2014 PROPERTY TAX CASES And Attorney General s Opinions

MCCREARY, VESELKA, BRAGG & ALLEN, P.C. ATTORNEYS AT LAW 700 Jeffrey Way, Suite 100 Round Rock, Texas 78665 2014 PROPERTY TAX CASES And Attorney General s Opinions Last updated: August 1, 2015 Cases Thiery v. Texas Tax Solutions, LLC 2014 WL 7447976 (W.D. Tex., December 19, 2014) Issues: Property tax loans Thiery took out two property-tax loans from Texas Tax Solutions. She later sued the lender in federal court under the Federal Truth in Lending Act (TILA), 15 U.S.C. 1601, et seq. The specifics of her claim are not described in this opinion from the district court. Instead, the opinion focuses on whether the TILA applies to property-tax loans at all. The lender argued that it did not and that the case should be dismissed. The TILA applies to consumer credit transactions, defined as transactions in which 1) credit is offered or extended to a natural person; and 2) the money, property, or services which are the subject of the transaction are primarily for personal, family, or household purposes. Credit means the right to defer payment of debt or to incur debt and defer its payment. A property tax assessed by a governmental entity is not an extension of credit; it simply arises as a result of property ownership. A property-tax loan, on the other hand, arises from a specific agreement between the parties. It involves an extension of credit. A property owner takes out the loan in order to avoid foreclosure and, at least in the case of the person s home, that is a personal, family, or household purpose. Thus the TILA can apply to a property-tax loan. The court refused to dismiss the case. Signal International Texas, L.P. v. Orange County 2014 WL 7183667 (Tex. App. Beaumont, December 18, 2014, pet. denied) (not reported) Issues: Agreements resolving protests; exhaustion of remedies Signal s business personal property, included a barge (worth almost $13 million) that it leased to another company. Signal rendered its bpp, including the barge, in 2011. Although Signal and the appraisal district initially disagreed about the value of Signal s property, they soon signed a written agreement settling on a value of about $32 million, including the barge. In early 2012, Signal contacted the district and claimed that the

lessee had moved the barge to Mexico prior to January 1, 2011. The district declined to make any type of correction to the 2011 appraisal roll. Signal sued the district and the taxing units. It claimed that its agreement with the district should be rescinded under equitable principles of contract law. (A court will sometimes rescind a contract if it appears that the parties were mutually mistaken about some fact critical to the contract.) The trial court dismissed the case for lack of jurisdiction, and Signal appealed. The court of appeals affirmed the dismissal. The higher court explained that under 1.111 of the Tax Code, an agreement between an appraisal district and a property owner is final if it relates to a claim that could be the subject of a protest. In May of 2011, Signal could have filed a protest concerning the taxable situs of the barge. It waived that right when it signed the settlement agreement. The types of claims and defenses that might lead a court to rescind an ordinary contract do not apply to an agreement made final by 1.111. A court has no jurisdiction to rescind such an agreement. Section 42.09 says that the Code s procedures and remedies are exclusive. A lawsuit based on contract principles is not available as an alternative. When Signal signed the settlement agreement, it gave up its rights to use the Code s procedures and to claim the Code s remedies. It left itself with no recourse when it later decided to assert a situs claim. Consequently, the trial court correctly dismissed the case. Billings v. Propel Financial Services, LLC 2014 WL 7448248 (W.D. Texas, November 28, 2014) Issues: Property tax loans This case raises the same issue raised in Thiery v. Texas Tax Solutions, discussed above, i.e., whether the Federal Truth in Lending Act (TILA), 15 U.S.C. 1601, et seq. applies to property tax loans. But this opinion reaches the opposite conclusion. A borrower sued a lender alleging violations of the TILA and the Federal Home Ownership and Equity Protection Act (HOEPA), 15 U.S.C. 1639. The court dismissed the claims concluding that property taxes are not a debt, and agreements concerning those taxes are not considered credit. Hidalgo International, Inc. v. Wolkowitz 2014 WL 6602416 (Tex. App. Houston [1 st Dist.], November 20, 2014, no pet.) (not reported) Issues: Redemption following tax sale Hidalgo bought property encumbered by liens securing delinquent taxes. When Hidalgo did not pay, the taxing units foreclosed, and Wolkowitz bought the property at the tax sale. Hidalgo later approached Wolkowitz about redeeming the property. She provided an itemized statement (under 34.21(i) of the Tax Code) of what she contended was the redemption amount. Hidalgo thought that Wolkowitz was claiming too much, but it never attempted to redeem the property through the tax office under 34.21(f), and it never tendered any payment to Wolkowitz. Instead, it waited until the redemption period had 2

passed and then sued Wolkowitz. In a trial, a jury found against Hidalgo, but it is not clear just what question was submitted to the jury or just what the jury s answer was. The trial court entered judgment for Wolkowitz, and Hidalgo appealed. On appeal, Hidalgo argued that it was excused from tendering payment to Wolkowitz or to the tax office because Wolkowitz was demanding an excessive redemption amount and because she had made it clear that she would not accept Hidalgo s tender. The court of appeals explained that it could not consider Hidalgo s arguments because they had not been raised in the trial court. Hidalgo had also failed to take the steps in the trial court that would have been necessary in order for it to challenge the jury s verdict on appeal. The court, however, added a footnote to its opinion that says, Even if Hidalgo had preserved error, we would conclude that its appellate arguments lack merit. The court of appeals affirmed the trial court s judgment. Bexar Appraisal District v. Sivage Investments, Ltd. 2014 WL 6475369 (Tex. App. San Antonio, November 19, 2014, no pet.) (not reported) Issues: Agricultural land changing use Several owners of open-space agricultural properties decided to develop those properties and take them out of agricultural use. The appraisal district determined that the uses of the properties had changed and that rollback taxes should be assessed. The district also determined that the properties should lose their agricultural appraisals for the years in which their uses were changed. The cancelation of an agricultural appraisal for the year that a property s use changes is required by the Comptroller s Manual for the Appraisal of Agricultural Land. Appraisal districts have followed the Manual for decades. These property owners, however, argued that the rule set out in the Manual was void. They claimed that they were entitled to keep their agricultural appraisals for the years in which they changed the uses of their properties. The trial courts issued summary judgments for the property owners, and the district appealed. The various cases were consolidated by the court of appeals. In a very short opinion, the court of appeals affirmed the trial courts rulings. The court reasoned that the Tax Code did not expressly authorize an appraisal district to reappraise an agricultural property in the year that the property underwent a change of use. The Comptroller s rule was void because it was contrary to the Code. Editor s Comment: The court s opinion exposes but does not answer a question raised by the Code: when is a property s eligibility for agricultural appraisal determined? Is January 1 the relevant date? Is another date relevant? Or, must the property be used for agriculture throughout the year? (By contrast, the Code has a lot to say about the dates that are relevant to exemptions. see 11.42-11.423, 26.10-26.113) This opinion threatens to undermine the answer provided by the State Property Tax Board and the Comptroller, but the opinion itself does not provide a clear alternative answer. Also noteworthy is the fact that the court chose to set out a potentially dramatic decision in a 3

memorandum opinion that will not be reported in the Southwestern Reporter. (That does not mean that it can be ignored.) Will other courts of appeals follow this opinion? Watch this space. Blume v. Wells Fargo Bank, N.A. 2014 WL 5768981 (Tex. App. Dallas, November 6, 2014, no pet.) (not reported) Issues: Liability for taxes Boyd was upside-down in his mortgage and behind on his payments to Wells Fargo. In early 2011, he contracted to sell his house to Blume. Their original contract contained a typical clause requiring proration of the 2011 taxes on the house, and added, If taxes are not paid at closing or prior to closing, Buyer shall pay taxes for the current year. Because the transaction was a short sale, it required the mortgagee s approval, and Wells Fargo granted that approval in a letter to Boyd dated January 21, 2011. Boyd and Blume later amended their contract to say, No 2011 taxes will be prorated at closing. They closed on February 25, 2011. Later that year, Blume paid $14,365 in 2011 taxes but claimed that Wells Fargo was obligated to reimburse her for those taxes. When Wells Fargo refused, she sued alleging breach of contract and other claims. The trial court entered a summary judgment for Wells Fargo, and Blume appealed. The court of appeals affirmed the judgment for Wells Fargo and tersely debunked Blume s claims. She first claimed that Wells Fargo had contracted to pay the taxes. The court responded that Wells Fargo was not even a party to the sales contract, and that the contract obligated Blume to pay the taxes. Wells Fargo s letter to Boyd did not even mention taxes and did not create any obligation to Blume. Blume next claimed that Wells Fargo was responsible for the taxes because, as of January 1, 2011, Boyd was in default on his mortgage and Wells Fargo could have foreclosed. According to Blume, that made Wells Fargo the house s equitable owner. The court explained that the person holding legal title to a property is ordinarily responsible for the taxes on it. A lienholder is not considered the owner (not even the equitable owner), even if the lienholder has the option of foreclosing. Thus, Blume, not Wells Fargo, was responsible for the taxes. Davis v. Fayette County Appraisal District 2014 WL 5802070 (Tex. App. Austin, November 4, 2014, pet. denied) (not reported) Issues: Delinquent-tax suits; counterclaims against taxing units The appraisal district, acting as the tax collector for various taxing units, sued Davis for delinquent taxes. Davis filed various counterclaims accusing the district of libel, slander, conspiracy, etc., all based on the district s having sued him. Davis was incarcerated, and, although he knew about the case being scheduled for trial, he made no effort to seek a court order that would have allowed him to appear for the trial. In Davis s absence, the district presented its evidence and the trial court entered a judgment for the district. The judgment denied Davis any relief on his counterclaims. Davis appealed. 4

