Office of the Attorney General

Honorable Ted Lyon

Letter Opinion No. 89059

Dear Senator Lyon:
You ask about the proper method of calculating a school district tax rate after the voters in that district voted, pursuant to section 26.08 of the Tax Code, to rollback the tax rate. Specifically, you ask whether the interpretation of the statutory formula set forth in section 26.08 of the Tax Code that is advocated by the State Property Tax Board [hereinafter the board] is a correct one and whether the board has the authority to make such an interpretation in the first instance.
We will address your second question first. We conclude that the board does not have authority to interpret, much less amend, the statutory formula for calculating the "rollback tax rate" set forth in section 26.08 of the Tax Code. But we also conclude that the board, in publishing a pamphlet intended as a guide to the proper calculation of tax rates under certain circumstances, neither "interpreted" nor "amended" the section; the pamphlet does not have the legal standing of dulypromulgated rules and can be disregarded by those whose legal responsibility it is to perform such calculations. In answer to your first question, we conclude that the board's recommended formula is a correct interpretation of the formula set out in section 26.08 of the code.
Pursuant to section 21 of article VIII of the Texas Constitution, sections 26.04 et seq. of the Tax Code set forth the methods of calculating the "effective tax rate" for taxing units under various circumstances, e.g., in an instance in which the taxing unit imposes pursuant to statute an additional sales and use tax or an instance in which there is a successful tax rate rollback election. You ask about the proper method of calculating the "effective tax rate" in an instance in which voters in a school district affirmatively voted to rollback the tax rate; such a rate is termed a "rollback tax rate."
Section 26.04 of the Tax Code governs the submission of a tax roll to the governing body of a taxing unit and sets forth the formula by which the "effective tax rate" and the "rollback tax rate" are calculated for taxing units other than school districts. It provides in pertinent part:
(c) An officer or employee designated by the governing body shall calculate the effective tax rate and the rollback tax rate for the unit, where:
(1) 'Effective tax rate' means a rate expressed in dollars per $100 of taxable value calculated according to the following formula:
EFFECTIVE TAX RATE =
(LAST YEAR'S LEVY  LOST PROPERTY LEVY)
(CURRENT TOTAL VALUE  NEW PROPERTY VALUE)
; and
(2) 'Rollback tax rate' means a rate expressed in dollars per $100 of taxable value and calculated according to the following formula:
ROLLBACK TAX RATE = (EFFECTIVE MAINTENANCE RATE x 1.08) + CURRENT DEBT RATE
Section 26.08(e) of the Tax Code governs rollback elections for school districts and provides the following:
If a majority of the qualified voters voting on the question in the election favor the proposition, the governing body may not adopt a tax rate in the following year that exceeds the rollback tax rate calculated as provided by Section 26.04 of this code for that year, except that in calculating the rollback tax rate the assessor shall use the following formula:
ROLLBACK TAX RATE = [ (EFFECTIVE MAINTENANCE AND OPERATIONS RATE FOR ELECTION YEAR) x 1.08] + CURRENT DEBT RATE
where 'election year' denotes amounts used in calculating the rollback tax rate in the year in which the tax increase that initiated the referendum occurred rather than the year in which the calculation occurs.
Your letter states the following:
I am seeking an opinion from your office regarding the State Property Tax Board's new formula for calculating a school district rollback tax rate.
....
Specifically, it appears that the State Property Tax Board has recently changed the state law interpretation of the formula used to reach a rollback tax rate. Section 26.08 of the Texas Property Tax Code provides the following formula:
Rollback Tax Rate = (Effective maintenance and operations rate for election year) x 1.08 + current debt rate
According to information I have received, the Board has changed 'Effective maintenance and operations rate for election year' to 'Adjusted maintenance and operations Levy for election year.'
....
In your opinion, please consider whether this is a valid interpretation of state law. Also consider whether the Board has the authority to make such an interpretation. (Emphasis added.)
We will address your second question first, namely whether the board has the authority to interpret the code provision at issue.
You asked whether the board has authority to "interpret" or "amend" the statutory formula for the "rollback tax rate." With regard to the board's authority to "amend" the formula, we note that, when the legislature acts with respect to a particular matter, an administrative agency may not act with respect to that matter so as to nullify the legislative action, even though the matter be within the agency's general regulatory field. Cobra Oil & Gas Corp. v. Sadler, 447 S.W.2d 887 (Tex.1968); State v. Jackson, 376 S.W.2d 341 (Tex.1964). Therefore, any rule or regulation promulgated by the board that acts to alter or amend the tax rate formulae set forth in section 26.08 of the Tax Code cannot be sustained.
With regard to the board's authority to "interpret" the statutory formula, we note that the interpretation of laws is a governmental function, the sole exercise of which, with certain limited exceptions recognized by law and the courts, is reposed in the state's judiciary. See generally Tex.Const. art. V, s 1 and cases cited thereunder. No state constitutional or statutory provision even purports to confer authority on the board to "interpret" those provisions of the Tax Code governing the calculation of the "effective tax rate" and the "rollback tax rate." The issue is whether the board, by publishing a pamphlet regarding the proper calculation of "effective tax rates" and "rollback tax rates, has attempted to "amend" or "interpret" state law.
