89R249 LHC-D
By: Goodwin H.B. No. 203
A BILL TO BE ENTITLED
AN ACT
relating to a limitation on increases in the appraised value for ad
valorem tax purposes of certain leased residential real property.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1.12(d), Tax Code, as effective until
January 1, 2027, is amended to read as follows:
(d) For purposes of this section, the appraisal ratio of
property to which Section 23.23, [or] 23.231, or 23.232 applies is
the ratio of the property's market value as determined by the
appraisal district or appraisal review board, as applicable, to the
market value of the property according to law. The appraisal ratio
is not calculated according to the appraised value of the property
as limited by Section 23.23, [or] 23.231, or 23.232.
SECTION 2. Section 1.12(d), Tax Code, as effective January
1, 2027, is amended to read as follows:
(d) For purposes of this section, the appraisal ratio of
property [a homestead] to which Section 23.23 or 23.232 applies is
the ratio of the property's market value as determined by the
appraisal district or appraisal review board, as applicable, to the
market value of the property according to law. The appraisal ratio
is not calculated according to the appraised value of the property
as limited by Section 23.23 or 23.232.
SECTION 3. Subchapter B, Chapter 23, Tax Code, is amended by
adding Section 23.232 to read as follows:
Sec. 23.232. LIMITATION ON APPRAISED VALUE OF CERTAIN
LEASED RESIDENTIAL REAL PROPERTY. (a) In this section:
(1) "Fair market rent" means the most recent
applicable fair market rent established by the United States
Department of Housing and Urban Development for the zip code in
which the property is located.
(2) "New improvement" means an improvement to real
property described by Subsection (b) made after the most recent
appraisal of the property that increases the market value of the
property and the value of which is not included in the appraised
value of the property for the preceding tax year. The term does not
include repairs to or ordinary maintenance of an existing structure
or the grounds or another feature of the property.
(b) This section applies only to real property that:
(1) is a single-family residential property leased to
a lessee and used by the lessee as a primary residence; and
(2) is leased to a lessee for a rent that does not
exceed the fair market rent.
(c) This section does not apply to property appraised under
Subchapter C, D, E, F, G, or H.
(d) Notwithstanding the requirements of Section 25.18 and
regardless of whether the appraisal office has appraised the
property and determined the market value of the property for the tax
year, an appraisal office may increase the appraised value of real
property described by Subsection (b) for a tax year to an amount not
to exceed the lesser of:
(1) the market value of the property for the most
recent tax year that the market value was determined by the
appraisal office; or
(2) the sum of:
(A) 10 percent of the appraised value of the
property for the preceding tax year;
(B) the appraised value of the property for the
preceding tax year; and
(C) the market value of all new improvements to
the property.
(e) If only part of a parcel of real property qualifies for
the limitation provided by Subsection (d), the limitation applies
only to that part of the parcel.
(f) When appraising real property described by Subsection
(b), the chief appraiser shall:
(1) appraise the property at its market value; and
(2) include in the appraisal records both the market
value of the property and the amount computed under Subsection
(d)(2).
(g) The limitation provided by Subsection (d) takes effect
as to a parcel or part of a parcel of real property described by
Subsection (b) on January 1 of the tax year following the first tax
year in which the owner of the property leases the property for an
amount described by Subsection (b). Except as provided by
Subsection (h), the limitation expires on January 1 of the tax year
following the first tax year in which the owner of the property
ceases to lease the property for an amount described by Subsection
(b).
(h) Notwithstanding Subsections (a)(2) and (d) and except
as provided by Subdivision (2) of this subsection, an improvement
to property that would otherwise constitute a new improvement is
not treated as a new improvement if the improvement is a replacement
structure for a structure that was rendered unusable by a casualty
or by wind or water damage. For purposes of appraising the property
under Subsection (d) in the tax year in which the structure would
have constituted a new improvement:
(1) the appraised value the property would have had in
the preceding tax year if the casualty or damage had not occurred is
considered to be the appraised value of the property for that year,
regardless of whether that appraised value exceeds the actual
appraised value of the property for that year as limited by
Subsection (d); and
(2) the replacement structure is considered to be a
new improvement only if:
(A) the square footage of the replacement
structure exceeds that of the replaced structure as that structure
existed before the casualty or damage occurred; or
(B) the exterior of the replacement structure is
of higher quality construction and composition than that of the
replaced structure.
