BILL ANALYSIS C.S.H.B. 947 By: Pitts 02-17-95 Committee Report (Substituted) BACKGROUND Buyers or sellers of agricultural land have at times found that their lender requires them to waive their ad valorem tax agriculture appraisal and pay the back taxes and penalties to protect the lender from a subsequent change of use and possible liability for the additional taxes and interest. PURPOSE This bill will eliminate the possibility that lenders could require the waiver and loss of agricultural appraisal benefits. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter C, Chapter 23 of the Tax Code by adding Section 23.47. Sec. 23.47 (a) A lender may not require a borrower to waive the right to an ag appraisal or agree not to apply for or receive the appraisal. (b) Loan documents require the waiver are void. (c) Loan documents requiring the borrower to make payments to protect the lender from loss because of the additional taxes and interest is void unless the document: (1) requires the borrower to put the amount of additional taxes into an escrow account held by the lender; (2) the escrow account would bear interest, credited monthly; (3) permits the lender to apply the funds in escrow to payment of additional taxes and interest if necessary during the life of the loan and requires the lender to refund the balance to the borrower; (4) requires the lender to refund all escrowed monies on payment of the loan. (d) The tax assessor shall, on the request of the borrower or the borrowers representative, compute the amount of additional taxes and interest that would be due the entity if a sale or change of use occurred on January 1 of that year. The assessor may charge a reasonable fee not to exceed the actual cost of the computing. (e) Lender is defined. SECTION 2. Applies as Section 1 but to Open Space Land. SECTION 3. Emergency clause, allows immediate effect. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute makes minor changes in the bill to specify that the Act applies to Loans Secured by Lien on Agricultural-Use Land and also to allow not only the borrower but also the borrower's representative to interact with the tax assessor. SUMMARY OF COMMITTEE ACTION The committee convened in a public hearing on February 20, 1995 to consider HB 947. HB 947 was left pending. The committee convened in a public hearing on March 1, 1995 to consider HB 947. The following people testified in favor of the bill: Rep. Pitts and Jerry F. McCarty. The following people testified neutrally on the bill: Merritt Lewis Hopson. HB 947 was left pending. The committee convened in a public hearing on March 13, 1995 to consider HB 947. Chairman Marchant offered a complete committee substitute for the bill which was adopted without objection. The motion to report HB 947 favorably as substituted with the recommendation that it do pass and be printed prevailed by the following record vote: 8 Ayes, 0 Nays, 0 PNV, 1 Absent.