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July 1999

Regular Session
76th Texas Legislature Passes 64 Property Tax and Related Bills

The 76th Texas Legislature passed 64 property tax bills that refine the property tax process. These bills address areas of property tax administration, exemptions, appraisal, protests, tax rate adoption, tax collection, and other related areas.

These 64 bills went to Governor George W. Bush for his approval or veto by June 20. The Governor signed all the bills into law. In comparison, 63 property tax bills passed in the 1997 regular legislative session, with one bill being vetoed.

The August issue of STATEMENT will include an insert that will explain each legislative change by Property Tax Code section and changes in related laws for administration, such as open meetings, public records, and other areas.

New legislation also will be addressed at the Comptroller's regional seminars in July and August. The seminar dates and locations are found on page 7 of this issue.

Property tax relief
Senate Bill (S.B.) 4 included school property tax relief to all property owners. By dedicating more state funds to local school districts, the local school boards may lower school property tax rates. The bill also changed how school districts calculate their property tax rollback rate (discussed later in this article under the section Tax rate adoption). (Effective September 1, 1999)
Appraisal district operations
S.B. 1209 provides that a chief appraiser and a property owner may agree in writing to provide any notices, renditions, application forms, and other communications by electronic format. The written agreement must specify the medium of communication, the type of communication covered, and the means for protecting the security of the communication. (Effective September 1, 1999)

House Bill (H.B.) 79 sets out the requirements for serving on the appraisal review board (ARB). In all appraisal districts, a person is ineligible to serve on the ARB if the person is a county appraisal district (CAD) director, a CAD officer or employee, a Comptroller employee, or a member of the governing body, officer, or employee of a taxing unit. In counties having a population of more than 100,000, a person is ineligible to serve on the ARB if the person has served for all or part of three previous terms or is a former director, officer, or employee of the CAD. A person also is ineligible to serve on the ARB in counties having a population of more than 100,000 until the fourth anniversary of the date the person ceased to serve as a member or officer of a taxing unit for which the appraisal district appraises property or if the person has ever appeared before the ARB for compensation. In counties having a population of 100,000 or less, a person is ineligible to be appointed to the ARB for a fourth term if the person has served for all or part of three consecutive terms. The person, however, may serve in some future year. (Effective June 19, 1999)

H.B. 834 repeals the Tax Code provision requiring the Galveston County CAD board of directors to be composed entirely of elected officials of taxing units. (Effective January 1, 2000)

H.B. 1037 addresses situations involving a property appraised by two or more appraisal districts. The bill continues the requirement that the chief appraisers, to the extent practicable, coordinate appraisal activities to encourage and facilitate the appraisal of overlapping properties by each district at the same value. The bill eliminates the requirement that other appraisal districts automatically approve a homestead exemption application approved by another appraisal district and that chief appraisers average differing appraisals if they fail to agree on the same value by May 1 of the tax year. (Effective January 1, 2000)

H.B. 3458 requires a county tax assessor-collector and a county treasurer, before they begin to perform the duties of office, to give bonds to the state and to the county conditioned on the faithful performance of their duties as assessor-collector and treasurer. Current law requires a bond within 20 days after receiving notice of election or appointment. (Effective August 30, 1999)

Exemptions
H.B. 541 exempts from property taxation property owned by an association providing assistance to ambulatory health care centers. The association must meet the criteria of Tax Code Section 11.18 (for charitable organizations). (Effective January 1, 2000)

H.B. 873 provides for a property tax exemption of incomplete improvements owned by certain non-profit organizations (charitable, youth associations, religious, water supply, and various miscellaneous organizations). The property (both real property and any incomplete improvement) would be exempt for up to three years while under "active construction or other physical preparation." (Effective May 18, 1999)

H.B. 1978 allows a charitable organization providing support to elderly persons or the handicapped to engage in other activities that support its charitable functions and still maintain its property tax exemption status on its property. The bill expands the definition of providing support to the elderly to also include providing recreational or social activities and facilities designed to address the special needs of elderly persons. (Effective January 1, 2000, if Texas voters pass the constitutional amendment proposed by House Joint Resolution (H.J.R.) 4 at November 2, 1999 general election)

H.J.R. 4 would amend the Texas Constitution to provide that charitable organizations no longer be "purely public charity," but "institutions engaged primarily in public charitable functions, which may conduct auxiliary activities to support those charitable functions," for purposes of qualifying for property tax exemptions. The wording on the November ballot proposition would read "institutions engaged primarily in public charitable functions." (Effective if passed by the Texas voters at the November 2, 1999 general election)

