82R9180 SMH-F
By: Garza H.B. No. 3552
A BILL TO BE ENTITLED
AN ACT
relating to the exemption from 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(a), Tax Code, is amended by
amending Subdivision (2) and adding Subdivisions (3) and (4) to
read as follows:
(2) "Community housing development organization" has
the meaning assigned by 24 C.F.R. Section 92.2 [42 U.S.C. Section
12704].
(3) "Control" means having the power to manage,
direct, superintend, restrict, regulate, govern, or oversee. An
organization is considered to control a limited partnership if the
organization directly or through a wholly controlled subsidiary
controls 100 percent of the general partner interest. An
organization is considered to control a limited liability company
if the organization is the sole manager or managing member of the
company.
(4) "Low-income individual or family" means
"individuals and families of low income" as defined by Section
2306.004, Government Code.
SECTION 2. Section 11.182, Tax Code, is amended by adding
Subsections (a-1), (b-1), (b-2), and (b-3) and amending Subsections
(b), (e), (g), (h), and (i) to read as follows:
(a-1) An organization is considered to own property for
purposes of this section and the provisions of Section 2, Article
VIII, Texas Constitution, authorizing the legislature by general
law to exempt from taxation property owned by an institution
engaged primarily in public charitable functions, if the
organization has legal or equitable title to the property. By way
of example, an organization has equitable title to property if it
has a present right to compel legal title to the property to be
conveyed to it in accordance with law, such as by means of an option
to acquire the property. For purposes of eligibility for an
exemption under this section:
(1) property owned by a tax credit partnership or
limited liability company is considered to be owned by a community
housing development organization if the general partner of the tax
credit partnership or the manager of the limited liability company
is or is controlled by the community housing development
organization; and
(2) property owned by a single member limited
liability company is considered to be owned by the company's single
member.
(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) For purposes of determining whether an organization
has satisfied the requirements of Subsection (b)(2) in order to
qualify for an exemption under this section, an opinion included in
an audit of the organization prepared by a person who is licensed by
this state as a certified public accountant or a determination of
tax-exempt status under Section 501(c), Internal Revenue Code of
1986, issued by the United States Internal Revenue Service is prima
facie evidence of the facts stated in the opinion or determination.
(b-2) Notwithstanding Subsection (b), if the legal owner of
property is not an organization described by that subsection, the
legal owner is entitled to an exemption from taxation of property
under this section if the property otherwise qualifies for the
exemption and the legal owner is:
(1) an entity 100 percent of the interest in which is
owned by an organization that meets the requirements of Subsection
(b); or
(2) an entity controlled by an organization that meets
the requirements of Subsection (b) and the organization or the
legal owner initially filed an application for the exemption on or
after January 1, 2002, and on or before December 31, 2003.
(b-3) A reference in this section to an organization
includes an entity described by Subsection (b-2).
(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 if the department has
continuing jurisdiction and oversight over the bond financing used
to finance the project; 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.
(g) To receive an exemption under Subsection (b) or (f), an
organization must annually have an audit prepared by an independent
auditor. The audit must include a detailed report on the
organization's sources and uses of funds. A copy of the audit must
be delivered to the [Texas Department of Housing and Community
Affairs and to the] chief appraiser of the appraisal district in
which the property subject to the exemption is located.
(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.
(i) If any property owned by an organization receiving an
exemption under this section has been acquired or sold during the
preceding year, such organization shall file [by March 31 of the
following year] with the chief appraiser in the county in which the
relevant property is located, on a form promulgated by the
comptroller of public accounts, a list of such properties acquired
or sold during the preceding year. The form must be filed by April
30 of the year following the year of the sale or acquisition or on a
later date authorized in writing by the chief appraiser.
SECTION 3. Section 11.1825, Tax Code, is amended by
amending Subsections (a), (c), (d), (i), (j), (k), (l), (p), (t),
and (v) and adding Subsections (a-1), (a-2), and (b-1) to read as
follows:
(a) In this section, "control" means having the power to
manage, direct, superintend, restrict, regulate, govern, or
oversee. An organization is considered to control a limited
partnership if the organization directly or through a wholly
controlled subsidiary controls 100 percent of the general partner
interest. An organization is considered to control a limited
liability company if the organization is the sole manager or
managing member of the company.
