BRUSNIAK’S 2008 PROPERTY TAX CASE LAW DIGEST

John Brusniak, Jr.

TEXAS SUPREME COURT

TAXING UNITS ARE EXEMPT FROM SUIT FOR ILLEGALLY COLLECTING TAXES OUTSIDE THEIR BOUNDARIES.

Nueces County v. San Patricio County, 51 Tex. Sup. Ct. J. 378 (Tex. January 25, 2008). [OPINION]

San Patricio County and Nueces County litigated a boundary dispute. San Patricio prevailed and subsequently sued Nueces to recover property taxes which Nueces had collected in the territory determined to belong to San Patricio. Nueces claimed it had governmental immunity from this suit. The appellate court disagreed and held that Nueces could only claim immunity from prosecution for its activities within its own boundaries. Since the tax collections in question occurred outside the boundaries of Nueces, no immunity existed. The Texas Supreme Court disagreed and reversed the decision, finding that a county is an involuntary agent of the state, and as such all of its acts are governmental in nature. As a result, without a specific waiver from the legislature, it is immune from suit for its conduct.

TEXAS COURT OF APPEALS

FOR PURPOSES OF CALCULATING TAX REVENUE LOSS ON AN AFFORDABLE HOUSING PROJECT, THE MEASURE IS THE DIFFERENTIAL IN TAX ON THE COMPLETED PROJECT WITH, AND WITHOUT, THE EXEMPTION.

Dallas Independent School Dist. v. Outreach Housing Corp., No. 05-07-00288-CV (Tex. App.–Dallas March 25, 2008, no pet. h.). (to be published). [OPINION]

Taxpayer constructed an affordable housing project and sought a 50% exemption from the school district in which the property was located. The school district denied the exemption pursuant to Section 11.1825(x)(3)(A) of the Texas Tax Code on the grounds that it could not “afford the loss of ad valorem tax revenue that would result from approving the exemption.” Taxpayer filed suit claiming that the denial was in appropriate because no revenue loss would result. It demonstrated that the property, prior to the construction of the project, was paying $2,500 in ad valorem taxes and that thereafter, even with a 50% exemption, it would be paying $50,000 in taxes. The court of appeals disagreed with the taxpayer’s analysis and held that the correct measure of the school district’s loss was the differential between the taxes on the full value after construction (i.e., $100,000) and the taxes on the property that would be incurred as a result of the granting of the exemption (i.e., $50,000).

PURCHASER OF FORECLOSED PROPERTY AT A PROPERTY TAX RESALE IS RESPONSIBLE FOR TAXES, PENALTIES AND INTEREST WHICH ACCRUE BETWEEN THE DATE OF JUDGMENT AND THE DATE OF ACQUISITION OF TITLE BY A TAXING UNIT AT THE ORIGINAL TAX FORECLOSURE SALE.

Irannezhad v. Aldine Independent School Dist., No. 01-07-00794-CV (Tex. App.–Houston [1^st Dist.] March 20, 2008, no pet. h.). (to be published). [OPINION]

Taxing unit sued for foreclosure of nonpayment of $145,000 in ad valorem taxes. Judgment was entered and when no one bid on the property at the sheriff’s foreclosure sale, the property was “struck off” to the taxing unit. A purchaser bought the property at a public resale from the taxing unit for $25,000. Thereafter, the taxing unit sued the taxpayer for taxes which had accrued on the property between the date of judgment and the date on which the property had been “struck off” to the taxing entity. (The parties stipulated that no taxes accrued on the property while title was held by the taxing unit.) The purchaser claimed that the post-judgment taxes merged into the title at the time of the resale, and that he owed nothing to the taxing unit. The court of appeals disagreed and held that both the judgment and the specific provisions of the Texas Tax Code authorized collection of these taxes. Specifically, Sections 33.52 (d) and 34.01(l) state that liability for post-judgment taxes, interest and penalties continue to accrue post-judgment.

THE FILING OF A MOTION TO COMPEL A CASE INTO NON-BINDING ARBITRATION DOES NOT SUPERSEDE A TRIAL COURT’S INHERENT POWER TO DISMISS A CASE FOR WANT OF PROSECUTION.

National Golf Operating, P.S., L.P. v. Williamson County Appraisal Dist., No. 03-07-00024-CV (Tex. App.–Austin March 13, 2008, no pet. h.). (to be published). [OPINION]

Taxpayer filed suit challenging the value of a property in 2000. Thereafter, the taxpayer amended the suit to add tax years to 2001 through 2003 to it. In late 2003, the court placed the case on its dismissal docket, but at the taxpayer’s request retained the case and set it for trial in June 2004. The case was not reached at that setting. In August 2006, the court again placed the case on the dismissal docket. On the morning of the dismissal hearing, the taxpayer filed a motion to compel the case to non-binding arbitration. The district court disregarded the motion and dismissed the suit. On appeal, the taxpayer contended that the court abused its discretion because Section 42.225 of the Texas Tax Code provides that upon the filing of a motion to compel a case to non-binding arbitration, the court “shall submit the appeal to non-binding arbitration.” They claimed that the mandatory language of the statute did not afford the trial court any discretion. The court of appeals disagreed, ruling that the trial court’s inherent power to dismiss cases which are not timely prosecuted is not “trumped” by this statutory provision.

TEXAS ATTORNEY GENERAL OPINIONS

TAX ABATEMENTS MAY NOT BE GRANTED ON IMPROVEMENTS LOCATED ON LEASED LAND; A MEMBER OF A COUNTY COMMISSIONERS COURT MUST ABSTAIN FROM VOTING ON AN ABATEMENT AGREEMENT IF THE MEMBER WILL BENEFIT ECONOMICALLY FROM THE AGREEMENT.

Op. Tex. Att’y Gen. No. GA-0600 (2008). [OPINION]

Section 312.402(a) of the Tax Code authorizes a county to execute tax abatement agreements with the owners of taxable property located in a reinvestment zone. A county commissioners court may execute tax abatement agreements with real property owners, as well as with owners of leasehold interests or improvements on tax-exempt, governmentally-owned, real property. Under the provisions of the “Property Redevelopment and Tax Abatement Act,” a tax abatement may not be granted on improvements which are located on privately leased land. A commissioners court may not authorize a tax abatement agreement with a leaseholder for improvements located on taxable real property. A member of a commissioners court may not participate in a vote on a matter involving the commissioner’s real property “if it s reasonably foreseeable that an action on the matter will have a special economic effect.”