House Ways & Means – April 19, 2021

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House Ways & Means met on April 19 to discuss a full agenda of bills. The full notice can be found here. A video of part one of the hearing can be found here and part two can be found here.

This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

HB 4411 (King, Tracy O.) (CS) – Relating to the property tax appraisal option of rural utilities for rendering market value for property which falls into multiple tax jurisdictions

Rural telephone companies are subject to taxation via property appraisal, and often those companies span several counties
Current system does not work for accurately and fairly calculating the taxes owed by the company on their property
CS specifies Ad Valorum rate as the property taxes affected

Patrick Sherrill, Poka Lambro Telephone Cooperative – For

Happy to pay taxes, but unpredictable and uneven tax rates for companies year over year are bad for business
Prior years have seen massive and unpredictable tax increases on certain properties
Causes problems for our service costs – can lead to unpredictable and inconsistent rates
Bill offers predictability and stability to rural utilities
Murphy – What was the jurisdiction’s justification for raising the rate to 57%?
- There were several counties that raised their rates on the company
- The model changed in the county – income model, urban comparable
Murphy – Did they use your income to derive the rate?
- Model predicted how much revenue the company would make, but its difficult because there is no frame for comparison
Cole – Does the independent audit cost money?
- Yes, cost borne by the utility
- In the range of $12,000, conducted in the status quo
Shine – How many counties does your coop cover?
- 9
Shine – So this could impact many cooperatives across the state?
- Yes, this is happening across the state

Don Richards, Texas Statewide Telephone Cooperative– For

Issue faces utilities around the state
Counties and districts around the state have been increasing property tax rates on cooperatives unfairly with secretive models that vary by district
No comparison and no consultation consistency
Not Fair Market Value (FMV)
Utilities are hard to get a FMV calculation for because they don’t sell, so you cant determine FMV in the regular way
There is already precedent in statute for theoretical FMV, just need to standardize it and clarify for rural utilities
Thierry – How many cooperatives does your firm represent?
- 18 of the 42 cooperatives, we represent individually
- Have had to negotiate property tax values individually for each of those companies with every county involved with that cooperative
Shine – Has there been consistency in evaluations before 3 years ago?
- Yes, there was regular and reliable evaluations before the last 3 years
- Some cooperatives began getting huge appraisal jumps and increases in tax rates, prompted concern
Shine – Have there been changes to the chief appraisers in the last 3 years
- Some counties have hired consultants to be chief appraisers
Shine – So this legislation would essentially have each company audit themselves and declare their net value, and determine tax rate
- Yes, never used net book value before
- Due to change in the models being used by some counties

HB 4411 left pending

HB 3833 (King) – Relating to the additional ad valorem tax and interest imposed as a result of a change in the use of certain land

Legislature reduced rollback in previous session
Previous rollback statute missed some pieces, so this bill will standardize the tax penalty
Will include previously unincluded property types/areas

Scott Norman, Texas Association of Builders – For

Harmonize reduction in previous session
Should pass for the same reasons as prior legislation

HB 3833 left pending

HB 2977 (Morrison) – Relating to the use of hotel occupancy tax revenue by certain municipalities and the authority of certain municipalities to pledge that revenue, and to receive and pledge certain other revenue, for the payment of obligations related to a hotel and convention center project.

City of Victoria would receive funding for a hotel and convention center project
City supports the bill

Derek Ferrell, City of Victoria – For

Assistant city manager
Victoria has the capabilities to support this project and support a variety of events
Victoria is centrally located between Austin, Houston, and Corpus Christi, and is growing

Thomas Gwosdz, City of Victoria – For

City attorney
Current hotel space is not targeted for short-term events or convention space – targeted for long-term stay for oil and gas workers
Bill extends deadlines for the project, 2023 is a short timeline for us, so 2027 is better for us and for many other cities that already have the capability to construct these facilities
Cole – Is the additional time statewide?
- The bill adds the City of Victoria to a bracket that already exists in statute
- By changing the deadline on the bracket allows every city already bracketed access to that extension

Justin Bragiel, Texas Hotel Lodging Association – For

Available for questions

HB 2977 left pending

HB 3439 (Deshotel) – Relating to the appraisal for ad valorem tax purposes of certain nonexempt property used for low-income or moderate-income housing.

