Property Tax Glossary

Glossary of Terms Used in Property Tax

Ad Valorem Tax

Latin for "according to value", a tax based upon assessed value of Real Estate or Personal Property.

Administrative Appeal

The Administrative Appeal process (the informal and formal hearings) must be exhausted prior to Judicial Appeals. Prior to filing a lawsuit or a request for Binding Arbitration, the taxpayer must complete the administrative appeal process of informal and formal (ARB) hearings.

Appeal

In Law, an appeal is a process requesting a formal change to an official decision. Concerning property taxes, it is the owner's right to object to an action of the chief appraiser, appraisal district or appraisal review board that applies to the property owner. Most property tax protests relate to the market value determined by the appraisal district. Other protests are filed regarding unequal appraisal, exemptions, agricultural valuation and a variety of other issues. Property owners can appeal annually on market value and unequal appraisal regardless of whether the appraisal district changes the market value.

Appraisal

The practice of determining the value of property, either Real, or personal. This applies to businesses as well as individuals.

Appraisal Review Board (ARB)	Appraisal Review Board (ARB) is the judicial part of the property tax system which is a separate body from the appraisal district office and serves a different function. It constitutes of an independent group of citizens authorized to hear and resolve disputes over appraisal matters provided the matters have been submitted to it. It has no role in the day-to-day operations of the appraisal district office or in appraising property. Except where it is deciding a protest, challenge, or a correction motion, it has no authority to change a value or correct the appraisal records directly. ARB orders the Chief Appraiser to re-appraise or correct the records related to an approved challenge, make changes or set a value only when resolving taxpayer protests. The decisions taken are binding only for the year in question. ARB meetings are open to the public and members are appointed by the Appraisal District's Board of Directors according to Property Tax Code, resident requirements, and qualifications. All the members must comply with special conflict of interest laws.
Appraised Value	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.
Appraiser	One who values property. Appraisers value real estate, business personal property, art, jewelry, mineral interests and other types of property.
Arbitration	See Binding Arbitration.
Assessment Comparables	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.
Binding Arbitration	Binding Arbitration is the resolution of a dispute subject to the decision of neutral third party. Decision is binding and there is a narrow right to appeal. Binding arbitration is usually quicker, less formal, less costly and more private than litigation
Business Personal Property	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.
Central Appraisal District (CAD)	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 Appraiser	Chief administrative officer of a central appraisal district.
Comparables	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.
Cost Approach	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.

