If you’re a business owner in Texas, you must report your taxable personal business property and real property to the appraisal district. The first step in keeping your business tax bill down is ensuring that the appraisal district places a fair value on your business property. The legal process for business owners to appeal the appraisal district’s value is by filing a protest against your real property and business personal property taxes in Texas. In this blog post, we will look at how to begin reducing your business tax bill!
What is Business Personal Property Tax in Texas?
If you own a business in Texas, you must report or render your income-producing personal property, which includes real property, furniture, fixtures, equipment, inventory, machinery, and vehicles. Your rendition will identify, describe, and give the location of your taxable property.
You must report tangible personal property you used to produce income on a yearly rendition form in addition to reporting your real property, i.e., land and improvements such as warehouses, offices, etc. (1)
Business Property Worth Less than $20,000
Owners of businesses with an aggregate value of less than $20,000 can file a simplified statement, which contains only the property owner’s name and address, a general description of the property in the location of the property.
Business Property Worth More than $20,000
Owners of businesses worth more than $20,000 must file a rendition with the following information:
- the property owner’s name and address
- a description of the property for inventory
- a description of each type of inventory
- a general estimate of the quantity of each type of inventory
- the property’s physical location
- Either the owner’s good faith estimate of the property’s market value or the property’s historical cost and year of acquisition.
You can complete your business personal property rendition with Form 50-144. State law contains stiff penalties for delinquent or fraudulent renditions.
Exercise your rights as a taxpayer by correctly filing your rendition. Then, if the appraisal district finds your property is worth more, they must send you a notice of appraised value, which you may protest.
When Should I Protest Business Property Tax?
Texas state law requires your appraisal district to send you a notice by May 1, or as soon as possible, of the market value of your business and how much tax you will need to pay.
You may want to protest personal property tax if:
- Their valuation of your property is higher than it was in the previous year
- Their valuation of your property is higher than the amount you gave on a rendition
- If your property was not on the appraisal district records in the last year
- If they canceled or reduced your exemption for the current year
Your notice from the appraisal district will also show the following:
- To which taxing entities you will have to pay property tax
- Their appraised value of your business in the prior-year
- The kind and amount of each exemption or partial exemption approved for the property for the current year and the preceding year.
- An explanation of when and how you can protest their valuation
- The taxable valuation of the property in the preceding year for each taxing unit taxing the property
- The property’s appraised value for the current year
- In italics typeface, the following statement: “The Texas legislature does not set the amount of your local taxes. Your property tax burden is decided by your locally elected officials, and all inquiries concerning your taxes should be directed to those officials.”
- A detailed explanation of the time and procedure for protesting their valuation
- The date and place the ARB will begin hearing protests
- A brief description of how the governing body determines whether taxes on the property will increase. The appraisal district determines the valuation of the property, but it does not set the tax rate.
How to Protest Your Business Property Taxes
Placing a fair market value on your business is the first step in the property tax process. The appraisal district in a County sets the taxable valuation of all property in the county appraisal district. However, you may protest this valuation and force your appraisal district to think twice about the valuation they place on your business property.
Understanding how the tax works can help you see how to effect change in your area. The local governments, like the County Commissioners Court, city council, school districts, (and some special purpose districts like a water or library district) use the total of property in their jurisdiction to set a tax rate according to their local government’s budgets. These budgets provide public services to your appraisal district.
So, the first step in limiting your tax bill is ensuring the appraisal district places a fair market value on your business.
The Texas legislature has created a legal process for business property owners to appeal the appraisal district’s valuation, which they often set much higher than the actual fair market value!
What to Expect During a Business Property Tax Protest
Before a meeting with an appraiser or attending an Appraisal Review Board (ARB) formal protestation, gather all information about your business personal and real property that may be relevant in considering the true market value of your business, such as:
- Photographs of property (yours and comparables)
- Receipts or estimates for repairs
- Sales price documentation, such as listings, closing statements, and other information
- Calculations of the median level of appraisal if you’re protesting equal and uniform appraisal.
- Affidavits, if needed
- Newspaper articles
- Architectural drawings or blueprints
- Engineering reports
- Property surveys
- Deed records
- Inventories may account for roughly half of the total valuation of business personal property in the state, so find proof of the current market value of this property or hire a professional appraiser if necessary and save big in this area!
Part of any meeting or hearing involves evidence, and another part involves arguing your case. Arguing means presenting your case with a clear and concise presentation of your proof.
This is not the time to get personal with anyone about how you feel, what you think of them, or what they say. You may feel your taxes are too high, but neither the ARB nor the county appraisal district sets your taxes.
