Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB2133 by Bhojani (Relating to a one-time credit against the ad valorem taxes imposed by a taxing unit on the first property that a person purchases and qualifies as the person's residence homestead and to the effect of the credit on the determination of the taxable value of a school district.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB2133, As Introduced: a negative impact of ($108,745,000) through the biennium ending August 31, 2027.
However, there would be a negative impact of ($176,494,000) in the biennium ending August 31, 2029.
General Revenue-Related Funds, Five- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2026
$0
2027
($108,745,000)
2028
($87,554,000)
2029
($88,940,000)
2030
($90,751,000)
All Funds, Five-Year Impact:
Fiscal Year
Probable Savings/(Cost) from Foundation School Fund 193
Probable Revenue Gain/(Loss) from Recapture Payments Atten Crdts 8905
Probable Revenue Gain/(Loss) from School Districts Levy Loss
2026
$0
$0
$0
2027
($108,745,000)
($40,409,000)
($113,877,000)
2028
($87,554,000)
($41,886,000)
($119,016,000)
2029
($88,940,000)
($46,799,000)
($124,458,000)
2030
($90,751,000)
($42,713,000)
($130,001,000)
Fiscal Analysis
Contingent on the passage of HJR 209, the bill would provide a one-time credit against property taxes imposed by a taxing unit on the first property a person purchases and qualifies as the person's residence homestead. The bill would provide the one-time credit calculation and definitions.
The bill would define application requirements, allow protests and appeals, as well as prescribe chief appraiser responsibilities for approval and dissemination of information to affected tax assessors.
The bill would direct the Comptroller to adopt rules to administer the credit, including documentation necessary to qualify for the credit.
The bill would provide that the taxable value determined for the school district property value study (SVPVS) would exclude the amount of taxable value required to generate the local property tax revenue equal to the total amount of credits provided by the school district.
Methodology
There is not information available on “first-time homebuyers” in Texas who use the property as a residence homestead. Based on Texas Realtor website information, approximately 30% of homebuyers in Texas who purchase a property are first-time homebuyers, and this analysis assumes these properties are their residence homesteads. As the bill states the credit would be claimed in the first year after the year in which the home was purchased; it is assumed that all first-time homebuyers would be certified eligible by the chief appraiser to receive the credit.
Due to the increase in home mortgage interest rates and down payment requirements affecting many first-time homebuyers the number reported by Texas Realtors has varied noticeably over the past few years. The Comptroller's office took the average between 24 percent reported for 2022 and 31 percent reported for 2023; the first-time homebuyer rate of 27.5 percent was used for this estimate and increased to 31 percent by 2030. This estimate assumes that for 40 percent of first time buyers $3,000 would be the lesser credit, for 60 percent one-half of tax assessed would be the lesser credit.
Under provisions of the Education Code, the school district tax revenue loss is partially transferred to the state. The estimated cost to the Foundation School Program (FSP) is $108.7 million in fiscal year 2027, $87.6 million in fiscal year 2028, increasing to $90.8 million in fiscal year 2030. The cost to the FSP includes estimated decreases in Recapture Payments - Attendance Credits of $40.4 million in fiscal year 2027, $41.9 million in fiscal year 2028, increasing to $42.7 million in fiscal year 2030 as a result of school district tax revenue loss. The decrease in recapture is reflected as a revenue loss in the table above because recapture is appropriated as a method of finance for the FSP in the General Appropriations Act.
Local Government Impact
Contingent upon passage of a constitutional amendment authorizing the property tax credit, the bill would provide a one-time credit against property taxes imposed by a taxing unit on the first property a person purchases and qualifies as the person's residence homestead which would reduce collections. However, the no-new-revenue and voter-approval tax rates as provided by Section 26.04, Tax Code would be higher as a consequence of the reduced collections proposed by the bill. If cities, counties, and special districts did not adopt higher rates, local levies would be reduced by $176.2 million in fiscal year 2027. If those jurisdictionsadopted higher tax rates, the initial revenue loss from the exemption would be offset by increased tax levies from owners not receiving the credit and slightly reduced tax savings from owners who receive the property tax credit proposed by the bill.