By: Bettencourt, et al. S.B. No. 4

(In the Senate - Filed February 6, 2025; February 7, 2025, read first time and referred to Committee on Local Government; February 11, 2025, reported favorably by the following vote: Yeas 7, Nays 0; February 11, 2025, sent to printer.) Click here to see the committee vote

A BILL TO BE ENTITLED

AN ACT

relating to an increase in the amount of the exemption of residence homesteads from ad valorem taxation by a school district and the protection of school districts against certain losses in local revenue.

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

ARTICLE 1. PROVISIONS CONTINGENT ON CONSTITUTIONAL AMENDMENT

SECTION 1.01. Section 11.13(b), Tax Code, is amended to read as follows:

(b) An adult is entitled to exemption from taxation by a school district of $140,000 [$100,000] of the appraised value of the adult's residence homestead, except that only $5,000 of the exemption applies to an entity operating under former Chapter 17, 18, 25, 26, 27, or 28, Education Code, as those chapters existed on May 1, 1995, as permitted by Section 11.301, Education Code.

SECTION 1.02. Section 46.071, Education Code, is amended by amending Subsections (a-2) and (b-2) and adding Subsections (a-3), (b-3), and (c-3) to read as follows:

(a-2) For [Beginning with] the 2023-2024 and 2024-2025 school years [year], a school district is entitled to additional state aid under this subchapter to the extent that state and local revenue used to service debt eligible under this chapter is less than the state and local revenue that would have been available to the district under this chapter as it existed on September 1, 2022, if any increase in a residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, and any additional limitation on tax increases under Section 1-b(d) of that article as proposed by the 88th Legislature, 2nd Called Session, 2023, had not occurred.

(a-3) Beginning with the 2025-2026 school year, a school district is entitled to additional state aid under this subchapter to the extent that state and local revenue used to service debt eligible under this chapter is less than the state and local revenue that would have been available to the district under this chapter as it existed on January 1, 2025, if any increase in the residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, as proposed by the 89th Legislature, Regular Session, 2025, had not occurred.

(b-2) Subject to Subsections (c-2), (d), and (e), additional state aid under this section for [beginning with] the 2023-2024 and 2024-2025 school years [year] is equal to the amount by which the loss of local interest and sinking revenue for debt service attributable to any increase in a residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, and any additional limitation on tax increases under Section 1-b(d) of that article as proposed by the 88th Legislature, 2nd Called Session, 2023, is not offset by a gain in state aid under this chapter.

(b-3) Subject to Subsections (c-3), (d), and (e), additional state aid under this section beginning with the 2025-2026 school year is equal to the amount by which the loss of local interest and sinking revenue for debt service attributable to any increase in a residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, as proposed by the 89th Legislature, Regular Session, 2025, is not offset by a gain in state aid under this chapter.

(c-3) For the purpose of determining state aid under Subsections (a-3) and (b-3), local interest and sinking revenue for debt service is limited to revenue required to service debt eligible under this chapter as of January 1, 2025, including refunding of that debt, subject to Section 46.061. The limitation imposed by Section 46.034(a) does not apply for the purpose of determining state aid under this section.

SECTION 1.03. Section 48.2543, Education Code, is amended to read as follows:

Sec. 48.2543. ADDITIONAL STATE AID FOR CERTAIN DISTRICTS [HOMESTEAD EXEMPTION]. [(a) For the 2022-2023 school year, a school district is entitled to additional state aid to the extent that state and local revenue under this chapter and Chapter 49 is less than the state and local revenue that would have been available to the district under this chapter and Chapter 49 as those chapters existed on September 1, 2021, if any increase in the residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, as proposed by the 87th Legislature, 3rd Called Session, 2021, had not occurred.

[(a-1)] Beginning with the 2025-2026 [2023-2024] school year, a school district is entitled to additional state aid to the extent that state and local revenue under this chapter, other than former Section 48.2543(a), and Chapter 49 is less than the state and local revenue that would have been available to the district under this chapter and Chapter 49 as those chapters existed on September 1, 2022, if any of the following had not occurred:

(1) an increase in a residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, and any additional limitation on tax increases under Section 1-b(d) of that article as proposed by the 88th Legislature, 2nd Called Session, 2023;

(2) an increase in a residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, as proposed by the 89th Legislature, Regular Session, 2025;

(3) a reduction of the amount of the limitation on tax increases provided by Section 11.26(a-10), Tax Code; and

(4) a reduction in the district's maximum compressed tax rate under Section 48.2555, as added by Chapter 1 (S.B. 2), Acts of the 88th Legislature, 2nd Called Session, 2023 [, had not occurred].

