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A BILL TO BE ENTITLED
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AN ACT
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relating to public facility corporations. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 303.041, Local Government Code, is |
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amended by adding Subsection (e) to read as follows: |
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(e) Notwithstanding Subsections (a)(3) and (d), a |
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corporation may not convey, assign, or transfer a tax exemption |
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granted under this subchapter to another entity unless |
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substantially all of the assets of the taxable entity are conveyed, |
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assigned, or transferred in the same transaction. |
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SECTION 2. Section 303.0421, Local Government Code, is |
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amended by amending Subsection (b) and adding Subsections (g-1) and |
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(j) to read as follows: |
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(b) Notwithstanding Section 303.042(c) and subject to |
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Subsections (c) and (d) of this section, an exemption under Section |
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303.042(c) for a multifamily residential development to which |
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Subsection (a) applies is available only if: |
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(1) the requirements under Sections [Section] |
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303.0425 and 303.0426 are met; |
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(2) at least: |
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(A) 10 percent of the units in the multifamily |
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residential development are reserved for occupancy as lower income |
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housing units, as defined under Section 303.0425; and |
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(B) 40 percent of the units in the multifamily |
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residential development are reserved for occupancy as moderate |
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income housing units, as defined under Section 303.0425; |
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(3) the corporation delivers to the presiding officer |
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of the governing body of each taxing unit in which the development |
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is to be located written notice of the development, at least 30 days |
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before the date: |
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(A) the corporation takes action to approve a new |
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multifamily residential development or the acquisition of an |
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occupied multifamily residential development; and |
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(B) of any public hearing required to be held |
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under this section; |
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(4) [if a majority of the members of the board are not |
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elected officials,] the development is approved by the governing |
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body of each taxing unit [the municipality] in which the |
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development is located [or, if the development is not located in a |
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municipality, the county in which the development is located]; |
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(5) for [an occupied] a multifamily residential |
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development that is acquired by a corporation [and not otherwise |
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subject to a land use restriction agreement under Section 2306.185, |
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Government Code] that was occupied at the time of acquisition or was |
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occupied at any time within the two-year period preceding the date |
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of the acquisition: |
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(A) at least 10 percent of the units in the |
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development are reserved for occupancy as lower income housing |
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units, as defined under Section 303.0425; at least 40 percent of the |
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units in the development are reserved for occupancy as moderate |
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income housing units, as defined under Section 303.0425; and not |
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less than 15 percent of the total gross cost of acquiring the |
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[existing] development, as shown in the settlement statement |
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related to the acquisition, is expended on rehabilitating, |
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renovating, reconstructing, or repairing the development, with |
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initial expenditures and construction activities: |
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(i) beginning not later than the first |
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anniversary of the date of the acquisition; and |
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(ii) finishing not later than the third |
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anniversary of the date of the acquisition; or |
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(B) at least at least 25 percent of the units are |
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reserved for occupancy as lower income housing units, as defined |
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under Section 303.0425, [and the development is approved by the |
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governing body of the municipality in which the development is |
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located or, if the development is not located in a municipality, the |
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county in which the development is located];, and at least 25 |
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percent of the units in the development are reserved for occupancy |
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as moderate income housing units, as defined under Section 303.0425 |
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[the development is approved by the governing body of the |
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municipality in which the development is located or, if the |
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development is not located in a municipality, the county in which |
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the development is located; and]; |
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(6) not less than 30 days before final approval of the |
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development: |
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(A) the corporation or corporation's sponsor |
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conducts, or obtains from a professional entity that has experience |
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underwriting affordable multifamily residential developments and |
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does not have a financial interest in the applicable development, |
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developer, or public facility user, an underwriting assessment of |
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the proposed development that [allows the corporation to make a |
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good faith determination that] is dated within six months of the |
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corporation 's approval of the development; |
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(7) not less than 30 days before final approval of the |
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development, the corporation or corporation's sponsor makes a good |
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faith determination based on the underwriting assessment that |
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[(i) for an occupied multifamily |
