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A BILL TO BE ENTITLED
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AN ACT
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relating to the ad valorem taxation of property used to provide |
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low-income or moderate-income housing. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 11.182, Tax Code, is amended by amending |
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Subsections (b), (e), (h), and (k) and adding Subsections (b-1) and |
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(b-2) to read as follows: |
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(b) An organization is entitled to an exemption from |
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taxation of improved or unimproved real property it owns if the |
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organization: |
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(1) is organized as a community housing development |
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organization; |
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(2) meets the requirements of a charitable |
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organization provided by Sections 11.18(e) and (f); |
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(3) owns the property for the purpose of building or |
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repairing housing on the property to sell without profit to a |
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low-income or moderate-income individual or family satisfying the |
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organization's eligibility requirements or to rent without profit |
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to such an individual or family; and |
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(4) engages [exclusively] in the building, repair, and |
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sale or rental of housing as described by Subdivision (3) and |
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related activities. |
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(b-1) Notwithstanding Subsections (b)(1) and (2), an owner |
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of improved or unimproved real property that is not an organization |
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described by Subsections (b)(1) and (2) is entitled to an exemption |
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from taxation of the property under Subsection (b) if the owner |
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otherwise qualifies for the exemption and the owner is: |
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(1) a limited partnership of which 100 percent of the |
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interest of the general partner is owned or controlled by an |
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organization described by Subsections (b)(1) and (2); or |
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(2) an entity 100 percent of the interest in which is |
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owned or controlled by an organization described by Subsections |
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(b)(1) and (2). |
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(b-2) A reference in this section to an organization |
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includes a limited partnership or other entity described by |
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Subsection (b-1). |
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(e) In addition to meeting the applicable requirements of |
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Subsections (b) and (c), to receive an exemption under Subsection |
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(b) for improved real property that is [includes a housing project
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constructed after December 31, 2001, and] financed with qualified |
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501(c)(3) bonds issued under Section 145 of the Internal Revenue |
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Code of 1986, tax-exempt private activity bonds subject to volume |
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cap, or low-income housing tax credits, the organization must: |
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(1) [control 100 percent of the interest in the
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general partner if the project is owned by a limited partnership;
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[(2)] comply with all rules of and laws administered |
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by the Texas Department of Housing and Community Affairs applicable |
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to community housing development organizations; and |
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(2) [(3)] submit annually to the Texas Department of |
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Housing and Community Affairs and to the governing body of each |
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taxing unit for which the project receives an exemption for the |
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housing project evidence demonstrating that the organization spent |
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an amount equal to at least 90 percent of the project's cash flow in |
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the preceding fiscal year as determined by the audit required by |
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Subsection (g), for eligible persons in the county in which the |
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property is located, on social, educational, or economic |
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development services, capital improvement projects, or rent |
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reduction. |
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(h) Subsections (d) and (e)(2) [(e)(3)] do not apply to |
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property owned by an organization if: |
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(1) the entity that provided the financing for the |
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acquisition or construction of the property: |
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(A) requires the organization to make payments in |
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lieu of taxes to the school district in which the property is |
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located; or |
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(B) restricts the amount of rent the organization |
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may charge for dwelling units on the property; or |
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(2) the organization has entered into an agreement |
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with each taxing unit for which the property receives an exemption |
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to spend in each tax year for the purposes provided by Subsection |
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(d) or (e)(2) [(e)(3)] an amount equal to the total amount of taxes |
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imposed on the property in the tax year preceding the year in which |
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the organization acquired the property. |
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(k) Notwithstanding Subsection (j) [of this section] and |
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Sections 11.43(a) and (c), an exemption under Subsection (b) or (f) |
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does not terminate because of a change in the ownership of the |
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property if the property is sold at a foreclosure sale and, not |
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later than the 30th day after the date of the sale, the owner of the |
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property submits to the chief appraiser evidence that the property |
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is owned by an organization that meets the requirements of |
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Subsections (b)(1), (2), and (4) or is owned by a limited |
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partnership described by Subsection (b-1)(1) or an entity described |
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by Subsection (b-1)(2) that meets the requirements of Subsection |
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(b)(4). If the owner of the property submits the evidence required |
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by this subsection, the exemption continues to apply to the |
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property for the remainder of the current tax year and for |
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subsequent tax years until the owner ceases to qualify the property |
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for the exemption. This subsection does not prohibit the chief |
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appraiser from requiring the owner to file a new application to |
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confirm the owner's current qualification for the exemption as |
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provided by Section 11.43(c). |
