Bill Text: TX HB1056 | 2011-2012 | 82nd Legislature | Comm Sub

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Bill Title: Relating to the ad valorem taxation of property used to provide low-income or moderate-income housing.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2011-05-10 - Committee report sent to Calendars [HB1056 Detail]

Download: Texas-2011-HB1056-Comm_Sub.html

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82R26428 SMH-F
By: Villarreal H.B. No. 1056
Substitute the following for H.B. No. 1056:
By: Villarreal C.S.H.B. No. 1056

A BILL TO BE ENTITLED
AN ACT
relating to the ad valorem taxation of property used to provide
low-income or moderate-income housing.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 11.182(a), Tax Code, is amended by
amending Subdivision (2) and adding Subdivisions (3) and (4) to
read as follows:
(2) "Community housing development organization" has
the meaning assigned by 24 C.F.R. Section 92.2, except that the
term also includes an organization that otherwise qualifies as a
community housing development organization under that section but
that:
(A) does not receive HOME funds as defined by
that section; or
(B) is governed by a board all of the members of
which are appointed by a state or local government [42 U.S.C.
Section 12704].
(3) "Control" includes:
(A) with respect to a limited partnership, the
control, directly or through a wholly controlled subsidiary, of 100
percent of the general partner interest; and
(B) with respect to a limited liability company,
serving as the sole manager or managing member of the company.
(4) "Department" means the Texas Department of Housing
and Community Affairs or its successor agency.
SECTION 2. Section 11.182, Tax Code, is amended by adding
Subsections (a-1), (b-1), (b-2), (j-1), (l), (m), (n), (o), (p),
(q), (r), and (s) and amending Subsections (e), (g), (h), (i), and
(k) to read as follows:
(a-1) An organization is considered to own property for
purposes of this section and the provisions of Section 2, Article
VIII, Texas Constitution, authorizing the legislature by general
law to exempt from taxation property owned by an institution
engaged primarily in public charitable functions, if the
organization has legal or equitable title to the property. By way
of example, an organization has equitable title to property if it
has a present right to compel legal title to the property to be
conveyed to it in accordance with law, such as by means of an option
to acquire the property. For purposes of eligibility for an
exemption under this section, property owned by a tax credit
partnership or limited liability company is considered to be owned
by a community housing development organization if the general
partner of the tax credit partnership or the manager of the limited
liability company is, or is controlled by, the community housing
development organization and the community housing development
organization holds equitable title to the property pursuant to an
option to acquire the property on terms negotiated between the
parties.
(b-1) Notwithstanding Subsection (b), if the legal owner of
property is not an organization described by that subsection, the
legal owner is entitled to an exemption from taxation of property
under this section if the property otherwise qualifies for the
exemption and the legal owner is:
(1) an entity 100 percent of the interest in which is
owned by an organization that meets the requirements of Subsection
(b); or
(2) an entity controlled by an organization that meets
the requirements of Subsection (b).
(b-2) A reference in this section to an organization
includes an entity described by Subsection (b-1)(1) or (2).
(e) In addition to meeting the other applicable
requirements of this section [Subsections (b) and (c)], to receive
an exemption under Subsection (b) for improved real property that
includes a housing project constructed after December 31, 2001, and
financed with qualified 501(c)(3) bonds issued under Section 145 of
the Internal Revenue Code of 1986, tax-exempt private activity
bonds subject to volume cap, or low-income housing tax credits, the
organization must:
(1) [control 100 percent of the interest in the
general partner if the project is owned by a limited partnership;
[(2)] comply with all rules of and laws administered by
the department [Texas Department of Housing and Community Affairs]
applicable to community housing development organizations; and
(2) [(3)] submit annually to the department, if the
property is a multifamily rental property consisting of more than
four dwelling units, or to the chief appraiser of the appraisal
district in which the property subject to the exemption is located,
if the property is not such a property, [Texas Department of Housing
and Community Affairs and to the governing body of each taxing unit
for which the project receives an exemption for the housing
project] evidence demonstrating that the organization spent an
amount equal to at least 90 percent of the project's cash flow in
the preceding fiscal year as determined by the audit required by
Subsection (g), for eligible persons in the county in which the
property is located, on social, educational, or economic
development services, capital improvement projects, or rent
reduction.
