HBA-ALS, ATS C.S.H.B. 1453 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1453 By: Smith Insurance 4/23/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Under the Tax Code, a homeowner is entitled to claim a homestead exemption from school ad valorem taxes. In addition, any person age 65 years or older is entitled to an additional exemption from school taxes on a residential homestead. To receive the exemption, a person claiming the exemption must apply for it by filing an exemption application form with the chief appraiser for each appraisal district in which the property subject to the claimed exemption is located. After considering the application, the chief appraiser determines whether to approve or disapprove the application. Even if the chief appraiser approves the application, the law requires an investigation if any reason materializes that indicates that an exemption previously allowed should be canceled. If the chief appraiser discovers that the property escaped taxes, the exemption is canceled and the school district is entitled to impose taxes, penalties, and interest on the property or value that escaped taxation. Many times, new homeowners and title companies are unaware of any improprieties concerning erroneous claims for homestead exemptions. Nonetheless, if a person purchases a residential homestead encumbered with delinquent taxes, penalties, and interest due to an invalid exemption, that person, rather than the former owner, must pay as the delinquent taxes, penalties, and interest are levied against the property, rather than the owner. C.S.H.B. 1453 allows the commissioner of insurance, for an owner policy on residential real property issued to a natural person, to adopt coverages that insure against ad valorem taxes, including penalties and interest, to be paid with respect to the property for a previous tax year and that are delinquent on the effective date due to specified circumstances. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Article 9.07A, Insurance Code, by adding Subsection (f), to authorize the commissioner of insurance, for an owner policy on residential real property issued to a natural person, to adopt coverages that insure against ad valorem taxes, including penalties and interest, to be paid with respect to the property for a previous tax year and that are delinquent on the effective date of the policy because of: (1) sale, diversion, or change of use, unless excluded because the insured has actual knowledge of the delinquent taxes, and (2) an exemption granted to a previous owner of the property under Section 11.013, Tax Code, or because of improvements not assessed for a previous tax year, unless excluded because the insured has actual knowledge of the delinquent taxes. SECTION 2. Effective date: September 1, 1999. SECTION 3. Makes application of Subsection (f), Article 9.07A, Insurance Code, prospective for an owner policy of title insurance that is delivered or issued for delivery on or after January 1, 2000. SECTION 4. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in SECTION 1 (proposed Article 9.07A(f), Insurance Code) to add language authorizing the commissioner, for an owner policy on residential real property that is issued to a natural person, to adopt coverages that insure against ad valorem taxes, including penalties and interest for a previous tax year that are delinquent on the effective date of the policy because of sale, diversion, or change of use, unless excluded because the insured has actual knowledge of the delinquent taxes, because of an exemption granted to a previous owner of the property under Section 11.13, Tax Code, or because of improvements not assessed for a previous tax year, unless excluded because the insured has actual knowledge of the delinquent taxes. Removes language from the original requiring an owner policy issued in connection with a transaction involving residential real property to indemnify an owner of residential real property on which delinquent ad valorem taxes and any tax liens exist if the owner paid consideration and had no knowledge of the encumbrances upon the property at the time of the purchase, notwithstanding any other law. Removes language providing that this subsection applies only to real property that is owned by a natural person and occupied by the owner as the owner's principal residence. Deletes SECTION 2 (proposed Section 11.48, Tax Code, which added proposed Section 11.48, to require the chief appraiser to send written notice (notice) to the county clerk of the county in which real property is located of each application for a residential homestead exemption (exemption) approved by the chief appraiser and of each exemption canceled by the chief appraiser, set time limits for such notice, and provide for the county clerk's filing requirements. Deletes SECTION 3 (Section 118.013(c), Local Government Code) of the original, which included documents filed in accordance with Section 11.48, Tax Code, among the records to which a fee for filing and provided that recording real property records in the office of the county clerk does not apply. The substitute redesignates proposed SECTION 4 of the original to SECTION 2 of the substitute. The substitute redesignates SECTION 5 of the original to SECTION 3 of the substitute. The substitute deletes SECTION 6 of the original which made application of the change made to Section 11.48, Tax Code, prospective. Redesignates SECTION 7 (emergency clause) of the original to SECTION 4 of the substitute.