HB 260

89S20220 RDS-D
		By: Metcalf
  H.B. No. 260
  A BILL TO BE ENTITLED
  AN ACT
  relating to a limitation on increases in the appraised value of
  certain 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, 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 2.  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
  COMMERCIAL REAL PROPERTY.  (a) In this section:
               (1)  "Commercial real property" means real property
  that is held or used for the production of income.
               (2)  "Disaster recovery program" means a disaster
  recovery program funded with community development block grant
  disaster recovery money authorized by federal law.
               (3)  "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 applies only to a parcel of commercial real
  property with a market value of $10 million or less for the tax year
  in which the limitation provided by Subsection (d) takes effect as
  to the property.
         (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 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)  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)  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
  (d)(2).
         (f)  The limitation provided by Subsection (d) 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.
         (g)  For purposes of Subsection (f), a person who acquired a
  parcel of commercial real property before the 2026 tax year is
  considered to have acquired the property on January 1, 2026.
         (h)  Notwithstanding Subsections (a)(3) 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)  Notwithstanding Subsection (h)(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, as
  effective January 1, 2027, 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 23.232;
               (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 23.232;
               (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, as amended by
  H.B. 4809, Acts of the 89th Legislature, Regular Session, 2025, and
  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;
               (9)  a determination of:
                     (A)  the appraised value of a structure or
  archeological site that qualifies for an exemption under Section
  11.24;
                     (B)  the appraised value of the land necessary to
  access the structure or site; and
                     (C)  the allocation of the appraised value between
  the structure or site and the land; or
               (10)  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, 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 6.  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 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, 2027, but only
  if the constitutional amendment proposed by the 89th Legislature,
  2nd Called Session, 2025, to authorize the legislature to limit the
  maximum appraised value of certain commercial real property for ad
  valorem tax purposes is approved by the voters.  If that amendment
  is not approved by the voters, this Act has no effect.