89R3607 LHC-D

By: Vasut H.B. No. 4217

A BILL TO BE ENTITLED

AN ACT

relating to the system for appraising property for ad valorem tax and school finance purposes.

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

ARTICLE 1. BOARDS OF DIRECTORS OF APPRAISAL DISTRICTS

SECTION 1.01. Chapter 5, Tax Code, is amended by adding Section 5.044 to read as follows:

Sec. 5.044. TRAINING OF APPRAISAL DISTRICT DIRECTORS. (a) In this section, "open government training" means the courses of training required of certain public officials by Sections 551.005(b) and 552.012(d), Government Code.

(b) The comptroller, with the assistance of one or more commissions as defined by Section 391.002, Local Government Code, shall develop an online training course for members of the board of directors of an appraisal district. The training must provide information relevant to the operation of an appraisal district and its board of directors, including an overview of the property tax system, a discussion of the duties and responsibilities of a board of directors, and a description of the resources available to a board. The comptroller shall make the training available on the comptroller's Internet website.

(c) Each member of the board of directors of an appraisal district must complete both the open government training and the training described by Subsection (b). The appraisal district shall conduct the training required by this section at a time before the first public meeting of the board during each calendar year. A member of the board who does not complete the training on the date the training is conducted by the appraisal district must complete the training during regular business hours at the main office of the appraisal district not later than the 30th day after the date the training was conducted.

(d) A member of the board of directors who does not complete the training in the time and manner prescribed by Subsection (c) is ineligible to continue to serve on the board. A new board member shall be appointed in the manner prescribed by Section 6.03(l) to fill the vacancy. A member appointed to fill a vacancy must complete the training required by Subsection (c) not later than the 30th day after the date the member is appointed or the member becomes ineligible to continue to serve on the board and shall be replaced as provided by this subsection.

(e) This section does not apply to a nonvoting member of the board of directors of an appraisal district.

SECTION 1.02. Section 5.12(b), Tax Code, is amended to read as follows:

(b) At the written request of the governing bodies of a majority of the taxing units participating in an appraisal district [or of a majority of the taxing units entitled to vote on the appointment of appraisal district directors], the comptroller shall audit the performance of the appraisal district. The governing bodies may request a general audit of the performance of the appraisal district or may request an audit of only one or more particular duties, practices, functions, departments, or other appraisal district matters.

SECTION 1.03. Section 5.13(h), Tax Code, is amended to read as follows:

(h) At any time after the request for an audit is made, the comptroller may discontinue the audit in whole or in part if requested to do so by:

(1) the governing bodies of a majority of the taxing units participating in the district, if the audit was requested by a majority of those units; or

(2) the taxpayers who requested the audit, [the governing bodies of a majority of the taxing units entitled to vote on the appointment of appraisal district directors, if the audit was requested by a majority of those units; or

[(3)] if the audit was requested under Section 5.12(c) [of this code, by the taxpayers who requested the audit].

SECTION 1.04. The heading to Section 6.03, Tax Code, is amended to read as follows:

Sec. 6.03. BOARD OF DIRECTORS [IN LESS POPULOUS COUNTIES].

SECTION 1.05. Section 6.03, Tax Code, is amended by amending Subsections (a), (a-1), and (l) and adding Subsection (m) to read as follows:

(a) [This section applies only to an appraisal district established in a county with a population of less than 75,000.

[(a-1)] The appraisal district is governed by a board of directors. Two directors are elected from each of the four commissioners precincts in the county in which the appraisal district is established and one director is elected at large from the county. The [Five directors are appointed by the taxing units that participate in the district as provided by this section. If the county assessor-collector is not appointed to the board, the] county assessor-collector serves as a nonvoting director. The county assessor-collector is ineligible to serve if the board enters into a contract under Section 6.05(b) or if the commissioners court of the county enters into a contract under Section 6.24(b). The directors other than the county assessor-collector are elected at an election conducted on the November uniform election date and serve staggered two-year terms beginning on January 1 of the year following the year in which the director was elected.

