ProtestTax | Glossary

Property Tax Glossary

For your convenience, we've compiled a list of commonly used terms in the property tax world here.

Tax based upon value

Collectively refers to the informal hearing and appraisal review board (ARB) hearing during the property tax appeal process. The administrative appeals must be exhausted before a property owner can file a judicial appeal (lawsuit in state district court).

See protest

An opinion of value, typically provided by an independent third party. Texas appraisal districts develop an opinion of value for all real estate, business personal property, and minerals within the county at least every three years.

The appraisal review board conducts property tax protest hearings for appeals not resolved at the informal hearing. In most counties, ARB hearings are conducted by three-member panels to prepare a recommendation for the full appraisal review board. The panel recommendations are formally affirmed at periodic meetings of a quorum of the appraisal review board. The appraisal review board is technically independent of the appraisal district. However, since the board of directors of the appraisal district hires appraisal review board members, the appraisal district pays and supervises ARB members, and an attorney controlled by the appraisal district guides the appraisal review board on legal matters, the appraisal review board is not completely independent of the appraisal district.

the value upon which property taxes are calculated. Both real property and business personal property can be partially or totally exempt. The homestead exemption is an example of a partial exemption for real property. The freeport exemption, which applies to inventory kept in the state for a limited period of time, is an example of a complete exemption.

No, the appraisal district will not send someone to your property because they have been protested. At the hearing, a ProtestTax agent can request that the appraisal district visit the property if we believe that it is in our client’s best interest. In general, they do not have time to individually visit protested properties.

Sometimes known as assessment comps, these are assessed values for properties which are comparable to the subject property. Factors that make a property comparable include property type, location, size, age and condition.

Tangible personal property used for the production of income. Business personal property is taxable at the same tax rate as real property in Texas. Examples of business personal property include inventory, office equipment, office furniture, heavy equipment, trucks and cars.

An organization that compiles an inventory of property within the county and values it periodically using mass appraisal. Types of property listed include real property, business personal property and minerals. The central appraisal district is charged with maintaining detailed information for the properties and administering exemptions. Most appraisal districts do not send tax bills; their activities are limited to determining market values and appraised values which are submitted to tax entities who prepare and mail tax bills. Each Texas county has an appraisal district or the activity is outsourced to another appraisal district.

Chief administrative officer of a central appraisal district.

also known as comps. Information on properties which are similar with regard to factors such as property type, location, size, year built and condition. For property tax matters, comparables are used both for the sales comparison approach and unequal appraisal.

one of the three generally accepted approaches to valuing real estate. Preparing a cost approach for real estate involves estimating the replacement cost of the property, subtracting an allowance for all types of depreciation and adding the market value of the land. The sum of the depreciated replacement cost and land value is the indication of market value via the cost approach.

a limitation on the increase in assessed value but not market value for homesteads. This limitation applies only to homesteads and not to second residences, homes owned for investment or any other type of real property, personal property or minerals. The limitation is 10% per year, times the number of years as the property was last reappraised, plus the market value of improvements added since the property was last appraised. (Improvements do not include maintenance.) For example, consider a home which was appraised last year at $100,000 and has been reappraised in the current year at $150,000. Since the home was appraised one year ago and no improvements have been made, the appraisal district can increase the market value to $150,000. However, the assessed value for the purposes of calculating property taxes can only be increased to a maximum of $110,000. Consider a second example: a home was last reappraised five years ago at $100,000. During the interim, the owner has made $20,000 in improvements (items other than maintenance). The appraisal district estimates market value for the current year at $200,000. The assessed value is capped at $170,000 or (($100,000 X five years X 10%) + $100,000 + $20,000).

a partial exemption of property taxes in Texas for owners of a residence. Qualifications include owning the house on January 1 and living in the house on January 1 of the tax year in question. In many jurisdictions, the benefit of a homestead exemption is property taxes are reduced by approximately 20%. However, homestead exemptions vary from tax entity to tax entity. Homeowners must apply for a homestead exemption. It is not necessary to apply annually once the homestead exemption has been approved. However, if the chief appraiser requests a new application, the homeowner must respond to maintain their homestead exemption.

the process of performing the income approach or a summary of the research and calculations performed during the income approach to value real estate.

one of the three generally accepted approaches to valuing real estate. The income approach can be performed using either a direct capitalization approach or a discounted cash flow analysis. The direct capitalization approach is most frequently applied during property tax appeals for income properties in Texas. Income properties would include apartments, office buildings, retail centers, and industrial properties which are totally or partially leased to third parties to produce income. Steps in the income approach include estimating market rent, market vacancy, other income, operating expenses and a capitalization rate. Effective gross income is defined as gross possible rent for all space at market rent, less vacancy, plus other income. Effective gross income minus operating expenses equals net operating income. Net operating income (NOI) divided by the capitalization rate (cap rate) is the indication of value for the property via the income approach.

A summary of the revenues, operating expenses, depreciation, interest and net operating income for a business or parcel of real estate.

the first step of the property tax protest process. The administrative hearings collectively include the informal hearing and an appraisal review board hearing. During the informal hearing, the property owner or property tax consultant meets with an appraiser employed by the central appraisal district. The owner/consultant and the appraiser trade information and attempt to negotiate a settlement. If the informal hearing results in an agreement, there is no appraisal review board hearing for the property and the assessed value is final for the year.

property which is neither real property nor tangible personal property. Intangible personal property can’t be seen, felt, weighed, or measured. Includes items such as contracts, stocks, bonds, patents, digital recordings, business enterprise value for an operating business, and accounts receivable.

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