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residential development acquired by the corporation,] the total |
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annual amount of rent reduction [on the income-restricted units |
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provided] at the development will be not less than 60 percent of the |
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estimated amount of the annual ad valorem taxes that would be |
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imposed on the property [without an exemption under Section |
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303.042(c) for the second, third, and fourth years after the date of |
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acquisition by the corporation; and] in the same tax year if the |
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property did not have the income restrictions and did not have an |
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exemption from those taxes under Section 303.042(c): |
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(A) for occupied developments acquired by the |
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corporation, for each of the third, fourth, and fifth tax years |
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after the date of acquisition; and |
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(B) for all other developments, for each of the |
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second, third, and fourth tax years after the development first |
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becomes occupied by one or more tenants while owned by the |
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corporation; and |
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[(ii) for a newly constructed multifamily |
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residential development, the development would not be feasible |
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without the participation of the corporation; and] |
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(8) [(B)] the corporation publishes on its Internet |
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website a copy of the underwriting assessment described by |
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Paragraph (A) Subdivision (6). |
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(g-1) This subsection and Subsections (f) and (g) expire |
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December 31, 2027. |
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(j) A corporation or a sponsor of a corporation may not |
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accept a payment from a public facility user or developer in |
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exchange for the corporation's or sponsor's participation in a |
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multifamily residential development unless the corporation or |
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sponsor obtains approval for the payment from each taxing unit in |
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which the development is to be located. |
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SECTION 3. Sections 303.0421(h) and 303.0421(i), Local |
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Government Code, are repealed. |
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SECTION 4. Chapter 303, Local Government Code, is amended |
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by adding Section 303.0422 to read as follows: |
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Sec. 303.0422. RENT REDUCTION REQUIREMENTS FOR BENEFICIAL |
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TAX TREATMENT RELATING TO CERTAIN MULTIFAMILY RESIDENTIAL |
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DEVELOPMENTS. |
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(a) This section does not apply to a multifamily development |
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that: |
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(1) has at least 20 percent of its residential units |
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reserved for public housing units; |
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(2) participates in the Rental Housing Assistance |
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Demonstration program administered by the United States Department |
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of Housing and Urban Development;and |
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(3) receives financial assistance administered under |
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Subchapter 2306, Government Code. |
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(b) An exemption under Section 303.042(c) does not apply in |
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a tax year to a multifamily residential development if the |
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difference in the rent charged for the income-restricted |
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residential units in the development in the immediately prior tax |
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year and the estimated maximum market rents that could be charged |
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for those units without the rent or income restrictions in such tax |
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year, as reported in the audit under Section 303.0426, is less than |
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60 percent of the amount of the ad valorem taxes that would have |
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been imposed on the property in the same prior tax year if the |
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property did not have the income restrictions and did not have an |
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exemption from those taxes under Section 303.042(c): |
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(1) beginning with the first tax year after the tax |
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year in which the development first becomes occupied by one or more |
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residential tenants; |
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(2) notwithstanding Subdivision (1), for an existing |
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multifamily residential development that is acquired by the |
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corporation, beginning with the third tax year after the tax year |
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that the corporation acquires the development; and |
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(3) notwithstanding Subdivisions (1) and (2), for a |
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multifamily residential development owned by the corporation as of |
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September 1, 2025, beginning with the 2028 tax year. |
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SECTION 5. Section The heading to Section 303.0426, Local |
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Government Code, is amended to read as follows: |
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Sec. 303.0426. AUDIT REQUIREMENTS APPLICABLE TO ALL [FOR |
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CERTAIN] MULTIFAMILY RESIDENTIAL DEVELOPMENTS. |
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SECTION 6. Sections 303.0426(b), (c), (d), (e), (f), and |
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(g), Local Government Code, are amended to read as follows: |
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(b) A public facility user of any [a] multifamily |
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residential development claiming an exemption under Section |
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303.042(c) [and to which Section 303.0421 applies] must annually |
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submit to the department and the chief appraiser of the appraisal |
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district in which the development is located an audit report for a |
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compliance audit, prepared at the expense of the public facility |
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user and conducted by an independent auditor or compliance expert |
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with an established history of providing similar audits on housing |
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compliance matters, to: |
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(1) determine whether the public facility user and |
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development is in compliance with Sections 303.0421, 303.0422, and |
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303.0425, if applicable; and |
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(2) identify the difference in the rent charged for |
