89R13976 CJC/SCL-D     By: Bell of Montgomery H.B. No. 5266       A BILL TO BE ENTITLED   AN ACT   relating to the authority of the attorney general to investigate   violations of law by certain local governments and to take action   against those local governments to enforce the law.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Chapter 402, Government Code, is amended by   adding Subchapter D to read as follows:   SUBCHAPTER D. VIOLATIONS OF LAW BY LOCAL GOVERNMENT          Sec. 402.101.  DEFINITIONS. In this subchapter:                (1)  "Local government" means a municipality or county.                (2)  "No-new-revenue tax rate" means the   no-new-revenue tax rate calculated under Chapter 26, Tax Code.          Sec. 402.102.  ATTORNEY GENERAL INVESTIGATION AND ACTION.   (a) The attorney general may investigate an alleged violation of   law by a local government.          (b)  The attorney general may bring an action in the name of   the state against a local government if the attorney general   determines after conducting an investigation under Subsection (a)   that the local government violated a law.          Sec. 402.103.  ENFORCEMENT ACTIONS DURING PENDENCY OF   ACTION. During the pendency of an action brought under this   subchapter, with respect to a local government defending the   action:                (1)  the comptroller shall withhold payment of any   money due to the local government under Section 321.502 or 323.502,   Tax Code, as applicable;                (2)  the local government may not adopt an ad valorem   tax rate that exceeds the local government's no-new-revenue tax   rate; and                (3)  the local government may not receive state grant   funds and any pending application for such funds shall be denied.          Sec. 402.104.  BURDEN OF PROOF; INITIAL HEARING.  (a) A local   government defending an action brought under this subchapter has   the burden of proof to establish by a preponderance of the evidence   that the local government complied with the law the alleged   violation of which is the subject of the action.          (b)  The court of original jurisdiction shall set an action   brought under this subchapter for an initial hearing not later than   the 30th day after the date the local government defending the   action was served with process for the action.          Sec. 402.105.  JURISDICTION; APPEAL.  (a) The First Business   Court Division has exclusive original jurisdiction of an action   brought under this subchapter.           (b)  The Fifteenth Court of Appeals has exclusive appellate   jurisdiction of an action brought under this subchapter.  A party   must appeal the action not later than the 30th day after the date   the judgment is signed.          Sec. 402.106.  RESOLUTION OF ACTION IN FAVOR OF ATTORNEY   GENERAL. (a) If the attorney general prevails in an action brought   under this chapter:                (1)  the local government defending the action may not,   during the five state fiscal years following the year in which the   judgment becomes final:                      (A)  adopt an ad valorem tax rate that exceeds the   local government's no-new-revenue tax rate; or                      (B)  receive state grant funds; and                (2)  the court issuing the final judgment resolving the   action shall provide in the judgment that the state is entitled to   recover from the local government defending the action a penalty   equal to the balance of the suspense account maintained for the   local government under Section 321.501 or 323.501, Tax Code, as   applicable, that exists on the date the judgment is signed.          (b)  The comptroller shall, on receipt of a copy of the final   judgment in an action brought under this subchapter that includes a   provision described by Subsection (a)(2), deposit the balance of   the suspense account maintained for the local government defending   the action under Section 321.501 or 323.501, Tax Code, as   applicable, as of the date the judgment is signed to the credit of   the general revenue fund.          Sec. 402.107.  RESOLUTION OF ACTION IN FAVOR OF LOCAL   GOVERNMENT. If a local government prevails in an action brought   under this subchapter, the comptroller shall, notwithstanding any   other law, immediately send to the local government the balance of   the suspense account maintained for the local government under   Section 321.501 or 323.501, Tax Code, as applicable, as of the date   the judgment resolving the action is signed.          SECTION 2.  Subchapter D, Chapter 402, Government Code, as   added by this Act, applies only to an alleged violation of law that   occurs on or after the effective date of this Act.          SECTION 3.  This Act takes effect September 1, 2025.