Texas Property Tax Code
2006 Edition
Texas Comptroller of Public Accounts
The Texas Property Tax Code (TPTC) contains statues regulating the assessment, taxation, exemptions, appeal options, hearing procedures for Texas property tax appeals, judicial appeals for Texas property taxes, timely payment of Texas property taxes, and penalties for late payment of property taxes. The TPTC covers all counties in Texas and does not vary from county to county. Each county has an appraisal district which estimates the market value (assessed value) for real and personal property in the county.
Articles on appealing your property taxes and obtaining exemptions are available in this site. This and the preceding paragraph were prepared by O’Connor & Associates and the Texas Property Tax Code is determined by the legislature and compiled by the Texas Comptroller.
Note: Please follow the links at the beginning or end of this chapter to return to either the previous chapter or to proceed to the next chapter or to the Table or Contents.
Chapter 22C | Table of Contents | Chapter 23B1 (Section 23.11 - 23.123) Title 1. Property Tax Code
Subtitle D. Appraisal and Assessment
Chapter 23. Appraisal Methods and Procedures
Subchapter A. Appraisals Generally
Sec. 23.01. Appraisals Generally.
Sec. 23.0101. Consideration of Alternate Appraisal Methods.
Sec. 23.011. Cost Method of Appraisal.
Sec. 23.012. Income Method of Appraisal.
Sec. 23.013. Market Data Comparison Method of Appraisal
Sec. 23.135. License to Occupy Dwelling Unit in Tax-Exempt Retirement Community.
Sec. 23.014. Exclusion of Property as Real Property.
Sec. 23.02. Reappraisal of Property Damaged in Natural Disaster Area.
Sec. 23.03. Compilation of Large Properties and Properties Subject to Limitation on Appraisal Value.
[Sections 23.04 to 23.10 reserved for expansion]
Sec. 23.01. Appraisals Generally
(a) Except as otherwise provided by this chapter, all taxable property is appraised at its market value as of January 1.
(b) The market value of property shall be determined by the application of generally accepted appraisal methods and techniques. If the appraisal district determines the appraised value of a property using mass appraisal standards, the mass appraisal standards must comply with the Uniform Standards of Professional Appraisal Practice. The same or similar appraisal methods and techniques shall be used in appraising the same or similar kinds of property. However, each property shall be appraised based upon the individual characteristics that affect the property's market value.
Amended by 1985 Tex. Laws, p. 6151, ch. 823, Sec. 5; amended by 1997 Tex. Laws, p. 3907, ch. 1039, Sec. 21.
Cross References:
Definition of market value, see Sec. 1.04(7).
Notes:
Neither a taxing authority nor a taxpayer can circumvent the constitutional restrictions on, or requirements for, taxation merely by agreeing to settle a dispute. But by the same token, a fair settlement of a legitimate dispute that contemplates the market value of the property is not unconstitutional simply because it is not an appraisal and assessment done by standard procedure. Fort Worth Independent School District v, City of Fort Worth and Southwestern Bell Telephone Company, 22 S.W.3d 831 (Tex. 2000).
The lessor is responsible for the taxes on the full value of his property. The appeal to district court is a trial de novo. When the determination of value is raised in the pleadings, the court has the power to determine the market value. Cherokee Water Co. v. Gregg County Appraisal District, 801 S.W.2d 872 (Tex. 1990).
Taxpayer is able to use federal court bankruptcy proceedings to reappraise its property so long as the reappraisal is determined by using state court principles. Under Texas law, only grossly excessive values can be adjusted and the taxpayer must prove the excessive nature of the initial tax appraisal. The court cannot take into consideration conditions which arise after January 1 of the disputed tax year and/or any other factors which impact the taxpayer's actual distribution. Business value does not impact the actual value of the inventory held by that business. In Re: Quality Beverage Co., Inc., 170 Bankruptcy Reporter 310 (Southern District, Texas 1994).