(a-1) To be eligible to serve on the board of directors, an individual other than the [a] county assessor-collector [serving as a nonvoting director] must:

(1) be a resident of:

(A) the commissioners precinct from which the office is elected, in the case of a director elected from a commissioners precinct; or

(B) the county in which the appraisal district is established, in the case of a director elected at large; [district] and

(2) [must] have resided in the appraisal district for at least two years immediately preceding the date the individual takes office. [An individual who is otherwise eligible to serve on the board is not ineligible because of membership on the governing body of a taxing unit. An employee of a taxing unit that participates in the district is not eligible to serve on the board unless the individual is also a member of the governing body or an elected official of a taxing unit that participates in the district.]

(l) If a vacancy occurs on the board of directors other than a vacancy in the position held by the [a] county assessor-collector [serving as a nonvoting director], the [each taxing unit that is entitled to vote by this section may nominate by resolution adopted by its governing body a candidate to fill the vacancy. The unit shall submit the name of its nominee to the chief appraiser within 45 days after notification from the board of directors of the existence of the vacancy, and the chief appraiser shall prepare and deliver to the board of directors within the next five days a list of the nominees. The] board of directors shall appoint [elect] by majority vote of its members a person [one of the nominees] to fill the vacancy. A person appointed to fill a vacancy under this subsection must meet the qualifications of the vacated position.

(m) If as a result of a change in the boundaries of a commissioners precinct an individual serving as a director no longer resides in the precinct from which the office is elected, the individual is not for that reason disqualified from office during the remainder of the term of office being served at the time the boundary change takes effect. If as a result of a change in the boundaries of a commissioners precinct an individual elected as a director before the boundary change to a term that begins after the boundary change no longer resides in the precinct from which elected, the individual is not for that reason disqualified from serving the term to which elected.

SECTION 1.06. The heading to Section 6.032, Tax Code, is amended to read as follows:

Sec. 6.032. BALLOT PROCEDURES FOR [ELECTED] DIRECTORS[; FILING FEE OR PETITION].

SECTION 1.07. Sections 6.032(a) and (b), Tax Code, are amended to read as follows:

(a) Except as provided by this section, Chapter 144, Election Code, applies to a candidate for a [an elective] position on an appraisal district board of directors.

(b) An application for a place on the ballot must be filed with the county judge of the county in which the appraisal district is established and is not required to be accompanied by a filing fee [prescribed by Subsection (c) of this section] or a petition in lieu of a [the] filing fee [that satisfies the requirements prescribed by Section 141.062, Election Code, and Subsection (d) of this section].

SECTION 1.08. Section 6.04(c), Tax Code, is amended to read as follows:

(c) Except as provided by this subsection, members [Members] of the board may not receive compensation for service on the board. Members of the board [but] are entitled to reimbursement for actual and necessary expenses incurred in the performance of their duties as provided by the budget adopted by the board. Members of the board may receive compensation in an amount not to exceed $100 per month if the compensation is approved by the voters in the county in which the appraisal district is established at an election held for the purpose on a uniform election date.

SECTION 1.09. Section 6.051(b), Tax Code, is amended to read as follows:

(b) The acquisition or conveyance of real property or the construction or renovation of a building or other improvement by an appraisal district must be approved by the governing bodies of three-fourths of the taxing units that participate in the district [entitled to vote on the appointment of board members]. The board of directors by resolution may propose a property transaction or other action for which this subsection requires approval of the taxing units. The chief appraiser shall notify the presiding officer of each governing body entitled to vote on the approval of the proposal by delivering a copy of the board's resolution, together with information showing the costs of other available alternatives to the proposal. On or before the 30th day after the date the presiding officer receives notice of the proposal, the governing body of a taxing unit by resolution may approve or disapprove the proposal. If a governing body fails to act on or before that 30th day or fails to file its resolution with the chief appraiser on or before the 10th day after that 30th day, the proposal is treated as if it were disapproved by the governing body.