Before the court of appeals could consider the case, the district released the judgment unconditionally, thus giving up all its rights under the judgment. (The court s opinion does not discuss the district s reason for releasing the judgment.) The court ruled that the release made the case moot insofar as it applied to the district s delinquent-tax claims and it vacated the award of delinquent taxes to the district. Davis s counterclaims were not moot, and the court proceeded to consider them. The record from the trial court, however, did not include any evidence related to the counterclaims because Davis had not been at the trial to present any evidence. His failure to appear and offer evidence justified the trial court s denial of his counterclaims. Davis tried including some documents as appendices to his brief, but the court of appeals would not allow that. The court of appeals affirmed the trial court s decision denying relief on the counterclaims. Haynes v. Haire 2014 WL 5409053 (Tex. App. Beaumont, October 23, 2014, pet. denied) (not reported) Issues: Redemption following tax sale Haynes owned a company called Vair and an interest in another company called Texas Regional. Texas Regional was facing a tax sale of its real property. On the day of the sale, Texas Regional conveyed the property to Vair. The tax sale proceeded and Haire bought the property for $53,000. Haynes, acting on behalf of Vair tried to redeem the property by offering Haire a check, but Haire rejected it. Haynes then went to the Tax office and filed an affidavit stating that Vair had attempted to redeem the property but Haire had rejected its efforts. Haynes gave the tax office a check for $66,250 representing Haire s purchase price for the property plus 25%. When Haire did not vacate the property, Haynes sued him. Haynes claimed the property and claimed damages because Haire had removed a tree and an old storage building from the property. Haire responded that Haynes had not redeemed the property because the amount that he had given to the tax office had been too small. Haire claimed that the redemption amount should include amounts that he had spent for things like clean-up directed by city officials, insurance, water, equipment and tools. The parties stipulated that Haire had spent $6,226. The trial court ruled for Haire, and Haynes appealed. The court of appeals affirmed the judgment for Haire. The court explained that the under 34.21 of the Tax Code the amount tendered to redeem a property must include amounts that the tax-sale purchaser spent on: maintaining, preserving and safekeeping the property; insurance; and repairs and improvements required by local authorities or by a lease. The correct redemption amount should have been calculated by adding Haire s $6,226 in costs to his $53,000 purchase price and then adding an extra 25% for a total of $74,033. A redemption will still be effective if the payment is off by an insignificant amount, but, in this case, Haynes s payment was almost $7,800 too low. Consequently, the attempted redemption was ineffective and Haire was the owner of the property. 5

Hammond v. Ocwen Loan Servicing, LLC 2014 WL 5326722 (N.D. Tex., October 21, 2014) Issues: Transfer of tax lien; home equity loan In 2006 remember what housing prices were doing in 2006? Ocwen made a $732,000 home equity loan to Hammond in exchange for a note and lien on Hammond s home. By 2009, Hammond could not pay his property taxes and took out the first of two property-tax loans, with the tax liens being transferred to the lender. The other property-tax loan occurred in 2011. In 2012, Ocwen paid off the property-tax loans. The total amount that Ocwen paid is not stated, but it increased Hammond s principal balance by $70,000 to a total of $710,000. Ocwen also demanded that Hammond pay more into escrow for property taxes. Hammond sued Ocwen in state court. Among other allegations, he claimed that Ocwen had violated the Texas Constitution s limitation on home equity loans. He also claimed that Ocwen had violated the Unfair Debt Collection Practices Act by making misrepresentations in connection with paying off the property-tax loans and increasing the amount of Hammond s home equity loan. Ocwen removed the case to federal court and asked the court to dismiss those two claims on the grounds that the facts alleged by Hammond did not amount to violations of law. In this opinion, the federal magistrate judge agreed with Ocwen. The Judge noted that Art. XVI, 50 of the Texas Constitution prohibits a home equity loan that, when combined with other liens on the property, exceeds eighty percent of the property s value. Hammond alleged that his property was worth less than the home equity loan balance when Ocwen added the $70,000 to that balance. The judge saw no problem. The Constitutional limitation applies at the time that a lender makes an extension of credit. When it paid off the property-tax loans and increased Hammond s balance, Ocwen was not making a new extension of credit. The original 2007 loan documents required Hammond to pay property taxes. They gave Ocwen the authority to pay off any debt that might arise with a lien-priority higher than that of Ocwen s lien and to add those payments to the amounts secured by Ocwen s lien. Ocwen merely exercised rights that Hammond gave it when he signed the original documents. The judge next explained that the Unfair Debt Collection Practices Act does not give a debtor a cause of action for a creditor s conduct that amounts to a breach of contract. The Act did not apply to Hammond s claims that Ocwen had made misrepresentations in violation of their loan agreement. Hammond might have a claim under contract law, but he did not have one under the Act. The Judge dismissed Hammond s claims under the Constitution and the Act. In Re Morales 2014 WL 5361928 (Bkrtcy. W.D.Tex., October 21, 2014) Issues: Transfer of tax lien; correction of loan agreement 6

Morales and her six siblings inherited real property from their deceased parents. Morales had a 1/7 interest in the property. On some unspecified date, probably early in 2012, she contracted for a property-tax loan from Ovation, with the money going to pay the delinquent taxes on the property. The original loan agreement contained an error concerning the size of the property. In July of 2012, Morales signed a corrected loan agreement. In March of 2014, Morales filed for bankruptcy. Ovation claimed that it had a top-priority tax lien on the whole property. Morales objected to Ovation s claim. She argued that because the original loan agreement contained an erroneous property description, Ovation s lien was invalid. She also argued that if Ovation had a lien at all, that lien covered only her 1/7 interest in the property, not the interests of her siblings. The bankruptcy judge ruled for Ovation. The judge explained that the correction of the property description in the corrected loan agreement almost two years before Morales filed bankruptcy did not invalidate Ovation s tax lien. He also explained that when Ovation paid the delinquent taxes pursuant to its agreement with Morales, it became subrogated to the taxing units tax liens on the property, i.e., it received all of the taxing units interests and rights. Those tax liens applied to the whole property, not just to Morales s 1/7 interest. Where a property has multiple owners, any of them can enter a property-tax loan agreement that results in the tax liens on the whole property being transferred to the lender. Williams v. Sterling City Independent School District 447 S.W.3d 505 (Tex. App. Eastland, October 16, 2014, no pet. hist.) Issues: School finance In 2006, the legislature passed House Bill 1, the bill that provided some additional state money for school districts but lowered and compressed local school taxes. One part of that bill, 42.2516(h) of the Education Code provided that if a school district wound up with too much of certain kinds of money, that excess amount (called a clawback amount ) would be subtracted from the district s state funding. A rich district would have to pay the clawback amount to the state. The three types of money listed in the statute were those resulting from increases in the equalized wealth level under 41.002, the basic allotment under 42.101and the guaranteed level under 42.302. The Commissioner of Education, however, also considered a school district s increased tax revenues resulting from increased property values when he calculated the district s clawback amount. Three rich school districts that were harmed by the Commissioner s actions sued him. The Commissioner responded that he was immune from the suit. The trial court ruled for the school districts. The court did not order the Commissioner to pay refunds to the districts. Instead it ordered him to give the districts credits against amounts that they would owe to the state in the future. The Commissioner appealed. The court of appeals affirmed the trial court s ruling. The court reasoned that a state official is not immune from being sued if he has acted ultra vires, i.e., if he has acted outside his legal authority or failed to perform an act that he is required to perform. The Commissioner acted ultra vires when he calculated the districts clawback amounts 7

using sources of money other than those listed in 42.2516(h). He could be sued, but only for prospective relief, not for refunds of excessive clawback payments. The credits ordered by the trial court were a form of prospective relief and were therefore legal. Scott v. Hamilton County 2014 WL 5317771 (Tex. App. Waco, October 16, 2014, pet. denied) (not reported) Issues: Service and notice for delinquent-tax suit; defenses to delinquent taxes; practicing law; demand for jury trial Taxing units sued Scott for delinquent taxes on her separate real property. She responded by filing a pro se answer and a counter-suit against the taxing units. Shortly before trial, the taxing units amended their pleadings. On the day before the trial, Scott responded with another answer and counter- suit, which included a demand for a jury trial. When the trial judge called the case for trial, Scott announced that she was ready to proceed. She asked for a jury, but the judge denied her request as untimely. The judge also denied her request to allow her husband to act as her lawyer. During the trial, she wanted her husband to testify that the property qualified for a religious exemption, but the judge did not allow his testimony. When the trial ended, the judge ruled for the taxing units. In a post-trial motion, Scott claimed that she was indigent and should be excused from paying some court costs and fees. After a hearing the judge concluded that she was not indigent. Scott appealed. The court of appeals affirmed the trial court s judgment and related rulings. Scott complained that she was not properly served with the taxing units pleadings or with the notice of the trial. The court responded by noting that she had previously admitted receiving the pleadings and that she had responded to them. She showed up for the trial and did not complain about any lack of notice at that time. Her husband could not represent her because he was not licensed to practice law. He could not testify about religious uses of the property because a property owner cannot claim a tax exemption in the context of a delinquent-tax case. Scott also complained that her son had not been allowed to testify at the indigence hearing because he would not take an oath, but, because there was no transcript of that hearing, the court of appeals could not review the trial judge s decision. A jury request must be filed at least thirty days before trial, so Scott s request filed one day before trial was not timely. Scott could not complain about not having received various items from the trial court after the trial because the record showed that she had received them and had not been charged for them. Harris County v. PRSI Trading, LLC 2014 WL 4924123 (S.D. Tex., September 29, 2014) Issues: Federal courts The appraisal district granted an exemption for PRSI s oil and petroleum products under the federal law creating foreign trade zones. The county claimed that the exemption should not have been granted because the operator of the foreign trade subzone in 8