(i) In this subsection, "disaster recovery program" means
the disaster recovery program administered by the General Land
Office or by a political subdivision of this state that is funded
with community development block grant disaster recovery money
authorized by federal law. Notwithstanding Subsection (h)(2), and
only to the extent necessary to satisfy the requirements of the
disaster recovery program, a replacement structure described by
that subdivision is not considered to be a new improvement if to
satisfy the requirements of the disaster recovery program it was
necessary that:
(1) the square footage of the replacement structure
exceed that of the replaced structure as that structure existed
before the casualty or damage occurred; or
(2) the exterior of the replacement structure be of
higher quality construction and composition than that of the
replaced structure.
(j) To receive a limitation under Subsection (d), a person
claiming the limitation must annually apply for the limitation by
filing an application with the chief appraiser of the appraisal
district. The chief appraiser shall accept and approve or deny an
application. For property appraised by more than one appraisal
district, a separate application must be filed in each appraisal
district to receive the limitation in that district.
(k) The comptroller, in prescribing the contents of the
application form for a limitation under Subsection (d), shall
ensure that the form requires an applicant to provide the
information necessary to determine the validity of the limitation
claim. The form must require an applicant to provide the
applicant's name and driver's license number, personal
identification certificate number, social security number, or
taxpayer identification number. The comptroller shall include on
the form a notice of the penalties prescribed by Section 37.10,
Penal Code, for making or filing an application containing a false
statement and shall include on the form a statement explaining that
the application must be made annually. In this subsection,
"driver's license" and "personal identification certificate" have
the meanings assigned by Section 11.43(f).
(l) To receive a limitation under Subsection (d) for a tax
year, a person must apply for the limitation not later than May 1 of
that year. Except as provided by Subsection (m), if the person
fails to timely file a completed application, the person may not
receive the limitation for that year.
(m) The chief appraiser shall accept and approve or deny an
application for a limitation under Subsection (d) for a tax year
after the deadline for filing the application has passed if the
application is filed not later than one year after the delinquency
date for the taxes on the property for that tax year. If a late
application is approved after approval of the appraisal records by
the appraisal review board, the chief appraiser shall notify the
collector for each taxing unit in which the property is located. If
the tax has not been paid, the collector shall deduct from the
person's tax bill the difference between the taxes that would have
been due had the property not qualified for the limitation and the
taxes due after taking the limitation into account. If the tax has
been paid, the collector shall refund the difference.
(n) This subsection expires January 1, 2030. For purposes
of applying the limitation provided by Subsection (d) in the first
tax year after the 2025 tax year in which the property is appraised
for taxation:
(1) the property is considered to have been appraised
for taxation in the 2025 tax year at a market value equal to the
appraised value of the property for that tax year; and
(2) a person who acquired real property described by
Subsection (b) in a tax year before the 2025 tax year is considered
to have acquired the property on January 1, 2025.
SECTION 4. Section 41.41(a), Tax Code, as effective until
January 1, 2027, is amended to read as follows:
(a) A property owner is entitled to protest before the
appraisal review board the following actions:
(1) determination of the appraised value of the
owner's property or, in the case of land appraised as provided by
Subchapter C, D, E, or H, Chapter 23, determination of its appraised
or market value;
(2) unequal appraisal of the owner's property;
(3) inclusion of the owner's property on the appraisal
records;
(4) denial to the property owner in whole or in part of
a partial exemption;
(4-a) determination that the owner's property does not
qualify for the circuit breaker limitation on appraised value
provided by Section 23.231;
(4-b) determination that the owner's property does not
qualify for the limitation on appraised value provided by Section
23.232;
(5) determination that the owner's land does not
qualify for appraisal as provided by Subchapter C, D, E, or H,
Chapter 23;
(6) identification of the taxing units in which the
owner's property is taxable in the case of the appraisal district's
appraisal roll;
(7) determination that the property owner is the owner
of property;
(8) a determination that a change in use of land
appraised under Subchapter C, D, E, or H, Chapter 23, has occurred;
or
(9) any other action of the chief appraiser, appraisal
district, or appraisal review board that applies to and adversely
affects the property owner.
