Honor system applications and inadequate scrutiny for hundreds of homeowners not billed for full taxes
Part 1 of a series
Data Research by Brandon Roberts
Pablo Ornelas Jr. is being hit this month with a sudden increase in property taxes totaling more than $18,000 that he must pay by January 31 or face stiff penalties and steep interest charges.
Still, it’s hard to complain when he enjoyed an improper tax break for 15 years on one of the homes he owns.
For Ornelas, it’s actually good news that the law restricts the collection of back taxes to just five of those 15 years (2008-2012).
While that adds up to a lot of money, he will not have to repay the additional $21,000 in taxes he was under-billed for in tax years 1998 through 2007, according to calculations provided by Renea Deckard, associate deputy for collections in the Travis County Tax Office.
The bottom line is that a single oversight by the Appraisal District has so far cost taxing entities some $39,000 in revenue that was due on a single house. As stated above, Ornelas is being billed for only $18,000 (46 percent) of that amount.
If not for this investigation—which triggered the Appraisal District’s action to initiate collection of back taxes from Ornelas, and upped the taxes for 2013 as well—this hemorrhage would have continued for the foreseeable future.
Not an isolated case
Ornelas is just one of more than 200 homeowners identified in this investigation who appear to have been under-billed for their full share of property taxes because they were granted more than the single residence homestead exemption authorized by state Property Tax Code Section 11.13(h) for their primary residence.
On Monday December 16, The Austin Bulldog provided a database to the Appraisal District with details about 165 Travis County homeowners who appear to have more than one residence homestead exemption—one of which may need to be cancelled. (Another database of 50 homeowners with a residence exemption in Travis County and a second residence exemption in another county will be provided to the Appraisal District later.)
The database provided not only indicates homeowners’ names and addresses for properties with exemptions but also identifies which owners are married, the addresses where owners are registered to vote, and, when the residence is connected to City of Austin utilities, who pays for water and wastewater service. The database also identifies in scores of cases the non-owners who are registered to vote and/or pay for utility service at these addresses.
Further, the database indicates the exemptions on each property, when they were applied for, the year in which the exemptions took effect, how many years the exemptions have been maintained, and the owners’ 2013 property tax savings enjoyed because of the exemptions.
The total estimated 2013 taxes under-billed on these homes for which exemptions are questionable is more than $125,000. Many of these homeowners have been under-billed for years—and in some cases for decades. Collection of back taxes will recover only a fraction of the total losses. And were it not for this investigation these losses would likely have continued indefinitely.
The Austin Bulldog asked Appraisal District officials to review the data and provide comments about the validity of these findings for this article.
“Because of the short turnaround we have not had an opportunity to review all of the data in your spreadsheet,” Chief Appraiser Marya Crigler wrote in an e-mail late Wednesday, adding, “We are committed to proper application of homestead exemptions and will continue to review the data provided and take appropriate action as needed.”
How could this happen?
By obtaining a homestead exemption for a primary residence, a homeowner pays property taxes on a taxable value that is substantially less than the appraised market value. This results in a smaller annual property tax bill.
Obtaining an additional over age 65 or older exemption is especially helpful because it freezes the amount of school taxes. School taxes generally account for more than half of a Travis County homeowner’s property tax bill. While property values generally rise over the years and tax rates tend to increase as well, the school-tax freeze staves off a good share of what otherwise would be ever increasing taxes for aged homeowners, many of whom are retirees living on fixed incomes.
In 1997, Pablo Ornelas Jr. applied to the Travis Central Appraisal District for an age 65 or older homestead exemption for a home at 2410 Glen Springs Way in Austin that he had owned since 1967, records indicate.
In 1998, Ornelas applied for a residence homestead exemption for a home at 1209 Lost Creek Blvd. in Austin that he and wife Ofilia Ornelas bought in January of that year, records indicate.
Because the state Property Tax Code permits a homeowner (defined as a single adult or a married couple) to receive an exemption on only one residence homestead in the same year, Ornelas’ Lost Creek application was flagged by Appraisal District personnel to indicate the exemption for the Glen Springs Way home was to be deleted when granting the new exemption.
This was not done.
Ornelas never notified the Appraisal District of the oversight.
Section 11.43(g) of the state Property Tax Code states, “a person who received an exemption that is not required to be claimed annually shall notify the appraisal office in writing before May 1 after this entitlement to the exemption ends.”