which the goods were located was not authorized to operate it. After an unsuccessful challenge before the ARB, the county filed suit against PRSI in a state district court. PRSI attempted to remove the case to federal court on the grounds that federal law controlled the issue. The county requested that the federal court transfer the case back to the state court. The federal judge agreed with the district and transferred the case back to the state court. The judge explained that a federal court will sometimes have jurisdiction to consider a case involving a substantial question of federal law, but not when the federal law is only being used defensively. In the judge s opinion, the county was claiming the authority to tax PRSI s property under Texas law, and PRSI was asserting the federal tax exemption in defense to the county s claim. A federal court may also have jurisdiction over a case filed against an agency or officer of the federal government or against an agent acting under a federal officer. But PRSI was not a federal officer or agent because it was not acting to help the federal government carry out its duties. There was no basis for the federal court to exercise jurisdiction over the case. Joaquin Independent School District v. Shelby County Appraisal District 2014 WL 5511479 (Tex. App. Tyler, August 29, 2014, pet. denied) (not reported) Issues: Challenging determination of property s location in taxing unit This case arose from a long-running controversy concerning the exact location of the boundary between the Joaquin ISD and the Shelbyville ISD. In the years 2008-2011, the JISD filed challenges with the ARB claiming that the appraisal district had erroneously determined that 164 properties were located in the SISD. It also claimed that the appraisal district had been under-appraising properties. The ARB denied those challenges. The JISD then filed suit against the appraisal district and the ARB. Its pleadings sought to appeal the ARB s orders, sought a declaratory judgment and sought relief under Chapter 43 of the Tax Code. The JISD requested that the appraisal rolls be changed going all the way back to 2003. It sought to recover the taxes it would have received if the appraisal district had listed the properties on the JISD s rolls--for some reason, it referred to this as a refund. The SISD intervened to defend itself. All parties filed Motions for summary judgment. The trial judge based his summary judgment on two prior court rulings in other cases. The net effect of his ruling was to transfer five properties into the JISD beginning the following year, 2013. The summary judgment denied all other relief sought by the JISD. The JISD appealed. The court of appeals affirmed the summary judgment. The JISD was not entitled to any relief on its claim concerning appraised values because it had not presented any evidence that the appraisal district was not appraising properties at their full market values. Chapter 43 allows a taxing unit to sue an appraisal district with respect to the district s policies and procedures. It is not an alternative to the Chapter-41 challenge procedures that allow a taxing unit to contest specific determinations made by a district. The Code s procedures and remedies are exclusive. That means that a declaratory judgment is not available as an alternative. A declaratory judgment ordering the 9

appraisal district to appraise properties at their market values would be pointless because the Tax Code already requires that. Because the JISD was not entitled to a declaratory judgment, it was not entitled to recover its attorneys fees under the Declaratory Judgments Act. The JISD based its claim for relief dating back to 2003 on an argument that in 2008, when it first filed a challenge, the ARB could have corrected appraisal rolls for five past years under 25.25(c). The court of appeals explained that taxing units are not allowed to file motions under that law. The court further reasoned that JISD was not entitled to refunds, even for the years in which it had filed challenges because the Tax Code did not specifically authorize refunds for taxing units. Because corrections to past years rolls would not result in refunds to the JISD, there would be no point in making those corrections. The trial court correctly ordered that the five properties be included in the JISD for only 2013 and future years. Waobikeze v. Fort Bend County 2014 WL 4345085 (Tex. App. Houston [1 st Dist], August 29, 2014, no pet.) (not reported) Issues: Exhaustion of remedies; proof of delinquent taxes Taxing units sued Waobikeze for delinquent 2005-2007 taxes on her business personal property. Waobikeze claimed that she had not been sent notices of appraised value for the relevant years and that the appraised values were too high. When the case was tried, the taxing units offered certified copies of their delinquent-tax records, which were admitted by the trial court. The court entered judgment for the taxing units in the amounts that they claimed, and Waobikeze appealed. The court of appeals affirmed the judgment for the taxing units. The court explained that a property owner who wants to complain about an appraised value or the delivery of a notice must do so in a timely protest or motion filed with the ARB. Section 42.09 of the Tax Code prevents a property owner from raising those claims as defenses in a delinquent-tax lawsuit. Section 33.47 of the Code allows taxing units to prove up their delinquent-tax claims using certified copies of their records just as the taxing units did in this case. The evidence established prima facie evidence of everything that they needed to prove. Waobikeze had no valid defense. Therefore the taxing units were entitled to judgment for their delinquent taxes. One footnote in the court s opinion is noteworthy. Waobikeze complained that the appraisal district had sent notices to the address of her business even after the business had closed. The court explained that in the absence of any renditions or other notices from Waobikeze, the district was not responsible for knowing that the business had closed. Houston Unlimited, Inc. v. Mel Acres Ranch 443 S.W.3d 820 (Tex. August 22, 2014) 10

Issues: Appraiser testimony This is not a property-tax case, but the opinion from the Supreme Court of Texas has a lot to say about how courts view testimony from appraisers. Over the course of several years, pollutants from HUI s metal processing plant ran off onto Mel s land, contaminated a stock tank and made the land temporarily unsafe for cattle. Mel reported the pollution to state authorities. HUI paid a fine, stopped its polluting practices and built a berm to prevent further runoff onto Mel s land. Mel sued HUI for negligence and sought to recover for the land s loss of value. Mel relied on testimony from an appraiser who concluded that the land s value had declined from $2.3 million to $900,000, a decline of $1.4 million, principally because contamination had stigmatized Mel s land. The appraiser relied on information about two other properties that had been affected by contamination in the past. She said that one had lost 72% of its value and the other had lost 41% of its value. From that evidence, she concluded that Mel s land had lost 60% of its value as a result of the contamination stigma. The jury believed the appraiser and awarded Mel $1.4 million in damages. The court of appeals affirmed the jury s decision. Then the Supreme Court decided to consider HUI s appeal. The Supreme Court reversed the Judgments of the lower courts and ruled that HUI did not owe Mel anything. The appraiser s testimony was so seriously flawed that it did not support the jury s verdict. The properties that she cited were not even in the same county as Mel s land. She considered them comparable to Mel s land only because they had a history of nearby contamination. She made no adjustments to account for differences between the properties or for differences between the types of contamination that affected the properties. One of the properties that she cited had been sold from a business to a former employee who called the sale a sweetheart deal. It was not an arm s-length sale. The other property had not sold at all. The appraiser had simply compared the owner s asking price with a verbal offer that he received. An unaccepted offer to buy or sell property does not tend to establish the property s market value. The amounts of the asking price and the verbal offer were both determined after contamination had occurred near the property, so they did not show a loss of value due to a contamination stigma. The appraiser assumed that the two properties lost value solely because of the stigma of past contamination, but she offered no evidence to support her assumption. She did not explain why she chose 60% as the portion of value lost by Mel s land. The Court explained that the conclusions of an appraiser or other expert are of no value if they have no basis to support them or if the basis offered does not actually support them. This is because the evidentiary value of expert testimony is derived from its basis, not from the mere fact that the expert has said it. In this case, the factual information cited by Mel s expert did not support her conclusions. In re Valero Refining-Texas, L.P. 2014 WL 4115917 (Tex. App. Houston [14 th Dist.], August 21, 2014, orig. proceeding) (not reported) 11

Issues: Discovery in appeals Valero sued the appraisal district to appeal an ARB order concerning Valero s refinery. Valero claimed excessive value and unequal value. The district used discovery procedures to seek information about the refinery, principally information about its income and expenses and the volumes of inputs consumed and products produced by the refinery. Valero objected, claiming that the information requested included trade secrets. When the trial court ordered it to produce the information, Valero withdrew its excessive-value claim and reasserted its objections to the discovery. Again the trial court ordered it to produce the information, and Valero took its objections to the court of appeals. The higher court ruled for Valero. The court explained that a trade secret is any formula, pattern, device or compilation of information which is used in one s business and presents an opportunity to obtain an advantage over competitors who do not know or use it. Determining whether information constitutes a trade secret involves considering six factors: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to the business and to its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. One of Valero s officers had testified to his conclusions that all six factors were present and that some of Valero s records were trade secrets. He offered few details to support his conclusions, but his testimony convinced the court of appeals. The court next considered whether it was necessary for the district to have the information. It acknowledged that the information would be very important to an income-approach appraisal but reasoned that the district might be able to determine the value of the refinery without using the income approach. For that reason, the trial court abused its discretion when it ruled that the district was entitled to the information. Editor s comment: Suppose a top-notch golfer applies to play in a major tournament and compete for large prizes. The tournament director tells him that he may play, but he may carry only seven clubs. The other competitors, all of them elite golfers, will each carry fourteen clubs. The Houston Court of Appels would say that the director s decision is correct because fourteen clubs are not really necessary; a golfer should be able to play a round with only seven clubs. The court, however, would be confusing what is necessary to play a round of golf and what is necessary to compete against the world s best golfers. That is just what the court did when it confused what is necessary to reach some estimate of a refinery s value with what is necessary to compete in a trial against a property owner with access to much more relevant information. Bauer-Pileco, Inc. v. Harris County Appraisal District 443 S.W.3d 304 (Tex. App. Houston [1 st Dist.], August 7, 2014, pet. denied) 12

