89R3283 DRS-D

By: Vasut H.B. No. 4082

A BILL TO BE ENTITLED

AN ACT

relating to a limitation on increases in the appraised value of real property for ad valorem tax purposes.

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

SECTION 1. (a) Section 1.12(d), Tax Code, as amended by Section 4.01, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, and effective until January 1, 2027, is amended to read as follows:

(d) For purposes of this section, the appraisal ratio of property to which Section 23.23 [or 23.231] applies is the ratio of the property's market value as determined by the appraisal district or appraisal review board, as applicable, to the market value of the property according to law. The appraisal ratio is not calculated according to the appraised value of the property as limited by Section 23.23 [or 23.231].

(b) Section 4.02, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, which amended Section 1.12(d), Tax Code, effective January 1, 2027, is repealed.

SECTION 2. The heading to Section 23.23, Tax Code, is amended to read as follows:

Sec. 23.23. LIMITATION ON APPRAISED VALUE OF REAL PROPERTY [RESIDENCE HOMESTEAD].

SECTION 3. Section 23.23, Tax Code, is amended by amending Subsections (a), (b), and (c) and adding Subsections (a-1), (a-2), (a-3), (a-4), (a-5), (a-6), (a-7), (a-8), (c-2), (c-3), (c-4), and (h) to read as follows:

(a) The appraised value of a parcel of real property for the first tax year in which the owner owns the property on January 1 is equal to the market value of the property. Notwithstanding Section 23.01, the appraised value of the property for each subsequent tax year until the tax year in which the limitation provided by this subsection expires is equal to the appraised value of the property for the preceding tax year as increased by the chief appraiser for the current tax year using the percentage by which the appraised value may be increased as determined by the comptroller under Subsection (a-8) [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 that the market value was determined by the appraisal office; or

[(2) the sum of:

[(A) 10 percent of the appraised value of the property for the preceding tax year;

[(B) the appraised value of the property for the preceding tax year; and

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

(a-1) Notwithstanding Subsection (a), if the owner of real property acquired the property as a bona fide purchaser for value, the purchase price of the property paid by the property owner is considered to be the market value of the property for the first tax year in which the owner owns the property on January 1.

(a-2) If the first tax year the property owner owned the property on January 1 was a tax year before the 2026 tax year:

(1) the property owner is considered to have acquired the property on January 1, 2025; and

(2) the appraised value of the property as shown on the 2025 appraisal roll is considered to be the market value of the property for that tax year for purposes of Subsection (a).

(a-3) Subsection (a-1) does not apply to real property if:

(1) the purchase was made:

(A) pursuant to a court order;

(B) from a trustee in bankruptcy;

(C) by one co-owner from one or more other co-owners;

(D) from a spouse or a person or persons within the first or second degree of lineal consanguinity of one or more of the purchasers; or

(E) from a governmental entity; or

(2) the chief appraiser determines that the applicant was not a bona fide purchaser for value under criteria established by rules adopted by the comptroller for that purpose.

(a-4) To receive a limitation on appraised value under Subsection (a) computed in accordance with Subsection (a-1), an owner of the property must apply for the limitation. To apply for the limitation, the owner must file an application with the chief appraiser for each appraisal district in which the property subject to the claimed limitation is located. The application must be filed not later than April 30. The comptroller by rule shall prescribe the form for the application to ensure that the applicant provides the information necessary to determine the applicant's eligibility for the limitation, including the purchase price of the property paid by the applicant.

(a-5) An application filed with a chief appraiser under Subsection (a-4) is confidential and not open to public inspection. The application and the information it contains may not be disclosed to another person other than an employee of the appraisal district who appraises property, except as provided by Subsection (a-6).

