89R12475 LHC-D

By: Lowe H.B. No. 3823

A BILL TO BE ENTITLED

AN ACT

relating to the determination of the appraised value of a residence homestead for ad valorem tax purposes.

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

SECTION 1. Section 23.23, Tax Code, is amended by amending Subsections (a), (e), and (f) and adding Subsection (h) to read as follows:

(a) Except as provided by Subsection (h), if [Notwithstanding the requirements of Section 25.18 and regardless of whether] the appraisal office has appraised the property and determined the market value of the property for the tax year, an appraisal office may increase the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of:

(1) the market value of the property for the [most recent] tax year as [that the market value was] determined by the appraisal office; or

(2) the sum of:

(A) 15 [10] percent of the appraised value of the property for the last [preceding tax] year in which the property was appraised for taxation;

(B) the appraised value of the property for the last [preceding tax] year in which the property was appraised for taxation; and

(C) the market value of all new improvements to the property.

(e) In this section, "new improvement" means an improvement to a residence homestead made after the most recent appraisal of the property that increases the market value of the property [and the value of which is not included in the appraised value of the property for the preceding tax year]. The term does not include repairs to or ordinary maintenance of an existing structure or the grounds or another feature of the property.

(f) Notwithstanding Subsections (a) and (e) and except as provided by Subdivision (2), an improvement to property that would otherwise constitute a new improvement is not treated as a new improvement 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. For purposes of appraising the property under Subsection (a) in the tax year in which the structure would have constituted a new improvement:

(1) the last year in which the property was appraised for taxation before [appraised value the property would have had in the preceding tax year if] the casualty or damage [had not] occurred is considered to be the last year in which the property was appraised for taxation for purposes of Subsection (a)(2)(A) [appraised value of the property for that year, regardless of whether that appraised value exceeds the actual appraised value of the property for that year as limited by Subsection (a)]; and

(2) the replacement structure is considered to be a new improvement only if:

(A) the square footage of the replacement structure exceeds that of the replaced structure as that structure existed before the casualty or damage occurred; or

(B) the exterior of the replacement structure is of higher quality construction and composition than that of the replaced structure.

(h) The commissioners court of a county may call an election in the county to permit the voters of the county to determine by majority vote whether a percentage limitation on maximum appraised value determined in the manner provided by Subsection (a)(2) using a percentage that is greater than the percentage specified by Subsection (a)(2)(A) will apply to the taxation of a residence homestead in the county by each taxing unit having territory in the county. The election shall be held on the date of the next general election for state and county officers. The ballot proposition shall specify the proposed percentage limitation on maximum appraised value. If a majority of the votes cast at the election favor the establishment of the proposed limitation, the limitation applies beginning with the tax year following the year in which the election is held and remains in effect until amended or repealed by the voters of the county at a subsequent election called by the commissioners court of the county for that purpose. An election to amend or repeal a limitation must be held on the date of the general election for state and county officers. If the voters of a county amend or repeal a limitation, the amendment or repeal applies beginning with the tax year after the year in which the election is held. A limitation established under this subsection applies to the taxation of all residence homesteads in the county by each taxing unit having territory in the county.

SECTION 2. Section 25.18, Tax Code, is amended by amending Subsection (b) and adding Subsections (b-1), (b-2), and (b-3) to read as follows:

(b) The plan shall provide for the following reappraisal activities for all real and personal property in the district at least once every three years, except as provided by Subsections (b-1), (b-2), and (b-3):

(1) identifying properties to be appraised through physical inspection or by other reliable means of identification, including deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps, and property sketches;

(2) identifying and updating relevant characteristics of each property in the appraisal records;

(3) defining market areas in the district;

(4) identifying property characteristics that affect property value in each market area, including:

(A) the location and market area of property;

(B) physical attributes of property, such as size, age, and condition;

(C) legal and economic attributes; and

(D) easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances, or legal restrictions;

(5) developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area and determines the contribution of individual property characteristics;

(6) applying the conclusions reflected in the model to the characteristics of the properties being appraised; and

(7) reviewing the appraisal results to determine value.

(b-1) The plan shall provide for the reappraisal of a residence homestead not more often than once every three years. The appraised value of a residence homestead may not be increased for a tax year in which the property is not appraised.

(b-2) Subsection (b-1) does not prohibit the reappraisal of a residence homestead in the tax year in which a limitation on appraised value under Section 23.23(a) expires.

(b-3) Notwithstanding Subsection (b-1), at any time during a tax year before the date the chief appraiser certifies the appraisal roll for the appraisal district, an owner of a residence homestead is entitled to a reappraisal of the owner's residence homestead for that year on written request delivered to the chief appraiser.

SECTION 3. Section 42.26(d), Tax Code, as effective until January 1, 2027, is amended to read as follows:

(d) For purposes of this section, the value of the property subject to the suit and the value of a comparable property or sample property that is used for comparison must be the market value determined by the appraisal district when the property is subject to a [the] limitation on appraised value imposed by or established under Section 23.23 or 23.231.

SECTION 4. Section 42.26(d), Tax Code, as effective January 1, 2027, is amended to read as follows:

(d) For purposes of this section, the value of the property subject to the suit and the value of a comparable property or sample property that is used for comparison must be the market value determined by the appraisal district when the property is a residence homestead subject to a [the] limitation on appraised value imposed by or established under Section 23.23.

SECTION 5. This Act applies only to the determination of the appraised value of a residence homestead for ad valorem taxation for a tax year that begins on or after the effective date of this Act.

SECTION 6. This Act takes effect January 1, 2026, but only if the constitutional amendment proposed by the 89th Legislature, Regular Session, 2025, authorizing the legislature to limit the maximum appraised value of a residence homestead for ad valorem tax purposes to the lesser of the most recent market value of the residence homestead or 115 percent, or a greater percentage, of the appraised value of the residence homestead for the last year in which the residence homestead was appraised for ad valorem tax purposes, to limit the frequency of the reappraisal of a residence homestead for those purposes, and to permit the voters of a county to establish a higher limitation on the maximum appraised value of a residence homestead for those purposes is approved by the voters. If that amendment is not approved by the voters, this Act has no effect.