Honorable Dennis Bonnen, Chair, House Committee on Ways & Means
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
SB279 by Watson (relating to the authority of the governing body of a taxing unit other than a school district to adopt an exemption from ad valorem taxation of a portion, expressed as a dollar amount, of the appraised value of an individual ’s residence homestead and to the authority of the governing body of any taxing unit that has adopted an exemption from ad valorem taxation of a portion, expressed as a percentage, of the appraised value of an individual ’s residence homestead to reduce the amount of or repeal the exemption.), Committee Report 2nd House, Substituted
No fiscal implication to the State is anticipated.
The bill would amend Chapter 11 of the Tax Code, regarding taxable property and exemptions, to authorize taxing units other than school districts to grant a residence homestead exemption of at least $5,000, or a larger amount specified by the taxing unit by taking official action before July 1st of the year in which the exemption is to take effect. The exemption amount would be capped if the average market value of residence homesteads in the taxing unit exceeds $25,000 in the tax year in which the exemption is adopted. The exemption cap would be the dollar amount of 20 percent of that taxing unit's average market value of residence homesteads in the tax year the exemption is adopted. The new exemption would be in addition to any other residence homestead exemption to which the property is eligible.
In a taxing unit other than a school district that rescinds an optional percentage homestead exemption and grants the proposed new exemption, a qualifying taxpayer would be entitled to continue to receive the percentage exemption in lieu of the new exemption if the taxpayer remains qualified, and the amount of the percentage exemption exceeds the amount of the proposed new exemption. This applies only to property for which the individual received an exemption in the last tax year in which the governing body granted the rescinded exemption. In these cases, the exemption would expire if there is a change of ownership or there is a change in the trustor or beneficiary of the trust if the property is owned by a qualifying trust.
The governing body of any taxing unit that adopted an optional percentage homestead exemption for the 2014 tax year may not reduce the amount of or repeal the exemption until the 2025 tax year unless the taxing unit (other than a school district) adopts the new exemption at an amount greater than $5,000.
This bill would take effect on January 1, 2016, contingent on the passage of a constitutional amendment.
Local Government Impact
The optional homestead exemption proposed by the bill would create a cost to taxing units other than school districts to the extent that: 1) the taxing units that currently grant an optional percentage homestead exemption adopt the new exemption at an amount that results in a larger cost; or 2) other taxing units adopt the new exemption.
The number of taxing units that would adopt the new exemption cannot be predicted. Similarly, the amount at which a taxing unit would set the exemption is unknown. Consequently, the cost of the bill to these taxing units cannot be estimated.
The bill's provision prohibiting taxing units that do not grant the proposed new exemption from repealing or reducing the amount of an optional percentage homestead exemption until tax year 2025 could create a cost to taxing units, including school districts, but the cost cannot be estimated because the value of any exemptions that would be repealed under current law is unknown. This provision would not create a cost to the state because under current law it is unlikely that school districts will receive state funding based on a taxable value resulting from the property value study deduction of one-half of any optional percentage homestead exemption as calculated under Government Code Section 403.302(d)(2) and certified to the commissioner of education under Government Code Section 403.302(k).