By: Cook S.B. No. 2767
 
 
 
   
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to public facility corporations.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 303.041, Local Government Code, is
  amended by adding Subsection (e) to read as follows:
         (e)  Notwithstanding Subsections (a)(3) and (d), a
  corporation may not convey, assign, or transfer a tax exemption
  granted under this subchapter to another entity unless
  substantially all of the assets of the taxable entity are conveyed,
  assigned, or transferred in the same transaction.
         SECTION 2.  Section 303.0421, Local Government Code, is
  amended by amending Subsection (b) and adding Subsections (g-1) and
  (j) to read as follows:
         (b)  Notwithstanding Section 303.042(c) and subject to
  Subsections (c) and (d) of this section, an exemption under Section
  303.042(c) for a multifamily residential development to which
  Subsection (a) applies is available only if:
               (1)  the requirements under Sections [Section]
  303.0425 and 303.0426 are met;
               (2)  at least:
                     (A)  10 percent of the units in the multifamily
  residential development are reserved for occupancy as lower income
  housing units, as defined under Section 303.0425; and
                     (B)  40 percent of the units in the multifamily
  residential development are reserved for occupancy as moderate
  income housing units, as defined under Section 303.0425;
               (3)  the corporation delivers to the presiding officer
  of the governing body of each taxing unit in which the development
  is to be located written notice of the development, at least 30 days
  before the date:
                     (A)  the corporation takes action to approve a new
  multifamily residential development or the acquisition of an
  occupied multifamily residential development; and
                     (B)  of any public hearing required to be held
  under this section;
               (4)  [if a majority of the members of the board are not
  elected officials,] the development is approved by the governing
  body of each taxing unit [the municipality] in which the
  development is located [or, if the development is not located in a
  municipality, the county in which the development is located];
               (5)  for [an occupied] a multifamily residential
  development that is acquired by a corporation [and not otherwise
  subject to a land use restriction agreement under Section 2306.185,
  Government Code] that was occupied at the time of acquisition or was
  occupied at any time within the two-year period preceding the date
  of the acquisition:
                     (A)  at least 10 percent of the units in the
  development are reserved for occupancy as lower income housing
  units, as defined under Section 303.0425; at least 40 percent of the
  units in the development are reserved for occupancy as moderate
  income housing units, as defined under Section 303.0425; and not
  less than 15 percent of the total gross cost of acquiring the
  [existing] development, as shown in the settlement statement
  related to the acquisition, is expended on rehabilitating,
  renovating, reconstructing, or repairing the development, with
  initial expenditures and construction activities:
                           (i)  beginning not later than the first
  anniversary of the date of the acquisition; and
                           (ii)  finishing not later than the third
  anniversary of the date of the acquisition; or
                     (B)  at least at least 25 percent of the units are
  reserved for occupancy as lower income housing units, as defined
  under Section 303.0425, [and the development is approved by the
  governing body of the municipality in which the development is
  located or, if the development is not located in a municipality, the
  county in which the development is located];, and at least 25
  percent of the units in the development are reserved for occupancy
  as moderate income housing units, as defined under Section 303.0425
  [the development is approved by the governing body of the
  municipality in which the development is located or, if the
  development is not located in a municipality, the county in which
  the development is located; and];
               (6)  not less than 30 days before final approval of the
  development:
                     (A)  the corporation or corporation's sponsor
  conducts, or obtains from a professional entity that has experience
  underwriting affordable multifamily residential developments and
  does not have a financial interest in the applicable development,
  developer, or public facility user, an underwriting assessment of
  the proposed development that [allows the corporation to make a
  good faith determination that] is dated within six months of the
  corporation 's approval of the development;
               (7)  not less than 30 days before final approval of the
  development, the corporation or corporation's sponsor makes a good
  faith determination based on the underwriting assessment that
                           [(i)  for an occupied multifamily
  residential development acquired by the corporation,] the total
  annual amount of rent reduction [on the income-restricted units
  provided] at the development will be not less than 60 percent of the
  estimated amount of the annual ad valorem taxes that would be
  imposed on the property [without an exemption under Section
  303.042(c) for the second, third, and fourth years after the date of
  acquisition by the corporation; and] in the same tax year if the
  property did not have the income restrictions and did not have an
  exemption from those taxes under Section 303.042(c):
                     (A)  for occupied developments acquired by the
  corporation, for each of the third, fourth, and fifth tax years
  after the date of acquisition; and
                     (B)  for all other developments, for each of the
  second, third, and fourth tax years after the development first
  becomes occupied by one or more tenants while owned by the
  corporation; and
                           [(ii) for a newly constructed multifamily
  residential development, the development would not be feasible
  without the participation of the corporation; and]
               (8) [(B)]  the corporation publishes on its Internet
  website a copy of the underwriting assessment described by
  Paragraph (A) Subdivision (6).
