The Comptroller of Public Accounts adopts amendments to §§9.4301, 9.4302, 9.4306, 9.4308, 9.4309, 9.4311, and 9.4313, concerning Subchapter L, Procedures for Protesting Comptroller Property Value Study and Audit Findings. Section 9.4301 is being adopted with changes to the proposed text as published in the November 9, 2012, issue of the Texas Register (37 TexReg 8927) and will be republished. Sections 9.4302, 9.4306, 9.4308, 9.4309, 9.4311, and 9.4313 are being adopted without changes and will not be republished.

These sections are being amended to provide added clarification to and improve efficiency of the protest process.

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

One individual inquired as to whether the proposed amendment to §9.4306 reflected in the Texas Register was the only proposed amendment to §9.4306. The proposed amendment to §9.4306 published in the Texas Register reflected all proposed changes to §9.4306. The commenter did not request any specific change and no change was made in response.

The agency received from another individual a written submission that seems to be contrasting the reference of "eligible property owner" as referenced in §9.4305(c) with the definition of "eligible property owner" in §9.4301. As stated in §9.4301, unless the context clearly indicates otherwise, the definitions of the words and terms defined in §9.4301 are the definitions that apply to the words and terms when used in every section included in Subchapter L, Procedures for Protesting Comptroller Property Value Study and Audit Findings. Thus, "eligible property owner" in §9.4305 has the meaning set forth in the definition of "eligible property owner" under §9.4301. The individual's written submission also references "property in school districts that are less than $100K but bump up against the $100K threshold" and questions "what happens to our $90,000 properties," stating that no recourse to protest "doesn't really seem fair to a company such as ours." The agency disagrees. First, to the extent clarification is warranted because the referenced statement and question do not mention tax liability, as noted in §9.4301 and set forth by statute in Government Code, §403.303, it is the tax liability on property that must be $100,000 or more, not the value of the property. As to property with tax liability of less than $100,000, the threshold is dictated by statute, not Comptroller rule, and legislative amendment would be required to change that threshold. No change was made in response to this written submission.

The agency received written submissions from two other individuals. The written submissions both address the definition of "eligible property owner" in §9.4301 as applied to multi-jurisdictional property assigned value by the Comptroller's Property Tax Assistance Division under unit appraisal methodology in the property value study (PVS). One individual asserts that the "proposed change is ill-advised and unduly restricts the rights of a property owner whose property is valued by the Property Tax Assistance Division (PTAD) as a part of its PVS, as well as the school districts in which that property is located." The individual argues that PTAD would apply a value reduction resulting from a property owner's successful "appeal" of the property value study findings "only in school districts where the property is subject to a tax liability of at least $100,000" and that "[t]he failure to adjust the reported values in all school districts, in which the property is located, will result in the PTAD intentionally reporting an inaccurate, erroneous, and illogical valuation of the property- a value that does not represent the actual value determined via the appeal." The other individual argues that "[t]he proposed change to the definition of an eligible property owner is detrimental to the integrity of the annual Property Value Study (PVS) because it limits changes to a tested, multi-jurisdiction property to just those school districts in which the property owner has a tax liability of at least $100,000 of tested property." The individual incorporates an example using a property owner "appeal" of PTAD's value of pipeline that the individual describes as "absolutely identical property" in multiple school districts. The individual argues that "the PTAD [would be put] in the untenable position of certifying different values on identical properties" and that "[t]he sole rationale for this bizarre finding would be that three of the school districts have lower tax rates that [sic] do the other two." The individual also states "[a]nother objection to the proposed rule change is that the PTAD would be relying on the unit appraisal concept but violating its basic premise that the subject property, despite having multi-jurisdictional situs, is actually a single operating property, the value of the components of which should, when summed, equal the total property value identified in the unit appraisal."

