CC MEETING: May 3, 2016
DATE: April 26, 2016
TO: Leonard Martin, City Manager
FROM: Meredith A. Ladd, City Attorney
Robert Scott, Assistant City Manager/CFO
Title
Approve A Resolution Relating To The Valuation Process Of The Homestead Exemption For Capped Properties.
Body
BACKGROUND:
The market value of a property is defined as “the price at which a property would transfer for cash or its equivalent under prevailing market conditions.” Tex. Tax Code Ann. § 1.04(7) (West). The appraised value of a property is its value as determined by Chapter 23 of the Tax Code. Tex. Tax Code Ann. § 1.04(8). As a default, market value and appraised value are the same unless otherwise provided in Chapter 23. Tex. Tax Code Ann. § 23.01(a). Specifically, a cap is placed on the appraised value of a residence homestead, limiting the appraised value to the lesser of either the actual market value or an amount equal to 110% of the previous year’s appraised value plus the market value of new improvements to the property. Tex. Tax Code Ann. § 23.23(a). Within this context, the appraised value is always equal to or less than the market value of a residence homestead.
According to the Tax Code, “an individual is entitled to an exemption from taxation of a percentage of the appraised value of his residence homestead.” Tex. Tax Code Ann. § 11.13(n). The plain reading of the statute makes it clear that when the appraised value of a residence homestead is capped, the exemption should be calculated as a percentage of that capped value and not the market value.
The Tax Code clearly supports a calculation based upon the appraised value of a property. The residence homestead exemption should therefore be applied to the capped appraised value and not the market value of a property.
FINANCIAL IMPLICATIONS:
Based on the 2016 preliminary tax roll valuations received by the City, the method used by Denton County will result in a loss of over $200,000 of taxes paid to the City. The loss in taxes in 2015 was about $65,500 and in 2014 was approximately $39,000.
STAFF RECOMMENDATION/ACTION DESIRED:
Requested approval of the Resolution
ATTACHMENTS:
Resolution