protest." The agency also received a written submission by another individual expressing disagreement with §9.4305. That commenter "feel[s] very strongly that the appraisal districts should be given the opportunity to appeal the school district ratio study even if the school district designates their own agent other than an appraisal district," stating that "[t]he appraisal district knows its values and property probably better than anyone and may be able to show why a particular change should be done" and that appraisal district protests "would allow for a more accurate report." The agency disagrees with these comments. Except as may be provided by comptroller rule, there is no statutory right of protest granted to an appraisal district. An appeal brought by an appraisal district can adversely impact the taxable value findings of a school district. The rules provide protest rights to an appraisal district when authorized by a school district. Furthermore, the rules do not limit the ability of an appraisal district to provide input and assistance to a protesting school district for which it appraises property. No change was made in response to these comments.

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also commented, with regard to §9.4302(d), that "[s]ome method of verification of the PTAD's receipt, similar to a file mark, would be appreciated" and asked what would constitute acceptable proof of delivery for a protest sent by email and whether "the automatic e-mail read acknowledgment" will suffice. Nothing in §9.4302(d) prohibits a request for verification of receipt. Regarding acceptable proof of delivery for protests submitted by email, an "automatic e-mail read acknowledgement" might be acceptable proof of delivery, but such a determination is fact dependent and subject to vary depending on the particular circumstances of each protest. No change was made in response to this comment.

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also commented, with regard to §9.4302(e) that "'[t]he independent discretion to impose deadlines and schedule hearing dates'" is an extremely broad grant of power that could be very prejudicial to the protester." The agency disagrees with this comment. The discretion referenced is limited by the phrase "[e]xcept as otherwise provided in this subchapter." No change was made in response to this comment.

The agency received a written submission from another individual that stated, with regard to §9.4302(e), "the division director should not be granted 'independent discretion' to impose deadlines that are not otherwise specified in the rules." The agency disagrees. The property value study protest process is subject to limiting time constraints. Section 9.4302(e) assists the division director in furthering the goal of expeditious management of the protest process. No change was made in response to this comment.

The agency received a written submission from an individual that stated, with regard to §9.4303(b), that a school district should have additional time to protest "if amended findings increase the PTAD value estimate," stating that "[t]he PTAD value estimate is what matters, as they try to retain their eligible district status, even if the proposed certified value does not change." The agency, although not in complete agreement with the commenter's rationale and assuming that the commenter actually intended to reference §9.4303(c), does agree with the commenter's suggested change insofar as an amended preliminary finding might impact a school district under Government Code, §403.3011(2)(C). Section 9.4303(d) was added to provide additional time to protest if amended preliminary findings result in a change from a determination of local value of 90% or greater of the lower limit of the margin of error to a determination of local value of less than 90% of the lower limit of the margin of error.

The commenter writing on behalf of Baker Botts, L.L.P. commented, with regard to §9.4303(c), that "[n]o statutory provision authorizes the imposition of more restrictive requirements on the ability of a school district or property owner to protest amended preliminary findings than are imposed on the ability to protest preliminary findings," asserting that a property owner should be permitted to protest the comptroller's calculation of statutory deductions, and suggested that the rule provide that "[i]f the comptroller certifies amended preliminary findings for a school district, the affected school district and eligible property owners to whose property the amended preliminary findings pertain have a right to protest the findings in the manner required by this subchapter." The agency, although not in complete agreement with the commenter's rationale, does agree with the commenter's suggested change insofar as an amended preliminary finding increases the appraised or assigned value of the property of an eligible property owner as defined in §9.4301(6). Section 9.4303(e) was added to provide additional time to protest if amended preliminary findings increase the appraised or assigned value of property included in the study and owned by an eligible property owner as defined in §9.4301(6).

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also inquired, with regard to §9.4304(a), as to the meaning of "technical errors or omissions." Pursuant to §9.4302(b), except as otherwise provided, the language is subject to construction as provided by the Code Construction Act, Government Code, Chapter 311. In application, this is a fact-dependent determination that, pursuant to §9.4304(a), is subject to the discretion of the division director and does not include failure to submit grounds for objection or supporting evidence as required. The commenter did not request any specific change and no change was made in response.

The agency received a written submission from an individual that stated, with regard to §9.4304(b), that "an extension of the filing deadline should be permitted, if good cause is shown," stating "[t]here is enough leeway in the overall timeline of the appeals process for a filing extension if the circumstances so warrant." The agency disagrees. The property value study protest process is subject to significant time constraints. Furthermore, pursuant to Government Code, §403.303(a), the 40-day time period within which to file a protest is statutory. No change was made in response to this comment.

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also commented, with regard to §9.4304(f), that "[t]he rule against extensions of time to file a protest seems to conflict with subsections (a) - (e)." The agency disagrees with this comment. Section 9.4304(a) is expressly limited to timely filed protest petitions. Section 9.4304(b) expressly excludes the deadline to file a protest. Section 9.4304(c) - (e) simply refer to extensions permitted under the rule. However, the wording in §9.4304(c) - (e) has been revised to clarify that those subsections only apply as provided under §9.4304(a) and (b).

