The opinion
QBfficeof the !ZittornepQkneral
&ate of ZEexae
DAN MORALES March 3.1992
ATTORNEY
GENERAL
Honorable Stephen C. Howard Opiion No. DM-94
Orange County Attorney
orange county calrthouse Re: Whether a county may tax property
Orange, Texas 77630 as new property upon expiration of a tax
abatement contract (RQ-77)
Dear Mr. Howard:
You have asked for our opinion as to whether the addition of the value of
taxable property due to the expiration of a tax abatement contract is considered
“[n]ew property value” under section 26.012(17) of the Tax Code. We conclude that
it is not.
We understand that Orange County, pursuant to authority granted to it in the
Property Redevelopment and Tax Abatement Act (the Tax Abatement Act),
chapter 312 of the Tax Code, has executed sixteen tax abatement contracts since
1986. Under the Tax Abatement Act, counties, as taxing units, may enter into
written tax abatement agreements with owners of taxable real property located
within a properly designated reinvestment zone.1 Tax Code Q312.402(a). In the
written agreement, the county may agree to exempt from taxation a portion of the
value of the real property for a period not to exceed ten years, on the condition that
the owner of the otherwise taxable real property makes specific improvements or
repairs to the property. Id (incorporating section 312.204(a)); see alro id 9 11.28.
Among the tax abatement contracts Orange County has executed, the earliest
expiration date is January 1.1992. Thus, in 1992 Orange County will tax for the first
time new facilities the property owners built during the time the tax abatement
agreement was in effect. You believe that the value of these new facilities should be
“[n]ew property value” to Orange County for the purposes of calculating the
effective tax rate under chapter 26 of the Property Tax Code (the code).
Pursuant to chapter 26 of the code, each of the state’s taxing units, including
counties, annually must appraise and assess all property located within the
‘To be designated as a reimmtment zone, an area must satisfy several criteria articulated in
Tax Code sxtion 3l2.202(a).
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Honorable Stephen C. Howard - Page 2 (DM-94 )
boundaries of the taxing unit for purposes of ad valorem taxation. 69 TEX. JUR. 3d
Tar&on 69 248-49. 347 (1989). As part of the annual process, a county’s chief
appraiser compiles appraisal records listing, among other items, the names of real
property owners, the appraised value of each piece of real property, and the kind of
partial exemption, if any, the owner is entitled to receive. Id 55 248-49; 34 T.A.C.
5 155.4(b). Upon completion of the appraisal records and the appraisal review
board’s approval of the records, the chief appraiser submits appraisal rolls* for
county taxes to the county’s assessor, who determines the total appraised values of
all real property within the county, the total assessed value4 of all real property
within the county, and the total taxable value of property that the county may tax.
Tax Code 8 26.04(a); 69 TEX. JUR. 3d, supm, Q 347 (1989). To determine the total
taxable value, the assessor deducts from the total assessed value the amount of any
applicable partial exemptions. Tax Code 8 1.04(10); 69 TEX. JUR. 3d, supru, 5 158
(1989).
Based on the assessor’s calculations, the county’s governing body calculates
the county’s effective tax rate. Tax Code 9 26.04(c) (as amended by Acts 1987,78th
Leg., ch. 947, $3). The code sets out the following formula for a taxing unit’s use in
determining the effective tax rate in dollars per $100 of taxable.value:s
EFFECTIVE TAX RATE = YEAR’S LEVY-m PROPBW LEyy)‘
(CURRENT TOTAL VALUE - NEW PROPERTY VALUE)
%IC ‘appraisalrecords”
becomethe ‘appraisalroll’whenthe appraisalreviewboardapproves
the records. Tax code $0 25.24,26.01(a); 69 TEX. JUR 3d Tmolon B 259 (1989).
?he “[alppraisedvalue.”
is ao amountdeterminedthroughthe use.of the code’sprovisions
governingappraisalandprocedures.Tax Code 5 1.04(S).
