Can a Texas city set a homestead property tax exemption minimum higher than $5,000?

Plain-English summary

Texas lets a city, county, or other political subdivision exempt part of a home's value from property taxes. Article VIII, section 1-b(e) of the Texas Constitution says a subdivision may exempt a percentage of a residence homestead's market value, up to 20%, but the exemption "may not be less than" $5,000 unless the Legislature sets a different dollar amount by general law. Tax Code section 11.13(n) carries that out: if a subdivision's chosen percentage would yield less than $5,000 on a particular home, the owner still gets a $5,000 exemption. A state senator asked the AG whether a home-rule city could go the other direction and set the floor higher than $5,000.

The City of Cedar Park, which sits in both Travis and Williamson Counties, had adopted an exemption equal to 1% of appraised value but not less than $10,000. The Travis County appraisal district refused to apply the $10,000 floor and certified its roll using $5,000 instead, while the Williamson County district used $10,000, so the same ordinance produced two different floors in two counties.

The AG concluded that a home-rule city cannot set a floor above $5,000. Home-rule cities have broad self-governing power but cannot pass ordinances inconsistent with the Constitution or general law, and the Property Tax Code supersedes any conflicting municipal ordinance. Reading the Constitution and section 11.13(n) together, the $5,000 figure is a minimum below which a particular owner's exemption cannot fall, not a number a subdivision may raise on its own; only the Legislature may change that dollar amount. A fixed-dollar exemption above $5,000 functions as an extra exemption not in proportion to value, which the AG explained raises problems under the constitutional requirement that taxes be equal and uniform, and a $10,000 floor can push the exemption past 20% on lower-valued homes. A city that wants to give a larger exemption has to raise the percentage, up to the 20% ceiling.

On the second question, the AG concluded that a chief appraiser does not have authority to disregard or modify a lawfully adopted homestead exemption. But because the appraiser must determine each property owner's right to an exemption "as authorized under the law," and registered professional appraisers are barred from official acts that violate the law, the appraiser has both a legal and ethical duty to treat an unlawful exemption as inapplicable to the extent it violates the law.

Currency note

This opinion was issued in 2018. Subsequent statutory amendments, court decisions, or later AG 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

The senator who requested the opinion: The AG concluded that a home-rule city lacks authority to set a homestead exemption floor above the $5,000 fixed by the Constitution and the Legislature, and that a city wanting a larger exemption must raise the percentage, up to 20%.

Home-rule cities (as the opinion described their authority): The opinion treated the Property Tax Code as superseding any conflicting ordinance and read article VIII, section 1-b(e) as reserving to the Legislature alone the power to change the $5,000 dollar floor, so a city-set floor above $5,000 was likely unconstitutional under the equal-and-uniform requirement.

Appraisal districts and chief appraisers: The opinion held that an appraiser cannot disregard or modify a lawful exemption, but described a legal and ethical duty to determine that an unlawful exemption is inapplicable to the extent it violates the law.

Homeowners: The opinion explained that every owner is entitled to at least a $5,000 exemption when a subdivision's percentage would otherwise produce less, and that the way to a larger exemption is a higher percentage, not a higher dollar floor.

Common questions

Can a Texas city promise a homestead exemption of at least $10,000? No, the AG concluded. The Constitution and Tax Code fix the floor at $5,000 and let only the Legislature change that dollar amount, so a city cannot adopt a higher dollar floor.

How can a city give homeowners a bigger break then?
By raising the exemption percentage, up to the 20% cap the Constitution allows, the AG explained. The percentage, not a fixed dollar minimum, is the lever a city controls.

Why is a higher fixed-dollar floor a problem?
The AG explained that a set-dollar exemption above $5,000 is effectively an extra exemption not in proportion to value, which conflicts with the equal-and-uniform requirement, and a $10,000 floor can exceed the 20% limit on lower-valued homes.

Can the appraisal district just ignore a city's exemption? Not a lawful one. The AG concluded an appraiser cannot disregard or modify a lawful exemption, but has a duty to treat an unlawful exemption as inapplicable to the extent it breaks the law.