SECTION 1.10. Section 6.052(f), Tax Code, is amended to read as follows:

(f) The taxpayer liaison officer is responsible for providing clerical assistance to the appraisal district board of directors [applicable appointing authority prescribed by Section 6.41(d)] in the selection of appraisal review board members and for publicizing the availability of positions on the appraisal review board. The officer shall deliver to the appraisal district board of directors [applicable appointing authority] any applications to serve on the board that are submitted to the officer and shall perform other duties as requested by the appraisal district board of directors [applicable appointing authority]. The officer may not influence the process for selecting appraisal review board members.

SECTION 1.11. Sections 6.06(a), (b), and (i), Tax Code, are amended to read as follows:

(a) Each year the chief appraiser shall prepare a proposed budget for the operations of the district for the following tax year and shall submit copies to each taxing unit participating in the district and to the district board of directors before June 15. The chief appraiser [He] shall include in the budget a list showing each proposed position, the proposed salary for the position, all benefits proposed for the position, each proposed capital expenditure, and an estimate of the amount of the budget that will be allocated to each taxing unit. Each taxing unit that participates in the district [entitled to vote on the appointment of board members] shall maintain a copy of the proposed budget for public inspection at its principal administrative office.

(b) The board of directors shall hold a public hearing to consider the budget. The secretary of the board shall deliver to the presiding officer of the governing body of each taxing unit participating in the district not later than the 10th day before the date of the hearing a written notice of the date, time, and place fixed for the hearing. The board shall complete its hearings, make any amendments to the proposed budget it desires, and finally approve a budget before September 15. If governing bodies of a majority of the taxing units participating in the district [entitled to vote on the appointment of board members] adopt resolutions disapproving a budget and file them with the secretary of the board within 30 days after its adoption, the budget does not take effect, and the board shall adopt a new budget within 30 days of the disapproval.

(i) The fiscal year of an appraisal district is the calendar year unless the governing bodies of three-fourths of the taxing units participating in the district [entitled to vote on the appointment of board members] adopt resolutions proposing a different fiscal year and file them with the secretary of the board not more than 12 and not less than eight months before the first day of the fiscal year proposed by the resolutions. If the fiscal year of an appraisal district is changed under this subsection, the chief appraiser shall prepare a proposed budget for the fiscal year as provided by Subsection (a) [of this section] before the 15th day of the seventh month preceding the first day of the fiscal year established by the change, and the board of directors shall adopt a budget for the fiscal year as provided by Subsection (b) [of this section] before the 15th day of the fourth month preceding the first day of the fiscal year established by the change. Unless the appraisal district adopts a different method of allocation under Section 6.061 [of this code], the allocation of the budget to each taxing unit shall be calculated as provided by Subsection (d) of this section using the amount of property taxes imposed by each participating taxing unit in the most recent tax year preceding the fiscal year established by the change for which the necessary information is available. Each taxing unit shall pay its allocation as provided by Subsection (e) [of this section], except that the first payment shall be made before the first day of the fiscal year established by the change and subsequent payments shall be made quarterly. In the year in which a change in the fiscal year occurs, the budget that takes effect on January 1 of that year may be amended as necessary as provided by Subsection (c) [of this section] in order to accomplish the change in fiscal years.

SECTION 1.12. Sections 6.061(b) and (e), Tax Code, are amended to read as follows:

(b) The taxing units participating in an appraisal district may adopt a different method of allocating the costs of operating the district if the governing bodies of three-fourths of the taxing units that participate in the district [are entitled to vote on the appointment of board members] adopt resolutions providing for the other method. However, a change under this subsection is not valid if it requires any taxing unit to pay a greater proportion of the appraisal district's costs than the unit would pay under Section 6.06 [of this code] without the consent of the governing body of that unit.