(a-6) Information that is confidential under Subsection (a-5) may be disclosed:

(1) in a judicial or administrative proceeding under a lawful subpoena;

(2) to a purchaser, grantee, seller, or grantor named in the application or in the deed to which the application applies or to a representative of the purchaser, grantee, seller, or grantor under a written authorization signed by the purchaser, grantee, seller, or grantor;

(3) to the comptroller or to an assessor for a taxing unit in which the property described in the application is located;

(4) in a judicial or administrative proceeding related to real property taxation:

(A) to which the purchaser, grantee, seller, or grantor is a party;

(B) to which an owner of the property described in the application is a party; or

(C) by the appraisal district for the purpose of establishing a value of the property or of providing evidence of comparable sales to appraise another property;

(5) for statistical purposes if the information is provided in a form that does not identify a specific property or specific purchaser, grantee, seller, or grantor;

(6) if and to the extent that the information is required to be included in a public document or record that the appraisal office is required to prepare or maintain; or

(7) to a taxing unit or its legal representative that is engaged in the collection of delinquent taxes on the property described in the application.

(a-7) Information that is disclosed under Subsection (a-6) does not lose its confidential character.

(a-8) For each tax year, using the index that the comptroller considers to most accurately report changes in the purchasing power of the dollar for consumers in this state, the comptroller shall determine and publicize the percentage by which the appraised value of real property may be increased under Subsection (a). Each chief appraiser shall use the percentage determined by the comptroller under this subsection to determine the appraised value under Subsection (a) of real property appraised by that chief appraiser.

(b) When appraising real property [a residence homestead], the chief appraiser shall:

(1) appraise the property at its market value; and

(2) include in the appraisal records both the market value of the property and the amount computed under Subsection (a) [(a)(2)].

(c) The limitation provided by Subsection (a) takes effect on January 1 of the first tax year in which the owner owns the property on January 1 [as to a residence homestead on January 1 of the tax year following the first tax year the owner qualifies the property for an exemption under Section 11.13]. Except as provided by Subsection (c-2) or (c-3), the [The] limitation expires on January 1 of the first tax year following the year in which [that neither] the owner of the property ceases to own the property.

(c-2) If property subject to a limitation under this section qualifies for an exemption under Section 11.13 when the ownership of the property is transferred to the owner's spouse or surviving spouse, the limitation expires on January 1 of the first tax year following the year in which [when the limitation took effect nor] the owner's spouse or surviving spouse ceases to own the property, unless the limitation is further continued under this subsection on the subsequent transfer to a spouse or surviving spouse [qualifies for an exemption under Section 11.13].

(c-3) If property subject to a limitation under Subsection (a), other than a residence homestead, is owned by two or more persons, the limitation expires on January 1 of the first tax year following the year in which the ownership of at least a 50 percent interest in the property is sold or otherwise transferred.

(c-4) Notwithstanding Subsection (c), a limitation established under Subsection (a) does not expire if a change in ownership of the property occurs by inheritance or under a will as long as the person who acquires the property qualifies for an exemption under Section 11.13.

(h) In this section, "real property" includes a manufactured home as that term is defined by Section 1201.003, Occupations Code, that qualifies as a residence homestead under Section 11.13 of this code, regardless of whether the owner of the manufactured home elects to treat the manufactured home as real property under Section 1201.2055, Occupations Code.

SECTION 4. (a) Sections 25.19(b) and (g), Tax Code, as amended by Section 4.04, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, and effective until January 1, 2027, are amended to read as follows:

(b) The chief appraiser shall separate real from personal property and include in the notice for each:

(1) a list of the taxing units in which the property is taxable;

(2) the appraised value of the property in the preceding year;

(3) the taxable value of the property in the preceding year for each taxing unit taxing the property;

(4) the appraised value of the property for the current year, the kind and amount of each exemption and partial exemption, if any, approved for the property for the current year and for the preceding year, and, if an exemption or partial exemption that was approved for the preceding year was canceled or reduced for the current year, the amount of the exemption or partial exemption canceled or reduced;

[(4-a) a statement of whether the property qualifies for the circuit breaker limitation on appraised value provided by Section 23.231;]

(5) in italic typeface, the following statement: "The Texas Legislature does not set the amount of your local taxes. Your property tax burden is decided by your locally elected officials, and all inquiries concerning your taxes should be directed to those officials";

(6) a detailed explanation of the time and procedure for protesting the value;

(7) the date and place the appraisal review board will begin hearing protests;

(8) an explanation of the availability and purpose of an informal conference with the appraisal office before a hearing on a protest; and

(9) a brief explanation that the governing body of each taxing unit decides whether or not taxes on the property will increase and the appraisal district only determines the value of the property.

