What happens to unclaimed property-tax overpayments in Texas after the three-year refund period ends?

Plain-English summary

Travis County collects property taxes for itself and for several other taxing units. When a taxpayer overpays or pays in error, the unclaimed money goes into a separate escrow account, and over the years that account had piled up. The county auditor asked the Attorney General what happens to that money after the window for a taxpayer to claim a refund closes: does it escheat to the state, or does it belong to the county and, if so, can it go into the county's general fund?

The Attorney General concluded the money belongs to the county, not the state. Tax Code section 31.11 lets a taxpayer apply for a refund of an overpayment or erroneous payment, but subsection (c) says the application must be made within three years of the payment "or the taxpayer waives the right to the refund." Nothing in the Tax Code, and no prior court decision or AG opinion, said what happens to the money after that. The office turned to the Texas Unclaimed Property Law (Property Code chapters 71 through 75) for the principle, not because it controlled directly, but because it supplied the rule about the state's escheat interest. Under the case law, the state's interest in abandoned property is only as great as the original owner's interest. Once the taxpayer waives the right to the refund after three years, the owner has no interest left, so the state has nothing to claim either.

That left the funds with no claimant except the county that was holding them. The office noted that counties had long retained unclaimed overpayments as a matter of standard, unchallenged practice, and concluded that, absent any authority to the contrary, a county may keep them. The money may be moved into the county's general fund under article VIII, section 9 of the Texas Constitution, which lets a county put all tax money it collects into one general fund regardless of purpose or source. The office added an important limit in a footnote: that constitutional provision covers only the county's own tax collections, not money the county collected on behalf of other political subdivisions.

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The Tax Code refund provisions in section 31.11 and the Property Code unclaimed-property chapters have been amended since 1993, and later authority may address the disposition of unclaimed tax overpayments more directly; confirm the current statutes and any later opinions before relying on anything described here.

Background and statutory framework

The mechanics start with Tax Code section 31.01, under which Travis County collects taxes for itself and other units, and section 31.11, which governs refunds. Section 31.11(a) lets a taxpayer apply to the collector for a refund of an overpayment or erroneous payment; the collector refunds it from current collections or appropriated funds once the unit's auditor (and, for refunds over $500, the governing body) determines the payment was excessive or erroneous. Section 31.11(c), as amended that year (Acts 1993, 73d Leg., ch. 198, § 1), set the deadline: the application "must be made within three years after the date of the payment or the taxpayer waives the right to the refund."

The Tax Code stops there. It does not say where the unclaimed money goes after three years, and the office found no court decision or prior opinion on the point. So it borrowed the analytic principle from the Texas Unclaimed Property Law. Chapter 71 handles property of a person who dies intestate without heirs, which escheats to and vests in the state under Property Code section 71.001. Chapters 72 and 74 handle abandoned property held by someone other than a banking organization or life insurance company; section 72.101(a) presumes personal property abandoned after three years if the owner is unknown to the holder and no claim or act of ownership has occurred. A footnote observed that Travis County qualified as a "holder" under section 72.001(e) before the reclamation period expired.

The decisive idea came from two Texas Court of Civil Appeals decisions. In State v. Texas Electric Service Co., the court held the state's interest in abandoned funds is only as great as the interest held by the original owner. In Central Power & Light Co. v. State, the court reasoned that once the owner's rights to the property cease, the state is left without an interest to claim. Applying that here: once the taxpayer waives the refund right after three years, the owner's interest is gone, so the state's derivative escheat interest is gone too. With neither the owner nor the state able to assert a claim, the money may be retained by the county. The office reinforced the conclusion with the practical observation that counties had long retained such overpayments without challenge, and pointed to article VIII, section 9 of the Texas Constitution for the authority to deposit the money in the general fund, limited to the county's own tax money.

Common questions

Do unclaimed property-tax overpayments escheat to the State of Texas?
No. The Attorney General concluded the state's escheat interest is only as large as the original owner's interest, and once the taxpayer waives the refund right after three years, there is no owner interest left for the state to inherit. The funds do not escheat.

Why does the three-year deadline matter so much?
Because Tax Code section 31.11(c) says a refund application must be made within three years "or the taxpayer waives the right to the refund." After that waiver, the taxpayer has no claim, which is what cuts off the state's escheat claim as well.

Who gets the money?
The county that collected and held it. With neither the taxpayer nor the state able to assert a claim, the office concluded that, absent contrary authority, the county may keep the unclaimed overpayments.

Can the county move the money into its general fund?
Yes, under article VIII, section 9 of the Texas Constitution, which lets a county pool all the tax money it collects into one general fund. But the office cautioned this reaches only the county's own tax collections, not amounts the county collected for other taxing units.