(e) A change in allocation of district costs made as provided by this section remains in effect until changed in a manner provided by this section or rescinded by resolution of a majority of the governing bodies of the taxing units that participate in the district [that are entitled to vote on appointment of board members under Section 6.03 of this code].

SECTION 1.13. Section 6.063(b), Tax Code, is amended to read as follows:

(b) The report of the audit is a public record. A copy of the report shall be delivered to the presiding officer of the governing body of each taxing unit that participates in the district [eligible to vote on the appointment of district directors], and a reasonable number of copies shall be available for inspection at the appraisal office.

SECTION 1.14. Section 6.15(c), Tax Code, is amended to read as follows:

(c) Subsections (a) and (b) do not apply to a routine communication between the chief appraiser and the county assessor-collector that relates to the administration of an appraisal roll, including a communication made in connection with the certification, correction, or collection of an account, regardless of whether the county assessor-collector serves on [was appointed to] the board of directors of the appraisal district [or serves as a nonvoting director].

SECTION 1.15. Sections 6.41(d), (d-1), (d-2-1), (d-3), (d-5), (d-10), (e), (f), (g), (i), and (j), Tax Code, are amended to read as follows:

(d) Members of the board are appointed by the [applicable appointing authority. For an appraisal district to which Section 6.03 applies, the appointing authority is the local administrative district judge under Subchapter D, Chapter 74, Government Code, in the county in which the appraisal district is established. For an appraisal district to which Section 6.0301 applies, the appointing authority is the] board of directors of the appraisal district. A vacancy on the board is filled in the same manner for the unexpired portion of the term.

(d-1) All applications submitted to the appraisal district or to the appraisal review board from persons seeking appointment as a member of the appraisal review board shall be delivered to the board of directors of the appraisal district [applicable appointing authority]. The appraisal district may provide the board of directors [appointing authority] with information regarding whether an applicant for appointment to or a member of the board owes any delinquent ad valorem taxes to a taxing unit participating in the appraisal district.

(d-2-1) A board of directors [acting as an appointing authority] must make appointments to the appraisal review board by majority vote[, with at least two members of the majority being elected members of the board of directors].

(d-3) The board of directors of the appraisal district [applicable appointing authority] shall cause the proper officer to notify appointees to the board of their appointment, and when and where they are to appear.

(d-5) The appraisal district of the county shall provide to the board of directors of the appraisal district [applicable appointing authority, or to the appraisal review board commissioners, as the case may be,] the number of appraisal review board positions that require appointment and shall provide whatever reasonable assistance is requested by the board of directors [applicable appointing authority or the commissioners].

(d-10) Upon selection of the individuals who are to serve as members of the appraisal review board, the board of directors of the appraisal district [applicable appointing authority] shall enter an appropriate order designating such members and setting each member's respective term of office, as provided elsewhere in this section.

(e) Members of the appraisal review board hold office for terms of two years beginning January 1. The appraisal district board of directors by resolution shall provide for staggered terms, so that the terms of as close to one-half of the members as possible expire each year. In making the initial or subsequent appointments, the board of directors of the appraisal district [applicable appointing authority, or the local administrative district judge's designee if the appointing authority is the judge,] shall designate those members who serve terms of one year as needed to comply with this subsection.

(f) A member of the appraisal review board may be removed from the board by the board of directors of the appraisal district [applicable appointing authority, or the local administrative district judge's designee if the appointing authority is the judge]. Not later than the 90th day after the date the board of directors[, local administrative district judge, or judge's designee that appointed a member of the appraisal review board] learns of a potential ground for removal of the member, the board of directors[, local administrative district judge, or judge's designee, as applicable,] shall remove the member or find by official action that the member's removal is not warranted. Grounds for removal are:

(1) a violation of Section 6.412, 6.413, 41.66(f), or 41.69;

(2) good cause relating to the attendance of members at called meetings of the board as established by written policy adopted by a majority of the appraisal district board of directors; or

(3) evidence of repeated bias or misconduct.

