22 nd Annual Legal Seminar on
Ad Valorem Taxation
Exemptions
Walt McCool
McCool Law Firm, P.C.
203 Lake Ridge Village #106
Dallas, Texas 75238
214.256.3673 Office
walt@mccoollaw.com
www.McCoolLaw.com
Chris Jackson
Perdue, Brandon, Fielder, Collins & Mott, L.L.P.
3301 Northland Dr., Suite 505
Austin, Texas 78731
512.302.0190 Office
cjackson@pbfcm.com
www.pbfcm.com
Taxable Unless Exempt
All real and personal property is taxable in
proportion to its value unless an exemption is
required or permitted by the Texas Constitution.
- Tex. Const. article VIII, sec. 1
What is an Exemption?
It is an exclusion of all, or a portion of, the
appraised market value of a property from ad
valorem taxation during a tax year.
Who Gets an Exemption?
Exemptions are
only for those
who QUALIFY!
Generally, What is the Path of an
Exemption?
The property qualifies on a particular date.
The taxpayer applies for the exemption.
The taxpayer files the application once /
annually.
Generally, What is the Path of an
Exemption?
The chief appraiser of the appraisal district
appraises property and administers any
applicable exemptions whether total or partial.
The appraisal district appraises property and
then applies any applicable exemptions.
Generally, What is the Path of an
Exemption?
Both the appraised value and exemption are listed on
the appraisal roll.
After certification of the appraisal roll to the taxing
units by the chief appraiser the tax assessor subtracts
the applicable exemption amount from the appraised
value to arrive at the taxable value for property for
the taxing unit’s tax roll.
Generally, What is the Path of an
Exemption?
Litigation?
Step 1: Qualification
On a Certain Date
January 1
The general rule is that the entitlement to an exemption
is determined as of January 1 of the given year.
The property must be used for the required use and its
owner must satisfy any applicable requirements as of
January 1 of the given year.
There are exceptions.
Date of Acquisition
The public property exemption takes effect on
the date of qualification (usually date of
acquisition) and the taxes are prorated.
Earlier Date an Exemption was
Granted
If an exemption has already been granted and the organization
has acquired additional property, the exemption applies as of the
date of exemption was granted.
For a cemetery - Section 11.17
For a charitable organization - Section 11.18
For a youth spiritual organization - Section 11.19
For a religious organization - Section 11.20
For a private school - Section 11.21
For miscellaneous exemptions - Section 11.23
For a nonprofit water supply corporation - Section 11.113
Later for Most Favored Exemption
Status
Other exemptions enjoy late application provisions. See e.g. Tax Code,
sections 11.431, 11.433, 11.432, 11.435 and 11.439.
Residence homestead — one year after the date the taxes became delinquent.
Disabled veterans — earlier of one year after taxes paid or one year after taxes
became delinquent.
Religious, school, charitable organizations — December 1 of the 5th year
following the year for which the exemption is sought.
