2023-050 House Bill 2071 Summary and Analysis August 4,2023 Report No. 2023-050
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
House Bill 2071 Summary and Analysis
BACKGROUND:
On July 25, 2023, City staff and the City's state legislative consultants, Jackson Walker, provided
an update on the 88th Session of the Texas Legislature. During that discussion, Council Member
Watts inquired if staff would provide a summary and analysis of House Bill(H.B.)2071,to which
staff responded that a summary would be made provided to the City Council.
H.B. 2071 by Rep. Jetton relates to requirements for multifamily developments owned by public
facility corporations(PFCs)and amends Section 303 of the Texas Local Government code.Among
its provisions, the bill generally provides that:
1. A PFC, a nonprofit corporation formed by a sponsoring governmental entity, or a sponsor,
including a city, county, school district, housing authority, or special district, may only
finance, own, or operate a multifamily residential development located in the area of
operation or jurisdictional boundaries of the sponsor;
2. To receive beneficial tax treatment for a multifamily development located in a city, a PFC
must:
a. meet certain minimum thresholds related to affordable housing availability;
b. give certain notice to the affected city;
c. obtain the consent of the city in certain circumstances; and
d. provide feasibility and other financial analyses related to the project;
3. Certain protections are extended to tenants living in tax-exempt multifamily developments
owned by PFCs;
4. All materials used to improve a qualifying multifamily development owned by a PFC are
exempt from sales and use taxes;
5. PFCs must make annual reports to the Texas Department of Housing and Community
Affairs (TDHCA) and chief appraiser and make certain information publicly available on
their websites; and
6. The Legislative Budget Board must conduct a study to assess the long-term effect the tax
exemptions for qualifying multifamily development projects have on the state's revenue.
H.B. 2071 became effective on June 18, 2023.
DISCUSSION:
While the City of Denton does not currently operate a PFC, staff have evaluated the legislation to
determine its general impact. Overall,the bill provides beneficial components that support housing
affordability and improves the PFC tool.
Affordability Requirements
The bill requires that, for a multifamily development project owned by a PFC to take advantage of
property tax and sales and use tax exemptions, 10% of the units of a given project must be
August 4,2023 Report No. 2023-050
affordable for renters at 60% of area median income (AMI) in addition to 40% of units affordable
at 80%AMI. PFC developments are still not required to reserve any units for renters earning 50%
AMI or below.
Projects deployed via the acquisition of existing housing (versus new construction)must dedicate
at least 15% of the cost of the property for rehabilitation of that property. Acquisitions may avoid
the rehab requirement by increasing the share of units affordable at 60%AMI from 10% to 25%,
with approval by the governing body of the municipality in which the project is located.
Additionally, income-restricted units must make up an equal proportionate share of each unit size
in a project, measured by number of bedrooms.
Increased Transparency
There are several provisions within the bill that increase transparency:
• For housing projects involving new construction, the project must show that the
development would not be feasible without the use of the PFC structure.
• For acquisition projects only, a "meaningful benefit test" is required that shows that 60%
of tax benefit is going toward reducing rents in income-restricted units. This, however, is
not required for new construction deals.
• For PFCs operating under a Public Housing Authority (PHA) that do not have a majority
of the members of the governing body who are elected officials, the PFC's multifamily
development must obtain approval from the elected body of the municipality (City
Council) in which the development is located for the development to receive tax benefits.
• A PFC must post information about each affordable housing project it owns on its website.
• For all project agreements, a 30-day notice must be given to all impacted taxing entities.
• An annual compliance audit conducted by auditors hired by property owners is required
and must be reviewed by TDHCA. Audits are only reviewed by, not conducted by,
TDHCA.
Jurisdiction Requirements
Prior to H.B. 2071, a PFC could deploy a housing project outside of the jurisdiction of the PFC
sponsor. With this new legislation, projects for a PFC may only occur within the jurisdictional
boundaries of the PFC sponsor.
