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Real Estate & Property Law

: a View from the property line

The Tax Code Giveth and the Tax Code Taketh Away...

By William G. Gammon

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One of our clients recently suffered the misfortune of having to pay delinquent property taxes on a reserve of land that was essentially gift-deeded to them by a former developer of the Subdivision many years back. This Association had no idea that the property given to them by the former developer still had unpaid assessments on it -- to the tune of SEVEN years' worth of taxes, penalties and interest -- until the taxing authority, in this case, the County, filed suit against the unsuspecting Association in district court. Our client paid all annual taxes due and owing each year that it owned the reserve since 2000, but never received notice of the delinquency for tax years 1998 through 2000 until our client was served with the tax suit. What makes this an even more galling story for our client, and for other potentially liable Associations out there, is this: under the Texas Tax Code (the "Tax Code") there is literally NO remedy for an Association seeking recovery of these delinquent taxes, penalties and interest if there was no mistake or omission made by the taxing authority which led to the delinquency and/or failure to pay by the Association EVEN IF THE FAILURE TO PAY WAS DUE TO A LACK OF NOTICE BY THE TAXING AUTHORITY or the former developer, in most cases.


Section 33.011 of the Tax Code states in part as follows:

33.011. WAIVER OF PENALTIES AND INTEREST.
SUBCHAPTER A. GENERAL PROVISIONS
(a) The governing body of a taxing unit:
(1) shall waive penalties and may provide for the waiver of interest on a delinquent tax if an act or omission of an officer, employee, or agent of the taxing unit or the appraisal district in which the taxing unit participates caused or resulted in the taxpayer's failure to pay the tax before delinquency and if the tax is paid not later than the 21st day after the date the taxpayer knows or should know of the delinquency; (emphasis added).


Nowhere in the above provision does lack of notice by the taxing authority (or by the conveying party) factor into the legislators' calculus of when a taxpayer can seek recovery of delinquent tax payments. Notice is covered in other sections of the Tax Code, like Section 33.04:


33.04. NOTICE OF DELINQUENCY.
SUBCHAPTER A. GENERAL PROVISIONS
At least once each year the collector for a taxing unit shall deliver a notice of delinquency to each person whose name appears on the current delinquent tax roll. However, the notice need not be delivered if:
(1) a bill for the tax was not mailed under Section 31.01(f); or
(2) the collector does not know and by exercising reasonable diligence cannot determine the delinquent taxpayer's name and address.

This statutory provision is significant because it used to provide a remedy for taxpayers who failed to receive notice from the taxing authority. Prior to the 2001 amendment to this tax code section, delinquent taxes, penalties and interest were waived if the taxing authority failed to provide certain notices under Section 33.04. In our client's case, this excised language would have saved the Association several thousand dollars in delinquent tax payments to the County. However, as the statute now reads, there is simply no recourse against the taxing authority if this notice is not provided, because Section 31.01 of the Tax Code provides an "out" for same:


31.01. TAX BILLS.
SUBTITLE E. COLLECTIONS AND DELINQUENCY
(a) ...
(g) Except as provided by Subsection (f) of this section, failure to send or receive the tax bill required by this section does not affect the validity of the tax, penalty, or interest, the due date, the existence of a tax lien, or any procedure instituted to collect a tax (emphasis added).

Reading the above provisions together renders the following outcome: if the Association finds itself saddled with a delinquent tax bill and wishes to challenge it, then the Association must first pay the delinquent taxes within 21 days of notice of the delinquent taxes (by suit or otherwise) even though they are disputed, and then seek a review by the taxing authority (Commissioner's Court or other administrative procedure) to assert an error or omission by that taxing entity. If after an administrative hearing is granted and the taxing authority can demonstrate that it sent notice to the delinquent taxpayer (notice is presumed proper under the Tax Code!) or that there was no apparent error or omission committed by same, then the taxing authority is absolved of any wrongdoing.


In the case of our unfortunate client, it lost its appeal at the administrative hearing (the County vouched that all requisite notices and tax bills were sent to the proper address, presumed and otherwise, and there was no error admitted to) and so there will be no refund of payment for those delinquent taxes, penalties and interest. Instead, our client must now seek redress from the former developer who conveyed the reserve to the Association -- a developer who may or may not have known that such liabilities were due and owing at the time of conveyance. In the end, the Association is only left with a legal avenue to pursue monetary recovery from a private party while the taxing authority is insulated from further investigation.


As Section 33.04 of the Tax Code illustrates, the Tax Code giveth (pre-2001) and the Tax Code taketh away. If your Association suspects that it may owe any amount of delinquent taxes, be proactive and inquire about same with your taxing authorit(ies) each year, even if you have received your annual tax statement. Taxing authorities are NOT REQUIRED to list delinquent tax amounts on your current tax bills, so do not let that omission comfort you. That phone call or letter to the County tax office or other taxing entity could end up saving your Association big money in the long run.


*A special "thanks" is extended to the 2001 Texas Legislature for eliminating what little protection taxpayers enjoyed under the Tax Code and for reducing certain notice provisions into mere "window dressing" to the chagrin of unsuspecting taxpayers statewide.

Full post as published by a View from the property line on December 28, 2007 (boomark / email).

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