Issues: Correcting appraisal rolls In 2008, Bauer rendered its business personal property at a value of $39 million. The appraisal district appraised the bpp in reliance on the rendition, and Bauer did not protest. In 2011, the company filed a motion under 25.25(c)(3) of the Tax Code, which allows an ARB to correct an appraisal roll to remove property that does not exist in the form or at the location described on the roll. Bauer argued that when it prepared its 2008 rendition, it mistakenly included: 1) items that were in transit but that had not reached Harris County; 2) intangible receivables; and 3) items that were actually in California. Bauer argued that the values of those items (a total of about $9 million) should be subtracted from the 2008 appraisal. It admitted having approximately $30 million of bpp in the county. The ARB denied Bauer s motion. Bauer then sued the district and included claims that the items in dispute were protected constitutionally from taxation in Harris County. The trial court granted a summary judgment for the district, and Bauer appealed. The court of appeals affirmed the summary judgment in favor of the district. It explained that 25.25(c)(3) does not apply to the types of errors alleged by Bauer. Bauer admitted having bpp at its Harris County location, so it could not deny having property in the form of bpp at that location. Additionally, 25.25(c)(3) requires a court or an ARB to focus on an appraisal roll. Although Bauer s rendition may have contained errors, the 2008 appraisal roll correctly reflected that Bauer had bpp in Harris County. The statute would not allow a court or an ARB to consider or change the value of that property. If Bauer had acted sooner, it could have raised its claims through a protest or a motion under 25.25(d) to correct a value alleged to be more than one-third too high. Bauer also argued that the district s motion for summary judgment had not addressed its constitutional claims. The court of appeals responded that even if it sent the constitutional claims back to the trial court, that court would not have the necessary jurisdiction to consider them. Bauer had failed to raise those claims through a timely protest to the ARB. Consequently, there was no reason to remand the constitutional claims to the trial court. Sam Griffin Family Investments-I, Inc. v. Dallas Central Appraisal District 2014 WL 3587354 (Tex. App. Dallas, July 21, 2014, no pet.) (not reported) Issues: Attorney s fees After an unsuccessful protest before the ARB, Griffin sued the appraisal district to challenge the 2010 appraisal of his car wash. While the case was pending, the district discovered that it had misclassified the car wash. It agreed to reduce the value from $500,000 to $270,000. That value was acceptable to Griffin, but he insisted on recovering his attorney s fees. The trial court held a trial on the issue of attorneys fees and found that Griffin had not proven, under 42.25 of the Tax Code, that the appraised value of his car wash exceeded the value required by law. He could not recover 13

attorney s fees under 42.29. The trial court denied Griffin s request for attorney s fees, and Griffin appealed. The court of appeals affirmed the trial court s judgment. In the court s words, [The] evidence suggests Griffin's property was overvalued because of a clerical error, rather than because it was excessively or unequally appraised. We cannot conclude that there is no evidence to support the trial court's findings that Griffin did not prove an excessive or unequal appraisal... Thus, 42.29 did not allow an award of attorneys fees to Griffin. Brookshire Brothers, Ltd. V. Aldridge, 2014 WL 2994435 (Tex. July 3, 2014) Issues: Preservation of evidence This isn t a property tax case, but it involves a detailed analysis by the Texas Supreme Court of a party s duty to preserve evidence and the consequences of spoliating (i.e., destroying or disposing of) evidence. It should be of interest to any person or entity that may become involved in litigation. The Court explained that a party has a duty to preserve evidence in its possession or control (including documents, photographs, videos and computer data) when the party knows or reasonably should know that there is a substantial chance that a claim will be filed and that the evidence will be relevant to that claim. If the party, either intentionally or negligently spoliates the evidence, it can be sanctioned by a court. A court will generally presume that the spoliated evidence would have been harmful to the party that destroyed or disposed of it. Sanctions should be proportionate to the spoliating party s culpability and the harm done to the other party. Sanctions can include requiring the spoliating party to pay the other party s legal fees, excluding evidence or striking the guilty party s claims or defenses. In the most serious cases, a court may instruct a jury to presume that the spoliated evidence would be harmful to the guilty party. Mandel v. Lewisville Independent School District 445 S.W.3d 469 (Tex. App. Fort Worth, July 1, 2014, pet. denied) Issues: Service of process in delinquent-tax suit The school district sued Ross and Lea Mandel for delinquent 2010 taxes on their house. The Mandels were personally served with the suit papers. (Personal service means that a deputy or some other process server actually found the defendant and handed him the papers. The deputy or process server files a written return of service with the court.) The Mandels did not file an answer. A lienholder that had not yet been served paid the taxes. Before the district got around to dismissing the case, the 2011 taxes became delinquent. In June of 2012, the district amended its pleadings and included claims for the 2011 taxes. The lienholder was personally served with the district s amended pleadings and filed an answer. The amended pleadings were served on the Mandels by certified mail under Rule 21a of the Texas Rules of Civil Procedure (TRCP). (Rule 21a 14

does not require personal service; a party can be served by less formal means such as certified mail, courier or fax.) In early November, the other taxing units intervened in the case but did not serve their pleadings on the Mandels or on the lienholder. In mid- November, the case was called to trial. The trial court entered judgment for the taxing units, ordered the sale of the property and ordered that the purchaser receive a writ of possession. The district clerk mailed notices of the judgment to the Mandels. The sheriff proceeded to publish notices of the tax sale and mailed a copy to the Mandels. On April 2, 2013, the Sheriff sold the property. On May 14, 2013, the Mandels filed a restricted appeal to contest the trial court s judgment. In October of 2013, the court clerk issued a writ of possession ordering that possession of the property be turned over to the purchaser. The Mandels filed a cash deposit with the clerk and demanded that the writ of possession be quashed. The trial court could not act fast enough. On the same day that a constable started removing the Mandels belongings from the house, the court of appeals granted an emergency stay of execution. The higher court then proceeded to consider the Mandels claims concerning service of process. The court explained hat in a restricted appeal, it could only consider the record from the earlier trial and determine whether the record showed error on the part of the trial court. The Mandels first complained that the officer who had served Ross Mandel had not noted in his return the specific time of day when the service occurred. The officer had noted the date of service and that service occurred in the A.M. The court explained that Rule 107 of the TRCP requires that a return of service include the date of service but not the specific time of day. The officer s return was sufficient to satisfy the rule. The Mandels next argued that the district s amended pleading had to be served on them personally. The court rejected that argument and ruled that service under Rule 21a was sufficient. The certificate of service on the district s amended pleading was enough to show that the Mandels were served, at least in the absence of any contrary evidence. The Mandels complained that the other taxing units had not served their pleadings on them at all. The court explained that Rule 117a of the TRCP did not require the other taxing units to serve the Mandels. The district s pleadings had identified the other taxing units and advised the Mandels that the other taxing units might file their own delinquenttax claims without further notice to the Mandels. The rules were sufficient to protect the Mandels due-process rights. The court further explained that the clerk s notice of judgment and the sheriff s notice of sale needed only to be served on the Mandels under Rule 21a. Neither the clerk nor the sheriff was required to include proof of that service in the record. The record did not show that the clerk or the sheriff failed to serve the notices. Because the record did not reveal any error, the Mandels restricted appeal failed, and the Court of appeals affirmed the trial court s judgment for the taxing units. Sonne v. Harris County Appraisal District 2014 WL 2933227 (Tex. App. Houston [1 st Dist.], June 26, 2014, no pet.) (not reported) 15

Issues: Payment of taxes during appeal In 2009, Sonne protested the appraisals of two tracts of land. The ARB reduced the appraised values, but Sonne nevertheless sued the appraisal district, claiming further reductions. His pleadings said that he would timely pay all taxes due, or he would pay the taxes on the undisputed value of the land, or he would request relief from the court. Sonne s taxes were only $638 but he did not pay and the taxes became delinquent. The same things happened in 2010, but Sonne s taxes for that year were only $40. He amended his pleadings to add his 2010 claims to his existing lawsuit but did not make any payment. When the appraisal district sought the dismissal of the case, Sonne responded that he had to pay only the taxes on the undisputed values of his land, and, because he claimed that his land had no value at all, that amount was zero. Thus, he argued, his payment of $0 satisfied 42.08 of the Tax Code and allowed him to maintain his suit. The trial court disagreed and dismissed the case. Sonne appealed. The court of appeals upheld the dismissal of the case. The court explained that if a property owner proposes to pay only the taxes on the undisputed value of his property, his pleading must be accompanied by a statement of the amount that he proposes to pay. Sonne s pleadings did not state the amount that he proposed to pay. Therefore, he had to pay the full amount of the assessed taxes. When he made no payment at all and the taxes became delinquent, he failed to even substantially comply with the payment requirement. Section 42.08 required the dismissal of the case. Sonne tried arguing that the statute was unconstitutional, but the court rejected that argument. KMR Minden, L.P. v. Harris County Appraisal District 2014 WL 2895581 (Tex. App. Houston [1 st Dist.], June 24, 2014, pet. denied) (not reported) Issues: Payment of taxes during appeal KMR protested the 2011 appraisal of its apartment complex and then sued to appeal the ARB s order. Its petition stated that it would timely pay all taxes due, or it would pay the taxes on the undisputed value of the property, or it would request relief from the court. In October of 2011, KMR received a tax bill for approximately $12,000. KMR did not pay any taxes prior to delinquency. It paid the full assessment in mid-april. When the appraisal district asked the trial court to dismiss the case, KMR responded by filing an affidavit of inability to pay. In the affidavit and in the testimony of its representative, KMR claimed that it did not have enough in its bank account as of January 31 to pay the entire assessment. It attached bank statements for the months of January through April, 2012. If further explained that in April, some of its owners had loaned it money to pay the taxes. The trial court concluded that KMR should not be excused from paying taxes and that the payment requirement did not unreasonably restrain KMR s access to the court. The court dismissed the case, and KMR appealed. 16

