Property Tax Implications of the Governor’s Disaster Declaration

A portion of the property tax limits that were the focus of a bruising legislative battle last year may not take effect in 2020, given the declaration of a statewide disaster to help combat COVID-19.

 

Governor Abbott on Friday declared a state of disaster due to COVID-19 under Chapter 418 of the Texas Government Code. That declaration triggers several provisions impacting local property taxes.

 

Cities, Counties, and Special Districts. Senate Bill 2 lowered the amount by which cities, counties, and special districts could raise property taxes before being subject to voter approval. Previously jurisdictions could raise up to 8% new revenue before voters could petition for a rollback election. Senate Bill 2 reduced the threshold to 3.5% for most large taxing jurisdictions and made the election automatic. However, if the taxing jurisdiction is within a formally declared disaster area the governing board may opt to use the higher, 8% limit. With the Governor’s proclamation applying statewide, all taxing jurisdictions are in a disaster area, and instead may opt for the 8% threshold. Further, if the jurisdiction incurred increased costs to respond to the disaster, the automatic election provision is suspended. Voters would have to petition for an election if the jurisdiction exceeds the 8% threshold.

 

If a taxing unit opts for the 8% threshold, it would remain in effect until the earlier of:

 

These provisions do NOT apply to the “real time tax notice” created in Senate Bill 2. The new notice will apply to all taxing jurisdictions in counties larger than 200,000 people in 2020, and to all taxing jurisdictions in 2021.

 

School Districts. School property taxes work differently than those for cities, counties, and special districts. Currently school districts are subject to automatic elections should their board adopt tax rates for maintenance and operations in excess of $0.97 per $100 of value (up to a maximum of $1.10—though these current-year rates will change due to the rate compression requirements in House Bill 3). The election requirement is suspended if the school district spends additional money to respond to a disaster. However, that suspension applies to the tax year following the “year in which the disaster occurs.” Tax rates for 2020, to be adopted this fall, would still be subject to the normal voter-approval requirements. The suspension of the election requirements would not occur until the 2021 tax year. If the district wants to maintain that rate in the following year, 2022, they would need to seek voter approval.

 

The Commissioner may have the authority to reimburse schools for disaster-related costs, but this provision does not appear to override the rollback suspension.

 

Other School Items of Note (Closures, Testing, Etc.). The Commissioner of Education has stated that he does not have the authority to close schools during this emergency, and that those decisions will be made by each school superintendent. Many school districts are on spring break, and some have announced that they will close for an additional two weeks during which those that have the ability to do so will implement on-line classes. School districts are funded on the basis of average daily attendance in their schools, and Section 48.005(d) of the Education Code gives the Commissioner authority to adjust the average daily attendance of a school district in which a disaster, flood, extreme weather condition, fuel curtailment, or other calamity has a significant effect on the district's attendance that is reasonably attributable to the impact of the disaster. The adjustment would ensure that the school district receives funding comparable to the funding it would have received prior to the disaster. The Commissioner has the authority to make this adjustment for up to two years following the date of the Governor’s proclamation. In addition, Governor Abbott has announced that he would waive testing requirements for this year’s State of Texas Assessments of Academic Readiness (STAAR) exams which were scheduled to be administered in April. He will also request a waiver from Federal testing requirements.

 

Several of our members have asked about the Governor’s disaster proclamation and the impact on tax filing deadlines. At this point in time, the Comptroller’s Office is set up to be fully operational during the COVID-19 emergency, and will be able to process tax returns and filings. They have not announced any broad extensions of tax deadlines; however, if a taxpayer is unable to file a return because of COVID-19 disruptions, they should contact the agency directly. The agency may waive penalties and interest at its discretion. If the IRS extends federal tax filing deadlines, the agency may reassess franchise tax deadlines.

 

For property tax, chief appraisers are required to extend a taxpayer’s rendition deadline upon request (see Tax Code 22.23).