[(b) The lesser of the school district's currently adopted maintenance and operations tax rate or the adopted maintenance and operations tax rate for:

[(1) the 2021 tax year is used for the purpose of determining additional state aid under Subsection (a); and

[(2) the 2022 tax year is used for the purpose of determining additional state aid under Subsection (a-1).]

SECTION 1.04. Sections 48.2542 and 48.283, Education Code, are repealed.

SECTION 1.05. Section 11.13, Tax Code, as amended by this article, applies only to an ad valorem tax year that begins on or after January 1, 2025.

ARTICLE 2. PROVISIONS NOT CONTINGENT ON CONSTITUTIONAL AMENDMENT

SECTION 2.01. Section 46.071, Education Code, is amended by adding Subsections (d-1) and (d-2) to read as follows:

(d-1) If the amount required to pay debt service on bonds issued under Subchapter A, Chapter 45, is less than the sum of state assistance provided under this chapter, including the amount of additional state aid provided under this section, and the revenue from the district's interest and sinking tax for a school year, the commissioner shall, except as provided by Subsection (d-2), reduce the amount of additional state aid provided under this section by the difference between:

(1) the sum of state assistance provided under this chapter, including the amount of additional state aid provided under this section, and the revenue from the district's interest and sinking tax for the school year; and

(2) the amount required to pay debt service on bonds described by this subsection for the school year.

(d-2) The amount of additional state aid provided under this section may not be reduced under Subsection (d-1) to an amount below zero.

SECTION 2.02. Section 48.2551, Education Code, is amended by adding Subsection (d-3) to read as follows:

(d-3) In calculating and making available school districts' maximum compressed rates under this section for the 2025-2026 school year, the agency shall calculate and make available the rates as if the increase in the residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, as proposed by the 89th Legislature, Regular Session, 2025, took effect and also as if that increase did not take effect. This subsection expires September 1, 2026.

SECTION 2.03. Section 48.283, Education Code, is amended to read as follows:

Sec. 48.283. ADDITIONAL STATE AID FOR CERTAIN DISTRICTS IMPACTED BY COMPRESSION. For the 2024-2025 school year, a [A] school district that received an adjustment under Section 48.257(b) for the 2022-2023 school year is entitled to additional state aid [for each school year] in an amount equal to [the amount of that adjustment for the 2022-2023 school year less] the difference, if the difference is greater than zero, between:

(1) [the amount to which the district is entitled under this chapter for the current school year; and

[(2)] the amount of state and local revenue that would have been available to [which] the district [would be entitled] under this chapter and Chapter 49 for the 2024-2025 [current] school year if the district's maximum compressed tax rate had not been reduced under Section 48.2555, as added by S.B. 2, Acts of the 88th Legislature, 2nd Called Session, 2023; and

(2) the amount of state and local revenue available to the district under this chapter and Chapter 49 for the 2024-2025 school year.

SECTION 2.04. Section 49.004, Education Code, is amended by adding Subsections (a-1), (b-1), and (c-1) to read as follows:

(a-1) This subsection applies only if the constitutional amendment proposed by S.J.R. 2, 89th Legislature, Regular Session, 2025, is approved by the voters in an election held for that purpose. As soon as practicable after receiving revised property values that reflect adoption of the constitutional amendment, the commissioner shall review the local revenue level of districts in the state and revise as necessary the notifications provided under Subsection (a) for the 2025-2026 school year. This subsection expires September 1, 2026.

(b-1) This subsection applies only to a district that has not previously held an election under this chapter. Notwithstanding Subsection (b), a district that enters into an agreement to exercise an option to reduce the district's local revenue level in excess of entitlement under Section 49.002(3), (4), or (5) for the 2025-2026 school year may request and, as provided by Section 49.0043(a), receive approval from the commissioner to delay the date of the election otherwise required to be ordered before September 1. This subsection expires September 1, 2026.