         (g-1)  This subsection and Subsections (f) and (g) expire
  December 31, 2027.
         (j)  A corporation or a sponsor of a corporation may not
  accept a payment from a public facility user or developer in
  exchange for the corporation's or sponsor's participation in a
  multifamily residential development unless the corporation or
  sponsor obtains approval for the payment from each taxing unit in
  which the development is to be located.
         SECTION 3.  Sections 303.0421(h) and 303.0421(i), Local
  Government Code, are repealed.
         SECTION 4.  Chapter 303, Local Government Code, is amended
  by adding Section 303.0422 to read as follows:
         Sec. 303.0422.  RENT REDUCTION REQUIREMENTS FOR BENEFICIAL
  TAX TREATMENT RELATING TO CERTAIN MULTIFAMILY RESIDENTIAL
  DEVELOPMENTS.
         (a)  This section does not apply to a multifamily development
  that:
               (1)  has at least 20 percent of its residential units
  reserved for public housing units;
               (2)  participates in the Rental Housing Assistance
  Demonstration program administered by the United States Department
  of Housing and Urban Development;and
               (3)  receives financial assistance administered under
  Subchapter 2306, Government Code.
         (b)  An exemption under Section 303.042(c) does not apply in
  a tax year to a multifamily residential development if the
  difference in the rent charged for the income-restricted
  residential units in the development in the immediately prior tax
  year and the estimated maximum market rents that could be charged
  for those units without the rent or income restrictions in such tax
  year, as reported in the audit under Section 303.0426, is less than
  60 percent of the amount of the ad valorem taxes that would have
  been imposed on the property in the same prior tax year if the
  property did not have the income restrictions and did not have an
  exemption from those taxes under Section 303.042(c):
               (1)  beginning with the first tax year after the tax
  year in which the development first becomes occupied by one or more
  residential tenants;
               (2)  notwithstanding Subdivision (1), for an existing
  multifamily residential development that is acquired by the
  corporation, beginning with the third tax year after the tax year
  that the corporation acquires the development; and
               (3)  notwithstanding Subdivisions (1) and (2), for a
  multifamily residential development owned by the corporation as of
  September 1, 2025, beginning with the 2028 tax year.
         SECTION 5.  Section  The heading to Section 303.0426, Local
  Government Code, is amended to read as follows:
         Sec. 303.0426.  AUDIT REQUIREMENTS APPLICABLE TO ALL [FOR
  CERTAIN] MULTIFAMILY RESIDENTIAL DEVELOPMENTS.
         SECTION 6.  Sections 303.0426(b), (c), (d), (e), (f), and
  (g), Local Government Code, are amended to read as follows:
         (b)  A public facility user of any [a] multifamily
  residential development claiming an exemption under Section
  303.042(c) [and to which Section 303.0421 applies] must annually
  submit to the department and the chief appraiser of the appraisal
  district in which the development is located an audit report for a
  compliance audit, prepared at the expense of the public facility
  user and conducted by an independent auditor or compliance expert
  with an established history of providing similar audits on housing
  compliance matters, to:
               (1)  determine whether the public facility user and
  development is in compliance with Sections 303.0421, 303.0422, and
  303.0425, if applicable; and
               (2)  identify the difference in the rent charged for
  income-restricted residential units and the estimated maximum
  market rents that could be charged for those units without the rent
  or income restrictions.
