By: Jackson S.B. No. 931

A BILL TO BE ENTITLED

AN ACT

relating to the appraisal for ad valorem tax purposes 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. 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 includes a development, as defined by Section 2306.6702, Government Code:

(A) the dwelling units in which are [on the effective date of this section was] rented or offered for rent to [a] low-income or moderate-income individuals [individual] or families [family] satisfying the [organization's] income eligibility requirements of Subchapter DD, Chapter 2306, Government Code [and that continues to be used for that purpose]; and

(B) [(2)] that was financed under the low income housing tax credit program under Subchapter DD, Chapter 2306, Government code;

(2) [(3)] that does not receive an exemption under Section 11.82 or 11.1825; and

(3) [(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) In appraising the property, the [The] chief appraiser shall:

(1) calculate the gross income potential of the property by:

(A) analyzing data on rental income of the property for the preceding fiscal year contained in the audited statement of income and expenses for the property provided under Subsection (g) to the chief appraiser if the dwelling units in the development were rented or offered for rent to individuals or families described by Subsection (a) (1) (A) for the entire fiscal year;

(B) analyzing the potential earnings capacity of the property if the dwelling units in the development were not rented or offered for rent to individuals or families described by Subsection (a) (1) (A) during the preceding fiscal year; and

(C) if the dwelling units in the development were rented or offered for rent to individuals or families described by Subsection (a) (1) (A) for only part of the preceding fiscal year, using the method prescribed by Paragraph (A) for the part of the fiscal year in which the dwelling units were rented or offered for rent and using the method prescribed by Paragraph (B) for the part of the fiscal year in which the dwelling units were not rented or offered for rent;

(2) calculate the operation and maintenance expenses of the property by:

(A) analyzing data on operation and maintenance expenses of the property for the preceding fiscal year contained in the audited statement of income and expenses for the property provided under Subsection (g) to the chief appraiser if the dwelling units in the development were rented or offered for rent to individuals or families described by Subsection (a (1) (A) for the entire fiscal year;

(B) analyzing data on operation and maintenance expenses of comparable properties available to the chief appraiser if the dwelling units in the development were not rented or offered for rent to individuals or families described by Subsection (a) (1) (A) during the preceding fiscal year; or

(C) if the dwelling units in the development were rented or offered for rent to individuals or families described by Subsection (a) (1) (A) for only part of the preceding fiscal year, using the method prescribed by Paragraph (A) for the part of the fiscal year in which the dwelling units were rented or offered for rent and using the method prescribed by Paragraph (B) for the part of the fiscal year in which the dwelling units were not rented or offered for rent;

(3) determine the appropriate capitalization rate as provided by Subsections (c) and (d); and

(4) compute the actual rental income from the property or project the future rental income from the property by considering the restrictions provided by Subchapter DD, Chapter 2306, Government Code, on:

(A) the income of the individuals or families to whom the property may be rented; and

(B) the amount of rent that may be charged for the property [appraise the property in the manner provided by Section 11.1825 (q)].

(c) The chief appraiser shall appraise the property using a capitalization rate of at least 13.5 percent, except as provided by Subsection (d).

(d) The chief appraiser may conduct a study of sales of comparable properties described by Subsection (a) that are located in the appraisal district to determine the appropriate capitalization rate to use in appraising the property. If as a result of the study the chief appraiser determines that a capitalization rate of less than 13.5 percent is more appropriate for that purpose, the chief appraiser shall use that lesser rate.

(e) Not later than January 31 of each year, the appraisal district shall give public notice in the manner determined by the district, including by posting on the district's website if applicable, of the capitalization rate to be used in that year to appraise property described by Subsection (a) if that rate is a rate of less than 13.5 percent.

(f) For purposes of determining the net operating income of the property, the operating income of the property for the preceding fiscal year is reduced by any disbursements made in that fiscal year for the operation and maintenance of the property, including disbursements for:

(1) standard property maintenance;

(2) debt service;

(3) ad valorem and franchise taxes;

(4) employee compensations;

(5) fees required by government agencies;

(6) expenses incurred in satisfaction of the requirement of lenders, including reserve requirements;

(7) insurance; and

(8) any other justifiable expense related to the operation and maintenance of the property.

(g) Not later than April 15 of each year, the property owner must provide to the chief appraiser an audited statement of the income and expenses for the property for the preceding fiscal year that includes data on rental income and operation and maintenance expenses for which disbursements described by Subsection (f) were made. The chief appraiser shall use the audited statement of income and expenses in appraising the property under this section. If the property owner fails to timely provide the audited statement of income and expenses, the chief appraiser shall appraise the property in the manner provided by Section 23.012.

(h) An audited statement of income and expenses for property provided to the chief appraiser under Subsection (g) is confidential and not available for public inspection. The chief appraiser may disclose information in the statement only to an employee of the appraisal office who appraises property, except as authorized by Subsection (i).

(i) Information made confidential by Subsection (h) may be disclosed:

(1) in a criminal proceeding;

(2) in a hearing conducted by the appraisal review board;

(3) on a judicial determination of good cause; or

(4) to a governmental agency, political subdivision, or regulatory body if the disclosure is necessary or proper for the enforcement of the laws of this or another state or of the United States.

(j) In connection with an annual study conducted under Section 403.302, Government Code, the value of property described by Subsection (a) that is selected for appraisal must be determined in the manner required by this section.

SECTION 2. This Act applies only to ad valorem taxes imposed for a tax year beginning on or after the effective date of this Act.

Section 3. This Act takes effect January 1, 2008.