(c-1) Notwithstanding Subsection (c), a district that receives approval from the commissioner to delay an election as provided by Subsection (b-1) may adopt a tax rate for the 2025 tax year before the commissioner certifies that the district has reduced its local revenue level to the level established by Section 48.257. This subsection expires September 1, 2026.

SECTION 2.05. Subchapter A, Chapter 49, Education Code, is amended by adding Section 49.0043 to read as follows:

Sec. 49.0043. TRANSITIONAL PROVISIONS: INCREASED HOMESTEAD EXEMPTIONS. (a) The commissioner shall approve a district's request under Section 49.004(b-1) to delay the date of an election required under this chapter if the commissioner determines that the district would not have a local revenue level in excess of entitlement if the constitutional amendment proposed by S.J.R. 2, 89th Legislature, Regular Session, 2025, were approved by the voters.

(b) The commissioner shall set a date by which each district that receives approval under this section must order the election.

(c) Not later than the 2026-2027 school year, the commissioner shall order detachment and annexation of property under Subchapter G or consolidation under Subchapter H as necessary to reduce the district's local revenue level to the level established by Section 48.257 for a district that receives approval under this section and subsequently:

(1) fails to hold the election; or

(2) does not receive voter approval at the election.

(d) This section expires September 1, 2027.

SECTION 2.06. Subchapter A, Chapter 49, Education Code, is amended by adding Section 49.0121 to read as follows:

Sec. 49.0121. TRANSITIONAL ELECTION DATES. (a) This section applies only to an election under this chapter that occurs during the 2025-2026 school year.

(b) Section 49.012 does not apply to a district that receives approval of a request under Section 49.0043. The district shall hold the election on a Tuesday or Saturday on or before a date specified by the commissioner. Section 41.001, Election Code, does not apply to the election.

(c) This section expires September 1, 2026.

SECTION 2.07. Section 49.154, Education Code, is amended by adding Subsections (a-2) and (a-3) to read as follows:

(a-2) Notwithstanding Subsections (a) and (a-1), a district that receives approval of a request under Section 49.0043 shall pay for credit purchased:

(1) in equal monthly payments as determined by the commissioner beginning March 15, 2026, and ending August 15, 2026; or

(2) in the manner provided by Subsection (a)(2), provided that the district notifies the commissioner of the district's election to pay in that manner not later than March 15, 2026.

(a-3) Subsection (a-2) and this subsection expire September 1, 2026.

SECTION 2.08. Section 49.308, Education Code, is amended by adding Subsection (a-1) to read as follows:

(a-1) Notwithstanding Subsection (a), for the 2025-2026 school year, the commissioner shall order any detachments and annexations of property under this subchapter as soon as practicable after the canvass of the votes on the constitutional amendment proposed by S.J.R. 2, 89th Legislature, Regular Session, 2025. This subsection expires September 1, 2026.

SECTION 2.09. Section 25.23, Tax Code, is amended by adding Subsection (a-1) to read as follows:

(a-1) This subsection applies only to the appraisal records for the 2025 tax year. The chief appraiser shall prepare supplemental appraisal records to account for the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025. This subsection expires December 31, 2026.

SECTION 2.10. Section 26.04, Tax Code, is amended by adding Subsections (a-1) and (c-1) to read as follows:

(a-1) On receipt of the appraisal roll for the 2025 tax year, the assessor for a school district shall determine the total taxable value of property taxable by the district and the taxable value of new property as if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were in effect for that tax year. This subsection expires December 31, 2026.

(c-1) An officer or employee designated by the governing body of a school district shall calculate the no-new-revenue tax rate and the voter-approval tax rate of the district for the 2025 tax year as if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were in effect for that tax year. This subsection expires December 31, 2026.

SECTION 2.11. Section 26.08, Tax Code, is amended by adding Subsection (q) to read as follows:

(q) For purposes of this section, the voter-approval tax rate of a school district for the 2025 tax year shall be calculated as if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were in effect for that tax year. This subsection expires December 31, 2026.

SECTION 2.12. Section 26.09, Tax Code, is amended by adding Subsection (c-1) to read as follows:

(c-1) The assessor for a school district shall calculate the amount of tax imposed by the school district on a residence homestead for the 2025 tax year as if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were in effect for that tax year and also as if the changes in law made by that Act were not in effect for that tax year. This subsection expires December 31, 2026.

