78R10704 SMH-D
By: Riddle, Elkins H.B. No. 1044
Substitute the following for H.B. No. 1044:
By: Hegar C.S.H.B. No. 1044
A BILL TO BE ENTITLED
AN ACT
relating to the exemption from ad valorem taxation of certain
property used to provide low-income or moderate-income housing.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading to Section 11.182, Tax Code, is
amended to read as follows:
Sec. 11.182. COMMUNITY HOUSING DEVELOPMENT ORGANIZATIONS
IMPROVING PROPERTY FOR LOW-INCOME AND MODERATE-INCOME HOUSING:
PROPERTY PREVIOUSLY EXEMPT.
SECTION 2. Section 11.182, Tax Code, is amended by adding
Subsections (j) and (k) to read as follows:
(j) An organization may not receive an exemption under
Subsection (b) or (f), as added by Chapter 1191, Acts of the 77th
Legislature, Regular Session, 2001, for property for a tax year
beginning on or after January 1, 2004, unless the organization
received an exemption under that subsection for that property for
the 2003 tax year.
(k) An organization that receives an exemption under this
section for property the organization owns may apply for an
exemption under Section 11.1825 for the property. The organization
must submit only the evidence required to meet any requirements for
an exemption under that section that are not imposed under this
section, except that the chief appraiser may require the
organization to submit additional information to establish the
organization's eligibility for the exemption under Section 11.1825
if the chief appraiser learns of any reason the organization is no
longer eligible for an exemption under this section. The chief
appraiser shall approve or deny the application not later than the
30th day after the date the application is received. If the chief
appraiser approves the application, the organization may not
receive an exemption under this section and Section 11.1825 for the
property in the same tax year.
SECTION 3. Subchapter B, Chapter 11, Tax Code, is amended by
adding Sections 11.1825 and 11.1826 to read as follows:
Sec. 11.1825. ORGANIZATIONS CONSTRUCTING OR REHABILITATING
LOW-INCOME HOUSING: PROPERTY NOT PREVIOUSLY EXEMPT. (a) In this
section:
(1) "Department" means the Texas Department of Housing
and Community Affairs.
(2) "Uniform service region" means a region
established by the comptroller under Section 120, Article V,
Chapter 19, Acts of the 72nd Legislature, 1st Called Session, 1991
(the General Appropriations Act).
(b) An organization is entitled to an exemption from
taxation of real property owned by the organization that the
organization constructs or rehabilitates to provide housing to
individuals or families meeting the income eligibility
requirements of this section.
(c) To receive an exemption under this section, an
organization must meet the following requirements:
(1) for at least the preceding three years, the
organization:
(A) has been exempt from federal income taxation
under Section 501(a), Internal Revenue Code of 1986, as amended, by
being listed as an exempt entity under Section 501(c)(3) of that
code;
(B) has met the requirements of a charitable
organization provided by Sections 11.18(e) and (f); and
(C) has had as its purpose providing low-income
housing; and
(2) a majority of the members of the board of directors
of the organization have their principal place of residence in this
state.
(d) Notwithstanding Subsection (c), an owner of real
property that is not an organization described by that subsection
is entitled to an exemption from taxation of property under this
section if the property otherwise qualifies for the exemption and
the owner is:
(1) a general partnership or limited partnership and
each general partner is an organization that meets the requirements
of Subsection (c);
(2) a limited partnership, 100 percent of the interest
in each general partner of the limited partnership is controlled by
an organization that meets the requirements of Subsection (c), and
each general partner is allocated at least 10 percent of the cash
flow of the limited partnership; or
(3) an entity the parent of which is an organization
that meets the requirements of Subsection (c).
(e) If the owner of the property is an entity described by
Subsection (d), the entity must:
(1) be organized under the laws of this state; and
(2) have its principal place of business in this
state.
(f) A reference in this section to an organization includes
an entity described by Subsection (d).
(g) For property to be exempt under this section, the
organization must own the property for the purpose of constructing
or rehabilitating a housing project on the property and renting the
housing to individuals or families whose median income is not more
than 60 percent of the median income of individuals or families in
the applicable uniform service region as determined by the
department.
