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.

Dennis Hart

Linebarger Goggan Blair &

Sampson, LLP

dennis.hart@lgbs.com

(512) 634-3809