SECTION 2.13. Section 26.15, Tax Code, is amended by adding Subsection (h) to read as follows:

(h) The assessor for a school district shall correct the tax roll for the district for the 2025 tax year to reflect the results of the election to approve the constitutional amendment proposed by S.J.R. 2, 89th Legislature, Regular Session, 2025. This subsection expires December 31, 2026.

SECTION 2.14. Section 31.01, Tax Code, is amended by adding Subsections (d-2), (d-3), (d-4), and (d-5) to read as follows:

(d-2) This subsection and Subsections (d-3) and (d-4) apply only to taxes imposed by a school district on a residence homestead for the 2025 tax year and only if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, would lower the taxes imposed by the district on the property for that tax year. The assessor for the district shall compute the amount of taxes imposed and the other information required by this section as if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were in effect for that tax year. The tax bill or the separate statement must indicate that the bill is a provisional tax bill and include a statement in substantially the following form:

"If the Texas Legislature had not enacted property tax relief legislation during the 2025 legislative session, your tax bill would have been $____ (insert amount of tax bill if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were not in effect for that tax year). Because of action by the Texas Legislature, your tax bill has been lowered by $____ (insert difference between amount of tax bill if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were not in effect for that tax year and amount of tax bill if that Act were in effect for that tax year), resulting in a lower tax bill of $____ (insert amount of tax bill if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were in effect for that tax year), contingent on the approval by the voters at an election to be held November 4, 2025, of the constitutional amendment proposed by S.J.R. 2, 89th Legislature, Regular Session, 2025. If that constitutional amendment is not approved by the voters at the election, a supplemental tax bill in the amount of $____ (insert difference between amount of tax bill if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were not in effect for that tax year and amount of tax bill if that Act were in effect for that tax year) will be mailed to you."

(d-3) A tax bill prepared by the assessor for a school district as provided by Subsection (d-2) and mailed as provided by Subsection (a) is considered to be a provisional tax bill until the canvass of the votes on the constitutional amendment proposed by S.J.R. 2, 89th Legislature, Regular Session, 2025. If the constitutional amendment is approved by the voters, the tax bill is considered to be a final tax bill for the taxes imposed on the property for the 2025 tax year, and no additional tax bill is required to be mailed unless another provision of this title requires the mailing of a corrected tax bill. If the constitutional amendment is not approved by the voters:

(1) a tax bill prepared by the assessor as provided by Subsection (d-2) is considered to be a final tax bill but only as to the portion of the taxes imposed on the property for the 2025 tax year that are included in the bill;

(2) the amount of taxes imposed by each school district on a residence homestead for the 2025 tax year is calculated as if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were not in effect for that tax year; and

(3) except as provided by Subsections (f), (i-1), and (k), the assessor for each school district shall prepare and mail a supplemental tax bill, by December 1 or as soon thereafter as practicable, in an amount equal to the difference between the amount of the tax bill if the changes in law made by S.B. 4, Acts of the 89th Legislature, Regular Session, 2025, were not in effect for that tax year and the amount of the tax bill if that Act were in effect for that tax year.

(d-4) Except as otherwise provided by Subsection (d-3), the provisions of this section other than Subsection (d-2) apply to a supplemental tax bill mailed under Subsection (d-3).

(d-5) This subsection and Subsections (d-2), (d-3), and (d-4) expire December 31, 2026.

SECTION 2.15. Section 31.02, Tax Code, is amended by adding Subsection (a-1) to read as follows:

(a-1) Except as provided by Subsection (b) of this section and Sections 31.03 and 31.04, taxes for which a supplemental tax bill is mailed under Section 31.01(d-3) are due on receipt of the tax bill and are delinquent if not paid before March 1 of the year following the year in which imposed. This subsection expires December 31, 2026.

ARTICLE 3. EFFECTIVE DATES

SECTION 3.01. Except as otherwise provided by this article:

(1) this Act takes effect immediately if this Act receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution; and

(2) if this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2025.

SECTION 3.02. Article 1 of this Act takes effect on the date on which the constitutional amendment proposed by S.J.R. 2, 89th Legislature, Regular Session, 2025, takes effect. If that amendment is not approved by the voters, Article 1 of this Act has no effect.

* * * * *