bill capping appraisal increases at 3.5 percent for all property

The text as introduced · 3,008 words

89R2079 LHC-F

By: Vasut
H.B. No. 375

A BILL TO BE ENTITLED

AN ACT

relating to a limitation on increases in the appraised value of real

property for ad valorem tax purposes.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. (a) Section 1.12(d), Tax Code, as amended by

Section 4.01, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd

Called Session, 2023, and effective until January 1, 2027, is

amended to read as follows:

(d) For purposes of this section, the appraisal ratio of

property to which Section 23.23 [ or 23.231 ] applies is the ratio of

the property's market value as determined by the appraisal district

or appraisal review board, as applicable, to the market value of the

property according to law. The appraisal ratio is not calculated

according to the appraised value of the property as limited by

Section 23.23 [ or 23.231 ].

(b) Section 4.02, Chapter 1 (S.B. 2), Acts of the 88th

Legislature, 2nd Called Session, 2023, which amended Section

1.12(d), Tax Code, effective January 1, 2027, is repealed.

SECTION 2. The heading to Section 23.23, Tax Code, is

amended to read as follows:

Sec. 23.23. LIMITATION ON APPRAISED VALUE OF REAL PROPERTY

[ RESIDENCE HOMESTEAD ].

SECTION 3. Section 23.23, Tax Code, is amended by amending

Subsections (a), (b), (c), and (e) and adding Subsections (c-2),

(c-3), (c-4), and (h) to read as follows:

(a) Notwithstanding the requirements of Section 25.18 and

regardless of whether the appraisal office has appraised the

property and determined the market value of the property for the tax

year, an appraisal office may increase the appraised value of real

property [ a residence homestead ] for a tax year to an amount not to

exceed the lesser of:

(1) the market value of the property for the most

recent tax year that the market value was determined by the

appraisal office; or

(2) the sum of:

(A) 3.5 [ 10 ] percent of the appraised value of

the property for the preceding tax year;

(B) the appraised value of the property for the

preceding tax year; and

(C) the market value of all new improvements to

the property.

(b) When appraising real property [ a residence homestead ],

the chief appraiser shall:

(1) appraise the property at its market value; and

(2) include in the appraisal records both the market

value of the property and the amount computed under Subsection

(a)(2).

(c) The limitation provided by Subsection (a) takes effect

on January 1 of the tax year following the first tax year in which

the owner owns the property on January 1 [ as to a residence

homestead on January 1 of the tax year following the first tax year

the owner qualifies the property for an exemption under Section

11.13 ]. Except as provided by Subsection (c-2) or (c-3), the [ The ]

limitation expires on January 1 of the first tax year following the

year in which [ that neither ] the owner of the property ceases to own

the property.

(c-2) If property subject to a limitation under this section

qualifies for an exemption under Section 11.13 when the ownership

of the property is transferred to the owner's spouse or surviving

spouse, the limitation expires on January 1 of the first tax year

following the year in which [ when the limitation took effect nor ]

the owner's spouse or surviving spouse ceases to own the property,

unless the limitation is further continued under this subsection on

the subsequent transfer to a spouse or surviving spouse [ qualifies

for an exemption under Section 11.13 ].

(c-3) If property subject to a limitation under Subsection

(a), other than a residence homestead, is owned by two or more

persons, the limitation expires on January 1 of the first tax year

following the year in which the ownership of at least a 50 percent

interest in the property is sold or otherwise transferred.

(c-4) For purposes of applying the limitation provided by

this section, a person who acquired real property in a tax year

before the 2025 tax year, other than property that qualified as the

residence homestead of the person under Section 11.13 in the 2025

tax year, is considered to have acquired the property on January 1,

2025.

(e) In this section, "new improvement" means an improvement

to real property [ a residence homestead ] made after the most recent

appraisal of the property that increases the market value of the

property and the value of which is not included in the appraised

value of the property for the preceding tax year. The term does not

include repairs to or ordinary maintenance of an existing structure

or the grounds or another feature of the property.

(h) In this section, "real property" includes a

manufactured home as that term is defined by Section 1201.003,

Occupations Code, that qualifies as a residence homestead under

Section 11.13 of this code, regardless of whether the owner of the

manufactured home elects to treat the manufactured home as real

property under Section 1201.2055, Occupations Code.

SECTION 4. (a) Sections 25.19(b) and (g), Tax Code, as

amended by Section 4.04, Chapter 1 (S.B. 2), Acts of the 88th

Legislature, 2nd Called Session, 2023, and effective until January

1, 2027, are amended to read as follows:

(b) The chief appraiser shall separate real from personal

property and include in the notice for each:

(1) a list of the taxing units in which the property is

taxable;

(2) the appraised value of the property in the

preceding year;

(3) the taxable value of the property in the preceding

year for each taxing unit taxing the property;

(4) the appraised value of the property for the

current year, the kind and amount of each exemption and partial

exemption, if any, approved for the property for the current year

and for the preceding year, and, if an exemption or partial

exemption that was approved for the preceding year was canceled or

reduced for the current year, the amount of the exemption or partial

exemption canceled or reduced;

[ (4-a) a statement of whether the property qualifies

for the circuit breaker limitation on appraised value provided by

Section 23.231; ]

(5) in italic typeface, the following

statement: "The Texas Legislature does not set the amount of your

local taxes. Your property tax burden is decided by your locally

elected officials, and all inquiries concerning your taxes should

be directed to those officials";

(6) a detailed explanation of the time and procedure

for protesting the value;

(7) the date and place the appraisal review board will

begin hearing protests;

(8) an explanation of the availability and purpose of

an informal conference with the appraisal office before a hearing

on a protest; and

(9) a brief explanation that the governing body of

each taxing unit decides whether or not taxes on the property will

increase and the appraisal district only determines the value of

the property.

