89R16235 LHC/KJE-F

By: Phelan H.B. No. 4407

A BILL TO BE ENTITLED

AN ACT

relating to providing property tax relief through the public school finance system and property tax appraisal and administration.

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

ARTICLE 1. SHORT TITLE

SECTION 1.01. This Act may be cited as the Property Tax Relief Act.

ARTICLE 2. SCHOOL DISTRICT TAX RATE COMPRESSION

SECTION 2.01. Subchapter F, Chapter 48, Education Code, is amended by adding Section 48.2554 to read as follows:

Sec. 48.2554. MAXIMUM COMPRESSED TAX RATE FOR 2025-2026 SCHOOL YEAR. (a) Notwithstanding any other provision of this title or Chapter 26, Tax Code, for the 2025-2026 school year, the commissioner shall calculate the value of a school district's maximum compressed tax rate by determining the district's maximum compressed rate under Section 48.2551 or 48.2552(b), if applicable, and reducing the tax rate determined under the applicable section by $0.15.

(b) If a school district's maximum compressed tax rate as calculated under Subsection (a) would be less than 90 percent of another school district's maximum compressed tax rate under Subsection (a), the district's maximum compressed tax rate is the value at which the district's maximum compressed tax rate would be equal to 90 percent of the other district's maximum compressed tax rate.

(c) Notwithstanding any other provision of this title or Chapter 26, Tax Code, for purposes of determining funding for school districts for the 2025-2026 school year, a reference in any of the following provisions of law to a school district's maximum compressed tax rate or maximum compressed rate as determined under Section 48.2551 means the maximum compressed tax rate determined for the district under this section:

(1) Section 13.054(f);

(2) Section 45.003(d);

(3) Section 45.0032(a);

(4) Section 48.051(a);

(5) Sections 48.2553(a) and (e);

(6) Section 48.2556; and

(7) Section 26.08(n), Tax Code.

(d) For purposes of Section 30.003(f-1), a reference in that section to Section 48.2551 includes this section.

(e) Notwithstanding any other provision of this title, for purposes of determining a school district's maximum compressed tax rate under Section 48.2551 for the 2026-2027 school year, the value of the district's "PYMCR" is the maximum compressed tax rate determined for the district under this section for the preceding school year.

(f) This section expires September 1, 2027.

ARTICLE 3. ESCROW ACCOUNTS

SECTION 3.01. Section 31.072(a), Tax Code, is amended to read as follows:

(a) At the request of a property owner, the [The] collector for a taxing unit shall [may] enter a contract with the [a] property owner under which the property owner deposits money in an escrow account maintained by the collector to provide for the payment of property taxes collected by the collector on any property the person owns.

SECTION 3.02. Sections 31.072(h) and (i), Tax Code, are repealed.

SECTION 3.03. This article applies only to a tax year that begins on or after the effective date of this article.

ARTICLE 4. LIMITATION ON INCREASES IN VALUE OF REAL PROPERTY

SECTION 4.01. (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 4.02. 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 4.03. Section 23.23, Tax Code, is amended by amending Subsections (a), (b), (c), and (e) and adding Subsections (c-2), (c-3), (c-4), and (h) to read as follows:

(a) 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 real property [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) five [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.

(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)(2).

(c) The limitation provided by Subsection (a) takes effect on January 1 of the tax year following 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) For purposes of applying the limitation provided by this section, a person who acquired real property in a tax year before the 2025 tax year, other than property that qualified as the residence homestead of the person under Section 11.13 in the 2025 tax year, is considered to have acquired the property on January 1, 2025.

(e) In this section, "new improvement" means an improvement to real property [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.

(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 4.04. (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 4.05. (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 4.06. (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 4.07. (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 4.08. The following provisions of the Tax Code are repealed:

(1) Sections 23.23(c-1) and 25.19(o); and

(2) Section 23.231.

SECTION 4.09. This article applies only to the appraisal for ad valorem tax purposes of real property for a tax year that begins on or after the effective date of this article.

ARTICLE 5. EFFECTIVE DATES

SECTION 5.01. Except as otherwise provided by this article, this Act takes effect September 1, 2025.

SECTION 5.02. Article 3 of this Act takes effect January 1, 2026.

SECTION 5.03. Article 4 of this Act takes effect January 1, 2026, but only if the constitutional amendment proposed by the 89th Legislature, Regular Session, 2025, to authorize the legislature to limit the maximum appraised value of real property for ad valorem tax purposes to 105 percent or more of the appraised value of the property for the preceding tax year is approved by the voters. If that amendment is not approved by the voters, Article 4 of this Act has no effect.