How are penalties and interest figured on deferred property taxes for an elderly Texas homeowner?

Plain-English summary

Scott Brumley, the Potter County Attorney, asked the Attorney General how to calculate interest and penalties on the homestead of an elderly or disabled person who deferred property taxes under Tax Code section 33.06. The deferral lets a qualifying homeowner postpone collection of taxes on a residence homestead, and it brings two benefits: interest on the unpaid taxes is capped at 8 percent per year instead of the usual 12 percent, and the section 33.01 penalty is not incurred during the deferral. The question was what happens when the deferral ends and the county finally totals up what is owed.

Two readings were on the table. One was that once the deferral ends, the county recalculates interest and penalties for the whole delinquency under the regular section 33.01 rules, "as if the deferral was never in place." The other was that the regular rules apply only to the time before and after the deferral, while the deferral period keeps its 8 percent interest and zero penalty even when the final number is computed later.

The opinion adopted the second reading. Section 33.06(d) preserves the interest and penalties that accrued before the deferral affidavit was filed, and separately says a section 33.01 penalty "is not incurred during a deferral or abatement period." The clear implication, the opinion reasoned, is that the lower interest rate and the absence of penalty during the deferral remain effective for that period even after the deferral ends. So the final calculation uses the higher rate and penalty for any time before the deferral began and after it ended, but for the deferral period itself, section 33.06 controls. The opinion concluded that the calculation of interest and penalties on a deferred elderly-or-disabled homestead is governed by section 33.06 for the entire period during which the deferral is effective.

Currency note

This opinion was issued in 2011. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

Potter County and its tax collector (as the opinion held for them): The opinion told the county that when it computes the final tax bill after a section 33.06 deferral ends, it must apply section 33.06 to the deferral period, meaning 8 percent annual interest and no penalty for that time, and apply the ordinary section 33.01 penalties and interest only to the periods before the deferral began and after it ended.

Elderly or disabled homeowners who deferred (as the opinion described it): Under the opinion, the favorable deferral terms were not undone when the deferral ended. The reduced interest and the lack of penalty for the deferral period stayed locked in, so the homeowner (or the estate) did not face a retroactive recalculation of that period at the higher rate.

On the two competing readings (where the opinion landed): The opinion rejected the "as if the deferral was never in place" interpretation. It read section 33.06(d) to preserve the deferral-period treatment, not to erase it once collection resumed.

Common questions

Does deferring property taxes lower the interest an elderly homeowner pays?
Yes. The opinion explained that section 33.06 caps interest at 8 percent per year during the deferral, instead of the up-to-12 percent interest under the general section 33.01 rule.

Are penalties added during a property tax deferral?
No. The opinion noted that section 33.06(d) provides a section 33.01 penalty "is not incurred during a deferral or abatement period."

When the deferral ends, does the county recalculate everything at the higher rate?
No. The opinion concluded that the deferral period keeps its 8 percent interest and zero penalty even in the final calculation; the higher section 33.01 rate and penalty apply only to time outside the deferral.

What about the time before the deferral started?
Interest and penalties that accrued before the homeowner filed the deferral affidavit are preserved and calculated under section 33.01, according to the opinion.

Background and statutory framework

Section 33.01 sets the general penalties and interest on unpaid property taxes: a delinquent tax incurs a 6 percent penalty in the first month plus 1 percent for each additional month up to a 12 percent maximum, and accrues interest at 1 percent per month up to 12 percent per year. Tex. Tax Code Ann. § 33.01(a), (c). A tax is delinquent unless paid before February 1. Id. § 31.02(a) (West 2008). Appraisal districts may add further penalties under sections 33.07(a) and 33.08(b). Id. §§ 33.07(a), 33.08(b).

Section 33.06 lets an elderly or disabled person defer collection of taxes on a residence homestead while it remains the homestead, and it can continue for a time after death for a qualifying surviving spouse. Id. § 33.06(a), (f). During the deferral, interest is capped at 8 percent per year and the section 33.01 penalty is not incurred; interest and penalties that accrued before the deferral affidavit are preserved. Id. § 33.06(d) (West 2008). In construing the statute, courts (and this office) look to legislative intent through the statute's plain language. Leland v. Brandal, 257 S.W.3d 204, 206 (Tex. 2008).

Citations

Cases:

• Leland v. Brandal, 257 S.W.3d 204, 206 (Tex. 2008)

Statutes:

• Tex. Tax Code Ann. § 33.06 (West 2008)
• Tex. Tax Code Ann. § 33.06(a)
• Tex. Tax Code Ann. § 33.06(d) (West 2008)
• Tex. Tax Code Ann. § 33.06(f)
• Tex. Tax Code Ann. § 33.01(a)
• Tex. Tax Code Ann. § 33.01(c)
• Tex. Tax Code Ann. § 31.02(a) (West 2008)
• Tex. Tax Code Ann. § 33.07(a)
• Tex. Tax Code Ann. § 33.08(b)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0881
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2011/ga0881.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

August 15, 2011

The Honorable Scott Brumley Opinion No. GA-0881
Potter County Attorney
500 South Fillmore Street, Room 303 Re: Proper method of calculating interest and penalties
Amarillo, Texas 79101 on the residence homestead of an elderly or disabled
person whose property taxes have been deferred under
section 33.06 of the Tax Code (RQ-0960-GA)

Dear Mr. Brumley:

You ask about the proper method of calculating interest and penalties on the residence homestead of an elderly or disabled person whose property taxes have been deferred under section 33.06 of the Tax Code.[1] See TEX. TAX CODE ANN. § 33.06 (West 2008). Your request relates to the collection of an existing debt.

