By: Isaac H.B. No. 139       A BILL TO BE ENTITLED   AN ACT   relating to the calculation of certain ad valorem tax rates of a   taxing unit and the manner in which a proposed ad valorem tax rate   that exceeds the voter-approval tax rate is approved; making   conforming changes.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 3828.157, Special District Local Laws   Code, is amended to read as follows:          Sec. 3828.157.  INAPPLICABILITY OF CERTAIN TAX CODE   PROVISIONS.  Sections 26.04, [26.042,] 26.05, and 26.07, [and   26.075,] Tax Code, do not apply to a tax imposed under Section   3828.153 or 3828.156.          SECTION 2.  Section 8876.152(a), Special District Local Laws   Code, is amended to read as follows:          (a)  Sections 26.04, [26.042,] 26.05, 26.06, 26.061, and   26.07, [and 26.075,] Tax Code, do not apply to a tax imposed by the   district.          SECTION 3.  Section 26.04(c), Tax Code, is amended to read as   follows:          (c)  After the assessor for the taxing unit submits the   appraisal roll for the taxing unit to the governing body of the   taxing unit as required by Subsection (b), an officer or employee   designated by the governing body shall calculate the no-new-revenue   tax rate and the voter-approval tax rate for the taxing unit, where:                (1)  "No-new-revenue tax rate" means a rate expressed   in dollars per $100 of taxable value calculated according to the   following formula:          NO-NEW-REVENUE TAX RATE = (LAST YEAR'S LEVY - LOST PROPERTY   LEVY) / (CURRENT TOTAL VALUE - NEW PROPERTY VALUE)          ; and                (2)  "Voter-approval tax rate" means a rate expressed   in dollars per $100 of taxable value calculated according to the   following [applicable] formula:                      [(A) for a special taxing unit:]          VOTER-APPROVAL TAX RATE = [(]NO-NEW-REVENUE MAINTENANCE AND   OPERATIONS RATE [x 1.08)] + CURRENT DEBT RATE          [; or                      [(B) for a taxing unit other than a special taxing   unit:          [VOTER-APPROVAL TAX RATE = (NO-NEW-REVENUE MAINTENANCE AND   OPERATIONS RATE x 1.035) + (CURRENT DEBT RATE + UNUSED INCREMENT   RATE)]          SECTION 4.  Sections 26.041(a), (b), and (c), Tax Code, are   amended to read as follows:          (a)  In the first year in which an additional sales and use   tax is required to be collected, the no-new-revenue tax rate and   voter-approval tax rate for the taxing unit are calculated   according to the following formulas:                NO-NEW-REVENUE TAX RATE = [(LAST YEAR'S LEVY -   LOST PROPERTY LEVY) / (CURRENT TOTAL VALUE - NEW   PROPERTY VALUE)] - SALES TAX GAIN RATE   and                VOTER-APPROVAL TAX RATE [FOR SPECIAL TAXING UNIT]   = [(]NO-NEW-REVENUE MAINTENANCE AND OPERATIONS RATE [x   1.08)] + [(]CURRENT DEBT RATE - SALES TAX GAIN RATE[)   [or                [VOTER-APPROVAL TAX RATE FOR TAXING UNIT OTHER   THAN SPECIAL TAXING UNIT = (NO-NEW-REVENUE MAINTENANCE   AND OPERATIONS RATE x 1.035) + (CURRENT DEBT RATE +   UNUSED INCREMENT RATE - SALES TAX GAIN RATE)]   where "sales tax gain rate" means a number expressed in dollars per   $100 of taxable value, calculated by dividing the revenue that will   be generated by the additional sales and use tax in the following   year as calculated under Subsection (d) by the current total value.          (b)  Except as provided by Subsections (a) and (c), in a year   in which a taxing unit imposes an additional sales and use tax, the   voter-approval tax rate for the taxing unit is calculated according   to the following formula, regardless of whether the taxing unit   levied a property tax in the preceding year:                VOTER-APPROVAL TAX RATE [FOR SPECIAL TAXING UNIT]   = [[(]LAST YEAR'S MAINTENANCE AND OPERATIONS EXPENSE   [x 1.08)] / (CURRENT TOTAL VALUE - NEW PROPERTY VALUE)]   + (CURRENT DEBT RATE - SALES TAX REVENUE RATE)   [or                [VOTER-APPROVAL TAX RATE FOR TAXING UNIT OTHER   THAN SPECIAL TAXING UNIT = [(LAST YEAR'S MAINTENANCE   AND OPERATIONS EXPENSE x 1.035) / (CURRENT TOTAL VALUE   - NEW PROPERTY VALUE)] + (CURRENT DEBT RATE + UNUSED   INCREMENT RATE - SALES TAX REVENUE RATE)]   where "last year's maintenance and operations expense" means the   amount spent for maintenance and operations from property tax and   additional sales and use tax revenues in the preceding year, and   "sales tax revenue rate" means a number expressed in dollars per   $100 of taxable value, calculated by dividing the revenue that will   be generated by the additional sales and use tax in the current year   as calculated under Subsection (d) by the current total value.          (c)  In a year in which a taxing unit that has been imposing   an additional sales and use tax ceases to impose an additional sales   and use tax, the no-new-revenue tax rate and voter-approval tax   rate for the taxing unit are calculated according to the following   formulas:                NO-NEW-REVENUE TAX RATE = [(LAST YEAR'S LEVY -   LOST PROPERTY LEVY) / (CURRENT TOTAL VALUE - NEW   PROPERTY VALUE)] + SALES TAX LOSS RATE   and                VOTER-APPROVAL TAX RATE [FOR SPECIAL TAXING UNIT]   = [[(]LAST YEAR'S MAINTENANCE AND OPERATIONS EXPENSE   [x 1.08)] / (CURRENT TOTAL VALUE - NEW PROPERTY VALUE)]   + CURRENT DEBT RATE   [or                [VOTER-APPROVAL TAX RATE FOR TAXING UNIT OTHER   THAN SPECIAL TAXING UNIT = [(LAST YEAR'S MAINTENANCE   AND OPERATIONS EXPENSE x 1.035) / (CURRENT TOTAL VALUE   - NEW PROPERTY VALUE)] + (CURRENT DEBT RATE + UNUSED   INCREMENT RATE)]   where "sales tax loss rate" means a number expressed in dollars per   $100 of taxable value, calculated by dividing the amount of sales   and use tax revenue generated in the last four quarters for which   the information is available by the current total value and "last   year's maintenance and operations expense" means the amount spent   for maintenance and operations from property tax and additional   sales and use tax revenues in the preceding year.          SECTION 5.  Section 26.07(b), Tax Code, is amended to read as   follows:          (b)  If the governing body of a [special] taxing unit [or a   municipality with a population of 30,000 or more] adopts a tax rate   that exceeds the taxing unit's voter-approval tax rate, [or the   governing body of a taxing unit other than a special taxing unit or   a municipality with a population of less than 30,000 regardless of   whether it is a special taxing unit adopts a tax rate that exceeds   the greater of the taxing unit's voter-approval tax rate or de   minimis rate,] the registered voters of the taxing unit at an   election held for that purpose must determine whether to approve   the adopted tax rate.          SECTION 6.  Sections 31.12(a) and (c), Tax Code, as amended   by S.B. 850, Acts of the 89th Legislature, Regular Session, 2025,   and effective September 1, 2025, are amended to read as follows:          (a)  A refund of a tax provided by Section 11.35(j),   11.431(b), 11.436(b), 11.438(c), 11.439(b), 23.1243(d), 23.48(d),   23.60(d), 26.05(e), 26.07(g), [26.075(k),] 26.08(d-2), 26.1115(c),   26.112(b), 26.1125(b), 26.1127(b), 26.15(f), 31.061(e), 31.071(c),   31.11, 31.111, or 31.112(c)(3) must be paid not later than the 60th   day after the date the liability for the refund arises as determined   under this section.          (c)  For purposes of this section, liability for a refund   arises:                (1)  if the refund is required by Section 11.35(j), on   the date the collector for the taxing unit learns the refund is   required;                (2)  if the refund is required by Section 11.431(b),   11.436(b), 11.438(c), or 11.439(b), on the date the chief appraiser   notifies the collector for the taxing unit of the approval of the   applicable exemption;                (3)  if the refund is required by Section 23.1243(d),   on the date the chief appraiser notifies the collector for the   taxing unit of the amount of tax to be refunded;                (4)  if the refund is required by Section 23.48(d),   23.60(d), 26.1115(c), 26.112(b), 26.1125(b), or 26.1127(b), on the   date the assessor notifies the collector for the taxing unit of the   decrease in the person's tax liability;                (5)  if the refund is required by Section 26.05(e), on   the date the action to enjoin the collection of taxes imposed by the   taxing unit is finally determined;                (6)  if the refund is required by Section 26.07(g)[,   26.075(k),] or 26.08(d-2), on the date the assessor for the taxing   unit mails the corrected tax bills under Section 26.07(f)[,   26.075(j),] or 26.08(d-1), as applicable;                (7)  if the refund is required by Section 26.15(f):                      (A)  for a correction to the tax roll made under   Section 26.15(b), on the date the change in the tax roll is   certified to the assessor for the taxing unit under Section 25.25;   or                      (B)  for a correction to the tax roll made under   Section 26.15(c), on the date the change in the tax roll is ordered   by the governing body of the taxing unit;                (8)  if the refund is required by Section 31.061(e), on   the date the taxing unit determines that the amount credited under   Section 31.061(d) exceeds the amount due to the taxing unit;                (9)  if the refund is required by Section 31.071(c), on   the date the challenge, protest, or appeal is finally determined;                (10)  if the refund is required by Section 31.11, on the   date the auditor for the taxing unit determines that the payment was   erroneous or excessive;                (11)  if the refund is required by Section 31.111, on   the date the collector for the taxing unit determines that the   payment was erroneous; or                (12)  if the refund is required by Section   31.112(c)(3), on the date the agreement described by Section   31.112(c) is made.          SECTION 7.  Section 33.08(b), Tax Code, is amended to read as   follows:          (b)  The governing body of the taxing unit or appraisal   district, in the manner required by law for official action, may   provide that taxes that become delinquent on or after June 1 under   Section [26.075(j),] 26.15(e), 31.03, 31.031, 31.032, 31.033,   31.04, or 42.42 incur an additional penalty to defray costs of   collection.  