By: Menendez, Paxton, Hilderbran, Villarreal, H.B. No. 2828
Oliveira, et al.
A BILL TO BE ENTITLED
AN ACT
relating to the ad valorem taxation of property used to provide
low-income or moderate-income housing.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 11.182, Tax Code, is amended by amending
Subsections (b), (e), (h), (j), and (k) and adding Subsections
(b-1) and (b-2) to read as follows:
(b) An organization is entitled to an exemption from
taxation of improved or unimproved real property it owns if the
organization:
(1) is organized as a community housing development
organization;
(2) meets the requirements of a charitable
organization provided by Sections 11.18(e) and (f);
(3) owns the property for the purpose of building or
repairing housing on the property to sell without profit to a
low-income or moderate-income individual or family satisfying the
organization's eligibility requirements or to rent without profit
to such an individual or family; and
(4) engages [exclusively] in the building, repair, and
sale or rental of housing as described by Subdivision (3) and
related activities.
(b-1) Notwithstanding Subsections (b)(1) and (2), an owner
of improved or unimproved real property that is not an organization
described by those subdivisions is entitled to an exemption from
taxation of the property under Subsection (b) if the owner
otherwise qualifies for the exemption and the owner is:
(1) a limited partnership of which 100 percent of the
interest of the general partner is owned or controlled by an
organization described by Subsections (b)(1) and (2); or
(2) an entity 100 percent of the interest in which is
owned or controlled by an organization described by Subsections
(b)(1) and (2).
(b-2) A reference in this section to an organization
includes a limited partnership or other entity described by
Subsection (b-1).
(e) In addition to meeting the applicable requirements of
Subsections (b) and (c), to receive an exemption under Subsection
(b) for improved real property [that includes a housing project
constructed after December 31, 2001, and financed with qualified
501(c)(3) bonds issued under Section 145 of the Internal Revenue
Code of 1986, tax-exempt private activity bonds subject to volume
cap, or low-income housing tax credits], the organization must:
(1) [control 100 percent of the interest in the
general partner if the project is owned by a limited partnership;
[(2)] comply with all rules of and laws administered
by the Texas Department of Housing and Community Affairs applicable
to community housing development organizations; and
(2) [(3)] submit annually to the Texas Department of
Housing and Community Affairs and to the governing body of each
taxing unit for which the project receives an exemption for the
housing project evidence demonstrating that the organization spent
an amount equal to at least 90 percent of the project's cash flow in
the preceding fiscal year as determined by the audit required by
Subsection (g), for eligible persons in the county in which the
property is located, on social, educational, or economic
development services, capital improvement projects, or rent
reduction.
(h) Subsections (d) and (e)(2) [(e)(3)] do not apply to
property owned by an organization if:
(1) the entity that provided the financing for the
acquisition or construction of the property:
(A) requires the organization to make payments in
lieu of taxes to the school district in which the property is
located; or
(B) restricts the amount of rent the organization
may charge for dwelling units on the property; or
(2) the organization has entered into an agreement
with each taxing unit for which the property receives an exemption
to spend in each tax year for the purposes provided by Subsection
(d) or (e)(2) [(e)(3)] an amount equal to the total amount of taxes
imposed on the property in the tax year preceding the year in which
the organization acquired the property.
(j) An organization may not receive an exemption under
Subsection (b) or (f) for property for a tax year unless the
organization applied for or received an exemption under that
subsection for the property for any part of the 2003 tax year.
(k) Notwithstanding Subsection (j) [of this section] and
Sections 11.43(a) and (c), an exemption under Subsection (b) or (f)
does not terminate because of a change in the ownership of the
property if the property is sold at a foreclosure sale and, not
later than the 30th day after the date of the sale, the owner of the
property submits to the chief appraiser evidence that the property
is owned by an organization that meets the requirements of
Subsections (b)(1), (2), and (4) or is owned by a limited
partnership described by Subsection (b-1)(1) or an entity described
by Subsection (b-1)(2) that meets the requirements of Subsection
(b)(4). If the owner of the property submits the evidence required
by this subsection, the exemption continues to apply to the
property for the remainder of the current tax year and for
subsequent tax years until the owner ceases to qualify the property
for the exemption. This subsection does not prohibit the chief
appraiser from requiring the owner to file a new application to
confirm the owner's current qualification for the exemption as
provided by Section 11.43(c).
SECTION 2. Sections 11.1825(c), (d), (q), and (t), Tax
Code, are amended to read as follows:
(c) Notwithstanding Subsection (b), an owner of real
property that is not an organization described by that subsection
is entitled to an exemption from taxation of property under this
section if the property otherwise qualifies for the exemption and
the owner is:
(1) a limited partnership of which an organization
that meets the requirements of Subsection (b) controls 100 percent
of the general partner interest; [or]
(2) an entity the parent of which is an organization
that meets the requirements of Subsection (b); or
(3) an entity the parent of which is controlled by an
organization that meets the requirements of Subsection (b).
(d) If the owner of the property is an entity described by
Subsection (c), the entity must[:
[(1) be organized under the laws of this state; and
[(2)] have its principal place of business in this
state.
