Texas Register Preamble
The Comptroller of Public Accounts adopts new §§9.4251 - 9.4266 concerning arbitration of appraisal review board determinations, with changes to the proposed text of §§9.4251 - 9.4258, 9.4260 - 9.4264, and 9.4266, and the two forms adopted by rule under §9.4266, as published in the November 10, 2017, issue of the Texas Register (42 TexReg 6329). These new rules comprise new Subchapter K titled Arbitration of Appraisal Review Board Determinations.
This preamble provides an overview of the new subchapter, addressing the major changes to existing procedures relating to arbitration and the required changes to implement recent legislation.
The agency received responsive comments written by or on behalf of 35 arbitrators who provided a group response, 13 arbitrators who each provided an individual response, six appraisal districts, and one property tax agent. The comments provided and the agency's responses are as follows:
Numerous comments were received regarding the time and resource challenges appraisal districts and arbitrators face in processing and responding to the substantial volume of requests for binding arbitration being filed. The comptroller's office anticipates that its new online arbitration system, called the Texas Comptroller Online Arbitration Center, will be available via the internet during the first quarter of next year and will partially address these comments. In response to these comments, the adopted rules recognize this new online arbitration system and require that all appraisal districts, arbitrators and agents use it once it becomes generally available. Property owners, however, may elect to use the online system or continue to file using the traditional paper-based method under the adopted rules.
The online system, together with the changes to the proposed rules discussed in more detail below, are expected to provide the following substantial benefits: communications and transmission of documents performed electronically within the online system itself; substantial reduction in the use of paper and mail delivery; a 45-day settlement period that begins on the date "on the comptroller's letter or notice" of acceptance of the arbitration request for a property owner or agent to settle the case with the appraisal district and receive a refund of the deposit (less the $50 administrative fee) before an arbitrator is assigned. Additional highlights of the changes to the proposed rules include the provision that once an arbitrator accepts a case, he or she will be entitled to the arbitrator's fee, including a fee for withdrawal requests filed after his or her acceptance of the case. These new rules also provide that the arbitrator's fee will be paid out of the deposit in all cases dismissed except for delinquent taxes. In response to several comments, changes were made to the proposed rule regarding agent representation in arbitration. A revised Form 50-791, titled Appointment of Agent(s) for Binding Arbitration, incorporates the changes which include: appointment of an alternate agent if the first agent is not available; expiration of the appointment three years from the date the form is signed; and a requirement that Form 50-791 be completed for all individuals qualified as owners' agents under Tax Code, §41A.08(b), including attorneys. Another change from the proposed rules is that property owners or their agents are required to submit a copy of the ARB order they are appealing at the time the request for binding arbitration is filed; appraisal districts will no longer perform this task. Set out below are the details regarding changes to each of the proposed rules that are reflected in the rules being adopted.
Beginning with adopted §9.4251, a definition for the new "online arbitration system" has been added as follows: "A method that is computer based and partially automated, providing access to the public through the internet, which the comptroller's office may implement as the Texas Comptroller Online Arbitration Center, to administer the binding arbitration system consistent with this subchapter, that is in addition to, or an alternative to the paper-based method. The terms and conditions of this subchapter apply with equal force to both methods of administration." References to this new "online arbitration system" have been added throughout new Subchapter K to provide for its operation.
The agency also added as adopted §9.4251(6) a definition for an "authorized individual" to clarify who may file a request for binding arbitration other than the property owner or agent to include employees of a property owner or one who holds a valid power of attorney. The agency revised the definition of "Comptroller or comptroller's office" as adopted §9.4251(7) to make clear that the agency is responsible not only for the adoption of rules governing the operation of the binding arbitration system, but for the administration of the system as well.
With regard to proposed definitions in §9.4251, arbitrator Michael Jacobs commented on several terms, namely, use of "owner" and "property owner" interchangeably; the unnecessary inclusion of the term "entity" in the definition of "owner"; use of the terms "hearing" and "arbitration proceeding" or "arbitration hearing" interchangeably as well as the failure to define "parties." The agency agrees with these comments and responds by revising the definitions in proposed §9.4251 by including the term "property owner" with the existing definition of "owner"; providing a definition for "parties"; and changing the defined term "binding arbitration" to "arbitration" and making clear that "arbitration" and "binding arbitration" and "arbitration proceeding" are synonymous and include the term arbitration "hearing," the specific event at which evidence is presented to an arbitrator. Mr. Jacobs also commented on use of the term "subchapter" and "this title" but the agency responds that the use of these terms is directed by the style requirements of the Texas Register. Mr. Jacobs also provided a draft copy of the proposed rules edited for style, suggestions which the agency declines to adopt. Arbitrator Richard Wiese commented that he supported the new format of the proposed rules as well as the method by which arbitrators are to be assigned to cases. No changes were suggested and none were made in response to this comment.
