89R9609 JAM-D     By: Gates H.B. No. 4307       A BILL TO BE ENTITLED   AN ACT   relating to multifamily residential developments financed, owned,   or operated by public facility corporations.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 303.0421(b), Local Government Code, is   amended to read as follows:          (b)  Notwithstanding Section 303.042(c) and subject to   Subsections (c) and (d) of this section, an exemption under Section   303.042(c) for a multifamily residential development to which   Subsection (a) applies is available only if:                (1)  the requirements under Sections [Section]   303.0425 and 303.0426 are met;                (2)  at least:                      (A)  10 percent of the units in the multifamily   residential development are reserved for occupancy as lower income   housing units, as defined under Section 303.0425; and                      (B)  40 percent of the units in the multifamily   residential development are reserved for occupancy as moderate   income housing units, as defined under Section 303.0425;                (3)  the corporation delivers to the presiding officer   of the governing body of each taxing unit in which the development   is to be located written notice of the development, at least 30 days   before the date:                      (A)  the corporation takes action to approve a new   multifamily residential development or the acquisition of an   occupied multifamily residential development; and                      (B)  of any public hearing required to be held   under this section;                (4)  if a majority of the members of the board are not   elected officials, the development is approved by the governing   body of the municipality in which the development is located or, if   the development is not located in a municipality, the county in   which the development is located;                (5)  for an occupied multifamily residential   development that is acquired by a corporation and not otherwise   subject to a land use restriction agreement under Section 2306.185,   Government Code:                      (A)  not less than 15 percent of the total gross   cost of the existing development, as shown in the settlement   statement, is expended on rehabilitating, renovating,   reconstructing, or repairing the development, with initial   expenditures and construction activities:                            (i)  beginning not later than the first   anniversary of the date of the acquisition; and                            (ii)  finishing not later than the third   anniversary of the date of the acquisition; or                      (B)  at least 25 percent of the units are reserved   for occupancy as lower income housing units, as defined under   Section 303.0425, and the development is approved by the governing   body of the municipality in which the development is located or, if   the development is not located in a municipality, the county in   which the development is located; and                (6)  not less than 30 days before final approval of the   development:                      (A)  the corporation or corporation's sponsor   conducts, or obtains from a professional entity that has experience   underwriting affordable multifamily residential developments and   does not have a financial interest in the applicable development,   developer, or public facility user, an underwriting assessment of   the proposed development that allows the corporation to make a good   faith determination that:                            (i)  for an occupied multifamily residential   development acquired by a corporation, the total annual amount of   rent reduction on the income-restricted units provided at the   development will be not less than 60 percent of the estimated amount   of the annual ad valorem taxes that would be imposed on the property   without an exemption under Section 303.042(c) for the second,   third, and fourth years after the date of acquisition by the   corporation; and                            (ii)  for a newly constructed multifamily   residential development, the development would not be feasible   without the participation of the corporation; and                      (B)  the corporation publishes on its Internet   website a copy of the underwriting assessment described by   Paragraph (A).          SECTION 2.  The heading to Section 303.0426, Local   Government Code, is amended to read as follows:          Sec. 303.0426.  AUDIT REQUIREMENTS APPLICABLE TO ALL [FOR   CERTAIN] MULTIFAMILY RESIDENTIAL DEVELOPMENTS.          SECTION 3.  Sections 303.0426(b), (c), (d), (e), (f), and   (g), Local Government Code, are amended to read as follows:          (b)  A public facility user of any [a] multifamily   residential development claiming an exemption under Section   303.042(c) [and to which Section 303.0421 applies] must annually   submit to the department and the chief appraiser of the appraisal   district in which the development is located an audit report for a   compliance audit, prepared at the expense of the public facility   user and conducted by an independent auditor or compliance expert   with an established history of providing similar audits on housing   compliance matters, to:                (1)  determine whether the public facility user is in   compliance with Sections 303.0421 and 303.0425, if applicable; and                (2)  identify the difference in the rent charged for   income-restricted residential units and the estimated maximum   market rents that could be charged for those units without the rent   or income restrictions.          (c)  Not later than the 60th day after the date of receipt of   the audit conducted under Subsection (b), the department shall   examine the audit report and publish a report summarizing the   findings of the audit.  The report must:                (1)  be made available on the department's Internet   website;                (2)  be issued to a public facility user that has an   interest in a development that is the subject of an audit, the   comptroller, the applicable corporation, the governing body of the   corporation's sponsor, and, if the corporation's sponsor is a   housing authority, the elected officials who appointed the housing   authority's governing board; and                (3)  describe in detail the nature of any failure to   comply with the requirements in Sections 303.0421 and 303.0425, if   applicable.          (d)  If an audit report submitted under Subsection (b)   indicates noncompliance with Sections 303.0421 and 303.0425 as   described by Subsection (c)(3), a public facility user:                (1)  must be given:                      (A)  written notice from the department or   appropriate appraisal district that:                            (i)  is provided not later than the 45th day   after the date a report has been submitted under Subsection (b);                            (ii)  specifies the reasons for   noncompliance;                            (iii)  contains at least one option for a   corrective action to resolve the noncompliance; and                            (iv)  informs the public facility user that   failure to resolve the noncompliance will result in the loss of an   exemption under Section 303.042(c);                      (B)  60 days after the date notice is received   under this subdivision, to resolve the matter that is the subject of   the notice; and                      (C)  if a matter that is the subject of a notice   provided under this subdivision is not resolved to the satisfaction   of the department and the appropriate appraisal district during the   period provided by Paragraph (B), a second notice that informs the   public facility user of the loss of the exemption under Section   303.042(c) due to noncompliance with Sections 303.0421 and   303.0425; and                (2)  is considered to be in compliance with Sections   303.0421 and 303.0425 if notice under Subdivision (1)(A) is not   provided as specified by Subparagraph (i) of that paragraph.          (e)  Except as provided by Section 303.0421(d), an [An]   exemption under Section 303.042(c) does not apply for a tax year in   which the department determines that a multifamily residential   development that is financed, owned, or operated by a public   facility corporation created under this chapter is not in   compliance with the audit report requirements of this section or,   as [determined by the department] based on the [an] audit conducted   under Subsection (b), [to] not [be] in compliance with the   requirements of Section 303.0421 or 303.0425, if applicable.          (f)  Notwithstanding Subsection (g), the [The] initial audit   report required by Subsection (b) for a multifamily residential   development to which Section 303.0421 applies is due not later than   June 1 of the year following the first anniversary of:                (1)  the date of acquisition for an occupied   multifamily residential development that is acquired by a   corporation; or                (2)  the date a new multifamily residential development   first becomes occupied by one or more tenants.          (g)  An audit report required by this section is [Subsequent   audit reports following the issuance of the initial audit report   under Subsection (f) are] due not later than June 1 of each year.          SECTION 4.  Subchapter B, Chapter 303, Local Government   Code, is amended by adding Section 303.0427 to read as follows:          Sec. 303.0427.  ADDITIONAL REQUIREMENT FOR BENEFICIAL TAX   TREATMENT APPLICABLE TO ALL MULTIFAMILY RESIDENTIAL DEVELOPMENTS.   (a)  In this section, "public facility user" has the meaning   assigned by Section 303.0425.          (b)  A public facility user of one or more multifamily   residential developments claiming an exemption under Section   303.042(c) must first submit to the Texas Department of Housing and   Community Affairs and to the county tax assessor-collector for each   appraisal district in which the exemption is sought a one-time   exemption application on a form promulgated by the comptroller.          SECTION 5.  (a)  Notwithstanding Section 10(d)(1), Chapter   1169 (H.B. 2071), Acts of the 88th Legislature, Regular Session,   2023, Section 303.0426, Local Government Code, as amended by this   Act, applies to all multifamily residential developments claiming   an exemption under Section 303.042(c), Local Government Code,   regardless of when the developments were approved or acquired and   regardless of whether Sections 303.0421 and 303.0425, Local   Government Code, apply to those developments.          (b)  Section 303.0427, Local Government Code, as added by   this Act, applies to all multifamily residential developments   claiming an exemption under Section 303.042(c), Local Government   Code, regardless of when the developments were approved or acquired   and regardless of whether Sections 303.0421 and 303.0425, Local   Government Code, apply to those developments.          SECTION 6.  This Act takes effect September 1, 2025.