BILL ANALYSIS C.S.S.B. 1387 By: Wentworth State Affairs 4-11-95 Committee Report (Substituted) BACKGROUND Currently, a property owner is authorized to allow another person to pay the taxes on the owner's property. The person who pays the taxes is entitled to receive a lien on the property for which the taxes were paid. Section 32.06, Tax Code, allows a maximum interest rate of 10 percent on such lien transfers. PURPOSE As proposed, C.S.S.B. 1387 raises the maximum interest rate for tax lien transfers. 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 Sections 32.06, Tax Code, as follows: Sec. 32.06. TRANSFER OF TAX LIEN. (a)-(b) Make nonsubstantive changes. (c) Provides that the transferee of a tax lien and any successor in interest is entitled to foreclose the lien in the manner provided by law for foreclosure of tax liens, or in a manner specified in Section 51.002, Property Code. (d) Makes no change. (e) Prohibits a person from charging a greater rate of interest than 18 percent, rather than 10, percent a year for plus any charge that is authorized by Section 32.065 and agreed to by the owner of the property under that section. (f) Provides that the holder of a preexisting lien on property encumbered by a tax lien is entitled to pay the holder of the tax lien the amount paid for the lien and the authorized charges, plus interest accrued at the rate set forth in Subsection (e) and recording and transfer expenses, and becomes subrogated to all rights in the lien. (g) Prohibits a suit to foreclose a tax lien transferred from being instituted within one year from the date on which the lien is recorded in all counties in which the property is located, unless the contract between the owner of the property and the transferee provides otherwise. (h) Makes no change. (i) Includes all authorized charges to be recovered among the charges to which a person whose property is sold as provided by this section or any person holding a first lien against the property is entitled. Makes conforming changes. Sec. 32.065. CONTRACT FOR FORECLOSURE OF TAX LIEN. (a) Sets forth the provisions to which this section does not abridge the right of an owner of real property to agree in such contract. Makes a conforming change. (b) Sets forth the authorized provisions of a contract entered into under Subsection (a). (c) Provides that a transferee of a tax lien is subrogated to and is entitled to exercise any rights and or remedy of the transferring taxing unit, including or related to foreclosure, judicial sale, and the ability to purchase property. (d) Prohibits Chapters 5, and 15, and Sections 1.07(d)(1) and (f), Title 79, V.T.C.S. (Article 5069-1.01 et seq., V.T.C.S.) from applying to any transaction covered by this section. Provides that the transferee of a tax lien under this section is not required to obtain a license under Title 79, V.T.C.S. (e) Provides that if in a contract under this section, a person contracts for, charges, or receives a rate or amount of interest that exceeds the rate allowed by this section, the amount of the penalty for which the person is obligated is determined in the manner provided by Chapter 8, Title 79, V.T.C.S. (Article 5069-8.01 et seq., V.T.C.S.). (f) Requires the first written communication by the lender to its prospective borrower to disclose the possibility that additional charges or fees may be incurred by the borrower in connection with the loan or contract. SECTION 2. Amends Section 34.02, Tax Code, by adding Subsection (e), to define "taxes." SECTION 3. Effective date: September 1, 1995. Makes application of this Act prospective. SECTION 4. Emergency clause.