One of our readers recently supplied a story tip that Lewisville City Councilman John Gorena, who is up for re-election this year, doesnâ€™t pay his business personal property (BPP) taxes as required by state law. Because that was a serious charge, and this writer is not by any stretch a property tax expert, we decided to investigate and make sure we had all of the facts.
Unfortunately, what we found is disappointing; the accusation is true. John Gorena, who operates a full-time computer-related business, JMG Enterprises, out of his home is required to render a personal property valuation and pay business personal property taxes on the equipment used in his business. Although he claims to have been in business since 1982, and filed an assumed name certificate with Denton County as early as 1998, the Denton County tax assessorâ€™s office has no account of Gorena or JMG filing a rendition or paying BPP taxes.
What is Business Personal Property Tax? Most Texans are familiar with real estate property tax, which is an ad valorem (based on value) tax on our land and buildings. In addition to real property tax, businesses in Texas are required to render (report the value of) and pay a tax on all â€śbusiness personal propertyâ€ť (BPP) used in the course of their business. Of course â€śpersonal propertyâ€ť is a bit of a misnomer, since itâ€™s really business property. In addition to things like equipment and fixtures, businesses must also render and pay tax on inventory of goods for sale. Each yearâ€™s rendition is due on April 15th, and the business must report what it physically had in possession on January 1st. (This is the reason, a lot of car dealers have big sales before New Years â€“ to get rid of inventory they would have to pay taxes on). The appraisal district certifies values during the summer, and taxing districts pass their rates in the fall. The tax is then due on January 31st of the following year.
Although many entrepreneurs start home-based businesses and are unaware of the law or may not be notified by the County, they are still responsible to file BPP renditions. Denton County uses a variety of means to find new businesses and send them rendition notices, but may not always catch a new business that is located in someoneâ€™s home. The law doesnâ€™t set a minimum amount of BPP before reporting, and one representative of the Denton Central Appraisal district told us that even if one only had $50 worth of property used on an occasional basis, a business owner must still file and pay.
What Gorena Might Owe In 2009, the total tax rate in Lewisville for Gorenaâ€™s address on Creekwood Lane was about $2.10 per $100. When the appraisal district fails to receive a rendition from a business, they use comparable businesses to estimate a value. According to the Denton Central Appraisal District, most home based businesses are typically valued under $2,000 in BPP. Since Gorena provides website design and hosting services, as well as selling computers, we think at a minimum, the business must have desktop or laptop computers, possibly servers, desks, chairs, tools, and miscellaneous office supplies and equipment. Gorena is also known to drive an SUV with JMG Enterprises decals on it, but state law now allows the exemption of one vehicle if it is also used for personal use. Weâ€™re going to assume that Gorena uses the vehicle for personal use too.
JMGâ€™s website lists website hosting services, and implies ownership of servers: â€śâ€¦This is hosted by a company (like JMG Enterprisesâ„˘) that leases space to you on their servers for your webpage, e-mail, etc... â€ś Webservers of the quality used in commercial hosting can cost thousands, but itâ€™s possible that JMG either outsources or resells hosting provided by others, or might have the servers leased or co-located with a datacenter elsewhere. We checked the Dallas Central Appraisal District and Tarrant Appraisal District and found no records there.
Taxing Entities and Rates for 2009: â€˘ City of Lewisville: .44021 â€˘ Lewisville ISD: 1.40870 â€˘ Denton County: .24980 â€˘ Total Combined Rate: 2.09871
If we assume conservatively that a comparable businessâ€™ BPP value was $2,000, then for 2009, it would have owed only $41.97. A penalty of 10% is assessed if a rendition is not filed, so $46.17 would have been the total. Of that figure, $9.68 would have gone to the City of Lewisville.