SECTION 5. Section 41.41(a), Tax Code, as effective January
1, 2027, is amended to read as follows:
(a) A property owner is entitled to protest before the
appraisal review board the following actions:
(1) determination of the appraised value of the
owner's property or, in the case of land appraised as provided by
Subchapter C, D, E, or H, Chapter 23, determination of its appraised
or market value;
(2) unequal appraisal of the owner's property;
(3) inclusion of the owner's property on the appraisal
records;
(4) denial to the property owner in whole or in part of
a partial exemption;
(4-a) determination that the owner's property does not
qualify for the limitation on appraised value provided by Section
23.232;
(5) determination that the owner's land does not
qualify for appraisal as provided by Subchapter C, D, E, or H,
Chapter 23;
(6) identification of the taxing units in which the
owner's property is taxable in the case of the appraisal district's
appraisal roll;
(7) determination that the property owner is the owner
of property;
(8) a determination that a change in use of land
appraised under Subchapter C, D, E, or H, Chapter 23, has occurred;
or
(9) any other action of the chief appraiser, appraisal
district, or appraisal review board that applies to and adversely
affects the property owner.
SECTION 6. Section 42.26(d), Tax Code, as effective until
January 1, 2027, is amended to read as follows:
(d) For purposes of this section, the value of the property
subject to the suit and the value of a comparable property or sample
property that is used for comparison must be the market value
determined by the appraisal district when the property is subject
to the limitation on appraised value imposed by Section 23.23, [or]
23.231, or 23.232.
SECTION 7. Section 42.26(d), Tax Code, as effective January
1, 2027, is amended to read as follows:
(d) For purposes of this section, the value of the property
subject to the suit and the value of a comparable property or sample
property that is used for comparison must be the market value
determined by the appraisal district when the property is [a
residence homestead] subject to the limitation on appraised value
imposed by Section 23.23 or 23.232.
SECTION 8. Sections 403.302(d) and (i), Government Code, as
effective until January 1, 2027, are amended to read as follows:
(d) For the purposes of this section, "taxable value" means
the market value of all taxable property less:
(1) the total dollar amount of any residence homestead
exemptions lawfully granted under Section 11.13(b) or (c), Tax
Code, in the year that is the subject of the study for each school
district;
(2) one-half of the total dollar amount of any
residence homestead exemptions granted under Section 11.13(n), Tax
Code, in the year that is the subject of the study for each school
district;
(3) the total dollar amount of any exemptions granted
before May 31, 1993, within a reinvestment zone under agreements
authorized by Chapter 312, Tax Code;
(4) subject to Subsection (e), the total dollar amount
of any captured appraised value of property that:
(A) is within a reinvestment zone created on or
before May 31, 1999, or is proposed to be included within the
boundaries of a reinvestment zone as the boundaries of the zone and
the proposed portion of tax increment paid into the tax increment
fund by a school district are described in a written notification
provided by the municipality or the board of directors of the zone
to the governing bodies of the other taxing units in the manner
provided by former Section 311.003(e), Tax Code, before May 31,
1999, and within the boundaries of the zone as those boundaries
existed on September 1, 1999, including subsequent improvements to
the property regardless of when made;
(B) generates taxes paid into a tax increment
fund created under Chapter 311, Tax Code, under a reinvestment zone
financing plan approved under Section 311.011(d), Tax Code, on or
before September 1, 1999; and
(C) is eligible for tax increment financing under
Chapter 311, Tax Code;
(5) the total dollar amount of any captured appraised
value of property that:
(A) is within a reinvestment zone:
(i) created on or before December 31, 2008,
by a municipality with a population of less than 18,000; and
(ii) the project plan for which includes
the alteration, remodeling, repair, or reconstruction of a
structure that is included on the National Register of Historic
Places and requires that a portion of the tax increment of the zone
be used for the improvement or construction of related facilities
or for affordable housing;
(B) generates school district taxes that are paid
into a tax increment fund created under Chapter 311, Tax Code; and
(C) is eligible for tax increment financing under
Chapter 311, Tax Code;
(6) the total dollar amount of any exemptions granted
under Section 11.251 or 11.253, Tax Code;
(7) the difference between the comptroller's estimate
of the market value and the productivity value of land that
qualifies for appraisal on the basis of its productive capacity,