(g) To receive an exemption under Subsection (b) or (f), an
organization must annually have an audit prepared by an independent
auditor. The audit must include a detailed report on the
organization's sources and uses of funds. A copy of the audit must
be delivered to the department, if the property is a multifamily
rental property consisting of more than four dwelling units, or
[Texas Department of Housing and Community Affairs and] to the
chief appraiser of the appraisal district in which the property
subject to the exemption is located, if the property is not such a
multifamily rental property.
(h) Subsections (d) and (e)(2) [(e)(3)] do not apply to
property owned by an organization if:
(1) the entity that provided the financing for the
acquisition or construction of the property:
(A) requires the organization to make payments in
lieu of taxes to the school district in which the property is
located; or
(B) restricts the amount of rent the organization
may charge for dwelling units on the property; or
(2) the organization has entered into an agreement
with each taxing unit for which the property receives an exemption
to spend in each tax year for the purposes provided by Subsection
(d) or (e)(2) [(e)(3)] an amount equal to the total amount of taxes
imposed on the property in the tax year preceding the year in which
the organization acquired the property.
(i) If any property owned by an organization receiving an
exemption under this section has been acquired or sold during the
preceding year, the [such] organization shall file by March 31 of
the following year with the department, for multifamily rental
properties consisting of more than four dwelling units, or with the
chief appraiser in the county in which the relevant properties are
[property is] located, for properties that are not such multifamily
rental properties, on a form promulgated by the comptroller of
public accounts, a list of such properties acquired or sold during
the preceding year.
(j-1) Notwithstanding Subsection (j), an organization may
not receive an exemption under Subsection (b) or (f) for property
for the 2012 tax year or a subsequent tax year if:
(1) the organization did not claim an exemption under
Subsection (b) or (f) for the property for the 2010 tax year; or
(2) the organization claimed an exemption under
Subsection (b) or (f) for the property for the 2010 tax year and the
organization is finally determined to be ineligible for the
exemption for the property for that tax year.
(k) Notwithstanding Subsection (j) of this section and
Sections 11.43(a) and (c), an exemption under Subsection (b) or (f)
does not terminate because of a change in the ownership of the
property if the property is sold at a foreclosure sale and, not
later than the 30th day after the date of the sale, the owner of the
property submits to the department, if the property is a
multifamily rental property consisting of more than four dwelling
units, or the chief appraiser, if the property is not such a
multifamily rental property, evidence that the property is owned by
an organization that meets the requirements of Subsections (b)(1),
(2), and (4). If the owner of the property submits the evidence
required by this subsection, the exemption continues to apply to
the property for the remainder of the current tax year and for
subsequent tax years until the owner ceases to qualify the property
for the exemption. This subsection does not prohibit the chief
appraiser or the department, as applicable, from requiring the
owner to file a new application to confirm the owner's current
qualification for the exemption as provided by Section 11.43(c).
(l) This subsection applies only to a multifamily rental
property consisting of more than four dwelling units. If the chief
appraiser of the appraisal district in which the property is
located cancels the exemption or requires the organization that
owns the property to file a new application to confirm the
organization's current qualification for the exemption, the
organization must file a new application for the exemption with the
department. The provisions of this code governing the filing of an
application under Section 11.43, action on the application, and the
effect of the granting of the application by a chief appraiser apply
to an application filed with the department under this subsection,
except as otherwise provided by this section.
(m) The department shall prescribe the contents of the
exemption application form for purposes of Subsection (l). The
provisions of Section 11.43 governing the contents of an
application form prescribed by the comptroller apply to an
exemption application form prescribed by the department to the
extent those provisions may be made applicable.
(n) Not later than the 60th day after the date an
organization submits a complete application to the department under
Subsection (l), the executive director of the department shall
determine whether the organization is entitled to an exemption for
the property under Subsection (b) or (f). In making a
determination, the executive director may rely on the conclusions
in any audit or legal opinion provided to the department or any
determination letter issued by the United States Internal Revenue
Service regarding the organization's status under Section 501,
Internal Revenue Code of 1986.
(o) The executive director may request that an organization
that files an application under Subsection (l) provide additional
information. If the executive director makes such a request, the
application is considered to be complete for purposes of Subsection
(n) on the date on which all additional information requested by the
executive director has been received by the department.
