Legal Topics

Recent Property Tax Cases

Posted by: Roy Armstrong on May 20, 2017

RECENT PROPERTY TAX CASES
Last updated: May 20, 2017

Harris County Appraisal District v. Texas Workforce Commission
2017 WL 2023616 (Tex., May 12, 2017)

Issues: ARB members’ eligibility for unemployment compensation

Several former members of the ARB filed claims for unemployment benefits contending that they had been employees of the appraisal district. Following an administrative hearing, the TWC determined that the members were former district employees entitled to benefits. The district then took the matter to the trial court, which denied the TWC’s motion for summary judgment and entered summary judgment for the district. The TWC appealed. The court of appeals reversed the judgement for the district and entered judgment for the TWC. The Texas Supreme Court agreed to consider the case.

The Supreme Court affirmed the judgment for the TWC. The Court explained that the relevant statute was §201.041 of the Labor Code, which defines employment as “a service performed by an individual for wages . . . unless it is shown . . . that the individual’s performance of the service has been and will continue to be free from control or direction under the contract and in fact.” The fact that a person receives pay for his services raises a presumption of employment, but the purported employer can rebut the presumption by proving that it did not control or direct the person’s work. In reviewing the TWC’s decision, the Court applied the very deferential substantial-evidence standard and concluded that there was more than a scintilla of evidence to support the agency.

Under the TWC’s regulations, twenty factors are potentially relevant to the question of whether someone is an employee. (Those factors generally seem designed to distinguish between employees and independent contractors in the private sector.) The Court described each factor and found that several of them supported the TWC’s conclusion. ARB members were required to receive training and the district paid for their training. The district’s functions and the ARB’s functions were integrated; both served the goal of accurate appraisals. ARB members could not sub-contract out their duties. The district hired and paid the ARB’s support staff. ARB members were paid in “regular amounts.” The district paid the ARB members’ business and travel expenses and furnished the tools and equipment used by the members. A member could perform his functions only through his relationship with the district. A member could quit without creating liability to the district. The Court further concluded that Tax Code provisions separating the ARB from the district were not intended to address the question of whether ARB members were employees.

The Court also rejected the district’s argument based on §201.063 of the Labor Code, which states that a “member of the judiciary” performing services for a local government is not an employee. The Court reasoned that ARB members were administrative not judicial officers. They were not part of the judicial branch of government.

Sullivan v. Sheridan Hills Development L.P.
2017 WL 1719170 (Tex. App. – Houston [14th Dist.], May 2, 2017, no pet hist.) (not reported)

Issues: Governmental immunity

Sheridan sued the appraisal district challenging the 2013 appraised value of its property. Sheridan paid taxes in an amount equal to what it had paid in 2012, about two-thirds of the 2013 assessment. Parties settled the appraisal case, and, as a result of the settlement, Sheridan owed about $561,000 in additional base taxes. The TAC billed Sheridan for that amount and included penalties and interest in the amount of $101,000 pursuant to §42.41(c) of the Tax Code. Sheridan objected to paying the penalties and interest. It paid the base tax and paid the penalties and interest under protest. It then sued the TAC demanding the refund of penalties and interest. The trial court entered summary judgment for Sheridan, and the TAC appealed on the grounds that the suit was barred by governmental immunity.

The court of appeals reversed the trial court’s summary judgment and dismissed the case. The court explained that governmental entities and governmental officials acting in their official capacities are immune from lawsuits, even suits for declaratory judgments and writs of mandamus. There are a few exceptions to this rule. An official can be sued with a claim that he acted ultra vires (i.e., wholly outside his legal authority) or a claim that he failed to perform a purely ministerial (i.e., non-discretionary) act required by law. An official can be sued in a mandamus case if he clearly abused his discretion. Even under those circumstances, however, the plaintiff can generally not get a judgment for money. Additionally, a taxpayer may sue to recover an illegally collected tax or fee if his payment was the result of fraud, mutual mistake of fact or duress. Sheridan’s claims did not fall under any of those exceptions. Thus, the TAC was immune from the suit.