%c ‘[a]ssesscdvalue”is the amountdetermined by multiply@the applicableassessment
ratiobythe appraisedvalue.Tax Code P 1X14(9).
sWe note that the legislature amended subsection 26.04(c) of the Tax Code twice in 1987. See
Acts l!X7,7OtbLea.,ch.849,s 2; Acts 1987,7Oth
Leg.,ch.947,s 3. Both chapters849 and 947 of Acts
1Wn spedfy ways to c&date the tax rate. Without decidiig whether the two are irreconcilably
repugnant, we note that the Property Tax Division of the State Comptroller’s Office (formerly the State
Property Tax Board) has adoptedthe mathematicalformulaarticulatedin chapter947. See STATE
PROPERTY TAX BOARD,Twrn IN TAXATION 1991: A GUIDE FOR SEI’ITNO TAX RATFS, at 4 (1991).
We therefore usethe versionof subsection26.04(c)that agencyhasadopted.
tie codedefmes“[Ilastyear’slev as
the amountof taxesthat wouldbe.generatedby multiplyingthe total tax rate
adoptedby the governingbodyin the precedingyearby the total taxablevalue
P. 473
Honorable Stephen C. Howard - Page 3 (DM-94)
Tax Code 0 26.04(c)(l) (footnote added).’ The current total value figure required
in the calculation refers to the current total tar&e value of property listed on the
appraisal roll for the current year, thus excluding all property exempt or partially
exempt from taxation. Id. 8 26.012(6).
Obviously, the correct determination of the effective tax rate requires the
correct new property value figure. The code defines “[n]ew property value” as
the total taxable value of property added to the appraisal roll in
the current year by annexation and improvements listed on the
appraisal roll that were made after January 1 of the preceding
tax year, including personal property located in new improve-
ments that was brought into the unit after January 1 of the
preceding tax year.
Id. 3 26.012(17). You claim that, if the definition of “[n]ew property value” in
section 26.012( 17) of the Tax Code is read literally, “the.addition of taxable property
in the context of a tax abatement will u be new property” (emphasis in original)
because the improvements were made prior to January 1 of the preceding year,
(footnote continued)
of propertyon the appraisalrollfor the precedingyear,includingall appraisal
rollsupplementsandcorrectionsas of the dateof the calfulatioa.
Tax Code B26.012(13). The code defines “[Ilost propertylevy”as
an amountof taxes levied in the preceding year on property value that was
taxable in the preceding year but is not taxable in the current year because the
propertyis exempt in the current year under a provision of this code other than
Section 11.251 [concerning tangible personal property transported outside the
state], the property has qualified for special appraisal under Chapter 23 of this
code in the current year, or the property is located in territory that has ceased
to bc. a part of the unit since the preceding year.
Id. 8 26.012(15). Sregerwrolly Attorney General Opinion MW-495 (1982) at 2 (discussing Property Tax
Code section 26,04(c)(3), “the amount of taxes imposed in the preceding year on taxable value that is
exempt in the current year”).
‘A county’s effective tax rate is the “sum of all the effective tax rates calculated for each type of
tax the county levies.” Id. .6 26.04(d) (as amended by Acts 1987, 70th Leg., ch. 947, $3). For purposes
of this opinion, we arc concerned only with the calculation of an individual cffectivc tax rate.
P. 474
Honorable Stephen C. Howard - Page 4 (DM-94 )
despite the fact that because of the property’s exempt status, the value of the
improvements to the property never has been part of the taxable value figures.
The Tax Code requires us to construe its provisions using the Code
Construction Act, id. P 1.03, pursuant to which we must read the words of a statute
in context and construe them according to the rules of common usage. Gov’t Code
8 311.011(a). This statutory requirement is consistent with Texas case law which
recognizes that words in a statute should be given their ordinary and popular
meaning unless a contrary intent is clearly apparent from the use of the words in
their statutory context or unless doing so would subvert the plain purpose of the
legislature in enacting the statute. 67 TEX. JUR. 3d Srututes $100 (1989) (and
authorities cited therein); see also Stare Highway Dep’t v. Gorham, 162 S.W.Zd 934,
936 (Tex. 1942) (courts must effect purpose indicated by language of the act read as
a whole); Attorney General Opinion JM-1104 (1989) at 2 (courts must follow
statutory language if unambiguous).
As stated above, the county annually listed an appraised value for the real
property and improvements that were subject to the county’s tax abatement
agreements on the county’s appraisal roll even though the property was exempt. On
its face, the definition of “[n]ew property value,” which includes only the value of
annexations and improvements “listed on the appraisal roll that were made after
January 1 of the preceding tax year,” unambiguously excludes improvements that
were listed on the appraisal roll over one year ago, even if the property has been
exempt from taxation. We find no legislative history that indicates the legislature
intended, contrary to the unambiguous language of section 26.012(17) of the Tax
Code, to include in the definition of “[n]ew property value” the value of
improvements to exempt property that occurred over one year ago.