Inconsistency with how low-income housing projects are valued while still under construction
Bill addresses those issues

Christopher Akbari, iTex – For

Currently exists period of time that legislation doesn’t allow appraisers to evaluate construction of low-income housing correctly
Currently no method for examining properties that are not stabilized

HB 3439 left pending

HB 3322 (Metcalf) – Relating to the selection and administration of an appraisal review board in certain counties; authorizing a fee.

Citizens do not have a voice on appraisal district review board membership – currently appointed positions
Bill would allow Montgomery county to elect its own appraisal review board members
County is one of the fastest growth counties in the country – demand for property is increasing every year
Needs to be a proper check on explosive and unfair property tax rates
Current appraisal board is unsympathetic to the massive rate increases impact on citizens in the county

Carl Walker, Texas Taxpayers and Research Association – Against

Against politicization of appraisal process – will create undue influence
Concerned with platforms for potential candidates and experience of candidates for the board
Recognize that confidence in ARB needs to be restored, there are better paths, including better training and continuing education resources
Database for performance appraisals for ARB members could also be key
Thierry – What qualifications are required now for ARB?
- Anyone who would like to serve, no specific qualifications required
Thierry – So they aren’t required to have qualifications?
- No, but they are required to have training
Thierry – So no standards right now for appointees?
- No, just the training requirement
Cole – Concern is that the current ARB board is not sensitive enough to current property value increases – should a percentage of the board be property owners?
- Its likely some are property owners

HB 3322 left pending

HB 3437 (Goldman) – Relating to the authority of a taxing unit other than a school district to establish a limitation on the amount of ad valorem taxes that the taxing unit may impose on the residence homesteads of individuals who are disabled or elderly and their surviving spouses.

Seniors are being taxed out of their homes; would shift impact from seniors and establish a ceiling for taxation

HB 3637 left pending

HJR 141 (Goldman) – Proposing a constitutional amendment to authorize a political subdivision other than a school district to establish a limitation on the amount of ad valorem taxes that the political subdivision may impose on the residence homesteads of persons who are disabled or elderly and their surviving spouses.

Allows previous bill to pass

HJR 141 left pending

HB 3482 (Rose) – Relating to the definition of “indigent defense compensation expenditures” for purposes of the adjustment of a county’s no-new-revenue maintenance and operations rate to reflect increases in those expenditures.

Past reforms missed public defenders offices – critical to efficient and fair legal system
Good deal for taxpayers – low-cost option for defendants incentivized to move cases along quickly

Dallas County – On

Previous legislation did not address public defenders in tax adjustment
Public defenders handle a significant amount of cases at around 40% of the cost – moves cases much faster and cheaper
Cole – Does this bill impact the state?
- No cost to state, positive fiscal note to counties
Meyer – Is this just legal counsel?
- This wraps in the entire public defenders office, including other staff than the attorneys and costs of running the office
Murphy – The current formula disincentivizes public defenders?
- Yes, perverse incentive to hire outside counsel at higher costs under current formula

Alex Bannon, Harris County & Harris County Public Defender’s Office – For

Intent of prior legislation was to support Public defenders, but it deters counties in the status quo
This legislation remedies that deterrence in the status quo
Public defenders are better registration than private lawyers supported by state funding in the status quo

Kelli Childress, El Paso Public Defender – For

Bill is about funding parity
Current models discourage public defenders
Public defenders’ offices are more efficient, budgets are more accountable, and can share resources like HR and IT with other county offices
Established training and accountability guidelines

Adam Hanes, Conference of Urban Counties – For

Past legislation has increased costs of public defense attorneys
CPS is also a huge rising cost – constitutional right to an attorney
Public defense offices are more efficient and less costly
Adjust the formula to include these offices – will be much better for the system and for those involved in the system