(g) Subsection (a) does not preclude the boards of directors of two or more adjoining appraisal districts from providing for the operation of a consolidated appraisal review board by interlocal contract. Members of a consolidated appraisal review board are appointed jointly by the boards of directors of the appraisal districts [applicable appointing authorities in the counties in which the appraisal districts] that are parties to the contract [are established].

(i) A chief appraiser or another employee or agent of the appraisal district, a member of the appraisal review board for the appraisal district, [a member of the board of directors of the appraisal district if the board is established for a district to which Section 6.03 applies,] a property tax consultant, or an agent of a property owner commits an offense if the person communicates with the board of directors of the appraisal district [applicable appointing authority] regarding the appointment of appraisal review board members. This subsection does not apply to:

(1) a communication between a member of the appraisal review board and the board of directors of the appraisal district [applicable appointing authority] regarding the member's reappointment to the board;

(2) a communication between the taxpayer liaison officer for the appraisal district and the board of directors of the appraisal district [applicable appointing authority] in the course of the performance of the officer's clerical duties so long as the officer does not offer an opinion or comment regarding the appointment of appraisal review board members;

(3) a communication between a chief appraiser or another employee or agent of the appraisal district[,] or a member of the appraisal review board for the appraisal district[, or a member of the board of directors of the appraisal district if the board is established for a district to which Section 6.03 applies] and the board of directors of the appraisal district [applicable appointing authority] regarding information relating to or described by Subsection (d-1), (d-5), or (f) of this section or Section 411.1296, Government Code;

(4) a communication between a property tax consultant or a property owner or an agent of the property owner and the taxpayer liaison officer for the appraisal district regarding information relating to or described by Subsection (f). The taxpayer liaison officer for the appraisal district shall report the contents of the communication relating to or described by Subsection (f) to the board of directors of the appraisal district [applicable appointing authority]; or

(5) a communication between a property tax consultant or a property owner or an agent of the property owner and the board of directors of the appraisal district [applicable appointing authority] regarding information relating to or described by Subsection (f).

(j) A chief appraiser or another employee or agent of an appraisal district commits an offense if the person communicates with a member of the appraisal review board for the appraisal district[,] or a member of the board of directors of the appraisal district[, or the local administrative district judge, if the judge is the appointing authority for the district,] regarding a ranking, scoring, or reporting of the percentage by which the appraisal review board or a panel of the board reduces the appraised value of property.

SECTION 1.16. Section 6.42(a), Tax Code, is amended to read as follows:

(a) A majority of the appraisal review board constitutes a quorum. The board of directors of the appraisal district [applicable appointing authority prescribed by Section 6.41(d) in the county in which the appraisal district is established] shall select a chairman and a secretary from among the members of the appraisal review board. The board of directors of the appraisal district [applicable appointing authority] is encouraged to select as chairman a member of the appraisal review board, if any, who has a background in law and property appraisal.

SECTION 1.17. The following provisions of the Tax Code are repealed:

(1) Sections 6.03(b), (c), (d), (e), (f), (g), (h), (i), (j), (k), and (k-1);

(2) Section 6.0301;

(3) Section 6.031;

(4) Sections 6.032(c), (d), and (e);

(5) Section 6.033;

(6) Section 6.034;

(7) Section 6.037;

(8) Section 6.10; and

(9) Sections 6.41(d-2), (d-4), (d-6), (d-7), and (d-8).

SECTION 1.18. The comptroller of public accounts shall make available the training course required by Section 5.044, Tax Code, as added by this article, not later than January 1, 2027.

SECTION 1.19. Section 5.044, Tax Code, as added by this article, applies only to a member of the board of directors of an appraisal district elected for a term that begins on or after January 1, 2027.

