By: Hamric H.B. No. 3546
A BILL TO BE ENTITLED
AN ACT
relating to the exemption from ad valorem taxation of certain
property used to provide low-income or extremely low-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
Subsection (j) 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, on or after the effective date
of this act.
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 OR EXTREMELY LOW-INCOME HOUSING: PROPERTY NOT
PREVIOUSLY EXEMPT. (a) Improved and unimproved real property is
exempt from taxation as provided by this section if the property:
(1) is owned by a community-based housing provider;
and
(2) is within the geographic service area of the
community-based housing provider and is being held for the
provision of affordable housing.
(b) Tangible personal property is exempt from taxation as
provided by this section if the property:
(1) is owned by an organization that owns real
property that is exempt as provided by this section; and
(2) is used in connection with the real property.
(c) To qualify as a community-based housing provider for the
purposes of this section and Section 11.1826, an organization must:
(1) be a nonprofit corporation incorporated in this
state under the Texas Non-Profit Corporation Act (Article 1396-1.01
et seq., Vernon's Texas Civil Statutes);
(2) validly exist and be in good standing under the
laws of this state;
(3) be authorized to contract for services from any
vendor and not be controlled, directly or indirectly, by any other
person through any contract, arrangement, understanding,
relationship, voting power, affiliation, trust, proxy, power of
attorney, pooling arrangement, security, warrant partnership,
option, discretionary account, joint venture, or other device;
(4) be exempt from federal income taxation under
Section 501(c)(3) or (4), Internal Revenue Code of 1986, as
amended;
(5) have as its principal purpose the provision of
decent housing that is affordable to individuals or families of low
income;
(6) have a defined geographic service area in which
its services are provided that is limited to a single county in this
state;
(7) conform to appropriate standards of financial
accountability;
(8) have a history of providing affordable housing in
its geographic service area that includes developing, owning,
managing, or financing at least three units of affordable housing
in that service area, whether those units are single-family
residences or individual housing units in multifamily properties;
(9) be governed exclusively by a board of directors
that meets the following requirements:
(A) at least five members of the board of
directors must be unrelated to one another within the second degree
by consanguinity or affinity and must not have any business
relationship with one another other than serving on the board of
directors of the organization;
(B) the board of directors must meet at least
three times each year;
(C) the members of the board of directors must be
residents of this state and must reside within the geographic
service area of the organization;
(D) if any member of the board of directors is
elected or appointed by another entity, that entity must also
qualify as a community-based housing provider under this section
unless that entity is a political subdivision of this state;
(E) another entity may not elect or appoint more
than one-third of the members of the board of directors; and
(F) at least one-third of the positions on the
board of directors must be reserved for and held by:
(i) low-income residents of the geographic
service area of the organization;
(ii) residents of low-income census tracts
in the organization's geographic service area; or
(iii) representatives appointed by
neighborhood organizations located within the organization's
geographic service area that represent low-income households; and
(10) have a formal policy containing procedures for
giving notice to and receiving advice from low-income households
regarding the design, siting, development, and management of
affordable housing projects.
(d) An organization must provide evidence of compliance
with Subsection (c)(2) by including with the application for an
exemption under this section:
(1) a copy of the organization's certificate of
incorporation, articles of incorporation, and bylaws; and
(2) a certificate of account status provided by the
comptroller that is dated not more than 30 days before the date the
application under this section or the audit under Section 11.1826,
as applicable, is filed.
(e) An organization must provide evidence of compliance
with Subsection (c)(3) by including with the application for an
exemption under this section an affidavit of compliance with that
subsection signed by each member of the board of directors of the
organization.
(f) An organization must provide evidence of compliance
with Subsection (c)(4) by including with the application for an
exemption under this section an appropriate determination letter
issued to the organization by the United States Internal Revenue
Service.
(g) To comply with Subsection (c)(5), an organization must
include in the organization's articles of incorporation or bylaws a
statement that the organization's principal purpose is the
provision of decent housing that is affordable to individuals or
families of low income.
(h) To comply with Subsection (c)(6), an organization must
identify in the organization's articles of incorporation or bylaws
the county in this state in which its services are provided.
(i) An organization must provide evidence of compliance
with Subsection (c)(7) by including with the application for an
exemption under this section a copy of the organization's most
recent audited financial statements dated not later than the 180th
day after the last day of the organization's most recent fiscal
year, conducted in accordance with generally accepted accounting
principles.
(j) An organization must provide evidence of compliance
with Subsection (c)(8), to the extent necessary to prove the
history therein prescribed, by including with the application for
an exemption under this section copies of one of the following for
each unit of affordable housing provided:
(1) a warranty deed or other purchase agreement or a
development agreement; or
(2) a management agreement; or
(3) a promissory note or other financing document
showing the organization as the provider of the financing; or
(4) in the case of a multifamily property, a document
reflecting the restrictive covenants imposed on the property to
establish its affordability; or
(5) in the case of a single-family property, a
document reflecting the property's affordability to individuals or
families of low or extremely low income.
(k) An organization must provide evidence of compliance
with Subsection (c)(9) by including with the application for an
exemption under this section:
(1) a copy of the organization's articles of
incorporation or bylaws;
(2) an affidavit of compliance with that subsection
signed by an authorized officer of the organization; and
(3) a current roster of the organization's board of
directors, including:
(A) each member's name and occupation;
(B) each member's home address; and
(C) a notation of which members are described by
Subsection (c)(9)(G).
