Compromise on Homestead Exemption and ISD Impact

The House Ways and Means Committee passed a committee substitute to SB 1 (homestead exemption) from committee on Thursday.  This is part of the now reduced tax relief package compromise between the House and the Senate.  The overall tax relief package is now approximately $3.8 billion (about a $1 billion less than the introduced plans), with the homestead exemption now accounting for about $1.2 billion for the 2016-17 biennium. 

The homestead exemption will be a flat $10,000 increase (no longer indexed), making the overall state homestead exemption $25,000 should voters approve.   The bill provides for a November 2015 election date to approve the constitutional amendment necessary for the increase.  While Rep. Bonnen still admits the November election date gives him concern, the homestead exemption compromise would apply beginning with the 2015 tax year. Unlike the version of SB 1 passed by the Senate, there is no longer a provision that would prohibit taxing units from repealing or reducing an existing local optional homestead exemption for 10 years.

Included in the committee substitute for SB 1 are the following provisions:

1.  Provides school districts with hold harmless funding for both M&O and I&S purposes based on the school finance formulas or debt service requirements as of September 1, 2015.

2.  Requires the effective tax rate and rollback tax rate for a school district to be calculated based on the $25,000 exemption.   

3.  Requires the following statement on tax bills: 

If the amount of the exemption from ad valorem taxation by a school district of a residence homestead had not been increased by the Texas Legislature, your tax bill would have been $____ (insert amount equal to the sum of the amount calculated under Section 26.09(c-1) based on an exemption under Section 11.13(b) of $15,000 and the total amount of taxes imposed by the other taxing unitswhose taxes are included in the bill). Because of action by the Texas Legislature increasing the amount of the residence homestead exemption, your tax bill has been lowered by $____ (insert difference between amount calculated under Section 26.09(c-1) based on an exemption under Section 11.13(b) of $15,000 and amount calculated under Section 26.09(c-1) based on an exemption under Section 11.13(b) of $25,000), resulting in a lower tax bill of $____ (insert amount equal to the sum of the amount calculated under Section 26.09(c-1) based on an exemption under Section 11.13(b) of $25,000 and the total amount of taxes imposed by the other taxing units whose taxes are included in the bill), contingent on the approval by the voters at an election to be held November 3, 2015, of a constitutional amendment authorizing the residence homestead exemption increase. If the constitutional amendment is not approved by the voters at the election, a supplemental school district tax bill in the amount of $____ (insert difference between amount calculated under Section 26.09(c-1) based on an exemption under Section 11.13(b) of $15,000 and amount calculated under Section 26.09(c-1) based on an exemption under Section 11.13(b) of $25,000) will be mailed to you.

Moak, Casey & Associates is currently working on the hold harmless model for these provisions and hope to have something to our clients districts in the coming days. 

For more information on the committee substitute, please visit the TLO site and view the documents under House Committee Report: http://www.capitol.state.tx.us/BillLookup/Text.aspx?LegSess=84R&Bill=SB1760 

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Posted By : Bob Popinski ~ 5/22/2015 10:35 AM
Related Categories: MCA Updates