If you own property in Texas, you pay property taxes. And you probably know that your property taxes are the largest source of funding for local services such as schools, roads, police, and fire protection. But did you know that Texas property taxes rank among the highest in the country? My guess is you do since you’re the one writing the checks. Private-property owners inequitably carry the primary tax burden for the state.

Recently, the Texas Supreme Court ruled that the structure of the Texas tax system was unconstitutional and called for an overhaul. In response, Gov. Rick Perry created a blue-ribbon tax panel to review the current system and recommend improvements to Texas’s tax structure with the goal of providing long-term property-tax relief and improving public school funding. The Supreme Court is forcing the issue by declaring a June 1 deadline for substantive change. Lawmakers must come up with a solution by summer, which should give property owners much-needed tax relief.

In the meantime, if you feel your property taxes are unfair, you have a right as a Texas taxpayer to protest. Now please folks, don’t take this as a license to protest the overall tax system. We all know it’s broke and as I said, they’re working on it. But if you truly believe your property tax burden is disproportionate with comparable homes in your area or if you feel you’ve been denied a legitimate exemption, you have every right to object.

Property taxes are ad valorem – or based on the appraised value of your home. Your local officials assess your property’s value, determine the rates, and collect the taxes each year. To maintain an element of fairness, the Texas Legislature mandates the state comptroller’s office to conduct an annual Property Value Study for each school district. The purpose of this research is to ensure that property values in each school district are at or near market value for equitable school funding.

The four stages of the property taxing process are valuation, protest period, tax-rate adoption, and the dreaded collection. Between January 1 and April 30, your local appraisal district determines the values for properties in your area. If you object to any action by the appraisal review board (ARB) regarding your property, you can protest, and trust me, it’s not all that rare. According to the state comptroller’s office, nearly 200,000 property disputes were filed in 2003. My guess is that number has risen, not declined. Protests are brought before the ARB after May 15. The ARB is an independent panel of citizens whose primary responsibility is to hear objections to appraisals and rule in favor of or against the property owner.

That was then, this is now
In the past if you were not happy with the ARB’s final decision, your only remedy was to take your appeal to district court. This could potentially cost you $5,000 or more, negating the financial advantage of appealing the ruling in the first place. But as of Jan. 1, 2006, a new post-ARB process is available to consumers who would prefer to keep their case out of district courts: binding arbitration.

If you think your property has been inaccurately valued and the ARB does not agree, you now have the option of either filing a lawsuit against the central appraisal district or going to an independent arbitrator for resolution. It’s important to point out that binding arbitration may only be used in cases concerning property values. You may not resort to arbitration if you were denied a tax exemption. In that situation, the ARB does have the last word. Once a decision regarding your appraisal is reached through arbitration, the agreement is binding – hence the term – and must be accepted by the appraisal district and the property owner.

If you choose to proceed with this process, you are responsible for paying $500 up front, which covers the cost of arbitration. However, there is a “loser pays” provision. This means that if you win, the comptroller’s office must refund all your money, minus a $50 filing fee. But if you lose, you will forfeit the full amount. Five-hundred dollars is still a far cry from $5,000 – the average cost of filing in district court.

There are some qualifiers and exceptions to this new process. You are responsible for filing the request and sending a cashier’s check or money order to the comptroller’s office no later than 45 days after receiving the initial ARB ruling. If you choose binding arbitration, you must also submit the necessary paperwork to the appraisal district, which in turn files it with the comptroller’s office. Failure to do any of these things could result in an automatic rejection of your request. In addition if your property is valued at more than $1 million, you may not use binding arbitration.

This new appeals process is just another example of Texas REALTORS®’ unyielding commitment to consumers. The Texas Association of REALTORS® supported this bill during the 79th legislative session, advocating the rights of private-property owners across the state. For more information about protesting your property taxes, visit the State Comptroller’s Web site or talk to your Texas REALTOR®. Your REALTOR® will be able to answer your questions about this process.