Gene Phillips isn't the type of homeowner the Texas Legislature had in mind when it passed a law in 1979 allowing senior citizens to indefinitely defer their property taxes. Think instead of an ailing grandmother, whose Social Security check wouldn't stretch quite far enough to cover groceries and property taxes, weeping bitterly as her home is sold on the courthouse steps.
"Essentially the law was kind of designed to avoid people over 65 being forced from their homes [by tax foreclosure]," says Charles Gilliland, a professor at Texas A&M University's Real Estate Center.
That hasn't stopped Phillips, a wealthy real estate investor with a 16-acre spread next door to George W. Bush and Tom Hicks in Preston Hollow, from taking advantage. According to Dallas County tax records, he hasn't paid any property taxes on his $25.7 million estate since 2005. His total outstanding balance -- money that under ordinary circumstances would be going to fund Dallas schools, cops, libraries and Parkland Hospital -- is $3.3 million. And all he had to do was file a tax-deferral affidavit with the Dallas County Appraisal District swearing that he's over 65, and his 18,000-square-foot home is his homestead, and he doesn't want to pay taxes on it right now.
The local governments that rely on this money aren't completely out of luck. Phillips' deferment will expire as soon as he sells the house or dies, in which case the county will be free to sell it on the courthouse steps if his estate doesn't cover the bill. And Phillips is being charged 8 percent annual interest plus various penalties and fees, an expensive proposition unless he has a killer investment strategy and/or doesn't care what property taxes he'll owe when he's dead.
There doesn't seem to be any data on how many senior citizens in Texas use property tax deferrals out of necessity versus just don't feel like paying their property taxes, but Gilliland says that the local tax collectors he talks to are concerned that an aging population and their increasing use of tax deferrals could affect revenues. We're waiting on data from DCAD, but the number of tax-deferred properties in Travis County increased tenfold between 2001 and 2012, from 286 to 2,867.
Nor, Gilliland says, does there appear to be any appetite for amending the law to make it tougher for people like Phillips to use. No reasonably intelligent lawmaker is going to push for a measure that is guaranteed to wind up in an attack ad featuring a grandmother eating cat food. Neither are the members of the Texas Legislature.
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