ETC Marketing, Ltd. v. Harris County Appraisal District
2017 WL 1535215 (Tex., April 28, 2017)

Issues: Taxability of gas in storage; interstate commerce

ETC bought natural gas, principally during the spring and summer, knowing that it could resell the gas at a profit in the fall and winter. It contracted with a related pipeline company to store the gas in a facility in Harris County. The pipeline company’s facilities were all in Texas but they were connected to pipelines going into other states. ETC was free to decide what to do with its stored gas, but when the gas was sold, most of it was moved to other states using the network of pipelines. The appraisal district appraised the gas and ETC protested, claiming that the gas could not be taxed because it was in interstate commerce. The ARB denied ETC’s protest and a trial court entered a summary judgment for the district. The court of appeals affirmed the summary judgment, and the Texas Supreme Court agreed to consider the case.

The Supreme Court affirmed the rulings of the lower courts and concluded that the gas was taxable in Texas. The court explained that the so-called dormant Commerce Clause of the U.S. Constitution may sometimes prohibit taxation that interferes with interstate commerce. Cases like this one involve two questions. First, a court must determine whether taxing the property “implicates” interstate commerce. ETC’s gas was involved in interstate commerce because it was in an interstate pipeline system and because most of it would be sold out of state. Where interstate commerce is implicated, the court must decide whether the taxes satisfy a four-part test created by the U.S. Supreme Court and called the Complete Auto test. The tax must: (1) apply to an activity with a substantial nexus with the taxing state; (2) be fairly apportioned; (3) not discriminate against interstate commerce; and (4) be fairly related to the services provided by the state.

The Supreme Court devoted most of its opinion to the whether ETC’s gas had a substantial nexus with Texas. It found the necessary nexus because the gas was stopped in Texas for ETC’s business purposes. ETC has business reasons for storing the gas, and it was under no obligation to send the gas out of state. The fact that the pipeline company was in possession of the gas did not matter. Neither did the question of whether ETC had offices and employees in Texas. The Court went on to conclude that the taxes were fairly apportioned because ETC would not face multiple taxation of its gas, even if every state had the same tax laws as Texas. The taxes did not discriminate against interstate commerce. Taxes were uniformly applied to property regardless of whether it was in interstate commerce. The taxes were fairly related to the services provides by state and local governments. ETC’s gas benefitted from governmental services like police and fire protection. Thus, every part of the Complete Auto test was satisfied.

Dish Network Corp. v. Collin Central Appraisal District
2017 WL 1536511 (Tex. App. – Dallas, April 27, 2017, no pet. hist.) (to be published)

Issues: Appraisal roll corrections

When Dish Network rendered business personal property in 2011, it claimed to have approximately $70 million of bpp, only $24 million of which was taxable. The appraisal district appraised the property at a figure very close to the $70 million. In 2012, Dish Network filed a motion with the ARB under §25.25(c) of the Tax Code claiming that the district had made clerical errors and appraised property that had not existed in the form or at the location shown on the 2011 appraisal roll. The ARB denied the motion, and Dish Network filed suit. The district filed a motion for summary judgment supported by an affidavit from one of its appraisers, and the trial court granted that motion. Dish Network appealed claiming that the evidence did not support the summary judgment.

The court of appeals affirmed the judgment. The court reviewed the appraiser’s affidavit which explained that the district had reviewed and rejected Dish Network’s theories that most of its bpp was not taxable. The district had arrived at its appraised value “through a process of deliberate determination, reasoning and appraisal.” That was sufficient to prove that the district’s value was not the result of a clerical error because a clerical error does not include a mistake in judgment or appraisal methodology. In order to have an appraisal roll corrected to remove property that did not exist in the form or at the location described in the roll, a property owner must show that no such property existed at that location. Dish Network admitted that it had bpp at the locations identified on the roll. Consequently, it was not entitled to have the roll changed.