Freeport — before the date the appraisal records are approved Over 65
Step 2: Application
Some Exemptions Are
More Equal Than Others
Automatic Exemptions – No
Application
Section 11.11 - Public Property
Section 11.12 - Federal Exemptions
Section 11.14 - TPP Not Producing Income
Section 11.145 - Income Producing TPP with a Value of Less
than $500
Section 11.146 - Mineral Interests with a Value of Less than $500
Automatic Exemptions – No
Application
Section 11.15 - Family Supplies for Home or Farm Use
Section 11.16 - Farm Products
Section 11.161 Implements of Husbandry
Section 11.25 - Marine Cargo Containers Used
Exclusively in International Commerce
Exemptions One Must Apply For
Section 11.111 – Public Property Used to
Provide Transitional Housing for Indigent
Persons
Section 11.13 – Residence Homestead
Section 11.17 – Cemeteries
Exemptions One Must Apply For
Section 11.18. – Charitable Organizations
Section 11.181 – Charitable Organizations Improving Property
for Low-Income Housing
Section 11.182 – Community Housing development
Organizations Improving Property for Low-Income and
Moderate-Income Housing; Property Previously Exempt
Section 11.1825 – Organizations Constructing or Rehabilitating
Low-Income Housing; Property Not Previously Exempt
Exemptions One Must Apply For
Section 11.183 – Association Providing Assistance to
Ambulatory Health Care Centers
Section 11.184 – Organizations Engaged Primarily in Performing
Charitable Functions
Section 11.185 – Colonia Model Subdivision Program
Section 11.19 – Youth Spiritual, Mental, and Physical
Development Associations
Exemptions One Must Apply For
Section 11.20 – Religious Organizations
Section 11.21 – Schools
Section 11.22 – Disabled Veterans
Section 11.23 – Miscellaneous Exemptions
Section 11.24 – Historic Sites
Exemptions One Must Apply For
Section 11.251 – Tangible Personal Property Exempt (Freeport)
Section 11.252 – Motor Vehicles Leased for Personal Use
Section 11.253 – Motor Vehicles Used for Production of Income
and for Personal Activities
Section 11.253 – Tangible Personal Property in Transit (Goods
in Transit)
Exemptions One Must Apply For
Section 11.27 – Solar and Wind Powered Energy Devices
Section 11.271 – Offshore Drilling Equipment Not in Use
Section 11.28 – Property Exempted from City Taxation by
Agreement
Section 11.29 – Inter-coastal Waterway Dredge Disposal Site
Section 11.30 – Nonprofit Water Supply or Wastewater Service
Corporation
Exemptions One Must Apply For
Section 11.31 – Pollution Control Property
Section 11.32 – Certain Water Conservation
Section 11.33 – Raw Cocoa and Green Coffee Held in
Harris County
Section 11.437 – Exemption for Cotton Stored in
Warehouse
Step 2: Application
To apply for an exemption, a person must file
and exemption application form with the chief
appraiser for each appraisal district in which the
property subject to the claimed exemption has
situs.
- Tax Code section 11.43(a).
Step 2: Application
Get your application form …
the appraisal district office
the appraisal district’s website
the Texas Comptroller’s website
The district and Comptroller’s forms may differ and usually the
local appraisal district form requires greater information.
Step 2: Application
Provide the necessary information.
Fill out the entire form
Attach any requested documentation
Provide a copy of either your Social Security card, Texas
driver’s license, or Texas personal identification certificate if
needed.
Step 2: Application
Generally, return the exemption form to the
appraisal district after January 1, but …
Step 2: Application - The Deadline
to Apply
BEFORE May 1 of the calendar year.
Step 2: Application - The Deadline
to Apply
For property that qualifies for an exemption and was acquired
after January 1, the application must be filed within one year
after acquisition date. For a cemetery - Section 11.17
For an over 65 and disabled residence homestead exemption - Section
11.13
For a cemetery – Section 11.17
For a charitable organization - Section 11.18
For a youth spiritual organization - Section 11.19
For a religious organization - Section 11.20
For a private school - Section 11.21
For miscellaneous exemptions - Section 11.23
For a nonprofit water supply corporation - Section 11.113
Step 2: Application - The Deadline
to Apply
Other exemptions enjoy late application provisions. See e.g. Tax
Code, sections 11.431, 11.433, 11.432, 11.435 and 11.439.
Residence homestead — one year after the date the taxes
became delinquent.
Disabled veterans — earlier of one year after taxes paid or one
year after taxes became delinquent.
Religious, school, charitable organizations — December 1 of the
5th year following the year for which the exemption is sought.
Freeport — before the date the appraisal records are approved
Step 2: Application
Making false statements on your exemption
application is a criminal offense
Step 3: How Frequently
Do I Need to Apply?
One and Done Exemption
Applications
Once allowed an exemption need not be claimed in
subsequent years.
The exemption applies until it changes ownership or
their person’s qualification change.
