A top priority of state lawmakers for many years, the Texas Property Tax Reform and Transparency Act of 2019 was finally signed into law last month. The expansive Senate Bill 2 (SB2) aims to slow the growth of property taxes in the state. The goal is to ease the huge tax burden on property owners.

SB2 makes several changes to the property tax appraisal and collection processes. New policies and requirements, like the publishing of certain data on official websites, are meant to make property tax systems easier for Texans to understand.

property tax terms

Among the amendments included in SB2 are those that define or redefine terms used in the Tax Code. These terms include the following:

“De minimis rate”

SB2 adds Subdivision 8-a to the Tax Code. Subdivision 8-a defines the term “de minimis rate” and how it is calculated. “De minimis rate” is the total of (1) the no-new-revenue maintenance and operations rate (M&O) of a taxing unit, (2) the current debt rate of a taxing unit, and (3) the rate that will impose taxes amounting to $500,000 when applied to the current total value of a taxing unit.

“Special taxing unit”

SB2 also adds Subdivision 19, which defines the term “special taxing unit,” to the Tax Code. “Special taxing unit” refers to a taxing unit, with the exception of a school district, that has a proposed M&O rate of 2.5 cents or fewer per every $100 of taxable value for the current tax year. A special taxing unit can also mean a hospital district or a junior college district.

“Excess collections”

There is a major change to the definition of “excess collections.” It is now defined as the amount by which debt taxes collected during the previous tax year exceeded the amount expected in the previous year’s calculation of the voter-approval tax rate. SB2 introduced “voter-approval tax rate” as an alternative to “rollback tax rate.”

The taxing unit’s collector is responsible for certifying the excess collections.

“Last year’s levy”

The term “last year’s levy” refers to the total amount of taxes refunded by a taxing unit in the previous year for tax years before that year. It also includes the taxes that would be generated when the total rate adopted by the governing body in the previous year is multiplied by the total taxable value of property found on the appraisal roll for the previous year.

The total taxable value includes any taxable value reduced in an appeal based on Chapter 42 of the Tax Code. The appraisal roll includes all supplements and corrections except for those made according to Section 25.25 of the Tax Code as of the calculation date.

The definition indicates that the previous year’s taxable value for a school district will exclude the total value of homesteads that have qualified for a tax limitation. It also says that the previous year’s taxable value for a municipality, county, or junior college district will exclude the total value of homesteads that have qualified for a tax limitation.

SB2 adds a new criterion to the definition of “last year’s levy.” It adds “the portion of taxable value of property that is the subject of an appeal under Chapter 42 on July 25 that is not in dispute.”

“No-new-revenue maintenance and operations rate”

“No-new-revenue maintenance and operations rate” replaced the term “effective maintenance and operations rate.” This rate is generated in dollars per $100 of taxable value. It is obtained by using the formula:

No-new-revenue maintenance and operations rate = (Last year’s levy – last year’s debt levy – last year’s junior college levy) / (Current total value – new property value)

 

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