Background and statutory framework

Article VIII, section 1-b(e) authorizes a political subdivision to exempt a percentage of a residence homestead's market value, capped at 20%, with the exemption not less than $5,000 unless the Legislature prescribes another amount by general law (Tex. Const. art. VIII, § 1-b(e)). Tax Code section 11.13(n) provides that if the percentage produces an exemption under $5,000 on a particular homestead, the owner is entitled to a $5,000 exemption (Tex. Tax Code § 11.13(n)). Home-rule cities possess full self-government power and look to the Legislature only for limitations (Town of Lakewood Vill. v. Bizios, 493 S.W.3d 527, 531 (Tex. 2016)), but no ordinance may be inconsistent with the Constitution or general law (Tex. Const. art. XI, § 5(a)), and the Property Tax Code supersedes conflicting ordinances (Tex. Tax Code §§ 1.01, 1.02). Statutes are read in context (In re Office of the Att'y Gen. of Tex., 456 S.W.3d 153, 155 (Tex. 2015)). The Constitution by comparison expressly allows a governing body to specify a larger amount only for the separate disabled or 65-and-older exemption (Tex. Tax Code § 11.13(d)-(e)).

Taxes must be equal and uniform, and property must be taxed in proportion to value unless an exemption is required or permitted by the Constitution (Tex. Const. art. VIII, § 1(a), (b)). The Texas Supreme Court held this controls municipal as well as state taxation and that, absent clear legislative authorization, a municipality's effort to exempt property is unconstitutional (City of Austin v. Austin Gaslight & Coal Co., 7 S.W. 200, 203 (Tex. 1887); Graham v. City of Fort Worth, 75 S.W.2d 930, 933 (Tex. App.-Eastland 1934, writ ref'd)).

On the appraiser's role, the Tax Code makes each county appraisal district responsible for appraising property and provides for a chief appraiser certified as a registered professional appraiser (Tex. Tax Code §§ 6.01(a)-(b), 6.05(c); Tex. Occ. Code §§ 1151.002(7-a), 1151.103, 1151.160(a)). Registered appraisers may not engage in an official act that violates the law (16 Tex. Admin. Code § 94.100(4)). The chief appraiser must prepare and certify the appraisal roll and determine each applicant's right to an exemption, and must cancel a granted exemption on discovering it should not have been granted (Tex. Tax Code §§ 26.01(a), 11.45(a); 34 Tex. Admin. Code § 9.3034(b)(5)).

Citations

Statutory and constitutional provisions:

• Tex. Const. art. VIII, §§ 1(a), (b), 1-b(e); art. XI, § 5(a)
• Tex. Tax Code §§ 1.01, 1.02, 6.01(a)-(b), 6.05(c), 11.13(d)-(e), (n), 11.45(a), 26.01(a)
• Tex. Occ. Code §§ 1151.002(7-a), 1151.103, 1151.160(a)
• 16 Tex. Admin. Code § 94.100(4); 34 Tex. Admin. Code § 9.3034(b)(5)

Cases:

• Town of Lakewood Vill. v. Bizios, 493 S.W.3d 527, 531 (Tex. 2016)
• In re Office of the Att'y Gen. of Tex., 456 S.W.3d 153, 155 (Tex. 2015)
• City of Austin v. Austin Gaslight & Coal Co., 7 S.W. 200, 203 (Tex. 1887)
• Graham v. City of Fort Worth, 75 S.W.2d 930, 933 (Tex. App.-Eastland 1934, writ ref'd)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0215
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2018/kp0215.pdf

Original opinion text

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

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

September 24, 2018

The Honorable Charles Schwertner
Opinion No. KP-0215
Chair, Committee on Health & Human Services
Texas State Senate
Re: Whether a municipality is authorized to
Post Office Box 12068
adopt a residential homestead property tax
Austin, Texas 78711-2068
exemption that establishes a floor for the
exemption in an amount greater than $5,000, and, if not, whether an appraisal district may disregard or modify the exemption
(RQ-0242-KP)