(h) Property may not receive an exemption under this section
unless:
(1) at least 50 percent of the dwelling units in the
housing project are reserved for individuals or families described
by Subsection (g), if the project is located in a county in which
the median income of individuals or families as determined by the
department is less than the median income of individuals or
families in the applicable uniform service region as determined by
the department; or
(2) at least 60 percent of the dwelling units in the
project are reserved for individuals or families described by
Subsection (g), if the project is located in a county not covered by
Subdivision (1).
(i) The monthly rent charged or to be charged for each
dwelling unit in the project may not exceed 30 percent of the
monthly income of the individual or family renting the unit at the
time the lease is entered into.
(j) The organization must give preference to public school
teachers and administrators, peace officers of counties or
municipalities, persons serving on active duty as members of the
armed forces of the United States, and honorably discharged
veterans of the armed forces of the United States in renting at
least three percent of the dwelling units in the housing project.
The rent charged for those units must be at least 10 percent less
than the rent charged for other comparable units in the project.
(k) If the property is owned for the purpose of constructing
a housing project on the property:
(1) the property must be used to provide housing to
qualifying individuals or families; or
(2) the housing project must be under active
construction or other physical preparation.
(l) For purposes of Subsection (k)(2), a housing project is
under physical preparation if the organization has engaged in
architectural or engineering work, soil testing, land clearing
activities, or site improvement work necessary for the construction
of the project or has conducted an environmental or land use study
relating to the construction of the project.
(m) An organization may not receive an exemption for a
housing project constructed by the organization if the construction
of the project was completed before the effective date of this
section.
(n) If the property is owned for the purpose of
rehabilitating a housing project on the property:
(1) the original construction of the housing project
must have been completed at least 10 years before the date the
organization began actual rehabilitation of the project;
(2) the person from whom the organization acquired the
project must have owned the project for at least five years, if the
organization is not the original owner of the project; and
(3) the organization must provide the chief appraiser
and, if the project was financed with bonds, the issuer of the
bonds, with a certificate prepared by a certified public accountant
stating that the organization has spent on rehabilitation costs at
least $10,000 or the amount required by the entity that provided the
financing for the project, whichever is less, for each dwelling
unit in the project.
(o) If the organization acquires the property for the
purpose of constructing or rehabilitating a housing project on the
property, the organization must rent or offer to rent the property
to individuals or families who meet the income eligibility
requirements of this section not later than the third anniversary
of the date the organization acquires the property.
(p) If property qualifies for an exemption under this
section, the chief appraiser shall use the income method of
appraisal as provided by Section 23.012 to determine the appraised
value of the property. In appraising the property, the chief
appraiser shall:
(1) consider the restrictions provided by this section
on the income of the individuals or families to whom the dwelling
units of the housing project may be rented and the amount of rent
that may be charged for purposes of computing the actual rental
income from the property or projecting future rental income; and
(2) use the same capitalization rate that the chief
appraiser uses to appraise other rent-restricted properties.
(q) Not later than January 31 of each year, the appraisal
district shall give public notice in the manner determined by the
district, including posting on the district's website if
applicable, of the capitalization rate to be used in that year to
appraise property receiving an exemption under this section.
(r) The amount of the exemption under this section from
taxation is:
(1) for a school district, 50 percent of the appraised
value of the property; and
(2) for a taxing unit other than a school district:
(A) 75 percent of the appraised value of the
property if at least 75 percent of the dwelling units in the housing
project are reserved for individuals or families described by
Subsection (g); and
(B) 65 percent of the appraised value of the
property if Paragraph (A) does not apply.
(s) Notwithstanding Section 11.43(c), an exemption under
this section does not terminate if:
(1) the property is foreclosed on for any reason and,
not later than the 30th day after the date of the foreclosure sale,
the owner of the property submits evidence to the chief appraiser
that the property is owned by:
(A) an organization that meets the requirements
of Subsection (c); or
(B) an entity that meets the requirements of
Subsections (d) and (e); or
(2) in the case of property owned by an entity
described by Subsections (d) and (e), the organization meeting the
requirements of Subsection (c) that is or controls the general
partner of or is the parent of the entity as described by Subsection
(d) ceases to serve in that capacity and, not later than the 30th
day after the date the cessation occurs, the owner of the property
submits evidence to the chief appraiser that the organization has
been succeeded in that capacity by another organization that meets
the requirements of Subsection (c).