H.B. 2269 provides that a public television station may qualify for a property tax exemption for its property, with the qualification requirement of receiving grants from the Corporation for Public Broadcasting, 47 U.S.C. Section 396, "and its subsequent amendments" (new language). The bill also allows a charitable organization providing housing on a cooperative basis to students of an institution of higher education to receive a property tax exemption. (Effective January 1, 2000)

H.B. 2821 provides that two qualified charitable organizations may divide responsibilities that further either organization's charitable purposes and continue to maintain their charitable exemptions. (Effective September 1, 1999)

S.B. 435 changes the deadline for a taxing unit's governing body to adopt or repeal an optional percentage homestead exemption from May 1 to July 1. (Effective June 19, 1999)

S.B. 1254 provides for late filing of exemption applications, for up to five years after the tax year, for certain property tax exemptions -- including religious organizations, private schools, charitable organizations, and veterans' organizations. (Effective June 18, 1999)

Senate Joint Resolution (S.J.R.) 21 would amend the Texas Constitution to authorize the Legislature to exempt leased motor vehicles not held primarily for the production of income by lessees. (Effective if passed by the Texas voters November 2, 1999 general election and subsequent passage of implementing legislation by the Texas Legislature in another legislative session)

Property appraisal
H.B. 2574 requires CADs to allocate to Texas the portion of the market value of an aircraft used for business purposes within the state. Currently, CADs allocate only commercial aircraft values, using a formula based on the number of departures from Texas compared to departures from other states. (Effective June 19, 1999)

H.B. 958 provides for waiving the change of use rollback tax penalty for timberland, if the land is transferred to the state or a political subdivision of the state to be used for a public purpose. (Effective June 19, 1999)

H.B. 3033 states that, for purposes of the vehicle inventory tax (VIT), a dealer is presumed to have commenced business on the issuance date of a dealer's general distinguishing number (GDN). The chief appraiser, however, has discretion to designate a different date. The bill also allows the Texas Department of Transportation to use otherwise confidential VIT information to audit compliance of licensees. (Effective June 19, 1999)

H.B. 3197 defines "HUD-code manufactured home" and "mobile home" consistent with current law for purposes of the inventory tax on retail manufactured housing dealers. (Effective January 1, 2000)

The bill also provides that a dealer is not liable for penalties and interest if the county tax assessor-collector fails to transfer the inventory taxes in escrow to taxing units before the delinquency date. (Effective September 1, 1999)

S.B. 977 sets out property tax exemptions and special appraisal benefits to timber operations and timberland. The bill extends the property tax exemption for farm products to include timber products. Standing timber and harvested timber located on the real property where it was harvested is considered "in the hands of the producer" and exempt from property taxes. The bill also exempts implements of husbandry used in the production of timber. (Effective January 1, 2000)

The bill adds a new Subchapter H to Tax Code Chapter 23, providing new procedures for timberland appraisal at one-half of the appraised timber value as determined under the current timber appraisal process when harvesting is restricted: 1) for aesthetic or conservation purposes; 2) to provide benefits for endangered species; or 3) to protect water qualify. The land qualifies for appraisal under the new subchapter for a 10-year period following a harvest if it is regenerated for timber production. (Effective September 1, 1999) S.B. 1435 expands the term "dealer's heavy equipment inventory" to include items of heavy equipment that are leased or rented and subject to a purchase option by the lessee or renter. "Sales price," for a lease or rental with an option to purchase, is defined as the total amount of the lease or rental payments plus any final consideration, excluding interest. A sale of heavy equipment occurs when the dealer transfers possession of an item of heavy equipment to the purchaser. (Effective January 1, 2000)

S.B. 1464 provides that if real property is appraised by a method that takes into account the value of furniture, fixtures, and equipment in or on the real property, the furniture, fixtures, and equipment shall not be subject to additional appraisal or taxation as personal property. (Effective September 1, 1999)

S.B. 1641 requires the chief appraiser to use the most appropriate appraisal method in determining market value. Current law states "the method the chief appraiser considers most appropriate." In applying the market approach to value, the new law requires the chief appraiser to use sales data. Current law states the chief appraiser "shall use comparable sales data if possible." (Effective January 1, 2000)

S.B. 694 rewrites Section 25.19, Property Tax Code, with the intent to simplify and streamline the notice of appraised value sent to property owners. (Effective January 1, 2000)

