Property Tax News

What is the Texas Circuit Breaker?

 

Posted on April 18, 2024

Written by Paul Pennington and Melinda Blackwell 

Read Time: 5 minutes

(Sec. 23.231. Circuit Breaker Limitation on Appraised Value of Real Property, Texas Property Tax Code)

Texans do not have an income tax, but they pay some of the highest property taxes in the country. This point is driven home by elected officials every legislative session. Each chance they get, they attempt to pass some sort of property tax relief to taxpayers, especially homeowners.

For example, in 2019 Texas Governor Greg Abbott signed into law Senate Bill 2. This Bill, among other things, limited the growth of tax rates for counties and cities to a maximum of 3.5% without a popular referendum. It also included $5.1 billion to buy down the school tax rates. During the subsequent 2021 session the Legislature passed various changes to the Texas Property Code including an increase to the homestead exemption for school taxes from $25,000 to $40,000. Moving into the 2023 legislative session, the Texas Comptroller told lawmakers they would have a historic budget surplus of $33 billion. Upon hearing this news, calls for property tax cuts were thrust into the forefront of priorities for the Governor and those in the legislature.

As the session began, the House and Senate produced their own plans. Both agreed to continue and increase the buy down of school tax rates, but each had their additional, competing tax reduction plans. The House plan included a 5% cap on all real property along with the buy down of school tax rates moving forward. The Senate plan proposed to raise the school homestead exemption from $40,000 to $100,000 with that amount increasing to $110,000 for homeowners aged over sixty-five.

The Texas legislature wrestled with these two opposing plans through the regular session and two special sessions. In the end, both the House and Senate agreed to spend $5.3 billion to increase homestead exemptions, make changes to Appraisal Review Boards, the Appraisal Districts’ Boards of Directors, allocate $12.6 billion to buy down school tax rates (by 10.7 cents) and to create a pilot program called the “Circuit Breaker.”

The new Texas “circuit breaker” applies a 20% taxable value cap placed on all real property with a value of $5 million or less, with exception for homesteaded properties, special appraisal land (1-d-1 appraisal), and business personal property accounts. Unlike the circuit breaker legislation in other states, the Texas version is not based on the taxpayer’s ability to pay their taxes, rather it is applied universally (with the exceptions noted). The biggest misconception about the new law is that it is applied to individual properties or economic units. Contrary to this belief, the law is applied to individual parcels. Therefore, one economic unit could be comprised of several accounts, some that could fall under the umbrella of the Circuit Breaker, and other accounts that will not enjoy that protection.

According to the Texas Comptroller’s Office, if the “circuit breaker” had been applied in the 2023 tax year, it would have impacted 84.1% of all multifamily, 94.96% of all commercial property, and 87.90% of all industrial parcels.  Now that 2024 value notices are being issued, Texas taxpayers will have questions about the mechanics and application of the “circuit breaker”.

A summary of the pertinent provisions of the statute is set forth below:
  • For the first year in place (2024), the provision only applies to real property with an appraised value of not more than $5 million.
  • For those properties, their value is capped at an increase of 20 percent. The value limitation is recalculated each year by the Comptroller’s Office based on the Consumer Price Index.
  • It does not apply to a residence homestead or agricultural special use properties or personal property.
  • New improvements are taxable and are not included in the calculation of the cap. A new improvement does not include repairs to or ordinary maintenance of an existing structure or the grounds or another feature of the property.
  • The capped value of a property is removed when the property sells. If the property qualifies, the new owner must re-establish the capped value.

  • In essence, starting with the 2024 tax year, this provision limits the amount of annual value increase to the appraised value of real property which was valued in 2023 at $5 million or less (excepting homesteads and special use type properties like agricultural land, timberland, recreational, park and scenic land, etc.).  For example, if a property was valued at $4 million in 2023, then this value is used to determine the capped value for the 2024 tax year. If the property’s market value for 2024 is increased to $5 million, the “circuit breaker” comes into play. The capped value is $4.8 million (20% of $4 million) and it is that value which is used to calculate the amount of taxes due (rather than the $5 million market value). The value cap does not “run” with the property. Once a property sells, the new owner does not get to retain the capped value already in place on the property. Rather, the new owner will have to establish a new cap on the property as of January 1 of the year following the first year of ownership (assuming the value of the property still qualifies). After the 2024 tax year, the Comptroller determines the value of property that qualifies for the “circuit breaker” protection. The calculation requires consideration of the consumer price index. The Comptroller is required to publish the qualifying value. Currently, the “circuit breaker” provision is set to expire at the end of 2026. However, the Legislature meets again in 2025. At that time, the Legislature could extend the date the “Circuit Breaker” ends beyond 2026 or simply allow it to expire.

