By:  Nixon                                            S.B. No. 1375

                                A BILL TO BE ENTITLED

                                       AN ACT

 1-1     relating to the appraisal of certain leaseholds for tax purposes.

 1-2           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-3           SECTION 1.  Section 23.13, Tax Code, is amended to read as

 1-4     follows:

 1-5           Sec. 23.13.  TAXABLE LEASEHOLDS.  (a)   A taxable leasehold

 1-6     or other possessory interest in real property that is exempt from

 1-7     taxation to the owner of the estate or interest encumbered by the

 1-8     possessory interest is appraised at the market value of the

 1-9     leasehold or other possessory interest.  Subject to the limitation

1-10     provided by Subsection (b), when appraising the leasehold or other

1-11     possessory interest in real property, the appraiser shall use the

1-12     equity method of valuation as follows:

1-13                 (1)  determine the market lease rate for comparable

1-14     properties with comparable restrictions;

1-15                 (2)  determine the actual lease rate for the property

1-16     being appraised;

1-17                 (3)  subtract the actual lease rate from the market

1-18     lease rate; and

1-19                 (4)  divide the remainder by a market capitalization

1-20     rate for property of comparable risk to determine the leasehold

1-21     value.

1-22           (b)  The [However, the] appraised value may not be less than

1-23     the total rental paid for the interest for the current tax year.

 2-1           SECTION 2.  Subchapter A, Chapter 41, Tax Code, is amended by

 2-2     adding Section 41.035 to read as follows:

 2-3           Sec. 41.035.  CHALLENGE RELATING TO CERTAIN TAXABLE

 2-4     LEASEHOLDS.  In a challenge filed under this subchapter that

 2-5     relates to a taxable leasehold or other possessory interest in real

 2-6     property, if the real property is owned by this state or a

 2-7     political subdivision of this state, the state or political

 2-8     subdivision, as appropriate, may intervene in or be a party to the

 2-9     challenge.  The state or political subdivision is not a necessary

2-10     party to the challenge.

2-11           SECTION 3.  Subchapter C, Chapter 41, Tax Code, is amended by

2-12     adding Section 41.414 to read as follows:

2-13           Sec. 41.414.  PROTEST RELATING TO CERTAIN TAXABLE LEASEHOLDS.

2-14     Notwithstanding Section 41.413 or any other law to the contrary,

2-15     the state or a political subdivision of this state, as appropriate,

2-16     may intervene in or be a party to a challenge filed under this

2-17     subchapter if the challenge relates to a taxable leasehold or other

2-18     possessory interest in real property that is owned by this state or

2-19     the political subdivision.  The state or political subdivision is

2-20     not a necessary party to the protest.

2-21           SECTION 4.  Section 42.031, Tax Code, is amended by adding

2-22     Subsection (c) to read as follows:

2-23           (c)  If an order of the appraisal review board relates to a

2-24     leasehold or other possessory interest in real property that is

2-25     owned by this state or a political subdivision of this state, the

 3-1     state or the political subdivision, as appropriate, may intervene

 3-2     in or be a party to an appeal of the board order.  To the extent of

 3-3     a conflict between Subsection (b) and this subsection, this

 3-4     subsection prevails.  The state or political subdivision is not a

 3-5     necessary party to the appeal.

 3-6           SECTION 5.  This Act takes effect September 1, 1997.

 3-7           SECTION 6.  The importance of this legislation and the

 3-8     crowded condition of the calendars in both houses create an

 3-9     emergency and an imperative public necessity that the

3-10     constitutional rule requiring bills to be read on three several

3-11     days in each house be suspended, and this rule is hereby suspended.