The House Local Government Ways and Means Committee recently released its interim report. The report’s city-related recommendations follow.

Local Sales Tax Sourcing

  • The legislature should examine the definition of “order” in defining a place of business. (This recommendation relates to the allocation of local sales tax revenue when a facility takes an order for the sale of a taxable product.)
  • The legislature should ensure that these orders (for allocation purposes) are legitimate and not just nominal sales to employees.
  • Sales tax revenues that are reallocated solely because a company changes the place of business to which the taxes are attributed should only be prospective.
  • The reallocation period for other changes, such as a mistake in the address of a place of business or another error, should be shortened from four years to two years.
  • The legislature should allow cities to challenge reallocation decisions through the administrative law process.
  • To mitigate the effects of any sales tax allocation changes or reallocations, cities should employ revenue-sharing. These agreements should remain voluntary for cities to create, and the cities should discuss these statewide.
  • The legislature should implement only the recommendations [of the Streamlined Sales Tax Project] that would minimally affect Texas cities and would have support of cities.

Tax Rate Notices

  • Local governments should continue to seek out ways to reach out to the public throughout their budget and tax rate adoption process and work to schedule hearings for times and places that will encourage maximum participation from cities.
  • The Constitution should be amended to remove the misleading estimated tax calculations from the appraisal notice.
  • The legislature needs to find a more effective way for local governments to reach taxpayers and notify them of tax hearings. Between the time that they set their preliminary budgets and hold their tax hearings, local governments—or whomever they contract with to collect their taxes—should be required to mail a notice to all property owners within their jurisdictions.
  • The legislature should clarify the required language for hearing notices.

Appraisal District Operations

  • In order to improve confidence in the appraisal system, the appeals process as it relates to the appraisal review board (ARB) should be separated from the board of directors and made more independent and professional. It is the committee’s recommendation that the ARB should be under the supervision of the Comptroller’s office or another yet-to-be-created state agency that will oversee the property tax system.
  • The legislature should remove the appointment of the ARB from the board of directors in each central appraisal district. ARB members should be appointed and paid by the Property Tax Division of the Comptroller’s office or the newly created property tax entity.
  • The ARB should meet in a separate facility from the central appraisal district in order to remove themselves (ARB members) from any appearance of impartiality.
  • The limits on which properties are eligible for binding arbitration should be adjusted to allow more property owners to use this method of dispute resolution.
  • All residence homesteads should be eligible to pursue binding arbitration.
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