Texas Legislature Proposes Historic Property Tax Reduction What You Need to Know

Texas Legislature Proposes Historic Property Tax Reduction: What You Need to Know

On Monday, Texas Lieutenant Governor Dan Patrick and Texas House Speaker Dale Phelan issued a joint statement announcing their agreement to propose legislation that would result in the “largest property tax reduction in the history of Texas.” The proposed legislation consists of HB 2/SB 2, HB 3/SB 3, and HJR 2, which are discussed further below.

Property Tax Reform – House Bill 2 (Rep. Morgan Meyer)/Senate Bill 2 (Sen. Paul Bettencourt)

HB 21 and SB 22 suggest several modifications to the Texas Education Code and Texas Tax Code, leading to the following outcomes:

  • The “maximum compressed rate” for school district property taxes would decrease by $0.107.
  • The homestead exemption for school district homes would be raised from $40,000 to $100,000.
  • The annual increase in the appraisal value of the non-homestead property (valued up to $5,000,000) would be limited to a 20% increase, plus the market value of any new improvements made to the property during the year.

To compensate for the reduction in property taxes resulting from these changes, school districts would receive additional funding. The Texas Legislature also aims to amend Section 1, Article VIII of the Texas

Constitution to implement these modifications, as discussed in House Joint Resolution 2. These changes are estimated to bring about a $12.7 billion tax reduction until August 31, 2025, and a $33.9 billion tax reduction until 2028.

All of the aforementioned bills were filed on July 10, 2023, and are expected to be approved by the Texas Senate later this week. They will then be sent to Governor Greg Abbott, who is anticipated to sign them into law.

Franchise Tax Reform – House Bill 3 (Rep. Charlie Geren)/Senate Bill 3 (Sen. Paul Bettencourt)

HB 35 and SB 36 propose the following modifications to Title 2, Chapter 171 of the Texas Tax Code, which deals with the Texas franchise tax:

  • Setting the “total revenue” exclusion amount at $2.47 million.
  • Entities that are exempt from Texas franchise tax due to the $2.47 million exclusion would no longer be obligated to file a Public Information Report with the Texas Comptroller.

These proposed changes to Chapter 171 are significant updates considering recent inflation and considerably simplify the filing requirements for smaller businesses that would be exempt from paying Texas franchise taxes.

Footnotes

1. HB 2

2. SB 2

3. HJR 2

4. Fiscal Note, Legislative Budget Board July 11, 2023

5. HB 3

6. SB 3

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