Update: 3/17/2010 After this story broke, Gorena did contact DCAD and file a rendition. He told the Council Monday night that the amount was [less than $1000 - we don't have the exact quote], resulting in a tax of about $20. Gorena's BPP does now show up in the DentonCAD database with a value of $6,350. With this valuation, we estimate $189.68 + 10% penalty of $18.97 for a total of $208.65 for 2009. 2008 would have been a comparable amount based on that year's tax rates.
Tax rates and equipment owned would have varied over the 28 years that Gorena has been in business.
Why It Matters Citizens expect their elected officials to play by the rules. In John Gorenaâ€™s role as a City Councilman, his vote was one of 5 that set the very tax rate that businesses in the city must pay, but that he didnâ€™t feel it necessary to pay.
We support entrepreneurship and small business, and fully understand the difficulties of compliance with all of the various tax codes that businesses are subject to at the federal, state, and local levels. It is understandable that someone could be in business for a short time and not realize that BPP taxes are due.
But in John Gorenaâ€™s case, he canâ€™t claim ignorance of the law; in 2007, he went on record at a Lewisville City Council meeting supporting a personal property abatement for a local business, which he then further explained in his blog:
â€śDuring the meeting, I did not remember being for an abatement for real property (appraised land value). What I actually supported was not taxing a company for personal property (what it has in storage). To me these are two entirely different things and that is why I did not relate the two. To me that's like taxing what is in your pockets. It does not matter if they store cow manure or gold bars. Yes, I do not think we need to tax the worth of what is stored in the buildings. What is the difference if a company had ten thousand dollars is bills or ten thousand dollars of widgets on the floor of the warehouse? It is still their money no matter what form it is in.â€ť 9/17/2007 - http://www.gorena.org/lv-abatements.htm
While it is understandable to have philosophical objections with certain types of tax, or to think that rates are too high, or to dislike the governmental body levying a tax, we canâ€™t simply choose not to pay. By his words in explaining BPP, Gorena shows that at least as early as 2007, he understood the concept. Gorena first ran unsuccessfully for City Council in 2008 against incumbent Greg Tierney, then won a runoff in 2009 for the open seat vacated by Mayor Dean Ueckert.
Removal from Office is Possible Although the amounts in question are low, there is principle involved. As John Gorena likes to preach on his favorite topic of immigration, this is about right and wrong, legal and illegal.
The Lewisville City Charter is in fact quite clear in that it expects and requires Lewisville Councilmen to pay their taxes. Section 3.02 of the Lewisville Charter says that
â€śThe mayor and each member of the city council, in addition to having such other qualifications as prescribed by law, â€¦shall not be in arrears in the payment of any taxes or other liabilities due to the cityâ€ť
In fact, the charter even allows the City Council to remove Gorena from the Council and declare a vacancy in the office. If Gorenaâ€™s violation were an immigration violation, then by his own standards, Lewisville Police would have to investigate. But in this case, given that Gorena is standing for re-election, the council is unlikely to remove him from office, since voters will have that opportunity.
What Gorena Says When contacted for comment, Gorena admitted that he doesnâ€™t render business personal property, but got furious and denied that he had to, saying that all he has is a personal computer that he uses from home. We asked if he understood what business personal property is, and he said he did, but changed the subject, saying: â€˘ We have no business asking about his business. â€˘ He says he carries no inventory. â€˘ This writer â€śis evil and will burn in hell some dayâ€ť, and heâ€™ll be praying for me. â€˘ He is not doing anything wrong. â€˘ He wants no contact with us and will sue for libel and slander â€˘ He is getting ready to change occupations soon, and says heâ€™ll keep doing what heâ€™s doing, and collecting sales taxes.
Coming Clean At a minimum, Gorena should admit his error and come current on his business personal property taxes. When we spoke to the Denton Central Appraisal District, the representative recommended that he immediately render for his business personal property by the deadline of April 15th. Gorena should admit to his mistake and commit to his constituents that he will render and pay his taxes in the future.
We know that John Gorena is generally an honorable man who has in the past owned up to his mistakes, so we are confident that he will eventually rectify the error.