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    Property Tax and State Income Tax Symposium Highlights

     

    Property & State Income Tax Symposium Highlights


    A big congratulations to the planning committees for orchestrating outstanding Property Tax and State Income Tax Symposiums last month! Your hard work and dedication ensured exceptional programs that gave attendees valuable insights and meaningful takeaways.

    Thank you to our presenters for delivering engaging and thought-provoking sessions on key topics, ranging from legislative updates to compliance strategies. Your expertise and commitment elevated the learning experience for all participants.

    A special thank-you goes out to our attendees for your enthusiastic participation. The energy you brought to the sessions, discussions, and networking events was inspiring and contributed to the success of these Symposiums.

    We look forward to seeing you at next year’s events!

    Property Tax Symposium Chair Jessica L. MacLean, Esq. and State Income Tax Symposium Chair Jennifer C. Waryjas, Esq., give comments at the Opening Session.

    Keynote speaker Corey Ciocchetti moved the audience with his presentation: “Inspire Integrity – Chase an Authentic Life.”

    Participants get to know each other before hitting the links at the pre-symposium golf tournament. Congratulations to First Place winners PJ Birmingham, Brian Ess, and Lee Winston. Aaron Hohman, Moiz Mohammed, Shane Stewart, and Erik Wind were in second place. Other winners include: • Men’s Longest Drive: Ryan Armstrong • Women’s Longest Drive: Jennifer Wadland • Closet to the Pin: Kevin Dover

    Jordan Goodman, Esq., CPA, and IPT Past President Janette Lohman, CMI, CCIP, CPA, Esq., inform and entertain attendees during a State Income Tax Symposium session titled “Monday Night Football Audit.”

    Committee Member Dan Tucker, Esq. introduced John O'Neil, CMI and Gerry Amoroso, CMI at the breakout session “Beyond the Lease: The Analysis of the Whole Property Value.”

    Many thanks for a job well done to the Symposium planning committees and their leadership. (L to R) State Income Tax Vice Chair Jeff Cook, CPA, State Income Tax Symposium Chair Jennifer C. Waryjas, Esq., IPT President Trisha Fortune, CMI, and IPT Executive Director Chris Muntifering, CMI.


    Thanks to Property Tax Symposium Co-Vice Chair Jerry Aucoin, CMI, here with Property Tax Symposium Chair Jessica MacLean, Esq. (Not pictured Co-Vice Chair Gauri Samant, Esq.)

    Everyone had a blast at Tuesday evening’s Bingo Night. IPT President Fortune had the chance to hang out with other Bingo enthusiasts.
    Thank you for being a part of IPT!

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    The IPT community Is Ready for You

    Join a diverse community of more than 6,600 members and achieve educational excellence, earn professional certification, and gain access to a world-class network. With IPT, you can advocate for equitable administration of state and local taxes, participate in volunteer opportunities to grow your leadership skills, and establish a stronger professional reputation by participating on our committees.

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    President's Message

     

    Happy holiday season!! As we close the book on 2024 and look ahead to 2025, I find myself reflecting on what an incredible year it has been for IPT. We ended on a high note with the successful conclusion of the Property Tax and State Income Tax Symposiums, held concurrently in Tucson, Arizona this November. Both programs delivered outstanding value through sessions that explored the latest developments in property and state income tax.

    Attendees were especially captivated by our keynote speaker, Corey Ciocchetti, whose moving presentation set a tone of inspiration and purpose. The symposiums also offered dynamic discussion forums and breakout sessions designed to maximize learning opportunities.

    The planning committees went above and beyond to create memorable networking experiences. Highlights included a pre-symposium golf tournament, a guided hike through Tucson’s beautiful terrain, and a networking lunch that fostered valuable connections. The evening receptions featured craft beer and tequila tastings, while late-night Bingo Night provided lighthearted fun. Of all the moments, seeing IPT’s new logo dramatically projected onto a nearby mountain stole the show—it was truly a crowd-stopper! 



