86R7076 CJC-F

By: Alvarado S.B. No. 1830

A BILL TO BE ENTITLED

AN ACT

relating to the appraisal for ad valorem tax purposes of certain nonexempt property used for low-income or moderate-income housing.

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

SECTION 1. Section 1.07(d), Tax Code, is amended to read as follows:

(d) A notice required by Section 11.43(q), 11.45(d), 23.215(g), 23.44(d), 23.46(c) or (f), 23.54(e), 23.541(c), 23.55(e), 23.551(a), 23.57(d), 23.76(e), 23.79(d), or 23.85(d) must be sent by certified mail.

SECTION 2. 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) for the purpose of renting the property [that on the effective date of this section was rented] to a low-income or moderate-income individual or family satisfying the organization's income eligibility requirements [and that continues to be used for that purpose];

(2) that was financed under the low income housing tax credit program under Subchapter DD, Chapter 2306, Government Code, and is subject to a land use restriction agreement under that subchapter that has not expired or been terminated;

(3) that does not receive an exemption under Section 11.182 or 11.1825; and

(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 property that is under construction or that has not reached stabilized occupancy on January 1 of the tax year in which the property is appraised, the [The] chief appraiser shall determine the appraised value of [appraise] the property in the manner provided by Section 11.1825(q), provided that the chief appraiser shall estimate the property's gross income potential and operating expenses based on the property's projected income and expenses for the first full year of operation as established and utilized in the underwriting report pertaining to the property prepared by the Texas Department of Housing and Community Affairs under Subchapter DD, Chapter 2306, Government Code, adjusted as provided by this subsection. For a property under construction on January 1, the income and expenses contained in the underwriting report shall be adjusted by multiplying those amounts by a fraction, the denominator of which is the total construction budget for the property and the numerator of which is the total amount spent in constructing the property as of January 1. For a property on which construction was completed but that has not reached stabilized occupancy on January 1, the income and expenses contained in the underwriting report shall be adjusted to reflect the actual occupancy of the property on January 1.

(c) In appraising property for the first tax year following the year in which construction on the property was completed and occupancy of the property had stabilized, the chief appraiser shall determine the appraised value of the property in the manner provided by Section 11.1825(q).

(d) In appraising property for the second and subsequent tax years following the year in which construction on the property was completed and occupancy of the property had stabilized, the chief appraiser shall determine the appraised value of the property by adjusting the appraised value of the property for the preceding tax year by the percentage change in the net income of the property in the preceding year as compared to the year preceding that year.

(d-1) Notwithstanding Subsection (d), for the 2020 tax year, in appraising property for which construction was completed on January 1, 2019, the chief appraiser shall determine the appraised value of the property by adjusting the average appraised value of the property for the preceding three-year period by the percentage change in the net income of the property in the 2019 tax year as compared to the 2018 tax year. This subsection expires January 1, 2021.

(e) If property appraised under this section is sold and is no longer subject to a land use restriction agreement described by Subsection (a)(2) after the sale, the property is no longer eligible for appraisal under this section and an additional tax is imposed on the property. The additional tax due is an amount equal to the difference between the taxes imposed on the property for each of the three years preceding the year in which the property is sold that the property was appraised as provided by this section and the taxes that would have been imposed had the property been appraised in each of those years at the lesser of:

(1) the price for which the property is sold; or

(2) the price for which the property is sold, adjusted by the percentage change in the net income of the property for the applicable year in the manner provided by Subsection (d).

(f) A tax lien attaches to property to which Subsection (e) applies on the date the property is sold to secure payment of the additional tax imposed by that subsection. The lien exists in favor of all taxing units for which the additional tax is imposed.

(g) A determination that property is no longer eligible for appraisal under this section is made by the chief appraiser. The chief appraiser shall deliver a notice of the determination to the owner of the property as soon as possible after making the determination and shall include in the notice an explanation of the owner's right to protest the determination. If the owner does not file a timely protest or if the final determination of the protest is that the additional taxes are due, the assessor for each taxing unit shall prepare and deliver a bill for the additional taxes as soon as practicable. The taxes are due and become delinquent and incur penalties and interest as provided by law for ad valorem taxes imposed by the taxing unit if not paid before the next February 1 that is at least 20 days after the date the bill is delivered to the owner of the property.

(h) Notwithstanding any other law:

(1) a property owner may not bring a protest under Section 41.41(a)(2) alleging unequal appraisal of the owner's property on the ground of the appraised value of the property being greater than the median appraised value of a reasonable number of comparable properties appropriately adjusted for any tax year in which the appraised value of the property is determined as provided by this section; and

(2) a property appraised as provided by this section may not be used as a comparable property for the purpose of determining whether another property that is not appraised as provided by this section is unequally appraised.

(i) For purposes of this section, the chief appraiser, in determining the percentage change in the net income of property:

(1) shall use generally accepted appraisal methods and techniques to determine the property's operating expenses based on information contained in:

(A) an audit of the organization that owns the property prepared by an independent auditor covering the relevant fiscal period; or

(B) the most recent annual owner's compliance report filed by the organization that owns the property with the Texas Department of Housing and Community Affairs; and

(2) may not consider the taxes imposed on the property and paid by the organization that owns the property to be an operating expense of the property.

(j) Not later than May 1 of each year, the owner of a property appraised under this section shall provide to the chief appraiser of the appraisal district that appraises the property a copy of the document described by Subsection (i)(1)(A) or (B), as applicable. The chief appraiser may extend the deadline provided by this subsection for good cause shown.

SECTION 3. The change in law made by this Act applies only to an ad valorem tax year that begins on or after January 1, 2020.

SECTION 4. This Act takes effect January 1, 2020.