Dear Senator Schwertner:

You request an opinion regarding "whether a home-rule municipality in Texas can legally adopt a residential homestead property tax exemption that provides for a minimum exemption amount greater than $5,000." [1] Article VIII, subsection 1-b(e) of the Texas Constitution authorizes municipalities to exempt from taxation a percentage of the value of a residence homestead, and it establishes a legislatively-defined floor for the exemption in an amount of $5,000:

The governing body of a political subdivision . . . may exempt from ad valorem taxation a percentage of the market value of the residence homestead . . . . The percentage may not exceed twenty percent. However, the amount of an exemption authorized pursuant to this subsection may not be less than Five Thousand Dollars ($5,000) unless the legislature by general law prescribes other monetary restrictions on the amount of the exemption.

TEX. CONST. art. VIII, § 1-b(e). Consistent with this provision, the Legislature provided for a
$5,000 exemption in instances when the percentage adopted by a political subdivision and applied to a specific property would otherwise result in an exemption amount of less than $5,000:

If the percentage set by the taxing unit produces an exemption in a tax year of less than $5,000 when applied to a particular residence homestead, the individual is entitled to an exemption of $5,000 of the appraised value. The percentage adopted by the taxing unit may not exceed 20 percent.

TEX. TAX CODE § 11.13(n).

You explain that the City of Cedar Park ("the City"), located in both Travis and Williamson Counties, adopted an ordinance providing for a residential homestead property tax exemption "equal to 1% of the appraised value of the residential homestead property, but not less than $10,000." Request Letter at 1. You further explain that the Travis County Central Appraisal District "refused to implement the City's homestead exemption as adopted and instead forwarded a certified tax roll reflecting a $5,000 minimum amount, claiming state law does not authorize the City to adopt a $10,000 minimum." Id. at 2. [2] You therefore ask about the authority of a home- rule municipality to adopt a floor for the exemption greater than the $5,000 provided for in the statute. Id. at 1.

"Home-rule municipalities derive their powers from the Texas Constitution and possess the full power of self government and look to the Legislature not for grants of power, but only for limitations on their power." Town of Lakewood Vill. v. Bizios, 493 S.W.3d 527, 531 (Tex. 2016) (quotation marks omitted). No municipal ordinance "shall contain any provision inconsistent with the Constitution of the State, or of the general laws enacted by the Legislature of this State." TEX. CONST. art. XI, § 5(a). And the Property Tax Code provides that it "supersedes any provision of a municipal charter or ordinance relating to property taxation." TEX. TAX CODE § 1.02; see id.
§ 1.01 ("This title may be cited as the Property Tax Code."). When construing statutes, we determine their meaning from the context of the statute's surrounding provisions. See In re Office of the Att'y Gen. of Tex., 456 S.W.3d 153, 155 (Tex. 2015) ("When construing statutes, or anything else, one cannot divorce text from context. The meaning of words read in isolation is frequently contrary to the meaning of words read contextually in light of what surrounds them."). Read together, article VIII, subsection 1-b(e) of the Constitution and section 11.13 of the Tax Code establish a framework whereby a political subdivision may adopt a percentage of the market value of a residence homestead to exempt from ad valorem taxation, up to twenty percent of the market value. TEX. CONST. art. VIII, § 1-b(e) ("The governing body of a political subdivision . . . may exempt from ad valorem taxation a percentage of the market value of the residence homestead . .
. ." (emphasis added)); TEX. TAX CODE § 11.13(n) ("[a]n individual is entitled to an exemption from taxation by a taxing unit of a percentage of the appraised value of his residence homestead .
. . ." (emphasis added)). Those provisions also provide that if a political subdivision's percentage, as applied to a specific property, results in an exemption of less than $5,000, the owner "is entitled to an exemption of $5,000 of the appraised value." TEX. TAX CODE § 11.13(n). Article VIII, subsection 1-b(e) grants municipalities the option to adopt a percentage, and it establishes a dollar value a property owner is entitled to regardless of the value of the property, authorizing only the Legislature to change that dollar amount. TEX. CONST. art. VIII, § 1-b(e) ("$5,000 unless the legislature by general law prescribes other monetary restrictions on the amount of the exemption" (emphasis added)). Nothing in the Constitution or the Tax Code authorizes a political subdivision to establish a floor dollar amount different from the amount established by the Constitution and the Legislature. [3] Cf. TEX. TAX CODE § 11.13(d)-(e) (providing a $3,000 exemption to an individual who is disabled or is 65 or older "unless a larger amount is specified by . . . the governing body authorizing the exemption"). Because the Constitution and subsection 11.13(n) establish an exemption amount of $5,000, they supersede a municipal ordinance adopting a different amount.

