Texas Tax Honor System, Sales Confidentiality Face Reform

AUSTIN-Two bills, taking aim at commercial property owners, will be on the agenda for the Texas Legislature when it convenes in January. Mandatory renditions most likely will get a thumbs up, but mandatory sales disclosure probably won’t pass muster, says the general counsel for the Texas Association of Property Tax Professionals.

Mark Hutcheson, partner in Popp & Ikard of Austin, tells GlobeSt.com that the 2003 issues are as significant as those weighed in 1997, a recognized year of banner reform. But, he adds, “the conventional buzz around the capitol is the Republicans are not going to have a real tax bill in the first session.” The January session will mark the first time in 100 years that the GOP will control Texas’ Senate and House.

Texas is one of the few states without a penalty for mandatory renditions or declaration of personal property. The in-place honor system could be on its way out the door, Hutcheson says. Up for discussion will be whether to grandfather those businesses that haven’t complied, deciding just what is taxable and defining whether fraudulent declarations fall under civil or criminal actions or both. Without a grandfather clause, the state could go back for two years and tax a non-complying company’s personal property plus impose a penalty.

Hutcheson says the legislation also includes a piggyback clause to expand auditing powers of appraisal districts, but that is likely to be scrapped as the legislation goes through the usual reworking before making it to the floor for a vote. The concern is the abuse opportunities that could arise from opening books to appraisal district auditors. The clause effectively could keep property owners from appealing assessments because they don’t want to open their books.

The state is looking for ways to offset a budget shortfall of at least $5 billion. One projection is that $1.3 billion in revenue could be generated from the mandatory rendition change, says Hutcheson. Even if the count is off, “it would be a good thing to get all the property subject to taxation on the appraisal roll,” he says.

Mandatory sales disclosure, though, is sure to meet stiff opposition because it would eliminate the confidentiality clause that keeps sales figures under wraps. The battle lines will be drawn between full disclosure and releasing only those values used to determine the assessment for a protesting property owner. Full disclosure means all names, price, financing terms and sale conditions would be public information, common practice in most states. The legislation draft includes a penalty for non-compliance.

Hutcheson says the Texas association supports full disclosure, but has a problem with any watering down to restrict what is and what isn’t available to the taxpaying public. Still, he says, “the likelihood of it making it through the system is slim, unlike the mandatory rendition bill.