BILL ANALYSIS


                                                         H.B. 947
                                                 By: Pitts (Cain)
                                                    State Affairs
                                                          4-25-95
                              Senate Committee Report (Unamended)
BACKGROUND

Texas allows certain property tax exemptions for land that is
designated for agricultural or open-space use.  Land may be
designated as open-space land for tax purposes if it has been used
principally for agriculture for five of the past seven years.  An
agricultural-use designation may be given land used exclusively for
agricultural purposes for the past three years.

When land designated as agricultural-use land is sold or diverted
to nonagricultural use, three years of additional taxes, plus
interest must be paid.  Five years of additional taxes, plus
interest, becomes due when an open-space tax designation is
changed.  The additional tax is the difference between the
agricultural-use tax and the tax that would have been levied
without the designation.

Title insurance companies are liable for additional taxes if an
open-space or agricultural-use exemption changes and may require
that additional taxes be paid at closing unless the additional tax
liability is waived by the lender.  

PURPOSE

As proposed, H.B. 947 prohibits a lender from requiring a borrower
to waive the borrower's right to an agricultural or open-space tax
exemption as a condition of acquiring a loan.  

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Chapter 23C, Tax Code, by adding Section 23.47,
as follows:

     Sec. 23.47.  LOAN SECURED BY LIEN ON AGRICULTURAL-USE LAND. 
     (a) Prohibits a lender from requiring as a condition to
     granting or amending the terms of a loan secured by a lien in
     favor of the lender on land appraised according to this
     subchapter that the borrower waive the right to the appraisal
     or agree not to apply for or receive the appraisal.
     
     (b) Provides that a provision in the loan instrument is void
       to the extent that it attempts to require the borrower to
       apply to waive the right to appraisal or prohibit the
       borrower from applying for or receiving the appraisal.  
       
       (c) Provides that a provision in the loan instrument that
       requires the borrower to make a payment to protect the
       lender from loss because of the imposition of additional
       taxes and interest under Section 23.46 is void unless the
       provision meets certain requirements.
       
       (d) Requires the assessor for each taxing unit, on the
       borrower's or a designee's request, to compute the
       additional taxes and interest that would be due that taxing
       unit if a sale or change of use occurred on January 1 of the
       year in which the loan is granted or amended.  Authorizes
       the assessor to charge a reasonable fee not to exceed the
       actual cost of making the computation.
       
       (e) Defines "lender."
       
       SECTION 2.   Amends Chapter 23D, Tax Code, by adding Section 23.58,
as follows:

     Sec. 23.58.  LOAN SECURED BY LIEN ON OPEN-SPACE LAND.  (a)
     Prohibits a lender from requiring as a condition to granting
     or amending the terms of the loan that the borrower waive the
     right to the appraisal or agree not to apply for or receive
     the appraisal.
     
     (b) Provides that a provision in the loan instrument is void
       to the extent that it attempts to require the borrower to
       apply to waive the right to appraisal or prohibit the
       borrower from applying for or receiving the appraisal.
       
       (c) Provides that a provision in the loan instrument that
       requires the borrower to make a payment to protect the
       lender from loss because of the imposition of additional
       taxes and interest under Section 23.55 is void unless the
       provision meets certain requirements.
       
       (d) Requires the assessor for each taxing unit, on the
       borrower's or the borrower's representative's request, to
       compute the additional taxes and interest that would be due
       that taxing unit if a sale or change of use occurred on
       January 1 of the year in which the loan is granted or
       amended.  Authorizes the assessor to charge a reasonable fee
       not to exceed the actual cost of making the computation.
       
       (e) Defines "lender."
SECTION 3. Emergency clause.
           Effective date: upon passage.