Bernal Bill Freezes School Taxes On 15-Year Homesteads

The text as introduced · 4,833 words

89R3419 TJB-F

By: Bernal
H.B. No. 642

A BILL TO BE ENTITLED

AN ACT

relating to a limitation on the total amount of ad valorem taxes

that a school district may impose on certain residence homesteads

following a substantial school tax increase.

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

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

adding Section 11.262 to read as follows:

Sec. 11.262. LIMITATION OF SCHOOL TAXES ON CERTAIN

HOMESTEADS FOLLOWING SUBSTANTIAL TAX INCREASE. (a) In this

section, "residence homestead" has the meaning assigned by Section

11.13.

(b) The chief appraiser shall appraise, and the tax assessor

for each school district shall calculate the taxes on, each

residence homestead in the manner provided by law for other

property.

(c) Except as provided by Subsection (g), if an individual

qualifies property as the individual's residence homestead for at

least 15 consecutive tax years and the total amount of school

district taxes imposed on the property in that 15th tax year is at

least 120 percent greater than the total amount of those taxes

imposed in the first of those tax years, not including taxes imposed

on the appraised value of all improvements made to the property

during that period, a school district may not impose taxes on that

residence homestead in a subsequent tax year in an amount that

exceeds the least of the following amounts:

(1) the amount of school taxes calculated for the

current tax year under Subsection (b);

(2) the amount of school taxes imposed for that 15th

tax year; or

(3) the amount of school taxes as limited under

Section 11.26, if applicable.

(c-1) An individual may not receive a limitation on taxes

under Subsection (c) based on an increase in taxes for any period

that began before the 2012 tax year.

(d) If an individual who qualifies for a limitation under

this section dies, the surviving spouse of the individual is

entitled to continue receiving the limitation on school taxes

imposed by a school district on the residence homestead of the

individual if the property:

(1) is the residence homestead of the surviving spouse

on the date that the individual dies; and

(2) remains the residence homestead of the surviving

spouse.

(e) Except as provided by Subsection (d) or (f), a

limitation under this section expires on January 1 if the property

is not the residence homestead of the individual entitled to the

limitation for the preceding tax year.

(f) A limitation under this section does not expire if:

(1) an owner of an interest in the residence homestead

conveys the interest to a qualifying trust as defined by Section

11.13(j) and the owner or the owner's spouse is:

(A) a trustor of the trust; and

(B) entitled to occupy the property; or

(2) the owner of the structure qualifies for an

exemption under Section 11.13 under the circumstances described by

Section 11.135(a).

(g) Except as provided by Subsection (h), a school district

may increase the tax on a residence homestead subject to a

limitation under this section in the first year the appraised value

of the property is increased as the result of an improvement made to

the property in the preceding tax year. The amount of the tax

increase is determined by applying the current tax rate of the

school district to the difference in the taxable value of the

property with the improvement and the taxable value the property

would have had without the improvement. A limitation imposed by

this section then applies to the increased amount of tax until

another improvement is made to the property.

(h) An improvement to a residence homestead is not treated

as an improvement under Subsection (g) if the improvement is:

(1) a repair;

(2) required to be made to comply with a governmental

requirement; or

(3) subject to Subsection (i), a replacement structure

for a structure that was rendered uninhabitable or unusable by a

casualty or by wind or water damage.

(i) A replacement structure described by Subsection (h)(3)

is considered to be an improvement under Subsection (g) only if:

(1) the square footage of the replacement structure

exceeds the square footage of the replaced structure as the

replaced structure existed before the casualty or damage occurred;

or

(2) the exterior of the replacement structure is of

higher quality construction and composition than that of the

replaced structure.

(j) If the appraisal roll provides for taxation of appraised

value for a prior year because a limitation under this section was

erroneously allowed, the tax assessor for the school district shall

add as back taxes due, as provided by Section 26.09(d), the positive

difference, if any, between the tax that should have been imposed

for that tax year and the tax that was imposed because of the

provisions of this section.

