SRC-TBR H.B. 2306 77(R)   BILL ANALYSIS


Senate Research Center   H.B. 2306
By: Chisum (Unknown)
Intergovernmental Relations
5/10/2001
Engrossed


DIGEST AND PURPOSE 

Current law does not extend residence homestead ad valorem tax exemptions
to a homestead owned by a family-owned business or protect these businesses
from forced sale.  Exempting principal residences that are converted to
family-owned businesses from this tax and protecting them from forced sale
may encourage family business entrepreneurship.  H.B. 2306 provides this
exemption and protection. 

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a
state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 11.13(j), Tax Code, by amending Subdivision (1)
and adding Subdivision (4), as follows: 

(1)  Redefines "residence homestead."

(4)  Defines "family-owned business."

SECTION 2.  Amends Section 11.26(f), Tax Code, to provide that the
limitation on tax increases required by this section does not expire
because the owner of an interest in the structure conveys the interest to a
family-owned business as defined by Section 11.13(j) in which the owner
owns an interest as long as the owner or the owner's spouse continues to
reside in the structure. 

SECTION 3.  Amends Section 11.43, Tax Code, by adding Subsection (j), to
provide that conveyance of a residence homestead by its owner to a
family-owned business as defined by Section 11.13(j) in which the owner
owns an interest does not constitute a change of ownership of the homestead
for purposes of Subsection (c) as long as the owner or the owner's spouse
continues to reside in the property. 

SECTION 4.  Amends Section 23.23(c), Tax Code, to provide that the
limitation does not expire because the owner of the property conveys the
property to a family-owned business as defined by Section 11.13(j) in which
the owner owns an interest as long as the owner or the owner's spouse or
surviving spouse continues to reside in the property. 

SECTION 5.  Amends Section 25.135, Tax Code, to read as follows:

Sec. 25.135.  New heading: QUALIFYING TRUSTS; FAMILY-OWNED BUSINESSES.

(b)  Requires the interest of a family-owned business as defined by Section
11.13(j) in a residence homestead to be listed in the name of the person
who occupies the homestead as the person's principal residence. 
 
SECTION 6.  Amends Section 32.07(c), Tax Code, to provide that a
family-owned business and the person in whose name the residence homestead
is listed are jointly and severally liable for the tax imposed on the
interest of the family-owned business in a residence homestead. 

SECTION 7.  Amends Chapter 41A, Property Code, by adding Section 41.0035,
as follows: 

Sec. 41.0035.  HOMESTEAD OWNED BY FAMILY-OWNED BUSINESS.  (a)  Defines
"family-owned business." 

(b)  Authorizes property owned by a family-owned business that otherwise
qualifies as a homestead to constitute the homestead of an individual if
the individual owns an interest in the family-owned business.  Provides
that the homestead rights of the individual do not affect the validity or
enforceability of any conveyance, mortgage, or encumbrance of the property
by the family-owned business. 

(c)  Authorizes the homestead claimant, if a homestead claimant conveys the
homestead to a family-owned business in which the homestead claimant owns
an interest, to continue to claim homestead rights in the homestead,
subject to the provisions of Subsection (b). 

SECTION 8.  Effective date: Provides that this Act takes effect on the date
on which the constitutional amendment proposed by the 77th Legislature,
Regular Session, 2001, to extend residence homestead ad valorem tax
exemptions and protection from forced sale to a homestead owned by a
family-owned business is approved by the voters.  Provides that if that
amendment is not approved by the voters, this Act has no effect.