82R9180 SMH-F

By: Garza H.B. No. 3552

A BILL TO BE ENTITLED

AN ACT

relating to the exemption from ad valorem taxation of property used to provide low-income or moderate-income housing.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 11.182(a), Tax Code, is amended by amending Subdivision (2) and adding Subdivisions (3) and (4) to read as follows:

(2) "Community housing development organization" has the meaning assigned by 24 C.F.R. Section 92.2 [42 U.S.C. Section 12704].

(3) "Control" means having the power to manage, direct, superintend, restrict, regulate, govern, or oversee. An organization is considered to control a limited partnership if the organization directly or through a wholly controlled subsidiary controls 100 percent of the general partner interest. An organization is considered to control a limited liability company if the organization is the sole manager or managing member of the company.

(4) "Low-income individual or family" means "individuals and families of low income" as defined by Section 2306.004, Government Code.

SECTION 2. Section 11.182, Tax Code, is amended by adding Subsections (a-1), (b-1), (b-2), and (b-3) and amending Subsections (b), (e), (g), (h), and (i) to read as follows:

(a-1) An organization is considered to own property for purposes of this section and the provisions of Section 2, Article VIII, Texas Constitution, authorizing the legislature by general law to exempt from taxation property owned by an institution engaged primarily in public charitable functions, if the organization has legal or equitable title to the property. By way of example, an organization has equitable title to property if it has a present right to compel legal title to the property to be conveyed to it in accordance with law, such as by means of an option to acquire the property. For purposes of eligibility for an exemption under this section:

(1) property owned by a tax credit partnership or limited liability company is considered to be owned by a community housing development organization if the general partner of the tax credit partnership or the manager of the limited liability company is or is controlled by the community housing development organization; and

(2) property owned by a single member limited liability company is considered to be owned by the company's single member.

(b) An organization is entitled to an exemption from taxation of improved or unimproved real property it owns if the organization:

(1) is organized as a community housing development organization;

(2) meets the requirements of a charitable organization provided by Sections 11.18(e) and (f);

(3) owns the property for the purpose of building or repairing housing on the property to sell without profit to a low-income or moderate-income individual or family satisfying the organization's eligibility requirements or to rent without profit to such an individual or family; and

(4) engages [exclusively] in the building, repair, and sale or rental of housing as described by Subdivision (3) and related activities.

(b-1) For purposes of determining whether an organization has satisfied the requirements of Subsection (b)(2) in order to qualify for an exemption under this section, an opinion included in an audit of the organization prepared by a person who is licensed by this state as a certified public accountant or a determination of tax-exempt status under Section 501(c), Internal Revenue Code of 1986, issued by the United States Internal Revenue Service is prima facie evidence of the facts stated in the opinion or determination.

(b-2) Notwithstanding Subsection (b), if the legal owner of property is not an organization described by that subsection, the legal owner is entitled to an exemption from taxation of property under this section if the property otherwise qualifies for the exemption and the legal owner is:

(1) an entity 100 percent of the interest in which is owned by an organization that meets the requirements of Subsection (b); or

(2) an entity controlled by an organization that meets the requirements of Subsection (b) and the organization or the legal owner initially filed an application for the exemption on or after January 1, 2002, and on or before December 31, 2003.

(b-3) A reference in this section to an organization includes an entity described by Subsection (b-2).

(e) In addition to meeting the applicable requirements of Subsections (b) and (c), to receive an exemption under Subsection (b) for improved real property that includes a housing project constructed after December 31, 2001, and financed with qualified 501(c)(3) bonds issued under Section 145 of the Internal Revenue Code of 1986, tax-exempt private activity bonds subject to volume cap, or low-income housing tax credits, the organization must:

(1) [control 100 percent of the interest in the general partner if the project is owned by a limited partnership;

[(2)] comply with all rules of and laws administered by the Texas Department of Housing and Community Affairs applicable to community housing development organizations if the department has continuing jurisdiction and oversight over the bond financing used to finance the project; and

(2) [(3)] submit annually to the [Texas Department of Housing and Community Affairs and to the] governing body of each taxing unit for which the project receives an exemption for the housing project evidence demonstrating that the organization spent an amount equal to at least 90 percent of the project's cash flow in the preceding fiscal year as determined by the audit required by Subsection (g), for eligible persons in the county in which the property is located, on social, educational, or economic development services, capital improvement projects, or rent reduction.

