Property Tax Post: As Flooding Washes Out Communities, Texans May Need More Property Tax Relief

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The weather, it seems, is making headlines around the world. From flooding in Paris to southeastern Texas, property owners are in desperate need of rain relief and tax relief.

On June 1, Governor Greg Abbott declared a state of disaster for 31 Texas counties affected by “severe weather and flooding that began on May 26, 2016.” News reports of human casualties, emergency evacuations, and properties only accessible by boat suggest that disruption to the community and regional economy caused by flooding can be widespread and long lasting.

According to, floods can happen anywhere, and they are the most frequent and costly natural disasters in the United States. “Flash floods, inland flooding, and seasonal storms affect every region of the country, severely damaging homes and businesses.” Even after determining that a property is in a flood zone and taking the necessary precautions like purchasing flood insurance, little prepares a property owner for the aftermath of devastation floods leave behind. Many property owners are left questioning how property values will change after flood damage. Dr. Clifford A. Lipscomb, Vice Chairman and Co-Managing Director at the economic and real estate research firm Greenfield Advisors, told  Bloomberg BNA via email that:

[F]looding situations, and how they translate into property value diminution, are complex. There’s the issue of whether any damages are temporary or permanent; there’s the issue of whether flood waters introduce a contaminant from one area into another area; and there’s the issue of whether the flood event creates a stigma about the area. In addition, if a contaminant is introduced to an area by flood waters, there’s the issue of how to remediate the situation and the associated costs.

Dr. Lipscomb’s analysis suggests that property owners confront several difficult post-flood property valuation issues and that there is not always a clear answer to those issues.

Tax Relief

Thus far, the Internal Revenue Service has stepped in to grant tax relief for Texas flood victims in the form of relaxed income tax filing and payment deadlines. Texas law already provides tax breaks or deferrals to help reduce the property tax obligations of property owners who qualify. Texas Property Tax Code § 31.032 allows taxpayers who sustain property damage as a result of a declared natural disaster to split their property tax payments into four equal interest-free installments, to be paid in full by July 31.  The residence must be real property that is: (1) the residence homestead of the owner or consists of property that is used for residential purposes; (2) owned or leased by a business entity whose gross receipts are within limits prescribed by the statute in the entity's most recent federal tax year or state franchise tax annual period, according to the applicable federal income tax return or state franchise tax report of the entity; (3) located in a declared disaster area; and (4) has been damaged as a direct result of the disaster.

Texans can use all the breaks they can get. According to a 2015 report by the Tax Foundation, Texas has the sixth highest property taxes in the nation. Also adding to the cost of property ownership in the state, the Dallas Morning News reported last year that Texas ranked third in the U.S. for having the highest rates for homeowner’s insurance. As the rains slow and conditions improve, Texans must begin the recovery process and face what comes next. Maybe additional property tax relief will keep Texas property owners from feeling they’ve been hung out to dry. 

Continue the discussion on LinkedIn: What other types of property tax incentives or exemptions should Texas offer residents who have suffered damages from the floods?

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By Cynthia N. Wells