Phelan Bill Lets Owners Buy Out Property Taxes For Good

The text as introduced · 2,684 words

89R16282 CJC-F

By: Phelan
H.B. No. 5210

A BILL TO BE ENTITLED

AN ACT

relating to an exemption from ad valorem taxation of the total

appraised value of real property for which the owner of the property

has prepaid those taxes.

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

SECTION 1. Subchapter B, Chapter 11, Tax Code, is amended by

adding Section 11.121 to read as follows:

Sec. 11.121. REAL PROPERTY ON WHICH TAXES ARE PREPAID. (a)

Except as otherwise provided by this section, real property for

which the taxes have been prepaid in the manner provided by this

section is exempt from taxation.

(b) A property owner may prepay the taxes on real property

by submitting to the comptroller an enrollment form and subsequent

payment in an amount equal to the amount computed under Subsection

(d) and presented to the property owner. On receipt of an

enrollment form that is administratively complete and payment in

full of the designated amount, the comptroller shall issue to the

property owner a certificate of prepayment of taxes for the

property. The comptroller by rule shall establish an annual

deadline for enrollment for prepayment of taxes and the date by

which the designated prepayment must be made to qualify the

property for an exemption under this section in subsequent tax

years.

(c) A property owner shall include a copy of the certificate

of prepayment of taxes received under Subsection (b) when filing an

application for the exemption provided by this section with the

chief appraiser of the appraisal district in which the property is

located. The chief appraiser shall approve an application that is

administratively complete and includes a copy of the certificate of

prepayment of taxes. If the chief appraiser approves the

application, the chief appraiser shall notify each taxing unit that

taxes the real property of the approval and enter the exemption in

the appraisal records.

(d) The amount a property owner is required to prepay

pursuant to an approved application submitted under Subsection (b)

is equal to the product of the appraised value of the property for

the tax year in which the property owner submits the enrollment form

and the ad valorem tax prepayment rate determined by the

comptroller for that tax year under Section 403.030, Government

Code.

(e) The exemption provided by this section does not expire

as to real property for which a certificate of prepayment is issued,

regardless of whether the property is sold or ownership of the

property otherwise changes.

(f) The exemption provided by this section does not apply to

a new improvement to the real property made during the tax year in

which the property owner submits an enrollment form under

Subsection (b) or a subsequent tax year unless the property owner

pays a supplemental prepayment amount to the comptroller in the

manner provided by comptroller rule in the amount determined as

provided by Subsection (d) for the increase in the appraised value

of the property attributable to the improvement. For purposes of

this subsection, "new improvement" has the meaning assigned by

Section 23.23, except that the term is not limited to an improvement

to a residence homestead.

(g) If after real property receives an exemption under this

section a taxing unit is established that imposes taxes on the real

property or the territory of a taxing unit is changed to include the

property, the exemption provided by this subsection does not apply

to the taxes imposed by that taxing unit unless the property owner

pays a supplemental prepayment amount to the comptroller in the

manner prescribed by comptroller rule in the amount determined as

provided by Subsection (d) in prepayment of the taxes due to the

taxing unit.

(h) The comptroller shall deposit each prepayment and

supplemental prepayment received under this section to the credit

of the prepaid property tax trust fund established under Section

49-s, Article III, Texas Constitution.

SECTION 2. Subchapter B, Chapter 403, Government Code, is

amended by adding Section 403.030 to read as follows:

Sec. 403.030. ADOPTION OF AD VALOREM TAX PREPAYMENT RATE;

REIMBURSEMENT RATE FOR POLITICAL SUBDIVISION. (a) In this

section:

(1) "Eligible taxing unit" means a taxing unit that is

eligible for a distribution from the fund.

(2) "Fund" means the fund established under Section

49-s, Article III, Texas Constitution.

(3) "No-new-revenue tax rate" means the

no-new-revenue tax rate calculated under Chapter 26, Tax Code.

(4) "Taxing unit" has the meaning assigned by Section

1.04, Tax Code.

(b) The comptroller shall determine and adopt an ad valorem

tax prepayment rate each year to compute tax prepayments under

Section 11.121, Tax Code, to be made to exempt property beginning in

the next tax year and shall publish the rate in the Texas Register.

The comptroller may consult with actuaries or any other persons as

necessary to determine a prepayment rate that will generate revenue

sufficient to adequately fund annual disbursements in the current

and future years to eligible taxing units from the fund.

(c) The comptroller shall adopt a procedure by which an

eligible taxing unit may request a distribution from the fund.

Subject to Subsection (d), an eligible taxing unit is entitled to an

annual disbursement from the fund in an amount equal to the product

of:

(1) the total appraised value of all real property in

the taxing unit that is exempt under Section 11.121, Tax Code, in

that year; and

(2) the taxing unit's no-new-revenue tax rate as

calculated for that year.

(d) If in any year the balance of the fund is not sufficient

to make a disbursement from the fund in the amount computed under

Subsection (c) to each eligible taxing unit, the comptroller may

proportionally reduce the amount of each disbursement from the fund

in that year to ensure that the fund remains solvent.

SECTION 3. Section 403.302(d), Government Code, as

effective until January 1, 2027, is 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, less the amount of any disbursement received by the

district in the applicable tax year from the prepaid property tax

trust fund under Section 49-s, Article III, Texas Constitution, and

Section 403.030 of this code 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 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.

SECTION 4. Section 403.302(d), Government Code, as

effective January 1, 2027, is 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, less the amount of any disbursement received by the

district in the applicable tax year from the prepaid property tax

trust fund under Section 49-s, Article III, Texas Constitution, and

Section 403.030 of this code 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 a

residence homestead to which Section 23.23, Tax Code, applies

exceeds the appraised value of that property as calculated under

that section; and

(14) the total dollar amount of any exemptions granted

under Section 11.35, Tax Code.

SECTION 5. This Act applies only to an ad valorem tax year

that begins on or after the effective date of this Act.

SECTION 6. This Act takes effect January 1, 2026, but only

if the constitutional amendment proposed by the 89th Legislature,

Regular Session, 2025, to provide for an exemption from ad valorem

taxation of the total market value of real property on which the ad

valorem taxes have been prepaid and to establish the prepaid

property tax trust fund to provide annual distributions to

political subdivisions affected by the exemption is approved by the

voters. If that amendment is not approved by the voters, this Act

has no effect.