“I did not write them a letter that I had vacated the (Glen Springs Way) house,” Ornelas told The Austin Bulldog in a December 11 phone interview. “I was thinking the exemption was good for life or until I sold my property. That was my assumption.”
As a result, for 15 years Ornelas was allowed to maintain homestead and age 65 or older exemptions on both of his homes.
The Appraisal District did not notice this oversight until it responded to The Austin Bulldog’s multiple public information requests for copies of more than 550 applications for homestead exemptions filed by homeowners.
Denise Pierce, customer service director for the Appraisal District, and Chief Appraiser Crigler readily conceded in a December 16 interview that these public information requests triggered collection efforts for Ornelas and “quite a few” others.
After filling these public information requests, Pierce said, “We went over the property owners where (the exemptions) shouldn’t have been there.”
The Appraisal District sent Ornelas a certified letter November 13, 2013, notifying him the exemptions for the Glen Springs Way home had been cancelled. The letter advised he had the right to appeal within 30 days by filing written notice with Appraisal Review Board.
“After I got that letter I called them immediately,” Ornelas told The Austin Bulldog. “I apologized for not notifying them. … They are going back and recomputing the tax I owed and I will pay.”
On December 4, the Appraisal District notified the Tax Collector’s office to initiate collection of Ornelas’ back taxes and issue a revised tax bill for 2013, Associate Deputy Collector Deckard told The Austin Bulldog.
The Additional Tax Bill for 2410 Glen Springs Way boosted Ornelas’ taxes from the previously issued Travis County Tax Bills for the Ornelas Homes of $1,008.89 to $3,689.51 for 2013 and tacked on back taxes for 2008 through 2012 as well. The new tax statement for that home totals $18,081.27.
Ornelas one of many
Although the Appraisal District has begun to review many questionable exemptions as a result of The Austin Bulldog’s public information requests, it missed more than 170 cases identified in the database provided to the district Monday.
As a result, the homeowners listed in that database have not yet been notified by the Appraisal District that they may lose their exemptions and be billed for back taxes.
It’s not immediately clear how much each of these homeowners will be billed for increased 2013 taxes and back taxes for 2008 through 2012 if their exemptions are removed.
One of the cases pending notification by the Appraisal District involves homeowners Richard Fred Gautier and Jeanette Burkett Gautier.
Jeanette Joseph Burkett applied for an age 65 or older exemption for 8108 Hillrise Drive in Austin in 1995, records indicate.
Public records indicate that Richard Gautier married Burkett in February 1999.
Today, according to voter registration records, Jeanette Burkett Gautier and Richard Gautier live in the Hillrise home. This home is currently valued at $400,000 by the Appraisal District. The homestead and age 65 or older exemptions on this home saved the couple more than $5,200 in 2013 property taxes
In June 1999 Richard Gautier—a licensed Certified Public Accountant since 1964—applied for exemptions for 2500 Deerfoot Trail, based on being the surviving spouse of a person with an age 65 or older exemption.
Now, nearly 15 years later, both of these properties maintain homestead and age 65 or older exemptions.
The occupants of the Deerfoot Trail home are Brent R. Drake, Edward Turner Noland, and Joseph J. Ayala, according to voter registration records, and Drake is billed for Austin water and wastewater service.
None of these men have an ownership interest in this home, which, like the Hillrise home, is also valued at $400,000.
The Austin Bulldog notified Richard Gautier of these findings in a December 13 telephone interview. (Like Ornelas, he would not agree to be interviewed in person.) After hearing the facts, he said, “I agree. You’re correct.”
Later that same day Gautier left a voice message for The Austin Bulldog in which he said, “I want to thank you for informing me about my erroneous homestead exemption. I have called the Travis County Appraisal Office and (asked) what I need to do. I hope they will send me the information. Again, I want to thank you very much.”
The homestead and age 65 and older exemptions would have saved the Gautiers more than $5,300 in 2013 property taxes on the Deerfoot Trail home—if not for discovery in this investigation.
The Appraisal District has not yet notified the Tax Office that the exemption has been cancelled on the Deerfoot home, Deputy Collector Deckard said, so she cannot provide an estimate of increased taxes for 2013 and back taxes for 2008 through 2012.