Instead of 100% Tax exemptions for the life of the property, the PFC exemptions now
automatically expire, unless extended with approval from same entities of initial approval. Tax
exemptions for acquisition projects expire after 30 years, while new construction projects expire
after 60 years.
Tenant Protections
H.B. 2071 requires that PFC developments must accept Housing Choice Vouchers (HCV) and
cannot require HCV holders to have a monthly income in excess of 250% of the household's total
monthly rent for a unit. Additionally, the PFC development must affirmatively market to voucher
holders.
August 4,2023 Report No. 2023-050
The bill also provides a baseline of tenant protections, including preventing retaliation regarding
the right to organize and just cause eviction protection.
ATTACHMENTS:
1. H.B. 2071 - Enrolled
STAFF CONTACT:
Dani Shaw
Community Services Director
Dani.Shaw@cityofdenton.com
(940) 349-7237
Ryan Adams
Chief of Staff
Ryan.Adams@cityofdenton.com
(940) 349-8565
REQUESTOR: Staff initiated
STAFF TIME TO COMPLETE REPORT: 2 hours
PARTICIPATING DEPARTMENTS:
Community Services
City Manager's Office
Legal
H . B . No . 2071
1 AN ACT
2 relating to certain public facilities , including public facilities
3 used to provide affordable housing .
4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS :
5 SECTION 1 . Section 303 . 021 , Local Government Code , is
6 amended by adding Subsection ( d) to read as follows :
7 (d) A corporation or a sponsor may finance , own , or operate
8 a multifamily residential development only if :
9 ( 1 ) the corporation or sponsor complies with all
10 applicable provisions of this chapter ; and
11 ( 2 ) the development is located :
12 (A) inside the area of operation of the sponsor ,
13 if the sponsor is a housing authority; or
14 (B ) if the sponsor is not a housing authority,
15 inside the boundaries of the sponsor, without regard to whether the
16 sponsor is authorized to own property or provide services outside
17 the boundaries of the sponsor .
18 SECTION 2 . Subchapter B, Chapter 303 , Local Government
19 Code , is amended by adding Section 303 . 0415 to read as follows :
20 Sec . 303 . 0415 . APPLICABILITY OF LAWS RELATING TO CONFLICT
21 OF INTEREST . A member of the board of a corporation or a member of
22 the governing body of a sponsor of a corporation is subject to the
23 same restrictions as a local public official under Chapter 171 .
24 SECTION 3 . The heading to Section 303 . 042 , Local Government
1
H . B . No . 2071
1 Code , is amended to read as follows :
2 Sec . 303 . 042 . TAXATION; EXEMPTION .
3 SECTION 4 . Subchapter B, Chapter 303 , Local Government
4 Code , is amended by adding Section 303 . 0421 , and a heading is added
5 to that section to read as follows :
6 Sec . 303 . 0421 . MULTIFAMILY RESIDENTIAL DEVELOPMENTS OWNED
7 BY PUBLIC FACILITY CORPORATIONS .
8 SECTION 5 . Section 303 . 0421 , Local Government Code , as
9 added by this Act , is amended by adding Subsections ( a) , ( c ) , ( d) ,
10 (g) , (h) , and ( i ) to read as follows :
11 ( a ) This section applies to a multifamily residential
12 development that is owned by a corporation created under this
13 chapter , except that this section does not apply to a multifamily
14 residential development that :
15 ( 1 ) has at least 20 percent of its residential units
16 reserved for public housing units ;
17 ( 2 ) participates in the Rental Assistance
18 Demonstration program administered by the United States Department
19 of Housing and Urban Development ;
20 ( 3 ) receives financial assistance administered under
21 Chapter 1372 , Government Code , or receives financial assistance
22 from another type of tax-exempt bond; or
23 ( 4 ) receives financial assistance administered under
24 Subchapter DD, Chapter 2306 , Government Code .
25 ( c ) A multifamily residential development that is owned by a
26 corporation created under this chapter by a housing authority and
27 to which Subsection ( a ) applies must hold a public hearing, at a
2
H . B . No . 2071
1 meeting of the authority ' s governing body, to approve the
2 development .
