Some of the many amendments introduced in the Texas Property Tax Reform and Transparency Act of 2019 focus on the “no-new-revenue” tax rate. The “no-new-revenue tax rate” replaces “effective tax rate” in the new legislation. What is the no-new-revenue tax rate, and what is it for?

What is “no-new-revenue”?

The no-new-revenue tax rate is a rate conveyed in dollars for every $100 of taxable value. The formula to calculate for the no-new-revenue tax rate is as follows:

No-new-revenue tax rate = (Last year’s levy – Lost property levy) / (Current total value – New property value)

Property Tax Reform

The no-new-revenue tax rate for a whole county is the total of all the no-new-revenue tax rates for each type of tax levied by the county.

The formula for calculating the no-new-revenue tax rate changes during the first year that a taxing unit requires an additional sales and use tax. In this case, you can compute for the no-new-revenue tax rate using this formula:

No-new-revenue tax rate = (Last year’s levy – Lost property levy) / (Current total value – New property value) – Sales tax gain rate

Here, “sales tax gain rate” is what you get when you divide the revenue expected from the additional sales and use tax in the coming year by the current total value. Like the no-new-revenue rate, the sales tax gain rate is in dollars per $100 taxable value.

There is another formula for calculating the no-new-revenue tax rate. This one is for a year in which a taxing unit stops imposing an additional sales and use tax. The formula is as follows:

No-new-revenue tax rate = (Last year’s levy – Lost property levy) / (Current total value – New property value) + Sales tax loss rate

The “sales tax loss rate” is what you get when you divide the sales and use tax revenue from the last four quarters by the current total value.

No-new-revenue tax rate to pay for state criminal justice mandate

Section 26.044 of the Tax Code says that during the first tax year, a county approves a tax rate after September 1, 1991, and during which the state criminal justice mandate applies, the county’s no-new-revenue maintenance and operation (M&O) rate will be increased. The formula for the rate of increase is:

State criminal justice mandate / (Current total value – New property value)

For the second and subsequent tax years—and if the amount spent for the state criminal justice mandate was increased over the previous year—the no-new-revenue M&O rate will increase. The formula for the rate of increase is the following:

(This year’s state criminal justice mandate – Previous year’s state criminal justice mandate) / (Current total value – New property value)

Tax rate adjustment for indigent health care

Section 26.0441 of the Tax Code says that during the first tax year, a county approves a tax rate after January 1, 2000, and during which the enhanced minimum eligibility standards for indigent health care apply to the taxing unit, the no-new-revenue M&O rate will increase. The formula for the increase is as follows:

Amount of increase = Enhanced indigent health care expenditures / (Current total value – New property value)

During each subsequent tax year, if the enhanced indigent health care expenses surpass the expenses from the previous year, the no-new-revenue M&O rate will increase. The formula for the increase is indicated below:

Amount of increase = (Current tax year’s enhanced indigent health care expenditures – Previous tax year’s indigent health care expenditures) / (Current total value – New property value)

When there is an increase in the no-new-revenue M&O rate, the taxing unit is required to publish the information in a newspaper and on the taxing unit’s website.

 

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