- Tax Code section 11.43(c)
One and Done Exemption
Applications
Section 11.13 – Residence Homestead
Section 11.17 – Cemeteries
Section 11.18. – Charitable Organizations
Section 11.182 – Community Housing development
Organizations Improving Property for Low-Income
and Moderate-Income Housing; Property Previously
Exempt
One and Done Exemption
Applications
Section 11.183 – Association Providing Assistance to
Ambulatory Health Care Centers
Section 11.19 – Youth Spiritual, Mental, and Physical
Development Associations
Section 11.20 – Religious Organizations
Section 11.21 – Schools
One and Done Exemption
Applications
Section 11.22 – Disabled Veterans
Section 11.23 – Miscellaneous Exemptions (h) (j) (j-1)
Section 11.29 – Inter-coastal Waterway Dredge Disposal Site
Section 11.30 – Non-profit Water Supply or Wastewater Service
Corporation
Section 11.31 – Pollution Control Property
The Exception to One and Done
The chief appraiser may require a person
allowed an exemption in a prior year to file a
new application to confirm the person’s current
qualifications by delivering written notice that a
new application is required accompanied by an
appropriate application form to the person
previously allowed the application.
Exemptions One Must Apply For
Annually
Section 11.111 – Public Property Used to
Provide Transitional Housing for Indigent
Persons
Section 11.181 – Charitable Organizations
Improving Property for Low-Income
Housing
Exemptions One Must Apply For
Annually
Section 11.1825 – Organizations Constructing
or Rehabilitating Low-Income Housing;
Property Not Previously Exempt
Section 11.185 – Colonia Model Subdivision
Program
Exemptions One Must Apply For
Annually
Section 11.23 – Miscellaneous Exemptions
Section 11.24 – Historic Sites
Section 11.28 – Property Exempted from City
Taxation by Agreement
Exemptions One Must Apply For
Annually
Section 11.32 – Certain Water Conservation
Section 11.33 – Raw Cocoa and Green Coffee
Held in Harris County
Section 11.437 – Exemption for Cotton Stored
in Warehouse
Step 4: Administration of
Exemptions by the Chief
Appraiser
Step 4: Administration by the Chief
Appraiser
Pursuant to Tax Code section 11.45, the chief appraiser must
take one of four actions on timely filed application applications:
Grant the application
Deny the application
Modify the application – the chief appraiser modifies the exemption and
grants it as modified (e.g. grant exemption for some but not all the
property sought for exemption).
Disapprove and request more information
Step 4: Administration by the Chief
Appraiser
If the chief appraiser denies or modifies your exemption, the
claimant must be notified in writing within five days.
This notice must explain how the claimant can protest before the
appraisal review board.
If the chief appraiser asks the claimant for more information, the
claimant has at least 30 days to reply.
The application is deemed denied if the claimant does not
provide the information. But, the claimant may protest.
Step 4: Administration by the Chief
Appraiser
If an application is required, the failure to timely
file an application bars the exemption for the
given tax year, unless the Tax Code provides
otherwise.
Step 4: Administration by the Chief
Appraiser
The chief appraiser may require a new
application by sending the taxpayer a written
notice and an application form.
Steps 5 -7
Step 5: The appraisal district appraises property and
then applies any applicable exemptions.
Step 6: Both the appraised value and exemption are
listed on the appraisal roll.
Step 7: After certification of the appraisal roll to the
taxing units by the chief appraiser the tax assessor
subtracts the applicable exemption amount from the
appraised value to arrive at the taxable value for
property for the taxing unit’s tax roll.
Step 8: Litigation?
Step 8: Litigation?
Pursuant to Tax Code section 41.41, the claimant may protest to
the appraisal review board the denial in whole, or in part, of an
exemption.
Pursuant to Tax Code Chapter 42, the claimant may also seek
trial de novo review of the determination of the appraisal review
board in state district court in the same manner as any other
protest determination.
Pursuant to Tax Code section 41.41, a taxing unit may also file a
challenge to the grant of an exemption by the chief appraiser
prior to June 1 or within 15 days after the. appraisal records are
submitted to the appraisal review board.