(k) For each school district in an appraisal district, the

chief appraiser shall determine the portion of the appraised value

of residence homesteads of individuals on which school district

taxes are not imposed in a tax year because of the limitation under

this section. That portion is calculated by determining the

taxable value that, if multiplied by the tax rate adopted by the

school district for the tax year, would produce an amount equal to

the amount of tax that would have been imposed by the school

district on those properties if the limitation under this section

were not in effect, but that was not imposed because of that

limitation. The chief appraiser shall determine that taxable value

and certify it to the comptroller as soon as practicable for each

tax year.

SECTION 2. Sections 23.19(b) and (g), Tax Code, are amended

to read as follows:

(b) If an appraisal district receives a written request for

the appraisal of real property and improvements of a cooperative

housing corporation according to the separate interests of the

corporation's stockholders, the chief appraiser shall separately

appraise the interests described by Subsection (d) if the

conditions required by Subsections (e) and (f) have been met.

Separate appraisal under this section is for the purposes of

administration of tax exemptions, determination of applicable

limitations of taxes under Section 11.26 , [ or ] 11.261, or 11.262,

and apportionment by a cooperative housing corporation of property

taxes among its stockholders but is not the basis for determining

value on which a tax is imposed under this title. A stockholder

whose interest is separately appraised under this section may

protest and appeal the appraised value in the manner provided by

this title for protest and appeal of the appraised value of other

property.

(g) A tax bill or a separate statement accompanying the tax

bill to a cooperative housing corporation for which interests of

stockholders are separately appraised under this section must

state, in addition to the information required by Section 31.01,

the appraised value and taxable value of each interest separately

appraised. Each exemption claimed as provided by this title by a

person entitled to the exemption shall also be deducted from the

total appraised value of the property of the corporation. The total

tax imposed by a school district, county, municipality, or junior

college district shall be reduced by any amount that represents an

increase in taxes attributable to separately appraised interests of

the real property and improvements that are subject to the

limitation of taxes prescribed by Section 11.26 , [ or ] 11.261 , or

11.262 . The corporation shall apportion among its stockholders

liability for reimbursing the corporation for property taxes

according to the relative taxable values of their interests.

SECTION 3. Sections 26.012(6), (13), and (14), Tax Code,

are amended to read as follows:

(6) "Current total value" means the total taxable

value of property listed on the appraisal roll for the current year,

including all appraisal roll supplements and corrections as of the

date of the calculation, less the taxable value of property

exempted for the current tax year for the first time under Section

11.31 or 11.315, except that:

(A) the current total value for a school district

excludes:

(i) the total value of homesteads that

qualify for a tax limitation as provided by Sections [ Section ]

11.26 and 11.262 ;

(ii) new property value of property that is

subject to an agreement entered into under former Subchapter B or C,

Chapter 313; and

(iii) new property value of property that

is subject to an agreement entered into under Subchapter T, Chapter

403, Government Code; and

(B) the current total value for a county,

municipality, or junior college district excludes the total value

of homesteads that qualify for a tax limitation provided by Section

11.261.

(13) "Last year's levy" means the total of:

(A) the amount of taxes that would be generated

by multiplying the total tax rate adopted by the governing body in

the preceding year by the total taxable value of property on the

appraisal roll for the preceding year, including:

(i) taxable value that was reduced in an

appeal under Chapter 42;

(ii) all appraisal roll supplements and

corrections other than corrections made pursuant to Section

25.25(d), as of the date of the calculation, except that last year's

taxable value for a school district excludes the total value of

homesteads that qualified for a tax limitation as provided by

Sections [ Section ] 11.26 and 11.262 and last year's taxable value

for a county, municipality, or junior college district excludes the

total value of homesteads that qualified for a tax limitation as

provided by Section 11.261; and

(iii) the portion of taxable value of

property that is the subject of an appeal under Chapter 42 on July

25 that is not in dispute; and

(B) the amount of taxes refunded by the taxing

unit in the preceding year for tax years before that year.

(14) "Last year's total value" means the total taxable

value of property listed on the appraisal roll for the preceding

year, including all appraisal roll supplements and corrections,

other than corrections made pursuant to Section 25.25(d), as of the

date of the calculation, except that:

(A) last year's taxable value for a school

district excludes the total value of homesteads that qualified for

a tax limitation as provided by Sections [ Section ] 11.26 and

11.262 ; and

(B) last year's taxable value for a county,

municipality, or junior college district excludes the total value

of homesteads that qualified for a tax limitation as provided by

Section 11.261.

