HBA-KDB H.B. 2416 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 2416
By: Brown, Betty
Ways & Means
4/12/2001
Introduced



BACKGROUND AND PURPOSE 

In 1978, Texas citizens voted to freeze the amount of ad valorem taxes on
homesteads of the elderly.  Ten years later, in 1988, Texas citizens voted
to extend the ad valorem tax freeze to surviving spouses of the elderly and
to allow the elderly and their surviving spouses to port their tax freeze
of ad valorem taxation from one taxing jurisdiction to another.  The freeze
on such taxes only applies to taxes imposed by school districts.  House
Bill 2416 provides a local option for a county or municipality to adopt an
ad valorem tax limitation  on homesteads of the elderly and their surviving
spouses. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 2416 amends the Tax Code to set forth provisions relating to the
limitation of a county or municipal tax on homesteads of the elderly. The
bill applies only to a county or municipality that has established a
limitation on the total amount of taxes that may be imposed by the county
or municipality on the residence homestead of an individual 65 years of age
or older.  The bill prohibits such a county or municipality from increasing
the total annual amount of ad valorem taxes the county  or municipality
imposes on the residence homestead of an individual 65 years of age or
older above the amount of the taxes the county or municipality imposed in
the first tax year, other than a tax year preceding the tax year in which
the county or municipality establishes the limitation, in which the
individual qualified that residence homestead for the exemption from
taxation by a school district of $10,000 for an individual 65 years of age
or older.  If the individual qualified that residence homestead for the
exemption after the beginning of that first year and the residence
homestead remains eligible for the exemption for  the next year, and if the
county or municipal taxes imposed on the residence homestead in the next
year are less than the amount of taxes imposed in that first year, a county
or municipality is prohibited from subsequently increasing the total annual
amount of ad valorem taxes it imposes on the residence homestead above the
amount it imposed in the year immediately following the first year, other
than a tax year preceding the tax year in which the county or municipality
establishes the limitation, for which the individual qualified that
residence homestead for the exemption. 

The bill authorizes the county or municipality, if an individual makes
improvements that are not required by the government to the individual's
homestead, to increase the amount of taxes on the homestead in the first
year the value of the homestead is increased on the appraisal roll because
of the enhancement of value by the improvements.  The limitation then
applies to the increased amount of county or municipal taxes until more
improvements, if any, are made. 

The bill provides that the limitation expires if, on January 1, none of the
owners of the structure who qualify for the exemption and who owned the
structure when the limitation first took effect is using the structure as a
residence homestead or none of the owners of the structure qualifies for
the exemption. 

 The bill requires the tax assessor for the applicable county or
municipality, if the appraisal roll provides for taxation of appraised
value for a prior year because a residence homestead exemption for persons
65 years of age or older was erroneously allowed, to add, as back taxes
due, the positive difference if any between the tax that should have been
imposed for that year and the tax that was imposed because of this Act. 

The bill provides that the limitation does not expire because the owner of
an interest in the structure conveys the interest to a qualifying trust if
the owner or the owner's spouse is a trustor of the trust and is entitled
to occupy the structure.  The bill prohibits a county or municipality, if
an individual who receives a tax limitation subsequently qualifies a
different residence homestead in the same county or municipality for an
exemption on a residence homestead, from imposing ad valorem taxes on the
subsequently qualified homestead in a year in an amount that exceeds the
amount of taxes the county or municipality would have imposed on the
subsequently qualified homestead in the first year in which the individual
receives that exemption for the subsequently qualified homestead had the
tax limitation not been in effect, multiplied by a fraction the numerator
of which is the total amount of taxes the county or municipality imposed on
the former homestead in the last year in which the individual received that
exemption for the former homestead and the denominator of which is the
total amount of taxes the county or municipality would have imposed on the
former homestead in the last year in which the individual received that
exemption for the former homestead had the tax limitation not been in
effect. 

The bill entitles an individual who receives a limitation on county or
municipality tax increases and who subsequently qualifies a different
residence homestead in the same county or municipality for  an exemption on
a residence homestead, or an agent of the individual, to receive from the
chief appraiser of the appraisal district in which the former homestead was
located a written certificate providing the information necessary to
determine whether the individual may qualify for a limitation on the
subsequently qualified homestead and to calculate the amount of taxes the
county or municipality may impose on the subsequently qualified homestead. 

The bill entitles the surviving spouse of a deceased individual who
qualified for a limitation on taxes imposed by the county or municipality
on the residence homestead of the individual if the surviving spouse is 55
years of age or older when the individual dies and the residence homestead
of the deceased individual is the residence homestead of the surviving
spouse on the date that the individual dies and remains the residence
homestead of the surviving spouse. 

The bill provides that, if an individual who qualifies for a limitation
dies in the first year in which the individual qualified for the limitation
and the individual first qualified for the limitation after the beginning
of that year, the amount to which the surviving spouse's county or
municipal taxes are limited is the amount of taxes imposed by the county or
municipality, as applicable, on the residence homestead in that year
determined as if the individual qualifying for the exemption had lived for
the entire year. 

The bill provides that, if in the first tax year after the year in which
such an individual dies the amount of taxes imposed by a county or
municipality on the residence homestead of the surviving spouse is less
than the amount of taxes imposed by the county or municipality in the
preceding year, in a subsequent tax year the surviving spouse's taxes
imposed by the county or municipality on that residence homestead are
limited to the amount of taxes imposed by the county or municipality in
that first tax year after the year in which the individual dies. 

EFFECTIVE DATE

January 1, 2002, if the constitutional amendment to permit a county or
municipality to establish an ad valorem tax freeze on residence homesteads
of the elderly and their spouses is approved by the voters. If that
amendment is not approved by the voters, the Act has no effect.