(p) Not later than the fifth day after the date the
executive director makes a determination under Subsection (n), the
executive director shall issue a letter to the applicant
organization stating the executive director's determination. If
the executive director determines that the organization is not
entitled to an exemption for the property under Subsection (b) or
(f), the letter must include the reasons for the determination and a
description of the procedure for appealing the determination. The
executive director shall send a copy of the letter by regular mail
to the chief appraiser of each appraisal district that appraises
the property. If the executive director determines that the
organization is entitled to an exemption for the property under
Subsection (b) or (f), the chief appraiser shall grant the
exemption. If the executive director determines that the
organization is not entitled to an exemption for the property under
Subsection (b) or (f), the chief appraiser shall deny the
exemption.
(q) The applicant organization or a taxing unit in which the
property to which the application applies is located may appeal the
executive director's determination under Subsection (p) to the
governing board of the department in the manner provided by
department rule. The organization may be represented in an appeal
by an agent in accordance with Section 1.111. The organization or
taxing unit may appeal under Chapter 42 a final determination by the
governing board of the department in the same manner as provided by
law for the appeal of a determination by an appraisal review board,
except that the petition for review must be brought against the
department rather than the appraisal district.
(r) The department shall employ sufficient personnel to
process any applications received under Subsection (l) and may
charge an organization filing an application a reasonable fee not
to exceed the lesser of:
(1) $2,500; or
(2) the direct and indirect administrative costs of
processing the application and issuing a determination under
Subsection (n).
(s) The department shall adopt rules to implement its duties
under this section. The rules must:
(1) establish procedures for considering exemption
applications; and
(2) be sufficiently specific to ensure that
determinations are equal and uniform.
SECTION 3. Section 11.1825, Tax Code, is amended by
amending Subsections (a), (c), (d), (i), (j), (l), (s), (t), (u),
(v), and (y) and adding Subsections (a-1), (a-2), (e-1), (z), (aa),
(bb), (cc), (dd), (ee), (ff), and (gg) to read as follows:
(a) In this section:
(1) "Control" includes:
(A) with respect to a limited partnership, the
control, directly or through a wholly controlled subsidiary, of 100
percent of the general partner interest; and
(B) with respect to a limited liability company,
serving as the sole manager or managing member of the company.
(2) "Department" means the Texas Department of Housing
and Community Affairs or its successor agency.
(a-1) An organization is considered to own property for
purposes of this section and the provisions of Section 2, Article
VIII, Texas Constitution, authorizing the legislature by general
law to exempt from taxation property owned by an institution
engaged primarily in public charitable functions, if the
organization has legal or equitable title to the property. By way
of example, an organization has equitable title to property if it
has a present right to compel legal title to the property to be
conveyed to it in accordance with law, such as by means of an option
to acquire the property. For purposes of eligibility for an
exemption under this section, property owned by a tax credit
partnership or limited liability company is considered to be owned
by an organization if the general partner of the tax credit
partnership or the manager of the limited liability company is, or
is controlled by, the organization and the organization holds
equitable title to the property pursuant to an option to acquire the
property on terms negotiated between the parties.
(a-2) An organization is entitled to an exemption from
taxation of real property owned by the organization that the
organization constructs or rehabilitates and uses to provide
housing to individuals or families meeting the income eligibility
requirements of this section.
(c) Notwithstanding Subsection (b), if the legal [an] owner
of real property [that] is not an organization described by that
subsection, the legal owner is entitled to an exemption from
taxation of property under this section if the property otherwise
qualifies for the exemption and the legal owner is:
(1) an entity 100 percent of the interest in which is
owned by [a limited partnership of which] an organization that
meets the requirements of Subsection (b) [controls 100 percent of
the general partner interest]; or
(2) an entity controlled by [the parent of which is] an
organization that meets the requirements of Subsection (b).
(d) If the legal owner of the property is an entity
described by Subsection (c)[, the entity must]:
(1) the legal owner must be organized under the laws of
this state[;] and
[(2)] have its principal place of business in this
state; and
(2) the organization that owns 100 percent of the
interest in or controls the legal owner as described by Subsection
(c) must have equitable title to the property.