SECTION 4. Section 44.004(c), Education Code, is amended to

read as follows:

(c) The notice of public meeting to discuss and adopt the

budget and the proposed tax rate may not be smaller than one-quarter

page of a standard-size or a tabloid-size newspaper, and the

headline on the notice must be in 18-point or larger type. Subject

to Subsection (d), the notice must:

(1) contain a statement in the following form:

"NOTICE OF PUBLIC MEETING TO DISCUSS BUDGET AND PROPOSED TAX RATE

"The (name of school district) will hold a public meeting at

(time, date, year) in (name of room, building, physical location,

city, state). The purpose of this meeting is to discuss the school

district's budget that will determine the tax rate that will be

adopted. Public participation in the discussion is invited." The

statement of the purpose of the meeting must be in bold type. In

reduced type, the notice must state: "The tax rate that is

ultimately adopted at this meeting or at a separate meeting at a

later date may not exceed the proposed rate shown below unless the

district publishes a revised notice containing the same information

and comparisons set out below and holds another public meeting to

discuss the revised notice." In addition, in reduced type, the

notice must state: "Visit Texas.gov/PropertyTaxes to find a link to

your local property tax database on which you can easily access

information regarding your property taxes, including information

about proposed tax rates and scheduled public hearings of each

entity that taxes your property.";

(2) contain a section entitled "Comparison of Proposed

Budget with Last Year's Budget," which must show the difference,

expressed as a percent increase or decrease, as applicable, in the

amounts budgeted for the preceding fiscal year and the amount

budgeted for the fiscal year that begins in the current tax year for

each of the following:

(A) maintenance and operations;

(B) debt service; and

(C) total expenditures;

(3) contain a section entitled "Total Appraised Value

and Total Taxable Value," which must show the total appraised value

and the total taxable value of all property and the total appraised

value and the total taxable value of new property taxable by the

district in the preceding tax year and the current tax year as

calculated under Section 26.04, Tax Code;

(4) contain a statement of the total amount of the

outstanding and unpaid bonded indebtedness of the school district;

(5) contain a section entitled "Comparison of Proposed

Rates with Last Year's Rates," which must:

(A) show in rows the tax rates described by

Subparagraphs (i)-(iii), expressed as amounts per $100 valuation of

property, for columns entitled "Maintenance & Operations,"

"Interest & Sinking Fund," and "Total," which is the sum of

"Maintenance & Operations" and "Interest & Sinking Fund":

(i) the school district's "Last Year's

Rate";

(ii) the "Rate to Maintain Same Level of

Maintenance & Operations Revenue & Pay Debt Service," which:

(a) in the case of "Maintenance &

Operations," is the tax rate that, when applied to the current

taxable value for the district, as certified by the chief appraiser

under Section 26.01, Tax Code, and as adjusted to reflect changes

made by the chief appraiser as of the time the notice is prepared,

would impose taxes in an amount that, when added to state funds to

be distributed to the district under Chapter 48, would provide the

same amount of maintenance and operations taxes and state funds

distributed under Chapter 48 per student in average daily

attendance for the applicable school year that was available to the

district in the preceding school year; and

(b) in the case of "Interest & Sinking

Fund," is the tax rate that, when applied to the current taxable

value for the district, as certified by the chief appraiser under

Section 26.01, Tax Code, and as adjusted to reflect changes made by

the chief appraiser as of the time the notice is prepared, and when

multiplied by the district's anticipated collection rate, would

impose taxes in an amount that, when added to state funds to be

distributed to the district under Chapter 46 and any excess taxes

collected to service the district's debt during the preceding tax

year but not used for that purpose during that year, would provide

the amount required to service the district's debt; and

(iii) the "Proposed Rate";

(B) contain fourth and fifth columns aligned with

the columns required by Paragraph (A) that show, for each row

required by Paragraph (A):