Tax rate adoption
H.B. 954 changes when a taxing unit is required to hold a public hearing and publish newspaper notices before adopting a tax rate. The unit must publish notice and hold a public hearing if the proposed tax rate exceeds the lower of the rollback rate or 103 percent of the effective tax rate. Current law provides that notices and a hearing are required if a proposed tax rate results in any property tax revenue increase from the preceding year. (Effective January 1, 2000)

H.B. 1398 allows a taxing unit to increase its effective maintenance and operations rate to reflect its "Enhanced Indigent Health Care Expenditures." This term is defined as the amount spent by the taxing unit for maintenance and operation costs of providing indigent health care at the increased minimum eligibility standards under Health and Safety Code Section 61.006, effective on or after January 1, 2000. (Effective September 1, 1999)

H.B. 1520 returns special truth-in-taxation provisions for small taxing units. A small taxing unit is one that adopts a $.50 or less tax rate and imposes taxes of $500,000 or less. These taxing units may mail a notice of the proposed tax rate to each property owner or publish notice in the legal notice section of a general circulation newspaper about the proposed tax rate. Current law provides that all taxing units must publish two newspaper notices, but not in the legal notice section, to adopt a tax increase. These small taxing units also would not be required to publish notices and hold a hearing when they adopt a tax rate that raises more taxes than last year's taxes. (Effective May 28, 1999)

H.B. 2075 changes the truth-in-taxation process for school districts. The new law combines the hearing notice for the budget and for the proposed tax rate into one notice and removes school districts from the Tax Code Chapter 26 notice and hearing requirements. School districts will follow new requirements in the Education Code. (Effective August 30, 1999)

S. B. 4 (discussed earlier in the section Property tax relief) provides for changing the school district's property tax rollback rate. The school districts will calculate the rollback rate to reflect additional state funding. The 8 cents added to the rollback rate is reduced to 3 cents for the first year (tax rate 1999) and 6 cents for tax years thereafter. Education Code Chapter 41 school districts (wealthy districts with a taxable wealth per student that exceeds $295,000 as changed by S.B. 4) have a different press for calculating their 1999 school rollback rate. (Effective September 1, 1999)

S.B. 1118 requires all taxing units to adopt their tax rates before the later of September 30 or the 60th day after the date that the chief appraiser certifies the appraisal roll to the taxing unit. Failure to adopt a tax rate on time would result in automatic adoption of the effective tax rate or last year's rate, whichever is lower. (Effective January 1, 2000)

S.B. 1804 provides for increasing and decreasing rollback tax rates of taxing units that agree by written contract to transfer either part or all of a responsibility for funding departments, functions, or activities. Current law requires the transfer of all of the department, function, or activity. (Effective August 30, 1999)

Tax collections
H.B. 51 authorizes taxing units to permit persons over 65 years of age to perform services for the taxing unit in lieu of paying their homestead property taxes. Credit per hour of service would be at the federal minimum wage. Taxing units would not be allowed to reduce their current work force and not be liable for injuries or damages arising from the taxpayer's performance of services. The bill contains provisions to allow taxing units to permit qualified individuals to perform teaching services in lieu of paying their school taxes on their homesteads. Taxing units also would be allowed to permit persons employed by a business entity to perform teaching services in lieu of paying the business property taxes. (Effective August 30, 1999)

H.B. 1413 allows cities to sell city-owned property in any manner when the sale is to a nonprofit organization that promotes community-based city revitalization or provides housing to low-income individuals and families. (Effective August 30, 1999)

H.B. 1604 provides that taxing units may waive penalties and interest on delinquent taxes on property acquired by religious organizations. It also allows an alternative method for a foreclosure sale if property is purchased by a religious organization agreeing to revitalize the property. (Effective September 1, 1999)

H.B. 2220 applies to Harris County (a county with a population of 2.8 million or more) to refund overpayments or erroneous property tax payments of $2,500 or less without approval of commissioner's court. Current law that sets the maximum refund allowed without governing body approval at $500 would stay the same for all other taxing units. (Effective September 1, 1999)

H.B. 3549 is an omnibus property tax bill, addressing various provisions of delinquent tax collections and other property tax areas. The collection changes address the 15-percent delinquent tax penalty, waiver of penalty and interest, foreclosure sales, and tax liens. The bill also provides that over-65 homestead exemptions are effective for the entire year regardless of when the person turns 65 or acquires the homestead in that year. (Some parts effective September 1, 1999; other parts effective January 1, 2000)