(e-1) An application for an exemption under this section for
a multifamily rental housing project consisting of more than four
dwelling units may be filed with the chief appraiser or the
department, except that if the legal owner of the property is an
entity described by Subsection (c)(2), the application must be
filed with the department.
(i) Property owned for the purpose of constructing or
rehabilitating a housing project on the property is exempt under
this section only if:
(1) the property is used to provide housing to
individuals or families described by Subsection (f) and the housing
project was under active construction or rehabilitation at the time
the organization initially filed an application for the exemption;
or
(2) the housing project is under active construction
or rehabilitation or other physical preparation.
(j) For purposes of Subsection (i)(2), a housing project is
under physical preparation if the organization has engaged in
architectural or engineering work, soil testing, land clearing
activities, or site improvement work necessary for the construction
or rehabilitation of the project or has conducted an environmental
or land use study relating to the construction or rehabilitation of
the project.
(l) If the property is owned for the purpose of
rehabilitating a housing project on the property:
(1) the original construction of the housing project
must have been completed at least 10 years before the date the
organization began actual rehabilitation of the project;
(2) the person from whom the organization acquired the
project must have owned the project for at least five years, if the
organization is not the original owner of the project, unless the
organization acquired the project from a person that acquired the
project by foreclosing on the project or receiving a deed or other
instrument in lieu of foreclosure that conveyed the project to the
person;
(3) the organization must provide to the department or
the chief appraiser, as applicable, and, if the project was
financed with bonds, the issuer of the bonds a written statement
prepared by a certified public accountant stating that the
organization has spent on rehabilitation costs at least the greater
of $5,000 or the amount required by the financial lender for each
dwelling unit in the project; and
(4) the organization must maintain a reserve fund for
replacements:
(A) in the amount required by the financial
lender; or
(B) if the financial lender does not require a
reserve fund for replacements, in an amount equal to $300 per unit
per year.
(s) Unless otherwise provided by the governing body of a
taxing unit any part of which is located in a county with a
population of at least 1.8 [1.4] million under Subsection (x), for
property described by Subsection (f)(1), the amount of the
exemption under this section from taxation is 50 percent of the
appraised value of the property.
(t) Notwithstanding Section 11.43(c), an exemption under
this section does not terminate because of a change in ownership of
the property if:
(1) the property is foreclosed on for any reason and,
not later than the 30th day after the date of the foreclosure sale,
the owner of the property submits to the department or the chief
appraiser, as applicable, evidence that the property is owned by:
(A) an organization that meets the requirements
of Subsection (b); or
(B) an entity that meets the requirements of
Subsections (c) and (d); or
(2) in the case of property owned by an entity
described by Subsections (c) and (d), the organization meeting the
requirements of Subsection (b) that owns 100 percent of the
interest in or controls the [general partner interest of or is the
parent of the] entity as described by Subsection (c) ceases to serve
in that capacity and, not later than the 30th day after the date the
cessation occurs, the owner of the property submits evidence to the
department or the chief appraiser, as applicable, that the
organization has been succeeded in that capacity by another
organization that meets the requirements of Subsection (b).
(u) The department or the chief appraiser, as applicable,
may extend the deadline provided by Subsection (t)(1) or (2), as
applicable, for good cause shown.
(v) Notwithstanding any other provision of this section, an
organization may not receive an exemption from taxation of property
described by Subsection (f)(1) by a taxing unit any part of which is
located in a county with a population of at least 1.8 [1.4] million
unless the exemption is approved by the governing body of the taxing
unit in the manner provided by law for official action.
(y) Not later than the fifth day after the date the
governing body of the taxing unit takes action under Subsection
(x), the taxing unit shall issue a letter to the organization
stating the governing body's action and, if the governing body
denied the exemption, stating whether the denial was based on a
determination under Subsection (x)(3)(A) or (B) and the basis for
the determination. The taxing unit shall send a copy of the letter
by regular mail to the chief appraiser of each appraisal district
that appraises the property for the taxing unit and to the
department, if applicable. The governing body may charge the
organization a fee not to exceed the administrative costs of
processing the request of the organization, approving or denying
the exemption, and issuing the letter required by this subsection.
If the chief appraiser or the department, as applicable, determines
that the property qualifies for an exemption under this section and
the governing body of the taxing unit approves the exemption, the
chief appraiser or the department, as applicable, shall grant the
exemption in the amount approved by the governing body.