except that the productivity value estimated by the comptroller may
not exceed the fair market value of the land;
(8) the portion of the appraised value of residence
homesteads of individuals who receive a tax limitation under
Section 11.26, Tax Code, on which school district taxes are not
imposed in the year that is the subject of the study, calculated as
if the residence homesteads were appraised at the full value
required by law;
(9) a portion of the market value of property not
otherwise fully taxable by the district at market value because of
action required by statute or the constitution of this state, other
than Section 11.311, Tax Code, that, if the tax rate adopted by the
district is applied to it, produces an amount equal to the
difference between the tax that the district would have imposed on
the property if the property were fully taxable at market value and
the tax that the district is actually authorized to impose on the
property, if this subsection does not otherwise require that
portion to be deducted;
(10) the market value of all tangible personal
property, other than manufactured homes, owned by a family or
individual and not held or used for the production of income;
(11) the appraised value of property the collection of
delinquent taxes on which is deferred under Section 33.06, Tax
Code;
(12) the portion of the appraised value of property
the collection of delinquent taxes on which is deferred under
Section 33.065, Tax Code;
(13) the amount by which the market value of property
to which Section 23.23, [or] 23.231, or 23.232, Tax Code, applies
exceeds the appraised value of that property as calculated under
Section 23.23, [or] 23.231, or 23.232, Tax Code, as applicable; and
(14) the total dollar amount of any exemptions granted
under Section 11.35, Tax Code.
(i) If the comptroller determines in the study that the
market value of property in a school district as determined by the
appraisal district that appraises property for the school district,
less the total of the amounts and values listed in Subsection (d) as
determined by that appraisal district, is valid, the comptroller,
in determining the taxable value of property in the school district
under Subsection (d), shall for purposes of Subsection (d)(13)
subtract from the market value as determined by the appraisal
district of properties to which Section 23.23, [or] 23.231, or
23.232, Tax Code, applies the amount by which that amount exceeds
the appraised value of those properties as calculated by the
appraisal district under Section 23.23, [or] 23.231, or 23.232, Tax
Code, as applicable. If the comptroller determines in the study
that the market value of property in a school district as determined
by the appraisal district that appraises property for the school
district, less the total of the amounts and values listed in
Subsection (d) as determined by that appraisal district, is not
valid, the comptroller, in determining the taxable value of
property in the school district under Subsection (d), shall for
purposes of Subsection (d)(13) subtract from the market value as
estimated by the comptroller of properties to which Section 23.23,
[or] 23.231, or 23.232, Tax Code, applies the amount by which that
amount exceeds the appraised value of those properties as
calculated by the appraisal district under Section 23.23, [or]
23.231, or 23.232, Tax Code, as applicable.
SECTION 9. Sections 403.302(d) and (i), Government Code, as
effective January 1, 2027, are amended to read as follows:
(d) For the purposes of this section, "taxable value" means
the market value of all taxable property less:
(1) the total dollar amount of any residence homestead
exemptions lawfully granted under Section 11.13(b) or (c), Tax
Code, in the year that is the subject of the study for each school
district;
(2) one-half of the total dollar amount of any
residence homestead exemptions granted under Section 11.13(n), Tax
Code, in the year that is the subject of the study for each school
district;
(3) the total dollar amount of any exemptions granted
before May 31, 1993, within a reinvestment zone under agreements
authorized by Chapter 312, Tax Code;
(4) subject to Subsection (e), the total dollar amount
of any captured appraised value of property that:
(A) is within a reinvestment zone created on or
before May 31, 1999, or is proposed to be included within the
boundaries of a reinvestment zone as the boundaries of the zone and
the proposed portion of tax increment paid into the tax increment
fund by a school district are described in a written notification
provided by the municipality or the board of directors of the zone
to the governing bodies of the other taxing units in the manner
provided by former Section 311.003(e), Tax Code, before May 31,
1999, and within the boundaries of the zone as those boundaries
existed on September 1, 1999, including subsequent improvements to
the property regardless of when made;
(B) generates taxes paid into a tax increment
fund created under Chapter 311, Tax Code, under a reinvestment zone
financing plan approved under Section 311.011(d), Tax Code, on or
