BILL ANALYSIS C.S.H.B. 1744 By: Jackson April 17, 1995 Committee Report (Substituted) BACKGROUND Chapter 23, Tax Code, provides for appraisal methods and procedures for property tax purposes, and Subchapter B [under this Chapter] includes provisions for special appraisals. Section 23.01 requires all taxable property to be appraised at its market value as of January 1, and that the market value be determined by the application of generally accepted appraisal techniques. Generally accepted appraisal technique requires an appraiser to apply all applicable approaches to value (market, income or cost). The cost approach establishes value in the amount it would cost to replace a property with one of equal utility. PURPOSE This bill would require that signs be appraised, for property tax purposes, by means of the cost approach to value. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter B, Chapter 23, Tax Code, by adding Section 23.145 (Signs). (a) On-premise and off-premise signs are appraised by means of: (1) determining the replacement or reproduction cost of the sign; (2) calculating the amount of the cost lost to depreciation; and (3) subtracting the depreciation from the cost. (b) Prohibits intangible property interest from inclusion in appraised value. (c) "Sign," "off-premise sign," and "on-premise sign," have the meanings assigned under Section 216.002, Local Government Code. SECTION 2. Effective date: January 1, 1996 SECTION 3. Emergency clause COMPARISON OF ORIGINAL TO SUBSTITUTE The committee substitute specifies a more in depth definition of cost approach and prohibits the use of intangible property interest in determining the appraised value of a sign. C.S.H.B. 1744 also deletes the requirement from the original bill that the comptroller adopt an appraisal manual and that the appraisal districts use it. SUMMARY OF COMMITTEE ACTION Public notice was posted in accordance with the rules, and a public hearing was held on March 21, 1995. Representative Jackson explained the bill. Representatives Jackson and Talton offered closing remarks. Without objection, H.B. 1744 was left pending before the committee. On March 28, 1995, the committee met in a public hearing and considered H.B. 1744 on pending business. Representative Jackson explained the bill. The bill was referred to the Subcommittee on Property Tax. On April 6, 1995, the Subcommittee on Property Tax convened in a formal meeting and considered H.B. 1744. The subcommittee considered a complete substitute. Without objection, C.S.H.B. 1744 was adopted. By a record vote of 4 ayes, 0 nays, 0 present not voting and 1 absent, the subcommittee voted to report H.B. 1744 to the full committee as substituted with the recommendation that it do pass. On April 11, 1995, the committee met in a public hearing and considered H.B. 1744 on subcommittee report. The committee considered a committee substitute by Representative Horn. Without objection, C.S.H.B. 1744 was adopted. By a record vote of 9 ayes, 0 nays, 0 present not voting and 2 absent, the committee voted to report H.B. 1744 to the House as substituted with the recommendation that it be sent to the Local and Consent Calendar and that it do pass. Testimony received in favor of the bill (3/21/95): Mark Ritter, representing Sign Ad, Inc. Jack A. Howard, representing himself and Fetzer/Howard, Inc. Testimony received neutrally on the bill (3/21/95): Tim Wooten, representing the Comptroller of Public Accounts