In addition to statutory requirements, a municipality's adoption of a floor exemption amount above $5,000 raises constitutional concerns. Article VIII, subsection 1(a) of the Constitution requires that all taxes be equal and uniform. TEX. CONST. art. VIII, § 1(a). Article VIII, subsection 1(b) provides: "All real property and tangible personal property in this State, unless exempt as required or permitted by this Constitution, . . . shall be taxed in proportion to its value." Id. art. VIII, § 1(b). The Texas Supreme Court long ago held that this provision "controlled municipal as well as state taxation." City of Austin v. Austin Gaslight & Coal Co., 7 S.W. 200, 203 (Tex. 1887). It further concluded that in the absence of legislation clearly expressing an intention to authorize a municipality to exempt property from taxation, a municipality's efforts to do so violated the Constitution. Id. Municipalities possess clear authority to adopt a percentage of the value of a residence homestead to exempt from taxation, up to twenty percent. TEX. CONST. art. VIII, § 1-b(e). However, article VIII, § 1-b(e) and section 11.13(n) do not provide political subdivisions with authority to set a floor exemption amount higher than $5,000. [4] Any set dollar amount exemption established by a municipality in excess of $5,000 is effectively an additional tax exemption not in proportion to the property's value and not authorized by either the Constitution or the Legislature.

Moreover, article VIII, subsection 1-b(e) prohibits a political subdivision's tax exemption from exceeding twenty percent. Id. art. VIII, § 1-b(e). Adopting a $10,000 floor exemption creates the potential for an exemption exceeding twenty percent as applied to certain properties. For example, a $45,000 homestead property with a $10,000 exemption will receive an exemption on twenty-two percent of the value of the property. While a $5,000 minimum exemption likewise creates the potential for exceeding twenty percent, because the Constitution expressly authorizes that floor amount, it does not pose the same constitutional concerns. Therefore, a court would likely conclude that an alternative exemption amount adopted by a political subdivision violates article VIII, sections 1(a) and (b) and subsection 1-b(e) of the Constitution. See City of Austin, 7 S.W. at 203; Graham v. City of Fort Worth, 75 S.W.2d 930, 933 (Tex. App.-Eastland 1934, writ ref'd) (holding that cities may not adopt exemptions other than or different from those prescribed in the Constitution).

You also ask "whether an appraisal district or chief appraiser is legally authorized to disregard or modify a local residential homestead property tax exemption adopted by a local taxing unit." Request Letter at 1. The Tax Code establishes a tax appraisal district in each county and makes the district responsible for appraising all property in the district for ad valorem tax purposes. See TEX. TAX CODE § 6.01(a)-(b). The appraisal district board of directors appoints a chief appraiser, who serves as chief administrator of the appraisal office. Id. § 6.05(c). Serving as a chief appraiser requires becoming certified as a registered professional appraiser under section 1151.160 of the Occupations Code. Id. § 6.05(c). The Legislature charged the Texas Commission of Licensing and Regulation with adopting standards of professional practice and minimum requirements for certification of these registrants. TEX. OCC. CODE §§ 1151.103, .160(a); see also id. § 1151.002(7-a) (defining "Commission" for purposes of chapter 1151). Pursuant to these rules, registered professional appraisers may not "engage in an official act that is . . . in violation of law." 16 TEX. ADMIN. CODE § 94.100(4) (Tex. Dep't of Licensing & Regulation, Code of Ethics).

