How Hurricane Harvey Could Impact Property Tax Bills

HOUSTON—Numerous counties in Southeast Texas are hurting in the wake of Hurricane Harvey, which governor Greg Abbott estimates could cost up to $180 billion in damages. Unfortunately, property owners are roughly a month away from receiving another costly punch in the gut in the form of 2017 property tax bills.

Tax bills are based on property characteristics as of January 1, which could be significantly different than the current bills, after one of the most devastating natural disasters in American history, according to Jonathan Sanders, client service leader, Houston, Paradigm Tax Group.

“We know property owners are facing difficult decisions about damage and it may be a long road until full operations are in place, but knowing some of the insurance specifics about reappraisals will be of great help,” Sanders tells GlobeSt.com.

Sanders recently discussed the recovery process and how reappraisals factor into the equation.

GlobeSt.com: What can be done to reduce the pain of recovery?

Sanders: Section 23.02 of the Texas Property Tax Code provides owners a pathway for some relief through reappraisal of damaged properties. Unfortunately, the governing body of the taxing jurisdictions in a declared disaster area must request a reappraisal of damaged properties by the local county appraisal district. This puts the taxing entities in a tough situation: help the local taxpayer or decimate a budget through reduced property tax revenue. Ideally, each taxing jurisdiction will do what's right and request the reappraisal.

GlobeSt.com: What happens after the reappraisal is requested?

Sanders: Once the reappraisal is requested, the counties will complete the process as soon as practical. Given the magnitude of the impacted area, this could take several months to complete. Property owners will not see the results/relief until months after the reappraisal when they receive prorated tax bills. Tax bills are prorated based on the declared disaster date. For impacted owners, this provides some level of relief.

GlobeSt.com: Can you provide a hypothetical example of tax rates for a property impacted by Hurricane Harvey?

Sanders: An industrial warehouse in Cypress, TX assessed at $2.5 million as of January 1, 2017 would have a tax rate of 2.84629%. The disaster was declared on August 26, 2017 and Harris County Appraisal District/HCAD was then authorized to revalue affected properties. HCAD reassesses the warehouse at a value of $1 million as of August 26, 2017. It is calculated as follows: 237 days elapsed out of 365 days or 64.93%; 128 days remaining out of 365 or 35.07%. This would be a tax rate of 2.85% or total projected taxes of $56,257.98.

GlobeSt.com: What should taxpayers do to maximize tax savings following the disaster?

Sanders: Property owners will need to carefully document the damages. This should include but is not limited to pictures and repair estimates. Even if with flood insurance, an owner is still entitled to some relief based on the status of a property as of August 26, 2017.

It is imperative that owners reach out to tax advisors immediately if a commercial property in South Texas suffered any damage as a result of the storm. While there is uncertainty surrounding the local governments' use of Section 23.02 of the property tax code, there are other avenues that can be utilized to potentially achieve similar value positions. There may not be opportunities for reductions on all properties, but it is imperative that owners have property tax values reviewed following a catastrophic event. Paradigm Tax Group is committed to ensuring that clients' properties are valued in a fair and equal manner.