Avery v. Guadalupe County Appraisal District
2017 WL 1337640 (Tex. App. – San Antonio, April 12, 2017, no pet. hist.) (not reported)

Issues: Time for filing appeal; authority to tax

In 2015, Avery filed a protest claiming that his property was over-appraised and appraised unequally. He also claimed that his property could not be taxed in Texas or in the taxing units where it was located because property taxation was unconstitutional. The ARB held a hearing and, on July 22, 2015, issued an order denying the protest on the value issues. When Avery insisted that the ARB hear and consider his other grounds, the board held a second hearing and denied the protest on the constitutional grounds on October 16, 2015. Avery filed an appeal with the trial court on December 14, 2017. The appraisal district responded that Avery’s suit was filed too late with respect to the value grounds, more than sixty days after he received the July 22 order. The district sought a traditional summary judgment and a no-evidence summary Judgment on Avery’s constitutional claims. The trial court dismissed the value claims and granted summary judgment for the district on the constitutional claims. Avery appealed.

On appeal, Avery basically withdrew his value claims, admitting that they were moot in light of his constitutional claims. The court of appeals affirmed the trial court’s summary judgment on the constitutional claims. The court explained that while Art. VIII, §1-e of the Texas Constitution prohibits state property taxes, it does not prohibit property taxes assessed by local governments. The taxes assessed on Avery’s property were not state taxes because they were not imposed by the state and because the state did control them. The court went on to explain that the taxing units had the constitutional authority to tax all non-exempt real property and that there was no evidence that Avery’s property qualified for any exemption. Avery’s efforts to quote the Founding Fathers did not constitute any evidence in support of his claims.

Piwonka v. SPX Corp.
2017 WL 1181302 (Tex. App. – Houston [14th Dist.], March 30, 2017, no pet. hist.) (to be published)

Issues: Exclusive remedies; governmental immunity

This opinion addressed just a small part of a complicated case. The appraisal district determined that property owned by SPX was shown as taxable in the wrong taxing units on several years’ appraisal rolls. The district filed a motion with the ARB asking it to correct the appraisal rolls under §25.25(c)(3) of the Tax Code. The ARB made the correction. Then SPX filed a protest with the ARB complaining about what the district and the ARB had done. The ARB denied the protest, and SPX filed suit against the district and the ARB to appeal the ARB’s order. The TACs for affected taxing units proceeded with refunds and new tax bills for the past years based on the corrected appraisal rolls. SPX did not pay the taxes before the delinquency dates stated on the bills, and the TACs added penalties and interest to their tax rolls. SPX included the TACs as defendants in its suit and sought mandamus and declaratory relief against them. The TACs claimed that they were immune from the suit. When the trial court refused to dismiss them, they appealed.

In a limited, interlocutory appeal, the court of appeals considered only whether the TACs were immune, and it concluded that they were. The court first concluded that SPX had standing to sue because the allegedly erroneous changes to the appraisal rolls and the resulting back-assessments had caused SPX harm in the form of penalties and interest. The court next explained that the Tax Code’s exclusive procedures and remedies did not allow a property owner to seek other remedies such as a declaratory judgment or a writ of mandamus. SPX had used the Code’s procedures when it filed a protest with the ARB and then filed an appeal of the ARB’s order. But the Code’s procedures do not allow taxing units or their assessors to be parties to such cases. The Code’s procedures were sufficient to protect SPX’s right to due process. Its claims really concerned actions by the district and the ARB, and it could litigate those claims without including the TACs. The TACs were immune from the suit, and the court of appeals ordered them dismissed.

City of El Paso v. Mountain Vista Builders, Inc.
2017 WL912154 (Tex. App. – El Paso, March 8, 2017, no pet. hist.) (to be published)

Issues: Exhaustion of remedies

This opinion is very confusing because the court obviously did not understand the differences between an appraisal district, an ARB and a taxing unit. It did not understand the differences between notices of appraised values and tax bills. We will endeavor to make some sense out of the court’s opinion.

Taxing units sued Mountain Vista for delinquent 2006 taxes on lots in a subdivision it had developed. Mountain Vista filed only a general denial. At trial, Mountain Vista claimed that since 2006 it had sold the lots one at a time using a title company that had later gone out of business. The taxes must have been paid because the title company should have made sure that they were paid as the lots were sold. Mountain Vista also claimed that the “taxing authority” was sending “tax notices” to the wrong address. The taxing units asserted that Mountain Vista’s lack-of-notice claim could not be raised in court because it had not been raised before the “CAD.” The trial court entered judgment for Mountain Vista, finding that “notices” had been sent to the wrong address and that the taxes had been paid. The taxing units appealed.