SECTION 1.20. (a) Appraisal district directors shall be elected as provided by Section 6.03, Tax Code, as amended by this article, beginning with the election conducted on the uniform election date in November 2026. The directors then elected take office on January 1, 2027.

(b) At the first meeting of the board of directors of an appraisal district described by Section 6.03, Tax Code, as amended by this article, that follows the November 2026 election of directors under that section, the directors shall draw lots to determine which four directors, including one director elected from each commissioners precinct, shall serve a term of one year and which five directors, including one director elected from each commissioners precinct and the director elected at large, shall serve a term of two years. Thereafter, all elected directors serve two-year terms.

(c) The change in the manner of selection of appraisal district directors made by this article does not affect the selection of directors who serve on the board before January 1, 2027.

(d) The term of an appraisal district director serving on December 31, 2026, expires on January 1, 2027.

ARTICLE 2. LIMITATION ON INCREASES IN APPRAISED VALUE OF CERTAIN

REAL PROPERTY

SECTION 2.01. Section 1.12(d), Tax Code, as effective January 1, 2027, is amended to read as follows:

(d) For purposes of this section, the appraisal ratio of a parcel of single-family residential real property [homestead] to which Section 23.23 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.

SECTION 2.02. The heading to Section 23.23, Tax Code, is amended to read as follows:

Sec. 23.23. LIMITATION ON APPRAISED VALUE OF SINGLE-FAMILY RESIDENTIAL REAL PROPERTY [RESIDENCE HOMESTEAD].

SECTION 2.03. Section 23.23, Tax Code, is amended by amending Subsections (a), (b), (c), and (e) and adding Subsections (a-1), (a-2), (a-3), (a-4), (a-5), (a-6), (a-7), (a-8), (a-9), (a-10), (a-11), (c-2), (c-3), and (h) to read as follows:

(a) The appraised value of a parcel of single-family residential 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 sum of:

(1) 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); and

(2) the value of all new improvements to the property, as determined under Subsection (a-11) [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 single-family residential 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, the comptroller shall determine and publicize the percentage by which the appraised value of single-family residential real property may be increased under Subsection (a). The comptroller shall determine the percentage by which the appraised value may be increased by calculating the sum of:

(1) the inflation rate, expressed as a percentage; and

(2) the growth rate of the population of this state for the preceding year, expressed as a percentage.

(a-9) Each chief appraiser shall use the percentage determined by the comptroller under Subsection (a-8) to determine the appraised value under Subsection (a) of single-family residential real property appraised by that chief appraiser.

(a-10) In this section, "inflation rate" means the positive amount, if any, computed by determining the percentage change in the Consumer Price Index for all Urban Consumers (CPI-U), U.S. City Average, published by the Bureau of Labor Statistics of the United States Department of Labor for the preceding calendar year as compared to the calendar year preceding that calendar year.

(a-11) Except as otherwise provided by this subsection, for purposes of Subsection (a), the value of a new improvement to a property is the market value of the improvement. The value of a new improvement to a property is the amount paid by the property owner for the improvement if:

(1) the property owner provides to the chief appraiser documentation sufficient to establish the price paid by the property owner for the improvement; and

(2) the chief appraiser determines that the price paid for the improvement was bona fide under criteria established by rules adopted by the comptroller for that purpose.

(b) When appraising single-family residential 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), 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) 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.

(e) In this section, "new improvement" means an improvement to a parcel of single-family residential real property [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.

(h) In this section, "single-family residential 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 2.04. Section 23.231(c), Tax Code, is amended to read as follows:

(c) This section does not apply to:

(1) a parcel of single-family residential real property to which Section 23.23 applies [residence homestead that qualifies for an exemption under Section 11.13]; or

(2) property appraised under Subchapter C, D, E, F, G, or H.

SECTION 2.05. 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 property [residence homestead] subject to the limitation on appraised value imposed by Section 23.23.