The amount of the penalty may not exceed the amount of   the compensation specified in the applicable contract with an   attorney under Section 6.30 to be paid in connection with the   collection of the delinquent taxes.          SECTION 8.  Section 49.057, Water Code, is amended by   amending Subsection (b) and adding Subsection (j) to read as   follows:          (b)  The board shall adopt an annual budget.  The board of a   developed district[, as defined by Section 49.23602,] shall include   as an appendix to the budget the district's:                (1)  audited financial statements;                (2)  bond transcripts; and                (3)  engineer's reports required by Section 49.106.          (j)  In this section, "developed district" means a district   that has financed, completed, and issued bonds to pay for all land,   works, improvements, facilities, plants, equipment, and appliances   necessary to serve at least 95 percent of the projected build-out of   the district in accordance with the purposes for its creation or the   purposes authorized by the constitution, this code, or any other   law.          SECTION 9.  Section 49.107(g), Water Code, is amended to   read as follows:          (g)  Sections 26.04, [26.042,] 26.05, 26.061, and 26.07,   [and 26.075,] Tax Code, do not apply to a tax levied and collected   under this section or an ad valorem tax levied and collected for the   payment of the interest on and principal of bonds issued by a   district.          SECTION 10.  Section 49.108(f), Water Code, is amended to   read as follows:          (f)  Sections 26.04, [26.042,] 26.05, 26.061, and 26.07,   [and 26.075,] Tax Code, do not apply to a tax levied and collected   for payments made under a contract approved in accordance with this   section.          SECTION 11.  Section 49.236(a), Water Code, is amended to   read as follows:          (a)  Before the board adopts an ad valorem tax rate for the   district for debt service, operation and maintenance purposes, or   contract purposes, the board shall give notice of each meeting of   the board at which the adoption of a tax rate will be considered.   The notice must:                (1)  contain a statement in substantially the following   form:   "NOTICE OF PUBLIC HEARING ON TAX RATE          "The (name of the district) will hold a public hearing on a   proposed tax rate for the tax year (year of tax levy) on (date and   time) at (meeting place). Your individual taxes may increase at a   greater or lesser rate, or even decrease, depending on the tax rate   that is adopted and on the change in the taxable value of your   property in relation to the change in taxable value of all other   property. The change in the taxable value of your property in   relation to the change in the taxable value of all other property   determines the distribution of the tax burden among all property   owners.          "Visit Texas.gov/PropertyTaxes to find a link to your local   property tax database on which you can easily access information   regarding your property taxes, including information about   proposed tax rates and scheduled public hearings of each entity   that taxes your property.          "(Names of all board members and, if a vote was taken, an   indication of how each voted on the proposed tax rate and an   indication of any absences.)";                (2)  contain the following information:                      (A)  the district's total adopted tax rate for the   preceding year and the proposed tax rate, expressed as an amount per   $100;                      (B)  the difference, expressed as an amount per   $100 and as a percent increase or decrease, as applicable, in the   proposed tax rate compared to the adopted tax rate for the preceding   year;                      (C)  the average appraised value of a residence   homestead in the district in the preceding year and in the current   year; the district's total homestead exemption, other than an   exemption available only to disabled persons or persons 65 years of   age or older, applicable to that appraised value in each of those   years; and the average taxable value of a residence homestead in the   district in each of those years, disregarding any homestead   exemption available only to disabled persons or persons 65 years of   age or older;                      (D)  the amount of tax that would have been   imposed by the district in the preceding year on a residence   homestead appraised at the average appraised value of a residence   homestead in that year, disregarding any homestead exemption   available only to disabled persons or persons 65 years of age or   older;                      (E)  the amount of tax that would be imposed by the   district in the current year on a residence homestead appraised at   the average appraised value of a residence homestead in that year,   disregarding any homestead exemption available only to disabled   persons or persons 65 years of age or older, if the proposed tax   rate is