         (c)  Not later than the 60th day after the date of receipt of
  the audit conducted under Subsection (b), the department shall
  examine the audit report and publish a report summarizing the
  findings of the audit. The report must:
               (1)  be made available on the department's Internet
  website;
               (2)  be issued to a public facility user that has an
  interest in a development that is the subject of an audit, the
  comptroller, the applicable corporation, the governing body of the
  corporation's sponsor, and, if the corporation's sponsor is a
  housing authority, the elected officials who appointed the housing
  authority's governing board; and
               (3)  describe in detail the nature of any failure to
  comply with the requirements in Sections 303.0421 , 303.0422 and
  303.0425, if applicable.
         (d)  If an audit report submitted under Subsection (b)
  indicates noncompliance with Sections 303.0421, 303.0422, and
  303.0425 as described by Subsection (c)(3), a public facility user:
               (1)  must be given:
                     (A)  written notice from the department or
  appropriate appraisal district that:
                           (i)  is provided not later than the 45th day
  after the date a report has been submitted under Subsection (b);
                           (ii)  specifies the reasons for
  noncompliance;
                           (iii)  specifies the reason for
  noncompliance with Section 303.0425:
         (a)  contains at least one option for a corrective action to
  resolve the noncompliance; and
                           (iv)  informs the public facility user that
  failure to resolve the noncompliance will result in the loss of an
  exemption under Section 303.042(c); ); and
               (2)  If the audit report indicates noncompliance with
  Section 303.0425, a public facility user must also be given:
                     (A)[(B)]  60 days after the date notice is
  received under [this] subdivision (1), to resolve the matter that
  is the subject of the notice; and
                     (B)[(C)]  if a matter that is the subject of a
  notice provided under [this]subdivision (1) is not resolved to the
  satisfaction of the department and the appropriate appraisal
  district during the period provided by Paragraph (A)[(B)], a second
  notice that informs the public facility user of the loss of the
  exemption under Section 303.042(c) due to noncompliance with
  Section [Sections 303.0421 and] 303.0425.[; and (2) is considered
  to be incompliance with Sections 303.0421 and 303.0425 if notice
  under Subdivision (1)(A) is not provided as specified by
  Subparagraph(i) of that paragraph.]
         (e)  An exemption under Section 303.042(c) does not apply to
  a multifamily residential development owned by a public facility
  corporation for a tax year in which:
               (1)  the department determines that the public facility
  user for the development is not in compliance with the audit report
  requirements of Subsection (b); or
               (2)  based on the audit conducted under Subsection (b),
  the department complies with the applicable notice requirements in
  Subsection (d) and:
                           (i)  the department determines that public
  facility user or development is not in compliance with the
  requirements of Section 303.0425 and the matter is not resolved to
  the satisfaction of the department within 60 days after the date
  notice is received under Subsection (d); or
                           (ii)  the department determines that the
  development is not in compliance with the requirements of Sections
  303.0421(b)(2) or 303.0421(b)(5). [a multifamily residential
  development that is owned by a public facility corporation created
  under this chapter is determined by the department based on an audit
  conducted under Subsection (b) to not be in compliance with the
  requirements of Section 303.0421 or 303.0425.]
         (e-1)  Notwithstanding Subsection (e), a public facility
  user and development is considered to be in compliance with:
               (1)  Section 303.0425 to the extent the applicable
  notice required under Subsections (d)(1) and (d)(2) is not
  provided; and
               (2)  Sections 303.0421 (b)(2) and (b)(5) to the extent
  the applicable notice required under Subsection (d)(1) is not
  provided.
         (f)  Notwithstanding Subsection (g), the [The] initial audit
  report required by Subsection (b) is due not later than June 1 of
  the year following the first anniversary of:
               (1)  the date of acquisition for an occupied
  multifamily residential development that is acquired by a
  corporation; or
               (2)  the date a new multifamily residential development
  first becomes occupied by one or more tenants.
         (g)  An audit report required by this section is [Subsequent
  audit reports following the issuance of the initial audit report
  under Subsection (f) are] due not later than June 1 of each year.