(g) By April 1 or as soon thereafter as practicable if the property is a single-family residence that qualifies for an exemption under Section 11.13, or by May 1 or as soon thereafter as practicable in connection with any other property, the chief appraiser shall deliver a written notice to the owner of each property not included in a notice required to be delivered under Subsection (a), if the property was reappraised in the current tax year, if the ownership of the property changed during the preceding year, or if the property owner or the agent of a property owner authorized under Section 1.111 makes a written request for the notice. The chief appraiser shall separate real from personal property and include in the notice for each property:

(1) the appraised value of the property in the preceding year;

(2) the appraised value of the property for the current year and the kind of each partial exemption, if any, approved for the current year;

[(2-a) a statement of whether the property qualifies for the circuit breaker limitation on appraised value provided by Section 23.231;]

(3) a detailed explanation of the time and procedure for protesting the value; and

(4) the date and place the appraisal review board will begin hearing protests.

(b) Section 4.05, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, which amended Sections 25.19(b) and (g), Tax Code, effective January 1, 2027, is repealed.

SECTION 5. (a) Section 41.41(a), Tax Code, as amended by Section 4.07, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, and effective until January 1, 2027, is amended to read as follows:

(a) A property owner is entitled to protest before the appraisal review board the following actions:

(1) determination of the appraised value of the owner's property or, in the case of land appraised as provided by Subchapter C, D, E, or H, Chapter 23, determination of its appraised or market value;

(2) unequal appraisal of the owner's property;

(3) inclusion of the owner's property on the appraisal records;

(4) denial to the property owner in whole or in part of a partial exemption;

[(4-a) determination that the owner's property does not qualify for the circuit breaker limitation on appraised value provided by Section 23.231;]

(5) determination that the owner's land does not qualify for appraisal as provided by Subchapter C, D, E, or H, Chapter 23;

(6) identification of the taxing units in which the owner's property is taxable in the case of the appraisal district's appraisal roll;

(7) determination that the property owner is the owner of property;

(8) a determination that a change in use of land appraised under Subchapter C, D, E, or H, Chapter 23, has occurred; or

(9) any other action of the chief appraiser, appraisal district, or appraisal review board that applies to and adversely affects the property owner.

(b) Section 4.08, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, which amended Section 41.41(a), Tax Code, effective January 1, 2027, is repealed.

SECTION 6. (a) Section 42.26(d), Tax Code, as amended by Section 4.09, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, and 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 the limitation on appraised value imposed by Section 23.23 [or 23.231].

(b) Section 4.10, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, which amended Section 42.26(d), Tax Code, effective January 1, 2027, is repealed.

SECTION 7. (a) Sections 403.302(d) and (i), Government Code, as amended by Section 4.11, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, and effective until January 1, 2027, are amended to read as follows:

(d) For the purposes of this section, "taxable value" means the market value of all taxable property less:

(1) the total dollar amount of any residence homestead exemptions lawfully granted under Section 11.13(b) or (c), Tax Code, in the year that is the subject of the study for each school district;

(2) one-half of the total dollar amount of any residence homestead exemptions granted under Section 11.13(n), Tax Code, in the year that is the subject of the study for each school district;

(3) the total dollar amount of any exemptions granted before May 31, 1993, within a reinvestment zone under agreements authorized by Chapter 312, Tax Code;

(4) subject to Subsection (e), the total dollar amount of any captured appraised value of property that:

(A) is within a reinvestment zone created on or before May 31, 1999, or is proposed to be included within the boundaries of a reinvestment zone as the boundaries of the zone and the proposed portion of tax increment paid into the tax increment fund by a school district are described in a written notification provided by the municipality or the board of directors of the zone to the governing bodies of the other taxing units in the manner provided by former Section 311.003(e), Tax Code, before May 31, 1999, and within the boundaries of the zone as those boundaries existed on September 1, 1999, including subsequent improvements to the property regardless of when made;

(B) generates taxes paid into a tax increment fund created under Chapter 311, Tax Code, under a reinvestment zone financing plan approved under Section 311.011(d), Tax Code, on or before September 1, 1999; and

