Court Opinion

ID: 4131566
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:17:10.501808+00
Date Added: 2024-06-11T14:32:34.956308
License: Public Domain

The Attorney General of Texas

MARK WHITE
Attorney General                                   July 14, 1982

                                 Mr. Kenneth E. Graeber                 Opinion No.   W-495
Supreme Court Suildin9           Executive Director
P. 0.80x   12548
                                 State Property Tax Board              ‘Re: Calculation of tax rate
Austin. TX. 78711-2348
5121475-2501
                                 9501 North III-35                      under section 26.04 of the
Telex 91Ol974-1367               Austin, Texas   70761                  Property Tax Code
Telecaoiar   5121475.V266
                                 Mr. Rsyman L. Bynum
                                 Commissioner
1M)7 Main St.. Suite 1400
Dallas. TX. 75201.4709
                                 Texas Education Agency
2141742-9944                     201 East 11th Street
                                 Austin, Texas   78701
4824 Alberta Ave.. Suite    WI
                                 Dear Messrs. Graeber and Bynum:
El Paso. TX. 79905.2793
91515333484
                                      Section 26.04 of the Property Tax Code sets forth procedures for
                                 calculating potential tax increases which must be followed by each
1220 Dallas Ave.. Suile 202      local taxing unit prior to its adoption of a tax rate.             The
“ouston. TX. 770028986
                                 computations required by subsection (d) produces the tax rate which,
713m50-0665
                                 when applied to this year’s assessments will yield taxes comparable to
                                 last year’s levy. Adjustments are made for property value which was
806 Broadway. Suite 312          formerly taxable but now exempt and for property added to the tax
Lubbock. TX. 79401.3479          roles. This “truth-in-taxation” statute requires a taxing unit to
8064747-5239
                                 hold public hearings if there is an increase of three percent or more
                                 in the proposed tax rate over the “effective tax rate.” Section
4309 N. Tenth. Swte S            26.04(c) provides for the calculation of an amount of tax dollars upon
McAlkn. TX. 78501.1685           which the “effective tax rate” is computed in accordance with section
512l692-4547                     26.04(d).

 200 Main Plaza. Suite 400            Section 26.04 states in part:
 San Antonio. TX. 78205-2797
 51242254191                                  (c) An officer or employee designated by the
                                           governing body shall subtract from the total
 An Equal Opportunity/
                                           amount of property taxes imposed by the unit in
 Attirmafive Action Employer               the preceding year:

                                                 (1) the amount of taxes imposed in the
                                              preceding,year to pay principal of and interest
                                              on bonds, warrants, certificates of obligation,
                                              or other lawfully authorized evidences of
                                              indebtedness issued or assumed by the unit and
                                              to    pay    lawfully   incurred    contractual

                                                          p. 1764
Mr. Kenneth E. Graeber - Page 2    (w-495)

             obligations providing security for the payment
             of principal of and Interest on bonds or other
             evidences of indebtedness issued on behalf of
             the unit by another political subdivision;

               (2) the amount of taxes imposed in the
            preceding year on property in territory that
            has ceased to be a part of the unit;

               (3) the amount of taxes imposed in the
            Preceding year on taxable value that is exempt
            in the current year; and

                (4) the amount of taxes imposed in the
             preceding year on taxable value that is not
             taxable in the current year because property
             appraised at market value in the preceding year
             Is required by law co be appraised at less than
             market value in the current year. (Emphasis
             added).

Your concerns center on the above underscored language. You suggest
that the phrase "taxable value that is exempt in the current year" is
susceptible of two interpretations. You first ask whether section
26.04(c)(3) of the Property Tax Code includes value lost through
partial as well as total exemptions or only value lost through total
exemptions. If we conclude that partial exemptions are included, you
then wish to know which of two suggested methods of calculating
taxable value lost through the granting of exemptions is correct. We
conclude that the underscored phrase in section 26.04(c)(3) is meant
to reach both taxable value which is exempt due to the granting of
partial exemptions and taxable value which is exempt due to the
granting of total exemptions in the current year.