(z) This subsection applies only to an application for an
exemption under this section filed with the department as
authorized or required by Subsection (e-1). The provisions of this
code governing the filing of an application under Section 11.43,
action on the application, and the effect of the granting of the
application by a chief appraiser apply to an application filed with
the department, except as otherwise provided by this section.
(aa) The department shall prescribe the contents of the
exemption application form for purposes of Subsection (z). The
provisions of Section 11.43 governing the contents of an
application form prescribed by the comptroller apply to an
exemption application form prescribed by the department to the
extent those provisions may be made applicable.
(bb) Not later than the 60th day after the date an
organization submits a complete application to the department under
Subsection (z), the executive director of the department shall
determine whether the organization is entitled to an exemption for
the property under this section. In making a determination, the
executive director may rely on the conclusions in any audit or legal
opinion provided to the department or any determination letter
issued by the United States Internal Revenue Service regarding the
organization's status under Section 501, Internal Revenue Code of
1986.
(cc) The executive director may request that an
organization that files an application under Subsection (z) provide
additional information. If the executive director makes such a
request, the application is considered to be complete for purposes
of Subsection (bb) on the date on which all additional information
requested by the executive director has been received by the
department.
(dd) Not later than the fifth day after the date the
executive director makes a determination under Subsection (bb), the
executive director shall issue a letter to the applicant
organization stating the executive director's determination. If
the executive director determines that the organization is not
entitled to an exemption for the property under this section, the
letter must include the reasons for the determination and a
description of the procedure for appealing the determination. The
executive director shall send a copy of the letter by regular mail
to the chief appraiser of each appraisal district that appraises
the property. If the executive director determines that the
organization is entitled to an exemption for the property under
this section, the chief appraiser shall grant the exemption. If the
executive director determines that the organization is not entitled
to an exemption for the property under this section, the chief
appraiser shall deny the exemption.
(ee) The applicant organization or a taxing unit in which
the property to which the application applies is located may appeal
the executive director's determination under Subsection (dd) to the
governing board of the department in the manner provided by
department rule. The organization may be represented in an appeal
by an agent in accordance with Section 1.111. The organization or
taxing unit may appeal under Chapter 42 a final determination by the
governing board of the department in the same manner as provided by
law for the appeal of a determination by an appraisal review board.
(ff) The department shall employ sufficient personnel to
process any applications received by the department under
Subsection (e-1) and may charge an organization filing an
application a reasonable fee not to exceed the lesser of:
(1) $2,500; or
(2) the direct and indirect administrative costs of
processing the application and issuing a determination under
Subsection (bb).
(gg) The department shall adopt rules to implement its
duties under this section. The rules must:
(1) establish procedures for issuing preliminary
determination letters and considering applications for exemptions;
and
(2) be sufficiently specific to ensure that
determinations are equal and uniform.
SECTION 4. Section 11.1826, Tax Code, is amended by
amending Subsections (c) and (d) and adding Subsection (e-1) to
read as follows:
(c) Not later than the 180th day after the last day of the
organization's most recent fiscal year, the organization must
deliver a copy of the audit to the department or [and] the chief
appraiser of the appraisal district in which the property is
located, whichever determines whether the property qualifies in the
current tax year for the exemption for which the audit is conducted.
(d) Notwithstanding any other provision of this section, if
the property contains not more than 36 dwelling units, the
organization may deliver to the department or [and] the chief
appraiser, as applicable, a detailed report and certification as an
alternative to an audit.
(e-1) If an application for an exemption under Section
11.182 or 11.1825 has been filed with the department, the executive
director of the department shall monitor eligibility for the
exemption. If the executive director learns of any reason
indicating that an exemption previously allowed should be canceled,
the executive director shall investigate. If the executive
director determines that the property is not eligible for the
exemption, the executive director shall notify the chief appraiser
and the chief appraiser shall cancel the exemption and deliver
written notice of the cancellation within five days after the date
the chief appraiser makes the cancellation. If the executive
director discovers that an exemption has been erroneously allowed
by the department in any one of the five preceding years, the
executive director shall notify the chief appraiser and the chief
appraiser shall add the property or appraised value that was
erroneously exempted for each year to the appraisal roll as
provided by Section 25.21 for other property that escapes taxation.