Section 33.01 of the Tax Code provides for the general assessment of penalties and interest on property taxes that remain unpaid after their due date. Id. § 33.01(a).[2] A "delinquent tax incurs a penalty of six percent of the amount of the tax for the first calendar month it is delinquent plus one percent for each additional month or portion of a month the tax remains unpaid prior to July 1." Id. If the tax is still delinquent on July 1, it incurs a "total penalty of twelve percent," the maximum penalty provided by statute. Id. Moreover, a delinquent tax accrues interest at the rate of one percent per month or portion of a month for as long as the tax remains unpaid, for a maximum of twelve percent per annum. Id. § 33.01(c).[3]

Section 33.06 of the Tax Code permits an elderly or disabled person to defer the collection of taxes on his or her residence homestead. Id. § 33.06(a). This deferral continues in effect so long as the taxpayer qualifies for the deferral by maintaining his or her residence as the homestead. Id. If the individual dies, the deferral "continues in effect until the 181st day after the date the surviving spouse of the individual no longer owns and occupies the property as a residence homestead," provided (1) the property was the residence homestead of the deceased spouse when he or she died; (2) the surviving spouse was 55 years or more when the deceased spouse died; and (3) the property was the residence homestead of the surviving spouse when the deceased spouse died. Id. § 33.06(f).

A number of benefits accrue to a person who qualifies for a deferral under section 33.06. The interest rate on uncollected taxes is capped at eight percent per annum rather than the twelve percent prescribed by section 33.01. Id. § 33.06(d). Furthermore, the penalty provided by section 33.01 "is not incurred" during the deferral period. Id.[4] You indicate that one interpretation suggests that after the deferral period expires, interest and penalties for the entire period of the delinquency are calculated under section 33.01, "as if the deferral was never in place." Request Letter at 2. Another view is that normal penalty and interest under section 33.01 are calculated until the deferral becomes effective as well as subsequent to its termination, but that the calculation of interest, eight percent per annum, and penalties, none, is preserved for the entire period of the deferral. Id.

In construing a statute, the objective of a court, and hence this office, is "to determine and give effect to the Legislature's intent." Leland v. Brandal, 257 S.W.3d 204, 206 (Tex. 2008). A court looks "first to the statute's language to determine that intent." Id. "If the statute's language is unambiguous, its plain meaning will prevail." Id. Section 33.06 specifically provides that "[i]nterest and penalties that accrued or that were incurred or imposed under Section 33.01 or 33.07 before the date the individual files the deferral affidavit under Subsection (b) ... are preserved." TEX. TAX CODE ANN. § 33.06(d) (West 2008) (emphasis added). However, "[a] penalty under Section 33.01 is not incurred during a deferral or abatement period." Id. The clear implication is that the lower interest rate imposed during the deferral period, and the absence of penalty during that time, remains effective after the deferral period ends for the period of the deferral. It follows that the final calculation of taxes owed must be based upon the higher rate and penalty for any period before the deferral begins and after it ends. But for the period of deferral, section 33.06 prevails when the final calculation is made.

We conclude that the calculation of interest and penalties on the homestead of an elderly or disabled person whose taxes have been deferred is governed by section 33.06 of the Tax Code for the entire period during which the deferral is effective.

SUMMARY

Calculation of interest and penalties on the homestead of an elderly or disabled person whose taxes have been deferred is governed by section 33.06 of the Tax Code for the entire period during which the deferral is effective.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

DANIEL T. HODGE
First Assistant Attorney General

DAVID J. SCHENCK
Deputy Attorney General for Legal Counsel

JASON BOATRIGHT
Chair, Opinion Committee

Rick Gilpin
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Scott Brumley, Potter County Attorney, to Honorable Greg Abbott, Attorney General of Texas (Apr. 11, 2011), https://www.oag.state.tx.us/opin/index_rq.shtml ("Request Letter").

[2] The tax is delinquent unless paid prior to February 1. TEX. TAX CODE ANN. § 31.02(a) (West 2008).

[3] Additional penalties may be assessed by the appraisal district pursuant to sections 33.07(a) and 33.08(b). Id. §§ 33.07(a), 33.08(b).

[4] The additional penalty permitted by section 33.07 may be imposed "only if the taxes for which collection is deferred or abated remain delinquent on or after the 181st day after the date the deferral or abatement period expires." Id. § 33.06(d).