Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
FROM:
John S O'Brien, Director, Legislative Budget Board
IN RE:
HB472 by Anderson, Charles "Doc" (Relating to the exemption from ad valorem taxation of the residence homestead of the surviving spouse of a 100 percent or totally disabled veteran.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB472, As Introduced: a negative impact of ($1,100,000) through the biennium ending August 31, 2013.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2012
$0
2013
($1,100,000)
2014
($2,362,000)
2015
($3,639,000)
2016
($4,951,000)
Fiscal Year
Probable Savings/(Cost) from Foundation School Fund 193
Probable Revenue Gain/(Loss) from School Districts - Net Impact
Probable Revenue Gain/(Loss) from Counties
Probable Revenue Gain/(Loss) from Cities
2012
$0
$0
$0
$0
2013
($1,100,000)
($385,000)
($428,000)
($478,000)
2014
($2,362,000)
($595,000)
($849,000)
($946,000)
2015
($3,639,000)
($831,000)
($1,278,000)
($1,422,000)
2016
($4,951,000)
($1,091,000)
($1,720,000)
($1,910,000)
Fiscal Analysis
The bill would amend Chapter 11 of the Tax Code, regarding property taxation, to entitle the surviving spouse of a disabled veteran to an exemption from taxation of the total appraised value of a surviving spouse’s residence homestead.
The surviving spouse would be entitled to the exemption if the disabled veteran qualified for a residence homestead exemption for a 100 percent or totally disabled veteran, the residence homestead of the surviving spouse is the same property to which the disabled veteran’s exemption applied upon the veteran’s death, and the property remains the residence homestead of the surviving spouse. In addition, the surviving spouse must not have remarried since the death of the disabled veteran.
The bill could be interpreted to conflict with the accompanying constitutional amendment (HJR 48), which provides that the exemption is the amount of the exemption received by the deceased disabled veteran on the residence homestead. In this enabling legislation, the dollar amount exempted would vary depending on the appraised value, but the surviving spouse’s tax liability would remain zero. In the resolution, the dollar amount exempted would remain static at the amount of the exemption received by the deceased disabled veteran. If the value of the residence homestead increased, then the surviving spouse could be responsible for any tax due that is over the static amount.
The bill also would modify exemption application procedures to include the proposed exemption for surviving spouses.
The bill would take effect January 1, 2012, contingent on the adoption of a constitutional amendment authorizing the exemption, and would apply only to a tax year beginning on or after January 1, 2012.
Methodology
The annual value loss from the proposed total exemption of the homesteads of bereaved spouses of 100 percent disabled veterans who qualified for a total exemption was estimated based on information from appraisal districts, publicly available mortality rates, and marriage rates. The number of 100 percent disabled veterans' homesteads was reduced by the percentage of unmarried 100 percent disabled veterans and multiplied by the appropriate mortality rate in each year of the projection period. This reduced number of homesteads was multiplied by the projected average taxable value of surviving spouses' homesteads to estimate a taxable value loss in each year. Each year's value loss was added to the losses in previous years and offset by the lapse of total exemptions caused by deaths, marriages, and relocations of surviving spouses.
The applicable projected tax rates were applied to estimate the levy loss to cities and counties, and to estimate the initial school district loss. Because of the operation of the hold harmless provisions of HB 1, 79th Legislature, Third Called Session (2006), the school district cost related to the compressed rate is transferred to the state. The enrichment cost and a portion of the school district debt (facilities) cost are transferred to the state after a one-year lag because of the operation of the enrichment and facilities funding formulas. All costs were estimated over the five year projection period.
Local Government Impact
The estimated fiscal implication to units of local government is reflected in the table above.