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income-restricted residential units and the estimated maximum |
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market rents that could be charged for those units without the rent |
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or income restrictions. |
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(c) Not later than the 60th day after the date of receipt of |
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the audit conducted under Subsection (b), the department shall |
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examine the audit report and publish a report summarizing the |
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findings of the audit. The report must: |
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(1) be made available on the department's Internet |
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website; |
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(2) be issued to a public facility user that has an |
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interest in a development that is the subject of an audit, the |
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comptroller, the applicable corporation, the governing body of the |
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corporation's sponsor, and, if the corporation's sponsor is a |
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housing authority, the elected officials who appointed the housing |
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authority's governing board; and |
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(3) describe in detail the nature of any failure to |
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comply with the requirements in Sections 303.0421 , 303.0422 and |
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303.0425, if applicable. |
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(d) If an audit report submitted under Subsection (b) |
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indicates noncompliance with Sections 303.0421, 303.0422, and |
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303.0425 as described by Subsection (c)(3), a public facility user: |
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(1) must be given: |
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(A) written notice from the department or |
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appropriate appraisal district that: |
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(i) is provided not later than the 45th day |
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after the date a report has been submitted under Subsection (b); |
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(ii) specifies the reasons for |
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noncompliance; |
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(iii) specifies the reason for |
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noncompliance with Section 303.0425: |
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(a) contains at least one option for a corrective action to |
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resolve the noncompliance; and |
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(iv) informs the public facility user that |
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failure to resolve the noncompliance will result in the loss of an |
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exemption under Section 303.042(c); ); and |
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(2) If the audit report indicates noncompliance with |
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Section 303.0425, a public facility user must also be given: |
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(A)[(B)] 60 days after the date notice is |
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received under [this] subdivision (1), to resolve the matter that |
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is the subject of the notice; and |
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(B)[(C)] if a matter that is the subject of a |
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notice provided under [this]subdivision (1) is not resolved to the |
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satisfaction of the department and the appropriate appraisal |
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district during the period provided by Paragraph (A)[(B)], a second |
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notice that informs the public facility user of the loss of the |
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exemption under Section 303.042(c) due to noncompliance with |
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Section [Sections 303.0421 and] 303.0425.[; and (2) is considered |
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to be incompliance with Sections 303.0421 and 303.0425 if notice |
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under Subdivision (1)(A) is not provided as specified by |
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Subparagraph(i) of that paragraph.] |
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(e) An exemption under Section 303.042(c) does not apply to |
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a multifamily residential development owned by a public facility |
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corporation for a tax year in which: |
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(1) the department determines that the public facility |
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user for the development is not in compliance with the audit report |
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requirements of Subsection (b); or |
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(2) based on the audit conducted under Subsection (b), |
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the department complies with the applicable notice requirements in |
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Subsection (d) and: |
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(i) the department determines that public |
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facility user or development is not in compliance with the |
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requirements of Section 303.0425 and the matter is not resolved to |
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the satisfaction of the department within 60 days after the date |
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notice is received under Subsection (d); or |
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(ii) the department determines that the |
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development is not in compliance with the requirements of Sections |
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303.0421(b)(2) or 303.0421(b)(5). [a multifamily residential |
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development that is owned by a public facility corporation created |
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under this chapter is determined by the department based on an audit |
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conducted under Subsection (b) to not be in compliance with the |
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requirements of Section 303.0421 or 303.0425.] |
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(e-1) Notwithstanding Subsection (e), a public facility |
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user and development is considered to be in compliance with: |
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(1) Section 303.0425 to the extent the applicable |
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notice required under Subsections (d)(1) and (d)(2) is not |
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provided; and |
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(2) Sections 303.0421 (b)(2) and (b)(5) to the extent |
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the applicable notice required under Subsection (d)(1) is not |
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provided. |
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(f) Notwithstanding Subsection (g), the [The] initial audit |
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report required by Subsection (b) is due not later than June 1 of |
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the year following the first anniversary of: |
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(1) the date of acquisition for an occupied |
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multifamily residential development that is acquired by a |
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corporation; or |
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(2) the date a new multifamily residential development |
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first becomes occupied by one or more tenants. |
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(g) An audit report required by this section is [Subsequent |
