88R742 RDS-D     By: Bailes H.B. No. 665       A BILL TO BE ENTITLED   AN ACT   relating to a limitation on increases in the appraised value of   commercial real property for ad valorem tax purposes.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 1.12(d), Tax Code, is amended to read as   follows:          (d)  For purposes of this section, the appraisal ratio of a   homestead to which Section 23.23 applies or of commercial real   property to which Section 23.231 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.          SECTION 2.  Subchapter B, Chapter 23, Tax Code, is amended by   adding Section 23.231 to read as follows:          Sec. 23.231.  LIMITATION ON APPRAISED VALUE OF COMMERCIAL   REAL PROPERTY. (a) In this section:                (1)  "Commercial real property" means real property   zoned or otherwise authorized for and actually used for a purpose   other than single-family use, multifamily use, heavy industrial   use, or use as a quarry.                (2)  "New improvement" means an improvement to   commercial real property 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 does not apply to property appraised under   Subchapter C, D, E, F, G, or H.          (c)  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 a   parcel of commercial real property 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)  3.5 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.          (d)  When appraising a parcel of commercial real property,   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   (c)(2).          (e)  The limitation provided by Subsection (c) takes effect   as to a parcel of commercial real property on January 1 of the tax   year following the first tax year in which the owner owns the   property on January 1 and in which the property meets the definition   of commercial real property.  The limitation expires on January 1 of   the tax year following the first tax year in which the owner of the   property ceases to own the property or the property no longer meets   the definition of commercial real property.          (f)  Notwithstanding Subsections (a)(2) and (c) 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 (c) 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 (c); 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.          (g)  In this subsection, "disaster recovery program" means a   disaster recovery program funded with community development block   grant disaster recovery money authorized by federal law.     Notwithstanding Subsection (f)(2), and only to the extent necessary   to satisfy the requirements of a 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.          SECTION 3.  Sections 25.19(b) and (g), Tax Code, are amended   to read as follows:          (b)  The chief appraiser shall separate real from personal   property and include in the notice for each:                (1)  a list of the taxing units in which the property is   taxable;                (2)  the appraised value of the property in the   preceding year;                (3)  the taxable value of the property in the preceding   year for each taxing unit taxing the property;                (4)  the appraised value of the property for the   current year, the kind and amount of each exemption and partial   exemption, if any, approved for the property for the current year   and for the preceding year, and, if an exemption or partial   exemption that was approved for the preceding year was canceled or   reduced for the current year, the amount of the exemption or partial   exemption canceled or reduced;                (4-a) a statement of whether the property qualifies for   the limitation on appraised value provided by Section 23.231;                (5)  in italic typeface, the following statement: "The   Texas Legislature does not set the amount of your local taxes. Your   property tax burden is decided by your locally elected officials,   and all inquiries concerning your taxes should be directed to those   officials";                (6)  a detailed explanation of the time and procedure   for protesting the value;                (7)  the date and place the appraisal review board will   begin hearing protests;                (8)  an explanation of the availability and purpose of   an informal conference with the appraisal office before a hearing   on a protest; and                (9)  a brief explanation that the governing body of   each taxing unit decides whether or not taxes on the property will   increase and the appraisal district only determines the value of   the property.          (g)  By April 1 or as soon thereafter as practicable if the   property is a single-family residence that qualifies for an   exemption under Section 11.13, or by May 1 or as soon thereafter as   practicable in connection with any other property, the chief   appraiser shall deliver a written notice to the owner of each   property not included in a notice required to be delivered under   Subsection (a), if the property was reappraised in the current tax   year, if the ownership of the property changed during the preceding   year, or if the property owner or the agent of a property owner   authorized under Section 1.111 makes a written request for the   notice.  The chief appraiser shall separate real from personal   property and include in the notice for each property:                (1)  the appraised value of the property in the   preceding year;                (2)  the appraised value of the property for the   current year and the kind of each partial exemption, if any,   approved for the current year;                (2-a) a statement of whether the property qualifies for   the limitation on appraised value provided by Section 23.231;                (3)  a detailed explanation of the time and procedure   for protesting the value; and                (4)  the date and place the appraisal review board will   begin hearing protests.          SECTION 4.  Section 41.41(a), Tax Code, 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   23.231;                (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 42.26(d), Tax Code, 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 23.231.          SECTION 6.  Sections 403.302(d) and (i), Government Code,   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 23.231, Tax Code,   applies exceeds the appraised value of that property as calculated   under Section 23.23 or 23.231, 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 23.231, 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, 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 23.231, 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,   Tax Code, as applicable.          SECTION 7.  This Act applies only to the appraisal of   commercial real property for ad valorem tax purposes for a tax year   that begins on or after the effective date of this Act.          SECTION 8.  This Act takes effect January 1, 2024, but only   if the constitutional amendment proposed by the 88th Legislature,   Regular Session, 2023, to authorize the legislature to limit the   maximum appraised value of commercial real property for ad valorem   tax purposes to 103.5 percent or more of the appraised value of the   property for the preceding tax year is approved by the voters. If   that amendment is not approved by the voters, this Act has no   effect.