City loses its suit to hold Tax Code provisions unconstitutional

City of Austin v. Travis Central Appraisal District, et al, 03-16-00038-CV (Tex. App — Austin. November 10,2016)

This is an appraisal case involving vacant land and commercial real property where the City sought to declare parts of the Tax Coder were unconstitutional. The Austin Court of Appeals affirmed the trial court’s dismissal of the suit.

City filed a petition challenging the Travis Central Appraisal District’s appraisals for the 2015 tax year on certain categories of real property . The City challenged certain Tax Code provisions which “have incentivized taxpayer protests and led to widespread diminution of appraised property values to a ‘median value’ that is below market value.” According to the City, the reduction in appraised values to median values “has resulted in unequal taxation in violation of the Texas Constitution.” See Tex. Const. art. VIII, § 1.  Essentially, according to the City, the Appraisal District’s application of §§41.43(b)(3) and 42.26(a)(3) to resolve taxpayer protests has resulted in a reduction of property value making an unconstitutional and unqueal tax Several commercial and residential property owners intervened. The intervenors then moved to dismissed the City’s claims, which the trial court granted. The City appealed.

“[E]xcept for certain specifically circumscribed rights,” the Tax Code’s comprehensive legislative scheme generally excludes taxing units, like the City, from the appraisal process.  Chapter 41, subchapter A, of the Tax Code provides taxing units, like the City, with a mechanism for challenging certain actions by their local appraisal districts. Chapter 41 also provides property owners a mechanism for appealing appraisals. The Austin Court of Appeals analyzed the City’s standing to bring such a claim and ultimately determined the City failed to establish an injury sufficient to confer standing. Further, the Tax Code is a pervasive regulatory scheme, vesting appraisal review boards with exclusive jurisdiction to decide protests and challenges as permitted under chapters 41 and 42. The record reflects that even though the City attended the Review Board hearing, the City did not present a case on the merits of its challenge at the hearing and, in truth, requested the challenge be denied so it could pursue other avenues of attack. The City’s position that it sufficiently exhausted its administrative remedies because it was present at the administrative hearing and requested the denial of its own challenge, if accepted, would thwart the intent of the administrative process and of the exhaustion requirement. The Court held that by affirmatively requesting the Review Board deny its challenge petition, the City failed to “appear,” as required under the law. The trial court did not error in dismissing the City’s case.

If you would like to read this opinion click here. The Panel includes Justice Puryear, Justice Pemberton, and Justice Field. Justice Field delivered the opinion of the court. If you would like to see the representatives for the Appellant and Appellees, please click here to see the docket page.