H.B. No. 203 introduces a limitation on the increases in appraised value for ad valorem tax purposes for certain leased residential properties. It amends Section 1.12(d) of the Tax Code to clarify the appraisal ratio for properties under Sections 23.23, 23.231, and the newly added Section 23.232. This new section establishes criteria for single-family residential properties leased as primary residences, which must be rented at or below the fair market rent as determined by the U.S. Department of Housing and Urban Development. The bill outlines conditions under which appraisal offices can increase the appraised value of these properties, ensuring that increases do not exceed a specified percentage of the previous year's appraised value plus any new improvements.

Additionally, the bill modifies the calculation of taxable value for residential real property, specifying the inclusion of properties under Sections 23.23 and 23.232 in determining taxable value. It details various exemptions and deductions, including residence homestead exemptions and captured appraised values within reinvestment zones. The bill clarifies that the comptroller must subtract the amount by which the market value exceeds the appraised value of properties subject to these sections when determining taxable value. The provisions of this bill will take effect on January 1, 2026, contingent upon the approval of a constitutional amendment proposed by the 89th Legislature. If the amendment is not approved by voters, the bill's provisions will not take effect.

Statutes affected:
Introduced: Subchapter B, Chapter , Tax Code 23.23 (Subchapter B, Chapter , Tax Code 23)