A district court can hear the Travis Central Appraisal District’s challenge to a vastly lowered property valuation for a landfill but will do so under procedural limitations likely to favor the taxpayer, the Texas Supreme Court determined Friday.
The dispute involves Texas Disposal Systems’ 344-acre landfill southeast of downtown Austin. The property doubles as a private exotic animal ranch and its events center is a popular location for the Texas Senate’s private parties.
The district brought a lawsuit after the Travis Appraisal Review Board determined the appraisal was unequal to similar properties and reduced the landfill’s 2019 valuation from $21.7 million to $2.8 million. The lawsuit, a rare filing by an appraisal district, claimed the lowered amount was unequal and below market value.
District Judge Catherine Mauzy dismissed the district’s market-value claim, finding that the court lacked jurisdiction. The Third Court of Appeals reversed, holding that review of an appraisal review board’s decision is not confined to the grounds asserted by the taxpayer before the board.
The landfill appealed to the Supreme Court, arguing that because it based its tax protest on “equal and uniform” grounds, the Tax Code does not give the appraisal district a right to judicial review of fair market value, a protest issue not raised by the taxpayer. The district argued that a trial de novo is not limited to the issues raised before the review board.
Writing for a 7-2 majority, Justice Jane Bland said statutes limit the trial court’s review to the challenge heard by the appraisal review board. That limitation, however, is procedural, not jurisdictional, the court said in affirming the court of appeals.
“Under the statute in this case, the trial court’s consideration of the appraisal district’s claim is confined to a de novo determination of the taxpayer’s protest. The District has no mandate to expand trial court review of an appraisal beyond the taxpayer’s protest,” Bland said.
Although the trial court can hear new evidence and arguments, Bland said, if the fair market value deviates from the equal and uniform value, a taxpayer is entitled to the lower calculation.
“Using evidence of appropriately adjusted fair market values, the District is free to counter the taxpayer’s suggested equal and uniform value of comparable properties—with the caveat that, under the statute, the Landfill gets the benefit of the calculation that results in the lowest appraised value,” said Bland.
The majority also warned that “the potential relevance of a subject property’s fair market value does not permit sweeping discovery into every aspect of a property owner’s business.”
The case, which was widely followed by appraisal districts and commercial and industrial taxpayers, was complicated by the unique nature of the landfill and the lack of comparable properties. It raised legal and policy issues central to the state’s ad valorem tax system, including whether real estate owned by large entities is valued at the same levels as those of residential taxpayers.
Justice Jeff Boyd, with Justice John Devine, joined the majority’s judgment to the extent it affirms the court of appeals’ judgment. “But to the extent the Court’s judgment prohibits the district court from addressing the chief appraiser’s claim that the appraisal review board’s appraisal fails to reflect the property’s market value, I respectfully dissent,” said Boyd.
“Because the chief appraiser’s pleadings challenged the ARB’s appraisal on the ground that it fails to reflect the property’s market value, I conclude that the district court must resolve that claim regardless of whether TDS Landfill protested the chief appraiser’s appraisal on that ground,” said Boyd.
Travis Central Appraisal District Chief Appraiser Leana Mann released the following statement in response to the opinion:
“The property tax system is based on the premise that the tax burden should be shared equitably among all taxpayers. We appreciate and agree with the Texas Supreme Court’s decision upholding the favorable 3rd Court of Appeals’ opinion. The Travis Central Appraisal District remains committed to determining market values accurately and fairly so that all property owners pay their fair and equitable share of the property tax burden.”
James D. Robinson, who represents governmental clients in tax disputes, said it’s difficult to assess the impact of the decision on future cases, partly because appraisal districts so rarely initiate litigation.
“There’s no longer an argument that market value evidence is admissible in an equity case,” said Robinson, a partner at Houston’s Olson & Olson.
TDS is represented by Wallace B. Jefferson of Alexander Dubose & Jefferson. The appraisal district is represented by Mark Trachtenberg of Haynes Boone.
The case number is 22-0620.