Step 8: Litigation -
How Are Exemptions Construed?
“Exemptions from taxation are
subject to strict construction….”
- N. Alamo Water Supply Corp. v. Willacy County
Appraisal Dist. 804 S.W.2d 894, 899 (Tex. 1991).
Step 8: Litigation -
Exemptions Are Not Favored
“Exemptions from taxation are not favored
since they shift the tax burden to other
taxpayers.”
- N. Alamo Water Supply Corp. v. Willacy County Appraisal
Dist., 804 S.W.2d 894, 899 (Tex. 1991).
Step 8: Litigation -
Who has the burden of proof?
“[T]he burden of proof of showing that
the organization falls within the statutory
exemption is on the claimant....”
- N. Alamo Water Supply Corp. v. Willacy County Appraisal
Dist., 804 S.W.2d 894, 899 (Tex. 1991).
Step 8: Litigation -
Does the Tie Go To The Runner?
“All doubts are resolved against the taxpayer in
favor of taxation.”
- N. Alamo Water Supply Corp. v. Willacy County Appraisal
Dist., 804 S.W.2d 894, 899 (Tex. 1991).
The Major Exemptions
Homestead Exemptions
Homestead exemptions remove part of the claimant’s
home’s value from taxation, so it lowers the taxes on it.
Only a homeowner's principal residence qualifies.
To qualify, a home must meet the definition of a residence
homestead
A homestead can include up to 20 acres
The home's owner must be an individual
The home must be used as a home and as a principal
residence on January 1 of the tax year.
Homestead Exemptions
There are several types of exemptions you may receive with a
homestead.
School taxes: All residence homestead owners may receive a
$15,000 homestead exemption from their home's value for
school taxes.
County taxes: If a county collects a special tax for farm-to-
market roads or flood control, a residence homestead owner
may receive a $3,000 exemption for this tax. If the county
grants an optional exemption for homeowners age 65 or
older or disabled, the owners will receive only the local-
option exemption.
Homestead Exemptions
There are several types of exemptions you may receive with a
homestead.
Age 65 or older and disabled exemptions: Individuals 65 and
older and/or disabled residence homestead owners may
qualify for a $10,000 homestead exemption for school taxes,
in addition to the $15,000 exemption for all homeowners.
If the owner qualifies for both the $10,000 exemption for 65
and older homeowners and the $10,000 exemption for
disabled homeowners, the owner must choose one or the
other for school taxes.
The owner cannot receive both exemptions.
Homestead Exemptions
There are several types of exemptions you may receive with a homestead.
Optional percentage exemptions: Any taxing unit-including a city, county,
school, or special district-may offer an exemption of up to 20 percent of a
home's value. But, no matter what the percentage is, the amount of an
optional exemption cannot be less than $5,000. Each taxing unit decides
whether to offer the exemption and at what percentage. This percentage
exemption is added to any other home exemption for which an owner
qualifies. The taxing unit must decide before July 1 of the tax year to offer
this exemption.
Optional 65 or older or disabled exemptions: Any taxing unit may offer
an additional exemption amount of at least $3,000 for taxpayers age 65 or
older and/or disabled.
Q: How do I get a general $15,000
homestead exemption?
The claimant may file an Application for Residential Homestead Exemption with its appraisal
district for the $15,000 homestead exemption up to one year after the taxes on the homestead are
due.
Once the claimant receives the exemption, the claimant does not need to reapply unless the chief
appraiser sends out a new application.
In that case, the claimant must file the new application.
If the claimant moves or the qualification ends, the claimant must inform the appraisal district in
writing before the next May 1st.
If the claimant temporarily move away from the home, it may continue to receive the exemption
if a new principal residence is not established elsewhere, the claimant intends to return to the
home, and is away less than two years.
A person may continue to receive the exemption if he or she does not occupy the residence for more
than two years only if the person is in military service or lives in a facility providing services related to
health, infirmity or aging.
Q: How do I get an additional $10,000
65+ or disabled homestead exemption?
