THE ATTORNEY GENERAL
OF TEXAS
August 9, 1990
Honorable Mark W. Stiles Opinion NO. JM-1205
Chairman
Committee on County Affairs Re: Whether a taxing unit
Texas House of Representatives is required to 1?ay interest
P. 0. BOX 2910 on refunds made on or after
Austin, Texas 78768-2910 June 15, 1989 (RQ-1894)
Dear Representative Stiles:
Chapter 42 of the Tax Code grants aggrieved taxpayers a
right of judicial review by a district court of certain
orders issued by ei.ther appraisal review boards or the State
Property Tax Board. Subchapter C of chapter 42 sets forth
post-appeal administrative procedures to be taken by taxing
units in instances in which a court orders a change in the
taxable value of a taxpayer's property. Section 42.43 of
the Tax Code governs the granting of refunds to a taxpayer
in instances in which a court has ordered a reduction in the
taxable value of that taxpayer's property.
Section 42.43 of the code was amended by the 70th and
71st Legislatures to require that interest at a specified
rate be included in addition to the refunded taxes. You ask
about the latter amendment. Section 42.43 of the Tax Code
provides the following:
(a) If the final ~determination of an
appeal that decreases a property owner's tax
liability occurs after the property owner has
paid his taxes, the taxing unit shall refund
to the property owner the difference between
the amount of taxes paid and amount of taxes
for which the property owner is liable.
(b) For a refund made under this section
because an exemption under Section 11.20 that
was denied by the chief appraiser or
appraisal review board is granted, the taxing
unit shall include with the refund interest
on the amount refunded calculated at an
P. 6378
Honorable Mark W. Stiles - Page 2 (JM-1205)
annual rate of 10 percent from the date the
amount refunded was paid by the propert
owner until the date the refund *is made. II
For 0
the taxina unit shall incue with the refund
interest on the amount refunded at an annual
Kate of eiaht vercent. calculated from the
delinouencv date for the taxes until the date
the refund is made.2 (Emphasis and footnotes ;I
added.)
. Acts 1909, 71st Leg., ch. 496, 5 46, at 3605-6 (hereinafter
House Bill 432).
you inform us of the following:
It has come to my attention that some
local taxing units are questioning their duty
to pay interest on refunds that result from
taxpayer lawsuits that were pending on the
amendment's effective date. Also, issues are
being raised as to interest calculations when
1. Section 11.20 of the Tax Code permits an exemption
from ad valorem taxation for religious organizations. i YOU
have not asked, and therefore we have not addressed, whether
according different taxpayers different rates of interest on
tax refunds is constitutional.
2. When the Tax Code was originally enacted, section
42.43 of the Tax Code required a taxing unit to refund ad
valorem taxes in an instance in which a court orders a
reduction in the appraised value of the that owner Is
property; no mention was made regarding the inclusion of any
interest. Acts 1979, 66th Leg., ch. 841, 5 1, at 2313. The
70th Legislature amended section 42.43 of the code by the
inclusion of subsection (b), requiring for the first time
that a taxing unit include, with the refunded taxes,
interest at a specified rate in instances in which an
exemption permitted under section 11.20 of the code was
improperly denied. Acts 1987, 70th Leg., ch. 640, 5 4, at
2438. The 71st Legislature amended the section again to
require inclusion of interest at a specified rate in all
other instances in which a refund is made under that
section. Acts 1989, 71st Leg., ch. 796, § 46, at 3605-6.
Pm 6379
Honorable Mark W. Stiles - Page 3 (JM-1205)
a taxpayer lawsuit involves more than a
single tax year.
Accordingly, YOU ask two questions about the proper
construction of the 1989 amendments.
Your first question~is:
Does Section 42.43(b), as amended above,
require taxing units to pay interest on
refunds that are paid on or after June 15,
1989, regardless of whether the lawsuit
giving rise to the refund was filed before,
onI or after that date?
The answer to your first question is set forth in the
bill enacting the amendment. Section 49 of House Bill 432
provides:
(a) This Act takes effect September 1,
1989, except that:
. . . .
(2) this section, Sections 3, 17, 30,' 31,
32, 33, 42, 43, 44, 45, and 46 of this Act,
take effect immediately.
. . . .
(1) The change in law made by Sections 30
and 46 of this~ Act aoolies onlv to a refund
paid on or after the effective date of this
a. (Emphasis added.)
By the very terms of the above underscored language, it
is clear that the legislature intended that the 1989
amendment to section 42.43 reach all refunds @& after the
effective date of the act, without regard to the date on
which any lawsuit was filed. Nothing in either the text of
the amendment, the bill containing the amendment, or the
legislative history of the bill supports the proposition
that the date on which a lawsuit is. filed triggers the
application of the bill.
P. 6380
Honorable Mark W. Stiles - Page 4 (JM-1205)
Your second question is:
For' lawsuits that involve more than one tax
year, does Section' 42.43(b), as amended
above, require interest to be calculated
separately for each tax year involved in the
litigation?
1, In order to clarify the nature of your second question,
we set forth an example of the proper application of the
section. Assume that a taxpayer has challenged the
appraised value of his residential property for the tax
years 1986 and 1987. Assume further that on July 14, 1989,
a court orders a reduction in the appraised value of the
taxpayer's property that results in a refund of taxes of
$100 for the 1986 tax year and $200 for the 1987 tax year.
Assume further that the defendant taxing unit refunds the
taxes on August 1, 1989. The formula for calculating the
interest for the 1986 refund is: $100 X .08 (interest rate)
X 3.5 (years since delinquency date)3 = $28.00. The formula
for calculating the interest for the 1987 refund is: $200 x
.08 X 2.5 = $68.00. The total amount of interest due is
$96.00.
It should be clear from the example above that the
interest for each tax year must be calculated separately.
Because the amount of the interest is the product of the tax
refunded multiplied by a specified percentage, calculated
"from the delincuencv date for the taxes until the refund is
made," the interest for each tax year must be calculated
separately. Tax Code 5 42.43(b) (emphasis added). There-
fore, we answer your second question in the affirmative.
SUMMARY
Section 42.43 of the Tax Code requires a
taxing unit to pay interest on refunds of
taxes that are paid on or after June 15,
1989, regardless of whether the lawsuit
giving rise to the refund was filed before,
on, or after that date. Because the formula
for calculating the interest requires the
3. See chapter 31 of the Tax Code for provisions
concerning payment due dates.
P. 6381
Honorable Mark W. Stiles - Page 5 (JM-1205)
amount of the tax refund to be multiplied by
a specified percentage calculated from the
delinquency date for that tax until the date
the refund is made, the interest must be
calculated for each
JIM MATTOX
Attorney General of Texas
MARYHHLLHR
First Assistant Attorney General
Lou MCcREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAHLEY
Special Assistant Attorney General
RENEA HICKS
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Jim Moellinger
Assistant Attorney General
P. 6382