Jeff Burkhart, Texas Indigent Defense Commission – On

Prior legislation does not cover public funding for public defender offices – need to fix revenue formula
Increases accountability, lowers costs, and decreases court and prison costs
Seen growth of Public defender offices in urban and rural counties – largest growth in rural areas
Bring Texas into line across the state

HB 3482 left pending

HB 7406 (Bernal) – Relating to installment payments of ad valorem taxes imposed on certain homesteads

Bill laid out by author
Anchor residents are the people who are being taxed out of their homes
Gentrification
Does provide the chance to stay in a house
Committee sub goes back to previous 4 installments

Kevin Keashnick, Texas Collectors Association- Against

During Hurricane Harvey over 9,000 people took advantage of waivers
People will take advantage of this if opened to everyone
Does not solve issue of gentrification
Willing to work with author on modifications to give people a place to stay
Do not want to ruin someone’s credit or speed up foreclosures
Shine- Is this a cash flow issue?
- Yes especially in area where a large portion of cashflow comes from homesteads
- Intention of this bill is excellent, but there is a better way
Shine – We have explored this idea, it is a good idea, but would it require tax collectors to create a new system?
- We would have to hire full time equivalents
- Would cost 4FTEs
- Cannot testify for a bill that puts properties in jeopardy and know it would raise our prices
Thierry – Essentially, it is just 4 payment installments. If it were just veterans and 65 years old and older, is that feasible?
- That is already in place
Thierry – So it is open to everyone, is there an issue with how many installments?
- The more times a bill is changed, the more expensive it gets
- This would require more boots on ground
Thierry – Down the line you would never consider an installment plan?
- The longer the payment the more expensive
- A lot of people have no protection of homestead cap
Thierry – Asked about homestead cap?
- Agreed that it was something to look into
- Payment plan is not going to help, just prolong
- Could work in certain areas where there is rapid growth
- There are better people, probably on appraisal side who could figure that out
Thierry – Is there offset to those who lose their homes?
- Not lots of foreclosures
- 95% of foreclosures are abandoned
Cole – Asked about what the raise in cost would be if bill was implemented
- At least 4 more full time employees, 100,000$ for his one county before adding benefits
Morgan – Have you meet with Bernal?
- This morning yes

Sheryll Johnson, Self – For

Works in collections and offers disaster installments
One of few tax offices that does not make them prove there was damage
Works with mortgage companies
Never seen mortgage company foreclose on someone who took advantage of installment plan

Bernal, in closing

Have tried to pass this idea and bill before but never passed
The idea of insurance is to make sure the client gets their money
Guerra – Thinks it is a wonderful bill, but wondered about the people who pay more in property tax
- Could be a legislative fiction

HB 7406 left pending

HB 1705 (Schofield) – Relating to the establishment of a limitation on the total amount of ad valorem taxes that taxing units may impose on the residence homesteads of individuals who are disabled or elderly and their surviving spouses.

Bill is laid out by author
This bill would expand the freeze for seniors
This bill would guarantee to all Texans 65 or disabled that their property tax would freeze
The first year the average Texan would save 95$ the first year, second 182, 3^rd 298 4^th 418$.
People on fixed income will never be able to keep up with property inflation
People should not be taxed out of their homes
Personally heard many people say they were thinking of moving to Northern Arkansas
Guerra- How would it work under your bill if two people live in one house, and one is over 65 and the other is not
- This bill would not change that at all
- Plays by same rules used for seniors and school taxes
Cole- Asked what the bill would do to cap rates
- Does not affect rates at all
- When you hit 65. Year sold or disables, however much you pay to schools freezes,
Cole- So the city could raise rates to make up the difference.
- Yes, but no because last session a bill passed that can only allow them to raise it so much

HB 1705 left pending

HJR 84 (Schofield) – Proposing a constitutional amendment establishing a limitation on the total amount of ad valorem taxes that political subdivisions may impose on the residence homesteads of individuals who are disabled or elderly and their surviving spouses.

HJR 84 left pending

HB 1601 (Allison) – Relating to a local option exemption from ad valorem taxation of all or part of the appraised value of the residence homesteads of certain peace officers.

