2015 GFOAT Spring Institute
Truth-In-Taxation
Calculating the Tax Rate and
Establishing a Property Tax Levy
Dennis Hart
Linebarger Goggan Blair &
Sampson, LLP
TRUTH-IN-TAXATION
LAWS
Texas Constitution and
Property Tax Code Chapter 26
requirements have two
purposes:
1. To make taxpayers aware of
tax rate proposal and
2. to allow taxpayers, in certain
cases, to rollback or limit tax
increase.
FOUR GUIDING
PRINCIPLES
1. Taxpayers’ right to know of property value increases and estimated taxes.
2. Unit’s obligation to calculate and publish rate before adoption.
3. Unit’s obligation to publish notices and hold hearings regarding increases.
4. Voters’ right to call for a tax
rate rollback election.
IMPORTANT DATES IN
TRUTH-IN-TAXATION
April 30 Chief appraiser certifies estimate of taxable values (city, co., ISD).
May 1 Chief appraiser sends appraisal notices. July 20 ARB approves appraisal records. July 25 Chief appraiser certifies approved
appraisal roll. Aug. 7 Units other than cities/counties/ISDs/water
dists. publish effective tax rate notices. Sept. 1 Cities/counties must have
published/mailed Notice of Proposed Tax Rate
Sept. 29 Must adopt tax rate by Sept. 29 or 60 days after receiving roll, whichever is later.
Oct. 1 Assessor mails tax bills.
NEW TAXING UNITS
• Did not levy in 2014; tax in
2015.
• No sales tax in 2014.
• Not required to comply
with TNT rate
calculations.
• Comptroller recommends
similar hearing notices to
inform taxpayers.
• *GA – 1070 and ‘zero’ tax
rate.
SMALL TAXING UNITS
• Sec. 26.052 states a small taxing
unit is one that adopts a tax rate
of 50 cents or less per $100 and
imposes taxes of $500,000 or
less.
• Simplified tax rate notice process
to publish effective/rollback rates
and other notices.
EFFECTIVE TAX RATE
The effective tax rate
is a rate that raises
about the same total
revenue as last year
on properties taxed in
both years.
2014 2015
EFFECTIVE TAX RATE
Prior Year’s Taxes
less
Taxes on Property value
Lost in 2015
divided by
Adjusted 2015
Taxable Value
X $100
EFFECTIVE TAX RATE (ETR)
WORKSHEET
Line 1: 2014 total taxable
value at calculation time
• Include most
adjustments
• Sec. 25.25(d) not
subtracted
• 2014 court ordered value
loss reflected
• Include values with
65/disabled ceilings
• Include TIF values.
ETR WORKSHEET CONT.
Line 2: 2014 taxable value of 65 or older or disabled homesteads with tax ceilings (if adopted 65/older or disabled tax ceiling in 2015, do not use this line until 2016).
Line 3: 2014 adjusted taxable value
1. Units with tax ceilings, Line 1 minus Line 2.
2. Other units, Line 1.
Line 4: 2014 total adopted tax rate.
ETR WORKSHEET CONT.
Line 5: Court ordered value loss.
1. Only decisions on 2014
values.
2. 2014 ARB values minus
court decisions on 2014
values.
Line 6: 2014 taxable value adjusted
for court-ordered reductions.
Line 7: 2014 value of property de-
annexed after January 1, 2014.
ETR WORKSHEET CONT.
Line 8: 2014 taxable value lost for first-time exemptions.
Exempt for:
• January 1, 2015 • Total or partial • No Freeport, “goods-in-transit” value • No new tax abatement value • Increased original exemption – not
lowered – use difference between original exempted and increased exempted amount.
Line 9: 2014 taxable value lost
for special appraisal
First qualified
ETR WORKSHEET CONT.
• January 1, 2015
• 1-d or 1-d-1, timber,
recreational/scenic or
public access airport
appraisal
• 2014 market value minus
• 2015 productivity or
special appraised value.
ETR WORKSHEET CONT.
Line 10: Total lost value Line 7 + Line 8 + Line 9
Line 11: 2014 adjusted taxable value Line 6 - Line 10
Line 12: Adjusted 2014 taxes (Line 11 X Line 4) / $100
Line 13: Taxes refunded for prior years • Tax Code Sections
25.25(b), (c), 31.11, 31.111 • Applies to 2013 & prior
year refunds only.
