By:  Nixon                                   S.B. No. 1375

         97S0820/1                           

                                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.  This Act takes effect September 1, 1997.

 2-2           SECTION 3.  The importance of this legislation and the

 2-3     crowded condition of the calendars in both houses create an

 2-4     emergency and an imperative public necessity that the

 2-5     constitutional rule requiring bills to be read on three several

 2-6     days in each house be suspended, and this rule is hereby suspended.