Citations

Constitutional and statutory provisions discussed:

• Tex. Tax Code § 31.01 (county collection of taxes for itself and other units)
• Tex. Tax Code § 31.11 (refunds of overpayments; three-year application deadline)
• Tex. Prop. Code § 71.001 (escheat of property of one who dies intestate without heirs)
• Tex. Prop. Code § 72.001, § 72.101 (abandoned personal property; "holder"; three-year presumption)
• Tex. Const. art. VIII, § 9 (county may pool collected tax money in one general fund)

Cases discussed:

• State v. Texas Electric Service Co., 488 S.W.2d 878 (Tex. Civ. App.—Fort Worth 1972, no writ)
• Central Power & Light Co. v. State, 410 S.W.2d 18 (Tex. Civ. App.—Corpus Christi 1966, writ ref'd n.r.e.)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0258
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1993/dm0258.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

September 28, 1993

Susan A. Spataro, CPA, CMA
Travis County Auditor
P.O. Box 1748
Austin, Texas 78767

Opinion No. DM-258

Re: Whether unclaimed overpayments on property taxes escheat to the state or do they belong to Travis County after three years

Dear Ms. Spataro:

Travis County collects property taxes for itself as well as several other taxing units pursuant to the Tax Code section 31.01. In the event of overpayment or erroneous payment of taxes, unclaimed funds are deposited in a separate escrow account. You express concern that over a significant period of time, the amount of funds in the account has accumulated. Refunds consisting of overpayments or erroneous payments are addressed by section 31.11 of the code which provides as follows:

(a) If a taxpayer applies to the tax collector of a taxing unit for a refund of an overpayment or erroneous payment of taxes and the auditor for the unit determines that the payment was erroneous or excessive, the tax collector shall refund the amount of the excessive or erroneous payment from available current tax collections or from funds appropriated by the unit for making refunds. However, if the amount of the refund exceeds $500, the collector may not make the refund unless the governing body of the taxing unit also determines that the payment was erroneous or excessive and approves the refund.
. . .
(c) An application for a refund must be made within three years after the date of the payment or the taxpayer waives the right to the refund.

Acts 1993, 73d Leg., ch. 198, § 1 (emphasis added). Your inquiry is concerned with the disposition of the funds once the three year time period for reclamation has lapsed. You specifically ask whether the unclaimed overpayments belong to Travis County and if so, whether they may be legally transferred into the county's general fund.

Our research indicates that the Tax Code does not address the disposition of the funds following the reclamation period, nor do any prior judicial or attorney general opinions. However, chapters 71 through 75 of the Property Code, also known as the Texas Unclaimed Property Law, address the escheat of personal property held by a person other than a banking organization or life insurance company. Chapter 71 addresses escheat in the context of an individual that dies intestate and without heirs. In such an instance the real and personal property previously held would escheat to and vest in the state. Prop. Code § 71.001.

Chapters 72 and 74 address abandoned unclaimed property and the procedures necessary for escheat to the state. Chapter 72 specifically applies to personal property held by a person other than a banking organization or life insurance company,[1] and provides in pertinent part:

personal property is presumed abandoned if, for longer than three years:
(1) the existence and location of the owner of the property is unknown to the holder of the property;[2] and
(2) according to the knowledge and records of the holder of the property, a claim to the property has not been asserted or an act of ownership of the property has not been exercised.

Id. § 72.101(a) (footnote added). While the state does possess a property interest in abandoned funds, that interest is only as great as the interest held by the original owner of the funds. State v. Texas Elec. Service Co., 488 S.W.2d 878, 881 (Tex. Civ. App.—Fort Worth 1972, no writ). As section 72.101 provides, the original owner waives all rights to the property once the three year time period has lapsed. Once the owner's rights to the property cease to exist, the state is left without an interest to claim. Central Power & Light Co. v. State, 410 S.W.2d 18, 26 (Tex. Civ. App.—Corpus Christi 1966, writ ref'd n.r.e.). Similarly, the original owner of an overpayment of property taxes waives his right to claim an interest in the funds once the three year reclamation period has lapsed. Hence, the state also loses any right to assert a claim to the funds at the end of the three year period. In the absence of an interest which may be asserted by the original owner of the funds or the state, such funds may be retained by the county.

For a substantial amount of time, counties levying such a tax have exercised their discretion in retaining unclaimed overpayments. Our research indicates that such exercise of discretion has been unchallenged. Thus, it is our understanding that it has been standard practice for counties to retain unclaimed overpayments collected at a local level. In the absence of authority to the contrary, we conclude that local counties may exercise their discretion in retaining possession of unclaimed overpayments on property taxes; furthermore, such funds may be transferred into the counties' general fund accounts pursuant to article VIII, section 9 of the Texas Constitution.[3]

SUMMARY

In the absence of authority to the contrary, unclaimed overpayments on property taxes belong to the county once the three year period of reclamation has lapsed under section 31.11 of the Tax Code. The funds may be transferred into the county's general fund account pursuant to article VIII, section 9 of the Texas Constitution.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Attorney General for Litigation

RENEA HICKS
State Solicitor

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Toya C. Cook
Assistant Attorney General

[1] Chapter 73 addresses the escheat of inactive accounts held by banking organizations. Id. §§ 73.001 - 73.503.

[2] For purposes of chapter 72, a holder is defined as a person who is in possession of property that belongs to another, a trustee, or is indebted to another on an obligation. Id. § 72.001(e). We conclude that Travis County meets the requirements of a holder prior to the expiration of the three year reclamation period.

[3] Article VIII, section 9 of the Texas Constitution states that "[a]ny county may put all tax money collected by the county into one general fund without regard to the purpose or source of each tax." We note that this provision only pertains to collections of county tax, not collections for other political subdivisions.