TAX RELIEF

Legislature passes the largest property tax cut in Texas history.

By Gina Erwin, HAA Legislative Chair, with Bradley Pepper, Vice President of Government Affairs

IT TOOK 140 days of the regular legislative session and two special sessions, but the Texas House of Representatives and Texas Senate finally agreed to a compromise that will bring $18 billion in property tax relief to Texas property owners.

Although it was not without contention and disagreement, the Governor, Lt. Governor and Speaker of the House were able to fulfill campaign promises by using more than half of a record $33 billion budget surplus for property tax cuts.

After failing to pass a property tax relief package during the regular session, Governor Greg Abbott called an immediate special session that began on the same day the regular session ended.

The Texas House gaveled in on May 30 to start the first special session. Within hours, they had passed bills to reduce school property taxes. The House then adjourned Sine Die for the remainder of the special session. That decision essentially left the Senate with a choice to either take the deal that the House passed or wait out the 30 days and have the Governor call another special session.

The latter happened and the Governor called a second special session that began on June 27. Only the Governor has the authority to both call a special session and determine the topics that will be taken up during that session.

This time he deemed that only bills pertaining to reducing property taxes would be considered. Specifically, only:

• Legislation to cut property-tax rates solely by reducing the school district maximum compressed tax rate in order to provide lasting property-tax relief for Texas taxpayers and

• Legislation to put Texas on a pathway to eliminating school district maintenance and operations property taxes.

On July 10, Lt. Gov. Dan Patrick and Speaker of the House Dade Phelan announced a deal had been brokered that would deliver the largest property tax cut in Texas history.

While the biggest piece of the package was increasing the school tax homestead exemption from $40,000 to $100,000, it also included several novel new concepts, including a new appraisal cap of 20% for non-homestead properties that are appraised at less than $5 million, as well as adding elected positions to Central Appraisal Districts (CAD).

Highlights of the compromise include:

• Homestead Exemption - An increase in the state-mandated school tax homestead exemption from $40,000 to $100,000.

• Rate Compression - A 10.7¢ (per $100 in property value) reduction in the school tax rate for all properties. The State will backfill those dollars to the school districts.

• Appraisal Cap - A three-year pilot program for a new 20% cap on annual appraisal increases of non-homestead real properties valued below $5 million. This will cover years 2024, 2025 and 2026, at which time the legislature can decide to extend/amend it when they convene in 2027.

• Appraisal District Boards - In counties over 75,000 in population, adding three elected members to appraisal districts boards of directors.

• Franchise Tax Exemption – Will double the franchise tax small business exemption from $1.23 million to $2.47 million.

Several of these items are constitutionally required to receive voter approval before being enacted. There will be a constitutional amendment on the ballot this November to approve these provisions.

On July 14, the House and Senate passed the three-bill package, sending it to the Governor’s desk to be signed into law. They then adjourned Sine Die (end of session), allowing lawmakers to go home for good after being in session for six and a half months.

Texas Supreme Court Emergency Order Expires

After over three years of COVID related Emergency Orders relating to eviction proceedings and rules of civil procedure, the Texas Supreme Court did not renew those orders and allowed them to expire on July 1.

One of the directives required a judge to allow legal aid in the courtroom. The order stated that the judge must allow, if available, representatives from legal aid organizations or voluntary legal services to represent and advise tenants in eviction cases.

Now, a judge is no longer required to allow legal aid access to tenants. However, a judge is also not prevented from allowing legal aid to be present in their court. The Harris County Commissioners Court has already authorized funding for this type of representation to eligible tenants for the next two years, so be prepared to see tenants lawyers in the courts moving forward.

A second directive involved rental assistance and the requirement to abate a case for 60 days if a tenant had applied for rental assistance. Now, a judge is no longer required to abate a case for 60 days because there has been an application for rental assistance. This would not prevent a landlord and tenant from agreeing to continue a case if they were waiting on rental assistance, however.

The expiration of the Texas Supreme Court Emergency Orders does not affect the 30-day notice to vacate requirement under the CARES Act. The 30-day notice to vacate under the CARES Act is still in effect.

Although many judges are not enforcing the 30-day notice to vacate requirement of the CARES Act, it is important that you follow the law. If you fail to comply with the 30-day requirement and the rules apply to your property, you may be in violation of the HUD rules or the FHFA rules.