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SECTION 2. Section 11.1826, Tax Code, is amended by |
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amending Subsections (b) and (e) and adding Subsection (c-1) to |
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read as follows: |
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(b) Property may not be exempted under Section 11.1825 for a |
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tax year unless the organization owning or controlling the owner of |
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the property has an audit prepared by an independent auditor, |
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licensed by this state as a certified public accountant, covering |
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the organization's most recent fiscal year. The audit must be |
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conducted in accordance with generally accepted accounting |
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principles. The audit must include an unqualified opinion that [on
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whether]: |
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(1) the financial statements of the organization |
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present fairly, in all material respects and in conformity with |
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generally accepted accounting principles, the financial position, |
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changes in net assets, and cash flows of the organization; and |
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(2) the organization has complied with all of the |
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terms and conditions of the exemption under Section 11.1825. |
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(c-1) The audit is binding on the appraisal district and |
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constitutes proof of eligibility for, including compliance with all |
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statutory requirements necessary for, an exemption under Section |
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11.1825. |
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(e) Property may not be exempted under Section 11.182 for a |
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tax year unless the organization owning or controlling the owner of |
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the property complies with this section, except that the audit |
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required by this section must address compliance with the |
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requirements of Section 11.182. Subsection (c-1) applies to an |
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audit that addresses compliance with the requirements of Section |
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11.182 in the same manner as that subsection applies to an audit |
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that addresses compliance with the requirements of Section 11.1825. |
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SECTION 3. Section 11.43(c), Tax Code, is amended to read as |
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follows: |
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(c) An exemption provided by Section 11.13, 11.17, 11.18, |
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11.182, 11.1825, 11.183, 11.19, 11.20, 11.21, 11.22, 11.23(h), (j), |
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or (j-1), 11.29, 11.30, or 11.31, once allowed, need not be claimed |
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in subsequent years, and except as otherwise provided by Subsection |
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(e), the exemption applies to the property until it changes |
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ownership or the person's qualification for the exemption changes. |
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However, the chief appraiser may require a person allowed one of the |
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exemptions in a prior year to file a new application to confirm the |
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person's current qualification for the exemption by delivering a |
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written notice that a new application is required, accompanied by |
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an appropriate application form, to the person previously allowed |
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the exemption. |
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SECTION 4. Section 23.215, Tax Code, is amended to read as |
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follows: |
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Sec. 23.215. APPRAISAL OF CERTAIN NONEXEMPT PROPERTY USED |
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FOR LOW-INCOME OR MODERATE-INCOME HOUSING. (a) This section |
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applies only to real property [owned by an organization]: |
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(1) that includes a development, as defined by Section |
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2306.6702, Government Code: |
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(A) the dwelling units in which on the effective |
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date of this section were [was] rented or offered for rent to [a] |
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low-income or moderate-income individuals [individual] or families |
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[family] satisfying the [organization's] income eligibility |
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requirements of Subchapter DD, Chapter 2306, Government Code, and |
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that continue [continues] to be used for that purpose; and |
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(B) [(2)] that was financed under the low income |
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housing tax credit program under Subchapter DD, Chapter 2306, |
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Government Code; |
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(2) [(3)] that does not receive an exemption under |
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Section 11.182 or 11.1825; and |
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(3) [(4)] the owner of which has not entered into an |
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agreement with any taxing unit to make payments to the taxing unit |
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instead of taxes on the property. |
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(b) In appraising the property, the [The] chief appraiser |
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shall: |
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(1) estimate the gross income potential of the |
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property by: |
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(A) analyzing data on rental income of the |
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property for the preceding fiscal year contained in the audited |
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statement of income and expenses for the property provided under |
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Subsection (g) to the chief appraiser if the dwelling units in the |
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development were rented or offered for rent to individuals or |
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families described by Subsection (a)(1)(A) for the entire fiscal |
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year; |
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(B) analyzing the potential earnings capacity of |
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the property if the dwelling units in the development were not |
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rented or offered for rent to individuals or families described by |
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Subsection (a)(1)(A) during the preceding fiscal year; or |
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(C) if the dwelling units in the development were |
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rented or offered for rent to individuals or families described by |
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Subsection (a)(1)(A) for only part of the preceding fiscal year, |
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using the method prescribed by Paragraph (A) for the part of the |
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fiscal year in which the dwelling units were rented or offered for |
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rent and using the method prescribed by Paragraph (B) for the part |
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of the fiscal year in which the dwelling units were not rented or |
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offered for rent; |
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(2) estimate the operation and maintenance expenses of |
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the property by: |
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(A) analyzing data on operation and maintenance |
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expenses of the property for the preceding fiscal year contained in |
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the audited statement of income and expenses for the property |