An appraisal which relies on data supplied by the bankrupt company whose property is being appraised; which uses internally inconsistent numbers from bankruptcy schedules; which uses a January 31 inventory value when a December 31 value is available; and which relies on book values, newspaper articles, and appraiser failure to personally inspect the property at issue deviates from standard appraisal techniques. In Re: Fairchild Aircraft Corp., 124 Bankruptcy Reporter 488 (U.S. Bankruptcy Court, W.D. Tex.-1991).
In some circumstances, book value of inventory may be probative of market value by either serving as an indication of market value or by being the same as market value; however, the two values may be entirely unrelated. The trier of fact must determine the market value of inventory according to the evidence presented on a case-by-case basis. Sears Roebuck and Company v. Dallas Central Appraisal District, 53 S.W.3d 382 (Tex. App.-Dallas [5th Dist.] 2000, pet. denied).
An overriding royalty is an interest in real property and not an interest in income. The interest's value is defined solely by the income received from production. The absence of net income renders the interest valueless. A royalty created merely as a mechanism by which a company may obtain a steady supply of lignite from its own reserves while paying a production company's costs has no objective value. Destec Properties Limited Partnership v. Freestone Central Appraisal District, No. 10-98-033-CV (Tex. App.-Waco 1999).
The court refused to interpret Sec. 23.01(b) to abolish the long line of precedent in Texas on market value, nor abolish the definition of "market value" as set forth in the Art. VIII, Sec. 20, Tex. Const., and Sec. 1.04(7), Tax Code. Consequently, the testimony of buyer and seller regarding sales price and terms fulfilled Sec. 23.01 requirement of proof of market value despite the lack of evidence as to the use of generally accepted appraisal techniques in determining market value. Bailey County Appraisal District v. Smallwood, 848 S.W.2d 822 (Tex. App.-Amarillo 1993, no writ).
Mass appraisal methods used to appraise property in an appraisal district is legal and conforms with the Sec. 23.01 (b) requirement that each property be appraised based on the property's individual characteristics. However, where taxpayer shows that mass appraisal results are not reliable as to his property, the district must take account of those facts in its appraisal. Haney v. Cooke County Tax Appraisal District, 782 S.W.2d 349 (Tex. App.-Ft. Worth 1989, no writ).
For mineral interests extending across the boundary between two counties, each county must separately determine the market value of a mineral interest based on the surface land located within that county's boundaries, according to generally accepted appraisal methods. If the market value of the mineral interest was uniform across the surface estate, simply determining the market value of the entire mineral interest and allocating that value according to the ratio of surface acreage located in each county may be an appropriate method of appraising the market value of the mineral interest. If, on the other hand, the market value was not uniform across the surface estate, simply allocating the value of the entire mineral interest based on surface acreage was not appropriate. Op. Tex. Att'y Gen. No. JC-436 (2001).
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Sec. 23.0101. Consideration of Alternate Appraisal Methods.
In determining the market value of property, the chief appraiser shall consider the cost, income, and market data comparison methods of appraisal and use the most appropriate method.
Added by 1997 Tex. Laws, p. 3908, ch. 1039, Sec. 22; amended by 1999 Tex. Laws, p. 4439, ch. 1295, Sec. 1.
Cross References:
Definition of market value, see Sec. 1.04(7).
Notes:
The three usual approaches for determining market value, i.e., the comparable sales, cost, and income approaches, are not to be thought of as being mutually exclusive. A blending of approaches is proper if the method used produces relevant and reliable evidence of market value. . The trial court therefore did not err by blending the income and comparable sales approaches, so long as the appraisal method as a whole constituted relevant and reliable evidence of market value. Houston R.E. Income Properties XV, Ltd. v. Waller County Appraisal District, 123 S.W.3d 859 (Tex. App.-Houston [1st Dist.] 2003, no pet. h.).