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audit reports following the issuance of the initial audit report |
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under Subsection (f) are] due not later than June 1 of each year. |
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SECTION 7. Subchapter B, Chapter 303, Local Government |
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Code, is amended by adding Section 303.0427 to read as follows: |
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Sec. 303.0427. ADDITIONAL REQUIREMENT FOR BENEFICIAL TAX |
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TREATMENT APPLICABLE TO ALL MULTIFAMILY RESIDENTIAL DEVELOPMENTS. |
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(a) In this section, "public facility user" has the meaning |
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assigned by Section 303.0425. |
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(b) A multifamily residential development owned by a public |
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facility corporation to which Section 303.0426 applies is |
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ineligible for an exemption under Section 303.042(c) unless the |
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corporation, the corporation's sponsor, or public facility user for |
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the development submits to the Texas Department of Housing and |
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Community Affairs and to the chief appraiser for each appraisal |
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district in which the exemption is sought a one-time exemption |
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application on a form promulgated by the comptroller. |
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SECTION 8. Section 392.066, Local Government Code, is |
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amended by adding Subsection (f) to read as follows: |
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(f) An authority that creates a public facility corporation |
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under Chapter 303 must submit to the Texas Department of Housing and |
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Community Affairs for each year that the corporation remains in |
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operation a certification providing: |
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(1) the name of the corporation; |
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(2) the names of all the developments owned by an |
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authority; |
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(3) the names of all subsidiaries of an authority; |
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(4) the names of any private partners involved in the |
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development; |
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(5) the areas in which the corporation operates; and |
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(6) any other information required by the department. |
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SECTION 9. (a) This Act applies only to a tax imposed for a |
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tax year beginning after the effective date of this Act. |
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(b) Sections 303.003 and 303.0421, Local Government Code, |
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as amended by this Act, apply only to a multifamily residential |
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development that is approved on or after the effective date of this |
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Act by a public facility corporation or the sponsor of a public |
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facility corporation. A multifamily residential development that |
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was approved by a public facility corporation or the sponsor of a |
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public facility corporation before the effective date of this Act |
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is governed by the law in effect on the date the development was |
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approved by the corporation or sponsor, and the former law is |
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continued in effect for that purpose. |
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(c) Notwithstanding subsection (b), Subdivision (1) of |
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Subsection 303.0421(b), as amended by this Act, applies to all |
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multifamily residential developments, regardless of the date they |
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were acquired or approved by a public facility corporation or |
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sponsor of the public facility corporation. |
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(d) Section 303.0422, Local Government Code, as added by |
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this Act, applies to all multifamily residential developments, |
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regardless of the date they were acquired or approved by a public |
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facility corporation or sponsor of the public facility corporation. |
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(e) Notwithstanding Section 10(d)(1), Chapter 1169 (H.B. |
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2071), Acts of the 88th Legislature, Regular Session, 2023, Section |
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303.0426, Local Government Code, as amended by this Act, applies to |
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all multifamily residential developments claiming an exemption |
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under Section 303.042(c), Local Government Code, regardless of when |
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the developments were approved or acquired and regardless of |
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whether Sections 303.0421 and 303.0425, Local Government Code, |
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apply to those developments. |
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(f) Section 303.0427, Local Government Code, as added by |
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this Act, applies to all multifamily residential developments |
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claiming an exemption under Section 303.042(c), Local Government |
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Code, regardless of when the developments were approved or acquired |
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and regardless of whether Sections 303.0421 and 303.0425, Local |
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Government Code, apply to those developments. |
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(g) Section 303.041(e), Local Government Code, as added by |
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this Act, applies only to the conveyance, assignment, or transfer |
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of an exemption that occurs on or after the effective date of this |
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Act. |
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(h) Section 303.0421(b), Local Government Code, as amended |
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by this Act, Section 303.0421(j), Local Government Code, as added |
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by this Act, and Section 303.0425(b-1), Local Government Code, as |
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added by this Act, apply only to a multifamily residential |
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development that is approved on or after the effective date of this |
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Act by a public facility corporation or the sponsor of a public |
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facility corporation, in accordance with Chapter 303, Local |
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Government Code. A multifamily residential development that was |
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approved by a public facility corporation or the sponsor of a public |
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facility corporation before the effective date of this Act is |
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governed by the law in effect on the date the development was |
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approved by the corporation or sponsor, and the former law is |
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continued in effect for that purpose. |
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SECTION 10. This Act takes effect September 1, 2025. |