First, as stated above, the $100,000 tax liability threshold is dictated by statute, not Comptroller rule, and legislative amendment would be required to change that threshold. Differences in the protest rights of property owners arising from differences in tax rates among school districts are the result of legislative determination, not the exercise of agency discretion. Second, school districts, by statute, have independent rights to protest Comptroller's preliminary findings resulting from the conduct of a property value study in the district. The definition of "eligible property owner" in no way restricts the protest rights of school districts. Third, the statutory right of protest of a school district is an optional right, exercised at the option of the school district. Fourth, pursuant to statute, (Government Code, §403.303(b)): "The comptroller may not order a change in the values of a school district as a result of a protest brought by another school district, a property owner in the other school district, or an appraisal district that appraises property for the other school district." Fifth, the property value study was previously conducted annually in all school districts, but as a result of legislative amendments that became effective January 1, 2010, the property value study is now a biennial study that involves the conduct of a study, with certain limited exceptions, in approximately only one half of the school districts each year. Finally, PTAD's values are reported only in school districts that are not "eligible school districts" as defined by Government Code, §403.3011 for which PTAD has determined that the local value for the school district is invalid and for which the local value does not exceed PTAD's value.

The two individuals' written submissions incorporate erroneous assumptions, such as the assumption that the portions of property in each jurisdiction in which a multi-jurisdictional property is located are "absolutely identical," the assumption that allocation of value among jurisdictions of all multi-jurisdictional properties appraised under unit appraisal methodology is simply a proportional allocation without any adjustments for variations or differences between or among portions of the unit, and the assumption that PTAD's value is reported to commissioner of education each year in every jurisdiction in which a multi-jurisdictional property sits for which a value has been determined. Furthermore, the written submissions do not acknowledge the statutory provisions outlined above or other applicable law. Very simply, by virtue of applicable law, any given jurisdictional portion of a multi-jurisdictional property assigned value by PTAD under unit appraisal methodology may or may not comprise a portion of total taxable value reported to the commissioner of education in any given year. For example, under existing law, a school district included in the property value study may protest the value of the portion of a multi-jurisdictional property that is located within the school district even if the owner of the multi-jurisdictional property does not protest the value. If the protest results in a reduced value, the law prohibits a change in any other school district even if the value was reduced by virtue of a revised unit valuation. Furthermore, under existing law, PTAD's value of multi-jurisdictional property appraised by PTAD under unit appraisal methodology is reported to the commissioner of education only as to the portions of such property that are located in districts in which state value is reported.

Even absent the statutory tax liability requirement, under existing law, the only circumstance under which all value comprising the total value of multi-jurisdictional property appraised by PTAD under unit appraisal methodology would be reported to the commissioner of education is that under which, at a minimum: (1) a study is conducted in every school district (or school district split, as applicable) in which any portion of the multi-jurisdictional property is located; (2) the value of the portion of property in each school district in which any portion of the multi-jurisdictional property is located is in a category or class that has an appraised value determined by the appraisal district that is greater than five percent of the school district's total appraised value of property in categories sampled in the study; (3) every school district or split in which any portion of the multi-jurisdictional property is located has local value that has been determined to be invalid; (4) none of the school districts or splits in which any portion of the multi-jurisdictional property is located is an eligible school district; and (5) none of the school districts or splits in which any portion of the multi-jurisdictional property is located has a local value that exceeds state value. However, again, at a minimum, the study is not conducted annually in every district and not all categories or classes of property in every district have an appraised value determined by the appraisal district that is greater than five percent of the school district's total appraised value of property in categories sampled in the study. Thus, actually, the greater the number of school districts in which portions of multi-jurisdictional property sits (and, therefore, not unlikely to be the multi-jurisdictional property with the greatest tax liability), the more unlikely it is that all value comprising the total value of multi-jurisdictional property appraised by PTAD under unit appraisal methodology will be reported to the commissioner of education.

Existing law limits the protest rights afforded to property owners. Existing law affords school districts protest rights that are optional and independent of property owners. Existing law prohibits changes in the values of one school district as a result of a protest brought by another school district or a property owner in another school district. Existing law provides that PTAD's values are reported only in certain school districts. The law may impose rights, restrictions, or prohibitions with which not all individuals may agree, but the proposed amendment to §9.4301 provides for reasonable administration of the law consistent with the law and creates no situation of reporting values for multi-jurisdictional properties that does not already exist. The agency disagrees with both individuals' written submissions; however, to avoid any unintended confusion, the proposed revisions to §9.4301(6), language included to provide added clarification in accordance with existing law and practice, have been deleted.

These amendments are adopted under Government Code, §403.303(c) which provides for the comptroller to adopt rules governing the conduct of protest hearings.

These amendments implement Government Code, §403.303(c).