     Section 1.04(10) of the Property Tax Code defines "taxable value"
to mean "the amount determined by deducting from assessed value the
amount of any. applicable partial exemption."       (Emphasis added).
Section 1.04(11) defines "partial exemption" to mean "an exemption of
part of the value of taxable property." (Emphasis added). When these
definitions are read together with the language "taxable value that is
exempt in the currents year" in section 26.04(c)(3), it is manifest
that the legislature intended that value lost due to the grant of
partial exemptions be included in the calculation of the effective tax
rate.

     It has been suggested, however, that section 26.04(c)(3). when
read together with article VIII , section 21 of the Texas Constitution,
is ambiguous and should properly be read to refer only to value lost
through the granting of total exemptions. We disagree. You inform us

                                  p. 1765
&   ’
        Mr. Kenneth E. Graeber - Page 3    (w-495)

        that. since the effective date of article 7244~' V.T.C.S.. the
        now-repealed predecessor to section 26.04. the language "taxable value
        that is exempt in the current year" has been uniformly construed by
        the State Property Tax Board, the Texas Education Agency, and the
        taxing units throughout the stste to include value lost through the
        granting of partial exemptions, not just value lost through the
        granting of total exemptions. The construction placed upon a statute
        by the agency charged with its administration is entitled to great
        weight, Rx parte Roloff, 510 S.W.2d 913 (Tex. 1974); State v. Aransas
        Dock and Channel Company, 365 S.W.2d 220 (Tex. Civ. App. - San Antonio
        1963, writ ref'd). especially vhere contemporaneous, or nearly so.
        with the statute itself. Burroughs v. Lyles, 181 S.W.2d 570 (Tex.
        1944); Stanford v. Butler, 181 S.W.Zd 269 (Tex. 1944).

               In addition, the legislature has enacted corrective amendments to
        the code without changing the administrative construction of section
        26.04.    See National Life Company v. Stegall, 169 S.W.2d 155 (Tex.
        1943). During the 1981 regular session the legislature enacted a
        corrective amendment to section 26.04(c)(4). This section refers to
        "taxable value that is not taxable in the current year" because of a
        legal requirement that property formerly appraised at market value be
        appraised at less than market value.         The amendment to section
        26.04(c)(4) requires taxing units to subtract taxable value lost due
        to the granting of special valuation as set forth in chapter 23 of the
        code. This subtraction was not permitted prior to the passage of the
        amendment, since a loss In taxable value resulting from special
        valuation is not identical to a loss in taxable value due to
        exemption. The fact that the legislature amended sectlon 26.04 by
        adding in 1981 another category of "taxable value that is not taxable
        in the current year" indicates its acceptance of the administrative
        construction.

              Moreover, we do not believe the language of article VIII, section
        21 compels us to read section 26.04(c)(3) as referring 9             to
        property totally exempt from property taxation. In our opinion, the
        constitutional   provision does not preclude the legislature from
        including in the computation property which is partially ,exempted.
        Article VIII, section 21 of the Texas Constitution provides the
        following in pertinent part:

                     Sec.   21 (a) Subject     to   any   exceptions
                  prescribed by general law, the total amount of
                  property taxes imposed by a political subdivision
                  in any year may not exceed the total amount of
                  property taxes imposed by that subdivision in the
                  preceding year unless the governing body of the
                  subdivision gives notice of its intent to consider
                  an increase in taxes and holds a public hearing on
                  the proposed increase before it increases those

                                          p. 1766
Mr. Kenneth E. Graeber - Page 4     (m-495)

          total taxes. The legislature shall prescribe by
          law the form, content, timing, and methods of
          giving the notice and the rules for the conduct of
          the hearing.

            (b) In calculating the total amount of taxes
         imposed in the current year for the purposes of
         Subsection (a) of this section, the taxes on
         property in territory added to the political
         subdivision since the preceding year and on new
         improvements that were not taxable in the
         preceding year are excluded. In calculating the
         total amount of taxes imposed in the preceding
         year for the purposes of Subsection (a)'of this
         section, the taxes imposed on real property that
         is not taxable by the subdivision in the current
         year are excluded. (Emphasis added).