The court of appeals affirmed the dismissal of the case. The higher court focused on several facts shown by the evidence. The bank statements presented by KMR did not cover the months of October through December, 2011, months when KMR had its tax bill. The bank statements that it did provide showed that KMR took in enough money in January to pay the taxes, but it elected to pay its other expenses instead. The statements also showed regular, unexplained transfers of thousands of dollars to another account. KMR s owners had lent it money before, and it did not explain why it could not have borrowed from them earlier in order to pay the taxes on time. KMR never contacted the taxing units or attempted to arrange for an installment payment plan. Additionally, KMR never offered any evidence concerning what the taxes would have been on the undisputed value of its property or whether it could have paid that undisputed amount. The fact that its original petition failed to state an undisputed value or an undisputed tax amount would not have prevented it from making such a payment. The court also explained that the substantial-compliance language in 42.08 of the Tax Code does not apply to the date of a tax payment. A payment must be timely, although its amount need not be exactly right. A property owner s failure to satisfy 42.08 deprives a trial court of jurisdiction to consider the owner s case. Parker County Appraisal District v. Francis 436 S.W.3d 845 (Tex. App. Fort Worth, June 19, 2014, no pet.) Issues: Land qualifying for homestead exemption and open-space appraisal Francis owned three tracts of contiguous land: a one-acre tract where he lived; a threeacre tract used for agriculture; and a nine-acre tract used for agriculture. Prior to 2010, the appraisal district had been applying a homestead exemption to the one-acre tract and appraising the two larger tracts as open-space agricultural land. In 2010, Francis applied to have the three acre tract included under the homestead exemption, but he also wanted to keep the open-space appraisal on that tract. The district responded that Francis could not receive both tax breaks on the same tract and denied the homestead exemption for the three-acre tract. After an unsuccessful protest before the ARB, Francis filed suit. Francis and the district stipulated the facts to be considered by the trial court. They stipulated that absent the open-space land valuation, the three-acre tract would qualify for the residence homestead exemption, and in the absence of the residence homestead exemption, the three-acre tract qualifies for the open-space land valuation. The trial court ruled for Francis and the district appealed. The court of appeals affirmed the judgment for Francis and ruled that, based upon the stipulations, the three-acre tract could receive both the homestead exemption and an open-space appraisal. The court noted that under 11.13(j) of the Tax Code, a residence homestead can include up to twenty acres of land used in connection with the residential occupancy of a structure. Section 23.25 requires an appraisal district to apply the same per-acre market value to the land portion of a single-family residence and contiguous agricultural land owned by the same people. The court understood that to mean that if the residential land qualifies for a homestead exemption, the agricultural land does too. Under 23.51, open-space land must be devoted principally to 17

agriculture, but that does not preclude it from being used for residential purposes as well. Section 23.55(i) allows an owner to claim some open-apace land as part of a homestead without paying a rollback tax. The court read that law to allow the same land to receive both agricultural and homestead benefits simultaneously. Under 11.13(k), a portion of a residential structure that is used primarily for non-residential purposes cannot qualify for a homestead exemption, but that rule does not apply to land. The district attempted to cite the Comptroller s Manual for the Appraisal of Agricultural Land, but the court said that the Manual did not even exist. Somehow, it disappeared when the Comptroller took over the responsibilities of the State Property Tax Board. Editor s Comment: The court of appeals focused on the specific language of the parties stipulations. If a similar issue arises in another case, a different ruling may result if the parties do not use stipulations or if they use different language in their stipulations. The court was mistaken about the Manual. The 1991 legislation that transferred the SPTB s duties to the Comptroller provided that the SPTB s rules would remain in effect unless they were amended, repealed or superseded by the Comptroller. The Comptroller has never repealed or changed the Manual. Ashland, Inc. v. Harris County Appraisal District 437 S.W.3d 50 (Tex. App. Houston [14 th Dist.], June 12, 2014, no pet. hist.) Issues: Freeport exemption Ashland claimed a freeport exemption for motor oil, gear oil and grease held at its at its plant in Houston. According to Art. VIII, 1-j of the Texas Constitution, the freeport exemption does not apply to oil, natural gas, and other petroleum products. Ashland claimed that its products were something different and that they qualified for the exemption. Ashland s claim was denied by the appraisal district and the ARB, and Ashland filed suit. The trial court entered a summary judgment for the district, and Ashland appealed. The court of appeals reversed the trial court s ruling and entered judgment for Ashland. The court referred to a definition of petroleum products found in 11.251 of the Tax Code: liquid and gaseous materials that are the immediate derivatives of the refining of oil or natural gas. It also noted that the Comptroller had prescribed a list of petroleum products and that the list included lubricants. Ashland, however, had submitted an affidavit from a chemical engineer, and the court relied heavily on that affidavit. The engineer explained that refining crude oil produces a product called base oil. Ashland acquired base oil and combined it with other chemicals and products in a secret manufacturing process. The resulting products, including motor oil, gear oil and grease were not immediate derivatives of refining; they were only secondary derivatives. Ashland s plant was not a refinery, and its manufacturing process did not begin until the refining process had been completed at a refinery somewhere else. The district did not respond with expert testimony of its own. The court accepted the conclusions of Ashland s engineer and concluded that Ashland s products were not petroleum products. The products, therefore qualified for the exemption. 18

Patel v. Harris County Appraisal District 434 S.W.3d 803 (The. App. Houston [14 th Dist.], June 5, 2014, no pet.) Issues: Appeal of favorable ARB order In 2010, Patel protested the $2 million appraised value of his property, claiming that the value was excessive and unequal compared to the appraised values of other properties. Patel s agent gave the ARB a document containing an unsworn statement that, in the agent s opinion, the property s value was $1.9 million. The ARB reduced the appraised value to the exact figure stated in the agent s document. Patel nevertheless filed suit to appeal the ARB s order. His pleadings claimed that the value set by the ARB was still excessive and unequal. The appraisal district responded that Patel should not be able to appeal an ARB order that gave him exactly the value that his agent had claimed. The trial court entered a summary judgment for the district, and Patel appealed. The court of appeals reversed the summary judgment for the district. The higher court noted that it did not have a full record of what happened at the ARB hearing. It could not be sure that the reduction ordered by the ARB completely satisfied Patel with respect to both of his grounds of protest. The court of appeals explained that the unusual circumstances of the case did not deprive the trial court of jurisdiction to consider Patel s claims. Section 42.01 of the Tax Code allows a property owner to file suit to appeal an ARB order determining the owner s protest. It contains no exception for an owner who is successful before the ARB. Patel had standing to appeal because he was the owner of the property and was responsible for the taxes on it. The case presented a real controversy because Patel claimed that the value set by the ARB was too high and the district disagreed. Even though Patel did not give the ARB the chance to consider whatever value he might claim in court, he had, nevertheless, exhausted his administrative remedies. The bar for exhausting administrative remedies in a value dispute is set pretty low. The district also argued that Patel s claim was barred by the principle of judicial estoppel, which generally prevents a party from taking inconsistent positions in two different cases. The court disagreed. Judicial estoppel applies when a party s inconsistent statements are sworn, and the statement of value that Patel s agent gave the ARB was not sworn. Further, the proceedings before the ARB and the trial court were in the same case, not two different cases. The court of appeals sent the case back to the trial court for further proceedings. Curry v. Harris County Appraisal District 434 S.W.3d 815 (The. App. Houston [14 th Dist.], June 5, 2014, no pet.) Issues: Appeal of favorable ARB order This case is very similar to Patel v. Harris County Appraisal District described above. In 2011, Curry protested the $1.6 million appraised value of his property, claiming that the 19

value was excessive and unequal compared to the appraised values of other properties. Curry s agent gave the ARB a document stating that, in the agent s opinion, the property s value was $1.5 million. The agent also testified under oath to the same figure at the ARB hearing. The ARB reduced the appraised value to the exact figure claimed by the agent. Curry nevertheless appealed, and the appraisal district raised the same defenses that it raised in the Patel case. The trial court entered a summary judgment for the district, and Curry appealed. This time, the court of appeals did have the record of the ARB hearing. It nevertheless reached the same conclusion that it did in the Patel case, i.e., that it could not determine whether the reduction ordered by the ARB completely satisfied Curry with respect to both of his grounds of protest. The court of appeals proceeded to rule that the trial court had jurisdiction over Curry s claims for the same reasons relied upon by the higher court in its Patel opinion. The court also addressed the principle of judicial estoppel. In this case, unlike in Patel, the agent had stated a value under oath before the ARB. But judicial estoppel did not apply because the proceedings before the ARB and the trial court were in the same case, not two different cases. The court of appeals reversed the trial court s summary judgment and sent the case back to the trial court for further proceedings. Hoppenstein Properties, Inc. V. McLennan County Appraisal District 2014 WL 2152010 (Tex. App. Amarillo, May 20, 2014, pet. denied) (not reported) Issues: Funding-out clause in lease; debt limitations The appraisal district acquired office space under a five-year lease from Hoppenstein. The lease contained a funding-out clause stating that [t]he loss or reduction of funds by the district shall render this agreement null and void as to those provisions for which funding is not available. The lease also said that any party that prevailed in litigation against the other would be entitled to recover its attorneys fees from the other party. The office space proved unsatisfactory, and during the second year of the lease, the district acquired other offices. The district s directors did not include money for the Hoppenstein lease in the district s 2010 budget, and the district ceased paying Hoppenstein after the end of 2009. Hoppenstein sued for breach of the lease. The trial court ruled that the district was liable to Hoppenstein. The parties presented several different calculations of the amount of lost rent. A jury found that the district owed Hoppenstein approximately $374,000, and the trial court entered judgment for Hoppenstein in that amount. The court did not award attorneys fees to Hoppenstein. Both parties appealed. On appeal, Hoppenstein argued that the trial court should have disregarded the jury s verdict and awarded it $475,000 in lost rent. The court of appeals explained that overturning the jury s verdict would require Hoppenstein to show: 1) that no evidence supported the jury s verdict; and 2) that the $475,000 figure was established conclusively by the evidence. Because there was evidence of several different amounts, 20