But with the same methodology used by the tax office to compute Ornelas’ increased taxes, The Austin Bulldog calculates the Gautiers will see their 2013 tax bill for the Deerfoot Trail home jump by more than $4,500.
In addition, collection of back taxes for this home for five years will total nearly $23,000.
The Gautiers will be required to pay the total increase of about $27,500 in taxes due by January 31.
Travis County Tax Collector Bruce Elfant said that homeowners may work out payment plans for property taxes.
“We have to offer up to 12 months to pay,” he said in a November 27 interview (but) for anything delinquent beyond 21 days penalties and interest kick in.”
There are benefits to being in a payment plan, Elfant said.
“Once in a payment plan you’re locked in. We can never come and foreclose on the property. That gives the taxpayer protection. We encourage paying off as soon as possible so it does not add exorbitant amounts for penalties and interest.”
Problem is widespread
The Ornelas and Gautier cases are but two examples of the phenomenon exposed by this investigation.
Most of the owners named in these findings may have been under-billed for smaller amounts than these two examples, but the longer improper exemptions exist, the larger the cumulative under-billing.
The properties for which exemptions are questioned in this investigation have been in effect an average of 14 years.
Fifteen of these questionable exemptions have been in effect for 20 to 29 years.
Cancelling inappropriate exemptions would assist the Appraisal District in accomplishing its mission (as stated on its website) which is in part to “ensure that each taxpayer pays only their fair share of the property tax burden.”
By the same token, no taxpayer should pay less than their fair share. When a homeowner enjoys an undeserved exemption, it comes at the expense of those homeowners who pay taxes required by law.
About this project
The results of this investigation are based on careful analysis of data collected from a wide variety of public sources. (For details see How The Austin Bulldog Investigated Residence Homestead Exemptions.)
This data is anything but static. In the course of daily events properties are being bought and sold.
Residence homestead exemptions are being added and cancelled.
Property owners are getting married, or getting divorced and dividing their property.
Property owners die and exemptions must be cancelled and reapplied for, if appropriate, by surviving spouses or heirs.
All of these actions, and more, will affect the accuracy of these findings. By the time you read this article some of the records involved may have changed.
In publishing the results of this investigation and a database of questionable homestead tax exemptions, The Austin Bulldog is not alleging that anyone committed a crime.
Nevertheless this investigation points to problems that need to be addressed by the appropriate officials
How exemptions are obtained
A “residence homestead” is defined by the state Property Tax Code Section 11.13(j)(1), as a structure, together with the land (not to exceed 20 acres) and improvements used in the residential occupancy of the structure that is owned by one or more individuals, is designed or adapted for human residence, is used as a residence, and is occupied as the principal residence by an owner.
Residential property owners seeking exemptions in Travis County submit to the Appraisal District an Application for Residence Homestead Exemption, Property Tax Form 50-114. There is no charge to apply for a residence homestead exemption.
The form contains a warning in the space immediately above where the application is signed, which states:
“By signing this application, you state that the facts in this application are true and correct, that you do not claim a residence homestead exemption on another residence homestead in Texas, and that you do not claim a residence homestead exemption on a residence homestead outside of Texas.”
Property Tax Form 50-114 also states, “You have a duty to notify the chief appraiser when your entitlement to any exemption ends.”
The same form is used to apply for a variety of property tax exemptions, including: general residence homestead exemption, disabled person exemption, age 65 or older exemption, 100 percent disabled veterans exemption, and surviving spouse exemption.
Per state Property Tax Code Section 11.43(f), the application must be accompanied by information necessary to determine the validity of the exemption claim, to include the applicant’s name and driver’s license number, state-issued personal identification certificate number, or social security account number.
The need for an applicant to have identification that matches the residential address for which the exemption is sought did not exist until the law to require it was enacted in 2011.
How much are exemptions worth?
The value of homestead residence exemptions are expressed in either specific dollar amounts or as a percentage of the taxable property value determined by the Appraisal District. The total value of exemptions on a residence reduces its value and thus its property taxes.
Some exemptions are mandated by state law while others, called local-option exemptions, are allowed if granted by school districts, cities, counties, and other governmental entities entitled to levy taxes.
Exemptions for which all homeowners are eligible in their primary residence
- State—$15,000 of the appraised value of an adult’s residence homestead is exempt from taxation by a school district per Property Tax Code, Section 11.13(b).
