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New Sections ____A, ____B, and ____C are added to SB 1908 as
follows:
SECTION ____A. Section 23.012, Tax Code, is amended to read
as follows:
§ 23.012. INCOME METHOD OF APPRAISAL. (a) If 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 rental data available to the
chief appraiser or the potential earnings capacity of the property,
or both, to estimate the gross income potential of the property;
(2) analyze comparable operating expense data
available to the chief appraiser to estimate the operating expenses
of the property;
(3) analyze comparable data available to the chief
appraiser to estimate rates of capitalization or rates of discount;
and
(4) base projections of future rent or income
potential and expenses on reasonably clear and appropriate
evidence.
(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.
(c) If the property to be appraised is rent-restricted, the
income approach is determined by the net operating income. The "net
operating income" means the income from property less the expenses
incurred that are specific to the property, using generally
accepted accounting principles and include compliance monitoring
fees and operating and replacement reserves. The property owner
must make available to the chief appraiser end of the year financial
statements and rent rolls for the property as requested by the chief
appraiser to determine the actual net operating income.
SECTION ____B. Section 23.215, Tax Code, is amended 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 is [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 of
the owner of the property [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 in the manner
provided by Section 11.1825(q).
(c) If the construction or rehabilitation of the housing
project on the property has not been completed, the chief appraiser
shall determine the appraised value of the property by:
(1) using the cost method of appraisal under Section
23.011, except that the chief appraiser shall consider only
restrictions placed on the land for the affordability of the units
constructed on the land and data pertaining to the cost of the land
on which the housing project is located and may not consider data
pertaining to the cost of any structure located on the land; or
(2) usingthe income method of appraisal as provided
by Section 23.012, except that the chief appraiser shall multiply
the appraised value of the property as determined under that
section by the percentage of completion of the construction or
rehabilitation of the structures comprising the housing project as
determined by the architect or lender for the project.
(d) If the construction or rehabilitation of the housing
project on the property has been completed, the chief appraiser
shall determine the appraised value of the property by using the
income method of appraisal as provided by Section 23.012.
(e) In determining the appraised value of property that
qualifies for an exemption under this section using the income
method of appraisal the chief appraiser shall:
(1) consider the restrictions 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 net operating income from the
property;and
(2) use the projected net operating income from the
property for the first year of operation of the housing project as
estimated by a property appraisal provided to the chief appraiser
by the property owner if the property is appraised under Subsection
(c)(1) or use the actual net operating income from the property if
the property is appraised under Subsection (c)(2).
SECTION ____C. Section 11.1825, Tax Code, is amended by
amending Subsections (q) and (r) and adding Subsections (q-1),
(q-2), and (q-3) to read as follows:
(q) If property qualifies for an exemption under this
section, the chief appraiser shall appraise the property in the
manner provided by Subsection (q-1) or (q-2), as applicable.
(q-1) If the construction or rehabilitation of the housing
project on the property has not been completed, the chief appraiser
shall determine the appraised value of the property by:
(1) using the cost method of appraisal under Section
23.011, except that the chief appraiser shall consider only
restrictions placed on the land for the affordability of the units
constructed on the land and data pertaining to the cost of the land
on which the housing project is located and may not consider data
pertaining to the cost of any structure located on the land; or
(2) using [use] the income method of appraisal as
provided by Section 23.012, except that the chief appraiser shall
multiply the appraised value of the property as determined under
that section by the percentage of completion of the construction or
rehabilitation of the structures comprising the housing project as
determined by the architect or lender for the project.
(q-2) If the construction or rehabilitation of the housing
project on the property has been completed, the chief appraiser
shall determine the appraised value of the property by using the
income method of appraisal as provided by Section 23.012.
(q-3) In determining the appraised value of property that
qualifies for an exemption under this section using the income
method of appraisal [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 net operating
[actual rental] income from the property [or projecting future
rental income]; [and]
(2) use the projected net operating income from the
property for the first year of operation of the housing project as
estimated by a property appraisal provided to the chief appraiser
by the property owner if the property is appraised under Subsection
(q-1)(2) or use the actual net operating income from the property if
the property is appraised under Subsection (q-2);
(3) use the same capitalization rate that the chief
appraiser uses to appraise other rent-restricted properties; and
(4) consider expenses in the manner provided for in
Section 11.182(a)(1).
(r) For purposes of this section, "net operating income"
means the income from property less the expenses incurred that are
specific to the property, using generally accepted accounting
principles and include compliance monitoring fees and operating and
replacement reserves. The property owner must make available to the
chief appraiser end of the year financial statements and rent rolls
for the property as requested by the chief appraiser to determine
the actual net operating income . 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.