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2003S0998-2 04/11/03


By:  Jackson                                                      S.B. No. 17 


A BILL TO BE ENTITLED

AN ACT

relating to the income and cost methods of 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 
income method of appraisal is applicable and if [If] the chief 
appraiser uses the income method of appraisal to determine the 
market value of real property, the chief appraiser shall:
		(1)  analyze comparable rental data available to the 
appraiser or the potential earnings capacity of the property, or 
both the comparable rental data and the potential earnings 
capacity, to estimate the gross income potential of the property 
[use rental income and expense data pertaining to the property if 
possible and applicable];
		(2)  analyze comparable operating expense data 
available to the appraiser to estimate the operating expenses of 
the property [make any projections of future rental income and 
expenses only from clear and appropriate evidence];
		(3)  analyze comparable data available to the appraiser 
to estimate rates of capitalization or rates of discount [use data 
from generally accepted sources in determining an appropriate 
capitalization rate]; [and]
		(4)  base projections of future rent or income 
potential and expenses on reasonably clear and appropriate 
evidence; and
		(5)  analyze the effect on value of any personal 
property, trade fixtures, or intangible items that are not real 
property but are included in the appraisal.
	(b)  When using potential earnings capacity to estimate the 
gross income potential of real property, the appraiser shall 
exclude the income and expenses attributable to any tangible 
personal property, intangible property, or other property that is 
not included in the appraisal.  For purposes of Subsection (a), the 
income method of appraisal is not considered applicable if the 
appraiser cannot with reasonable certainty exclude the income and 
expenses attributable to other property as provided by this 
subsection [determine a capitalization rate for income-producing 
property that includes a reasonable return on investment, taking 
into account the risk associated with the investment].
	SECTION 2.  Section 23.011, Tax Code, is amended to read as 
follows:         
	Sec. 23.011.  COST METHOD OF APPRAISAL.  If the chief 
appraiser uses the cost method of appraisal to determine the market 
value of real property, the chief appraiser shall:
		(1)  use cost data obtained from generally accepted 
sources, such data to include ordinary installation where 
applicable;
		(2)  make any appropriate adjustment for physical, 
functional, or economic obsolescence;
		(3)  make available to the public on request cost data 
developed and used by the chief appraiser as applied to all 
properties within a property category and may charge a reasonable 
fee to the public for the data;
		(4)  clearly state the reason for any variation between 
generally accepted cost data and locally produced cost data if the 
data vary by more than 10 percent; and
		(5)  make available to the property owner on request 
all applicable market data that demonstrate the difference between 
the replacement cost of the improvements to the property and the 
depreciated value of the improvements.
	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.