(g) By April 1 or as soon thereafter as practicable if the

property is a single-family residence that qualifies for an

exemption under Section 11.13, or by May 1 or as soon thereafter as

practicable in connection with any other property, the chief

appraiser shall deliver a written notice to the owner of each

property not included in a notice required to be delivered under

Subsection (a), if the property was reappraised in the current tax

year, if the ownership of the property changed during the preceding

year, or if the property owner or the agent of a property owner

authorized under Section 1.111 makes a written request for the

notice. The chief appraiser shall separate real from personal

property and include in the notice for each property:

(1) the appraised value of the property in the

preceding year;

(2) the appraised value of the property for the

current year and the kind of each partial exemption, if any,

approved for the current year;

[ (2-a) a statement of whether the property qualifies

for the circuit breaker limitation on appraised value provided by

Section 23.231; ]

(3) a detailed explanation of the time and procedure

for protesting the value; and

(4) the date and place the appraisal review board will

begin hearing protests.

(b) Section 4.05, Chapter 1 (S.B. 2), Acts of the 88th

Legislature, 2nd Called Session, 2023, which amended Sections

25.19(b) and (g), Tax Code, effective January 1, 2027, is repealed.

SECTION 5. (a) Section 41.41(a), Tax Code, as amended by

Section 4.07, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd

Called Session, 2023, and effective until January 1, 2027, is

amended to read as follows:

(a) A property owner is entitled to protest before the

appraisal review board the following actions:

(1) determination of the appraised value of the

owner's property or, in the case of land appraised as provided by

Subchapter C, D, E, or H, Chapter 23, determination of its appraised

or market value;

(2) unequal appraisal of the owner's property;

(3) inclusion of the owner's property on the appraisal

records;

(4) denial to the property owner in whole or in part of

a partial exemption;

[ (4-a) determination that the owner's property does

not qualify for the circuit breaker limitation on appraised value

provided by Section 23.231; ]

(5) determination that the owner's land does not

qualify for appraisal as provided by Subchapter C, D, E, or H,

Chapter 23;

(6) identification of the taxing units in which the

owner's property is taxable in the case of the appraisal district's

appraisal roll;

(7) determination that the property owner is the owner

of property;

(8) a determination that a change in use of land

appraised under Subchapter C, D, E, or H, Chapter 23, has occurred;

or

(9) any other action of the chief appraiser, appraisal

district, or appraisal review board that applies to and adversely

affects the property owner.

(b) Section 4.08, Chapter 1 (S.B. 2), Acts of the 88th

Legislature, 2nd Called Session, 2023, which amended Section

41.41(a), Tax Code, effective January 1, 2027, is repealed.

SECTION 6. (a) Section 42.26(d), Tax Code, as amended by

Section 4.09, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd

Called Session, 2023, and effective until January 1, 2027, is

amended to read as follows:

(d) For purposes of this section, the value of the property

subject to the suit and the value of a comparable property or sample

property that is used for comparison must be the market value

determined by the appraisal district when the property is subject

to the limitation on appraised value imposed by Section 23.23 [ or

23.231 ].

(b) Section 4.10, Chapter 1 (S.B. 2), Acts of the 88th

Legislature, 2nd Called Session, 2023, which amended Section

42.26(d), Tax Code, effective January 1, 2027, is repealed.

SECTION 7. (a) Sections 403.302(d) and (i), Government

Code, as amended by Section 4.11, Chapter 1 (S.B. 2), Acts of the

88th Legislature, 2nd Called Session, 2023, and effective until

January 1, 2027, are amended to read as follows:

(d) For the purposes of this section, "taxable value" means

the market value of all taxable property less:

(1) the total dollar amount of any residence homestead

exemptions lawfully granted under Section 11.13(b) or (c), Tax

Code, in the year that is the subject of the study for each school

district;

(2) one-half of the total dollar amount of any

residence homestead exemptions granted under Section 11.13(n), Tax

Code, in the year that is the subject of the study for each school

district;

(3) the total dollar amount of any exemptions granted

before May 31, 1993, within a reinvestment zone under agreements

authorized by Chapter 312, Tax Code;

(4) subject to Subsection (e), the total dollar amount

of any captured appraised value of property that:

