Property Taxes in Disaster Areas and During Droughts

Tax Code Section 6.053 requires a chief appraiser to comply with any request by a federal, state, or local government emergency management authority to provide information and assistance pertinent to disaster mitigation or recovery, including assisting in the estimation of damage from an actual or potential disaster event.

Tax Code Section 11.35 allows a qualified property that is at least 15 percent damaged by a disaster in a governor-declared disaster area to receive a temporary exemption of a portion of the appraised value of the property. A property owner must apply for the temporary exemption no later than 105 days after the governor declares a disaster area. Qualified property includes:

• tangible personal property used for income production;
• improvements to real property; and
• certain manufactured homes.

The chief appraiser determines if the property qualifies for the temporary exemption and assigns a damage assessment rating of Level I, II, III or IV based on the physical damage sustained by the property. The chief appraiser may rely on information from a county emergency management authority, the Federal Emergency Management Agency (FEMA) or other appropriate sources when making this determination.

The damage assessment rating determines the percentage of appraised value of the qualified property to be exempted. The amount of the exemption is determined by multiplying the property value after applying the damage assessment rating to a fraction (the number of days remaining in the tax year after the date the governor declares the disaster divided by 365).

The chief appraiser must send written notice of the approval, modification or denial of the application to the applicant no later than five days after making the determination. The temporary disaster area exemption expires on Jan. 1 of the first tax year in which the property is reappraised.

Tax Code Section 11.135 provides that a property owner may continue to receive the homestead exemption on the structure, land, and improvements when the residential structure is rendered uninhabitable or unusable by a casualty or by wind or water damage while the owner constructs a replacement structure on the land.

The owner may not establish a different principal residence for which the owner receives a homestead exemption during that period and the owner must intend to return and occupy the structure as the owner's principal residence.

To continue receiving the exemption, the owner must begin active construction of the replacement qualified residential structure or other physical preparation of the construction site. The active construction or other physical preparation must begin no later than one year after the owner ceases to occupy the former residential structure. Comptroller Rule 9.416 requires a property owner to notify an appraisal office within 30 days after the date that the eligibility for continuation ends. The continuation cannot be for more than two years.

If the property is in a governor-declared disaster area and is uninhabitable or unstable because of the disaster, the owner must begin active construction of the replacement structure or site preparation no later than five years after ceasing to occupy the principal residence and may not receive the exemption for more than five years.

If the owner sells the property prior to completing the replacement qualified structure, the property owner is subject to additional taxes and interest.

If a residence homestead is rendered uninhabitable or unusable by a casualty or by wind or water damage, the replacement structure owned by a qualified individual or surviving spouse may continue to receive the limitations on property taxes allowed by Tax Code Sections 11.26 and 11.261.

However, the replacement structure will be subject to an increase in tax if:

• the square footage of the replacement structure exceeds that of the replaced structure as that structure existed before the casualty or damage occurred; or
• the exterior of the replacement structure is of higher quality construction and composition than that of the replaced structure.

Tax Code Section 23.23 provides for the limitation on the appraised value of residence homesteads to 10 percent of the appraised value for the preceding tax year plus the market value of all new improvements to the property. If an improvement is a replacement structure for a structure that was rendered uninhabitable or unusable by a casualty or by wind or water damage, then the structure is not considered a new improvement.

If the replacement structure exceeds the square footage of the original structure or the exterior of the replacement structure is of higher construction quality and composition than the original structure, then the replacement structure is considered a new improvement and is taxed accordingly. A replacement structure is not considered a new improvement to the extent necessary to satisfy square footage or the quality and composition of the exterior requirements of a disaster recovery program administered by the General Land Office or by a political subdivision of Texas that is federally funded.

Tax Code Section 23.522 provides that the eligibility of land for open space appraisal does not end because the land ceases to be devoted principally to agricultural use to the degree of intensity generally accepted in the area if:

1. a drought declared by the Governor creates an agricultural necessity to extend the normal time the land remains out of agricultural production; and
2. the owner intends to resume the use the land in the manner and to the degree of intensity at the end of the declared drought.

Tax Code Section 23.129 allows chief appraisers and tax assessor-collectors to waive certain penalties for failing to file or timely file a declaration or tax statement for motor vehicles, dealer's heavy equipment or retail manufactured housing inventory. A chief appraiser or collector may waive a penalty only if the taxpayer's failure to file or timely file the declaration or statement was a result of a disaster or an event beyond the taxpayer's control destroyed the taxpayer's property or records. The taxpayer must file a written application for the waiver not later than the 30th day after the date the declaration or statement was required to be filed and the taxpayer must otherwise be in compliance with Tax Code Chapter 23.

