Commercial Sales Disclosure Ready for Texas Showdown

Texas is one of the last states with sales still shrouded in secrecy from appraisers. And Texas, famous as a last-stand ground, is likely to fall before this legislative season ends May 30, say state capital watchdogs. The issue not only is embedded in a bill to cut school property taxes by one-third, but it's part of every other major proposal tied to the Public Schools Finance System bailout. The real estate industry already has blocked similar attacks to tax commercial leases, professional services and cap appraisals. HB3 is being touted as the largest tax cut in the state's history.

Residential properties don't pose the same problem as commercial sales because the MLS system provides comps. If passed in its present form, HB3 proponents say $87 million in new revenue will be harvested annually by eliminating non-disclosure for commercial sales.

"It's us and Florida and it's been raised every session for five or six sessions," says William Allaway, president of the Texas Taxpayers & Research Association, an Austin-based lobbyist group representing 1,200 members with ties to 350 of the state's major businesses. Florida, once a non-disclosure state, now requires documentary stamps that enables appraisers to determine the sales price.

Allaway tells GlobeSt.com that it was decided late yesterday afternoon that HB3 will go to the floor Thursday. State representative James Keffer, R-TX 60th District and chairman of the ways and means committee, earlier this month introduced the property tax-relief measure. As word got out about commercial sales disclosure, proponents and opponents started to rally forces for the cause.

"We have expressed some concerns about the provision, but haven't opposed it," Allaway says. "We have asked the committee to put in safeguards."

The lobbyist group is requesting changes to allow more than three days to file reports after a complicated business transaction with multiple locations; implement language so a series of property sales wouldn't become public knowledge to drive up prices; make the information privy to appraisers but not the eyes of all. "Most of our members are less concerned about disclosure to the appraisal districts than they are to someone else out there getting the information," Allaway says.

Still, a groundswell is building to completely strip commercial sales from the bill. "We don't think they will get any real benefit for sales disclosure," says Steve Bronner, managing principal of the Southwest and central region for Miami-based Parmenter Realty Partners and the president of the North Texas NAIOP chapter. The local chapter is leading an opposition camp of six organizations representing all commercial sectors, including BOMA. Each organization will have representatives on capitol hill when the issue goes to the floor, Bronner says.

Should disclosure win nods, then the coalition plans on lobbying for full disclosure rather than limit information to appraisal districts and tax appeals. The coalition says research shows the existing system has been 99% accurate for residential sales and 98% accurate for commercial trades.

Bronner, who supports a broad-based business tax, says the coalition sees disclosure as a forerunner for a real estate transfer tax. "And we are strongly opposed to a transfer tax," he says.

The Texas Association of Realtors, largely a residential organization, also is opposed to a transfer tax, but has tossed its support behind HB3. TAR's officials were not available for comment for the article although it has a press release coming out this morning about the disclosure issue.

The North Texas Association of Realtors yesterday passed along the TAR request for members to support HB3. However, it wasn't intended to reflect an official NTCAR position, says Brian Jetty, the organization's executive director.

Likewise, the Real Estate Council has not taken a formal position. "It is very early in the process, but we will continue to monitor this issue," says Will Mundinger of Dallas-based Archon Group and the council's PAC chairman. "We will decide what additional measures should be taken, if any, as it develops in Austin."

Clearly, the 79th legislative session is ready to drop the curtain on the rule. "I think there's a great likelihood that some version of sales disclosure is going to pass the legislature," says James Popp, managing partner of Austin-based Popp & Ikard, the Texas member of the American Property Tax Counsel. "The fight now is between making it confidential as in the current bill or making it full disclosure."

Popp says the firm's clients have mixed reactions to the HB3 provision. "I don't get any sense that they think it would be bad for business," he says. "They just think it's their private information."