H.B. No. 3306

AD VALOREM TAXATION

Bill Description

Governor Bush signed HB 3306 on June 18, 1997. HB 3306 becomes effective January 1, 1998.

HB 3306 concerns collection of ad valorem taxation. It was picked up as a bill that might impact probate for two reasons: (1) it may impose a penalty on personal representatives, guardians and/or trustees who fail to pay the tax; and (2) it contains a venue provision which might affect suits to collect ad valorem taxes where property is held in an estate under administration.

First, a little background: In Bailey v. Cherokee County Appraisal District, 862 S. W. 2d 581 (Tex. 1993), the Texas Supreme Court held that a claim for ad valorem taxes on property in a decedent's estate which is subject to administration is a claim against the estate and that jurisdiction lies in the probate court, not the district court. 862 S. W. 2d at 581. Thus, the taxing authority could not proceed directly against the heirs in district court. In the Bailey case, the property was located in the same county where the estate was pending. Thus, no venue issues were presented.

However, in Crawford v. Town of Flower Mound, 933 S. W. 2d 727 (Tex. App. -- Fort Worth 1996, no writ history), the real property was located in Denton County, while the estate was pending in Dallas County. The taxing authority filed suit in the district court of Denton County and obtained a judgment. The personal representative of the estate then filed a writ of error on behalf of the estate in the Court of Appeals, asserting that the Denton County district court lacked jurisdiction, citing the Bailey case.

The Court of Appeals in Crawford held:

Because holding otherwise would place an insurmountable burden on taxing authorities, we hold the provision in section 33.41(a) of the Texas Tax Code requiring suits for delinquent ad valorem taxes to be brought in the county where the real estate is located provides jurisdiction for that county that is dominant over the jurisdiction for probate procedures provided in sections 5(c), 5(e) and 5A(b) of the Texas Probate Code. Accordingly, these probate provisions do not extend to judgments and foreclosures for delinquent property taxes on property located outside the county of the probate proceeding.


933 S. W. 2d at 731. Note that, in both Bailey and Crawford, the courts' analysis hinges on jurisdiction, not venue. The provision of the Tax Code cited by the Crawford court, Section 33.41, provides:
§ 33.41. Suit to Collect Delinquent Tax

(a) At any time after its tax on property becomes delinquent, a taxing unit may file suit to foreclose the lien securing payment of the tax, to enforce personal liability for the tax, or both. The suit must be in a court of competent jurisdiction for the county in which the tax was imposed.

(b) A suit to collect a delinquent tax takes precedence over all other suits pending in appellate courts.

(c) In a suit brought under Subsection (a), a taxing unit may foreclose any other lien on the property in favor of the taxing unit or enforce personal liability of the property owner for the other lien.



(Emphasis added.) Section 33.41(a) may be read to be a venue statute, not a jurisdiction statute. Whether one views it as a jurisdictional statute or a venue statute has some bearing on how conflicts over venue or jurisdiction in tax suits involving estates should be resolved.

That brings us to the 1997 legislative session and HB 3306, which amends Section 32.07 of the Tax Code to read as follows (changes highlighted):
§ 32.07. Personal Liability for Tax

(a) Except as provided by Subsections (b) and (c) of this section, property taxes are the personal obligation of the person who owns or acquires the property on January 1 of the year for which the tax is imposed. A person is not relieved of the obligation because he no longer owns the property.

(b) The person in whose name a property is required to be listed by Section 25.13 of this code is personally liable for the taxes imposed on the property.

(c) A qualifying trust as defined by Section 11.13(j) and each trustor of the trust are jointly and severally liable for the tax imposed on the interest of the trust in a residence homestead.

(d)  Any person who receives or collects an ad valorem tax or any money represented to be a tax from another person holds the amount so collected in trust for the benefit of the taxing unit and is liable to the taxing unit for the full amount collected plus any accrued penalties and interest on the amount collected.

(e)  With respect to an ad valorem tax or other money subject to the provisions of Subsection (d), an individual who controls or supervises the collection of tax or money from another person, or an individual who controls or supervises the accounting for and paying over of the tax or money, and who wilfully fails to pay or cause to be paid the tax or money is liable as a responsible individual for an amount equal to the tax or money not paid or caused to be paid. The liability imposed by this subsection is in addition to any other penalty provided by law. The dissolution of a corporation, association, limited liability company, or partnership does not affect a responsible individual's liability under this subsection.

(f)  Venue for suits arising under this section shall be governed by Section 33.41(a).

(g)  In this section:

(1)  "Responsible individual" includes an officer, manager, director, or employee or a corporation, association, or limited liability company or a member of a partnership who, as an officer, manager, director, employee, or member, is under a duty to perform an act with respect to the collection, accounting, or payment of a tax or money subject to the provisions of Subsection (d).

(2)  "Tax" includes any ad valorem tax or money subject to the provisions of Subsection (d), including the penalty and interest computed by reference to the amount of the tax or money.



Note that HB 3306 refers to Section 33.41(a) as a venue statute. It is unclear what affect, if any, HB 3306 will have on the Bailey and Crawford line of cases.

It also is unclear if a personal representative, guardian or trustee is "an individual who controls or supervises the collection of tax or money from another person, or an individual who controls or supervises the accounting for and paying over of the tax or money, and who wilfully fails to pay or cause to be paid the tax or money is liable as a responsible individual for an amount equal to the tax or money not paid or caused to be paid." If so, the apparent 100% penalty imposed by Section 32.07 may apply to fiduciaries.


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Copyright © 1997 by Glenn M. Karisch. This page was last revised on June 23, 1997.