Texas House Bill HB177

Texas 2025 - 89th 2nd C.S.

• Filed: 8/15/25

Caption

Relating to the calculation of certain ad valorem tax rates of a taxing unit and the manner in which a proposed ad valorem tax rate that exceeds the voter-approval tax rate is approved; making conforming changes.

Impact

If enacted, HB 177 would significantly alter how property tax rates are calculated and approved. It establishes new formulas for calculating the no-new-revenue tax rate and the voter-approval tax rate, which could lead to a reduction in tax increases and provide more certainty in local budget planning. The changes are set to take effect on January 1, 2026, and are poised to influence the revenue landscape for local government and taxing units across Texas.

Summary

House Bill 177 focuses on the calculation of ad valorem tax rates for certain taxing units including junior college and hospital districts. It aims to streamline the process of determining voter-approval tax rates, particularly for tax units whose maintenance and operations tax rate proposal is below a specified threshold of 2.5 cents per $100 taxable value. The legislation includes changes that would categorize the foregone revenue amount for eligible taxing units as zero for specific years, thereby easing immediate fiscal pressures on these entities.

Contention

While proponents of the bill argue that it simplifies the taxation process and offers much-needed relief to local governments, there are concerns about potential drawbacks. Critics argue that the adjustments could limit the ability of taxing units to recover lost revenues, effectively hindering their ability to fund vital services such as education and healthcare. Moreover, the criteria under which the foregone revenue is calculated have raised questions regarding their fairness and efficacy in addressing the real financial needs of these districts.

Texas Constitutional Statutes Affected

Tax Code

• Chapter 26. Assessment
  • Section: New Section
  • Section: 04
  • Section: 063
  • Section: 07
  • Section: 075

Water Code

• Chapter 49. Provisions Applicable To All Districts
  • Section: 23601
  • Section: 23602
  • Section: 23603
  • Section: 057