    Our deepest gratitude goes to the committees that made these events possible:

    • Property Tax Symposium Committee: Special thanks to Chair Jessica L. McClean, Esq., Co-Vice Chairs Jerry Aucoin, CMI, and Gauri S. Samant, Esq., along with their incredible team.
    • State Income Tax Symposium Committee: A heartfelt thank you to Chair Jennifer C. Waryjas, Esq. and Vice Chair Jeff J. Cook, CPA, and their dedicated Committee for countless hours of hard work and preparation.

    Looking ahead to 2025, I am especially excited for IPT’s Annual Conference to be held at the Habor Beach resort in Fort Lauderdale, June 22nd through the 25th. The oceanfront location promises to be a fantastic setting. Our theme is “Club Pro Royale”. (I encourage you to watch Palm Royale if you are not already a fan and to get ready for our fun Casino Royale event on Tuesday night). In addition to a great program, we are planning a full slate of networking events that will guarantee a unique and engaging experience for all attendees.

    And as we prepare to turn the calendar, I want to express my gratitude to everyone who served on a property tax or state income tax program committee this year, whether it was a school, symposium, webinar, or seminar. To all who volunteered on any IPT committee in 2024, thank you. Your time, talent, and dedication inspire us all and ensure IPT remains the premier resource for SALT professionals. To all who volunteered on any IPT committee in 2024, thank you. Your time, talent, and dedication inspire us all and ensure IPT remains the premier resource for SALT professionals.

    Lastly, to all IPT members: thank you for your participation, commitment, and care for our organization. IPT is more than a professional association; it is a community where education meets opportunity and where connections lead to growth. Because when you know more, you PRO more. I wish you and your families a joyous holiday season and happy new year. And as we consider our new year resolutions, please consider putting becoming more involved in IPT in 2025 towards the top of your list.

    Warmest regards,
    Trisha Thank you for being a part of IPT!

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    Why Investing in IPT Programs Is a Smart Move For Your SALT Team

    You know firsthand that state and local tax (SALT) regulations evolve constantly. That’s why, for tax departments and professionals like you, it’s essential to stay ahead of these changes. Falling behind can lead to costly errors, missed opportunities, and compliance issues directly affecting your company’s bottom line.

    IPT programs provide the structured, expert-led education you and your team need to stay compliant, effective, and strategically positioned. Let’s explore why IPT programs are a good fit for your team members.

    The Challenge of Keeping Up with Change

    The pace of change in SALT laws and regulations can feel relentless. Tax professionals face an overwhelming amount of new information each year, from complex legislative updates to shifting compliance requirements. IPT has a proven track record as a trusted partner that can keep your team informed and ready, offering training and insights that are immediately applicable.

    The Unique Benefits of IPT Schools and Programs

    IPT offers two distinct types of in-person learning experiences: schools and programs.

    Each serves a specific purpose, and both are crucial to making a strategic investment in your team's professional growth.

    IPT Schools: Building a Strong Foundation and Advanced Skills

    IPT schools deliver comprehensive, hands-on training covering both fundamental principles and advanced concepts in SALT. These sessions dive deeply into essential tax topics, equipping attendees with the practical skills to address real-world challenges. Through interactive exercises, small group discussions, and mock presentations, your team members can return to work with actionable knowledge and the confidence to implement it effectively.

    IPT Programs: Staying Ahead with Emerging Trends and Networking

    IPT programs—like symposiums and conferences—focus on the latest developments, emerging trends, and strategic insights in SALT. These events offer a unique opportunity for your tax professionals to stay current with rapidly changing regulations, learn about cutting-edge strategies, and gain exposure to new technologies.

    Programs also emphasize the importance of networking so your team can connect with industry leaders and peers, building a robust support system of professional contacts.

    The Benefits of IPT Schools

    IPT schools transform tax professionals into highly skilled, confident practitioners capable of navigating complex SALT challenges.

    Expert-Led Curriculum

    The curriculum at IPT schools isn’t off-the-shelf. Instead, it’s crafted and delivered by seasoned tax professionals facing state and local tax challenges daily. Your employees aren’t just learning theory—they’re absorbing practical knowledge from experts who understand the real-world implications of SALT issues.

    Training includes mock presentations, small group exercises, and case studies mirroring problems your team may actually encounter, ensuring they leave with the ability to apply what they’ve learned immediately.

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    IPT schools emphasize active participation and hands-on learning.

    Attendees engage in interactive sessions that go beyond traditional lectures, offering practical exercises to prepare them to tackle complex tax issues head-on.

    These experiences cultivate critical thinking and problem-solving skills, which translate directly into improved workplace performance. The result is a team that can effectively handle daily responsibilities and contribute to the overall efficiency of your tax department.