With regard to proposed §9.4252 regarding requests for arbitration, several changes were made in response to comments. Adopted §9.4252(a) recognizes that an appeal of an ARB order may be initiated "using either the traditional paper-based arbitration system or the comptroller's online arbitration system, whichever is available and subject to §9.4255," under the terms and conditions of this section. Adopted subsection (b) provides that property owners or agents filing a request for arbitration online are referred to as "filers" and the filer is required to pay the deposit online at the time of the request; clarifies the types of government-issued identification numbers that are acceptable to process a refund; and expands the options available for delivery of the request package to the appraisal district by adding "through the U.S. Postal Service or a private third-party service such as FedEx or United Parcel Service (UPS) so long as proof of delivery is provided, or by submission through use of the comptroller's online arbitration system if available." Adopted subsections (e) and (f)(9) require the property owner or agent to submit a copy of the ARB order he or she intends to appeal to avoid any questions or confusion regarding the subject of the binding arbitration being requested under Chapter 41A. Adopted §9.4252(f)(3) provides that if the online arbitration system is used to file the request, two additional forms of payment of the deposit are acceptable with payment of a processing fee - by credit card (with entry of the filer's credit card number and security code) or by electronic check (with entry of the filer's bank account number and bank routing number).
The Tarrant Appraisal District commented that the property owner should not be provided "an additional 10 day grace period" in which to submit an appointment of agent form with the request for binding arbitration as it conflicts with the terms of the request. The agency agrees with this comment and has deleted proposed text in §9.4252(e) and replaced it with the requirement that the property owner or agent must submit a copy of the ARB order being appealed with the request for arbitration. Arbitrator Michael Jacobs pointed out that the required submission of the appointment of agent for binding arbitration form with the request for binding arbitration was addressed in several separate rules - namely proposed §9.4252(e) and (f)(8), as well as §9.4253(f), and §9.4255(d) - and appeared to be duplicative. The agency agrees and has eliminated unnecessary duplication by deleting proposed §§9.4252(e), 9.4253(f) and 9.4255(d).
The Harris County Appraisal District requested clarification on proposed §9.4252(f)(4) regarding delinquent property taxes. It wrote: "There is often confusion among property owners and arbitrators about the issue of delinquency and undisputed taxes being paid. This stems from the question of what year is being referenced in this rule. Can there be no delinquent taxes in any year, or just the year in question? Can the arbitration go forward if previous years' taxes were not paid timely?" In response to this comment, the agency revised proposed §9.4252(f)(4) as well as §9.4261(m)(1) regarding dismissal due to delinquency to clarify. Taxes are delinquent on the property if they have not been paid in any prior year or, if for the tax year at issue, the undisputed tax amount was not paid before the delinquency date. Put another way, all tax amounts due are required to be paid for all tax years and timely tax payment is required only for the year at issue.
In commenting on proposed §9.4252, the Collin Central Appraisal District noted that "the proposed rules do not specify the actions the Appraisal District or State is required to do when an appeal is made on an action that the property owner did not receive an ARB order on." The appraisal district stated that "the Request for Arbitration form should make the property owner specify whether they are appealing an action filed under 41.41(a)(1) or (2) or both based on their Appraisal Review Board Order and the proposed Arbitration Rules should specify that an Arbitration Request received seeking an appeal of an action to which the Appraisal Review Board did not render a decision and send an order on, should be rejected once received by either the Appraisal District or the State." The agency responds that the appraisal district's role in arbitration is as a party defending its valuation and the comptroller's role is to administer the binding arbitration system. The issues the appraisal district raises are ones to be taken up with the arbitrator on a case-by-case basis. As a result, no changes were made in response to this comment.
The Tarrant Appraisal District commented that §9.4252(b) should be changed to shorten the deadline to file the request for arbitration from 45 days to 30 days from the date the owner receives the ARB order "due to the overwhelming increase" in binding arbitrations across the state "to ensure the volume of cases are heard in a timely manner." As this 45-day deadline is set by statute under Tax Code, §41A.03(a), no change can be made.
Patrick O'Connor, a property tax agent and the owner and president of O'Connor & Associates, challenged §9.4253(c) which requires the execution of Form 50-791, the comptroller-prescribed appointment of agent for binding arbitration form, for a valid appointment to represent an owner in binding arbitration, through comments submitted by Attorney Clemetric Frazier. Mr. O'Connor stated: "We believe this section directly contradicts Tax Code 1.111" which "is a statute and not an administrative rule which should not be superseded." The agency disagrees. Under Tax Code, §1.111(a), a property owner may designate "a lessee or other person to act as the agent of the owner" for any purpose under this title. This provision has no restrictions or qualifications for the agent - any individual or legal entity, including a company - may be designated an agent under Tax Code, §1.111(a). Unlike §1.111(a), Tax Code, §41A.08(b) does not use the term "agent" and instead permits the "parties to an arbitration proceeding under this chapter" to "be represented by" only qualified individuals who hold specific licenses, certifications or registrations. Arbitration is an alternative to a judicial proceeding under Chapter 42. No one would argue that a "person" designated under Tax Code, §1.111 "to act as the agent of the owner for any purpose under this title" may represent a party in district court under Chapter 42; only attorneys may do so. The same reasoning applies to Chapter 41A proceedings, except that the legislature has expanded the individuals qualified to represent a property owner in arbitration to include not only attorneys, but also appraisers, certified public accountants, real estate agents and brokers, and property tax consultants.
