1-1     By:  Nixon                                            S.B. No. 1375

 1-2           (In the Senate - Filed March 13, 1997; March 19, 1997, read

 1-3     first time and referred to Committee on Finance; April 28, 1997,

 1-4     reported favorably, as amended, by the following vote:  Yeas 13,

 1-5     Nays 0; April 28, 1997, sent to printer.)

 1-6     COMMITTEE AMENDMENT NO. 1                               By:  Nelson

 1-7     Amend S.B. No. 1375 by adding the following sections to the bill,

 1-8     appropriately numbered, and renumbering subsequent sections of the

 1-9     bill accordingly:

1-10           SECTION ___.  Subchapter A, Chapter 41, Tax Code, is amended

1-11     by adding Section 41.035 to read as follows:

1-12           Sec. 41.035.  CHALLENGE RELATING TO CERTAIN TAXABLE

1-13     LEASEHOLDS.  In a challenge filed under this subchapter that

1-14     relates to a taxable leasehold or other possessory interest in real

1-15     property, if the real property is owned by this state or a

1-16     political subdivision of this state, the state or political

1-17     subdivision, as appropriate, may intervene in or be a party to the

1-18     challenge.  The state or political subdivision is not a necessary

1-19     party to the challenge.

1-20           SECTION ___.  Subchapter C, Chapter 41, Tax Code, is amended

1-21     by adding Section 41.414 to read as follows:

1-22           Sec. 41.414.  PROTEST RELATING TO CERTAIN TAXABLE LEASEHOLDS.

1-23     Notwithstanding Section 41.413 or any other law to the contrary,

1-24     the state or a political subdivision of this state, as appropriate,

1-25     may intervene in or be a party to a challenge filed under this

1-26     subchapter if the challenge relates to a taxable leasehold or other

1-27     possessory interest in real property that is owned by this state or

1-28     the political subdivision.  The state or political subdivision is

1-29     not a necessary party to the protest.

1-30           SECTION ___.  Section 42.031, Tax Code, is amended by adding

1-31     Subsection (c) to read as follows:

1-32           (c)  If an order of the appraisal review board relates to a

1-33     leasehold or other possessory interest in real property that is

1-34     owned by this state or a political subdivision of this state, the

1-35     state or the political subdivision, as appropriate, may intervene

1-36     in or be a party to an appeal of the board order.  To the extent of

1-37     a conflict between Subsection (b) and this subsection, this

1-38     subsection prevails.  The state or political subdivision is not a

1-39     necessary party to the appeal.

1-40                            A BILL TO BE ENTITLED

1-41                                   AN ACT

1-42     relating to the appraisal of certain leaseholds for tax purposes.

1-43           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-44           SECTION 1.  Section 23.13, Tax Code, is amended to read as

1-45     follows:

1-46           Sec. 23.13.  TAXABLE LEASEHOLDS.  (a)   A taxable leasehold

1-47     or other possessory interest in real property that is exempt from

1-48     taxation to the owner of the estate or interest encumbered by the

1-49     possessory interest is appraised at the market value of the

1-50     leasehold or other possessory interest.  Subject to the limitation

1-51     provided by Subsection (b), when appraising the leasehold or other

1-52     possessory interest in real property, the appraiser shall use the

1-53     equity method of valuation as follows:

1-54                 (1)  determine the market lease rate for comparable

1-55     properties with comparable restrictions;

1-56                 (2)  determine the actual lease rate for the property

1-57     being appraised;

1-58                 (3)  subtract the actual lease rate from the market

1-59     lease rate; and

1-60                 (4)  divide the remainder by a market capitalization

1-61     rate for property of comparable risk to determine the leasehold

1-62     value.

1-63           (b)  The [However, the] appraised value may not be less than

1-64     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.

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