With regard to the chief appraiser's specific duties, each year the chief appraiser must "prepare and certify to the assessor for each taxing unit . . . the appraisal roll . . . that lists the property taxable by the unit." TEX. TAX CODE § 26.01(a). The chief appraiser of the appraisal district in which the property is located has a statutory duty to determine, in the first instance, whether property is tax exempt. Id. § 11.45(a) ("The chief appraiser shall determine . . . each applicant's right to an exemption."); see also 34 TEX. ADMIN. CODE § 9.3034(b)(5) (Comptroller of Pub. Accounts, Notice of Exemption Application Requirement) (requiring a chief appraiser to provide notice when "the chief appraiser is required to cancel a granted exemption if he discovers any reason that the exemption should not have been granted"). Thus, the chief appraiser must determine which exemptions each property receives as authorized under the law in order to prepare the certified rolls of taxable property. The appraiser does not have authority to disregard or modify a lawfully adopted residential homestead property tax exemption ordinance. But to the extent a taxing unit adopts an unlawful exemption, the appraiser maintains a legal and ethical duty to determine that the exemption is inapplicable to the extent it violates the law.

SUMMARY

Subsection 11.13(n) of the Tax Code provides that if a municipality adopts a tax exemption percentage that produces an exemption of less than $5,000 when applied to a particular residence homestead, the individual is entitled to an exemption of $5,000 of the appraised value. Because article VIII, section 1-b(e) of the Texas Constitution and the Legislature establish a legislatively- defined floor for the exemption in an amount of $5,000, a court would likely conclude that a home-rule municipality lacks authority to increase the floor above $5,000. Municipalities desiring to increase the homestead exemption must do so by raising the tax exemption percentage, up to twenty percent, as authorized in the Constitution.

The Legislature charged the chief appraiser with determining an individual's right to a property tax exemption, and the Commission of Licensing and Regulation prohibits appraisers from engaging in an official act that violates the law. If a taxing unit adopts an unlawful exemption, the appraiser maintains both a legal and ethical duty to determine that the exemption is inapplicable to the extent it violates the law.

Very truly yours,

KEN PAXTON
Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

[1] Letter from Honorable Charles Schwertner, Chair, Senate Comm. on Health & Human Servs. to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Aug. 16, 2018), https://texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").

[2] You also note that the Williamson County Central Appraisal District certified its tax roll reflecting a $10,000 minimum amount, meaning the City's homestead exemption ordinance will result in two different minimum amounts in two different counties for the upcoming fiscal year. Id. at 1-2.

[3] You suggest that nothing in article VIII, section 1-b(e) or Tax Code section 11.13(n) "expressly prohibits a higher minimum exemption amount" than the $5,000 included in the statute. Id. at 3. However, those provisions establish a specific amount and do not provide any authority for a political subdivision to deviate from that amount. That amount is a minimum below which a specific property owner's exemption may not fall, not a minimum above which a political subdivision can raise the exemption. When those provisions apply, the property owner is "entitled to an exemption of $5,000 of the appraised value," not $5,000 or a higher amount as determined by the political subdivision. TEX. TAX CODE § 11.13(n).

[4] The City's adopted residential homestead property tax exemption provides for an exemption equal to one percent of the appraised value of the property but not less than $10,000. If applied, this exemption effectively results in a $10,000 tax exemption for all residential homestead property valued at $1 million or less. The City's current tax rate is $0.45750 per $100 of valuation. See http://www.cedarparktexas.gov/how-do-i-/learn-more-about/how-property-taxes-are-calculated. Under the City's adopted $10,000 minimum exemption, $490,000 of a $500,000 appraised property would be taxed, resulting in a $2,241.75 tax bill. Under a $5,000 minimum exemption, the same property (but $495,000 taxable) would incur $2,264.63 in City property taxes.