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provided under Subsection (g) to the chief appraiser if the |
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dwelling units in the development were rented or offered for rent to |
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individuals or families described by Subsection (a)(1)(A) for the |
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entire fiscal year; |
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(B) analyzing data on operation and maintenance |
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expenses of comparable properties available to the chief appraiser |
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if the dwelling units in the development were not rented or offered |
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for rent to individuals or families described by Subsection |
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(a)(1)(A) during the preceding fiscal year; or |
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(C) if the dwelling units in the development were |
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rented or offered for rent to individuals or families described by |
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Subsection (a)(1)(A) for only part of the preceding fiscal year, |
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using the method prescribed by Paragraph (A) for the part of the |
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fiscal year in which the dwelling units were rented or offered for |
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rent and using the method prescribed by Paragraph (B) for the part |
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of the fiscal year in which the dwelling units were not rented or |
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offered for rent; |
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(3) determine the appropriate capitalization rate as |
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provided by Subsections (c) and (d); and |
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(4) compute the actual rental income from the property |
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or project the future rental income from the property by |
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considering the restrictions provided by Subchapter DD, Chapter |
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2306, Government Code, on: |
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(A) the income of the individuals or families to |
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whom the property may be rented; and |
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(B) the amount of rent that may be charged for the |
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property [appraise the property in the manner provided by Section
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11.1825(q)]. |
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(c) The chief appraiser shall appraise the property using a |
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capitalization rate of at least 13.5 percent, except as provided by |
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Subsection (d). |
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(d) The chief appraiser may conduct a study of sales of |
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comparable properties described by Subsection (a) that are located |
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in the appraisal district to determine the appropriate |
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capitalization rate to use in appraising the property. If as a |
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result of the study the chief appraiser determines that a |
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capitalization rate of less than 13.5 percent is more appropriate |
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for that purpose, the chief appraiser shall use that lesser rate. |
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(e) Not later than January 31 of each year, the appraisal |
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district shall give public notice in the manner determined by the |
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district, including by posting on the district's website if |
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applicable, of the capitalization rate to be used in that year to |
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appraise property described by Subsection (a) if that rate is a rate |
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of less than 13.5 percent. |
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(f) For purposes of determining the net operating income of |
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the property, the operating income of the property for the |
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preceding fiscal year is reduced by any disbursements made in that |
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fiscal year for the operation and maintenance of the property, |
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including disbursements for: |
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(1) standard property maintenance; |
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(2) debt service; |
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(3) ad valorem and franchise taxes; |
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(4) employee compensation; |
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(5) fees required by government agencies; |
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(6) expenses incurred in satisfaction of the |
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requirements of lenders, including reserve requirements; |
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(7) insurance; and |
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(8) any other justifiable expense related to the |
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operation and maintenance of the property. |
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(g) Not later than April 15 of each year, the property owner |
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must provide to the chief appraiser an audited statement of the |
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income and expenses for the property for the preceding fiscal year |
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that includes data on rental income and operation and maintenance |
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expenses for which disbursements described by Subsection (f) were |
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made. The chief appraiser shall use the audited statement of income |
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and expenses in appraising the property under this section. If the |
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property owner fails to timely provide the audited statement of |
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income and expenses, the chief appraiser shall appraise the |
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property in the manner provided by Section 23.012. |
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(h) An audited statement of income and expenses for property |
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provided to the chief appraiser under Subsection (g) is |
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confidential and not available for public inspection. The chief |
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appraiser may disclose information in the statement only to an |
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employee of the appraisal office who appraises property, except as |
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authorized by Subsection (i). |
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(i) Information made confidential by Subsection (h) may be |
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disclosed: |
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(1) in a criminal proceeding; |
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(2) in a hearing conducted by the appraisal review |
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board; |
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(3) on a judicial determination of good cause; or |
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(4) to a governmental agency, political subdivision, |
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or regulatory body if the disclosure is necessary or proper for the |
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enforcement of the laws of this or another state or of the United |
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States. |
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(j) In connection with an annual study conducted under |
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Section 403.302, Government Code, the value of a property described |
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by Subsection (a) that is selected for appraisal must be determined |
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in the manner required by this section. |
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SECTION 5. This Act applies only to ad valorem taxes imposed |
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for a tax year beginning on or after the effective date of this Act. |
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SECTION 6. This Act takes effect January 1, 2010. |