The court of appeals overturned the trial court’s judgment. The higher court ruled that Mountain Vista should have raised its lack-of-notice claims before the “CAD” or maybe the ARB. The court seemed to be discussing tax bills, but the law it cited (§41.411 of the Tax Code) deals with notices from appraisal districts and ARB’s, not tax bills. In any event, the court of appeals ruled that the trial court had no jurisdiction to consider Mountain Vista’s lack-of-notice claims.

The court of appeals went on to rule that Mountain Vista should not have been allowed to claim that the taxes had been paid. Payment was an affirmative defense that should have been included in Mountain Vista’s written pleadings. Citing Rule 95 of the Texas Roles of Civil Procedure, the court said, “A payment defense requires the defendant to file with his plea an account stating distinctly the nature of such payment, and, failing that, the defendant shall not be allowed to prove the same, unless it be so plainly and particularly described in the plea as to give the plaintiff full notice of the character thereof.” Mountain Vista might also have been attempting to raise other affirmative defenses based on a claim that the taxing units did not interfere with the closings on the lots, but those affirmative defenses were also barred because they were not included in Mountain Vista’s written pleadings. The court of appeals sent the case back to the trial court for further proceedings.

Editor’s Comment: Section 41.411 allows a property owner to file a protest with an ARB based on a claim that the appraisal district or the ARB itself failed to deliver some notice to which the property owner was legally entitled. Section 41.411 does not concern tax bills. Neither an appraisal district nor an ARB has any authority over a claim that a taxing unit failed to deliver tax bills.

Valero Refining—Texas, L.P. v. Galveston Central Appraisal District
2017 WL 727276 (Tex. February 24, 2017)

Issues: Unequal appraisal

Valero owned one of three refineries in Galveston County. In 2011, the appraisal district appraised component parts of the refinery under several account numbers with a total value of just over $1 billion. After a partially successful protest, Valero took its unequal-appraisal claims to court. Its original pleadings identified five accounts including process units, pollution-control equipment (PCE), and tank facilities. As the trial began, Valero amended its pleadings to remove two accounts, including the PCE. Its experts compared the disputed parts of its refinery with comparable parts of the two other refineries. One of those refineries was substantially larger than Valero’s and the other was substantially smaller. The smaller refinery could not refine oil as completely as the larger two. The experts adjusted the appraised values based on the refineries’ “equivalent distillation capacities.” EDC measures a refinery’s capacity and complexity. The experts then took the median appraised value per EDC and applied the value to Valero’s refinery. They performed their calculations once without considering the refineries’ PCE and once with the PCE included. When they included the PCE, their conclusion of an equalized value was substantially higher. The experts could not explain why Valero had dropped the PCE from its suit. They admitted that the PCE was necessary and that it would be included in the sale of a refinery. They performed an analysis that did not include the PCE just because that is what Valero asked them to do. Based upon their analysis that did not include the PCE, the jury lowered the value of the three accounts by almost $190 million. The appraisal district appealed the trial court’s judgment based on the jury’s verdict.

On appeal, the district argued that because Valero had included only some of the refinery accounts in its suit, the trial court had no jurisdiction over the case. The court of appeals rejected that argument. The court of appeals, however, went on to conclude that Valero’s evidence was not sufficient to support the jury’s verdict. The court did not consider the validity of the method used by Valero’s experts, and it thought that there was at least some evidence that the other refineries were comparable to Valero’s. The differences between the refineries could be dealt with through adjustments. The court, however, criticized the experts for preparing an analysis that did not include the PCE. The fact that Valero itself had dropped the account from its suit did not give the experts a reason for failing to consider it. The court of appeals overturned the trial court’s judgment. Both sides asked the Texas Supreme Court to consider the case and the Court agreed.