The State Property Tax Board is required by subsection 5.05(a) of the Tax Code to prepare and issue, inter alia, "news and reference bulletins." Pursuant to this subsection and section 5.08 of the Tax Code, which permits the board to provide "professional and technical assistance on request," the board since its inception has published a monthly newsletter titled "Statement," as well as topical pamphlets, such as "Taxpayers' Rights, Remedies, Responsibilities" and "Appraisal Board Manual." The "Statement" contains articles of both general and technical information of interest to employees of appraisal districts, as well as to others involved in ad valorem taxation. The topical pamphlets are designed to focus on more narrow, specific aspects of the ad valorem taxation system. Once every year, the board publishes a topical pamphlet titled "Truth in Taxation," intended to serve as a guide to the proper calculation of tax rates; in addition to the publication of the pamphlet, board employees annually conduct regional meetings throughout the state offering technical assistance to those performing the calculations. You ask about a recommended formula for school district rollback tax rates set forth in the 1988 pamphlet titled "Truth in Taxation":
(Adjusted M & O levy for election year) x 1.08
(adjusted 1989 values)
+ current debt rate
Additionally, the Tax Code confers specific rulemaking authority in many instances. See, e.g., Tax Code ss 5.035.07. But the "Statement" and the various pamphlets published by the board are not adopted pursuant to rule. But see Tax Code ss 23.41, 23.52, 23.73 (board by rule shall develop and distribute to each appraisal office appraisal manuals setting forth the proper method of appraising at a special valuation certain types of qualifying "openspace" land). In other words, articles that are published in the "Statement" and topical pamphlets published with the intention of providing technical assistance are not adopted by the board by administrative rule (except, of course, where specifically required by the code). Thus, they constitute recommendations and advice by the staff of the board that employees of appraisal districts may disregard, rather than rules dulypromulgated by the board that employees of appraisal districts are required to follow.
Therefore, in answer to your second question, we conclude that the board does not have authority to interpret, much less amend, the statutory formula set forth in section 26.08 of the Tax Code for calculating the "rollback tax rate" for school districts. But we also conclude that the board, in publishing a pamphlet intended as a guide to the proper calculation of tax rates under certain circumstances, neither "interpreted" nor "amended" the section; the pamphlet does not have the legal standing of dulypromulgated rules and can be disregarded by those whose legal responsibility it is to perform such calculations. We turn now to your first question.
You ask whether the recommended formula set forth in the board pamphlet "Truth in Taxation" is correct or consistent with the statutory formula set forth in section 26.08 of the Tax Code. The issue is whether the "Truth in Taxation" formula is definitionally equivalent to the formula set forth in section 26.08 of the code. We conclude that it is.
The section 26.08(e) formula is as follows:
ROLLBACK TAX RATE = [ (EFFECTIVE MAINTENANCE AND OPERATIONS RATE FOR ELECTION YEAR) x 1.08] + CURRENT DEBT RATE
The "Truth in Taxation" "formula for calculating the rollback rate" is as follows:
(Adjusted M & O levy for election year) x 1.08
(adjusted 1989 values)
+ current debt rate
"Truth in Taxation" 17 (1988).
Obviously, the two formulas are definitionally equivalent if the "effective maintenance rate" is definitionally equivalent to the formula:
'Adjusted M & O levy for election year'
adjusted 1989 values
As noted previously, subsection (c) of section 26.04 of the code defines "effective tax rate" to mean:
(LAST YEAR'S LEVY  LOST PROPERTY LEVY)
(CURRENT TOTAL VALUE  NEW PROPERTY VALUE)
Therefore, the two formulas are definitionally equivalent if the following two phrases are definitionally equivalent:
(LAST YEAR'S LEVY  LOST PROPERTY LEVY)
(CURRENT TOTAL VALUE  NEW PROPERTY VALUE)
and
(Adjusted M & O levy for election year)
(adjusted 1989 values)
Simply put, a tax rate is a quotient, arrived at by dividing a taxing unit's levy (i.e. the amount of money that a taxing unit seeks to raise) by that taxing unit's taxable property. The "effective tax rate" is that tax rate that is determined, essentially, by dividing the previous year's tax levy (adjusted by subtracting from the previous year's levy the amount of taxes levied on properties no longer taxable) by this year's current total taxable value (adjusted by subtracting from this year's total taxable value the amount of property value added from the previous year). The "effective tax rate," by tying the rate to the previous year's adjusted levy, is designed to raise in one year the same amount of taxes raised in the previous year on the same property that was taxed in the previous year. We understand the phrase in the "Truth in Taxation" formula "Adjusted M & O levy for election year" to mean the "previous year's levy adjusted by subtracting the amount of property value that was taxed in the previous year but that is not taxable this year." Therefore, we conclude that the two phrases are definitionally equivalent and that the recommended formula set forth in the board's "Truth in Taxation" pamphlet comports with the statutory formula found in section 26.08 of the Tax Code.
You indicated in your letter requesting an opinion that
[a]ccording to information I have received, the Board has changed 'Effective maintenance and operations rate for election year' to 'Adjusted maintenance and operations Levy for election year.'
The letter to you from the superintendent of the school district that prompted your request also characterizes the State Property Tax Board's "Truth in Taxation" formula in the same fashion. In other words, you understand the board's formula to read as follows:
Rollback tax rate = (Adjusted M & O levy for election year) x 1.08 + current debt rate
In fact, this is not the formula set out in the board's pamphlet. That formula is:
Rollback tax rate =
(Adjusted M & O levy for election year) x 1.08
(adjusted 1989 values)
+ current debt rate
Hence, you failed to include the denominator in the calculation.
The State Property Tax Board has no authority to amend or interpret the statutory formula for calculating the "rollback tax rate" set forth in section 26.08 of the Tax Code. But the board, in publishing a pamphlet intended as a guide to the proper calculation of tax rates under certain circumstances, neither "interpreted" nor "amended" the section; the pamphlet does not have the legal standing of dulypromulgated rules and can be disregarded by those whose legal responsibility it is to perform such calculations. The board's recommended formula is a correct interpretation of section 26.08 of the Tax Code.
Very truly yours,
Jim Moellinger
Assistant Attorney General
Opinion Committee
Approved:
Rick Gilpin
Chairman
Opinion Committee