Mr. O'Connor also questioned "the public policy intention with naming a specific agent that will attend the arbitration" as required by proposed §9.4253(e). In responding to this comment, the agency explains that existing Form 50-791 permits the property owner to identify one individual to sign the request and to receive any refund of the deposit (under Steps 2 and 3 of the form) and if this agent will not be representing the property owner at the arbitration proceeding or hearing, the property owner may identify a second individual to do so (under Step 4 of the form). The agency responds that if no individual is appointed by a property owner to represent his or her interests (in Step 4) after the request for arbitration has been signed, the appointment is incomplete, leaving the owner's interests unrepresented at the arbitration hearing or any other phase of the arbitration. The agency further responds that to remedy this gap in representation created by the use of the existing form 50-791 and in response to comments received, it has revised Form 50-791 and proposed §9.4253 as will be discussed in detail below.
With regard to proposed §9.4253(a), arbitrator Michael Jacobs commented that the phrase "and holds a current, active Texas law license" be added to the requirements for an agent who is an attorney under §9.4253(a)(1) to be consistent with the requirements for an arbitrator under §9.4258(c)(1). In response, the agency revised proposed §9.4253(a) to require that all agents for property owners "hold a current and active license, certification, or registration."
The Collin Central Appraisal District commented on the use of the existing Form 50-791, the Appointment of Agent for Binding Arbitration form. The appraisal district asked whether the form needed to be complete when submitted with the request for binding arbitration and if an agent change is necessary, does an entirely new form need to be submitted with an updated signature and date. In connection with these comments, the appraisal district submitted two versions of completed Form 50-791, both of which showed they had been signed by the same person on the same day for the same property. In the first version, submitted with the request for arbitration, an individual was designated in Step 2 of the form and appointed only to sign the request for arbitration and receive deposit refunds; no one was designated to represent the property owner for the binding arbitration proceeding itself in Step 4. The second version of the form, submitted later, appeared to have been altered because although the signature and date were the same as the first, the name of a different individual had been typed in under Step 4 of the form as an agent. The agency's response to both questions is yes. Form 50-791 is required to be complete when submitted with the request for arbitration. If a change in agents is undertaken, another form must be completed, signed, and submitted. The agency responds further to the situation the appraisal district describes with revisions to both existing Form 50-791 and proposed §9.4253 which will be explained in more detail below.
Arbitrator Michael Jacobs commented on the confusion existing Form 50-791 creates when an owner designates an agent in "Step 2" and then designates a different individual on the same form in "Step 4." Mr. Jacobs pointed out the questions this situation raises for the arbitrator. Is the notice of hearing sent to the agent identified in Step 2 or Step 4? Does the arbitrator contact the agent in Step 2 or Step 4 or both to schedule the hearing and to discuss other matters? Who is authorized to withdraw the request for binding arbitration - is it the owner or the Step 2 agent or Step 4 agent? If an attorney appears to represent the owner in a case where 1 or 2 agents also have been designated on Form 50-791, who is the arbitrator to recognize as authorized? Mr. Jacobs further commented by providing suggestions on how proposed §9.4253 may be amended to resolve this confusion regarding existing Form 50-791.
To respond in a comprehensive fashion to the situation the appraisal district and Mr. Jacobs describe, the agency revised existing Form 50-791 and proposed §9.4253 in several respects. With the adopted rule and new form, when an agent is appointed, he or she is authorized and agrees to undertake all the specific duties required to represent the owner (unless the owner strikes out certain ones). The six authorized duties are: "(1) Sign and file or initiate the request for binding arbitration to start the appeal; (2) Receive and send communications regarding the arbitration proceeding; (3) Negotiate with the appraisal district to try to settle the case before the arbitration hearing; (4) Execute a settlement agreement with the appraisal district to resolve the protest without an arbitration hearing; (5) Withdraw a request for binding arbitration; and (6) Appear and represent the property owner at the binding arbitration hearing." An agent authorization is no longer limited to signing the request for arbitration and receiving any deposit refund. With new Form 50-791, Appointment of Agent(s) for Binding Arbitration, and adopted §9.4253, the property owner also has the option of designating - in this same form and at the same time - an alternate agent if the appointed agent is not available to undertake all six duties. However, the alternate agent "shall not be recognized as authorized to act unless and until the alternate agent provides written notice to the appraisal district and to the arbitrator that the first agent is not available." Under adopted §9.4253(f), if an individual other than one designated in Form 50-791 is to represent the owner, a subsequently completed and signed form is required.Cont'd...
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