- Austin Community College—One percent of the appraised value of an adult’s residence homestead is exempt from taxation with a minimum of $5,000.
- Austin Independent School District—None.
- Central Health (formerly known as the Travis County Healthcare District)—20 percent of the appraised value, with a minimum of $5,000.
- City of Austin—None
- Travis County—20 percent of the appraised value, with a minimum of $5,000
Additional exemptions for the primary residence of disabled or age 65 and older homeowners
- State—$10,000 of the appraised value of the home owned by a person who is disabled, or is 65 or older, is exempt from taxation by a school district per Property Tax Code Section 11.13(c).
- Austin Community College—$115,000.
- Austin Independent School District—$25,000
- Central Health—$70,000
- City of Austin—$51,000
- Travis County—$70,000
Back taxes not the only hazard
In addition to being charged for back taxes if an exemption is cancelled, Property Tax Code Section 22.29 provides that a 50 percent penalty may be imposed by a court if fraud or intent to evade a tax is proven.
Further, criminal charges could be pursued against homeowners who have filed an application for homestead exemption containing a false statement. Application forms for residence homestead exemptions require the owner to sign a statement acknowledging that fact:
NOTICE REGARDING PENALTIES FOR MAKING OR FILING AN APPLICATION CONTAINING A FALSE STATEMENT: If you make a false statement on this form, you could be found guilty of a Class A misdemeanor or a state jail felony under Section 37.10, Penal Code.
Your signature on this application constitutes a sworn statement that you have read and understand the Notice Regarding Penalties for Making or Filing an Application Containing a False Statement.
Although the criminal penalty exists, the Texas Comptroller of Public Accounts—which prescribes the application forms and requires it to include a notice of possible criminal penalties—was not aware of any cases in which a homeowner has been charged and/or convicted under this statute, Press Secretary Kevin Lyons stated in a November 26 e-mail, in response to The Austin Bulldog’s query.
Further, in a Wednesday e-mail responding to The Austin Bulldog’s question, Crigler stated, “I have checked with legal counsel and the district has not reported anyone to the Travis County Attorney nor are we aware of anyone charged or convicted of filing a false statement on a homestead application.”
In effect the toothless enforcement of criminal penalties for making false statements in applications for residence homestead exemptions constitute an open invitation to abuse the system.
In actual practice anyone caught with an inappropriate exemption will at most be billed for up to five years of back taxes and goes scot-free for avoiding payment of their full share of property taxes in earlier years.
There’s neither a penalty nor a penny of extra interest for those who—once an improper exemption is discovered and cancelled—pay the back taxes on time.
What’s next—Part 2 in this series will focus in greater detail on the Appraisal District’s methods of reviewing applications for residence homestead exemptions and outline significant obstacles that stand in the way of weeding out improper homestead tax exemptions.
The following links allow readers to access source documents that support the findings outlined in this part of the investigation.
Travis County Homeowners Who May Have An Improper Homestead Exemption, an Excel spreadsheet reflecting data for 336 residential properties.
Pablo Ornelas Jr. and Ofelia Ornelas
Appraisal District Records for the Ornelas Homes, indicating the ownership; exemptions granted; valuations; taxing jurisdictions; estimated taxes due with and without the current exemptions; and deed history.
Exemption Applications for the Ornelas Homes processed by the Appraisal District.
Travis County Tax Bills for the Ornelas Homes originally issued for these two homes, which reflected the exemptions and amounts owed for 2013.
Travis Central Appraisal District Letter to Pablo Ornelas Jr. to Ornelas cancelling exemptions for 2008-2013 for the Glen Springs Way home.
Additional Tax Bill for 2410 Glen Springs Way totaling $18,081.27 for back taxes for 2008-2012 and the additional tax for 2013.
Voter Registration Records for occupants of these two homes.
Richard Gautier and Jeanette Burkett Gautier
Appraisal District Records for the Gautier Homes, indicating the ownership; exemptions granted; valuations; taxing jurisdictions; estimated taxes due with and without the current exemptions; and deed history.
Exemption Applications for the Gautier Homes processed by the Appraisal District.
Travis County Tax Bills for the Gautier Homes, which reflect the exemptions and amounts owed for 2013 before the taxes are increased due to the anticipated cancellation of exemptions on the 2500 Deerfoot Trail home.
Voter Registration Records for occupants of these two homes.