(q) If property qualifies for an exemption under this
section, the chief appraiser shall use the income method of
appraisal as provided by Sections [Section] 23.012 and 23.215 to
determine the appraised value of the property. In appraising the
property, the chief appraiser shall:
(1) adjust for [consider] the restrictions provided by
this section on the income of the individuals or families to whom
the dwelling units of the housing project may be rented and the
amount of rent that may be charged for purposes of computing the
actual rental income from the property or projecting future rental
income; and
(2) use the same capitalization rate that the chief
appraiser uses to appraise other rent-restricted properties.
(t) Notwithstanding Section 11.43(c), an exemption under
this section does not terminate because of a change in ownership of
the property if:
(1) the property is foreclosed on for any reason and,
not later than the 30th day after the date of the foreclosure sale,
the owner of the property submits to the chief appraiser evidence
that the property is owned by:
(A) an organization that meets the requirements
of Subsection (b); or
(B) an entity that meets the requirements of
Subsections (c) and (d); or
(2) in the case of property owned by an entity
described by Subsections (c) and (d), the organization meeting the
requirements of Subsection (b) that controls the general partner
interest of, [or] is the parent of, or controls the parent of the
entity as described by Subsection (c) ceases to serve in that
capacity and, not later than the 30th day after the date the
cessation occurs, the owner of the property submits evidence to the
chief appraiser that the organization has been succeeded in that
capacity by another organization that meets the requirements of
Subsection (b).
SECTION 3. Section 11.1826, Tax Code, is amended by adding
Subsection (c-1) and amending Subsection (e) to read as follows:
(c-1) The audit is binding on the appraisal district and
constitutes proof of eligibility for, including compliance with all
statutory requirements necessary for, an exemption under Section
11.1825.
(e) Property may not be exempted under Section 11.182 for a
tax year unless the organization owning or controlling the owner of
the property complies with this section, except that the audit
required by this section must address compliance with the
requirements of Section 11.182. Subsection (c-1) applies to an
audit that addresses compliance with the requirements of Section
11.182 in the same manner as that subsection applies to an audit
that addresses compliance with the requirements of Section 11.1825.
SECTION 4. Section 23.215, Tax Code, is amended to read as
follows:
Sec. 23.215. APPRAISAL OF CERTAIN NONEXEMPT PROPERTY USED
FOR LOW-INCOME OR MODERATE-INCOME HOUSING. (a) This section
applies only to real property and only if:
(1) the property is owned for the purpose of operating
a housing project on the property the dwelling units in which are
required to be rented to individuals or families whose median
income is not more than 60 percent of the greater of:
(A) the area median family income for the
household's place of residence, as adjusted for family size and as
established by the United States Department of Housing and Urban
Development; or
(B) the statewide area median family income, as
adjusted for family size and as established by the United States
Department of Housing and Urban Development;
(2) at least 50 percent of the total square footage of
the dwelling units in the housing project on the property is
reserved for individuals or families described by Subdivision (1);
and
(3) the property is subject to a restrictive covenant
recorded in the real property records of the county in which the
property is located evidencing the restrictions described by
Subdivisions (1) and (2) [by an organization:
[(1) that on the effective date of this section was
rented to a low-income or moderate-income individual or family
satisfying the organization's income eligibility requirements and
that continues to be used for that purpose;
[(2) that was financed under the low income housing
tax credit program under Subchapter DD, Chapter 2306, Government
Code;
[(3) that does not receive an exemption under Section
11.182 or 11.1825; and
[(4) the owner of which has not entered into an
agreement with any taxing unit to make payments to the taxing unit
instead of taxes on the property].
(b) In appraising the property, the [The] chief appraiser
shall use the income method of appraisal as provided by Section
23.012 and shall:
(1) estimate the net income of the property by:
(A) analyzing data on rental income and expenses
of the property contained in the statement of income and expenses
for the property for the preceding fiscal year and the rent roll for
the property for December of the preceding year, if the dwelling
units in the project were required to be rented to individuals or
families described by Subsection (a) during the preceding year; or
(B) basing the potential income and expenses of
the property on reasonably clear and appropriate evidence, if the
construction of the dwelling units in the project has commenced but
has not been completed as of the date of the appraisal or if for any
other reason Paragraph (A) does not apply;
(2) include deductions for required replacement
reserves, franchise taxes imposed by this state, and fees imposed
by governmental entities;
(3) if Subdivision (1)(B) applies, reduce the
stabilized value of the property to account for the income lost
during the lease-up and construction period and for the percentage
of construction yet to be completed; and
(4) use the capitalization rate determined and
published by the chief appraiser [appraise the property in the
manner provided by Section 11.1825(q)].
(c) In determining the capitalization rate, the chief
appraiser shall adjust for:
(1) the restrictions on the income of the individuals
or families to whom the dwelling units in the project are required
to be rented and the amount of rent that may be charged;
(2) the restrictions on transferability of the
property and the period for which the property is subject to a
restrictive covenant described by Subsection (a)(3); and
(3) the regulatory burdens associated with complying
with the restrictive covenant described by Subsection (a)(3) to
which the property is subject.
(d) Not later than January 1 of each year, the appraisal
district shall give public notice in the manner determined by the
district, including by posting on the district's Internet website
if applicable, of the capitalization rate to be used in that year to
appraise property under this section.
(e) In connection with an annual study conducted under
Section 403.302, Government Code, the value of a property described
by Subsection (a) that is selected for appraisal must be determined
in the manner required by this section.
SECTION 5. This Act applies only to ad valorem taxes imposed
for a tax year beginning on or after the effective date of this Act.
SECTION 6. This Act takes effect January 1, 2010.