Articles...Popp, Gray & Hutcheson

THE NEW RENDITION PROVISIONS

SUMMARY

The Texas Legislature recently passed a new rendition statute, which becomes effective for the 2004 tax year. A summary of the new provisions follows:

1. An owner must render either a good faith estimate of the market value of the property or its historical cost new, including year of acquisition. If the owner renders an opinion of value, the Chief Appraiser may request, and the owner must provide, information to support the owner’s opinion.

2. The Chief Appraiser may impose a penalty of 10% of the taxes if an owner does not comply with these requirements in a timely manner. The Chief Appraiser may seek an additional 50% penalty for fraud or intent to evade the tax. The Chief Appraiser retains 20% of any penalty as a collection cost.

3. After imposition of the penalty by the Chief Appraiser, a person may request that the Chief Appraiser waive the penalty. The penalty may be waived if the person exercised reasonable diligence to comply or has substantially complied. The Chief Appraiser’s failure to grant the waiver of the penalty may be protested.

4. The new requirements take effect for the 2004 tax year. However, if prior to December 1, 2003, a person renders for tax year 2003 under the new requirements, the Chief Appraiser may not add omitted property for 2001 or 2002. However, omitted property may be added for 2003.

RENDITION INFORMATION REQUIREMENTS

The rendition statute makes it mandatory for an owner to provide the following information to the Chief Appraiser:

1. Specific property information:
(a) Owner's good faith estimate of the market value of the property;
OR
(b) Historical cost when new and year of acquisition;

2. Name and address of the property owner;
3. Description of the property by type or category;
4. Physical location or taxable situs of the property; and
5. If inventory, a description of each type of inventory and a general estimate of the quantity of inventory. (Sec. 22.01 ( f))

The rendition must be filed no later than April 15, however upon written request, the Chief Appraiser shall extend the deadline to May 15.

ADDITIONAL INFORMATION REQUESTS

If a person chooses to render a good faith estimate of market value rather than historical cost, the Chief Appraiser may request additional information from the owner concerning the determination of the owner's good faith estimate of market value. (Sec. 22.07(c))

The request must be in writing and the owner must respond within 21 days after receipt of the request. (Sec. 22.07 (c),(d))

The owner’s statement in response to the Chief Appraiser’s request must:

1. summarize information sufficient to identify the property, including:
(a) The physical and economic characteristics relevant to the opinion of value; and
(b) the source of the information;
2. state the effective date of the opinion of value; and
3. explain the basis of the value rendered. (Sec. 22.07(c))

PENALTY FOR FAILURE TO PROPERLY RENDER

The Chief Appraiser may impose a penalty of 10% of taxes imposed for person’s failure to fully comply with the rendition requirements or to timely file. (Sec. 22.28 )

ADDITIONAL PENALTY

The Chief Appraiser may seek an additional penalty of 50% of taxes imposed if:

1. Any of the following actions "affect any appraisal district proceeding":

(a) the person alters, destroys, or conceals any record, document or thing,
(b) the person presents to the Appraisal District any altered or fraudulent record, document or thing, or
(c) the person otherwise engages in fraudulent conduct (Sec. 22.29 (a)(2))

2. the person filed a false statement or report with intent to commit fraud or evade the tax. (Sec. 22.29(a)(1))

If the chief appraiser alleges fraud, the allegation must be determined by a court, who may impose a 50% penalty. (Sec. 22.29(b))

The Court, in determining liability for the 50% penalty, shall consider:

1. the person's compliance history with regard to paying taxes and filing reports;
2. the type, nature, and taxability of the specific property involved;
3. the type, nature, size, and sophistication of the person's business;
4. the completeness of the person's records;
5. the person's reliance on advice provided by the appraisal district that may have contributed to the violation;
6. any change in appraisal district policy during the current or proceeding year that may affect how property is rendered; and
7. any other factor the court considers relevant. (Sec. 22.30(b))

CONTESTING THE PENALTY

The imposition of a penalty by the Chief Appraiser may be contested by filing a written request for waiver of the penalty within 30 days of receiving notice of the imposition of the penalty.

A person may protest the Chief Appraiser's failure to waive a penalty. The Chief Appraiser may waive the penalty if the person exercised reasonable diligence to comply with or has substantially complied with the requirements. (Sec. 22.30(a)(c))

The Chief Appraiser shall determine a waiver of the penalty after considering:

SPECIAL EXCEPTIONS AND OTHER LIMITATIONS

1. If the total aggregate value of property in the county for an owner is less than $20,000, the rendition must only include: a) the name and address of the owner, b) a general description of the property by type or category and c) the physical location or taxable situs of the property. (Sec. 22.01)

2. The good faith estimate of market value and a statement to the Chief Appraiser explaining the good faith estimate are solely for rendition purposes and are inadmissible in any other proceeding except: a) to determine compliance with the rendition statute; b) to determine the 50% penalty application; or c) in a protest. (Sec. 22.01(g); 22.07 (d))

3. The statute provides that certain filings with regulatory commissions may be substituted for the filing of a rendition with the chief appraiser. (Sec. 22.01(h))

4. The filing of information substantially similar to that required by the rendition statute with a District’s outside appraisal company constitutes the filing of a rendition. (Sec. 22.01(i))

5. If a property owner has less than 50 employees, the owner may base the estimate of value on the depreciation schedules used for federal income tax purposes. (Sec. 22.07(c)(3))

SAFE HARBOR PROVISION

If a rendition filed before December 1, 2003 contains the information required under the new statute, the Chief Appraiser may not add any omitted property for 2001 or 2002, but may add omitted property for 2003. (Sec. 22.23(c))

(The preceding is a summary of the new provisions, it is not a legal opinion. Every property owner’s situation is different. There are several exceptions and special circumstances contained in the statute, which should be reviewed by you. It is recommended that you discuss the entire statute, and its application to your business, with a professional.)