H.B. 136 78(R)    BILL ANALYSIS


H.B. 136
By: Brown, Fred
Local Government Ways and Means
Committee Report (Unamended)



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 136 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 committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

House Bill 136 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.  

Tax officials would continue to appraise property, however, the taxes to
be paid will be subject to the limitation.  Counties and municipalities
are prohibited from increasing ad valorem taxes on residences for the
elderly above that of the first year in which the individual qualified
other than a tax year preceding that in which the limitation was
established by the county or municipality. 

The bill authorizes the county or municipality to increase taxes based on
the appraisal if an individual makes improvements to the homestead that
are not required by the government. The tax is calculated by determining
the difference between the homestead with and without the improvements.
The limitation then applies to the increased amount of taxes based on the
improvements until more improvements are made.  

The limitation expires if, on January 1st, 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 to add back taxes if the exemption was
erroneously allowed. 

The limitation does not expire if the owner of an interest conveys the
interest to a qualifying trust if the owner or the spouse created the
trust and is entitled to occupy the structure.  

If an individual qualifies for a second residence homestead in the same
county or municipality in the same year, the county or municipality would
be prohibited from imposing taxes above the taxes without the limitation
that would have been assessed in the first year the person received the
limitation. To calculate the taxes the taxing entity would multiply the
taxes for the subsequently  qualified residence homestead by a fraction.
The numerator of the fraction 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.  The denominator 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
had the tax limitation not been in effect.  

An individual or the individual's agent who receives a limitation on
county or municipality tax increases, and who subsequently qualifies for a
different residence homestead exemption in the same county or
municipality, is entitled to receive a certificate from the chief
appraiser of the appraisal district in which the former homestead was
located 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 that may be imposed. 

A surviving spouse of an individual qualifying for the limitation would
also qualify if the surviving spouse is 55 years of age or older at the
time of death, the residence homestead of the deceased is also that of the
surviving spouse on the date of death, and it remains the residence
homestead of the surviving spouse. 

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
surviving spouses's taxes are limited to the amount imposed by the county
or municipality as if the deceased had lived for the entire year.  

If, in the first tax year after the year in which 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 imposed in the
preceding year, the surviving spouse's taxes imposed by the county or
municipality on that residence homestead are limited to the amount of
taxes imposed in the first tax year after the death in subsequent tax
years.  

EFFECTIVE DATE
January 1, 2004, 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.