The Supreme Court agreed that Valero did not need to include all accounts in order to invoke the trial court’s jurisdiction. Because the district had divided the refinery into separate accounts, Valero was free to choose which accounts to include in its suit. The high Court thought that Valero’s refinery could be compared to the smaller refinery. Properties do not have to be identical in order to be comparable. The court noted that both refineries served the same business purpose. The district had appraised them using similar methods and divided them into similar accounts. The district argued that the component parts of the refineries were to interconnected to be analyzed separately. The Court, however, thought that the district had undermined its own arguments by using multiple accounts. Because the district had separated the PCE into separate accounts, it had conceded that other parts of the refineries could be compared without reference to the PCE. The Supreme Court reversed the court of appeals and sent the case back to the intermediate court for further consideration.

Chambers v. San Augustine County Appraisal District
2017 WL 511892 (Tex. App. – Tyler, February 8, 2017, no pet.) (to be published)

Issues: Mineral appraisals

Chambers signed an oil and gas lease on his land in Shelby County and retained a royalty interest in the minerals. The mineral interests in Chambers’s land were pooled with interests in land located in San Augustine County. The appraisal district in San Augustine County determined that there had been a cross-conveyance of the mineral interests resulting in Chambers owning taxable minerals in San Augustine County. Chambers disagreed and, after an unsuccessful protest, sued the district. The trial court entered a summary judgement for the district, and Chambers appealed.

The court of appeals reversed the trial court’s judgment. The higher court explained that the pooling of mineral interests ordinarily does effect a cross-conveyance. The particular contracts involved, however, may change that. In this case, Chamber’s lease expressly said that pooling “shall not have the effect of exchanging or transferring any interest under” the leases. The unit designations stated that they were made subject to the leases. Thus, given the particular language of the relevant documents, Chambers had not cross-conveyed any interests and had not acquired any taxable minerals in San Augustine County. The district should not have appraised any San Augustine County property in his name.

Flores v. Grayson Central Appraisal District
2016 WL 7384161 (Tex. App. – Dallas, December 21, 2016, no pet. hist.) (not reported)

Issues: Burden of proof; opinion testimony

In 2014, the appraisal district appraised Flores’s house at $58,000, and he challenged that value, first in a protest then in an appeal to district court. At trial, the district’s appraiser explained how the district had determined its value. Flores stated his opinion of “around $37,000.” He tried to present a market analysis that he had done, but the judge stopped him because he had not provided his information in advance in response to the district’s discovery. The trial court then entered a directed verdict and a judgment for the district. Flores appealed.

On appeal, Flores argued that the trial court should have placed the burden of proof on the district. The court of appeals explained that the burden had been properly placed on Flores and that he had completely failed to meet it. A property owner may generally testify to his opinion about the value of his property, even if he has no formal training as an appraiser. Like an expert, however, a property owner must support his opinion with some factual basis. Flores could not do that because he had not disclosed his market analysis before the trial. His unsupported opinion had no value as evidence. The court of appeals affirmed the trial court’s judgment for the district.

Cypress Creek Fayridge, L.P. v. Harris County Appraisal District
2016 WL 7164032 (Tex. App. – Houston [1st Dist.], December 8, 2016, no pet. hist.) (not reported)

Issues: Burden of proof; income-approach appraisal

Cypress Creek challenged the appraisal district’s 2013 appraisal of its low-income apartment complex. The complex was only partially complete and unoccupied on January 1, 2012. By January 1, 2013, it was completed and about two-thirds occupied. The district used the income approach to determine a 2013 value of about $5 million. At trial, Cypress Creek presented the testimony of a real estate broker who said that because the complex had not produced any net income in 2012, its 2013 value should be the same as its 2012 value, approximately $2.2 million. The district presented the testimony of one of its staff appraisers to support its appraised value. The appraiser explained that he was aware of the complex’s actual income for 2012, but he had based his opinion on typical income and expense information from comparable properties. The trial court accepted the district’s value, and Cypress Creek appealed.

On appeal, Cypress Creek argued first that the burden of proof had incorrectly been placed on it by the trial court. The court of appeal cited several cases holding that the property owner bears the burden of proof in a property-tax case. In this case, the burden of proof did not really make any difference because the evidence supported the trial court’s judgement regardless of which side had the burden.

