HBA-SEP C.S.H.B. 2306 77(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 2306
By: Chisum
Financial Institutions
4/2/2001
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Current law does not extend residence homestead ad valorem tax exemptions
to a homestead owned by a family-owned business or protect these businesses
from forced sale.  Exempting principal residences that are converted to
family-owned businesses from this tax and protecting them from forced sale
may encourage family business entrepreneurship.  C.S.H.B. 2306 provides
this exemption and protection.  

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. 

ANALYSIS

C.S.H.B. 2306 amends the Tax and Property codes relating to the extension
of residence homestead ad valorem tax exemptions and protection from forced
sale to a homestead owned by a family-owned business.  The bill modifies
the definition of "residence homestead" to include a residence that is
owned through an interest in a family-owned business and is occupied by an
owner of the interest. As long as the owner or the owner's spouse
continues to reside in such a residence, the limitation of school tax on
homesteads of the elderly does not expire.  Conveyance of a residence
homestead by its owner to a familyowned business in which the owner owns an
interest, as long as the owner or the owner's spouse continues to reside in
the property, does not cause the limitation on the appraised value of a
residence homestead to expire, nor does the conveyance constitute a change
of ownership of the homestead, thus the homestead exemption, once allowed,
need not be reclaimed.  The homestead rights of the individual are subject
and subordinate to the rights of creditors of and purchasers of property
from the family-owned business and do not affect the validity or
enforceability of any conveyance, mortgage, or encumbrance of the property
by the family-owned business.  If a homestead claimant conveys the
homestead to a family-owned business in which the claimant owns an
interest, the claimant may continue to claim homestead rights in the
homestead. 

EFFECTIVE DATE

This Act takes effect on the date on which the constitutional amendment
proposed relating to the extension of homestead ad valorem tax exemptions
and protection from forced sale to a homestead owned by a family-owned
business is approved by the voters.  If the amendment is not approved, this
Act has no effect. 

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 2306 modifies the original by providing that the homestead rights
of the individual are subject and subordinate to the rights of creditors of
and purchasers of property from the family-owned business and do not affect
the validity or enforceability of any conveyance, mortgage, or encumbrance
of the property by the family-owned business.