Local governments set tax rates based on votes. The appraisal districts and the ARB are involved in valuing property and settling debates about the market value. The tax rate determines how high of a percentage of your property value you will owe in taxes.
However, YOU determine the evidence that your appraisal review board uses to look twice at the valuation of your business property during a property protest.
The Role of the ARB in Business Property Tax Protests
Most appraisal districts provide one-on-one with an appraiser to discuss the valuation of your real business property. The vast majority of disputes, 70 to 90%, are settled during this informal process.
It is imperative, however, that you preserve your right to protest to the ARB by filing a notice of protest no later than 30 days after the appraisal district mailed a notice of appraised value to you. Even if you hope to resolve your concerns at the informal meeting with the appraisal district, still put in your notice of protest.
Bring all your evidence to any informal meetings to increase your potential for an adjustment and avoid having to present your case in front of the ARB.
If your appraisal district doesn’t have an informal process for business entities, or you believe they placed an inflated valuation on your business property, ask for a formal hearing with the ARB.
Remember that you must have filed a notice of protest by the due date, or you may unintentionally forfeit your right to appear before the ARB!
Who Is the Appraisal Review Board (ARB)?
The Appraisal Review Board (ARB) is an independent body and is not subject to the authority of the appraisal district. They are typically your neighbors, who most likely also own homes or businesses and are interested in ensuring the appraisal process is fair.
The Appraisal Review Board (ARB) generally consists of a three-member panel and works like a judge and jury.
In a case, they will hear evidence both from you and the Appraisal District representative. After hearing and considering the evidence, the ARB will decide on the valuation of your real and personal business property, like a judge.
ARB members cannot discuss your case with anyone outside the hearing. Likewise, you should not contact any ARB members about your issue outside the hearing. If you do, the members cannot hear your case.
While most protest hearings are open to the public, you (as the property owner) and the Appraisal District representative can make a joint motion to require a closed hearing if you plan to disclose confidential information.
Successfully Protest Your Business Personal Property Taxes in Texas
Types of protest appeals include if the:
- Market value the appraisal district places on your business is inaccurate.
- Appraisal district has approved your business valuation at a higher proportion in relation to similar businesses. Appraisals must be equal in uniform, and if you believe this is not the case, you can show the ARB appraisals of other similar businesses to prove your point as a business owner.
- Appraisal district denied your exemption application or modified an existing exemption. If the appraisal district refused an exemption you deserve, you may end up with a higher tax bill. Appealing this issue to the ARB may help you reduce your taxes.
- Appraisal district failed to notify you that the valuation of your business had changed to a degree that it would increase your tax liability.
The Appraisal Review Board (ARB) must send you a notice of the:
- Date
- Time
- Place of your appraisal hearing
- Description of the subject matter you’re protesting
- Statement that entitles you to a postponement at least 15 days in advance of the hearing date.
- It must be postmarked (not received) 15 days before the hearing.
At least 14 days before the hearing date, the appraisal district must send you the comptroller’s publication: “Property Tax Payer Remedies” explaining:
- Your protest appeal rights and responsibilities
- ARB’s procedures for the protest hearing
- Statement notifying you that you are entitled to copies of data schedules, formulas, and other information the appraisal district plans to use at your hearing.
The appraisal district does NOT include what they plan to introduce at your hearing. However, you CAN request the information. You have a right to obtain a copy of ALL the information the appraisal district plans to introduce at the hearing free of charge.
Visit your appraisal district office and ask that they provide you with all the data they used in determining the valuation of your business and all evidence they may use at the upcoming hearing.
Some Appraisal Districts may ask you to make your request in writing. Others make evidence available through their website. Ask for copies of items you may need to prepare for the hearing.
Under the law, the appraisal district must give you all the information used to appraise your property at no cost.
Request this information as soon as you receive your notice so the appraisal district can provide the copies. However, you may only have a few days before the hearing before you receive the information.
You can appear at the ARB hearing in person, by telephone, by affidavit, or through an agent.
Contact Our Real Estate Attorneys For Your Best Outcome
Texas property tax code allows for the valuation of business personal and real property at its market value. However, often appraisal review board valuations look at comparable businesses to prepare a valuation for your business personal property. They do not assess your property individually before sending your valuation.
Putting in a property tax protest increases the odds of a lower assessed value. And successfully reducing your taxes begins with working with an experienced real estate attorney who understands the market well.
As experienced real estate attorneys in the Houston area, Jarrett Law works with property owners in the Houston area to reduce tax liability. We ensure that your real property receives a correct valuation instead of a statistical analysis giving you an inflated valuation.
Don’t wait until the filing deadline to work out your future. Contact us today to get a fair total market value for your property taxation!
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