S.B. 307 changes the wording required on the exterior of a tax bill. The tax bill's exterior would contain the words, in all capital letters, "RETURN SERVICE REQUESTED," or another appropriate statement directing the United States Postal Service to return the tax bill if it is not deliverable as addressed. The Tax Code currently requires the words "ADDRESS CORRECTION." (Effective September 1, 1999)

S.B. 337 reduces the period of time from seven to two years that a person can claim from the court clerk any excess proceeds from a property tax foreclosure sale. If the amount of excess proceeds is more than $25, the court clerk must send written notice by certified mail to the former owner that the owner has a right to claim the excess proceeds. (Effective September 1, 1999)

S.B. 446 requires the State Comptroller to prescribe a property tax refund application form for use by taxing units. Taxpayers may request a refund by written request without using the application form, if the taxpayer provides sufficient information to allow the taxing unit to determine refund entitlement. (Effective September 1, 1999)

S.B. 779 allows a taxing unit to accept property tax payments by electronic funds transfer through a written agreement with the taxpayer. Penalties and interest on a delinquent tax would be waived under certain circumstances, including errors in the transmission of funds. (Effective June 18, 1999)

S.B. 953 provides that a taxing unit may vacate a judgment in a delinquent tax lawsuit for failure to join or serve a necessary party to the suit or failure to adequately describe the property subject to the suit. (Effective August 30, 1999)

Property tax protests
H.B. 1552 requires ARB hearings that involve pooled or unitized mineral interests to be held in the county in which the production site is located. If there are two or more production sites, then the ARB hearing would be held in the county where at least two-thirds of the area of the mineral lease is located. (Effective January 1, 2000)

H.B. 3616 allows a district court petition to be amended to: (1) correct or change the name of a party or (2) at least 120 days before the trial date, identify or describe the property originally involved in the appeal. (Effective June 19, 1999)

S.B. 1097 amends Tax Code Chapters 41 and 42 to allow the state or its political subdivisions to receive an ARB notice and appear at ARB hearings and in district court when the matters in dispute involve a taxable leasehold or other possessory interest in property owned by the state or one of its political subdivision. The bill allows the state or its political subdivision to offer evidence and argument at the ARB hearing and to intervene as a party in district court. (Effective September 1, 1999)

S.B. 1359 specifies that the Comptroller's model rendition forms provide for the person filing the form to swear that the information provided in the rendition is true and accurate "to the best of the person's knowledge and belief." Current law requires that the person swear that the information is true and correct. (Effective September 1, 1999)

The bill also establishes a standard form for property owner affidavits that are presented to the appraisal review board (ARB) for the purpose of offering evidence and argument without the owner personally appearing before the board. The new form would be prescribed by the Comptroller and must include: (1) the owner's name; (2) a property description; and (3) the owner's statement specifying the appraisal district or ARB determination for which the owner sought relief. Appraisal districts would be required to have copies of the affidavit form available to property owners without charge. A property owner, however, is not required to use the Comptroller-prescribed affidavit form. (Effective January 1, 2000)

Other related areas
Tax increment financing

S.B. 824 defines "educational facilities" for purposes of Tax Code Section 311.008 for tax increment financing (TIF) zones. "Educational facilities" would include equipment, real property, and other facilities, including a public school building, that are used or intended to be used jointly by the municipality and an independent school district. (Effective June 19, 1999)

H.B 2684 (discussed below in the subsection School finance) also addresses TIF zones. (Effective June 19, 1999)

Tax abatement agreements
H.B. 3034 allows counties to enter into tax abatement agreements with different terms than the agreements entered into by the city. Current law required that the county and city agreements must be identical. (Effective September 1, 1999)

Special districts
H.B. 3029 allows for creating Development Corporations for Spaceport Facilities. The bill exempts these corporations from property taxation, but the corporations will be required to make payments in lieu of real property taxes. (Effective September 1, 1999) S.B. 1771 addresses Dallas County Utility and Reclamation District and allows the district to enter into tax abatement agreements for a period not to exceed 50 years based on specific criteria. (Effective September 1, 1999) School finance
H.B. 98 changes a school district's fiscal year to begin July 1 or September 1, as determined by the school district's board of trustees. The bill requires the chief appraiser by July 15 to prepare and certify to each school district an estimate of the school district's taxable property value and to assist the district in determining its property values for budget purposes. (Effective September 1, 2001)

