Every April, American’s go through the annual ritual of filing their tax returns, but May, is actually the month when some of the more consequential decisions relating to taxes may be made. For vast majority of Americans, their home is the most valuable asset they own, and the property taxes on that home are a significant chunk of their annual taxes, but do you know that in general, May happens to be the month by which you must file your property tax protest. What is a “protest” you say? Well, lets cover that.
Property taxes are a significant source of income for local governments, and in certain taxes without income tax (like Texas), they can be the largest source of revenue. Property taxes are also what fund significant portions of the school districts, county governments, city governments budgets. However, the taxes are based on the value of the property. Counties have have a dedicated division called appraisal district (County Appraisal District or “CAD”) that is responsible for assessing the value of properties within the county. Appraisal Districts assign value to both real property and personal property, and the county tax office generates property tax bills based on this appraisal. Every year, after January, the CAD publishes a property appraisal roll. Of course, the appraisal district does not get all the values right. Generally, they use published data, market trends and historical sales to value the properties, but it is still largely an exercise in statistics, and while statistics are fine in generalities, when it gets to individual data points, they usually are not. In some cases, I have experienced Appraisal District doubling the value of a property in a single year! Fortunately, built into the law is a provision for property owners to challenge these valuations. That is where a “protest” comes into the picture. You can protest your property value for a variety of reasons, ranging from you no longer own the property to your value has been raised dis-proportionally. The deadline to file these protests, happens to file in May, usually May 15. In Texas, the law says, “The usual deadline for filing a protest is May 15 or 30 days after the notice of appraised value was delivered to the property owner, whichever is later.” so in some cases, that deadline can be after May 15. You must file a protest of your taxes by this deadline if you want to challenge them. Fortunately, most counties these days allow protests to be filed online. Regardless of whether you protest via paper or online, make sure to keep copies of your protest.
There is an entire industry of “property tax consultants” who will handle such protests for you with no out of pocket costs. Generally, you sign up with an agent, who then negotiates on your behalf with Appraisal District, and takes a cut of savings, ranging from 30% to as much as 50%, so it behooves the homeowners to shop around. The good news is that there is no out of pocket cost. If the agent saves you nothing, they get nothing. If they are able to cut down your taxes by $1,000.00, they get $300.00 to $500.00 based on the agreement you made. If they save you $5,000, then they get a portion of that! Sounds easy enough, right? What if the Appraisal District does not agree to a different value? If you cant reach an agreement with Appraisal District, then you can go the next step, and get a formal hearing with Appraisal Review Board (ARB). In theory, the board is made of independent ordinary citizen, and both you, and the appraisal district present your case, and board makes a ruling. The ARB members are not volunteers, they are paid per-diem, and have to meet certain criteria to be on the board. In any case, once the ARB rules, you can choose to accept the new valuation (Appraisal District MUST accept that valuation) or choose to go to next step, which can be to go to Arbitration for file a lawsuit against the Appraisal District. This is where a law firm can bring additional value.
Some law firms can file your property tax protest, negotiate on your behalf and then go all the way to filing a lawsuit if necessary. Other law firms can be hired by tax consultants or home owners after they have exhausted ARB option and not received a satisfactory solution. What you should know is that you have the option of reaching a similar arrangement that you would make with a “tax consultant” with an appropriate law firm as well. Many law firms (like ours) would also agree to make a protest on your behalf and take it upto a lawsuit with no out of pocket cost to you. Others will want a standard retainer arrangement to file a lawsuit. As with everything in life, shop around.
“As an added bonus, while your valuation is being litigated, you can opt to pay taxes on the undisputed value without incurring any interest or penalties.”
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Sanjay R Chadha Law PLLC offers legal services to clients in India and USA. We have licensed attorneys in both countries with experience in business litigation, business transactions, technology and cybersecurity issues, tax litigation, contracts, administrative law and appellate law. We offer value-centric services for our clients and also provide paymaster services for international transactions.