(t) The chief appraiser may extend the deadline provided by
Subsection (s)(1) or (2), as applicable, for good cause shown.
(u) Notwithstanding the other provisions of this section,
the governing body of a taxing unit that is located in a county with
a population of at least 1.4 million by official action of the
governing body adopted with the approval of at least two-thirds of
the members of the governing body in the manner required by law for
official action not later than the 90th day after the date this
section takes effect may:
(1) provide for taxation of property exempted under
this section unless the property qualifies for an exemption under
the criteria adopted by the governing body; or
(2) provide for an exemption under this section in an
amount other than the amount provided by Subsection (r).
(v) Subsection (u)(1) does not authorize a taxing unit to
waive the requirements of Subsections (c)(1)(A) and (B).
(w) If a taxing unit provides under Subsection (u)(1) for
taxation of property exempted under this section, the exemption
prescribed by this section does not apply to the taxing unit except
as to property that qualifies for an exemption under the criteria
adopted by the governing body of the taxing unit.
(x) To receive an exemption under this section from taxation
by a taxing unit that takes action under Subsection (u)(1), an
organization must submit a written request to the taxing unit for a
determination of whether the property qualifies for an exemption
under the criteria adopted by the governing body of the taxing unit.
The request must include information that permits the taxing unit
to determine whether the property qualifies for the exemption.
(y) Following submission of a written request under
Subsection (x), the taxing unit shall determine whether the
property qualifies for an exemption under the criteria adopted by
the governing body of the taxing unit. The taxing unit shall issue
a letter to the organization stating the taxing unit's
determination of whether the property qualifies for the exemption.
The taxing unit shall send a copy of the letter by regular mail to
the chief appraiser of the appraisal district that appraises the
property for the taxing unit. The taxing unit may charge the
organization a fee not to exceed the taxing unit's administrative
costs for processing the information submitted by the organization,
making the determination, and issuing the letter required by this
subsection.
(z) An organization seeking an exemption from taxation by a
taxing unit that takes action under Subsection (u)(1) shall provide
to the chief appraiser a copy of the letter issued by the taxing
unit under Subsection (y) stating the taxing unit's determination
that the property qualifies for an exemption under the criteria
adopted by the governing body of the taxing unit. The chief
appraiser shall accept the determination of the taxing unit as
conclusive evidence that the property qualifies for an exemption
under the criteria adopted by the governing body.
Sec. 11.1826. MONITORING OF COMPLIANCE WITH LOW-INCOME AND
MODERATE-INCOME HOUSING EXEMPTIONS. (a) In this section:
(1) "Corporation" means the Texas State Affordable
Housing Corporation.
(2) "Department" means the Texas Department of Housing
and Community Affairs.
(b) Not later than July 25 of each year, the chief appraiser
shall submit to the corporation a list of the housing projects,
including projects under construction or rehabilitation or to be
constructed or rehabilitated, in the appraisal district receiving
an exemption under Section 11.182 or 11.1825 in that year.
(c) Not later than the second anniversary of the date the
corporation receives a list from the chief appraiser, the
corporation shall conduct an audit of each listed housing project
to determine whether the project is in material compliance with the
requirements of the low income housing tax credit program under
Subchapter DD, Chapter 2306, Government Code. The corporation by
rule shall adopt guidelines for conducting compliance audits under
this subsection. An organization that owns, or that is or controls
the general partner of or is the parent of the entity that owns, a
project that is the subject of an audit shall pay the corporation a
fee to cover the cost of the audit to the extent the department does
not already impose a compliance audit fee in connection with the low
income housing tax credit program. The amount of the fee is
computed by multiplying $25 by the number of dwelling units in the
project.