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    Investing in IPT schools delivers a tangible return on your team’s time and budget.

    Your team members can return equipped with the expertise to analyze and resolve tax challenges more effectively, minimizing risks and uncovering opportunities that directly benefit your business.

    Practical skills gained through IPT’s rigorous training reduce the likelihood of costly mistakes and improve the overall strategic impact of your tax department.

    The Advantages of Attending IPT Programs

    IPT programs, including symposiums and conferences, are designed to keep your tax department at the forefront of the industry. These events equip your team with the connections and knowledge they need to excel in a constantly shifting tax landscape. Best of all, they are scheduled with the important dates on the SALT calendar in mind so your team members can attend because the timing works for them.

    Here are just a few of the reasons why your team members can benefit from IPT’s annual programming.

    Cutting-Edge Knowledge

    IPT programs ensure your employees stay well-informed on the latest trends, regulations, and strategic developments in state and local taxation. Sessions are packed with insights into emerging technologies, complex SALT issues, and legislative updates. By staying current, your team is equipped to anticipate and navigate changes, maintaining a competitive edge in the field.

    Industry-Specific and Regional Focus

    Understanding that tax issues can vary significantly by industry and region, IPT programs offer sessions tailored to meet the specific needs of your team members. No matter the sector your teams work in, they’ll receive targeted, relevant knowledge. This focused approach allows tax professionals to more effectively address industry-specific challenges and implement strategies that can directly impact your business operations.

    Valuable Networking Opportunities

    One of the most significant benefits of IPT programs is the opportunity to build a network of peers and industry leaders across multiple tax disciplines. These connections can be invaluable when your team faces complex challenges, offering a go-to resource for advice and collaboration.

    Establishing relationships at these events not only fosters professional growth but also creates a support system for your teams that extends well beyond the conference room.

    The Strategic Value of Investing in IPT Programs

    Investing in IPT programs isn’t just about professional development—it’s a strategic decision for your business that can yield substantial returns. Here’s why investing in IPT membership for your team members makes good business sense.

    Efficient Access to Resources

    The sheer volume and specificity of information shared at IPT events are unparalleled. Unlike piecemeal, independent research, IPT programs consolidate critical SALT updates and advanced strategies into a single, cohesive learning experience. The efficiency saves your team members time and ensures they receive insights that are both current and comprehensive.

    Additionally, the perspective that your team members can gain from industry leaders will help them apply their new skills on a practical level. Your teams will benefit from nuanced interpretations of regulations and real-world case studies, giving them the tools to make well-informed decisions at work.

    Impact on the Bottom Line

    Well-trained tax professionals are more adept at navigating intricate regulations, meaning fewer costly errors and more opportunities to optimize tax positions.

    Consider the financial implications: an error in tax compliance or a missed opportunity for tax optimization can have serious repercussions.

    IPT-trained employees are equipped to minimize risks and capitalize on tax-saving strategies. The return on investment isn’t theoretical—it translates to measurable financial gains and increased operational efficiency.

    Long-Term Benefits

    Beyond the immediate impact, IPT programs foster long-term growth and stability. Employees with this level of specialized training develop into confident, knowledgeable professionals who can easily handle evolving tax challenges. This continuous upskilling reduces the need for constant retraining and positions your department as a strategic asset rather than a reactive cost center.
    Further, investing in your employees’ education reinforces your commitment to professional development, improving retention, and helping you attract top talent.

    Staying ahead in the industry isn’t just about compliance; it’s about cultivating a tax team driving value year after year.

    Help Your Team Stay Prepared and Current

    A well-prepared, knowledgeable tax team is a necessity. IPT schools deliver both foundational and advanced training, giving your team members practical, real-world skills they can apply immediately. IPT programs  ensure your team stays ahead of industry changes with timely updates and strategic insights so your tax department is more agile and effective.

    Investing in IPT memberships for your team is a smart, strategic way to maximize your education budget. The ROI is clear: a more capable, confident, and efficient tax team that can navigate SALT complexities with precision. Learn more about specific IPT programs and take the next step toward strengthening your tax department today.

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    Join a diverse community of more than 6,600 members and achieve educational excellence, earn professional certification, and gain access to a world-class network. With IPT, you can advocate for equitable administration of state and local taxes, participate in volunteer opportunities to grow your leadership skills, and establish a stronger professional reputation by participating on our committees.