Update: Houston Court of Appeals holds property owner has burden of proof at trial, Section 23.01(e) chief appraiser burden does not apply in Chapter 42 tax appraisal lawsuit.
By Natalie A. Maloney | March 29, 2023
Providence Town Square Housing, Ltd. v. Harris County Appraisal District, No. 01-20-00835-CV, 2022 WL 17981838 (Tex. App.—Houston [1st Dist.] December 29, 2022, no. pet. h.)
This case is important because it holds the property owner has the burden of proof at trial in a property tax lawsuit filed under Chapter 42 of the Texas Property Tax Code. The Code places different burdens of proof on the chief appraiser, appraisal district, and property owner at different times during the valuation process and local and judicial review. This case concerns the chief appraiser and property owner burdens of proof under Sections 23.01(e) and 42.23(a).
The Section 23.01(e) chief appraiser burden of proof becomes an issue when two tax years are involved. In year 1, the property owner protests the property’s appraised value and successfully lowers it through a final determination such as an appraisal review board (ARB) order or district court judgment. In year 2, the chief appraiser may not increase the property’s appraised value unless it supports the increase by substantial evidence (under the current version of the statue the standard is clear and convincing evidence). Section 23.01(e) states the “burden of proof is on the chief appraiser to support an increase.”
Here, the property owner filed a protest appealing the 2017 appraised value of its property. After exhausting its administrative remedies, the property owner appealed the order of the ARB to district court. The parties settled the lawsuit. An agreed final judgment set the 2017 value at $5 million. For the 2018 tax year, the appraisal district increased the value to over $7 million. The property owner protested, and the ARB issued an order reducing the value to $6+ million. The property owner appealed, filing a lawsuit in district court arguing the 2018 value was excessive, Section 23.01(e) established a $5 million ceiling on the 2018 value, and the burden of proof required to raise the value above that ceiling was not met.
The appraisal district argued Section 23.01(e) does not apply to Chapter 42 lawsuits, where trial is de novo (from the beginning, afresh) pursuant to Section 42.23(a) of the Code. The property owner argued de novo review includes all matters that could have been raised before the ARB, and whether the 23.01(e) burden to support an increase was met is reviewable by the trial court. The trial court found neither party met “any applicable burden of proof” and entered a take nothing judgment against the property owner.
The Houston Court of Appeals affirmed the trial court’s ruling, holding Section 23.01(e) does not apply to Chapter 42 lawsuits. Looking to the plain language of the statute, the court of appeals reasoned Section 42.23(a) expressly states the trial court must “try all issues of fact and law raised by the pleadings in the manner applicable to civil suits generally.” In civil suits generally the party seeking relief has the burden of proof. In tax appraisal suits, courts of appeal routinely find the burden of proof is on the property owner. The court of appeals concluded the de novo standard does not mean the trial court must use the same procedures and burdens applicable at the administrative level.
The court of appeals rejected the property owner’s argument that the chief appraiser’s Section 23.01(e) burden shifts to the appraisal district at trial. The court of appeals concluded the failure of the appraisal district at trial to carry the 23.01(e) burden of proof did not result in a cap on the 2018 value at the 2017 agreed judgment value. The chief appraiser burden of proof is not imputed to the appraisal district in a de novo trial. The property owner has the burden of proof at trial.
To review this case’s appellate history and status, click the following link (or copy and paste): https://search.txcourts.gov/Case.aspx?cn=01-20-00835-CV&coa=coa01.
 To review the text of Texas Property Tax Code Section 23.01, click the following link (or copy and paste): https://codes.findlaw.com/tx/tax-code/tax-sect-23-01.html.
 To review the text of Texas Property Tax Code Section 42.23, click the following link (or copy and paste): https://codes.findlaw.com/tx/tax-code/tax-sect-42-23.html.
 Under the current version of Section 23.01(e) the standard is clear and convincing evidence; it is no longer substantial evidence. The current version of Section 23.01(e) in relevant part states: “…In the next tax year in which the property is appraised, the chief appraiser may not increase the appraised value of the property unless the increase by the chief appraiser is reasonably supported by clear and convincing evidence when all of the reliable and probative evidence in the record is considered as a whole….The burden of proof is on the chief appraiser to support an increase in the appraised value of property under the circumstances described by this subsection.”