SECTION 2.06. Sections 403.302(d) and (i), Government Code, as effective 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 a parcel of single-family residential real property [residence homestead] to which Section 23.23, Tax Code, applies exceeds the appraised value of that property as calculated under that section; 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 single-family residential real property [residence homesteads] to which Section 23.23, Tax Code, applies the amount by which that amount exceeds the appraised value of that property [those properties] as calculated by the appraisal district under Section 23.23, Tax Code. 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 single-family residential real property [residence homesteads] to which Section 23.23, Tax Code, applies the amount by which that amount exceeds the appraised value of that property [those properties] as calculated by the appraisal district under Section 23.23, Tax Code.

SECTION 2.07. Section 23.23(c-1), Tax Code, is repealed.

SECTION 2.08. As soon as practicable after the effective date of this article, the comptroller of public accounts shall adopt the rules required by Section 23.23, Tax Code, as amended by this article.

SECTION 2.09. This article applies only to ad valorem taxes imposed for a tax year beginning on or after the effective date of this article.

ARTICLE 3. APPRAISAL REVIEW BOARD MEMBERS

SECTION 3.01. Section 6.41(c), Tax Code, is amended to read as follows:

(c) To be eligible to serve on the board, an individual must:

(1) be a resident of the district;

(2) [and must] have resided in the district for at least two years;

(3) own real property located in the district; and

(4) have at least five years of experience in finance, real estate, or business.

SECTION 3.02. Section 6.412(d), Tax Code, is amended to read as follows:

(d) A person is ineligible to serve on the appraisal review board of an appraisal district established for a county with a population of 120,000 or more if the person:

(1) is a former member of the board of directors, former officer, or former employee of the appraisal district;

(2) served as a member of the governing body or officer of a taxing unit for which the appraisal district appraises property, until the fourth anniversary of the date the person ceased to be a member or officer; or

(3) appeared before the appraisal review board for compensation during the two-year period preceding the date the person is appointed[; or

[(4) served for all or part of three previous terms as a board member or auxiliary board member on the appraisal review board].

SECTION 3.03. The changes made to Section 6.41, Tax Code, by this article apply only to the appointment of appraisal review board members to terms beginning on or after January 1, 2026. This article does not affect the term of an appraisal review board member serving on December 31, 2025, if the member was appointed before January 1, 2026, to a term that began before December 31, 2025, and expires December 31, 2026.

ARTICLE 4. PROPERTY VALUE STUDY MARGIN OF ERROR

SECTION 4.01. Section 403.302(c), Government Code, is amended to read as follows:

(c) If after conducting the study the comptroller determines that the local value for a school district is valid, the local value is presumed to represent taxable value for the school district. In the absence of that presumption, taxable value for a school district is the state value for the school district determined by the comptroller under Subsections (a) and (b) unless the local value exceeds the state value, in which case the taxable value for the school district is the district's local value. In determining whether the local value for a school district is valid, the comptroller shall use a margin of error that does not exceed 10 [five] percent unless the comptroller determines that the size of the sample of properties necessary to make the determination makes the use of such a margin of error not feasible, in which case the comptroller may use a larger margin of error.

SECTION 4.02. The change in law made by this article applies only to the study conducted under Section 403.302, Government Code, for a tax year that begins on or after January 1, 2026. The study for a tax year that begins before that date is covered by the law in effect immediately before the effective date of this article, and the prior law is continued in effect for that purpose.

ARTICLE 5. EFFECTIVE DATES

SECTION 5.01. Except as otherwise provided by this article, this Act takes effect January 1, 2026.

SECTION 5.02. (a) Except as otherwise provided by this section, Article 1 of this Act takes effect January 1, 2027.

(b) This section and Sections 1.06, 1.07, and 1.20 of this Act take effect January 1, 2026.

SECTION 5.03. Article 2 of 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 single-family residential 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 and population growth rates is approved by the voters. If that amendment is not approved by the voters, Article 2 of this Act has no effect.