Tepper Bill Cuts Homestead Appraisal Cap From 10 To 2.5 Percent

The text as introduced · 3,526 words

90R550 MLH-D

By: Tepper
H.B. No. 457

A BILL TO BE ENTITLED

AN ACT

relating to limitations on increases in the appraised value of

certain property for ad valorem tax purposes.

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

SECTION 1. Section 1.12(d), Tax Code, is amended to read as

follows:

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

property [ a homestead ] 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 .

SECTION 2. Section 23.23, Tax Code, is amended by amending

Subsections (a), (b), (c), (c-1), and (f) and adding Subsections

(a-1) and (c-2) to read as follows:

(a) This section applies only to property that qualified for

an exemption under Section 11.13 in the preceding tax year and

qualifies for an exemption under that section in the current tax

year.

(a-1) 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 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) 2.5 [ 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 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-1)(2) [ (a)(2) ].

(c) The limitation provided by Subsection (a-1): [ (a) ]

(1) takes effect as to a residence homestead on

January 1 of the tax year following the earlier of the first tax

year :

(A) the owner qualifies the property for an

exemption under Section 11.13 ; or

(B) a predecessor in title of the owner qualified

the property for an exemption under that section, so long as the

property has continuously qualified for an exemption under that

section; and

(2) [ . The limitation ] expires on January 1 of the

first tax year [ that neither the owner of ] the property ceases to

qualify [ when the limitation took effect nor the owner's spouse or

surviving spouse qualifies ] for an exemption under that section

[ Section 11.13 ].

(c-1) For purposes of Subsection (c)(1) [ (c) ], an owner who

receives an exemption as provided by Section 11.42(f) is considered

to have qualified the property for the exemption as of January 1 of

the tax year following the tax year in which the owner acquired the

property.

(c-2) For purposes of Subsection (c)(1)(B), a predecessor

in title of the owner who qualified the property for an exemption

under Section 11.13 before the 2027 tax year is considered to have

first qualified the property for the exemption for the 2027 tax

year.

(f) Notwithstanding Subsections (a-1) [ (a) ] and (e) and

except as provided by Subdivision (2), an improvement to property

that would otherwise constitute a new improvement is not treated as

a new improvement if the improvement is a replacement structure for

a structure that was rendered uninhabitable or unusable by a

casualty or by wind or water damage. For purposes of appraising the

property under Subsection (a-1) [ (a) ] in the tax year in which the

structure would have constituted a new improvement:

(1) the appraised value the property would have had in

the preceding tax year if the casualty or damage had not occurred is

considered to be the appraised value of the property for that year,

regardless of whether that appraised value exceeds the actual

appraised value of the property for that year as limited by

Subsection (a-1) [ (a) ]; and

(2) the replacement structure is considered to be a

new improvement only if:

(A) the square footage of the replacement

structure exceeds that of the replaced structure as that structure

existed before the casualty or damage occurred; or

(B) the exterior of the replacement structure is

of higher quality construction and composition than that of the

replaced structure.

SECTION 3. Subchapter B, Chapter 23, Tax Code, is amended by

adding Section 23.231 to read as follows:

Sec. 23.231. LIMITATION ON APPRAISED VALUE OF REAL PROPERTY

OTHER THAN RESIDENCE HOMESTEAD. (a) In this section:

(1) "Disaster recovery program" means a disaster

recovery program funded with community development block grant

disaster recovery money authorized by federal law.

(2) "New improvement" means an improvement to real

property 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.

(b) This section does not apply to:

(1) a residence homestead that qualifies for an

exemption under Section 11.13; or

(2) property appraised under Subchapter C, D, E, F, G,

or H.

(c) 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 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) eight 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.

(d) When appraising real property to which this section

applies, 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

(c)(2).

(e) The limitation provided by Subsection (c):

(1) takes effect as to a parcel of real property on

January 1 of the tax year following the earlier of the first tax

year:

(A) the owner qualifies the property for the

limitation; or

(B) a predecessor in title of the owner qualified

the property for the limitation, so long as the property has

continuously qualified for the limitation; and

(2) expires on January 1 of the first tax year the

property ceases to qualify for the limitation.

(f) For purposes of Subsection (e)(1)(B), a person who

acquired real property to which this section applies before the

2027 tax year is considered to have acquired the property on January

1, 2027.

(g) Notwithstanding Subsections (a) and (c) and except as

provided by Subdivision (2) of this subsection, an improvement to

real property that would otherwise constitute a new improvement is

not treated as a new improvement if the improvement is a replacement

structure for a structure that was rendered uninhabitable or

unusable by a casualty or by wind or water damage. For purposes of

appraising the property under Subsection (c) in the tax year in

which the structure would have constituted a new improvement:

(1) the appraised value the property would have had in

the preceding tax year if the casualty or damage had not occurred is

considered to be the appraised value of the property for that year,

regardless of whether that appraised value exceeds the actual

appraised value of the property for that year as limited by

Subsection (c); and

(2) the replacement structure is considered to be a

new improvement only if:

(A) the square footage of the replacement

structure exceeds that of the replaced structure as that structure

existed before the casualty or damage occurred; or

(B) the exterior of the replacement structure is

of higher quality construction and composition than that of the

replaced structure.

(h) Notwithstanding Subsection (g)(2), and only to the

extent necessary to satisfy the requirements of a disaster recovery

program, a replacement structure described by that subdivision is

not considered to be a new improvement if to satisfy the

requirements of the disaster recovery program it was necessary

that:

(1) the square footage of the replacement structure

exceed that of the replaced structure as that structure existed

before the casualty or damage occurred; or

(2) the exterior of the replacement structure be of

higher quality construction and composition than that of the

replaced structure.

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

SECTION 5. Section 41.41(a), Tax Code, 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 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;

(9) a determination of:

(A) the appraised value of a structure or

archeological site that qualifies for an exemption under Section

11.24;

(B) the appraised value of the land necessary to

access the structure or site; and

(C) the allocation of the appraised value between

the structure or site and the land; or

(10) any other action of the chief appraiser,

appraisal district, or appraisal review board that applies to and

adversely affects the property owner.

SECTION 6. Section 42.26(d), Tax Code, 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 [ a

residence homestead ] subject to the limitation on appraised value

imposed by Section 23.23 or 23.231 .

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

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

[ a residence homestead ] 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 [ that

section ]; 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 [ residence homesteads ] 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 [ residence homesteads ] 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 .

SECTION 8. Section 23.23, Tax Code, as amended by this Act,

and Section 23.231, Tax Code, as added by this Act, apply only to

the appraisal of real property for an ad valorem tax year that

begins on or after the effective date of this Act.

SECTION 9. This Act takes effect January 1, 2028, but only

if the constitutional amendment proposed by the 90th Legislature,

Regular Session, 2027, to authorize the legislature to set lower

limits on the maximum appraised value of residence homesteads and

of real property other than a residence homestead for ad valorem tax

purposes and to provide that those limits continue in effect

following a change of ownership of the property is approved by the

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

has no effect.