     Article VIII, section 21 establishes a limitation on the taxes
which may be imposed from one year to the next. It provides that the
total amount may not exceed a .speclfied amount unless certain notice
and hearing requirements are met.   In no event would the calculation
required by the statute exceed the amount derived from the calculation
formula set forth in article VIII, section 21. The amount of taxes
imposed in the preceding year will be reduced under the statute by
taxable value lost not only,by the grant of total exemptions but also
by the grant of partial exemptions. The total amount of taxes
calculated under the statute will thus always be less than that
calculated under article VIII, section 21.

     Moreover, even if article VIII, section 21(b) were construed as
providing a compulsory calculation formula, section 26.04 would not
violate the constitutional provision. The inclusion of the phrase in
article VIII, section 21(a) "[slubject to any exceptions prescribed by
general law" severely undercuts any argument that article VIII,
section 21 sets forth a compulsory calculation formula which the
legislature is without power to change by statute. Therefore, section
26.04. to the extent that.it departs from any calculation formula set
forth in article. VIII, section 21. constitutes an "exception
prescribed by general law." We conclude that section 26.04(c)(3) of
the Property Tax Code includes value lost through partial as well as
total exemptions.

     Your second question concerns the method of calculating taxable
value lost through exemptions. You wish to know the proper method of
calculating the amount to be subtracted from the amount of taxes
imposed in the preceding year. Specifically, you wish to know which
of two suggested methods of calculating "the amount of taxes imposed

                                  p. 1767
,- Mr. Kenneth E. Graeber - Page 5     (h&+&S)

  in the preceding year on taxable value that is exempt in the current
  year” more closely comports with section 26.04 of the code.

       A brief explanation may be helpful here.         A tax rate is
  determined by dividing the amount of tax revenue the taxing unit seeks
  to collect by the taxable value of the property of the taxing unit.
  That is,

                    tax levy (i.e. adopted budget)
       tax rate =
                    taxable value of property

       The effective tax rate calculation is designed to provide
  taxpayers an accurate means of determining the amount of increase or
  decrease in property taxes levied from one year to the next. The
  “effective tax rate” means the tax rate directed at yielding the
  amount of taxes collected last year when it Is applied to this year’s
  taxable property. In computing the effective tax rate, the numerator
  in the fraction, i.e. the amount of tax revenue which the taxing unit
  seeks to collect,=    based on the amount of taxes collected in the
  previous year. Generally. the effective tax rate is determined by
  dividing the tax levy imposed in the preceding year (with certain
  amounts subtracted therefrom) by the market value of all property in
  the taxing unit in the current year (with certain amounts subtracted
  therefrom). The amounts subtracted from the numerator and denominator
  are the tax levy and taxable value attributable to properties taxed
  last year which remain untaxed in the current year because of
  exemption or special valuation. That is,

                   1981 tax levy minus taxes levied on property
       effective =               taxable in 1981 but not in 1982
       tax rate    taxable value in 1982 minus value taxable in
                                               1981 but not 1982

       Under the method proposed by the Texas Education Agency
  (hereinafter TEA). the taxable value ‘for the current year is
  subtracted from the taxable value for the preceding year and that
  remainder is multiplied by the preceding year’s tax rate.          The
  resulting product is purportedly the amount of tax dollars lost from
  last year’s tax revenues due to the granting of exemptions in the
  current year on taxable value that was taxed in the preceding year.
  If the taxable value for the current year is greater than the taxable
  value for the preceding year, the taxing unit would incur no nets loss
  in tax revenue and no amount of levy would be subtracted. TEA’s
  method begins, then, with a comparison of taxable value from one year
  to the next and, in the event that there is no net loss in taxable
  value in the current year as compared with thepreceding year, no
  adjustment is made to last year’s levy to account for revenue loss.
  However subsection (c)(3) requires the subtraction of that revenue

                                     p. 1768
.   ’   Mr. Kenneth E. Graeber - Page 6   (w-495)

        loss which is attributable to the granting of exemptions in the
        current year that were not granted in the preceding year. It applies
        to taxable value which, first, was taxed In the preceding year and.
        second,‘is exempt in the current year. It does not apply only when
        there is a net loss of taxable value from one year to the next. The
        method proposed by TEA simply does not comport with the statute.