(l) An organization must provide evidence of compliance
with Subsection (c)(10) by including with the application:
(1) a copy of the organization's bylaws; or
(2) a certificate signed by the secretary of the
organization stating that the organization has a policy required by
Subsection (c)(10), to which is attached a copy of the policy and a
resolution adopted by the board of directors of the organization
approving the policy.
(m) For purposes of this section:
(1) an individual or family is considered to have
extremely low income if the income of the individual or family is
not more than 30 percent of the greater of:
(A) the area median family income for the
household's place of residence, as adjusted for family size and as
established by the United States Department of Housing and Urban
Development; or
(B) the statewide area median family income, as
adjusted for family size and as established by the United States
Department of Housing and Urban Development; and
(2) an individual or family is considered to have low
income if the income of the individual or family is not more than 50
percent of the greater of:
(A) the area median family income for the
household's place of residence, as adjusted for family size and as
established by the United States Department of Housing and Urban
Development; or
(B) the statewide area median family income, as
adjusted for family size and as established by the United States
Department of Housing and Urban Development.
(n) Residential rental property is eligible for exemption
under this section only if:
(1) the organization establishes a reserve fund for
replacements as required by the person providing financing for the
property; or
(2) the person providing financing for the property
does not require the establishment of a reserve fund for
replacements and the organization sets aside as a reserve for
capital improvements an amount equal to:
(A) $250 per unit per year for units that are not
more than five years old; or
(B) $300 per unit per year for units that are more
than five years old.
(o) Beginning with the 2005 tax year, the amount of the
reserve required by Subsection (o)(2) is increased by an annual
cost-of-living adjustment determined under Section 1(f)(3),
Internal Revenue Code of 1986, as amended, substituting "calendar
year 2004" for "calendar year 1992" in Section 1(f)(3)(B) of that
code.
(p) A reserve must be established under Subsection (n) for
each unit in the property, regardless of whether the unit is
affordable. The reserve must be maintained on an ongoing basis,
with withdrawals permitted only to pay the cost of capital
improvements needed for the property to maintain habitability under
the Minimum Property Standards of the United States Department of
Housing and Urban Development or a local code, whichever is more
restrictive. For purposes of this subsection, "capital
improvements" means property improvements that have a depreciable
life of at least five years under generally accepted accounting
principles, excluding typical "make ready" expenses such as
expenses for sheetrock repair, interior painting, or floor
coverings.
(q) If the property is owned for the purpose of building or
rehabilitating housing to be sold to an individual or family of low
or extremely low income, including a sale as part of a
lease-purchase program, the amount of the exemption from taxation
under this section is 75 percent of the appraised value of the
property for so long as the owner or lessee qualifies under
Subsection (m)(2).
(r) If the property is owned for the purpose of building or
rehabilitating housing to be rented, the amount of the exemption
from taxation under this section equals 75 percent of the appraised
value of the property multiplied by a fraction the numerator of
which is equal to the number of the net rentable square feet of
residential units in the property reserved for rental to
individuals or families of low or extremely low income and the
denominator of which is equal to the number of the net rentable
square feet for all residential units in the property.
(s) For the purposes of the computation required by
Subsection (r), for each unit reserved for rental to an individual
or family of extremely low income, a unit of equal size not
otherwise reserved for rental to an individual or family of low or
extremely low income may be considered exempt in accordance with
Subsection (r).
(u) Notwithstanding Subsections (q) and (r), the governing
body of a taxing unit by official action may provide that the amount
of the exemption under this section from taxation by the taxing unit
may exceed but not go below 75 percent of the appraised value of
property. This subsection applies only to property that qualifies
for an exemption under:
(1) Subsection (q); or
(2) Subsection (r).
(v) Property owned by an organization and exempted under
Subsection () may not be exempted under this section after the first
anniversary of the date the organization acquires the property
unless the organization has sold the property to individuals or
families of low or extremely low income or is offering to rent or is
renting the property to individuals or families of low or extremely
low income.
Sec. 11.1826. MONITORING OF COMPLIANCE WITH LOW-INCOME AND
MODERATE-INCOME HOUSING EXEMPTIONS. (a) In this section,
"department" means the Texas Department of Housing and Community
Affairs.
(b) Property may not be exempted under Section 11.1825 for a
tax year unless the community-based housing provider owning the
property has an audit prepared by an independent auditor for the
community-based housing provider. The audit must be conducted in
accordance with generally accepted accounting principles.
(c) The audit must include an opinion on whether the
financial statements present fairly, in all material respects and
in conformity with accounting principles generally accepted in the
United States, the financial position, changes in net assets, and
cash flows of the community-based housing provider and whether the
community-based housing provider complied with specific terms and
conditions of the exemption under Sections 11.1825(c), (n), (q),
and (r), as applicable.
(d) Not later than the 180th day after the last day of the
community-based housing provider's most recent fiscal year, the
community-based housing provider must deliver a copy of the audit
to the department and the chief appraiser of the appraisal district
in which the subject property is located.
(e) An audit must be conducted under this section and
delivered to the department and the chief appraiser of the
appraisal district each year.
(f) Notwithstanding the other provisions of this section,
if the property contains not more than 36 units, the
commmunity-based housing provider may deliver to the department and
the chief appraiser a detailed report and certification as an
alternative to an audit.
(g) Property may not be exempted under Section 11.182 for a
tax year unless the organization owning the property complies with
this section, except that the audit required by this section must
address compliance with the requirements of Section 11.182.
(h) All information submitted to the department or the chief
appraiser under this section is subject to required disclosure, is
excepted from required disclosure, or is confidential in accordance
with Chapter 552, Government Code, or other law.
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,] 11.183, 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 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. 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.