before September 1, 1999; and
(C) is eligible for tax increment financing under
Chapter 311, Tax Code;
(5) the total dollar amount of any captured appraised
value of property that:
(A) is within a reinvestment zone:
(i) created on or before December 31, 2008,
by a municipality with a population of less than 18,000; and
(ii) the project plan for which includes
the alteration, remodeling, repair, or reconstruction of a
structure that is included on the National Register of Historic
Places and requires that a portion of the tax increment of the zone
be used for the improvement or construction of related facilities
or for affordable housing;
(B) generates school district taxes that are paid
into a tax increment fund created under Chapter 311, Tax Code; and
(C) is eligible for tax increment financing under
Chapter 311, Tax Code;
(6) the total dollar amount of any exemptions granted
under Section 11.251 or 11.253, Tax Code;
(7) the difference between the comptroller's estimate
of the market value and the productivity value of land that
qualifies for appraisal on the basis of its productive capacity,
except that the productivity value estimated by the comptroller may
not exceed the fair market value of the land;
(8) the portion of the appraised value of residence
homesteads of individuals who receive a tax limitation under
Section 11.26, Tax Code, on which school district taxes are not
imposed in the year that is the subject of the study, calculated as
if the residence homesteads were appraised at the full value
required by law;
(9) a portion of the market value of property not
otherwise fully taxable by the district at market value because of
action required by statute or the constitution of this state, other
than Section 11.311, Tax Code, that, if the tax rate adopted by the
district is applied to it, produces an amount equal to the
difference between the tax that the district would have imposed on
the property if the property were fully taxable at market value and
the tax that the district is actually authorized to impose on the
property, if this subsection does not otherwise require that
portion to be deducted;
(10) the market value of all tangible personal
property, other than manufactured homes, owned by a family or
individual and not held or used for the production of income;
(11) the appraised value of property the collection of
delinquent taxes on which is deferred under Section 33.06, Tax
Code;
(12) the portion of the appraised value of property
the collection of delinquent taxes on which is deferred under
Section 33.065, Tax Code;
(13) the amount by which the market value of property
[a residence homestead] to which Section 23.23 or 23.232, Tax Code,
applies exceeds the appraised value of that property as calculated
under Section 23.23 or 23.232, Tax Code, as applicable [that
section]; and
(14) the total dollar amount of any exemptions granted
under Section 11.35, Tax Code.
(i) If the comptroller determines in the study that the
market value of property in a school district as determined by the
appraisal district that appraises property for the school district,
less the total of the amounts and values listed in Subsection (d) as
determined by that appraisal district, is valid, the comptroller,
in determining the taxable value of property in the school district
under Subsection (d), shall for purposes of Subsection (d)(13)
subtract from the market value as determined by the appraisal
district of properties [residence homesteads] to which Section
23.23 or 23.232, Tax Code, applies the amount by which that amount
exceeds the appraised value of those properties as calculated by
the appraisal district under Section 23.23 or 23.232, Tax Code, as
applicable. If the comptroller determines in the study that the
market value of property in a school district as determined by the
appraisal district that appraises property for the school district,
less the total of the amounts and values listed in Subsection (d) as
determined by that appraisal district, is not valid, the
comptroller, in determining the taxable value of property in the
school district under Subsection (d), shall for purposes of
Subsection (d)(13) subtract from the market value as estimated by
the comptroller of properties [residence homesteads] to which
Section 23.23 or 23.232, Tax Code, applies the amount by which that
amount exceeds the appraised value of those properties as
calculated by the appraisal district under Section 23.23 or 23.232,
Tax Code, as applicable.
SECTION 10. This Act applies only to the appraisal of
residential real property for ad valorem tax purposes for a tax year
that begins on or after the effective date of this Act.
SECTION 11. This Act takes effect January 1, 2026, but only
if the constitutional amendment proposed by the 89th Legislature,
Regular Session, 2025, to authorize the legislature to provide for
a limitation on the maximum appraised value for ad valorem tax
purposes of certain leased residential real property is approved by
the voters. If that amendment is not approved by the voters, this
Act has no effect.