Senate Calls for $2.5B ISD Homestead Exemption

This morning, Lt. Governor Patrick, along with Sen. Nelson and Sen. Schwertner, unveiled the initial Senate proposal that would provide up to $4.6 billion in tax relief to both Texas homeowners and businesses. This package provides a homestead exemption (school district tax rates only) that would be based on 25% of the state's home median market value, a decrease to the state’s franchise tax by 15%, and it would increase those businesses exempt from the franchise tax from $1 million to $4 million in total revenue.

SB 1 by Sen. Nelson will be the Senate’s vehicle for the school district homestead exemption.  The homestead exemption has a price tag of about $2.5 billion for the biennium. At the press conference, Sen. Nelson stated that that a constitutional amendment is required (SJR 1), which she hopes will be on the ballot on September 12 so that tax relief and the hold harmless funding needed for districts can flow during the 2015-16 school year. 

Sen. Nelson explained that the new indexed exemption is based on 25% of the state’s home median market value. In 2015, the Comptroller estimated the median market value for a home at $134,500, which would provide a $33,625 homestead exemption (current law is $15,000).  In 2016, the median price is estimated at $143,915, which would provide a $35,979 exemption. 

SB 1 contains the following provisions: 

1.  LBB shall determine state’s home median market value as of September 30 for 2015 and in all future years by July 25 and post in the Texas Register.

2.  Districts that adopted local optional homestead exemptions for 2014 tax year may not reduce or repeal local exemption until after December 31, 2024.

3.  Provides for tax relief for those receiving 65 and older exemption.

4.  School districts must adopt tax rates for the 2015 tax year before the later of October 31 or the 60th day after the date of the certified roll is received by the taxing unit. 

5.  Provides for both M&O and I&S school district hold harmless funding through the Comptroller’s Property Value Study. A special I&S hold harmless provision applies to districts that do not receive EDA and/or IFA funding under Chapter 46.  Hold harmless funding only applies to the tax rates adopted in the 2014 tax year.

6.  SJR 1 would also prohibit any tax on real estate sales. 

MCA will continue to analyze the language in this bill and we will provide more details as soon as possible.  Our first reading indicates that there could be some timing issues with the current provisions as drafted.  

SB 7 by Sen. Nelson provides $1.5 billion for the biennium in franchise tax relief by reducing the current franchise tax rate by 15% on a permanent basis. 

SB 8 by Sen. Schwertner would exempt business from the franchise tax that have $4 million or less in total revenue.  At $760 million for the biennium, approximately 61,000 small business would be exempt, or 52% of all business entities.

Next week the Senate Finance Committee will begin hearing these tax relief bills, along with many other tax relief bills filed by the Senators.  Stay tuned. 


SB 1 bill text:  http://www.capitol.state.tx.us/BillLookup/Text.aspx?LegSess=84R&Bill=SB1

SB 7 bill text:  http://www.capitol.state.tx.us/BillLookup/Text.aspx?LegSess=84R&Bill=SB7

SB 8 bill text:  http://www.capitol.state.tx.us/BillLookup/Text.aspx?LegSess=84R&Bill=SB8


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Posted By : Bob Popinski ~ 2/24/2015 2:29 PM
Related Categories: MCA Updates