(g) To receive an exemption under Subsection (b) or (f), an organization must annually have an audit prepared by an independent auditor. The audit must include a detailed report on the organization's sources and uses of funds. A copy of the audit must be delivered to the [Texas Department of Housing and Community Affairs and to the] chief appraiser of the appraisal district in which the property subject to the exemption is located.

(h) Subsections (d) and (e)(2) [(e)(3)] do not apply to property owned by an organization if:

(1) the entity that provided the financing for the acquisition or construction of the property:

(A) requires the organization to make payments in lieu of taxes to the school district in which the property is located; or

(B) restricts the amount of rent the organization may charge for dwelling units on the property; or

(2) the organization has entered into an agreement with each taxing unit for which the property receives an exemption to spend in each tax year for the purposes provided by Subsection (d) or (e)(2) [(e)(3)] an amount equal to the total amount of taxes imposed on the property in the tax year preceding the year in which the organization acquired the property.

(i) If any property owned by an organization receiving an exemption under this section has been acquired or sold during the preceding year, such organization shall file [by March 31 of the following year] with the chief appraiser in the county in which the relevant property is located, on a form promulgated by the comptroller of public accounts, a list of such properties acquired or sold during the preceding year. The form must be filed by April 30 of the year following the year of the sale or acquisition or on a later date authorized in writing by the chief appraiser.

SECTION 3. Section 11.1825, Tax Code, is amended by amending Subsections (a), (c), (d), (i), (j), (k), (l), (p), (t), and (v) and adding Subsections (a-1), (a-2), and (b-1) to read as follows:

(a) In this section, "control" means having the power to manage, direct, superintend, restrict, regulate, govern, or oversee. An organization is considered to control a limited partnership if the organization directly or through a wholly controlled subsidiary controls 100 percent of the general partner interest. An organization is considered to control a limited liability company if the organization is the sole manager or managing member of the company.

(a-1) An organization is considered to own property for purposes of this section and the provisions of Section 2, Article VIII, Texas Constitution, authorizing the legislature by general law to exempt from taxation property owned by an institution engaged primarily in public charitable functions, if the organization has legal or equitable title to the property. By way of example, an organization has equitable title to property if it has a present right to compel legal title to the property to be conveyed to it in accordance with law, such as by means of an option to acquire the property. For purposes of eligibility for an exemption under this section:

(1) property owned by a tax credit partnership or limited liability company is considered to be owned by an organization if the general partner of the tax credit partnership or the manager of the limited liability company is or is controlled by the organization; and

(2) property owned by a single member limited liability company is considered to be owned by the company's single member.

(a-2) An organization is entitled to an exemption from taxation of real property owned by the organization that the organization constructs or rehabilitates and uses to provide housing to individuals or families meeting the income eligibility requirements of this section.

(b-1) For purposes of determining whether an organization has satisfied the requirements of Subsection (b)(1)(B) in order to qualify for an exemption under this section, an opinion included in an audit of the organization prepared by a person who is licensed by this state as a certified public accountant or a determination of tax-exempt status under Section 501(c), Internal Revenue Code of 1986, issued by the United States Internal Revenue Service is prima facie evidence of the facts stated in the opinion or determination.

(c) Notwithstanding Subsection (b), if the legal [an] owner of real property [that] is not an organization described by that subsection, the legal owner is entitled to an exemption from taxation of property under this section if the property otherwise qualifies for the exemption and the legal owner is:

(1) an entity 100 percent of the interest in which is owned by [a limited partnership of which] an organization that meets the requirements of Subsection (b) [controls 100 percent of the general partner interest]; or

(2) an entity controlled by [the parent of which is] an organization that meets the requirements of Subsection (b).

