H.B. No. 261 introduces significant amendments to the Tax Code concerning the appraisal of commercial real property for ad valorem tax purposes. The bill clarifies that the appraisal ratio for properties under Sections 23.23 or 23.232 is based on the market value determined by the appraisal district, rather than the appraised value limited by these sections. It establishes a new section, 23.232, which defines "commercial real property" and sets criteria for limiting the appraised value of such properties with a market value of $10 million or less. The appraisal office is permitted to increase the appraised value of commercial real property, but only within specified limits, including a maximum increase of 20% from the previous year's appraised value plus the market value of any new improvements.

The bill also mandates that property owners be notified about their eligibility for the new limitation on appraised value and outlines the appraisal process to ensure that both market value and the computed amount under the new limitation are included in appraisal records. It specifies conditions for classifying improvements as "new improvements" and notes that certain disaster recovery programs may influence this classification. Importantly, the bill will take effect for tax years beginning on or after January 1, 2027, contingent upon voter approval of a related constitutional amendment. If the amendment is not approved, the provisions of the bill will not take effect, aiming to create a more predictable and fair tax assessment framework for commercial property owners.

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