Bill provides for local option exemption for peace officers from ad valorem taxation
During period of unrest during the summer of 2020, we met with community groups and stakeholders around San Antonio to discuss issues with policing – found need for increased police presence as neighbors, community involvement
Designed to encourage peace officers to live in areas of “high need” by providing a tax exemption on their property tax rate
References HJR 83 that accompanies the bill to provide a constitutional amendment

HB 1601 left pending

HB 2311 (Krause) – Relating to limitations on increases in the appraised value for ad valorem tax purposes of residence homesteads and single-family residences other than residence homesteads.

Would cap homestead tax increase at 5%
10% cap on property tax increase for all residential homes

Chandler Crouch, Chandler Crouch Realtors – For

How to we avoid property tax crisis without impacting funding for entities and without implementing other taxation?
It is a cash flow issue
Property tax increases without caps leads to people being forced out of their homes – some appraisal districts even forget to re-value property annually, which surprises homeowners

Dick Levine, Every Texan – Against

50% of benefit from tax breaks go to the highest income households
This bill would likely concentrate those benefits in that group again
Bill includes non-homestead single-family homes, which includes things like vacation homes and 2^nd homes, etc.
We don’t know how this will affect equity – House rules don’t require tax equity note for property tax changes
Recommends changes in House rules so that a tax equity note will be required for all tax bills, including property taxes

Dale Cramer, Texas Taxpayers and Research Association – Against

Cannot support this approach to property tax relief – simply shift costs to other properties
Has been mentioned that local districts are constrained in how much they can increase property tax rates – when you cap one set of properties at a lower level than others in the market, localities will simply raise the rate by 3.5% on other properties to compensate
You save one group of taxpayers revenue at the expense of others paying more
Anything you do to save taxes on existing properties will simply get passed on to other properties
Well intentioned legislation, but not the best approach

Cheryl Johnson, Galveston County Tax Assessor Collector – For

Got to do something about property tax increases
Big real estate boom if we put a cap on increasing rates in real property

HB 2311 left pending

HJR 108 (Krause) – Proposing a constitutional amendment to authorize the legislature to establish a lower limit on the maximum appraised value of residence homesteads for ad valorem tax purposes and to establish a limit on the value of single-family residences other than residence homesteads for those purposes.

Constitutional amendment that would need to go into effect before HB 2311 could be implemented

HJR 108 left pending

HB 2711 (Hinojosa) – Relating to the continuation of a residence homestead exemption from ad valorem taxation while the owner is temporarily absent because of service outside of the United States as a foreign service officer employed by the United States Department of State.

No current homestead exemption for FSOs working overseas temporarily on behalf of the US; seeks to correct that
Currently one exists for military members overseas
Cole – What’s a FSO versus military officer?
- Military officer is enlisted, FSOs are civilian and are diplomats
Meyer – What are some examples of FSOs?
- Economic Officers, Consular Officers, Political Officers, etc.

HB 2711 left pending

HB 2428 (Murr) (CS) – Relating to the calculation of net to land in the appraisal of open-space land for ad valorem tax purposes.

Chronic wasting disease (CWD) affects some deer species
TPWD and Animal Health Commission maintain 5 CWD Containment Zones to protect hunting revenue in the state and monitor animals
Current formula accounts for hunting leases and revenue in determining land valuation of large empty tracks of land, like ranchers
Many ranches in CWD Containment zones have to explain lack of revenue to appraiser to get a fair valuation – bill would shift burden to the appraiser to account for CWD Containment when valuing land

HB 2428 left pending

HB 4357 (Schaefer) – Relating to the application of sales and use taxes to information technology consulting and technical support services.

