Written by: Edward E. Gray, CPA
Texas, like many states, imposes an ad valorem (property) tax. This is tax assessed on certain types of property that is owned and used by individuals or entities.
Most people are familiar with property taxes imposed on real property such as commercial buildings, land, homes, and so on. In Texas however, property taxes are also imposed on tangible personal property used in a business also known as Business Personal Property or “BPP.” Some, but not all, not-for-profit entities are exempt from such taxes. The Texas Property Tax Code has very specific requirements to be exempt, in addition to being a 501(c)(3).
Many types of property used in a business are subject to BPP taxes: inventories, computers, machinery, equipment, vehicles, furniture, and fixtures are generally taxed. But some assets commonly capitalized by a business are not subject to BPP tax, such as leasehold improvements, leased equipment, software, inventory “in-transit”, and other intangible assets. Some inventories are even exempt if located in jurisdictions that have elected the Freeport or Goods in Transit Exemption. Texas requires an annual rendition of BPP by the owner to the Central Appraisal District (“CAD”) in which the property is located, which describes the type and quantities of BPP and may include the owner’s estimate of value. Renditions are due by April 15th each year, but an extension to May 15th is available.
Failure to file or late filing of the rendition will result in the imposition of an additional 10% penalty on the resulting BPP tax.
Appraised values of property as of January 1st of each year are established by the CAD, which then provides those values to the various taxing entities (county, city, ISD, etc.) for their assessment, billing, and collection of taxes. If a taxpayer disagrees with the CAD’s “Estimate of Value”, the value can be argued with the CAD and/or a formal protest filed with the Appraisal Review Board (“ARB”) by statutory deadlines.
It is important to note that if you wait until you receive the tax bill in the fall, you have waited too long and are out of luck.
Taxes resulting from the final settled values (which are a lien on the property) are payable by January 31st of the following year, with significant penalties and interest for late payment.
If you need further information or assistance regarding your property taxes, please contact us. We have expertise in the filing of appropriate BPP renditions and in assisting in the dispute of assessed values. Partner, Ed Gray is a former member of the Board of Directors of the Dallas CAD and has developed and presented courses dealing with Texas Property Taxes to other CPAs throughout the state.
Please feel free to contact Ed Gray if you have any questions.