the evidence did not establish that particular figure conclusively. Hoppenstein was not entitled to recover its attorneys fees. Section 271.159 of the Government Code (since repealed) allowed a party to a contract with a local government to recover attorneys fees for breach of the contract, but only if the contract specifically referred to that statute. Hoppenstein s lease did not refer to the statute. The court of appeals also concluded that the funding-out clause did not release the district from its obligation to pay rent to Hoppenstein. The district did have enough money to pay the rent even though it choose to spend the money in other ways. The district also cited two sections of the Texas Constitution that restrict the ability of a city or county to incur debts. The court, however, ruled that those provisions did not apply to the district because it was neither a city nor a county. The court of appeals affirmed the trial court s judgment in all respects. Dallas City Homes, Inc. v. Dallas County 2014 WL 2109376 (Tex. App. Dallas, May 14, 2014, no pet.) (not reported) Issues: Delinquent-tax suits; collection alternatives In 2004, DCH, a nonprofit corporation, made a deal with the city to build affordable housing. The city lent money to DCH and took a deed of trust on DCH s property on Lancaster Road. The deed of trust said that it would also secure other debts that DCH might owe to the city. DCH failed to build the housing that it had promised. In the fall of 2010, the city notified DCH that it was in default on their agreement. DCH decided to allow the city to foreclose on its deed of trust. In February of 2011, the taxing units, including the city and the county, sued DCH for delinquent taxes on the property for the years 2006 through 2010. In September of 2011, while the suit was pending, the city foreclosed its deed of trust and bought the property at the foreclosure sale. The county had been making payments to DCH in connection with affordable housing that DCH operated at other locations. The county s rules, however, allowed it to withhold those payments if DCH did not pay the taxes on the Lancaster Road property. It began withholding the payments in June of 2012 and applying them to the delinquent taxes (apparently to all the taxing units taxes, although the court s opinion is not clear on that point). DCH filed a counterclaim alleging that the delinquent taxes were satisfied by the city s foreclosure of its deed of trust and that the county had no right to withhold its payments to DCH. By the time the case finally came to trial, the taxes had already been paid with money that the county had withheld. The taxing units claimed only their court costs and abstractor s fees. The trial court denied DCH s claims and awarded the taxing units about $1,000 for their costs. DCH appealed. The court of appeals agreed that DCH s claims should be denied. The city might have had the right to include the delinquent taxes in its foreclosure of the deed of trust, but it did not have to. None of the proceeds from the foreclosure sale went to pay the delinquent taxes, and those taxes were still delinquent when the county began withholding its payments. The county had the right to withhold the payments and apply them to the delinquent taxes. The court of appeals ruled, however, that the taxing units 21

were not entitled to recover their costs. Section 33.48 of the Tax Code allows taxing units to recover their costs in a delinquent-tax suit, but the Texas Rules of Civil Procedure say that a party must be successful in order to recover costs. The court reasoned that the taxing units could and did collect their taxes through the withholding of the county s payments to DCH, not through the delinquent-tax suit. The suit was unnecessary, and the taxing units were not successful in the suit. The court did note that the taxing units lawyers had not responded when DCH disputed their right to recover costs. The court of appeals reversed the trial court s award of costs to the taxing units but otherwise affirmed the trial court s judgment. Dallas County v. Sides 430 S.W.3d 649 (Tex. App. Dallas, May 8, 2014, no pet.) Issues: Excess proceeds following tax sale Taxing units sued Bobby and Marsha Sides for delinquent taxes for the years 1998-1010. The evidence presented at trial showed that Bobby was the only owner. The trial court ordered the sale of the property, and the sale resulted in more than $1 million in excess proceeds. The Bobby Sides claimed the excess proceeds, but the taxing units opposed his claims and claimed the excess proceeds for themselves. The taxing units argued that Sides had abandoned the property or at least abandoned the right to claim excess proceeds. They sought to introduce evidence that Sides had neglected the property, violated city codes and allowed environmental hazards to exist on the property. The trial court refused to consider the taxing units arguments or their evidence. The court ordered that some of the excess proceeds go to pay the 2011 and 2012 taxes on the property but awarded the rest to Sides. The taxing units appealed, and Sides responded by claiming that the appeal was frivolous. The court of appeals affirmed the trial court s order. The higher court explained that Bobby was the owner of the property because he was the legal title holder. That gave him the right to receive the excess proceeds. Texas law does not recognize a concept of abandonment. The evidence that the taxing units sought to introduce was not relevant and the trial court properly excluded it. A denial of ownership included in the Sideses original answer was reasonable because Marsha was not an owner. The denial did not affect an abandonment of Bobby s rights. The court of appeals further explained that if a party files a frivolous appeal under truly egregious circumstances, the appellate court may require that party to pay the other party s attorneys fees. In this case, the taxing units appeal did not rise to the level of being truly egregious. Bastrop Central Appraisal District v. Acme Brick Co. 428 S.W.3d 911 (Tex. App. Austin, April 11, 2014, no pet.) Issues: Retroactive cancellation of exemptions; agreements resolving protests 22

The Texas Commission on Environmental Quality approved a pollution-control exemption for some new equipment at Acme s plant. Acme and the appraisal district disagreed about whether Acme filed an exemption application form in 2004, but the district had a copy of the TCEQ s approval letter and knew that Acme wanted the exemption. Acme filed a protest in 2004 covering various properties including the new equipment. Acme s agent and the district s contract appraisal firm negotiated a settlement agreement that included an exemption for the new equipment. The District granted the exemption for the years 2004-2007. Then, the district discovered that it did not have an application form in its files. It cancelled the exemption retroactively for all the years. The ARB denied a protest by Acme and Acme then filed suit against the District. The trial court entered a summary judgment granting Acme the exemption and overturning the district s cancellation of the exemption. The district appealed. The court of appeals affirmed the judgment for Acme. The court ruled that the 2004 settlement agreement deprived the district of the authority that it would have otherwise had to cancel the exemption retroactively. Under 1.111(e) of the Tax Code, a settlement agreement between an appraisal district and a property owner is final and binding on the parties if it concerns a protest or a dispute that could be protested. Although the 2004 settlement agreement did not address whether the district might later cancel the exemption retroactively, it nevertheless prevented the district from doing so. The court explained, however, that a binding agreement does not arise merely because an appraisal district grants an exemption. There must be a disagreement between the district and the property owner that is resolved by a negotiated agreement. Acme was entitled to the exemption for 2004 by virtue of the settlement agreement. That meant that it did not need to file exemption applications for the later years. The District could not use Acme s failure to apply in 2005-2007 as a basis for cancelling the exemption for those years. Editor s comment: The court s reasoning may be sound, but it is difficult to see how that reasoning applies to the facts of this case. If Acme never applied for the 2004 exemption, then the district never had an application that it could approve or disapprove. If the district never disapproved an application or even notified Acme that it was planning to disapprove an application, then the parties never had a dispute to resolve, by agreement or otherwise. It is difficult to see how the 2004 settlement agreement could be seen as resolving a dispute about the exemption. JR Wellness Services, LLC v. Harris County Appraisal District 2014 WL 1267053 (Tex. App Houston [1 st Dist.], March 27, 2014, no pet.) (not reported) Issues: Payment of taxes during appeal In 2010, the appraisal district appraised JR s business personal property at $223,525. JR did not protest. 2010 taxes were assessed in the amount of $5,642, but JR did not make any payment. About thirteen months after the 2010 taxes became delinquent, JR filed a motion with the ARB seeking a correction of the 2010 appraisal roll. The motion 23

was filed under 25.25 of the Tax Code, but it is not clear just what type of appraisal-roll error JR was alleging. At the ARB hearing, the issue of the unpaid taxes came up and JR s president offered to pay the ARB $404, the amount that he claimed to be the taxes on the undisputed value of the property. The ARB declined the payment and denied JR s motion. JR then sued the district, which asked the court to dismiss the case based on JR s failure to pay taxes. JR then filed an affidavit in which its president recounted his effort to pay the ARB and said that JR did not have funds to pay the full tax assessment. He said that JR was still prepared to pay the $404. The trial court dismissed the case and JR appealed. The court of appeals affirmed the dismissal. The court analyzed 42.08 of the Tax Code and JR s obligation to pay taxes in order to maintain its lawsuit. JR failed to substantially comply with 42.08(b) because it had not paid any portion of the tax assessment before the delinquency date. Neither had it substantially complied with 42.08(d). Even if the president s affidavit were read as an attempt at an oath of inability to pay, it was inadequate because it contained only a conclusory statement that JR did not have funds to pay the full assessment. It did not claim that JR should be excused from making a payment, nor did it claim that JR could not have paid taxes on the undisputed value prior to delinquency. JR also complained about the ARB s refusal to accept its payment. The court explained that an ARB is not a proper entity to accept tax payments. Honeywell International, Inc. v. Denton Central Appraisal District 441 S.W.3d 495 (Tex. App. -- El Paso, March 19, 2014, pet. denied) Issues: Omitted property; amnesty renditions Honeywell did not render its business personal property in 2002. It did not file a timely rendition in 2003, and, instead, filed an amnesty rendition in late November of that year. An amnesty rendition was a special feature of the law in 2003. It was designed to help appraisal districts discover previously unknown BPP. If a property owner filed an amnesty rendition before December 1, 2013, the appraisal district could not go back and appraise BPP omitted for any preceding year. The district could, however, pick up BPP omitted earlier in 2003. In this instance, Honeywell s amnesty rendition revealed that it had over $100 million in BPP that the appraisal district had not previously discovered. In December, the district created supplemental appraisal records to include the additional property. In January of 2004, it sent a notice to Honeywell. Honeywell filed a protest, but the ARB ruled that the appraisal records should not be changed. The district then used the supplemental appraisal records to add the property to the 2003 appraisal roll. Honeywell filed suit to appeal the ARB s order. At the trial, Honeywell contended that the district had not added omitted property to the roll but had simply raised the value of property that it had already appraised for 2003. The evidence, however, made it clear that the appraisal district had appraised property that it had not known about before Honeywell filed the amnesty rendition, property omitted from the district s original 2003 appraisal records. The trial court entered judgment for the district, and Honeywell appealed. 24

