Gov. Abbott signed into law on July 24th the bills that comprise the full slate of property tax cuts passed by the legislature in the 2nd Special Session.
The major provisions are as follows:
- $12 billion in state spending to cut the school property tax rate for all homeowners and business properties (SB 2)
- Homesteads get a $100,000 homestead exemption. (HJR 2)
- Non-homesteads property valued at $5 million and under (both residential and commercial properties) get a 20% temporary appraisal cap (three-year pilot project)(HJR 2)
- Newly-created elected positions on local appraisal boards.(HJR 2)
- Increases the current business franchise tax exemption for small businesses from $1 million to $2.47 million (SB 3)
Lawmakers knew from the beginning of the regular session that some level of property tax relief was going to become law, eventually. With a $35 billion surplus and tax relief being a cornerstone of nearly every campaign, it was not a matter of “if” but “when.” And then of course there are the details that clearly took some time to work out.
For our industry, the two biggest changes are the increased exemption to the franchise tax, and the “circuit breaker” appraisal cap. TMHA supported the House’s original proposal on a 5 percent appraisal cap on all properties. In fact, we worked specifically to modify that bill to ensure personal property MH was included, which in the original version we were not. But appraisal caps faced a lot of opposition not just from the Senate but from several significant business and property groups worried that caps would distort the market and/or inhibit property sales.
The good news is that for a while, like the first special session, it appeared any form of appraisal cap was off the table. But it was resurrected, but this time more limited. Only for properties valued under $5million, only for a three-year pilot experiment, and the cap is at 20 percent. But for many of our mid and small size MH community owners, this will offer some relief. Granted higher valued MHCs will not be impacted, but at a minimum the legislature is sending a signal to taxing jurisdictions that a year-over-year 20+ percent jump better be more than justified.
TMHA would also like to make sure all our members, but in particular our MHC owners, make sure their residents know about the homestead exemption. For many MH owners if they do a little bit of simple paperwork to make sure their home is declared their residential homestead, now with a $100,000 homestead exemption they might not have a property tax bill, or at least one significantly lower than under the previous law that was just $40,000.
Now it looks like lawmakers and your TMHA Lobby Team will have a bit of break. We expect additional special sessions, but it looks like those won’t start until around October.
And for those interested, but maybe have not had the time to look at our comprehensive recap on all things that transpired in the regular session, we encourage you to do so.