bill tightens the tax break for public facility corporation apartments

The text as introduced · 1,572 words

89R9609 JAM-D

By: Gates
H.B. No. 4307

A BILL TO BE ENTITLED

AN ACT

relating to multifamily residential developments financed, owned,

or operated by public facility corporations.

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

SECTION 1. Section 303.0421(b), Local Government Code, is

amended to read as follows:

(b) Notwithstanding Section 303.042(c) and subject to

Subsections (c) and (d) of this section, an exemption under Section

303.042(c) for a multifamily residential development to which

Subsection (a) applies is available only if:

(1) the requirements under Sections [ Section ]

303.0425 and 303.0426 are met;

(2) at least:

(A) 10 percent of the units in the multifamily

residential development are reserved for occupancy as lower income

housing units, as defined under Section 303.0425; and

(B) 40 percent of the units in the multifamily

residential development are reserved for occupancy as moderate

income housing units, as defined under Section 303.0425;

(3) the corporation delivers to the presiding officer

of the governing body of each taxing unit in which the development

is to be located written notice of the development, at least 30 days

before the date:

(A) the corporation takes action to approve a new

multifamily residential development or the acquisition of an

occupied multifamily residential development; and

(B) of any public hearing required to be held

under this section;

(4) if a majority of the members of the board are not

elected officials, the development is approved by the governing

body of the municipality in which the development is located or, if

the development is not located in a municipality, the county in

which the development is located;

(5) for an occupied multifamily residential

development that is acquired by a corporation and not otherwise

subject to a land use restriction agreement under Section 2306.185,

Government Code:

(A) not less than 15 percent of the total gross

cost of the existing development, as shown in the settlement

statement, is expended on rehabilitating, renovating,

reconstructing, or repairing the development, with initial

expenditures and construction activities:

(i) beginning not later than the first

anniversary of the date of the acquisition; and

(ii) finishing not later than the third

anniversary of the date of the acquisition; or

(B) at least 25 percent of the units are reserved

for occupancy as lower income housing units, as defined under

Section 303.0425, and the development is approved by the governing

body of the municipality in which the development is located or, if

the development is not located in a municipality, the county in

which the development is located; and

(6) not less than 30 days before final approval of the

development:

(A) the corporation or corporation's sponsor

conducts, or obtains from a professional entity that has experience

underwriting affordable multifamily residential developments and

does not have a financial interest in the applicable development,

developer, or public facility user, an underwriting assessment of

the proposed development that allows the corporation to make a good

faith determination that:

(i) for an occupied multifamily residential

development acquired by a corporation, the total annual amount of

rent reduction on the income-restricted units provided at the

development will be not less than 60 percent of the estimated amount

of the annual ad valorem taxes that would be imposed on the property

without an exemption under Section 303.042(c) for the second,

third, and fourth years after the date of acquisition by the

corporation; and

(ii) for a newly constructed multifamily

residential development, the development would not be feasible

without the participation of the corporation; and

(B) the corporation publishes on its Internet

website a copy of the underwriting assessment described by

Paragraph (A).

SECTION 2. The heading to Section 303.0426, Local

Government Code, is amended to read as follows:

Sec. 303.0426. AUDIT REQUIREMENTS APPLICABLE TO ALL [ FOR

CERTAIN ] MULTIFAMILY RESIDENTIAL DEVELOPMENTS.

SECTION 3. Sections 303.0426(b), (c), (d), (e), (f), and

(g), Local Government Code, are amended to read as follows:

(b) A public facility user of any [ a ] multifamily

residential development claiming an exemption under Section

303.042(c) [ and to which Section 303.0421 applies ] must annually

submit to the department and the chief appraiser of the appraisal

district in which the development is located an audit report for a

compliance audit, prepared at the expense of the public facility

user and conducted by an independent auditor or compliance expert

with an established history of providing similar audits on housing

compliance matters, to:

(1) determine whether the public facility user is in

compliance with Sections 303.0421 and 303.0425 , if applicable ; and

(2) identify the difference in the rent charged for

income-restricted residential units and the estimated maximum

market rents that could be charged for those units without the rent

or income restrictions.