(C) is eligible for tax increment financing under Chapter 311, Tax Code;

(5) the total dollar amount of any captured appraised value of property that:

(A) is within a reinvestment zone:

(i) created on or before December 31, 2008, by a municipality with a population of less than 18,000; and

(ii) the project plan for which includes the alteration, remodeling, repair, or reconstruction of a structure that is included on the National Register of Historic Places and requires that a portion of the tax increment of the zone be used for the improvement or construction of related facilities or for affordable housing;

(B) generates school district taxes that are paid into a tax increment fund created under Chapter 311, Tax Code; and

(C) is eligible for tax increment financing under Chapter 311, Tax Code;

(6) the total dollar amount of any exemptions granted under Section 11.251 or 11.253, Tax Code;

(7) the difference between the comptroller's estimate of the market value and the productivity value of land that qualifies for appraisal on the basis of its productive capacity, except that the productivity value estimated by the comptroller may not exceed the fair market value of the land;

(8) the portion of the appraised value of residence homesteads of individuals who receive a tax limitation under Section 11.26, Tax Code, on which school district taxes are not imposed in the year that is the subject of the study, calculated as if the residence homesteads were appraised at the full value required by law;

(9) a portion of the market value of property not otherwise fully taxable by the district at market value because of action required by statute or the constitution of this state, other than Section 11.311, Tax Code, that, if the tax rate adopted by the district is applied to it, produces an amount equal to the difference between the tax that the district would have imposed on the property if the property were fully taxable at market value and the tax that the district is actually authorized to impose on the property, if this subsection does not otherwise require that portion to be deducted;

(10) the market value of all tangible personal property, other than manufactured homes, owned by a family or individual and not held or used for the production of income;

(11) the appraised value of property the collection of delinquent taxes on which is deferred under Section 33.06, Tax Code;

(12) the portion of the appraised value of property the collection of delinquent taxes on which is deferred under Section 33.065, Tax Code;

(13) the amount by which the market value of property to which Section 23.23 [or 23.231], Tax Code, applies exceeds the appraised value of that property as calculated under that section [Section 23.23 or 23.231, Tax Code, as applicable]; and

(14) the total dollar amount of any exemptions granted under Section 11.35, Tax Code.

(i) If the comptroller determines in the study that the market value of property in a school district as determined by the appraisal district that appraises property for the school district, less the total of the amounts and values listed in Subsection (d) as determined by that appraisal district, is valid, the comptroller, in determining the taxable value of property in the school district under Subsection (d), shall for purposes of Subsection (d)(13) subtract from the market value as determined by the appraisal district of properties to which Section 23.23 [or 23.231], Tax Code, applies the amount by which that amount exceeds the appraised value of those properties as calculated by the appraisal district under Section 23.23 [or 23.231], Tax Code[, as applicable]. If the comptroller determines in the study that the market value of property in a school district as determined by the appraisal district that appraises property for the school district, less the total of the amounts and values listed in Subsection (d) as determined by that appraisal district, is not valid, the comptroller, in determining the taxable value of property in the school district under Subsection (d), shall for purposes of Subsection (d)(13) subtract from the market value as estimated by the comptroller of properties to which Section 23.23 [or 23.231], Tax Code, applies the amount by which that amount exceeds the appraised value of those properties as calculated by the appraisal district under Section 23.23 [or 23.231], Tax Code[, as applicable].

(b) Section 4.12, Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023, which amended Sections 403.302(d) and (i), Government Code, effective January 1, 2027, is repealed.

SECTION 8. The following provisions of the Tax Code are repealed:

(1) Sections 23.23(c-1), (e), (f), and (g);

(2) Section 23.231; and

(3) Section 25.19(o).

SECTION 9. This Act applies only to ad valorem taxes imposed for a tax year beginning on or after the effective date of this Act.

SECTION 10. 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 provide that the appraised value of a parcel of real property for ad valorem tax purposes for the first tax year in which the owner owns the property on January 1 is the market value of the property and that, if the owner purchased the property, the purchase price of the property is considered to be the market value of the property for that tax year and to limit increases in the appraised value of the property for subsequent tax years based on the inflation rate is approved by the voters. If that amendment is not approved by the voters, this Act has no effect.