89R9609 JAM-D
By: Gates H.B. No. 4307
A BILL TO BE ENTITLED
AN ACT
relating to multifamily residential developments financed, owned,
or operated by public facility corporations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 303.0421(b), Local Government Code, is
amended to read as follows:
(b) Notwithstanding Section 303.042(c) and subject to
Subsections (c) and (d) of this section, an exemption under Section
303.042(c) for a multifamily residential development to which
Subsection (a) applies is available only if:
(1) the requirements under Sections [Section]
303.0425 and 303.0426 are met;
(2) at least:
(A) 10 percent of the units in the multifamily
residential development are reserved for occupancy as lower income
housing units, as defined under Section 303.0425; and
(B) 40 percent of the units in the multifamily
residential development are reserved for occupancy as moderate
income housing units, as defined under Section 303.0425;
(3) the corporation delivers to the presiding officer
of the governing body of each taxing unit in which the development
is to be located written notice of the development, at least 30 days
before the date:
(A) the corporation takes action to approve a new
multifamily residential development or the acquisition of an
occupied multifamily residential development; and
(B) of any public hearing required to be held
under this section;
(4) if a majority of the members of the board are not
elected officials, the development is approved by the governing
body of the municipality in which the development is located or, if
the development is not located in a municipality, the county in
which the development is located;
(5) for an occupied multifamily residential
development that is acquired by a corporation and not otherwise
subject to a land use restriction agreement under Section 2306.185,
Government Code:
(A) not less than 15 percent of the total gross
cost of the existing development, as shown in the settlement
statement, is expended on rehabilitating, renovating,
reconstructing, or repairing the development, with initial
expenditures and construction activities:
(i) beginning not later than the first
anniversary of the date of the acquisition; and
(ii) finishing not later than the third
anniversary of the date of the acquisition; or
(B) at least 25 percent of the units are reserved
for occupancy as lower income housing units, as defined under
Section 303.0425, and the development is approved by the governing
body of the municipality in which the development is located or, if
the development is not located in a municipality, the county in
which the development is located; and
(6) not less than 30 days before final approval of the
development:
(A) the corporation or corporation's sponsor
conducts, or obtains from a professional entity that has experience
underwriting affordable multifamily residential developments and
does not have a financial interest in the applicable development,
developer, or public facility user, an underwriting assessment of
the proposed development that allows the corporation to make a good
faith determination that:
(i) for an occupied multifamily residential
development acquired by a corporation, the total annual amount of
rent reduction on the income-restricted units provided at the
development will be not less than 60 percent of the estimated amount
of the annual ad valorem taxes that would be imposed on the property
without an exemption under Section 303.042(c) for the second,
third, and fourth years after the date of acquisition by the
corporation; and
(ii) for a newly constructed multifamily
residential development, the development would not be feasible
without the participation of the corporation; and
(B) the corporation publishes on its Internet
website a copy of the underwriting assessment described by
Paragraph (A).
SECTION 2. The heading to Section 303.0426, Local
Government Code, is amended to read as follows:
Sec. 303.0426. AUDIT REQUIREMENTS APPLICABLE TO ALL [FOR
CERTAIN] MULTIFAMILY RESIDENTIAL DEVELOPMENTS.
SECTION 3. Sections 303.0426(b), (c), (d), (e), (f), and
(g), Local Government Code, are amended to read as follows:
(b) A public facility user of any [a] multifamily
residential development claiming an exemption under Section
303.042(c) [and to which Section 303.0421 applies] must annually
submit to the department and the chief appraiser of the appraisal
district in which the development is located an audit report for a
compliance audit, prepared at the expense of the public facility
user and conducted by an independent auditor or compliance expert
with an established history of providing similar audits on housing
compliance matters, to:
(1) determine whether the public facility user is in
compliance with Sections 303.0421 and 303.0425, if applicable; and
(2) identify the difference in the rent charged for
income-restricted residential units and the estimated maximum
market rents that could be charged for those units without the rent
or income restrictions.
