Your property taxes are based on a simple equation: the tax rate times the assessment equals your property taxes. While it’s difficult to protest tax rates that are moving north, challenging your assessment can be successful if you understand what is involved: the three approaches to value; the comparable assessment analysis and the protest process.

What Are You Protesting?
You have the right to protest your assessment if you dispute one or more of the following:

• The market value placed on your property
• The unequal assessment placed on your property
• The inclusion of your property on the assessment roll
• The exclusion of any exemptions that may apply
• Which taxing jurisdictions your property is in
• Ownership of the property
• Any action taken by the appraisal district or appraisal review board that adversely affects your assessment

While all of the above are legitimate reasons for protesting your property tax assessments, the market value and the unequal assessment are the most common reasons to file a protest. If your protest is based on the assigned market value, you should prepare a market analysis to support your opinion of value. A complete analysis and presentation should consider all three approaches to market value.

Cost Approach
The value of the property is estimated based on the cost to replace the improvements less depreciation and adding in the current market value of the land.

Income Approach
The property’s income less expenses is capitalized to calculate the enterprise value. The enterprise value includes the real estate, personal property and business value.

Market (Sales) Approach
The sale price of the properties that are judged to be most comparable will give an indication of market value. Like the income approach, this market analysis includes real estate, personal property and business value. Business value is an enhancement that results from intangibles such as management skills, marketing skills, working capital, trade names, and non-realty agreements. Properties with business value include hotels, nursing homes and storage facilities. The assessment of your property should only value the real estate. Real estate is defined as the land and permanent improvements. If there is good data to support the cost and income approaches, the difference between the two is considered to be the business value.

Equalization?
In a litigated protest, Harris County Appraisal District (HCAD) v. United Investors Realty Trust (United) confirmed that comparable properties must be equally assessed. HCAD appealed a trial court’s judgment in favor of United, in which United sought to be equally assessed with comparable properties without considering the true market value of the subject property. The Court of Appeals confirmed the trial court’s decision.
When preparing a comparable assessment analysis, it is crucial to include all of the supporting data such as rents and occupancies. Without this data, the Appraisal Review Board (ARB) may decide not to consider your analysis.

The protest process follows three steps: 1) an informal hearing with a county appraiser; 2) a formal hearing with the ARB; and 3) an appeal to the Court. During your informal hearing with a county appraiser, you will present your analysis supporting a reduction in your assessment. If not presented with the information, you should ask to see the district’s analysis (how they got to your assessment). With respect to the district’s analysis, you’ll want to present facts that differ from their data and support your valuation. The county appraiser will review your analysis with the district’s information, and should you both agree to a reduced value, you will be asked to sign a document finalizing your assessment.

Should you not reach an agreement, a formal hearing will be scheduled with the appraisal review board. The typical ARB is a three-member citizen panel, appointed by the appraisal district board of directors. At the board hearing, you and the county appraiser will be sworn in. Usually, the county appraiser will go first by identifying the property under protest, and then describing how the district arrived at its assessments. You will then be asked to present your analysis. After all rebuttals have been heard, the ARB will close the hearing and the chairperson will announce the decision.

If you are dissatisfied with the results of the ARB hearing, you have the right to appeal this decision in court. An appeal must be filed within 45 days of receiving the written board order. One should consider the cost of a court appeal versus potential savings. Cost could include attorney fees, expert witness fees and a full appraisal.

There are several bills currently before the Texas legislature that would lower the school property tax rates to a cap of 1% and cap increases to real estate (residential and commercial) assessments at 5% per year. Without caps on the assessments, the lower caps on rates don’t limit the revenues of local taxing jurisdictions (cities and counties), but gives the ability to hide tax increases in the property appraisals. Therefore, caps on commercial real estate assessments may become law. So it’s important that your protest is successful in setting a favorable valuation as the basis for next year’s taxable value.

Deadline
Protests should be filed by May 31 or within 30 days of the date posted on your notice of valuation. Protest forms are available at the appraisal district. If you submit your protest by mail, certified mail is highly recommended as proof of your timely protest.
Although the protest process takes time, with a complete and thorough market analysis and/or comparable assessment analysis, you can be successful in getting your assessment and property taxes lowered.