Current uncertainty in the law provides confusion to tech and IT services concerning labeling their services
Bill clarifies categorization of services

Keith Willis, ECX Systems – For

Company provides IT services for startups
Recent audit of the company created huge disparity in classification of our services to a client, which resulted in a massive bill
State auditors were not able to tell us why this happened – we aren’t trained in the law or audit practice
We don’t have a way to easily determine how to collect required sales tax and other state fees and service taxes
Clarifying that there are different types of services in statute for IT will increase compliance and ease of access
Cole – How does the law clarify the services?
- Bill changes a clause in the sales tax statute that says consulting is not taxable, but over time audits have been stretching sales classifications to quality consulting as something different, resulting in consulting being taxed
- Result of complex overreach of audits over time – needs to be corrected
- Partially due to lack of understanding of the industry by the state auditors
Noble – So you have products and goods you sell and charge sales tax on. So you’re looking to clarify less black and white services?
- Yes exactly
- Provides analogy to retail services to clarify service vs product distinction

Richard Zamora – For

Bill will provide clear guidance for IT companies in collecting and reporting tax on services
Complex tax code that will improve tax collection and reduce unnecessary audits

Laura Habib, Comptroller’s Office – On

Resource witness
Meyer – Could you provide some clarity about services and products tax?
- Goods and property are taxable – including computer software
- Current exception in tax code holds that if you aren’t the maintainer of the program or seller, its not taxable
Meyer – Is there a lack of clarity?
- Not necessarily

HB 4357 left pending

HB 3629 (Bonnen) – Relating to the date a deferral or abatement of the collection of ad valorem taxes on the residence homestead of an elderly or disabled person or disabled veteran expires.

Bill provides sufficient time for families of elderly individuals who deferred tax payments and then passed away to address the issue with taxation

Cheryl Johnson, Galveston County Tax Assessor Collector – For

Generally send a notice 180 days after death of elderly individual
About 50% of those who defer do pay their taxes, just use deferral as a safety net
Impact of deferral can be thousands of dollars higher in costs for families
Appraisal increases were blunted for elderly homeowners due to ceiling, but that does not apply for their families

HB 3629 left pending

HB 4179 (Bonnen) – Relating to the procedures to be used by an appraisal district in resolving a protest following the filing of a notice of protest by a property owner.

Value increase drives up risk assessment
ARB panels can be expensive and COVID has only complicated the informal conference process that many ARB members hold to resolve issues
Bill would standardize current informal process and create a structure for holding informal conferences across the state

Cheryl Johnson, Galveston County Tax Assessor Collector – For

Appraisal process is very complex, and no uniform standard for meetings with ARB members or representatives
Varies county by county
Bill’s standardization is good for disputes and for reducing ARB hearings and formal dispute proceedings – creates confidence and consistency

HB 4179 left pending

HB 1090 (Bailes) (CS) – Relating to the appraisal for ad valorem tax purposes of property that was erroneously omitted from an appraisal roll in a previous year.

Bill allows for back tax assessments to only go back 3 years
Aligns with other sections of tax code requiring 3-year intervals for appraisal

HB 1090 left pending

HB 4270 (Rodriguez) – Relating to the procedures for requesting or applying for certain ad valorem tax refunds and exemptions.

Bill requires applications for homestead exemptions to state that applicants may be eligible for an extension
Bill changes proof of identity requirement to remove notarization requirement
Prohibits districts from denying exemption based on date of ID of drivers license

Richard Andro, Refund Advisory Corp. – For

Bill will help future applicants apply for retroactive exemptions
Will give homeowners more control over receiving their refunds for property taxes
Standardizes ID proof requirements to be the same as the homestead application requires
Failing to update your ID should not be reason to deny your application for tax exemption

HB 4270

HB 361 (Sherman) – Relating to a franchise tax credit for taxable entities that provide paid family care leave

Offers incentive tax credit to employers that pay maternity leave for employees
Minimum 4 weeks for mothers and 2 weeks for fathers
Franchise taxes can be quite costly for businesses, providing relief will incentivize businesses to promote the bond of family
Committee substitute in progress of changes

HB 361 left pending

HB 1279 (Kacal) – Relating to a local option exemption from ad valorem taxation of a percentage of the appraised value of the residence homesteads of certain volunteer first responders.

Shine – Would provide tax exemptions to volunteer first responders who provide valuable services
Optional tool to reward current volunteers and recruit future volunteers

HB 1279 left pending

HB 321 (Howard) – Relating to a sales and use tax exemption for certain feminine hygiene products.