The claimant may apply to the appraisal district up to one year after the date it
turns 65 or qualifies for disability, or up to one year after the taxes are due,
whichever is later.
If the application is approved, the claimant will receive the exemption for the
entire year in which he or she turns 65 or becomes disabled and for
subsequent years as long as the person owns a qualified homestead.
Beginning in 2005, if the person’s date of birth was on the original homestead
application or other written correspondence to the appraisal district about
their homestead, the person will automatically receive the 65 or older
exemption without applying, if he or she is entitled to the general homestead
exemption.
Q: How do I qualify for a disabled
person's exemption?
A claimant is eligible for this exemption if it can't engage in gainful work because of a
physical or mental disability or the person is 55 years old and blind and can't engage in
his or her previous work because of the blindness.
To qualify, the claimant must meet the Social Security definition for disabled.
The person qualifies if he or she is receiving disability benefits under the federal Old
Age, Survivors and Disability Insurance Program administered by the Social Security
Administration.
Disability benefits from any other program do not automatically qualify the person.
To prove eligibility, the claimant may need to provide the appraisal district with
information on disability ratings from the civil service, retirement programs, or from
insurance documents, military records, or a doctor's statement.
Q: What is the deadline for filing for a
homestead exemption?
Any homestead exemption may be filed up to one year after the delinquency
date.
The delinquency date is normally February 1st.
If the claimant is age 65 or older or disabled, the person qualifies for the
exemption on the date he or she became age 65 or disabled.
To receive the exemption for that year, 65 or older or disabled homeowners
must apply for the exemption no later than one year from the date of
qualification or one year after the delinquency date, whichever is later.
If the claimant misses the deadline, he or she may apply for the following
year.
Q: If I am 65 years of age or older, disabled, or a surviving spouse
who is age 55 or older, does a tax ceiling apply to county, city or
junior college district property taxes?
If the county commissioners court, city council or board of the
junior college district authorizes a tax limitation on the
homesteads of persons 65 years of age or older or disabled. The
taxing unit's governing bodies or voters (by petition and election)
may adopt the limitation.
This local option exemption does not apply to other special
districts such as water, hospital, etc.
Q: If I own only 50 percent of the home I live in,
do I qualify for the residence homestead
exemption on the home?
If you qualify for a homestead exemption and are not
the sole owner of the property to which the homestead
exemption applies, the exemption received is based on
the interest owned.
For example, you own a 50 percent interest in a
homestead and will receive one half, or $7,500, of a
$15,000 homestead offered by a school district.
Q: Is the disabled veteran's exemption
the same as the disabled person's
exemption?
No.
To receive a disabled veteran exemption, you must either be a veteran who
was disabled while serving with the U.S. armed forces or the surviving spouse
or child (under 18 years of age and unmarried) of a disabled veteran or of a
member of the armed forces who was killed while on active duty.
In order to qualify for a disabled person exemption, you can't engage in
gainful work because of physical or mental disability or you are 55 years old
and blind and can't engage in your previous work because of your blindness.
If you receive disability benefits under the federal Old Age, Survivors and
Disability Insurance Program administered by the Social Security
Administration, you will qualify for the disabled person exemption.
Charitable Exemptions
An organization that qualifies as a charitable organization is entitled to certain
exemptions from taxation.
To qualify, the organization must be organized exclusively to perform
religious, charitable, scientific, literary, or educational purposes, engage
exclusively in performing one or more of many charitable functions.
A charitable organization must be operated in a way that does not result in
accrual of distributable profits, realization of private gain resulting from
payment of compensation in excess of a reasonable allowance for salary or
other compensation for services rendered, or realization of any other form of
private gain, and some charitable organizations must be organized as a non-
profit corporation as defined by the Texas Non-Profit Corporation Act.
Religious Exemptions
An organization that qualifies as a religious organization is
entitled to certain exemptions from taxation.
To qualify, the organization must be organized and operated
primarily for the purpose of engaging in religious worship or
promoting the spiritual well being of individuals.
