As a Texas business owner, it’s crucial to understand the property tax rate adoption process. It is a critical process that influences your tax liability. Hence, knowing how it works and preparing accordingly can save you time and money and help you avoid unnecessary tax surprises.
In this blog, we will discuss what you need to know as a business property owner and the steps that you can take to help minimize the tax impact on your business.
Understanding the Property Tax Rate Adoption Process
The property tax rate adoption process in Texas follows “truth-in-taxation” principles, requiring taxing units to provide transparency about how rates are set. Taxing authorities calculate two key rates:
- No-New-Revenue Tax Rate (NNR): This is essentially a “status quo” tax rate for a taxing entity. It is calculated to generate the same revenue as the previous year, assuming no changes in property values or new properties are added to the tax roll.
The NNR allows taxpayers to see how much of their property tax bill changes are due to changes in tax rates versus changes in property valuations. If your property value increases, but the taxing unit adopts the NNR, you will not pay more taxes on your property.
- Voter-Approval Tax Rate (VATR): This tax rate sets the minimum rate allowed without voter approval. This allowable increase is typically 3.5% for most cities and counties and 8% for special taxing units. It establishes the maximum rate at which taxes can increase for operations and debt service before taxpayers must be asked to approve the changes through a tax rate election.
The VATR includes a maintenance and operations (M&O) component for everyday services and Debt service rates for repaying bonds and loans for projects like schools, roads, or emergency facilities.
The Role of Public Notifications and Hearings
Local taxing units are required to notify taxpayers of proposed tax rates. This is typically done through publications in local newspapers, direct mail to taxpayers, and updates on official websites. Notifications must include the time, date, and location of public hearings to discuss proposed tax rates.
When a proposed rate exceeds the lower of NNR or VATR, a special public hearing is mandatory. These hearings allow property owners to ask questions and provide feedback before the tax rate is adopted.
Key Deadlines in the Property Tax Cycle
Preliminary Calculations and Notices: Taxing units calculate NNR and VATR rates, typically in July or August. Proposed rates must be published at least 7 days before public hearings.
Public Hearings and Adoption: Hearings must occur no less than 5 days after notice publication, with final adoption deadlines falling in September. If a tax rate election is necessary, the order must be issued at least 71 days before the election date.
How to Engage and Protect Your Interests
Participating in Hearings: Public hearings provide a platform to ask critical questions about increased rates and voice your concerns. Stay informed through official websites and local publications to attend or submit feedback effectively.
Petition for Elections: If your taxing unit adopts a rate above a certain threshold but below the de minimis rate, you may initiate a petition for a tax rate election. This ensures taxpayer involvement in crucial decisions.
Consult a Property Tax Professional
A property tax consultant can help you through the complex process of valuations, rate negotiation, and exemption applications. This will save you time and reduce your tax liability.
Simplify Property Taxes with Expert Guidance
The property tax rate adoption process in Texas is complex and transparent, offering opportunities for business owners to participate and prepare. By staying informed about valuation timelines, leveraging exemptions, and consulting experts, you can manage your tax obligations efficiently.
To get the maximum benefits from your tax obligations, consult and partner with a property tax consultant. Consultants bring specialized knowledge and expertise, ensuring you fully understand your property valuations and tax rates.
To learn more about how a property tax consultant can help you, contact our advisors today.