(d) On a determination that a housing project of an
organization is in material noncompliance with the requirements of
the low income housing tax credit program, the corporation shall
notify the organization of the results of the audit and order the
organization to bring the project into material compliance with the
program. If the organization does not comply with the order of the
corporation before the 90th day after the date of the order, the
corporation shall assess an administrative penalty on the
organization in the manner provided for an administrative penalty
under Section 2306.6023, Government Code. The amount of the
penalty is computed by multiplying $200 by the number of dwelling
units in the project. The corporation shall impose a separate
penalty for each day the project fails to comply with the order of
the corporation. A penalty imposed by the corporation is payable to
the assessor–collector for the county for which the appraisal
district is established. The assessor–collector shall distribute
to each taxing unit from which the project received an exemption in
the year in which the list was submitted an amount equal to the
amount of the penalty multiplied by a fraction, the numerator of
which is the total dollar amount of taxes the taxing unit would have
imposed on the project in that year if the project had been subject
to taxation by that taxing unit in that year and the denominator of
which is the total dollar amount of taxes all of the taxing units
from which the project received an exemption in that year would have
imposed on the project in that year if the project had been subject
to taxation by those taxing units in that year.
(e) If the housing project remains in material
noncompliance with the requirements of the program, the corporation
shall notify the department, and the department shall consider the
noncompliance for purposes of scoring any pending or subsequent
application submitted by the organization under any program
administered by the department.
SECTION 4. Section 11.43(c), Tax Code, is amended to read as
follows:
(c) An exemption provided by Section 11.13, 11.17, 11.18,
11.182, 11.1825, 11.183, 11.19, 11.20, 11.21, 11.22, 11.23(j),
11.29, 11.30, or 11.31, once allowed, need not be claimed in
subsequent years, and except as otherwise provided by Subsection
(e), the exemption applies to the property until it changes
ownership or the person's qualification for the exemption changes.
However, the chief appraiser may require a person allowed one of the
exemptions in a prior year to file a new application to confirm the
person's current qualification for the exemption by delivering a
written notice that a new application is required, accompanied by
an appropriate application form, to the person previously allowed
the exemption.
SECTION 5. Sections 11.436(a) and (c), Tax Code, are
amended to read as follows:
(a) An organization that acquires property that qualifies
for an exemption under Section 11.181(a) or 11.1825 [11.182(a)] may
apply for the exemption for the year of acquisition not later than
the 30th day after the date the organization acquires the property,
and the deadline provided by Section 11.43(d) does not apply to the
application for that year.
(c) To facilitate the financing associated with the
acquisition of a property, an organization, before acquiring the
property, may request from the chief appraiser of the appraisal
district established for the county in which the property is
located a preliminary determination of whether the property would
qualify for an exemption under Section 11.1825 [11.182] if acquired
by the organization. The request must include the information that
would be included in an application for an exemption for the
property under Section 11.1825 [11.182]. Not later than the 15th
[21st] day after the date a request is submitted under this
subsection, the chief appraiser shall issue a written preliminary
determination for the property included in the request. A
preliminary determination does not affect the granting of an
exemption under Section 11.1825 [11.182].
SECTION 6. Subchapter B, Chapter 23, Tax Code, is amended by
adding Section 23.215 to read as follows:
Sec. 23.215. APPRAISAL OF CERTAIN NONEXEMPT PROPERTY USED
FOR LOW-INCOME OR MODERATE-INCOME HOUSING. (a) This section
applies only to real property owned by an organization:
(1) that on the effective date of this section was
rented to a low-income or moderate-income individual or family
satisfying the organization's income eligibility requirements and
that continues to be used for that purpose;
(2) that was financed under the low income housing tax
credit program under Subchapter DD, Chapter 2306, Government Code;
(3) that does not receive an exemption under Section
11.182 or 11.1825; and
(4) the owner of which has not entered into an
agreement with any taxing unit to make payments to the taxing unit
instead of taxes on the property.
(b) The chief appraiser shall appraise the property in the
manner provided by Section 11.1825(p) except that the
capitalization rate used in the appraisal may not be less than 12.5
percent.
SECTION 7. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2003.