Cypress Creek next argued that the district’s evidence did not support the judgment because the district was required to use the property’s actual 2012 income and expense figures under §23.01 of the Tax Code, which requires an appraisal district to consider a property’s “individual characteristics” and evidence specific to its value. The court disagreed and explained that the Code does not require a district to rely on any specific type of data over other types. The district may have been required to take the property’s actual income and expenses into account, which it did. But it was not required to base its appraisal on those actual figures. That is particularly true in this case because circumstances had changed since from 2012 to 2013. Further, §23.012 contemplates the use of income and expense data from comparable properties. The court of appeals affirmed the trial court’s judgment for the district.

United Airlines, Inc. v. Harris County Appraisal District
2016 WL 7018250 (Tex. App. – Houston [14th Dist.], December 6, 2016, no pet. hist.) (to be published)

Issues: Pleadings in appeals

United protested the 2014 appraisal of its aircraft and related property at about $971 million. The ARB reduced the value to about $929 million, but that did not satisfy United, which claimed a value of $404 million. United filed a timely suit to appeal the ARB’s order claiming that the appraised value was excessive. About ten months later (long after the deadline for filing suit had passed), United filed an amended petition dropping its claim of excessive valuation and substituting a new claim of unequal valuation. The district filed a plea to the jurisdiction and moved to have the case filed dismissed because: 1) the excessive-value claim had been dropped; and 2) the unequal-value claim had been filed too late. United responded that the first amended petition had been filed by mistake. It filed a second amended petition stating its excessive-value claim and also filed a motion to withdraw its first amended petition. The trial court granted the district’s motion and dismissed the case. United appealed.

The court of appeals reversed the trial court and reinstated United’s suit. The higher court ruled that in order to invoke the jurisdiction of a trial court, a property owner must file its petition on time, but its timely petition does not have to state what its claims are. The appraisal district that is sued can use discovery or special exceptions to try find out what the property owner is actually complaining about. In this case, the trial court acquired jurisdiction when United filed its timely original petition and did not lose its jurisdiction when United filed its amended pleadings.

Editor’s Comment: This opinion is truly bizarre. Ordinarily, courts address jurisdictional issues with respect to claims, not whole cases. A plaintiff may file a pleading asserting several claims and a defendant may respond with several counterclaims. A court may determine that it has jurisdiction over some of those claims and counterclaims but not others. If a court determines that it has jurisdiction over the claims before it, that does not mean that it will have jurisdiction over claims that may be added later.

Ordinarily, a statute of limitations is not jurisdictional. If a plaintiff files a claim after the limitations period has expired, the court may have jurisdiction, but it will dismiss the case nonetheless if the defendant asks it to do so. This opinion addresses the jurisdictional effects of §42.21 of the Tax Code, but does not address the effects of the statute as an ordinary statute of limitations. Saying that the trial court had jurisdiction over United’s claim (claims?) does not necessarily answer the question of whether that claim (claims?) should be dismissed. Is the court of appeals saying that it is fine for a property owner to file a pleading that simply says that the appraisal district did something that the property owner doesn’t like and that the property owner wants the trial court to do something about it?

Parker County Appraisal District v. Bosque Disposal Systems, LLC
2016 WL 7017955 (Tex. App. – Fort Worth, December 1, 2016, no pet. hist.) (to be published)

Issues: Appraisal of saltwater disposal wells

The appraisal district, relying on Pritchard & Abbott, appraised several saltwater disposal wells separately from the land above them. Operators transported saltwater from other sites and paid to inject it into the wells. The wells were appraised using the income approach to value. The property owners protested the appraisals and then took their claims to court. The trial court entered summary judgment for the property owners, ruling that the appraisals of the wells were “void as illegal double taxation.” The district appealed.