adopted;                      (F)  the difference between the amounts of tax   calculated under Paragraphs (D) and (E), expressed in dollars and   cents and described as the annual percentage increase or decrease,   as applicable, in the tax to be imposed by the district on the   average residence homestead in the district in the current year if   the proposed tax rate is adopted; and                      (G)  if the proposed combined debt service,   operation and maintenance, and contract tax rate requires [or   authorizes] an election to approve [or reduce] the tax rate, [as   applicable,] a description of the purpose of the proposed tax   increase;                (3)  contain a statement in substantially the following   form[, as applicable:                      [(A)  if the district is a district described by   Section 49.23601]:   "NOTICE OF VOTE ON TAX RATE          "If the district adopts a combined debt service, operation   and maintenance, and contract tax rate that would result in the   taxes on the average residence homestead increasing from the   preceding year [by more than eight percent], an election must be   held to determine whether to approve the operation and maintenance   tax rate under Section 49.23601, Water Code.";                      [(B)  if the district is a district described by   Section 49.23602:   ["NOTICE OF VOTE ON TAX RATE          ["If the district adopts a combined debt service, operation   and maintenance, and contract tax rate that would result in the   taxes on the average residence homestead increasing by more than   3.5 percent, an election must be held to determine whether to   approve the operation and maintenance tax rate under Section   49.23602, Water Code."; or                      [(C)  if the district is a district described by   Section 49.23603:   ["NOTICE OF TAXPAYERS' RIGHT TO ELECTION TO REDUCE TAX RATE          ["If the district adopts a combined debt service, operation   and maintenance, and contract tax rate that would result in the   taxes on the average residence homestead increasing by more than   eight percent, the qualified voters of the district by petition may   require that an election be held to determine whether to reduce the   operation and maintenance tax rate to the voter-approval tax rate   under Section 49.23603, Water Code.";] and                (4)  include the following statement: "The 86th Texas   Legislature modified the manner in which the voter-approval tax   rate is calculated to limit the rate of growth of property taxes in   the state.".          SECTION 12.  The heading to Section 49.23601, Water Code, is   amended to read as follows:          Sec. 49.23601.  AUTOMATIC ELECTION TO APPROVE TAX RATE [FOR   LOW TAX RATE DISTRICTS].          SECTION 13.  Sections 49.23601(a) and (c), Water Code, are   amended to read as follows:          (a)  In this section, "voter-approval tax rate" means the   rate equal to the sum of the following tax rates for the district:                (1)  the current year's debt service tax rate;                (2)  the current year's contract tax rate; and                (3)  the operation and maintenance tax rate that would   impose [1.08 times] the amount of [the] operation and maintenance   tax imposed by the district in the preceding year on a residence   homestead appraised at the average appraised value of a residence   homestead in the district in that year, disregarding any homestead   exemption available only to disabled persons or persons 65 years of   age or older.          (c)  If the board of a district adopts a combined debt   service, contract, and operation and maintenance tax rate that   would impose more than [1.08 times] the amount of tax imposed by the   district in the preceding year on a residence homestead appraised   at the average appraised value of a residence homestead in the   district in that year, disregarding any homestead exemption   available only to disabled persons or persons 65 years of age or   older, an election must be held in accordance with the procedures   provided by Sections 26.07(c)-(g), Tax Code, to determine whether   to approve the adopted tax rate.  If the adopted tax rate is not   approved at the election, the district's tax rate is the   voter-approval tax rate.          SECTION 14.  The following provisions are repealed:                (1)  Section 45.0032(d), Education Code;                (2)  Section 120.007(d), Local Government Code;                (3)  Sections 26.012(8-a) and (19), Tax Code;                (4)  Section 26.013, Tax Code;                (5)  Section 26.042, Tax Code;                (6)  Section 26.0501(c), Tax Code;                (7)  Section 26.063, Tax Code;                (8)  Section 26.075, Tax Code;                (9)  Section 49.23601(b), Water Code;                (10)  Section 49.23602, Water Code; and                (11)  Section 49.23603, Water Code.          SECTION 15.  This Act applies only to ad valorem taxes   imposed for an ad valorem tax year that begins on or after the   effective date of this Act.          SECTION 16.  This Act takes effect January 1, 2026.