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Lawsuit Challenges Texas School District’s Tax Break Repeal

A lawsuit has been filed against another Texas school district for repealing the local option homestead exemption. The Texas Attorney General has intervened in the suit saying, “Local governments cannot be allowed to simply ignore laws that they do not like.”

Three taxpayers who own residence homesteads have sued the Kilgore Independent School District, the board of trustees of Kilgore ISD (in their official capacities as a trustee), the Superintendent, and the Tax-Assessor Collector of Gregg County, Texas.

The plaintiffs urge that the Texas Constitution provides for a “Residence Homestead Exemption” which provides certain limited exemptions from ad valorem taxation for residence homesteads. One of these exemptions is known as the “local option homestead exemption.”

The Residence Homestead Exemption allows a governing body of a political subdivision to exempt from ad valorem taxation, a percentage of the market value of the residence homestead of a married or unmarried adult, including one living alone. The amount of the exemption may not exceed 20 percent and may not be less than $5,000 unless the Texas Legislature prescribes other monetary restrictions. An eligible adult is entitled to receive other applicable exemptions provided by law, such as the homestead exemption with statewide application pertaining to ad valorem taxation for general elementary and secondary public school purposes, the plaintiffs argue.

The Legislature codified the local option homestead exemption in the Texas Tax Code.

The lawsuit states that a joint resolution adopted by the 84th Legislature in 2015 (S.J.R. 1) amended the Texas Tax Code and provides that the “governing body of a school district, municipality, or county that adopted an exemption under Subsection (n) for the 2014 tax year may not reduce the amount of or repeal the exemption.” The provision expires December 31, 2019. It became effective on January 1, 2015.

The plaintiff taxpayers argue that “In adopting S.B. 1, the Legislature intended to prevent school districts, municipalities, and counties from reducing the amount of or repealing local option homestead exemptions that they had adopted for the 2014 tax year for use in subsequent years.”

Moreover, they urge the legislative intent as evidenced in the Bill Analysis of S.B. 1 states that “[a]ny local taxing units that currently offer the optional homestead exemption must maintain the current exemptions offered for 10 years.”

“The bill would prohibit a school district, municipality, or county that has adopted an optional percentage homestead exemption for the 2014 tax year under Section 11.13(n) Tax Code from reducing or repealing the exemption for a period extending through the end of tax year 2019.”

This legislative intent was confirmed in a letter from Senator Jane Nelson (R-Flower Mound). Sen. Nelson serves as the Chair of the Senate Finance Committee.

On March 17, 2016, the Office of the Attorney General of Texas issued a formal opinion (KP-0072) that held that “any repeal of or reduction in the amount of a local option homestead exemption by a school district, municipality, or county in 2015 would have no effect under subsection 11.13(n-1)’s express terms.”

Texas Attorney General Ken Paxton has intervened in the lawsuit against Kilgore ISD saying that the district violated state law and the Texas Constitution when it repealed the local option homestead exemption. Paxton filed a similar intervention against the White Deer Independent School District on September 15.

In a statement obtained by Breitbart Texas, AG Paxton said, “Local governments cannot be allowed to simply ignore laws that they do not like. This is a blatant attempt by a school district to take away from Texas homeowners, without their vote or consent, what rightfully belongs to them – their own money. I am confident that the local taxpayers and the State will prevail in this lawsuit and the suits to come.”

Upon the filing of the lawsuit, SB 1 author Senator Jane Nelson said: “SB 1 clearly stated that the tax relief approved last session was over and above any local option homestead exemption. Implementation of the law needs to be uniformly enforced across the state.”

Texas State Senator Paul Bettencourt (R-Houston) told Breitbart Texas, “The 22 ISDs that cancelled their optional homestead exemption are denying their own taxpayers the homestead exemption approved by voters and the Legislature. They are totally wrong and the courts will order them to reverse their illegal action.” Bettencourt served as the Harris County Tax Assessor-Collector prior to becoming a state senator.

Lana Shadwick is a contributing writer and legal analyst for Breitbart Texas. She has served as a prosecutor and associate judge in Texas. Follow her on Twitter @LanaShadwick2.

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