Furthermore, the Property Tax Division of the State Comptroller’s Office
(formerly the State Property Tax Board) interprets the definition of “[n]ew property
value” only to include additions to exkting improvements or new or separate
structures added to a property containing existing improvements made after January
1 of the preceding year. STATE PROPERTYTAX BOARD, TRUTH IN TAXATION
1991: A GUIDE FOR SE’ITINGTAX RATES, at 4, (1991); see aLto id. at 13, No. 18
(defining “[nlew”to include only new improvements and new personal property not
listed on the preceding year’s appraisal roll). In general, courts will give weight to
an agency’s interpretation of a statute, unless the agency interpretation is contrary to
the clear meaning of an unambiguous statute. Attorney General Opinion JM-1149
(1990) at 2; 2 TEX. JUR. 3d Administrative Law § 7 (1979). In our opinion, the
p. 475
Honorable Stephen C. Howard - Page 5 (on-94 1
Property Tax Division’s interpretation of the definition of “[n]ew property value”
accurately reflects the plain meaning of an unambiguous statute.
Accordingly, under the definition of .“[n]ew property value” found in section
26.012(17), the key to determining “[n]ew property value” is to determine whether
the county had the power to levy a tax on the value of the property last year. Here,
the county had the power to tax the property covered by the tax abatement
agreement during the entire period the agreement was in effect; the county chose,
however, not to tax the property. Thus, unless the improvements occurred during
the preceding tax year, the value of the improvements-to the exempted property do
not constitute “[n]ew property value” within the meaning of sections 26.012(17) or
26.04(c)(l) of the code. Instead, the value of the improvements to the previously
exempted property must be included in the “[clurrent total value” figure, an amount
explicitly defined to include the value of all currently taxable property. Tax Code
Q 26.012(6).
Under the code, after the county governing board has calculated the effective
tax rate according to the procedures discussed above, it sets’the proposed tax rate, a
rate that will raise sufficient revenues to pay the county’s debt service and fund the
county’s anticipated maintenance and operation expenditures for the next year. Id.
$26.0.5(a). If the county’s proposed tax rate exceeds 103 percent of the cahzulated
effective tax rate, the county governing board must notify its constituents and hold a
public hearing. Id.$26.0.5(d); see id.9 26.06 (establishing requirements for notice,
hearing, and vote); STATEPROPERTYTAX BOARD,TRUTH IN TAXATION1991: A
GUIDE FOR SETTINGTAX RATES,at 4, 8-9 (1991) (stating -requirements for notice,
hearing, and vote). You state in your brief, however, that if we construe the code’s
definition of “[n]ew property value” to exclude the value of improvements to
previously exempted property, “the county’s effective tax rate will change by more
than 3% forcing the county to publish notice and hold public hearings which will be
misleading to its citizens.”
Admittedly, whether or not the value of the improved property is considered
part of the county’s new property value affects the calculation of the effective tax
rate. If the current total value of taxable property is increased, then the tax rate
must be lowered below 100 percent of the effective tax rate to raise the same
amount of tax dollars as the previous year. Contrary to the statement in your brief,
however, the notice and public hearing requirements are not activated until the
county proposes a tax rate in excess of 103 percent of the effective tax rate
calculated pursuant to section 26.04 of the Tax Code.
p. 476
Honorable Stephen C. Howard - Page 6 (DM-94)
SUMMARY
The value of improvements to real property exempted for
a period of years pursuant to a tax abatement agreement is
not “[n]ew property value” for purposes of chapter 26 of the
Property Tax Code, unless the improvements were made after
January 1 of the preceding tax year.
DAN MORALES
Attorney General of Texas
WILL PRYOR
First Assistant Attorney General
MARY KELLER
Deputy Assistant Attorney General
JUDGE ZOLLIE STEAKLEY (Ret.)
Special Assistant Attorney General
RENEA HICKS
Special Assistant IAttorney General
MADELEINE B. JOHNSON
Chair, Opinion Committee
Prepared by Kymberly Oltrogge
Assistant Attorney General
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