Exempts female hygiene products like tampons and pads from sales and use tax
Necessary products for women to participate in society
While other medical products are exempt from the sales tax, menstrual products are not
Most agree that these products are a necessity, yet 25% of Texas women regularly report not being able to access these products
Cole – What is considered Health-related products?
- Prescription medications, over the counter medications, etc.

Ashley Adolvo, Self – For

Menstrual equity advocate
Opposes “period poverty” and supports efforts to combat it
Supports exempting menstrual products from the sales tax – essential to livelihoods of women

Claire Moore, Self – For

Menstrual equity advocate
Opposes “period poverty” and supports efforts to combat it
Supports exempting menstrual products from the sales tax – essential to livelihoods of women

Sharia Tamai, Self – For

Menstrual equity advocate
Opposes “period poverty” and supports efforts to combat it
Supports exempting menstrual products from the sales tax – essential to livelihoods of women

Andrea Risondo, Self – For

Menstrual equity advocate
Opposes “period poverty” and supports efforts to combat it
Supports exempting menstrual products from the sales tax – essential to livelihoods of women

Shina Sutaria, Self – For

Menstrual equity advocate
Opposes “period poverty” and supports efforts to combat it
Supports exempting menstrual products from the sales tax – essential to livelihoods of women

Alexa Atkinson, Self – For

Menstrual equity advocate
Opposes “period poverty” and supports efforts to combat it
Supports exempting menstrual products from the sales tax – essential to livelihoods of women

Paula Blackman, Self – For

Menstrual equity advocate
Opposes “period poverty” and supports efforts to combat it
Supports exempting menstrual products from the sales tax – essential to livelihoods of women
Time to end gender tax

Sofia Ramichansia, Self – For

Menstrual equity advocate
Opposes “period poverty” and supports efforts to combat it
Supports exempting menstrual products from the sales tax – essential to livelihoods of women

Serana Zhang, Self – For

Menstrual equity advocate
Opposes “period poverty” and supports efforts to combat it
Supports exempting menstrual products from the sales tax – essential to livelihoods of women

Testimony continued for approximately 45 more minutes; all in favor of the bill

HB 1360 (Landgraf) – Relating to the procedure by which a taxing unit is required to provide public notice of certain ad valorem tax-related information.

Bill laid out
Currently information is to be published on each website of subdivision and historically newspaper of record
Lack of broadband and elderly access to website, seeks to be transparency by providing information the way some people prefer

Donnis Baggett, Texas Press Association – For

Makes government more accountable in the taxation process
Newspaper has more “discoverability” factor and a third party accountability oversight
Notes there is a digital divide in Texas
25% of Texans over age of 65 have no broadband access
Accountability is essential for trust
Murphy – asked about statistic, what sort of % subscribe to a newspaper?
- Newspaper readers are loyal readers
- Will get that statistic back to the committee on hard print newspaper

Robin Harper – Texas Tax Assessor’s Association – On

Ask that bill language remain permissive

Landgraf, in closing

Accountability through transparency reaches a larger audience with this bill
Need to continue to have the discussion
Meyer – does it still allow for online notice?
- Yes; supplements online publication
- There is currently no prohibition against doing this, it is just not mandatory

HB 1360 left pending

HB 2292 (Landgraf) – Relating to the appraisal for ad valorem tax purposes of a real property interest in oil or gas in place.

Bill laid out
Complicated formula and one year average is looked at now, the bill would simplify by getting rid of complex formula and modify the average so there are more data points
Look at average over two years instead of one could possibly minimize volatility

James Labeouf, Texas Oil and Gas – On

Property tax is tax on future vs other taxes that look at past activity
Current code takes a guess at the future, if we make law about past then would be abandoning market value as top principle
Benefit of stability and as noted in fiscal note but generally industry tends to take a dim view of retreating from market value

Landgraf, in closing

There are some complexities that should be taken in account
Yo-yo effect of prices can have a negative effect, concerns they need to work through
Will work with stakeholders to get a better draft
Important discussion to keep moving forward

HB 2292 left pending