Evidence Date	Concerning Binding Arbitration, this is the date by which both parties must exchange evidence and provide the arbitrator with a list of that evidence
HB-201 Request.	According to Sec 1.461 of the property tax code, at least 14 days before the hearing, the Chief Appraiser shall; (1) deliver a copy of the pamphlet prepared by the comptroller under Section 5.06(a) to the property owner initiating the protest, or his agent, if requested and (2) inform the property owner or agent may obtain a copy of any data the chief appraiser plans to present at the hearing.
Homestead Cap	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.)
Homestead Exemption	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.
Income Analysis	The process of performing the income approach or a summary of the research and calculations performed during the income approach to value real estate.
Income Approach	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.
Income Statement	A summary of the revenues, operating expenses, depreciation, interest and net operating income for a business or parcel of real estate.
Informal Hearing	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.
Intangible Personal Property	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.
Judicial Appeal	Property owners may file a judicial appeal, or a lawsuit in state district court, if they are not satisfied with the result obtained at the appraisal review board hearing.
Market Value	The amount of money, in US dollars, which could be obtained for property exposed to the market for a reasonable period of time, where both parties are knowledgeable regarding all possible uses and defects with the property and neither party is under duress to consummate a transaction.
Mass Appraisal	A process used to value real estate when it is not possible to perform an individual appraisal for each property. The process usually involves compiling data regarding the physical characteristics of the property and market data such as rental rates, vacancy rates, expense rates, other income, capitalization rates, cost data and comparable sales data. Valuations are calculated using data for each subject property with the market data. Statistical processes including regression analysis are performed to develop an estimate of value for each property. This is the process typically used by appraisal districts in Texas to estimate the market value for real estate.
Official Notice	The ARB may consider certain kinds of basic facts that neither side presents as evidence. This is called "taking official notice" of the fact.
P & L	Profit and loss statement. See income statement.
Personal Property	Property which is tangible yet is not real property. In Texas, the typical basis for differentiating between real property and personal property is whether it is attached to the real property. For example, a refrigerator is not typically considered attached to real estate. However, a light fixture, plumbing fixture, carpet or vinyl tile would typically be considered attach to the real estate. Examples of personal property include automobiles, boats, guns, clothes, household items, tools, office supplies, office furniture, office equipment and inventory. Personal property used for the production of income is taxable in Texas, at the same tax rate applied to real estate. Personal property not used in the production of income is not taxable in Texas
Property Tax	The tax calculated by multiplying the appraised value times the tax rate for a tax entity. The appraised value may be different from the market value if the item is partially or totally exempt or subject to a homestead cap.
Property Tax Consultant	One who represents property owners in property tax matters, generally regarding market value disputes. Other services performed by tax consultants include renditions of business personal property, exemptions and combining or separating tax accounts.
Property Tax Valuation Date	January 1 is the relevant date for valuing property for property tax purposes in most circumstances. This is meaningful if a property suffers either physical or economic damage just before or just after January 1. However, the CAD is allowed to look two months into the future, up to February 28th of the next year, to aid them in determining value, even though this is extremely illogical.
Protest	Property owner's right to appeal or object to an action of the chief appraiser, appraisal district or appraisal review board that applies to or adversely affects the property owner. Most property tax protests relate to the market value determined by the appraisal district. Other protests are filed regarding unequal appraisal, exemptions, agricultural valuation and a variety of other issues. Property owners can appeal annually on market value and unequal appraisal regardless of whether the appraisal district changes the market value.
Protest Deadline	May 31 is the typical deadline for filing a property tax appeal in Texas. However, the deadline is technically the later of May 31 or 30 days after the appraisal district mails a notice of appraised value. (It is 30 days after the date the appraisal districts mails the notice of appraised value. It is not 30 days after the property owner receives the notice.) If the property tax protest deadline falls upon a holiday or weekend, the deadline is extended until the following workday. Property tax protests are considered timely filed if mailed by first-class mail deposited in the mail on the deadline day.
Real Estate	Land, improvements to the land (buildings), a mine or quarry, minerals, standing timber and any estate or interest in the previously mentioned property.
Rebuttal Date	Concerning Binding Arbitration, the rebuttal date is the date on or before which any rebuttal evidence based upon evidence previously exchanged, must be delivered to the opposing party and the arbitrator.
Rent Roll	A summary of the tenants for a real estate property. Most rent rolls include fields of data such as the name of the tenant, amount of rent, amount of space, suite number, lease start date, lease termination date and other income if applicable.
Sales Comparison Approach	One of the three generally accepted methods to valuing real estate. The first step is to compile information on sales of comparable properties, sometimes referred to as comps. The appraiser considers factors such as date of sale, property type, size, age, condition and location when determining which comparable sales to utilize. After selecting comparable sales, the appraiser makes adjustments for factors such as changes in market condition, conditions of sale (i.e. distress sale), property rights conveyed, age, size, location and condition. The final step is to determine an indication of value for the subject property using the adjusted values calculated for the comparable sales.
Sales Comparables	These are also known as sales comps. Data regarding sales of properties similar to the subject property. Fields of data compiled include factors such as date of sale, property address, seller, buyer, sale price, square feet, year built, condition and notes. See also sales comparison approach. The CAD will use a 14 month window in selecting it's comps. The window is from January 1st to the February 28th of the next year. i.e.; 01/01/2007 - 02/28/2008
Share-CAD	Terminology used to describe a property that is valued by two appraisal districts. This occurs when property lies within the boundaries of a tax entity which straddles a county line and the tax entity has chosen the central appraisal district (CAD) outside of the subject property county to value parcels within the tax entity. Appraisal districts are required to accept the lowest assessed value established in any of the appraisal districts for a share-CAD property. The lowest assessed value can be generated by its notice value, an informal hearing, an appraisal review board hearing or a judicial appeal.
Subject Property	The real estate, business personal property or mineral interests being valued or reviewed for unequal appraisal
Taxing Entity	A city, county, school district, hospital district or any other political unit of the state authorized to impose property taxes.
Tax Rate	The proportion of the appraised value which must be paid to taxing entities annually. The appraised value may be lower than the market value because of either exemptions or the homestead property tax cap. Many properties are subject to taxes from five to 10 tax entities. Customary practice is to refer to the total tax rate for all tax entities as "the tax rate". Consider the following example: a homestead has a market value of $100,000, a homestead exemption totaling $20,000 and a 3% tax rate. Annual property taxes would be $2,400 or (($100,000-$20,000) X 3%).
Unequal Appraisal	Occurs when the market value for a property exceeds the market value established by the appraisal district for comparable properties after making reasonable adjustments. Unequal appraisal sometimes occurs when properties are selectively reappraised following their acquisition. In other cases it occurs because the appraisal district has inaccurate data for a property or submarket. It can also occur when the appraisal district reappraises the market value for only a portion of properties in an area. Property owners can appeal both market value and unequal appraisal annually in Texas.