(a-1) An organization is considered to own property for
purposes of this section and the provisions of Section 2, Article
VIII, Texas Constitution, authorizing the legislature by general
law to exempt from taxation property owned by an institution
engaged primarily in public charitable functions, if the
organization has legal or equitable title to the property. By way
of example, an organization has equitable title to property if it
has a present right to compel legal title to the property to be
conveyed to it in accordance with law, such as by means of an option
to acquire the property. For purposes of eligibility for an
exemption under this section:
(1) property owned by a tax credit partnership or
limited liability company is considered to be owned by an
organization if the general partner of the tax credit partnership
or the manager of the limited liability company is or is controlled
by the organization; and
(2) property owned by a single member limited
liability company is considered to be owned by the company's single
member.
(a-2) An organization is entitled to an exemption from
taxation of real property owned by the organization that the
organization constructs or rehabilitates and uses to provide
housing to individuals or families meeting the income eligibility
requirements of this section.
(b-1) For purposes of determining whether an organization
has satisfied the requirements of Subsection (b)(1)(B) in order to
qualify for an exemption under this section, an opinion included in
an audit of the organization prepared by a person who is licensed by
this state as a certified public accountant or a determination of
tax-exempt status under Section 501(c), Internal Revenue Code of
1986, issued by the United States Internal Revenue Service is prima
facie evidence of the facts stated in the opinion or determination.
(c) Notwithstanding Subsection (b), if the legal [an] owner
of real property [that] is not an organization described by that
subsection, the legal owner is entitled to an exemption from
taxation of property under this section if the property otherwise
qualifies for the exemption and the legal owner is:
(1) an entity 100 percent of the interest in which is
owned by [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 controlled by [the parent of which is] an
organization that meets the requirements of Subsection (b).
(d) If the legal owner of the property is an entity
described by Subsection (c)[, the entity must]:
(1) the legal owner must be organized under the laws of
this state[;] and
[(2)] have its principal place of business in this
state; and
(2) the organization that owns 100 percent of the
interest in or controls the legal owner as described by Subsection
(c) must have equitable title to the property.
(i) Property owned for the purpose of constructing or
rehabilitating a housing project on the property is exempt under
this section only if:
(1) the property is used to provide housing to
individuals or families described by Subsection (f); or
(2) the housing project is under active construction
or rehabilitation or other physical preparation.
(j) For purposes of Subsection (i)(2), a housing project is
under physical preparation if the organization has engaged in
architectural or engineering work, soil testing, land clearing
activities, or site improvement work necessary for the construction
or rehabilitation of the project or has conducted an environmental
or land use study relating to the construction or rehabilitation of
the project.
(k) An organization may not receive an exemption for
property owned for the purpose of constructing a housing project
[constructed by the organization] if the construction of the
project was completed before January 1, 2004.
(l) If the property is owned for the purpose of
rehabilitating a housing project on the property:
(1) the original construction of the housing project
must have been completed at least 10 years before the date the
organization began actual rehabilitation of the project;
(2) the person from whom the organization acquired the
project must have owned the project for at least five years, if the
organization is not the original owner of the project, unless the
organization acquired the project from a person that acquired the
project by foreclosing on the project or receiving a deed or other
instrument in lieu of foreclosure that conveyed the project to the
person;
(3) the organization must provide to the chief
appraiser and, if the project was financed with bonds, the issuer of
the bonds a written statement prepared by a certified public
accountant stating that the organization has spent on
rehabilitation costs at least the greater of $5,000 or the amount
required by the financial lender for each dwelling unit in the
project; and
(4) the organization must maintain a reserve fund for
replacements:
(A) in the amount required by the financial
lender; or
(B) if the financial lender does not require a
reserve fund for replacements, in an amount equal to $300 per unit
per year.
(p) If the organization acquires the property for the
purpose of constructing or rehabilitating a housing project on the
property, the organization must be renting or offering to rent the
applicable square footage of dwelling units in the property to
individuals or families described by Subsection (f) not later than
the third anniversary of the date the organization acquires the
property. For purposes of this subsection, if the organization
acquired the property after January 31 of a year, the organization
is considered to have acquired the property on January 1 of the
following year.
(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 owns 100 percent of the
interest in or controls the [general partner interest of or is 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).
(v) Notwithstanding any other provision of this section, an
organization may not receive an exemption from taxation of property
described by Subsection (f)(1) by a taxing unit any part of which is
located in a county with a population of at least 1.4 million unless
the exemption is approved by the governing body of the taxing unit
in the manner provided by law for official action. Approval of the
exemption is required only for the tax year for which the initial
application for the exemption is filed.
SECTION 4. This Act applies only to ad valorem taxes imposed
for a tax year beginning on or after the effective date of this Act.
SECTION 5. This Act takes effect January 1, 2012.