ETR WORKSHEET CONT.
Line 14: Taxes in TIF for 2014 • TIF taxes paid into fund. • If no 2015 captured appraised value in TIF, enter zero.
Line 15: Adjusted 2014 taxes with refunds
Line 12 + Line 13 - Line 14.
Second Part of Equation
Line 16: Total 2015 certified taxable value A. 2015 certified values: includes 65 or older
or disabled taxable values B. County: Railroad rolling stock values C. Pollution control exemption value: Check
with attorney D. 2015 captured appraised value in TIF zone
(do not include new property listed in Line 21)
E. Total 2015 value A + B - C - D
ETR WORKSHEET CONT.
Line 17: Total value of properties under protest or not included on certified appraisal roll.
2015 taxable value of properties under
protest:
• 5% (10%) or less total value - Two values: CAD’s & taxpayer’s
Use taxpayer’s value • 2015 value not increased,
estimate taxpayer wins • Value increased, use 2014 value
or value if taxpayer wins • Always use lower value
2015 taxable value of properties not
under protest or on cert. app. roll
ETR WORKSHEET CONT.
Line 18: Enter 2015 taxable value of 65/older or disabled homesteads with tax ceilings. (If adopted 65/older or disabled tax ceiling in 2015, do not use this line until 2016.)
Line 19: 2015 total taxable value Line 16+ Line 17 - Line 18
Line 20: 2015 value of annexed property 1. Annexed after January 1, 2014 2. Real & personal property
ETR WORKSHEET CONT.
Line 21: 2015 taxable value of new improvements and new personal property located in new improvements 1. New building or structure after 1/1/14; 2. Transportable structure erected on
land not held for sale or temporary; 3. New addition to existing improvement;
4. New personal property in new building;
5. Plats, water, sewer, drainage line, paving;
6. Expiring or terminated tax abatement; and remember
7. Does not include: • New mineral interest • Omitted property.
ETR WORKSHEET CONT.
Line 22: Total adjustments to 2015 taxable
value
Line 20 + Line 21
Line 23: 2015 adjusted taxable value
Line 19 - Line 22
Line 24: 2015 effective tax rate
Line 15/Line 23 X $100
Line 25: County’s total 2015 effective tax
rate:
Add all county rates on Line 24.
ETR WORKSHEET CONT.
2015 ROLLBACK
TAX RATE
Two Components:
• Maintenance & Operations Rate
(M&O): Utilities, salaries, day-to-
day operations
• Debt Service Rate: Repay bonds,
debt secured by property taxes
ROLLBACK
CALCULATION (Not ISDs or Water
Dists.)
M & O Tax Rate:
1. Take adjusted 2014 value,
2. Multiply by 2014 M&O rate,
3. Divide by adjusted 2015 taxable
values,
4. Multiply by $100,
5. Multiply by 1.08 to get
maximum (rollback) operating
rate.
SPECIAL PROVISIONS:
1. Criminal Justice Mandate –
Counties (Tx. Comm. On Jail
Standards 512/463-5505)
2. TIF taxes
3. Transferring a function (all of
a dept., function or activity)
4. Pollution control (TCEQ,
512/239-6348)
5. Enhanced Indigent Health
Care costs (July 1, 2014 –
June 30, 2015) .
ROLLBACK RATE CALCULATIONS CONT.
ALL TAXING UNITS CALCULATIONS
Debt service tax rate:
1. 2015 debt payments
2. Less 2014 excess debt tax collections
(*amount above 2014 Line 34)
3. Divide by 2015 anticipated collection
rate
4. Equals 2015 adjusted debt
5. Divide adjusted debt by 2015 total
taxable values
6. Less 2015 captured TIF value, and
7. Multiply by 100
8. Equals 2015 debt service rate.
ROLLBACK RATE CALCULATIONS CONT.
ADDITIONAL SALES TAX RATE
First Year
Units that adopted sales tax in
November 2014 or in May
2015
• Use Comptroller’s estimate of
taxable sales for previous
four quarters.
Estimated sales tax revenue =
Estimated taxable sales X sales tax rate X .95
Estimated sales tax revenue divided by
2015 total taxable value (x 100) =
Sales tax adjustment rate
(Subtracted from effective & rollback rates)
ADDITIONAL SALES TAX RATE CONT.