Sec. 23.011. Cost Method of Appraisal.
If the chief appraiser uses the cost method of appraisal to determine the market value of real property, the chief appraiser shall:
(1) use cost data obtained from generally accepted sources;
(2) make any appropriate adjustment for physical, functional, or economic obsolescence;
(3) make available to the public on request cost data developed and used by the chief appraiser as applied to all properties within a property category and may charge a reasonable fee to the public for the data;
(4) clearly state the reason for any variation between generally accepted cost data and locally produced cost data if the data vary by more than 10 percent; and
(5) make available to the property owner on request all applicable market data that demonstrate the difference between the replacement cost of the improvements to the property and the depreciated value of the improvements.
Added by 1997 Tex. Laws, p. 3908, ch. 1039, Sec. 22.
Cross References:
Definition of market value, see Sec. 1.04(7).
Notes:
The comparable sales, cost and income methods of valuation are not necessarily the exclusive methods of determining market value. The trial court did not err by blending the income and comparable sales approaches, so long as the appraisal method as a whole constituted relevant and reliable evidence of market value. Houston R.E. Income Properties XV, Ltd. v. Waller County Appraisal District, 123 S.W.3d 859 (Tex. App.-Houston [1st Dist.] 2003, no pet..).
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Sec. 23.012. Income Method of Appraisal.
(a) If the income method of appraisal is the most appropriate method to use to determine the market value of real property, the chief appraiser shall:
(1) analyze comparable rental data available to the chief appraiser or the potential earnings capacity of the property, or both, to estimate the gross income potential of the property;
(2) analyze comparable operating expense data available to the chief appraiser to estimate the operating expenses of the property;
(3) analyze comparable data available to the chief appraiser to estimate rates of capitalization or rates of discount; and
(4) base projections of future rent or income potential and expenses on reasonably clear and appropriate evidence.
(b) In developing income and expense statements and cash-flow projections, the chief appraiser shall consider:
(1) historical information and trends;
(2) current supply and demand factors affecting those trends; and
(3) anticipated events such as competition from other similar properties under construction.
Added by Acts 1997, 75th Leg., ch. 1039, § 22, eff. Jan. 1, 1998. Amended by Acts 2003, 78th Leg., ch. 548, § 1, eff. Jan. 1, 2004.
Cross References:
Definition of market value, see Sec. 1.04(7).
Notes:
The comparable sales, cost and income methods of valuation are not necessarily the exclusive methods of determining market value. The trial court did not err by blending the income and comparable sales approaches, so long as the appraisal method as a whole constituted relevant and reliable evidence of market value. Houston R.E. Income Properties XV, Ltd. v. Waller County Appraisal District, 123 S.W.3d 859 (Tex. App.-Houston [1st Dist.] 2003, no pet. h.).
An overriding royalty is an interest in real property and not an interest in income. The interest's value is defined solely by the income received from production. The absence of net income renders the interest valueless. A royalty created merely as a mechanism by which a company may obtain a steady supply of lignite from its own reserves while paying a production company's costs has no objective value. Destec Properties Limited Partnership v. Freestone Central Appraisal District, 6 S.W.3d 601 (Tex. App.-Waco 1999, petition filed).
Sec. 23.013. Market Data Comparison Method of Appraisal.
If the chief appraiser uses the market data comparison method of appraisal to determine the market value of real property, the chief appraiser shall use comparable sales data and shall adjust the comparable sales to the subject property.
Added by 1997 Tex. Laws, p. 3908, ch. 1039, Sec. 22; amended by 1999 Tex. Laws, p. 4439, ch. 1295, Sec. 2.
Cross References:
Definition of market value, see Sec. 1.04(7).
Notes:
The comparable sales, cost and income methods of valuation are not necessarily the exclusive methods of determining market value. The trial court did not err by blending the income and comparable sales approaches, so long as the appraisal method as a whole constituted relevant and reliable evidence of market value. Houston R.E. Income Properties XV, Ltd. v. Waller County Appraisal District, 123 S.W.3d 859 (Tex. App.-Houston [1st Dist.] 2003, no pet. h.).