The organization must be operated in such a way that no
individual profits (other than salary) and the organization's
bylaws, charter or other regulations must pledge its assets for use
in performing the organization's religious functions.
Agricultural Appraisal
Land designated for agricultural use is appraised at its value
based on the land's capacity to produce agricultural products.
The value of land based on its capacity to produce agricultural
products is determined by capitalizing the average net income
the land would have yielded under prudent management from
production of agricultural products during the five (5) years
preceding the current year.
Property owners may qualify for agricultural appraisal under two
different laws. You may refer to Subchapter C, Section 23.41 and
Subchapter D, Section 23.51 of the Texas Property Tax Code for
details of these laws.
The Freeport Exemption
A community may choose to offer the Freeport exemption for
various types of goods that are detained in Texas for a short
period of time.
Freeport property includes goods, wares, merchandise, ores, and
certain aircraft and aircraft parts.
Freeport property qualifies for an exemption from ad valorem
taxation only if it has been detained in Texas for 175 days or less
for the purpose of assembly, storage, manufacturing, processing,
or fabricating.
Some New Hits
Pollution Control Equipment
A Texas constitutional amendment providing an exemption from property taxation for pollution
control equipment was approved in 1993.
The intent was to ensure that compliance with environmental mandates through capital
investments did not result in an increase in a facility's property taxes.
A facility must first receive a determination from the Texas Commission on Environmental
Quality (TCEQ) that property is for pollution control purposes.
That positive use determination is then provided to the local appraisal district, which must accept
the TCEQ's decision and grant the property an exemption from property taxes.
To be eligible for a positive use determination, the property must have been purchased, acquired,
constructed, installed, replaced, or reconstructed after January 1,1994 to meet or exceed federal,
state, or local environmental laws, rules, or regulations.
Solar & Wind-Powered Energy
Devices
The Texas property tax code allows an exemption of the amount of the appraised
property value that arises from the installation or construction of a solar or wind-
powered energy device that is primarily for the production and distribution of thermal,
mechanical, or electrical energy for on-site use, or devices used to store that energy.
A “solar energy device” converts solar energy into thermal, mechanical or electrical energy
by a process other than burning; stores converted solar energy; or distributes converted solar
energy.
A “wind-powered energy device” converts wind energy into thermal, mechanical or electrical
energy; stores converted wind energy; or distributes converted wind energy.
Thus, eligible renewable technologies include passive solar space heat, solar water heat,
solar space heat, solar thermal electric, solar thermal process heat, photovoltaics, wind,
biomass, storage technologies, solar pool heating, anaerobic digestion.
Reinvestment Zones
Abatements
Reinvestment Zones & Abatements
What has taken the place of school district abatements
is Tax Code Chapter 313 agreements.
They work about the same as an abatement (with the
property value limits provided to the entity seeking such an
agreement), but there is no big financial windfall to the
district resulting from any kind of property value increase
while the hold-harmless protects the district against a loss of
tax revenue (resulting from the value limits), increased
recapture, etc.
Reinvestment Zones & Abatements
The designation of specified areas as "reinvestment zones" is a
local economic development tool used by municipalities and
counties throughout the state of Texas.
Reinvestment zones have been used to stimulate local economies
by attracting new companies and encouraging the growth of
existing businesses.
These zones can be created for the purpose of granting local
businesses property tax abatements on a portion of the value of
real or tangible personal property located in the zone, for a
period of up to 10 years.
Reinvestment Zones & Abatements
Special taxation entities having jurisdiction over a reinvestment
zone may participate in executed abatement agreements;
however, the special taxing districts may not designate
reinvestment zones or initiate tax abatement agreements.
Reinvestment zones are designated by local ordinance or
resolution. Incorporated cities, counties and special districts are
allowed to enter into tax abatement agreements.
However, school districts no longer possess this ability.
Reinvestment Zones & Abatements
Pursuant to Tax Code section 11.43, a
claimant must make an annual application
for an abatement.
This is frequently missed.
Fin