Introduction
Senate Bill 340, passed in the 2003 regular legislative session, took effect January 1,
2004. You can get a copy of the bill from the Texas Legislature's website at
www.capitol.state.tx.us. SB 340 made sweeping changes to the laws concerning
rendition, or reporting, of business assets for property tax purposes. If you own a
business, you are required by this law to report personal property that is used in that
business to your county appraisal district. There are substantial penalties for failure to
report or for falsification and tax evasion. The Liberty County Appraisal District has
prepared this document to assist you in complying with this new and very important law.
What is a rendition?
A rendition is a form that provides information about property that you own. The
appraisal district uses the information you provide to appraise your property for taxation.
Who has to render?
- Owners of tangible personal property that is used for the production of income
(see below)
- Owners of property on which an exemption has been cancelled or denied
- Owners who have been formally notified by the chief
appraiser that they must render.
What kinds of property must be rendered?
For taxation purposes, your property is classified as either real property (land, buildings,
and other items attached to land) or personal property (items that can be owned but are
not attached to land). Personal property that you use to produce income or for
business purposes must be rendered unless the total value of all of the personal
property is $500 or less. This includes furniture and fixtures, equipment, machinery,
computers, inventory held for sale or rental, raw materials, finished goods, and work in
process. You are not required to render intangible personal property (items that can be
owned but do not have a physical form) such as cash, accounts receivable, goodwill,
custom computer software, and other similar items. If your organization qualifies for an
exemption that applies to personal property, for example, a religious or charitable
organization exemption, you are not required to render the exempt property.
Which forms will I need to file?
For Liberty County Appraisal district, most businesses will need to file the general
rendition form, 22.15. There are additional special forms if your business owns aircraft, pipe stock, or vessels.
In addition, we have specific forms for cable company and industrial plant assets.
Call
our office at 936-336-5722 if you have questions about these forms.
When must the rendition be filed?
The last day to file your rendition is April 15, 2005. If you mail it, it must be postmarked
on or before April 15. If you hand deliver it or use a private delivery service such as
federal express, it must be physically received in our office before close of business on
April 15. If your property must be rendered because the chief appraiser has denied or
cancelled an exemption, you must render it within 30 days of the date the chief appraiser
denies or cancels the exemption.
Where must the rendition be filed?
Renditions for property located in Liberty County Appraisal District must be filed with
LCAD. The mailing address for the general rendition forms is Liberty County Appraisal
District, Business Property Division, P.O. Box 10016 Liberty, TX 77575. The street address
of LCAD's offices is 2030 Sam Houston Liberty, TX 77575. If your property is
appraised by two or more appraisal districts, you must file renditions before the deadline
with both districts.
If I can't file on time, what should I do?
The law provides for two extensions of time. If you make the request in writing before
the deadline, the chief appraiser must automatically extend your deadline to May 15. If
you provide good cause and need a little extra time, the chief appraiser has the discretion
to further extend the deadline to May 30.
What will the appraisal district do with my rendition?
Your rendition will be analyzed and used, along with other information we collect on
similar businesses, to develop an estimate of value for your property.
Is my information confidential?
Yes. Information contained in a rendition cannot be disclosed to third parties except in
very limited circumstances. In addition, the code specifically provides that any estimate
of value you provide is not admissible in proceedings other than a protest to the ARB or
ARB or court proceedings related to penalties for failure to render. The final value we
place on your property is public information, but your rendition is not.
What do I have to file if my personal property is valued at less
than $20,000?
Unless your total business personal property assets are valued at less than $500, you will
have to file at least the general rendition form. However, you will only be required to fill
out a short table generally describing your assets and giving their location.
What information is required for the rendition?
Depending on the type of property you own and its value, you can expect to provide the
following information:
Location
You will need to give the address where the property was located on January 1. If the
property was in transit on January 1 or is regularly used in more than one location, you
should provide additional information about the property's normal location and
circumstances on January 1.
General description
A general description should give enough information to identify the property and
distinguish it from other items that you own. At minimum, you should identify the major
categories of personal property assets that you own, using the same terminology you
would use in reporting to the internal revenue service. You have the option of providing
an itemized listing of the various assets in any category. For vehicles, you will need to
provide the plate and VIN number, as well as the year, make, and model.
Quantity of items
If you own an inventory of items that you hold for sale or rental, you will need to provide
an estimate of the quantity of each type of item that you hold in inventory. Again, you
can provide an itemized list if you prefer for any category.
Good faith estimate of market value
The appraisal district will estimate the market value of your inventory on the basis of
your rendition and other information in its possession. Under the new rendition law, you
must provide for either a good faith estimate of the market value of your items or the
historical cost and acquisition date (discussed below) of the items. If you choose to give
a market value estimate, you should be aware that there are several different definitions
of market value that may apply. For items other than inventory, market value is defined
as follows:
"Market value" means the price at which a property would transfer for cash or its equivalent
under prevailing market conditions if:
- exposed for sale in the open market with a reasonable time for the seller to
find a purchaser;
- both the seller and the purchaser know of all the uses and purposes to which the
property is adapted and for which it is capable of being used and of the
enforceable restrictions on its use; and
- both the seller and purchaser seek to maximize their
gains and neither is in a position to take advantage of the exigencies of the
other. (Sec. 1.04, Texas Tax Code)
For inventory, market value is defined by the tax code as "the price for which it would
sell as a unit to a purchaser who would continue the business." Sec. 23.12, Texas Tax
Code.
