Texas Legislature Begins Week With HB3 Debate

"There is a great deal of confusion," William Allaway, president of the Texas Taxpayers and Research Association, tells GlobeSt.com. "I don't think non-disclosure is the issue that will decide whether or not the bill passes. At this point, nobody is thinking about non-disclosure. They're thinking about this other provision." The hot button is an employer-paid payroll tax. In fact, the non-disclosure debate has yet to get any airtime.

Nonetheless, the real estate industry is closely watching--and divided--over the elimination of non-disclosure, which is projected to raise $87 million just from the commercial sector. Texas is one of 12 states in which property sales information is kept out of reach for the public and appraisal districts. The Texas measure, embedded in the bill, will give appraisers--and no one else--full access to commercial and residential sales.

The issue has been before the legislature many times in the past, but this is the first time that some state realtors' groups have voiced support. "The difference today is we recognize the need for equity and fairness in taxation," says Fred Baca, president of the Houston office for Colliers International Inc. and chair-elect for the Houston Association of Realtors. "We've become aware that it works in other states. I'm very confident that we can deal with the equity in taxation. We're all focused on the need to provide capital for education."

Though some of his peers differ, Baca doesn't foresee the elimination of non-disclosure as being the first leap toward imposing a real estate transfer tax. "If they want to tax real estate transactions, they are going to tax them" he says. "They don't need to throw something in front of it." Organizations like BOMA and NAIOP as well as those representing the hotel and apartment sectors are opposing the proposed change in the disclosure law.

Baca thinks the "Information Highway" has contributed to the changed attitude among some groups. Information is free-flowing thanks to the Internet. "I think a well-informed market is a better market for all," he says, "and that includes the taxing people."

Ken Nolan, Dallas County's chief appraiser, says Texas is long overdue for ending the "cat and mouse" game between appraisers and property owners. Information about residential sales is available through agreements with the MLS in most parts of the state. The commercial sector is a horse of a different breed, forcing appraisers to rely on any means possible to get a fair share for the taxing authority. Nolan says published prices and high assessments that force owners through the appeals door are routinely part of the game on his side of the fence.

"We're charged with treating all property equitably and fairly," Nolan says. "If you're going to use market value as a standard, we need to have all the tools. We're flying blind in some cases because we don't have all the information."

The rules of the game change if there's an appeal. To get the case heard, the property owner must open all books. "I tell them that if we had had this information up front, we wouldn't be sitting here," Nolan says. "Right now, we are begging for sales information or forcing it out of them. That's not the way it should be."

At one time, Texas had a system like Florida's in which documentary stamps were purchased at sale time, providing a tool for assessors to figure out selling prices unless the buyer picked a few extra to inflate property value for re-sale purposes. Texas phased out the system in the early 1960s, according to Baca. Besides Texas, other non-disclosure states are Alabama, Alaska, Delaware, Idaho, Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, Oregon and Utah.