The court of appeals affirmed the trial court s judgment. The court explained that 25.21 and 25.23 of the Tax Code allow an appraisal district to appraise omitted property and add it to an appraisal roll through the use of supplemental appraisal records. In this case, the district acted correctly when it appraised the omitted property in late 2003 and added it to the 2003 appraisal roll. The ARB correctly ruled that the supplemental appraisal records for the omitted property should not be changed. Its order should not be interpreted to prevent the addition of the property to the 2003 appraisal roll. Honeywell again insisted that the district had raised the 2003 value of property it had already appraised and that the trial court s findings to the contrary were wrong. The court of appeals, however, determined that the trial court s findings were supported by the evidence. If the trial court made minor, technical errors in the wording of its findings, those errors did not harm Honeywell. The trial court was not required to make additional findings about details that were not the ultimate facts of the case. Additionally the trial court correctly denied Honeywell s request to recover its attorneys fees. Rio Valley, LLC v. City of El Paso 441 S.W.3d 482 (Tex. App. El Paso, March 19, 2014, no pet.) Issues: Exhaustion of remedies; protesting lack of notice In September of 2008, the city sued Rio for delinquent 2007 taxes and added 2008 taxes to its suit in March of 2009. Rio responded with an answer and a motion for summary judgment claiming that it had not received delinquent-tax notices prior to being sued. In June of 2009, the trial court denied Rio s motion. Sometime in mid-2009, Rio filed a protest with the ARB concerning the years 2006 and 2007. The specifics about that protest are not clear because the notice of protest was not included in the appellate record. The ARB denied that protest, and Rio received notice of the denial in early October. In late December, Rio filed a counterclaim against the city alleging that the city s 2006, 2007 and 2008 taxes were void because Rio had been deprived of notices required by law. In the spring of 2010, Rio filed a second protest with the ARB, this one claiming that the appraisal district had failed to send it appraisal notices and that the city had failed to send it tax bills in 2006, 2007 and 2008. The ARB heard and denied the protest in May. In June, Rio added the district and the ARB as new parties to the existing lawsuit and sought to appeal the ARB s order. In response to a second motion for summary judgment from Rio, the trial court denied the city s delinquent-tax claims and ordered the city to refund some penalties and interest that Rio had paid. The court, however, did not order the city to refund the taxes that Rio had paid or award Rio its attorney s fees. Rio appealed. The court of appeals reversed the portions of the judgment that favored Rio and dismissed Rio s claims against the city, the district and the ARB. The court explained that any complaints raised in Rio s first protest could not be challenged in court because Rio did not file an appeal within sixty days after it received notice of the ARB s order. Even if Rio s counterclaim against the city could be considered some kind of appeal, it was filed too late. The court explained that a lack-of-notice protest must ordinarily be 25

filed before the delinquency date for the year in question. If, however, a property owner shows that all taxing units failed to send him tax bills, his protest will still be considered timely as long as it was filed within 125 days after the property owner first received some notice of his delinquent taxes. Rio had notice of its delinquent 2007 taxes at least as early as October of 2008 when it was served with the city s original pleading in the lawsuit. It had notice of its delinquent 2008 taxes when the city amended its pleadings in March of 2009. Rio s second protest, however, was not filed until 2010. The ARB never had the authority to hear or determine the second protest, and Rio had no right to appeal. Because it failed to timely appeal the ARB s order determining the first protest and because it filed its second protest too late, Rio could not sue the district or the ARB. (An ARB is not a proper party to an appeal in any event.) Rio could not raise lack of notice or any other grounds of protest as claims or defenses against the city in the delinquent-tax suit. The court of appeals referred the case back to the trial court for further consideration of the city s delinquent-tax claims. Johnson v. Dallas County 2014 WL 1010259 (Tex. App. Dallas, March 5, 2014, pet. denied) (not reported) Issues: Proof of delinquent taxes Taxing units sued Johnson for delinquent taxes and some special assessments on his property. He filed an answer and an affidavit in which he admitted owing the taxes and assessments. Johnson did not appear for the trial because he was incarcerated. The Taxing units produced an affidavit of a tax-office employee verifying copies of delinquent-tax records and records of the special assessments. The trial court admitted the evidence and, on March 8, 2012, entered judgment for the taxing units. Three weeks later, Johnson filed a motion asking the court to vacate or modify the judgment, but he never requested a hearing on the motion. On July 2, 2012, he filed a petition for a temporary restraining order to prevent the taxing units from destroying his property. The trial court took no action on either Johnson s motion or his petition for a TRO. Johnson appealed. The court of appeals affirmed the judgment for the taxing units. The court explained that under 33.47 of the Tax Code, the evidence presented by the taxing units was sufficient to support a judgment in their favor, and Johnson had not offered any contrary evidence. Johnson s motion to vacate or modify the judgment was timely because it was filed within thirty days after the judgment was signed. But, because Johnson failed to request a hearing on the motion, the trial court had no obligation to consider it. The motion was overruled automatically seventy-five days after the judgment was signed. Johnson s petition for a TRO was not timely because it was filed more than thirty days after the judgment was signed. The trial court had no obligation to consider it. On appeal, Johnson attempted to raise a claim that the taxing units and their lawyers were perpetrating some sort of land grab conspiracy, but the court of appeals would not consider the claim because it had not been raised in the trial court. Metro Hospitality Management, LLV v. Harris County Appraisal District 26

2014 WL 527536 (Tex. App. Houston [1 st Dist.], February 6, 2014, no pet.) (not reported) Issues: Payment of taxes during appeal After a partially successful protest before the ARB, Metro sued the Appraisal District to contest the 2012 appraisal of its property. Metro failed to pay any taxes before they became delinquent, but it paid them in full, together with penalties and interest, in March of 2013. The District filed a motion asking the court to dismiss the case because of Metro s late payment. The parties agreed to have the motion submitted to the judge for consideration without a hearing on a certain date. Three days before the judge was scheduled to consider the motion, Metro filed a response claiming that it had not had the money to pay the taxes on time. On the day that the judge was to consider the district s motion, Metro filed a motion seeking a continuance on the grounds that its lawyer had only learned about its inability to pay a few days earlier. The trial judge proceeded to consider the district s motion and dismissed the case. Metro appealed. On appeal, Metro had a new argument. It claimed that its response to the district s motion was actually Metro s own motion to have the trial court determine whether it had substantially complied with the payment requirement of 42.08 of the Tax Code. Subsection (e) required Metro to send notices to the taxing units at least 45 days before the trial judge could consider its motion. By considering the district s motion just three days after Metro filed its own motion, the judge failed to allow for 45 days notice to the taxing units. The court of appeals, however, ruled that Metro could not raise an argument in the appeal that it had not raised before the trial court. Metro also argued that it was entitled to a hearing on its response that was actually a motion. The court of appeals agreed that 42.08 requires a hearing, but only if the party filing the motion provides the required 45 days notice to the taxing units. Because Metro did not provide that notice, it was not entitled to a hearing. The trial judge did not commit an error when he dismissed the case without holding a hearing. The court of appeals affirmed the trial judge s dismissal of the case. Galveston Central Appraisal District v. TRQ Captain s Landing L.P. 423 S.W.3d 374 (Tex., January 17, 2014) Issues: Community housing development organization exemption A limited partnership, TRQ bought an apartment complex in 1998. In 2003, TRQ was acquired by two entities, CD and TRQ Galveston, which became its limited partner and general partner respectfully. CD owned a 100% interest in TRQ Galveston. None of those entities was a community housing development organization, but CD was owned by a CHDO called American Housing Foundation (AHF). CD applied for an exemption for the complex under 11.182 of the Tax Code. Although CD claimed an exemption for 2003, it did not file its application until shortly after it acquired its interest in TRQ in December of 2003. The appraisal district denied the exemption because the property 27

was not owned by a CHDO and because the application was not filed within thirty days after TRQ acquired the property in 1998. After an unsuccessful protest, CD and AHF sued the appraisal district, but the trial court ruled against them in a summary judgment. The court of appeals reversed the trial court s judgment and ruled in favor of CD and AHF. The court of appeals accepted the argument that while legal title to the property was not held by a CHDO, a CHDO nevertheless held equitable title to the complex. The organizations had argued that AHF could have dissolved CD and then dissolved TRQ Galveston. It would have then owned TRQ directly. It could have dissolved TRQ and assumed direct ownership of the complex. The court of appeals also agreed with the organizations argument that the exemption application was timely under 11.436. In 2003, the statute allowed a property owner to apply for a CHDO exemption during the thirty days following the date the organization acquires the property. The court reasoned that the thirty days began to run when CD and TRQ Galveston acquired TRQ. The district asked the Texas Supreme Court to consider the case, and the Supreme Court agreed to do so. In a very short opinion, the Supreme Court agreed with the court of appeals on both issues. The Court ruled that the complex qualified for the exemption by virtue of its equitable ownership by a CHDO and that the exemption application was timely because it was filed within the thirty days following the acquisition of TRQ by CD and TRQ Galveston. Key Energy Services, LLC v. Shelby County Appraisal District 428 S.W.3d 133 (Tex. App. Tyler, January 15, 2014, pet. denied) Issues: Appraisal Roll Corrections; expert testimony; classification of property Key owned two saltwater disposal wells, one on land that it owned, the other on land that it leased. The appraisal district hired Pritchard & Abbott to appraise the wells beginning in 2007. It took some time for P&A s appraiser Rodney Kret to get the information that he needed to appraise the wells, so they were not included in the district s initial 2007 appraisal records. By September, the wells were appraised and notices were sent to Key. The wells were added to the appraisal roll in December. Kret s methodology was different than the district s and resulted in substantially higher values. The wells were added to the taxing units 2007 tax rolls in February of 2008, and tax bills were sent on February 15. Key did nothing until October, 2008 when it attempted to pay the 2007 base taxes. The tax office returned its checks. In December of 2008, Key filed two motions with the ARB under 25.25 of the Tax Code. One alleged various claims under Subsection (c), clerical errors, the appraisal property that did not exist, etc. But the motion made it clear that Key was really complaining about Kret s methodology. The other motion claimed, under Subsection (d) that the 2007 appraisals were more than one-third too high. After the ARB denied the motions, Key sued the district. It took several years for the case to go to trial, and during those years Key protested the appraisals of the wells for 2008, 2009 and 2010 and then added those years to its lawsuit. The trial court dismissed Key s claims for the year 2007, but it conducted a trial 28