H.B. 2684 defines the manner in which captured value in a tax increment financing (TIF) agreement is deducted from the school district's taxable value for the Comptroller's school district property value study. The 1997 amendment to the Government Code ended the deduction for school district property value for TIF agreements entered into after August 31, 1999. The language, however, was unclear about the rules for including TIFs entered into before the August 31, 1999, date, for property added to the older TIFs after the August 31, 1999 date. The new language in the Government Code limits the deductions by placing various restrictions on the deducted amount, duration of the deduction, and the geographic area to which the deductions apply. (Effective June 19, 1999)

H.B. 3211 requires the Comptroller in the annual school property value study to ensure that different levels of appraisal on sold and unsold properties do not adversely affect the study's accuracy. It also repeals Tax Code Section 5.101(f) that allows a per diem for the Comptroller's Technical Advisory Committee members. (Effective June 19, 1999)

S.B. 7 is the electric utilities deregulation bill. The bill requires the Comptroller to report to the Commissioner of Education not later than March 1 of each year the amount of property value loss for school districts that is attributable to deregulation. (Effective September 1, 1999)

S.B. 521 deletes language in the Government Code requiring the Comptroller to notify the Commissioner of Education about values specified by school districts relative to the Comptroller's school property value study. The bill repeals Tax Code Section 23.41(c) and (d), requiring the Comptroller to compile, publish, and distribute certain agricultural appraisal information. It also repeals Section 23.1241(h) that requires appraisal districts to report heavy equipment dealers who sell less than a certain number of items to the Comptroller. (Effective June 18, 1999)

S.B. 868 requires the Comptroller to adjust school property value losses attributable to the 10-percent appraisal increase limitation on homesteads by the Category A (Single Family Residences) ratio to conform with current agency policy and practice. (Effective September 1, 1999)

Other areas
H.B. 351 limits the county tax assessor-collectors' civil liability to civil actions commenced later than four years after their terms of office end, unless the Comptroller conducts an audit of an assessor-collector's office relative to administration of public funds within two years of the date the terms of office end. Any civil action after the term of office would be required to commence not later than four years after the audit is completed. (Effective September 1, 1999)

H.B. 1563 prohibits a person from filing in the county clerk's office a plat record to subdivide property, unless the plat or replat of a subdivision of real property has attached to it an original tax certificate from each taxing unit indicating no delinquent property taxes are owed on the real property. The bill allows an exception for persons acquiring property by will or inheritance. (Effective September 1, 1999)

H.B. 1588 requires a county judge to provide a list of utility service connections to the appraisal district and each emergency communication district in the county. (Effective September 1, 1999)

H.B. 2109 provides that a taxing unit is not liable as owner or operator of underground or above ground storage tanks obtained through a foreclosure sale. (Effective September 1, 1999)

H.J.R. 62 would amend the Texas Constitution to eliminate duplicative, executed, obsolete, archaic, and ineffective constitutional provisions. (Effective if Texas voters approve at the November 3, 1999 general election)

S.B. 234 deletes the Board of Tax Professional Examiners' (BTPE) requirement of filing a roster of licensees with the Secretary of State. Under current Texas law, certain state agencies must file a roster of licensees. The secretary of state makes a record of the filing and then transfers the report to the State Library and Archives Commission for long-term retention. (Effective September 1, 1999)

S.B. 674 provides that a county tax assessor-collector is exempt from BTPE certification requirements if the county has contracted to have its property taxes assessed and collected by another taxing unit or by an appraisal district. The bill increases the annual BTPE fees from the current $35 to not less than $45 but not more than $75. BTPE applicants are required to file an application on a form printed and prescribed by the board, accompanied by the fee and filed with the board not later than the 14th day before the certification examination date. (Effective September 1, 1999)

S.B. 1367 amends Tax Code Chapter 6 to require appraisal districts to provide certain information to the Texas Legislative Council. On written request of the council, an appraisal district that maintains its appraisal records in electronic format must provide a copy of the information or data in the appraisal records to the council, without charge and in a form approved by the council. An appraisal district must provide the requested information within 30 days of the council's request. (Effective June 20, 1999)

S.B. 1368 revises the Tax Code for non-substantive changes. (Effective September 1, 1999)

S.B. 1690 adds Natural Resources Code Section 33.610 addressing land submerged by erosion or subsidence. If the Commissioner of the General Land Office determines that the land has become submerged and as a result is dedicated to the permanent school fund, the Commissioner will notify in writing the appraisal district that appraises the land for property tax purposes. Upon notification, the appraisal district shall remove the land from the appraisal roll and each taxing unit from its tax roll. (Effective September 1, 1999)