SECOND YEAR SALES TAX
ADOPTED BEFORE November 2014
Use actual last four
quarters of additional sales tax revenue and divide by 2015 taxable value (x 100) =
Sales tax adjustment rate (Subtracted from rollback rate
only)
For a taxing unit’s historical
summary of monthly local sales
and use tax allocation payments,
view: TEXAS COMPTROLLER
Web site:
https://mycpa.cpa.state.tx.us/allocation/HistSales.jsp
• Note: tax bill must include statement
with sales tax savings
• Small unit has special
notice
• City/County notice
• School district notice
• Other taxing units and
water
• dists. notices
• Comptroller Web site for
notices.
REQUIRED NOTICES FOR RATE
ADOPTION
1. Assessor calculates effective and rollback
rates.
2. Assessor reports rates to governing body.
3. Assessor publishes effective and rollback
rates, but not for counties, cities, ISDs, water
dists. and small taxing units.
4. Governing body complies with TNT laws.
5. Governing body determines if proposed rate
may trigger special notices and public
hearings.
STEPS DETERMINING WHETHER TO PUBLISH
NOTICES AND HOLD MEETINGS
If proposed rate does not exceed the lower of rollback rate or effective rate: • Governing body posts open
meeting notice for regular meeting.
• Governing body adopts rate as separate agenda item.
• Governing body adopts 2-part rate for M&O & debt service.
• Cities/counties still must publish Notice of Proposed Tax Rate.
STEPS DETERMINING WHETHER TO PUBLISH NOTICES
AND HOLD MEETINGS CONT.
If 2015 proposed tax rate exceeds lower of effective or rollback tax rate, unit must publish notice(s) and hold public hearings, except small units.
The governing body plans a
calendar of events. (Your
local elected officials are
welcome to call me for
assistance with this time
table)
STEPS DETERMINING WHETHER TO PUBLISH NOTICES
AND HOLD MEETINGS CONT.
NOTICE OF PROPOSED TAX RATE FOR CITIES AND COUNTIES
The notice must contain the
following information:
• Proposed, preceding year and
effective tax rates
• Rollback rate if proposing above
effective rate
• Hearing date, time and place for
each hearing if above effective rate
• How to calculate your taxes
• Assessor contact information.
PUBLISHING REQUIREMENTS
1. Must be at least quarter page ad in
standard/tabloid size newspaper.
2. Must be published by September 1.
3. Must have 24-point type or larger
headline.
4. Must follow wording of Sec. 140.010
Local Gov’t Code.
5. Must publish in general circulation
newspaper in county of the
jurisdiction(may mail to each
property owner).
Notice of Proposed Tax Rate For Cities and
Counties
PUBLIC HEARINGS
REQUIREMENTS
• Hold on weekdays, not public
holidays.
• Open Meeting Law requires posting open meeting’s notice.
• Must have quorum of governing body.
• Public may present their views.
• Announce date, time, place for adopting rate, 3 to 14 days after second hearing.
MEETING TO ADOPT
TAX RATE
• Open Meeting Law requires posting open meeting’s notice.
• Open Meeting Law requires adoption as separate item on agenda.
• Adopt rate 3 to 14 days after second hearing.
• Most counties & general law cities required to adopt budget first. 1. Cities – Local Gov’t Code Sec. 102.007 2. Counties – Local Gov’t Code Sec. 111.008
• Adopt as official action.
• Adopt rate in two parts: M&O rate & debt service
rate
MEETING TO ADOPT TAX RATE CONT.
Tax Code Section 26.05(b): Counties, cities
and special districts (not water districts)
that adopt rate above the effective rate
must: • Take a record vote on ordinance, resolution or
order adopting rate using special language in the
motion to adopt.
• Include special language in the ordinance,
resolution or order using larger type if increasing
operating taxes.
• Include the special language in a notice on the
home page of the unit’s Web site if increasing
operating taxes.
ALL TAXING UNITS
Tax Code Section 26.05(a) states
rate must be adopted by:
1. September 29 or
2. 60th day after taxing unit
received appraisal roll
(whichever is later). Failure to adopt within time period results in adopting either the effective rate or last year’s rate, whichever is lower.
What if governing body does not follow procedures or does not comply in good faith with truth-in-taxation procedures?
Any taxpayer can obtain an injunction prohibiting unit from collecting taxes if filed before unit delivers substantially all bills.