The court of appeals reversed the trial court’s judgment and entered summary judgment for the district. The court explained that illegal “double taxation” occurs when some properties are appraised differently than other similar properties without a valid reason in violation of the Texas Constitution’s equal-and-uniform-tax clause. That had not occurred in this case. The court went on to explain that the Tax Code’s definition of real property includes land, improvements, mines, quarries, minerals in place, and “an estate or interest other than a mortgage or deed of trust.” Those various categories of real property may overlap, and it may not always be clear which one or more of those categories includes a particular item. But perfect clarity is not necessary in order for something to be taxed. The various component parts of real property generally do not have to be appraised or taxed together even if they have the same owner. A component part should not escape taxation altogether merely because an appraisal district miscategorizes it. The property owners failed to show that the district had violated any law by appraising the wells separately from the surface interests. The court also explained that the district was not attempting to appraise intangible disposal permits from the Railroad Commission.

City of Austin v. Travis Central Appraisal District
2016 WL 6677937 (Tex. App. – Austin, November 10, 2016, no pet. hist.) (to be published)

Issues: Taxing unit challenges; unequal appraisal claims

The city was concerned about the extremely strict standards that the Tax Code sets out for appraisal districts with respect to unequal-appraisal claims. Property owners with large budgets for lawyers and appraisers are often able to intimidate appraisal districts and get their properties appraised well below their actual market values. In 2015, the city filed a challenge with the ARB complaining about the levels of appraisals for commercial real property and vacant land. At the ARB hearing, representatives of the appraisal district and the city asked the ARB to deny the challenge so that the city could then appeal and take its claims to court. The ARB denied the challenge, and the city appealed. The suit was filed against the appraisal district and thousands of property owners. The city included claims that the unequal-appraisal standards set out in §§41.43(b)(3) and 42.26(a)(3) were unconstitutional. Several property owners filed answers and asked that the case be dismissed. The trial court dismissed it, ruling that: 1) the city lacked standing to challenge the constitutionality of the statute; and 2) the city had not exhausted the administrative remedies available from the ARB. The city appealed the case to the Austin Court of Appeals.

The higher court affirmed the trial court’s dismissal. The court ruled that the city lacked standing to challenge appraisal statutes because the appraisal district, not the city, was the entity charged with implementing those laws. The city failed to claim that it had suffered an injury that was “concrete and particularized to the city.” The court of appeals also agreed that the city had failed to exhaust the remedies that might have been available from the ARB. Instead of presenting the ARB with any evidence or arguments supporting its claims the city actually asked the ARB to deny its challenge. Because the city never gave the ARB a chance to consider its claims, it could not appeal those claims to the court, and the court never had jurisdiction to consider those claims.

National Church Residences of Alief, Texas v. Harris County Appraisal District
2016 WL 4199148 (Tex. App. – Houston [1st Dist.], August 9, 2016, no pet. hist.) (to be published)

Issues: Charitable exemptions

NCR owned an apartment complex and rented apartments to elderly tenants. It applied for an exemption for the complex under §11.18 of the Tax Code on the grounds that it provided permanent housing and related social, health care, and educational facilities for persons who are 62 years of age or older without regard to the residents' ability to pay. NCR sued the appraisal district after the district denied the exemption application. The trial court entered a summary judgment for the district, and NCR appealed.

The court of appeals reversed the trial court’s judgment because the district had not conclusively shown that the complex did not qualify for the exemption. NCR required a refundable security deposit of $50 or more from each tenant. The court noted, however that the deposits were fairly small, they could be paid from sources other than a tenant’s own income and no one had been denied an apartment because he could not pay the deposit. The court characterized the deposit as “a one-time administrative charge that has little bearing on whether NCR provides housing without regard to the residents’ ability to pay.” Each tenant paid a portion of his monthly rent based on his income, with the rest being provided by the federal government. But NCR had a policy against evicting tenants unable to pay their share of rent. Instead it would help tenants find governmental or charitable assistance to help them pay.

The court went on to explain that the evidence would not support a summary judgment in favor of NCR. NCR had not shown any examples of providing housing to a tenant unable to pay his share of the rent. Its apartments were rented for market rental rates, even though some of the money came from the government. Some services were provided to the tenants, but those services were paid for by the tenants themselves or the government, not by NCR. Because the evidence did not support a summary judgment for either party, the court of appeals referred the case back to the trial court for further proceedings.