(c) Not later than the 60th day after the date of receipt of
the audit conducted under Subsection (b), the department shall
examine the audit report and publish a report summarizing the
findings of the audit. The report must:
(1) be made available on the department's Internet
website;
(2) be issued to a public facility user that has an
interest in a development that is the subject of an audit, the
comptroller, the applicable corporation, the governing body of the
corporation's sponsor, and, if the corporation's sponsor is a
housing authority, the elected officials who appointed the housing
authority's governing board; and
(3) describe in detail the nature of any failure to
comply with the requirements in Sections 303.0421 and 303.0425, if
applicable.
(d) If an audit report submitted under Subsection (b)
indicates noncompliance with Sections 303.0421 and 303.0425 as
described by Subsection (c)(3), a public facility user:
(1) must be given:
(A) written notice from the department or
appropriate appraisal district that:
(i) is provided not later than the 45th day
after the date a report has been submitted under Subsection (b);
(ii) specifies the reasons for
noncompliance;
(iii) contains at least one option for a
corrective action to resolve the noncompliance; and
(iv) informs the public facility user that
failure to resolve the noncompliance will result in the loss of an
exemption under Section 303.042(c);
(B) 60 days after the date notice is received
under this subdivision, to resolve the matter that is the subject of
the notice; and
(C) if a matter that is the subject of a notice
provided under this subdivision is not resolved to the satisfaction
of the department and the appropriate appraisal district during the
period provided by Paragraph (B), a second notice that informs the
public facility user of the loss of the exemption under Section
303.042(c) due to noncompliance with Sections 303.0421 and
303.0425; and
(2) is considered to be in compliance with Sections
303.0421 and 303.0425 if notice under Subdivision (1)(A) is not
provided as specified by Subparagraph (i) of that paragraph.
(e) Except as provided by Section 303.0421(d), an [An]
exemption under Section 303.042(c) does not apply for a tax year in
which the department determines that a multifamily residential
development that is financed, owned, or operated by a public
facility corporation created under this chapter is not in
compliance with the audit report requirements of this section or,
as [determined by the department] based on the [an] audit conducted
under Subsection (b), [to] not [be] in compliance with the
requirements of Section 303.0421 or 303.0425, if applicable.
(f) Notwithstanding Subsection (g), the [The] initial audit
report required by Subsection (b) for a multifamily residential
development to which Section 303.0421 applies is due not later than
June 1 of the year following the first anniversary of:
(1) the date of acquisition for an occupied
multifamily residential development that is acquired by a
corporation; or
(2) the date a new multifamily residential development
first becomes occupied by one or more tenants.
(g) An audit report required by this section is [Subsequent
audit reports following the issuance of the initial audit report
under Subsection (f) are] due not later than June 1 of each year.
SECTION 4. Subchapter B, Chapter 303, Local Government
Code, is amended by adding Section 303.0427 to read as follows:
Sec. 303.0427. ADDITIONAL REQUIREMENT FOR BENEFICIAL TAX
TREATMENT APPLICABLE TO ALL MULTIFAMILY RESIDENTIAL DEVELOPMENTS.
(a) In this section, "public facility user" has the meaning
assigned by Section 303.0425.
(b) A public facility user of one or more multifamily
residential developments claiming an exemption under Section
303.042(c) must first submit to the Texas Department of Housing and
Community Affairs and to the county tax assessor-collector for each
appraisal district in which the exemption is sought a one-time
exemption application on a form promulgated by the comptroller.
SECTION 5. (a) Notwithstanding Section 10(d)(1), Chapter
1169 (H.B. 2071), Acts of the 88th Legislature, Regular Session,
2023, Section 303.0426, Local Government Code, as amended by this
Act, applies to all multifamily residential developments claiming
an exemption under Section 303.042(c), Local Government Code,
regardless of when the developments were approved or acquired and
regardless of whether Sections 303.0421 and 303.0425, Local
Government Code, apply to those developments.
(b) Section 303.0427, Local Government Code, as added by
this Act, applies to all multifamily residential developments
claiming an exemption under Section 303.042(c), Local Government
Code, regardless of when the developments were approved or acquired
and regardless of whether Sections 303.0421 and 303.0425, Local
Government Code, apply to those developments.
SECTION 6. This Act takes effect September 1, 2025.