If an exemption that was erroneously allowed did not apply to all
taxing units in which the property was located, the chief appraiser
shall note on the appraisal records, for each prior year, the taxing
units to which the exemption applied and that are entitled to impose
taxes on the property or appraised value that escaped taxation.
SECTION 5. Section 303.042, Local Government Code, is
amended by adding Subsections (f), (g), (h), (i), (j), and (k) to
read as follows:
(f) A corporation that owns multifamily rental property
used to provide housing for low-income individuals or families is
engaged exclusively in the performance of governmental functions,
and the corporation and the property are exempt from taxation by
this state or a municipality or other political subdivision of this
state.
(g) Notwithstanding Subsection (f), if the legal owner of
property described by that subsection is not a corporation, the
legal owner is entitled to an exemption from taxation of the
property under this section if the property otherwise qualifies for
the exemption and the legal owner is:
(1) an entity 100 percent of the interest in which is
owned by a corporation; or
(2) an entity controlled by a corporation.
(h) If the legal owner of property described by Subsection
(f) is an entity described by Subsection (g)(1) or (2):
(1) the legal owner must be organized under the laws of
this state and have its principal place of business in this state;
and
(2) the corporation that owns 100 percent of the
interest in or exclusively controls the legal owner as described by
Subsection (g) must have equitable title to the property.
(i) A person is considered to own property described by
Subsection (f) for purposes of this section and the provisions of
Section 2, Article VIII, Texas Constitution, authorizing the
legislature by general law to exempt from taxation public property
used for public purposes, if the person has legal or equitable title
to the property. By way of example, a person has equitable title to
property described by Subsection (f) if the person has a present
right to compel legal title to the property to be conveyed to the
person in accordance with law, such as by means of an option to
acquire the property. For purposes of eligibility of property
described by Subsection (f) for an exemption under this section,
property owned by a tax credit partnership or limited liability
company is considered to be owned by a corporation if the general
partner of the tax credit partnership or the manager of the limited
liability company is, or is controlled by, the corporation and the
corporation holds equitable title to the property pursuant to an
option to acquire the property on terms negotiated between the
parties.
(j) For purposes of Subsections (g), (h), and (i), "control"
means having the power to manage, direct, superintend, restrict,
regulate, govern, administer, or oversee. For purposes of those
subsections, "control" includes:
(1) with respect to a limited partnership, the
control, directly or through a wholly controlled subsidiary, of 100
percent of the general partner interest; and
(2) with respect to a limited liability company,
serving as the sole manager or managing member of the company.
(k) A corporation or other person claiming an exemption
under this section for property described by Subsection (f) may
file an application for the exemption with the chief appraiser of
the appraisal district in which the property is located or the Texas
Department of Housing and Community Affairs or its successor
agency. Sections 11.1825(z)-(gg), Tax Code, apply to an
application filed under this subsection with the Texas Department
of Housing and Community Affairs or its successor agency to the
extent those provisions can be made applicable.
SECTION 6. (a) Except as provided by Subsection (b) of this
section, this Act applies only to ad valorem taxes imposed for a tax
year beginning on or after the effective date of this Act.
(b) This Act applies to ad valorem taxes imposed on property
for a tax year beginning before the effective date of this Act if on
the effective date of this Act the property is the subject of a
protest under Chapter 41, Tax Code, or an appeal under Chapter 42 of
that code, the protest or appeal relates to the exemption of the
property under Section 11.182 or 11.1825, Tax Code, or under
Section 303.042, Local Government Code, the protest or appeal is
pending on the effective date, and before the protest or appeal is
finally determined the owner of the property notifies the appraisal
review board or court in which the protest or appeal is pending that
the owner elects to have this Act apply to the determination of the
protest or appeal.
(c) If a property owner elects to have this Act apply to the
determination of a protest or appeal regarding ad valorem taxes
imposed on the property for a tax year beginning before the
effective date of this Act as authorized by Subsection (b) of this
section and the owner has paid all or part of the taxes imposed on
the property for that tax year, the owner is not entitled to a
refund of the amount of taxes paid if the property is finally
determined to have been eligible for the exemption for that tax
year.
SECTION 7. This Act takes effect January 1, 2012.