(A) is within a reinvestment zone created on or

before May 31, 1999, or is proposed to be included within the

boundaries of a reinvestment zone as the boundaries of the zone and

the proposed portion of tax increment paid into the tax increment

fund by a school district are described in a written notification

provided by the municipality or the board of directors of the zone

to the governing bodies of the other taxing units in the manner

provided by former Section 311.003(e), Tax Code, before May 31,

1999, and within the boundaries of the zone as those boundaries

existed on September 1, 1999, including subsequent improvements to

the property regardless of when made;

(B) generates taxes paid into a tax increment

fund created under Chapter 311, Tax Code, under a reinvestment zone

financing plan approved under Section 311.011(d), Tax Code, on or

before September 1, 1999; and

(C) is eligible for tax increment financing under

Chapter 311, Tax Code;

(5) the total dollar amount of any captured appraised

value of property that:

(A) is within a reinvestment zone:

(i) created on or before December 31, 2008,

by a municipality with a population of less than 18,000; and

(ii) the project plan for which includes

the alteration, remodeling, repair, or reconstruction of a

structure that is included on the National Register of Historic

Places and requires that a portion of the tax increment of the zone

be used for the improvement or construction of related facilities

or for affordable housing;

(B) generates school district taxes that are paid

into a tax increment fund created under Chapter 311, Tax Code; and

(C) is eligible for tax increment financing under

Chapter 311, Tax Code;

(6) the total dollar amount of any exemptions granted

under Section 11.251 or 11.253, Tax Code;

(7) the difference between the comptroller's estimate

of the market value and the productivity value of land that

qualifies for appraisal on the basis of its productive capacity,

except that the productivity value estimated by the comptroller may

not exceed the fair market value of the land;

(8) the portion of the appraised value of residence

homesteads of individuals who receive a tax limitation under

Section 11.26, Tax Code, on which school district taxes are not

imposed in the year that is the subject of the study, calculated as

if the residence homesteads were appraised at the full value

required by law;

(9) a portion of the market value of property not

otherwise fully taxable by the district at market value because of

action required by statute or the constitution of this state, other

than Section 11.311, Tax Code, that, if the tax rate adopted by the

district is applied to it, produces an amount equal to the

difference between the tax that the district would have imposed on

the property if the property were fully taxable at market value and

the tax that the district is actually authorized to impose on the

property, if this subsection does not otherwise require that

portion to be deducted;

(10) the market value of all tangible personal

property, other than manufactured homes, owned by a family or

individual and not held or used for the production of income;

(11) the appraised value of property the collection of

delinquent taxes on which is deferred under Section 33.06, Tax

Code;

(12) the portion of the appraised value of property

the collection of delinquent taxes on which is deferred under

Section 33.065, Tax Code;

(13) the amount by which the market value of property

to which Section 23.23 [ or 23.231 ], Tax Code, applies exceeds the

appraised value of that property as calculated under that section

[ Section 23.23 or 23.231, Tax Code, as applicable ]; and

(14) the total dollar amount of any exemptions granted

under Section 11.35, Tax Code.

(i) If the comptroller determines in the study that the

market value of property in a school district as determined by the

appraisal district that appraises property for the school district,

less the total of the amounts and values listed in Subsection (d) as

determined by that appraisal district, is valid, the comptroller,

in determining the taxable value of property in the school district

under Subsection (d), shall for purposes of Subsection (d)(13)

subtract from the market value as determined by the appraisal

district of properties to which Section 23.23 [ or 23.231 ], Tax

Code, applies the amount by which that amount exceeds the appraised

value of those properties as calculated by the appraisal district

under Section 23.23 [ or 23.231 ], Tax Code[ , as applicable ]. If the

comptroller determines in the study that the market value of

property in a school district as determined by the appraisal

district that appraises property for the school district, less the

total of the amounts and values listed in Subsection (d) as

determined by that appraisal district, is not valid, the

comptroller, in determining the taxable value of property in the

school district under Subsection (d), shall for purposes of

Subsection (d)(13) subtract from the market value as estimated by

the comptroller of properties to which Section 23.23 [ or 23.231 ],

Tax Code, applies the amount by which that amount exceeds the

appraised value of those properties as calculated by the appraisal

district under Section 23.23 [ or 23.231 ], Tax Code[ , as

applicable ].

(b) Section 4.12, Chapter 1 (S.B. 2), Acts of the 88th

Legislature, 2nd Called Session, 2023, which amended Sections

403.302(d) and (i), Government Code, effective January 1, 2027, is

repealed.

SECTION 8. Sections 23.23(c-1), 23.231, and 25.19(o), Tax

Code, are repealed.

SECTION 9. This Act applies only to the appraisal for ad

valorem tax purposes of real property for a tax year that begins on

or after the effective date of this Act.

SECTION 10. This Act takes effect January 1, 2026, but only

if the constitutional amendment proposed by the 89th Legislature,

Regular Session, 2025, to authorize the legislature to limit the

maximum appraised value of real property for ad valorem tax

purposes to 103.5 percent or more of the appraised value of the

property for the preceding tax year is approved by the voters. If

that amendment is not approved by the voters, this Act has no

effect.