(i) the "Local Revenue per Student," which

is computed by multiplying the district's total taxable value of

property, as certified by the chief appraiser for the applicable

school year under Section 26.01, Tax Code, and as adjusted to

reflect changes made by the chief appraiser as of the time the

notice is prepared, by the total tax rate, and dividing the product

by the number of students in average daily attendance in the

district for the applicable school year; and

(ii) the "State Revenue per Student," which

is computed by determining the amount of state aid received or to be

received by the district under Chapters 43, 46, and 48 and dividing

that amount by the number of students in average daily attendance in

the district for the applicable school year; and

(C) contain an asterisk after each calculation

for "Interest & Sinking Fund" and a footnote to the section that, in

reduced type, states "The Interest & Sinking Fund tax revenue is

used to pay for bonded indebtedness on construction, equipment, or

both. The bonds, and the tax rate necessary to pay those bonds,

were approved by the voters of this district.";

(6) contain a section entitled "Comparison of Proposed

Levy with Last Year's Levy on Average Residence," which must:

(A) show in rows the information described by

Subparagraphs (i)-(iv), rounded to the nearest dollar, for columns

entitled "Last Year" and "This Year":

(i) "Average Market Value of Residences,"

determined using the same group of residences for each year;

(ii) "Average Taxable Value of Residences,"

determined after taking into account the limitation on the

appraised value of residences under Section 23.23, Tax Code, and

after subtracting all homestead exemptions applicable in each year,

other than exemptions available only to disabled persons or persons

65 years of age or older or their surviving spouses, and using the

same group of residences for each year;

(iii) "Last Year's Rate Versus Proposed

Rate per $100 Value"; and

(iv) "Taxes Due on Average Residence,"

determined using the same group of residences for each year; and

(B) contain the following information: "Increase

(Decrease) in Taxes" expressed in dollars and cents, which is

computed by subtracting the "Taxes Due on Average Residence" for

the preceding tax year from the "Taxes Due on Average Residence" for

the current tax year;

(7) contain the following statement in bold print:

"Under state law, the dollar amount of school taxes imposed on the

residence of a person 65 years of age or older or of the surviving

spouse of such a person, if the surviving spouse was 55 years of age

or older when the person died, may not be increased above the amount

paid in the first year after the person turned 65, regardless of

changes in tax rate or property value.";

(8) contain the following statement in bold print:

"Notice of Voter-Approval Rate: The highest tax rate the district

can adopt before requiring voter approval at an election is (the

school district voter-approval rate determined under Section

26.08, Tax Code). This election will be automatically held if the

district adopts a rate in excess of the voter-approval rate of (the

school district voter-approval rate)."; [ and ]

(9) contain a section entitled "Fund Balances," which

must include the estimated amount of interest and sinking fund

balances and the estimated amount of maintenance and operation or

general fund balances remaining at the end of the current fiscal

year that are not encumbered with or by corresponding debt

obligation, less estimated funds necessary for the operation of the

district before the receipt of the first payment under Chapter 48 in

the succeeding school year ; and

(10) contain the following statement in bold print:

"Under state law, the dollar amount of school taxes imposed on a

residence homestead that qualifies as the owner's residence

homestead for at least 15 consecutive years, during which time the

total amount of school district taxes imposed on the property has

increased by at least 120 percent, may not be increased above the

amount of school taxes imposed on the property in that 15th

consecutive year, regardless of changes in tax rate or property

value." .

SECTION 5. Section 403.302(d), Government Code, 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 or 11.262 , 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 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 6. Section 403.302(d), Government Code, effective

on 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 or 11.262 , 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 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 7. The limitation on school taxes provided by

Section 11.262, Tax Code, as added by this Act, applies only to ad

valorem taxes imposed for an ad valorem tax year that begins on or

after the effective date of this Act.

SECTION 8. This Act takes effect January 1, 2026, but only

if the constitutional amendment proposed by the 89th Legislature,

Regular Session, 2025, authorizing the legislature to limit the

total amount of ad valorem taxes that a school district may impose

on certain residence homesteads following a substantial school tax

increase is approved by the voters. If that amendment is not

approved by the voters, this Act has no effect.