             The revenue loss computed by TEA’s proposed method accurately
        reflects the tax revenue lost only when the market value of a property
        receiving an exemption remains constant from the preceding year to the
        current year. In that event, any loss In taxable value in the current
        year as compared to that of the preceding year is attributable solely
        to the grant of an exemption in the current year or to special
        valuation. See section 26.04(c)(4), Property Tax Code. However, if a
        taxing unit reappraises property in the current year and the resulting
        increase in market value is greater than the amount of any new
        exemption granted in current year, TEA’s proposed method would
        mistakenly indicate no loss in revenue due to the granting of new
        exemptions. In reality, however, the taxing unit would incur a loss
        of revenue due to the granting of new exemptions; the loss would
        merely be offset by the increase in market value, and the taxing unit
        would incur no net loss in tax revenue in the current year. If a
        taxing unit reappraises property in the current year and there is a
        decrease in market value of property which receives an exemption in
        the current year which it did not receive in the preceding year, TEA’s
        method would mistakenly attribute the total loss in taxable value to
        the granting of the exemption. It would fail to take into account a
        loss in market value.

             Under the method proposed by the State Property Tax Board
        (hereinafter SPTB), the amount of the exemption granted in the current
        year on taxable value taxed in the preceding year is multiplied by the
        tax rate for the preceding year. The amount of the new exemption
        granted in the current year is determined in one of two ways. If the
        new .exemption granted is a partial exemption, *,     $5,000 residence
        homestead exemption or $10,000 residence homestead exemption for the
        elderly, see section 11.13. Property Tax Code, that dollar amount is
        the amountof    the exemption granted. That amount is used in the
        calculation, If the new exemption granted is a percentage of market
        value, see article VIII, section l-b, Texas Constitution, the
        percentagemultiplied by the preceding year’s market value is the
        amount of the exemption granted.

             We conclude that the method proposed by SPTB comports with the
        statute; the loss computed under this method more accurately reflects
        the loss in tax revenues due to the granting of new exemptions. In
        the event that there is no reappraisal and the market value of a
        property receiving a new exemption remains the same, the loss
        reflected by SPTB’s method equals the loss in taxable value actually

                                      p. 1769
    :

1
        Hr. Kenneth E. Graeber - Page 7     (m-495)

        attributable to the granting of the new exemption. In the event that
        there is a reappraisal and the market value of a property receiving a
        new exemption increases, the loss reflected by SPTB’s method again
        equals the loss in taxable value actually attributable to the granting
        of the new exemption. This is so regardless of whether the increase
        in market value offsets the loss incurred due to the granting of the
        exemption. In the event that there is a reappraisal and the market
        value of a property receiving a new exemption decreases, the loss
        reflected by SPTB’s method equals the loss in taxable value actually
        attributable to the granting of the new exemption. It does not
        mistakenly include a loss in taxable value which is attributable to a
        loss in market value.

                                     SUHMARY

                    The phrase “taxable value that is exempt In the
                 current year” in section 26.04(c)(3) of the
                 Property Tax Code refers not only to taxable value
                 lost as a result of the granting of total
                 exemptions, but also that lost to the granting of
                 partial exemptions.     The   correct method of
                 determining “the amount of taxes imposed in the
                 preceding year on taxable value that is exempt in
                 the current year” is determined by multiplying the
                 amount of the exemption granted in the current
                 year on taxable value taxed in the preceding year
                 by the preceding year’s tax rate. The amount of
                 the exemption granted in the current year is
                 determined in one of twosways. If the exemption
                 is a partial exemption or a total exemption, the
                 number used in the calculation is simply the
                 amount granted. If the exemption granted is a
                 percentage exemption granted pursuant to article
                 VIII, section l-b of the Texas Constitution, then
                 the amount of the exemption granted .is equal to
                 that percentage multiplied by the preceding year’s
                 market value.

                                               xzg

                                                    MARK      WHITE
                                                    Attorney General of Texas

        JOHN W. FAINTER, JR.
        First Assistant Attorney General

        RICHARD E. GRAY III
        Executive Assistant Attorney General

                                          p. 1770