78R13219 RCJ-F


By:  Eiland                                                       H.B. No. 1460

Substitute the following for H.B. No. 1460:                                   

By:  Quintanilla                                              C.S.H.B. No. 1460



A BILL TO BE ENTITLED

AN ACT

relating to the appraisal of real property for ad valorem tax 
purposes.     
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Section 23.012, Tax Code, is amended to read as 
follows:         
	Sec. 23.012.  INCOME METHOD OF APPRAISAL.  (a)  If the [chief 
appraiser uses the] income method of appraisal is the most 
appropriate method to use to determine the market value of real 
property, the chief appraiser shall:
		(1)  analyze comparable [use] rental [income and 
expense] data available to the chief appraiser or the potential 
earnings capacity of [pertaining to] the property, or both, to 
estimate the gross income potential of the property [if possible 
and applicable];
		(2)  analyze comparable operating expense data 
available to the chief appraiser to estimate the operating [make 
any projections of future rental income and] expenses of the 
property [only from clear and appropriate evidence];
		(3)  analyze comparable [use] data available to the 
chief appraiser to estimate rates of [from generally accepted 
sources in determining an appropriate] capitalization or rates of 
discount [rate]; and
		(4)  base projections of future rent or income 
potential and expenses on reasonably clear and appropriate evidence 
[determine a capitalization rate for income-producing property 
that includes a reasonable return on investment, taking into 
account the risk associated with the investment].
	(b)  In developing income and expense statements and 
cash-flow projections, the chief appraiser shall consider:
		(1)  historical information and trends;                                
		(2)  current supply and demand factors affecting those 
trends; and   
		(3)  anticipated events such as competition from other 
similar properties under construction.
	SECTION 2.  Subchapter A, Chapter 23, Tax Code, is amended by 
adding Section 23.014 to read as follows:
	Sec. 23.014.  EXCLUSION OF PROPERTY AS REAL PROPERTY.  In 
determining the market value of real property, the chief appraiser 
shall analyze the effect on that value of, and exclude from that 
value the value of, any:
		(1)  tangible personal property, including trade 
fixtures;           
		(2)  intangible personal property; or                                  
		(3)  other property that is not subject to appraisal as 
real property.
	SECTION 3.  This Act takes effect January 1, 2004, and 
applies only to the appraisal of real property for ad valorem tax 
purposes for a tax year that begins on or after that date.