(d) If the legal owner of the property is an entity described by Subsection (c)[, the entity must]:

(1) the legal owner must be organized under the laws of this state[;] and

[(2)] have its principal place of business in this state; and

(2) the organization that owns 100 percent of the interest in or controls the legal owner as described by Subsection (c) must have equitable title to the property.

(i) Property owned for the purpose of constructing or rehabilitating a housing project on the property is exempt under this section only if:

(1) the property is used to provide housing to individuals or families described by Subsection (f); or

(2) the housing project is under active construction or rehabilitation or other physical preparation.

(j) For purposes of Subsection (i)(2), a housing project is under physical preparation if the organization has engaged in architectural or engineering work, soil testing, land clearing activities, or site improvement work necessary for the construction or rehabilitation of the project or has conducted an environmental or land use study relating to the construction or rehabilitation of the project.

(k) An organization may not receive an exemption for property owned for the purpose of constructing a housing project [constructed by the organization] if the construction of the project was completed before January 1, 2004.

(l) If the property is owned for the purpose of rehabilitating a housing project on the property:

(1) the original construction of the housing project must have been completed at least 10 years before the date the organization began actual rehabilitation of the project;

(2) the person from whom the organization acquired the project must have owned the project for at least five years, if the organization is not the original owner of the project, unless the organization acquired the project from a person that acquired the project by foreclosing on the project or receiving a deed or other instrument in lieu of foreclosure that conveyed the project to the person;

(3) the organization must provide to the chief appraiser and, if the project was financed with bonds, the issuer of the bonds a written statement prepared by a certified public accountant stating that the organization has spent on rehabilitation costs at least the greater of $5,000 or the amount required by the financial lender for each dwelling unit in the project; and

(4) the organization must maintain a reserve fund for replacements:

(A) in the amount required by the financial lender; or

(B) if the financial lender does not require a reserve fund for replacements, in an amount equal to $300 per unit per year.

(p) If the organization acquires the property for the purpose of constructing or rehabilitating a housing project on the property, the organization must be renting or offering to rent the applicable square footage of dwelling units in the property to individuals or families described by Subsection (f) not later than the third anniversary of the date the organization acquires the property. For purposes of this subsection, if the organization acquired the property after January 31 of a year, the organization is considered to have acquired the property on January 1 of the following year.

(t) Notwithstanding Section 11.43(c), an exemption under this section does not terminate because of a change in ownership of the property if:

(1) the property is foreclosed on for any reason and, not later than the 30th day after the date of the foreclosure sale, the owner of the property submits to the chief appraiser evidence that the property is owned by:

(A) an organization that meets the requirements of Subsection (b); or

(B) an entity that meets the requirements of Subsections (c) and (d); or

(2) in the case of property owned by an entity described by Subsections (c) and (d), the organization meeting the requirements of Subsection (b) that owns 100 percent of the interest in or controls the [general partner interest of or is the parent of the] entity as described by Subsection (c) ceases to serve in that capacity and, not later than the 30th day after the date the cessation occurs, the owner of the property submits evidence to the chief appraiser that the organization has been succeeded in that capacity by another organization that meets the requirements of Subsection (b).

(v) Notwithstanding any other provision of this section, an organization may not receive an exemption from taxation of property described by Subsection (f)(1) by a taxing unit any part of which is located in a county with a population of at least 1.4 million unless the exemption is approved by the governing body of the taxing unit in the manner provided by law for official action. Approval of the exemption is required only for the tax year for which the initial application for the exemption is filed.

SECTION 4. This Act applies only to ad valorem taxes imposed for a tax year beginning on or after the effective date of this Act.

SECTION 5. This Act takes effect January 1, 2012.