Texas Supreme Court Lets Stand Landmark Property-Tax Decision

On January 25, 2019, the Texas Supreme Court denied Travis Central Appraisal District’s petition for writ of mandamus in a landmark Texas tax case that affects the rights of every real-property owner in the State of Texas. The Court’s decision leaves in place the Austin Court of Appeals’s decision in In re Catherine Tower LLC, which holds that in an “unequal appraisal” protest of a governmental tax appraisal, the governmental tax-appraising entity is not entitled to discover evidence of the property’s fair-market value. 553 S.W.3d 679 (Tex. App.—Austin 2018, orig. proceeding).

The decision is a victory for all Texas property owners. For years, governmental appraising entities have used the litigation-discovery process to uncover the purchase prices of Texas properties—even when the sales prices are irrelevant to the claims brought by the taxpayer. The appraising entities then use the information obtained in discovery to raise appraised values of all other comparable properties in the appraisal district. The Austin Court of Appeals’s decision puts an end to that practice when the information sought is irrelevant to the particular claim in litigation.

Texas law contemplates two separate types of challenges to governmental property-tax appraisals. The first, and most traditional challenge, is to contest the government’s calculation of a property’s fair-market value. The second, a lesser-known challenge, is to contest the government’s calculation of a property’s appraised value as disproportionate to the government’s appraised value of comparable properties properly adjusted for disparities. This is called an “unequal appraisal” challenge. The court of appeals held that evidence of a property’s fair-market value—including its sales price—is not relevant or discoverable in an “unequal appraisal” challenge brought under Texas Tax Code Section 42.26(a)(3).

Catherine Tower, LLC was represented by appellate counsel Ryan Clinton of Davis, Gerald & Cremer, and Lorri Michel of Michel Gray, both in Austin, Texas.

Resources:

Catherine Tower’s Response to Petition for Writ of Mandamus in the Texas Supreme Court
Catherine Tower’s Petition for Writ of Mandamus in the Austin Court of Appeals
Austin Court of Appeals’s Opinion