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also commented, with regard to §9.4305(e), that it "is unclear what constitutes authorization of a school district for a CAD to protest." Section 9.4305(e) specifically provides that "[a]n appraisal district may not protest unless authorized to do so in writing by a school district." Furthermore, §9.4306(b)(2) requires that a petition be signed by "the superintendent of the school district and the chief appraiser of the appraisal district, if it is a petition filed by an appraisal district authorized by a school district." The commenter did not request any specific change and no change was made in response.

The commenter writing on behalf of Baker Botts, L.L.P. commented, with regard to §9.4305(h), that "[t]his Proposed Rule ignores the possibility of the Comptroller requiring an appraisal district to incorrectly calculate a statutorily required deduction from the local value for an unstudied district," stating "there would be no way for the school district or any other entity to challenge the incorrect instructions." The commenter urged the comptroller not to adopt §9.4305(h). The agency disagrees. Government Code, §403.303 provides rights of protest only as to comptroller "findings." Section 9.4305(h) provides a rational and logical limitation that takes into account the statutory framework as revised in the last legislative session to conduct a study at least every two years rather than annually. No change was made in response to these comments.

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also commented, with regard to §9.4306(c), that "[i]t seems unnecessarily cumbersome to mandate that a 'petition is not filed until it is actually received by the division director'" and asked if they "will need to hand the petition to the director specifically." The commenter also stated that "clarification of and specificity of the conditions constituting acknowledgment of receipt would be appreciated." Section 9.4306(c) expressly references §9.4302(d) which, in turn, provides specific addresses for each permissible method of filing. Determinations regarding proof of receipt regarding any specific protest are fact dependent and subject to vary depending on the particular circumstances of the protest. No change was made in response to this comment.

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also commented, with regard to §9.4306(e), that "[t]he USPS has become parsimonious about postmarks" and asked if "in-house postage meter or franking dates [will] be acceptable." The agency disagrees that the United States Postal Service has become parsimonious about postmarks. However, the subsection has been revised to permit postmark by compliant use of a postage meter licensed by the United States Postal Service.

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also commented, with regard to §9.4307(d), that "[g]iving only five calendar days to file exceptions is extremely short" and suggested that the rule should make the filing of exceptions mandatory. The commenter writing on behalf of Baker Botts, L.L.P. also commented, with regard to §9.4307(d), §9.4309(f), and §9.4315(c), that the five-day period to file exceptions "is an uncommonly brief period of time." The commenter suggested a ten calendar day period. The agency received a written submission containing similar comments from an individual writing on behalf of Texas Taxpayers and Research Association (TTARA), stating that the proposed rules should be amended "as necessary to allow more time to file exceptions to a proposal for decision" and that "valuable flexibility would be provided if an adversely affected party could, for good cause shown, be allowed to obtain a one-time extension of five additional days." The agency disagrees with these comments. The five-day period applies equally to all parties and furthers the goal of expeditious management of the protest process. Government Code, §403.303(d) provides for the "opportunity," not a mandate, to file exceptions if the comptroller has not heard the case or read the record. Despite the agency's disagreement, the five-day periods in §9.4307(d), §9.4309(f), and §9.4315(c) have been revised to seven-day periods.

The commenter writing on behalf of members of McCreary, Veselka, Bragg & Allen, P.C. also inquired, with regard to §9.4307(e), if "this is intended to foreclose judicial review of dismissals" and "[w]hy even refer a matter to SOAH if the deputy comptroller will make an independent decision on the matter." Government Code, §403.303 expressly vests the comptroller with authority for final decisions. Additionally, Government Code, §403.303 governs the right of appeal to protest a comptroller determination and §9.4307(e) does not abridge any such right. The commenter did not request any specific change and no change was made in response.

The commenter writing on behalf of Baker Botts, L.L.P. commented that §9.4307(h) "would impermissibly shift the burden of proof on jurisdictional matters for property value study protests," citing an Texas appellate court opinion for the proposition that "[w]hen evaluating a challenge to standing, the factual allegations by the party seeking standing are accepted as true, unless the other party pleads and proves that the allegations were made fraudulently to confer jurisdiction." The commenter urged the comptroller not to adopt §9.4307(h). The commenter stated that "Government Code, §403.303(a) specifically states who may protest the property value study, and the Comptroller may not by regulation restrict the statutory right to protest held by school districts and certain property owners." The agency received a written submission containing similar comments from an individual writing on behalf of Texas Taxpayers and Research Association (TTARA), requesting deletion of §9.4307(h) and stating that "elimination of this proposed rule would be consistent with the practice in judicial proceedings and with assignment to the Comptroller of the burden of proof on value disputes." The agency disagrees with these comments. Protest rights are statutory. Section 9.4307(h) does not in any manner abridge a proper party's right to protest. Additionally, the case law cited by the commenter writing on behalf of Baker Botts, L.L.P. is not controlling. No change was made in response to these comments.