Honorable Dustin Burrows, Chair, House Committee on Ways & Means
FROM:
John McGeady, Assistant Director Sarah Keyton, Assistant Director Legislative Budget Board
IN RE:
HB3844 by Smithee (Relating to the period for which certain property acquired by a charitable organization to provide low-income housing may be exempted from ad valorem taxation.), As Introduced
Passage of the bill would extend the date after which certain low-income housing properties owned by qualified charitable organizations are prohibited from receiving a property tax exemption. As a result, taxable property values could be reduced and the related costs to the Foundation School Fund could be increased through the operation of the school finance formulas.
The bill would amend Chapter 11 of the Tax Code, regarding taxable property and exemptions, to extend the date after which certain low-income housing properties owned by qualified charitable organizations are prohibited from receiving a property tax exemption from the fifth to the tenth anniversary of the date the transferring organization acquired the property.
The five-year extension of the date after which certain low-income housing properties owned by qualified charitable organizations are prohibited from receiving a property tax exemption would create a cost to local taxing units and to the state through the school funding formulas. The preliminary 2018 total value loss of the current exemption for school districts was $92.2 million. The total amount of land that will be held longer than the currently allowed five-year period to take advantage of the extended exemption period proposed by the bill is unknown; consequently, the cost of the bill cannot be estimated.
The bill would take effect immediately upon enactment, assuming it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2019.
Local Government Impact
Passage of the bill would extend the date after which certain low-income housing properties owned by qualified charitable organizations are prohibited from receiving a property tax exemption. As a result, taxable property values and the related ad valorem tax revenue for units of local government could be reduced.