COVID-19 and Property Tax April 20, 2020 Update

One week ago, the Texas Attorney General issued an opinion on Texas Tax Code § 11.35 stating that the statute does not cover purely economic damage caused by COVID-19 to properties. Since the release of that opinion, more and more appraisal districts have claimed not to take the economic impact into account for the 2020 tax year and are claiming that any economic damage caused by COVID-19 should be reflected in the 2021 property values.  

Those appraisal districts take the approach that an investment property is valued based on the income that it creates, and since they are valuing properties as of January 1, 2020 the most relevant information is the prior year’s income.  In their opinion, since COVID-19 did not have a significant effect on the 2019 operations of properties, the 2020 appraised values should remain unaffected.  So far, Nueces, Wichita, Williamson, Fort Bend, and Porter-Randall Appraisal Districts have all issued the following statement:  

“There are currently no provisions in the tax code to allow for reductions in values for the 2020 tax year based on an event such as the current health crisis . . . Any impact on property values due to COVID-19 will be reflected in the 2021 valuations.” 

Some counties have gone so far as to print a similar statement in red ink on both sides of the envelope used for mailing 2020 value notices.   

Webb County, in contrast, has stated that its 2020 notice values will remain the same as the property values from 2019.  Bexar Appraisal District proposed this approach approximately four weeks ago at the beginning of the declared disaster, but its board rejected this plan. 

Neither of these responses serve property owners and both have significant problems.  First, the strategy of valuing property based on 2019 operations will result in a large tax bill amidst the largest cash-flow crisis for most businesses.  It ignores the fact that on January 1, numerous property types were aware of the possibility of a coming disruption, and this approach bases the value on backward-looking performance instead of a reasonable projection of the future year’s performance.  This approach treats the COVID-19 pandemic in the same way as it would treat a hurricane, tornado, or other natural disaster.   

Automatically freezing all property values, on the other hand, does not address the value changes for properties where it is justified.  Some properties’ values should decrease from 2019 and some should increase, which means that some property owners will pay more than they should, and some will pay less.