Improving the System Ideally, we think small businesses should have a certain exemption level before being required to file or pay BPP. If in-home businesses are required to pay, then the County should send out rendering forms to each business that has an assumed name on file with the County, as well as corporations with addresses in the county and individuals holding professional licenses. It is very easy be in business without realizing one must pay BPP. It is not a lot of tax, but the cost of compliance is relatively high, and can be daunting if one is not familiar with how the process works.
Our Research When it comes to serious allegations like this, WhosPlayin is committed to getting to the truth of the matter. For this reason, we did diligent research both online and by phone. We looked for evidence that might exonerate Mr. Gorena, and we had at least 3 conversations with Denton Central Appraisal District employees to confirm tax law, and have them double-check that Gorena was not in their system. We then contacted Gorena to give him a chance to respond. Nevertheless, it is understandable in political situations like this for one to be skeptical when a blog that has been critical of the policies of an elected official publishes an article like this. For this reason, weâ€™ve attached our notes.
I am understanding of the difficulty in complying with complex tax laws as I state above. I understand that people will always differ over the value of things, and the classification of income. There will be legitimate cases where people believe they don't owe taxes and they do. There will also be those who claim ignorance or misunderstanding but know full well who they are cheating.
The difference here is that Geithner is not somebody who I am asked to vote for. My voice in calling out Geithner is hardly needed, since we have mainstream news media and a rabid right-wing attack machine who were more than happy to make issue of it.
Given that only a few media outlets watch the Lewisville City Council, it matters to us. Keep in mind that Gorena's vote was one of those that set the tax rate. His claim of ignorance of the law speaks to his general lack of attention to detail when it comes to his duties on the City Council. Ultimately voters will decide whether it is important, but I believe it is.
Posted: 2010/3/15 13:51 Updated: 2010/3/15 13:56
Re: Councilman Gorena Fails to File or Pay Business Prope...
That's a pretty weak argument and completely transparent attack based on your bias.
Rules for Radicals strikes again.
If only you were honest in your hate of non-Marxist flavored public servants. Facts are stubborn things.
Rule 5: Ridicule is manâ€™s most potent weapon. Itâ€™s hard to counterattack ridicule, and it infuriates the opposition, which then reacts to your advantage.
Rule 8: Keep the pressure on. Use different tactics and actions and use all events of the period for your purpose. â€śThe major premise for tactics is the development of operations that will maintain a constant pressure upon the opposition. It is this that will cause the opposition to react to your advantage.â€ť
Rule 11: Pick the target, freeze it, personalize it, polarize it. Donâ€™t try to attack abstract corporations or bureaucracies. Identify a responsible individual. Ignore attempts to shift or spread the blame.
Just as a clarification, my $46.17 figure was based on 2009 rates plus 10% penalty for a $2,000 valuation. Of course that $2,000 valuation is just an educated guess of value. If Gorena is saying $20 for 2010, then his valuation after depreciation would be somewhere in the neighborhood of $1,000. We're not going to dispute that. Once someone files their rendition with the appraisal district, the values, although publicly available, are between the district and the business owner - reported on the honor system. Gorena won't pay a penalty for 2010 taxes as long as he gets his rendition in by April 15th.
It will be up to the appraisal district or the tax assessor-collector to decide whether to seek valuations and charge back taxes for the past 5 years of the statute of limitations. If the values are similar, it's probably not worth their time, and Gorena has suffered enough for the error.
OK, I don't want to dwell on this, but notice how Gorena told the Council and the media all day Monday that his tax liability would only be about $20? Well, if this latest valuation, now shown in the DentonCAD database is correct, he could owe a lot more.
The valuation given by DentonCAD for 2008, 2009 = $6,350.
That would be about $189.68 + 10% penalty of $18.97 = $208.65 for 2008 and again for 2009
That means $417.30 or that Gorena only misstated his liability by a factor of 2,086%
Of course, we haven't verified these numbers, and they don't jive with what Gorena said in the Council meeting, so take it for what it's worth.