Under Tax Code Section 26.08(a) and 26.042(e), if a school district adopts a tax rate that exceeds the voter-approval tax rate, the registered voters of the district determine whether to approve the adopted tax rate at an election. When a school district needs to increase expenditures because of a disaster, such as a tornado, hurricane, flood, or other calamity (excluding drought, epidemic or pandemic) and the Governor has requested federal disaster assistance for the school district's area, an election is not required to approve the tax rate for the tax year after the disaster.

Under Tax Code Section 26.07(b), the registered voters of the taxing unit determine whether to approve the adopted tax rate at an election if the governing body of:

• a special taxing unit or a municipality with a population of 30,000 or more adopts a tax rate that exceeds the voter-approval tax rate; or
• a taxing unit other than a special taxing unit or a municipality with a population of less than 30,000 regardless of whether it is a special taxing unit adopts a tax rate that exceeds the greater of the taxing unit's voter-approval rate or de minimis rate.

When these taxing unit types need to increase expenditures because of a disaster such as a tornado, hurricane, flood, wildfire, or other calamity (except drought, epidemic or pandemic) and the Governor declared any part of the area in which the taxing unit is located as a disaster area, an election is not required to approve the tax rate for the tax year after the disaster.

Tax Code Section 31.032 allows homeowners, other certain residential property owners and small businesses whose property is located in a disaster area or emergency area and has been damaged as a direct result of the disaster or emergency to pay their taxes in four installments. For small businesses, this includes real and personal property that is owned or leased by a business entity that has gross receipts under a specified threshold, which is adjusted by the Comptroller's office annually.

The installment payments apply to taxes imposed on the property by all taxing units on the tax bill before the first anniversary of the disaster or emergency. The property owner must make the first installment payment and provide notice that they will be paying the remaining taxes in three equal installments before the delinquency date, which is usually Feb. 1. The remaining payments are due before April 1, June 1 and Aug. 1, without any penalty or interest. If the delinquency date is not Feb. 1, then other deadlines apply. If an installment payment is missed, taxes will incur a six percent penalty and interest in the amount of one percent for each month of delinquency. More information on installment payment deadlines, delinquency and penalty and interest can be found on the Payment Options page.

Tax Code Section 31.033 allows the governing body of a taxing unit located in a disaster area or emergency area to provide an installment payment option for certain businesses that own or lease real property and personal property that has not been damaged as a result of a disaster or emergency. A business is eligible for the installment payment plan if the business has gross receipts under a specified threshold, which is adjusted by the Comptroller's office annually.

The installment payments apply to taxes imposed on the property by all taxing units on the tax bill before the first anniversary of the disaster or emergency. The property owner must make the first installment payment and provide notice that they will be paying the remaining taxes in three equal installments before the delinquency date, which is usually Feb. 1. The remaining payments are due before April 1, June 1, and Aug. 1, without any penalty or interest. If the delinquency date is not Feb. 1, other deadlines apply. If an installment payment is missed, the taxes will incur a six percent penalty and interest in the amount of one percent for each month of delinquency. More information on installment payment deadlines, delinquency and penalty and interest can be found on the Payment Options page.

Pursuant to Tax Code Section 31.032(h), for the 2009 tax year, the limit on gross receipts under Tax Code Section 31.032(a)(1)(A)(ii) is $5 million. For each subsequent tax year, the Comptroller's office is required to adjust the limit to reflect inflation by using the index that the Comptroller's office considers to most accurately report changes in the purchasing power of the dollar for consumers in this state and to publicize the adjusted limit. Each collector must use the adjusted limit as calculated by the Comptroller's office under this subsection to determine whether property is owned or leased by a business entity described by Tax Code Section 31.032(a)(1)(A)(ii).

Tax Code Chapter 31.033(c) allows taxing units to adopt an installment plan for real and personal property that is owned or leased by a business entity that has gross receipts under a threshold adjusted by the Comptroller's office. The property must be located in a disaster area or emergency area and has not been damaged as a direct result of the disaster or emergency.

The installment payments apply to taxes imposed on the property by all taxing units on the tax bil before the first anniversary of the disaster or emergency. The property owner must pay the first installment before the delinquency date (usually Feb. 1) and provide notice that the person will be paying the remaining taxes in three equal installments. The remaining payments are due before April 1, June 1 and Aug. 1, without any penalty or interest. If the delinquency date is not Feb. 1, then other deadlines apply. If an installment payment is missed, the owner faces a 6 percent penalty and also must pay interest at 1 percent for each month of delinquency.