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Sec. 23.135. License to Occupy Dwelling Unit in Tax-Exempt Retirement Community.
(a) license to occupy a dwelling unit in a retirement community that is exempt from taxation under Section 11.18(d)(19) is not a taxable leasehold or other possessory interest in real property regardless of whether the occupant of the dwelling unit is required to pay a refundable or nonrefundable deposit or a periodic service fee under the contract granting the occupant the license to occupy the dwelling unit.
Added by Acts 2005, 79th Leg., ch. 606, § 1, eff. June 17, 2005. .
Sec. 23.014. Exclusion of Property as Real Property.
In determining the market value of real property, the chief appraiser shall analyze the effect on that value of, and exclude from that value the value of, any:
(1) tangible personal property, including trade fixtures;
(2) intangible personal property; or
(3) other property that is not subject to appraisal as real property.
Added by Acts 2003, 78th Leg., ch. 548, § 2, eff. Jan. 1, 2004.
Cross References:
Definition of market value, see Sec. 1.04(7).
Definition of tangible personal property, see Sec. 1.04(5).
Definition of intangible personal property, see Sec.1.04(6).
Sec. 23.02. Reappraisal of Property Damaged in Natural Disaster Area.
(a) The governing body of a taxing unit that is located partly or entirely inside an area declared to be a natural disaster area by the governor may authorize reappraisal of all property damaged in the disaster at its market value immediately after the disaster.
(b) If a taxing unit authorizes a reappraisal pursuant to this section, the appraisal office shall complete the reappraisal as soon as practicable. The appraisal office shall include on the appraisal records, in addition to other information required or authorized by law:
(1) the date of the disaster;
(2) the appraised value of the property after the disaster; and
(3) if the reappraisal is not authorized by all taxing units in which the property is located, an indication of the taxing units to which the reappraisal applies.
(c) A taxing unit that authorizes a reappraisal under this section must pay the appraisal district all the costs of making the reappraisal. If two or more taxing units provide for the reappraisal in the same territory, each shall share the costs of the reappraisal in that territory in the proportion the total dollar amount of taxes imposed in that territory in the preceding year bears to the total dollar amount of taxes all units providing for reappraisal of that territory imposed in the preceding year.
(d) If property damaged in a natural disaster is reappraised as provided by this section, the governing body shall provide for prorating the taxes on the property for the year in which the disaster occurred. If the taxes are prorated, taxes due on the property are determined as follows: the taxes on the property based on its value on January 1 of that year are multiplied by a fraction, the denominator of which is 365 and the numerator of which is the number of days before the date the disaster occurred; the taxes on the property based on its reappraised value are multiplied by a fraction, the denominator of which is 365 and the numerator of which is the number of days, including the date the disaster occurred, remaining in the year; and the total of the two amounts is the amount of taxes on the property for the year.
(e) Repealed in 1983.
Added by 1981 Tex. Laws (1st C.S.), p. 136, ch. 13, Sec. 57; amended by 1983 Tex. Laws, p. 4829, ch. 851, Sec. 28.
Sec. 23.03. Compilation of Large Properties and Properties Subject to Limitation on Appraised Value.
Each year the chief appraiser shall compile and send to the Texas Department of Economic Development a list of properties in the appraisal district that in that tax year:
(1) have a market value of $100 million or more; or
(2) are subject to a limitation on appraised value under Chapter 313.
Added by 2001 Tex. Laws, p. 5069, ch. 1505, Sec. 2.
Cross References:
Texas Economic Development Act, see Ch. 313.
[Secs. 23.04 to 23.10 reserved for expansion]
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Chapter 22C | Table of Contents | Chapter 23B1 (Section 23.11 - 23.123)
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