on the other years. The district relied on Kret s testimony, and Key presented its own appraiser. The court ruled for the district, and Key appealed. The court of appeals first considered 2007. The court explained that Key was not really claiming that a clerical error had occurred or that the district had appraised property that did not exist; it was simply seeking a reevaluation of its wells. That claim could not be considered under 25.25(c). Subsection (d) might apply, but Key filed its motion too late. A motion under 25.25(d) must be filed (and the property owner must make a payment) before the delinquency date for the relevant tax year. The 2007 tax bills were not sent until February, 2008. Under 34.01(a), if a bill is sent after January 10, the delinquency date is extended until the first day of the next month that will give the property owner at least twenty-one days to pay. In this case, that was April 1, 2008, but Key did not tender a payment or file its motion until months later. Key argued that the applicable law was 31.04(a-1), which applies to taxes on property that was erroneously omitted from a tax roll. That subsection would have given Key until February 1, 2009 to make its payment and file its motion. The court disagreed and explained that, The fact the tax roll was supplemented in 2008 did not turn a late appraisal in to an omitted one. Key s claims concerning 2007 were correctly dismissed. The court of appeals next considered Key s criticism of Kret s appraisal. Kret had treated each well as having two components, real property and personal property. He had appraised the components separately and listed the total value under a single account. The court expressed approval of Kret s approach. It explained that the definition of real property in 1.04(2) includes an estate or interest in land. Key s right to inject saltwater into the ground was a taxable estate or interest in land that could be appraised separately, regardless of whether Key owned or leased the land itself. Even if Kret had miscategorized the property, it would still be taxable. Kret used the income approach to appraise the real-property component but concluded that the value should be capped at each well s replacement cost new. He testified that his appraisal did not include the value of any intangible property. The court noted that the cost approach and the income approach are both expressly recognized in the Code and that an appraiser may combine two approaches in arriving at a value. The fact that the district had previously used a different approach did not prove that Kret s approach was wrong. The higher court rejected Key s arguments and affirmed the trial court s judgment for the district. Opinion No. GA-1092 December 8, 2014 Issues: Charitable exemptions Attorney General s Opinions 29

The Deaf Action Center was charitable organization under 11.18 of the Tax Code, receiving an exemption on apartments that it owned. The Center proposed entering a complicated transaction with a limited partnership that it managed and controlled. The Center would demolish the existing apartments and lease the land to the partnership. The partnership would build new apartments on the land. Apparently the Center would not take legal title to the apartments, at least not right away. But, the new apartments would somehow be involved in the Center s charitable functions. The AG was asked whether the lease arrangement would preclude an exemption for the property. He first explained that the appraisal district s chief appraiser would be responsible for making the initial determination about whether the property qualified for exemption under 11.18. The AG could not do that. He explained, however, that courts had applied the principle of equitable title to public-property exemptions and to exemptions for community housing development organizations. Equitable title means that an organization may be considered the owner of a property for exemption purposes even if it does not have full legal title to the property. The organization may have equitable title to a property if it has the current right to have legal title transferred to it. The AG expected that a court would apply the principle of equitable title to charitable exemptions under 11.18. The Center might be considered the equitable owner of the new apartments even if it did not have legal title to them. Equitable title is an issue to be decided case-by-case based on the relevant facts of each case. Opinion No. GA-1086 November 10, 2014 Issues: Confidential information about law-enforcement officials Under the Public Information Act ( 552.1175 of the Government Code), certain law enforcement officials may direct that personal information about them be kept confidential by governmental entities. An official who chooses to exercise that option must submit a form to the entity, accompanied by evidence of the official s status. In this opinion, the Attorney General concluded that a local government may photocopy evidence such as the official s identification card, but it does not have to do so. If the government copies the evidence, the copy that it keeps in its records would likely not be available for public inspection. The statute discussed by the Attorney General does not apply to property-tax records, but the Tax Code contains a similar provision in 25.025, which allows a lawenforcement official to have his home address kept confidential. The Tax Code does not expressly refer to an official providing evidence of his status. But, when an appraisal district is presented with documentation such as an officer s identification card, the district should be able to keep a copy and maintain the confidentiality of that copy. Opinion No. GA-1073 August 4, 2014 30

Issues: City s authority to require voter approval for property tax A city included the following language in its home-rule charter: No ad valorem or additional sales tax or assessments may be imposed... without the approval of the electorate. The Attorney General was asked whether the city could require voter approval before the city council could adopt a property tax. He concluded that the city could do so. He noted that a home-rule city has broad powers, but it may not violate state laws. Chapter 26 of Tax Code gives a taxing unit s governing body the authority to adopt property taxes, and 1.02 says, that the Code supersedes any provision of a municipal charter or ordinance relating to property taxation. The AG, however, reasoned that the city was not really trying to change the requirements of Chapter 26; it was adding a requirement of voter approval, a step not expressly prohibited by the Code. Section 1.02 refers to using municipal-level initiative and referendum to set a... limitation on [a] tax increase. That language, according to the AG, suggests a general legislative intent to limit the preclusive effect of state Tax Code requirements on municipal tax increase elections. The charter provision was valid. Editor s comment: According to Opinion GA-1070 (summarized below), a taxing unit that adopted a property tax for the first time would have to hold a rollback election if enough voters petitioned for the election. The election would determine whether the taxing unit could assess taxes at all. Thus, the city described in Opinion GA-1073 might have to hold two elections in order to adopt a tax. In a footnote, the Attorney General noted this possibility but declined to comment on it. Opinion No. GA-1072 July 30, 2014 Issues: resale of property acquired in tax sale The sheriff conducted a tax foreclosure sale of land, including the surface and nonproducing minerals. When no one made a sufficient bid, the property was bid off to the city for the benefit of all the taxing units. Later, the city proposed to resell the surface interest in the property but to retain ownership of the minerals. The Attorney General was asked whether that type of resale was authorized by the Tax Code. He concluded that it was not. Section 34.05 provides that a resale deed must convey to the purchaser the right, title, and interest acquired or held by each taxing unit that was a party to the judgment foreclosing tax liens on the property. That means all of the rights, title and interests held by the taxing units at the time of the resale. Taxing units may not reserve any interest in the property. Opinion No. GA-1070 July 2, 2014 Issues: Rollback elections; tax-freeze elections 31

This opinion concerns a city that has not assessed or collected property taxes for several years. The city council is considering assessing taxes for 2014. The Attorney General was asked whether any 2014 tax rate adopted by the city council could be subjected to a rollback election if a sufficient number of voters petitioned for the election. He reasoned that because the city did not assess taxes at all in 2013, its rollback rate for 2014 would be zero. Any tax rate that the council might adopt would be higher than that rollback rate and would open the door to a rollback election. A successful rollback election would prevent the city from assessing any taxes at all for 2014. The AG was also asked whether voters in the city could petition for a tax-freeze election under Art. VIII, 1-b(h) of the Texas Constitution. Again, his answer was yes. The voters could petition for an election. If a tax freeze were adopted at a time when the city was not assessing any taxes at all, senior and disabled homeowners would have their city taxes frozen at zero. Editor s Comment: The AG failed to understand the difference between assessing taxes in the amount of zero and not assessing taxes at all. A taxing unit that did not assess taxes at all in 2013 would not have the levy information or the value information necessary to even calculate an effective rate or a rollback rate for 2014. That is why the Comptroller s website states the following: A taxing unit that did not levy property taxes last year is not required to comply with truth-in-taxation laws in the current year. Also, if no tax was assessed on a homestead in 2013, there is no tax amount to use as the basis for a freeze in 2014 or future years. Opinion No. GA-1040 January 31, 2014 Issues: Appraisal district budgeting In this opinion, the Attorney General addressed several issues concerning the budgeting and finances of appraisal districts. The first concerned 6.06(j) of the Tax Code, which provides that if the total amount of taxing units payments to an appraisal district exceeds the amount actually spent or obligated to be spent by the district during the fiscal year, the district must credit the excess against the taxing unit's payments for the following year. The Comptroller s MAP guidelines recognize that if a district sees that it will have unobligated funds left at the end of the year, its directors may obligate those funds by voting to move them into a reserves-for-replacement account, a disaster fund account, or some similar account. Then the funds do not have to be credited against the taxing units payments for the next year. The AG concluded that a court would probably agree with the Comptroller s interpretation of the statute. Second, the AG explained that money a district may receive from sources other than its taxing units does not fall under the rule of 6.06(j); even if it is not spent or obligated, the money does not have to be credited against the taxing units payments for the next year. 32

Third, the AG was unable to answer a vague question about automatic appropriations into a capital improvement fund, but he did explain that a district s proposed budget can be amended by the directors after it has been prepared by the chief appraiser and that even an adopted budget can be amended at any time with a new or revised line item. The amendment of an adopted budget is subject to being disapproved by the taxing units under 6.10, which allows taxing units to disapprove virtually any action by a district s directors. Fourth, the AG considered whether a district can give its employees an across-theboard, one-time lump sum merit payment. He explains that Art. III, 52 of the Texas Constitution prohibits a local government from giving an employee a bonus for work that he has already done. But that provision generally does not prohibit a local government for providing additional compensation for work that an employee will do in the future. If a payment operates prospectively, it is probably constitutional. 33