If your business has 50 or fewer employees, you may base your estimate of value on
federal income tax depreciation schedules. You will need to be prepared to defend your
estimate and explain how it was developed.
Original cost
Instead of providing a good faith estimate of market value, you may provide the original
cost and date you acquired the property. Original cost (the code uses the term "historical
cost when new") refers to the amount you paid to acquire the property. Your cost would
include transportation and any other necessary expenses incurred in acquiring the
property. If you purchased a used item, you should note on the form that you purchased
it used and give the amount you paid.
Date of acquisition
Date of acquisition is simply the date you bought or acquired ownership of the property.
How should I estimate market value?
Publications that provide value information on assets are helpful tools in estimating
market value. For example, there are numerous publications on vehicles and computer
equipment that provides a range of value information for these assets. If you chose to use
published value information, you must use a value that would reflect the assets worth
near January 1st. Developing
an estimated useful life and replacement cost of an asset is another method of estimating
market value. Divide the actual age of the asset by the estimated useful life in order to
calculate the depreciation for the asset. Multiply the depreciation percentage by the
replacement cost to estimate an amount of depreciation. Subtract the amount of
depreciation from the replacement cost to arrive at an estimate of market value.
How should I determine original cost?
To determine original cost, you need to refer to your accounting records such as, original
journal entries and account ledgers. Use original purchase documents, such as invoices
or purchase orders to determine the original cost of the asset. You need to add all cost
that is attributed to getting the asset functioning, such as freight and set-up cost.
What are the penalties for failure to comply?
There are two levels of penalties for failure to comply. If you fail to file your rendition
before the deadline or you do not file it at all, the penalty is equal to 10% of the amount
of taxes ultimately imposed on the property. If a court determines that you have
committed fraud or done other acts with the intent of evading taxes on the property, a
penalty equal to 50% of the taxes ultimately imposed on the property will be levied. The
appraisal district imposes and collects this penalty. It will not appear on your tax bill.
How do I find out whether the appraisal district received my
rendition on time?
Call our office at 936-336-5722 and our staff will be able to tell you if it was received.
What are my rights if a penalty is assessed against me?
If a penalty is assessed against you, you can file a request for a waiver of the penalty.
You must file the request in writing with the chief appraiser within 30 days after you
receive the notice that the penalty has been imposed. Your request must include
documentation showing that either you substantially complied with the rendition law or
that you made a good faith effort to do so. The documentation should also address:
- your compliance history with respect to paying taxes and filing statements or
reports;
- the type, nature, and taxability of the specific property involved;
- the type, nature, size, and sophistication of your business;
- the completeness of your records;
- your reliance on advice provided by the appraisal district that may have
contributed to your failure to comply and the imposition of the penalty;
- any change in appraisal district policy during the current or preceding tax year
that may affect how property is rendered; and
- any other factors that may have caused you to fail to
timely file a statement or report.
The chief appraiser is required by law to consider these factors and notify you in writing.
If the chief appraiser declines to waive a penalty and you have made a timely request for
waiver, you may protest the imposition of the penalty to the appraisal review board. The
board may waive the penalty if it finds that you substantially complied with the rendition
law or made a good faith effort to do so.
When can the chief appraiser request an explanatory statement
from me?
If you provide a good faith estimate of market value instead of original cost and
acquisition date for any items, the chief appraiser may request an explanatory statement
from you. The chief appraiser must make the request in writing, and you must provide the
statement within 20 days of the date you receive the chief appraiser's request.
What must I include in an explanatory statement?
The explanatory statement must set out a detailed explanation of the basis for the
estimate(s) of market value given in your rendition. The statement must include adequate
information to identify the property. It must describe the physical and economic
characteristics of the property that are relevant to its market value. It must give the
source(s) of information used in valuing the property, and explain the basis for the value
estimate.
What happens if I don't file my statement on time?
If you don't file your statement on time, a penalty equal to 10% of the amount of taxes on
the property will be imposed. There is also a 50% penalty if a court finds you engaged in
fraud or other actions with intent to evade taxes. You have the same waiver and appeal
rights discussed above.
What if the appraisal district values my property at a higher
amount than what I render?
You may file a protest with the appraisal review board.
Can I report all my properties on one rendition?
If the appraisal district has already set up accounts covering your property, you should
file a rendition corresponding to each account. If the district does not have accounts set
up for your property, it is generally best to file a rendition applicable to each location
where your property is kept. For example, if you own three separate convenience stores,
file three renditions, one for each store.
Can I request an extension to file the rendition?
Yes. See what to do if you can't file on time, above.
Can I fax my rendition?
Yes, but you must follow up with the original postmarked prior to the deadline.
If I can't file by the extension deadline, what should I do?
You should file your rendition as soon as you can, and
include with it a request for waiver of penalty and explanation of your reasons
for missing the deadline as described above. If you receive a notice from the
chief appraiser regarding the imposition of a penalty, be sure to file the
request for waiver within 30 days of the date you receive it.
