HBA-MPM H.B. 2964 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2964 By: Staples Public Education 3/26/1999 Introduced BACKGROUND AND PURPOSE Current state law provides that if an individual is over 65 years old and owns a homesteaded residence assessed at $25,000, or less, the individual is exempt from paying school district ad valorem taxes on the residence. The law also allows that individual to transfer this homestead exemption to another residence and still be exempt from school district ad valorem taxes regardless of the value of the new residence. A possible scenario in this case is that the residence to which the homestead exemption is transferred may be worth much more than the original residence, and yet the individual's tax liability would remain at zero. The same application of the homestead exemption applies for improvements to the home if the improvement raises the value of the residence above $25,000. H.B. 2964 provides that for an individual who owns a homestead with a zero taxable value and who buys, builds, or adds to that homestead in a manner which increases its value to more than $25,000, a percentage of school district ad valorem taxes will be calculated at 50 percent of the assessed value up to $50,000, and an additional 25 percent if the residence is valued at more than $50,000. 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 Section 11.26(g), Tax Code, as added by Chapter 592, Acts of the 75th Legislature, Regular Session, 1997, as follows: (g) Includes proposed Subsection (m), in addition to Subsection (b), as an exception to this section regarding school district ad valorem taxes imposed on residential homesteads. SECTION 2. Amends Section 11.26, Tax Code, by adding Subsection (m), as follows: (m) Makes this subsection applicable only to an individual receiving a limitation on tax increases imposed by this section and whose residence homestead (homestead) had no taxable value for school district ad valorem tax purposes (ad valorem taxes) in the year the individual first qualified that homestead for an exemption under Section 11.13 (Residence Homestead), Tax Code. Provides that if the individual subsequently qualifies a different homestead for an exemption under that section, the limitation provided by Subsection (g) of this section is inapplicable to the subsequently acquired homestead. Prohibits a district, except as provided by Subsection (b) (regarding certain improvements to an individual's homestead for which the district may increase the tax on the homestead in the first year the value of the homestead is increased), from imposing ad valorem taxes on the subsequently qualified homestead in a year in an amount that exceeds: (1) 50 percent of the tax amount the district would have imposed on the subsequently qualified homestead in the first year the individual receives an exemption for that homestead, had the limitation on tax increases imposed by this section not been in effect, if the homestead was appraised at no more than $50,000 in that year; or (2) 75 percent of the tax amount the district would have imposed on the subsequently qualified homestead in the first year the individual receives an exemption for that homestead, had the limitation on tax increases imposed by this section not been in effect, if the homestead was appraised at more than $50,000 in that year. SECTION 3. Effective date: January 1, 2000. Makes this Act applicable only to the calculation of the limitation of school district ad valorem taxes on the residence homestead of an elderly person for a tax year beginning on or after the effective date. SECTION 4. Emergency clause.