(c) Not later than the 60th day after the date of receipt of

the audit conducted under Subsection (b), the department shall

examine the audit report and publish a report summarizing the

findings of the audit. The report must:

(1) be made available on the department's Internet

website;

(2) be issued to a public facility user that has an

interest in a development that is the subject of an audit, the

comptroller, the applicable corporation, the governing body of the

corporation's sponsor, and, if the corporation's sponsor is a

housing authority, the elected officials who appointed the housing

authority's governing board; and

(3) describe in detail the nature of any failure to

comply with the requirements in Sections 303.0421 and 303.0425 , if

applicable .

(d) If an audit report submitted under Subsection (b)

indicates noncompliance with Sections 303.0421 and 303.0425 as

described by Subsection (c)(3) , a public facility user:

(1) must be given:

(A) written notice from the department or

appropriate appraisal district that:

(i) is provided not later than the 45th day

after the date a report has been submitted under Subsection (b);

(ii) specifies the reasons for

noncompliance;

(iii) contains at least one option for a

corrective action to resolve the noncompliance; and

(iv) informs the public facility user that

failure to resolve the noncompliance will result in the loss of an

exemption under Section 303.042(c);

(B) 60 days after the date notice is received

under this subdivision, to resolve the matter that is the subject of

the notice; and

(C) if a matter that is the subject of a notice

provided under this subdivision is not resolved to the satisfaction

of the department and the appropriate appraisal district during the

period provided by Paragraph (B), a second notice that informs the

public facility user of the loss of the exemption under Section

303.042(c) due to noncompliance with Sections 303.0421 and

303.0425; and

(2) is considered to be in compliance with Sections

303.0421 and 303.0425 if notice under Subdivision (1)(A) is not

provided as specified by Subparagraph (i) of that paragraph.

(e) Except as provided by Section 303.0421(d), an [ An ]

exemption under Section 303.042(c) does not apply for a tax year in

which the department determines that a multifamily residential

development that is financed, owned , or operated by a public

facility corporation created under this chapter is not in

compliance with the audit report requirements of this section or,

as [ determined by the department ] based on the [ an ] audit conducted

under Subsection (b) , [ to ] not [ be ] in compliance with the

requirements of Section 303.0421 or 303.0425 , if applicable .

(f) Notwithstanding Subsection (g), the [ The ] initial audit

report required by Subsection (b) for a multifamily residential

development to which Section 303.0421 applies is due not later than

June 1 of the year following the first anniversary of:

(1) the date of acquisition for an occupied

multifamily residential development that is acquired by a

corporation; or

(2) the date a new multifamily residential development

first becomes occupied by one or more tenants.

(g) An audit report required by this section is [ Subsequent

audit reports following the issuance of the initial audit report

under Subsection (f) are ] due not later than June 1 of each year.

SECTION 4. Subchapter B, Chapter 303, Local Government

Code, is amended by adding Section 303.0427 to read as follows:

Sec. 303.0427. ADDITIONAL REQUIREMENT FOR BENEFICIAL TAX

TREATMENT APPLICABLE TO ALL MULTIFAMILY RESIDENTIAL DEVELOPMENTS.

(a) In this section, "public facility user" has the meaning

assigned by Section 303.0425.

(b) A public facility user of one or more multifamily

residential developments claiming an exemption under Section

303.042(c) must first submit to the Texas Department of Housing and

Community Affairs and to the county tax assessor-collector for each

appraisal district in which the exemption is sought a one-time

exemption application on a form promulgated by the comptroller.

SECTION 5. (a) Notwithstanding Section 10(d)(1), Chapter

1169 (H.B. 2071), Acts of the 88th Legislature, Regular Session,

2023, Section 303.0426, Local Government Code, as amended by this

Act, applies to all multifamily residential developments claiming

an exemption under Section 303.042(c), Local Government Code,

regardless of when the developments were approved or acquired and

regardless of whether Sections 303.0421 and 303.0425, Local

Government Code, apply to those developments.

(b) Section 303.0427, Local Government Code, as added by

this Act, applies to all multifamily residential developments

claiming an exemption under Section 303.042(c), Local Government

Code, regardless of when the developments were approved or acquired

and regardless of whether Sections 303.0421 and 303.0425, Local

Government Code, apply to those developments.

SECTION 6. This Act takes effect September 1, 2025.