87th LegislatureState HouseState SenateTaxes & SpendingProperty Tax Disaster Loophole for Pandemics Closed by 87th Legislature

A year after a loophole was triggered allowing property taxes to be increased above the new limits during the pandemic, the state legislature has passed legislation attempting to close it.
June 1, 2021
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Over the interim, a loophole was discovered within the text of the 2019 legislative session’s marquee legislation allowing localities to subvert the new property tax increase limits and raise ad valorem taxes up to 8 percent without triggering an election.

That provision allowed localities to increase taxes up to 8 percent if a disaster had been declared in their county that year. The loophole was passed with disasters like Hurricane Harvey in mind, physical disasters rather than economic disasters like coronavirus. State GOP leaders objected that it applied only to physical damage but that was never litigated in court.

Instead, the legislature opted to close it through statute. They have passed two substantial pieces of legislation to prevent that loophole from being triggered again under similar circumstances.

Senate Bill (SB) 1427 ties property tax exemptions explicitly to disasters creating physical damage and SB 1438 removes epidemics and pandemics from application to the loophole just like droughts already were.

The latter also — when a political subdivision utilizes the 8 percent disaster loophole increase through physical damage — requires the voter-approval rate, 3.5 percent, to be calculated and published on the truth-in-taxation database.

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Its purpose is to prevent that 8 percent increase from becoming the baseline from which the following year’s tax rate is set. It’s an emergency exemption and must be treated as such — a one-time allowance.

“Texas Taxpayers will get the full effect of SB 2’s property tax relief provision that as values go up, the tax rate will come down now that this loophole is finally closed,” Sen. Paul Bettencourt (R-Houston) told The Texan in a statement.

“Who knew a statewide pandemic resolution, would allow cities and counties to continue to try and raise property taxes even higher?  Thanks to Chairman [Dustin] Burrows (R-Lubbock) for helping me fight these 8 percent rollbacks across the state during 2020, and for all those taxpayers who spoke up against them as well.”

When the loophole was discovered last year shortly after Governor Greg Abbott issued his statewide disaster declaration, various localities began planning to utilize the up to 8 percent increase. Houston and Harris County each deployed the increase while the City of Dallas opted not to after public outcry.

This legislation also prevents localities from leapfrogging from one disaster to the next in subsequent years.

It is unclear whether localities will again try to use the loophole with the coronavirus disaster declarations extending into this calendar year. The legislation is not retroactive to the 2021 tax year and the statewide disaster from the February blackouts also opens the door for localities to use the loophole again — as it was very much a physical disaster.

But should another situation arise like last year’s, taxpayers would be protected against sharp property tax increases without voter approval while many lose their jobs en masse from the pandemic’s government-mandated shutdowns.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.