BILL ANALYSIS

H.B. 982

By: Wilson

Ways & Means

Committee Report (Unamended)

BACKGROUND AND PURPOSE

The bill author has informed the committee that Texas has provided those among the most vulnerable of our population much needed property tax relief by limiting the amount of property taxes that certain taxing units, such as school districts, counties, municipalities, and junior college districts, can impose on residence homesteads of low-income individuals who are either disabled or elderly. However, the bill author has further informed the committee that the Texas Legislature has yet to extend such limits to other political subdivisions, for example municipal utility districts and hospital districts. H.B. 982 seeks to provide comprehensive property tax relief to low-income individuals who are disabled or elderly, as well as their surviving spouses.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

H.B. 982 amends the Tax Code to set out provisions relating to the authority of a taxing unit other than a public school district, county, municipality, or junior college district to establish a limitation on the total amount of taxes that may be imposed by the taxing unit on the residence homesteads of eligible low-income individuals who are disabled or 65 years of age or older. For purposes of the bill's provisions, an "eligible individual" is an individual whose household income does not exceed 200 percent of the federal poverty level.

Implementation of Limitation

H.B. 982 prohibits a qualifying taxing unit that establishes such a limitation from increasing the total annual amount of property taxes the taxing unit imposes on the residence homestead of an eligible individual who is disabled or is 65 years of age or older above the amount of the taxes the taxing unit imposed on the homestead in the first tax year in which the eligible individual was an eligible individual and qualified that homestead for the residence homestead exemption from school district taxes based on the person's age or disability. If the eligible individual qualified that residence homestead for the exemption after the beginning of that first year and the homestead remains eligible for the exemption for the next year, and if the taxes imposed by the taxing unit on the homestead in the next year are less than the amount of those taxes imposed in that first year, the taxing unit may not subsequently increase the total annual amount of property taxes it imposes on the homestead above the amount it imposed on the homestead in the year immediately following the first year for which the individual qualified that homestead for the exemption and was an eligible individual.

H.B. 982 requires the tax officials to appraise the residence homestead of an eligible individual who is disabled or is 65 years of age or older and calculate taxes on that residence homestead in the same manner as other residence homesteads, but if the tax so calculated exceeds the limitation provided by the bill, the tax imposed is the amount of the tax as limited, except as otherwise provided by the bill's provisions.

Tax Increase Based on Property Improvements

H.B. 982 authorizes the qualifying taxing unit, if an eligible individual who is disabled or is 65 years of age or older makes improvements to the individual's residence homestead, other than repairs and other than improvements required to comply with governmental requirements, to increase the amount of taxes on the homestead in the first year the value of the homestead is increased on the appraisal roll because of the enhancement of value by the improvements. The bill provides the following with respect to such an increase:

· the amount of the tax increase is determined by applying the current tax rate of the qualifying taxing unit to the difference between the appraised value of the homestead with the improvements and the appraised value the homestead would have had without the improvements; and

· the limitation provided by the bill then applies to the increased amount of taxes on the residence homestead until more improvements, if any, are made.

Expiration of Limitation

H.B. 982 establishes that a limitation on tax increases as provided by the bill's provisions expires if any of the following circumstances exist on January 1:

· none of the owners of the structure who qualify for the residence homestead exemption from school district taxes for an individual who is disabled or is 65 years of age or older and who owned the structure when the limitation first took effect are using the structure as a residence homestead;

· none of the owners of the structure qualify for that exemption; or

· none of the owners of the structure are eligible individuals.

The bill establishes that the limitation on tax increases provided by the bill does not expire because the owner of an interest in the structure conveys the interest to a qualifying trust, as defined by reference to statutory provisions relating to residence homestead exemptions, if the owner or the owner's spouse is a trustor of the trust and is entitled to occupy the structure.

Back Taxes

H.B. 982 requires the tax assessor for the applicable county, if the appraisal roll provides for taxation of appraised value for a prior year because a residence homestead exemption for an eligible individual who is disabled or is 65 years of age or older was erroneously allowed or because an individual was erroneously considered to be an eligible individual, to add, as back taxes due, the positive difference, if any, between the tax that should have been imposed for that year and the tax that was imposed under the requirements of the bill.

Surviving Spouses

H.B. 982 entitles the surviving spouse of an eligible individual who dies, and who had qualified for a limitation on tax increases under the bill, to the limitation on taxes imposed by the qualifying taxing unit on the residence homestead of the individual under the following circumstances:

· the surviving spouse is disabled or is 55 years of age or older when the individual died and is an eligible individual; and

· the residence homestead of the individual is the residence homestead of the surviving spouse on the date that the individual died and remains the residence homestead of the surviving spouse.

