Property Tax Relief and Reform is on the November Ballot

Reforms Passed in July’s Special Session

Property taxes are a major line-item expense for hotel owners, and the Texas legislature was primed to take up property tax relief this year.  It was our mission at THLA to make sure that property tax relief measures would include commercial properties, instead of proposals that would only increase residential homestead exemptions.  After months of many heated discussions and a great deal of back-and-forth between the Texas Senate, Texas House of Representatives, the Governor, and Lt. Governor, the Texas Legislature finally passed meaningful property tax relief and reform in a July special legislative session.  Now some of those reforms are on the ballot in this November election. 

Budget Appropriation and School District Tax Reduction: 

The Legislature appropriated $12.6 billion of the state budget to be spent on public education.  In Texas, public education is funded both by state tax revenue and local property tax revenue.  If more state dollars are appropriated to public education, less local property tax revenues are needed to fund independent school districts.  Because school district property taxes typically account for more than 60 percent of all property owners’ tax bills, the appropriation of state money will compress the need to collect local property tax revenues for the local school district.  This positive change will affect both commercial and residential property owners since both types of property are subject to school district property taxes.

Franchise Tax Exemptions:

To give commercial property owners even more tax relief, the Legislature also passed an increase to the franchise tax exemption.  The Texas franchise tax works as a business income tax, subjecting Texas businesses to a tax on the business’ profit margins.  Currently, the first $1.24 million in a business’s profit margin is exempt from the tax.  With the 2023 legislation, the exemption will increase to $2.47 million annually.

Temporary Appraisal Cap on Commercial Property Valued at $5 Million or Less (and residential property that is not homesteaded):  

For the first time in Texas, commercial property and residential property that is not homesteaded valued at $5 million or less will be subject to a 20 percent cap on appraisals.  This means appraisal districts may not increase the taxable value of any of those properties by more than 20 percent each year, for the next three years. The program will end in 2026 unless the Legislature and voters decide to continue it.

Election of County Appraisal District Officials:

Each county in Texas has an appraisal district that sets the appraised value of all commercial and residential properties in the county.  Currently, the appraisal districts’ board of directors are appointed by city and county governments, school districts, and other governmental recipients of the property tax revenue.  In July, the Legislature passed a law requiring the direct election of three positions on each board for four-year terms.

Expansion of the Residential Homestead Exemption:

The Legislature also increased the residential homestead exemption, which will affect those Texans who own residential property and use that property as their primary residence.  Homestead exemptions reduce the amount of value for a property that may be taxed.  Currently, the residential homestead exemption is $40,000, and if the measure is approved by voters this November, it will increase to $100,000.  The measure will also increase exemptions for seniors and homeowners with disabilities.


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