         SECTION 7.  Subchapter B, Chapter 303, Local Government
  Code, is amended by adding Section 303.0427 to read as follows:
         Sec. 303.0427.  ADDITIONAL REQUIREMENT FOR BENEFICIAL TAX
  TREATMENT APPLICABLE TO ALL MULTIFAMILY RESIDENTIAL DEVELOPMENTS.
  (a) In this section, "public facility user" has the meaning
  assigned by Section 303.0425.
         (b)  A multifamily residential development owned by a public
  facility corporation to which Section 303.0426 applies is
  ineligible for an exemption under Section 303.042(c) unless the
  corporation, the corporation's sponsor, or public facility user for
  the development submits to the Texas Department of Housing and
  Community Affairs and to the chief appraiser for each appraisal
  district in which the exemption is sought a one-time exemption
  application on a form promulgated by the comptroller.
         SECTION 8.  Section 392.066, Local Government Code, is
  amended by adding Subsection (f) to read as follows:
         (f)  An authority that creates a public facility corporation
  under Chapter 303 must submit to the Texas Department of Housing and
  Community Affairs for each year that the corporation remains in
  operation a certification providing:
               (1)  the name of the corporation;
               (2)  the names of all the developments owned by an
  authority;
               (3)  the names of all subsidiaries of an authority;
               (4)  the names of any private partners involved in the
  development;
               (5)  the areas in which the corporation operates; and
               (6)  any other information required by the department.
         SECTION 9.  (a) This Act applies only to a tax imposed for a
  tax year beginning after the effective date of this Act.
         (b)  Sections 303.003 and 303.0421, Local Government Code,
  as amended by this Act, apply only to a multifamily residential
  development that is approved on or after the effective date of this
  Act by a public facility corporation or the sponsor of a public
  facility corporation. A multifamily residential development that
  was approved by a public facility corporation or the sponsor of a
  public facility corporation before the effective date of this Act
  is governed by the law in effect on the date the development was
  approved by the corporation or sponsor, and the former law is
  continued in effect for that purpose.
         (c)  Notwithstanding subsection (b), Subdivision (1) of
  Subsection 303.0421(b), as amended by this Act, applies to all
  multifamily residential developments, regardless of the date they
  were acquired or approved by a public facility corporation or
  sponsor of the public facility corporation.
         (d)  Section 303.0422, Local Government Code, as added by
  this Act, applies to all multifamily residential developments,
  regardless of the date they were acquired or approved by a public
  facility corporation or sponsor of the public facility corporation.
         (e)  Notwithstanding Section 10(d)(1), Chapter 1169 (H.B.
  2071), Acts of the 88th Legislature, Regular Session, 2023, Section
  303.0426, Local Government Code, as amended by this Act, applies to
  all multifamily residential developments claiming an exemption
  under Section 303.042(c), Local Government Code, regardless of when
  the developments were approved or acquired and regardless of
  whether Sections 303.0421 and 303.0425, Local Government Code,
  apply to those developments.
         (f)  Section 303.0427, Local Government Code, as added by
  this Act, applies to all multifamily residential developments
  claiming an exemption under Section 303.042(c), Local Government
  Code, regardless of when the developments were approved or acquired
  and regardless of whether Sections 303.0421 and 303.0425, Local
  Government Code, apply to those developments.
         (g)  Section 303.041(e), Local Government Code, as added by
  this Act, applies only to the conveyance, assignment, or transfer
  of an exemption that occurs on or after the effective date of this
  Act.
         (h)  Section 303.0421(b), Local Government Code, as amended
  by this Act, Section 303.0421(j), Local Government Code, as added
  by this Act, and Section 303.0425(b-1), Local Government Code, as
  added by this Act, apply only to a multifamily residential
  development that is approved on or after the effective date of this
  Act by a public facility corporation or the sponsor of a public
  facility corporation, in accordance with Chapter 303, Local
  Government Code. A multifamily residential development that was
  approved by a public facility corporation or the sponsor of a public
  facility corporation before the effective date of this Act is
  governed by the law in effect on the date the development was
  approved by the corporation or sponsor, and the former law is
  continued in effect for that purpose.
         SECTION 10.  This Act takes effect September 1, 2025.