H.B. 982 establishes the following with respect to the limitation for a surviving spouse:

· if an eligible individual who is 65 years of age or older and qualifies for a limitation on tax increases under the bill dies in the first year in which the individual qualified for the limitation and the individual first qualified for the limitation after the beginning of that year, the amount to which the surviving spouse's taxes are limited is the amount of taxes imposed by the qualifying taxing unit on the residence homestead in that year determined as if the individual qualifying for the exemption had lived for the entire year; and

· if in the first tax year after the year in which an eligible individual who is 65 years of age or older dies under those circumstances, the amount of taxes imposed by the qualifying taxing unit on the residence homestead of the surviving spouse is less than the amount of taxes imposed by the taxing unit in the preceding year as limited, in a subsequent tax year the surviving spouse's taxes imposed by the taxing unit on that residence homestead are limited to the amount of taxes imposed by the taxing unit in that first tax year after the year in which the individual dies.

Qualification of a Different Residence Homestead

H.B. 982 provides for the following with respect to an eligible individual who receives a limitation on tax increases under the bill, including a surviving spouse, and who subsequently qualifies a different residence homestead for a residence homestead exemption:

· if the different homestead is in the same qualifying taxing unit, the taxing unit may not impose property taxes on the subsequently qualified homestead in a year in an amount that exceeds the amount of taxes the taxing unit would have imposed on the subsequently qualified homestead in the first year in which the individual receives that exemption for the subsequently qualified homestead had the limitation on tax increases not been in effect, multiplied by a fraction the numerator of which is the total amount of taxes imposed on the former homestead by the taxing unit in the last year in which the individual received that exemption for the former homestead and the denominator of which is the total amount of taxes that would have been imposed on the former homestead by the taxing unit in the last year in which the individual received that exemption for the former homestead had the limitation on tax increases not been in effect; and

· the eligible individual or an agent of the individual is entitled to receive from the chief appraiser of the appraisal district in which the former homestead was located a written certificate providing the information necessary to determine whether the individual may qualify for a limitation on the subsequently qualified homestead and to calculate the amount of taxes the qualifying taxing unit may impose on the subsequently qualified homestead.

Structures Rendered Uninhabitable or Unusable

H.B. 982 establishes that the limitation on tax increases provided by the bill does not expire if the owner of the structure qualifies for a residence homestead exemption under circumstances rendering the residential structure uninhabitable or unusable by a casualty or by wind or water damage. The bill provides the following with respect to property improvements:

· an improvement to property that would otherwise constitute an improvement triggering an authorized tax increase under the bill's provisions is not treated as such if the improvement is a replacement structure for a structure that was rendered uninhabitable or unusable by a casualty or by wind or water damage; and

· for purposes of appraising the property in the tax year in which the structure would have constituted an improvement, the replacement structure is considered to be an improvement only if the square footage of the replacement structure exceeds that of the replaced structure as that structure existed before the casualty or damage occurred or if the exterior of the replacement structure is of higher quality construction and composition than that of the replaced structure.

Heir Property

H.B. 982 establishes that an heir property owner who qualifies heir property as the owner's residence homestead is considered the sole owner of the property for purposes of the limitation on tax increases provided by the bill.

Information for Chief Appraiser

H.B. 982 authorizes the chief appraiser for an appraisal district in which a qualifying taxing unit participates to require an individual to provide any information that is reasonably necessary for the chief appraiser to determine whether the individual is an eligible individual.

Other Provisions

H.B. 982 includes the limitation on tax increases provided by the bill among the purposes for which a separate appraisal of certain interests is made with respect to property occupied by stockholders of a corporation incorporated under the state Cooperative Association Act. The bill establishes, for purposes of statutory provisions relating to assessments, that the current total value and last year's taxable value for a taxing unit other than a school district, county, municipality, or junior college district excludes the total value of homesteads that qualify for a tax limitation under the bill.

Prospective Applicability

H.B. 982 applies only to property taxes imposed for a tax year beginning on or after the bill's effective date.

EFFECTIVE DATE

January 1, 2026, if the constitutional amendment authorizing a limitation on the total amount of property taxes that a political subdivision other than a school district, county, municipality, or junior college district may impose on the residence homesteads of certain low-income persons who are disabled or elderly and their surviving spouses is approved by the voters.