3 (d) Notwithstanding Subsection (b ) , an occupied multifamily
4 residential development that is acquired by a corporation and to
5 which Subsection ( a ) applies is eligible for an exemption under
6 Section 303 . 042 ( c ) for :
7 ( 1 ) the one-year period following the date of the
8 acquisition, regardless of whether the development complies with
9 the requirements of Subsection (b ) ; and
10 ( 2 ) a year following the year described by Subdivision
11 ( 1 ) only if the development comes into compliance with the
12 requirements of Subsection (b) not later than the first anniversary
13 of the date of the acquisition .
14 ( g) Subsection ( f) does not apply to taxes imposed on a
15 multifamily residential development by a conservation and
16 reclamation district created under Section 52 , Article III , or
17 Section 59 , Article XVI , Texas Constitution , that provides water,
18 sewer , or drainage services to the development , unless the
19 applicable corporation has entered into a written agreement with
20 the district to make a payment to the district in lieu of taxation ,
21 in the amount specified in the agreement .
22 (h) Subject to Subsection ( i ) , an exemption under Section
23 303 . 042 ( c ) for a multifamily residential development to which
24 Subsection ( a ) applies expires :
25 ( 1 ) for an occupied multifamily residential
26 development that is acquired by a corporation , on the 30th
27 anniversary of the date of the acquisition by the corporation ; and
3
H . B . No . 2071
1 ( 2 ) for a multifamily residential development not
2 described by Subdivision ( 1 ) , on the 60th anniversary of the date
3 the development receives , from the corporation or the corporation ' s
4 sponsor , the final approval under this chapter that is necessary to
5 obtain the exemption .
6 ( i ) An exemption under Section 303 . 042 ( c ) for a multifamily
7 residential development to which Subsection ( a) applies may be
8 extended for the same term of years applicable to the length of the
9 development ' s exemption under Subsection (h) if :
10 ( 1 ) in the five-year period preceding the expiration
11 of the exemption under Subsection (h) , the corporation provides
12 notice of the extension to the governing body of the municipality in
13 which the development is located or , if the development is not
14 located in a municipality, the county in which the development is
15 located;
16 ( 2 ) the extension is approved in the same manner as was
17 required for the preceding approval of the exemption ; and
18 ( 3 ) the development is in compliance with, and
19 maintains compliance with, this section and Section 303 . 0425 .
20 SECTION 6 . Section 303 . 042 ( c ) , Local Government Code , is
21 amended to read as follows :
22 ( c ) Subject to Section 303 . 0421 (h) , a [ ] corporation is
23 engaged exclusively in performance of charitable functions and is
24 exempt from taxation by this state or a municipality or other
25 political subdivision of this state . Bonds issued by a corporation
26 under this chapter, a transfer of the bonds , interest on the bonds ,
27 and a profit from the sale or exchange of the bonds are exempt from
4
H . B . No . 2071
1 taxation by this state or a municipality or other political
2 subdivision of this state .
3 SECTION 7 . Sections 303 . 042 ( d) , (e ) and ( f ) Local
4 Government Code , are transferred to Section 303 . 0421 , Local
5 Government Code , as added by this Act , redesignated as Sections
6 303 . 0421 (b) , ( e ) , and ( f) , Local Government Code , and amended to
7 read as follows :
8 (b ) Notwithstanding Section 303 . 042 ( c ) and subject to
9 Subsections ( c ) and (d) of this section, an [ (el) An ] exemption under
10 Section 303 . 042 ( c) [titls see4rre-n ] for a multifamily residential
11 development to which Subsection ( a) applies is available ie
12
13
14 j-rL e e nt- e E 4!t-e "n i-tn s L-e g eL-ve4 €-ei- �- is 19 4 r e heirs im n q is n z6t-e , r e6-]
15 only if :
16 ( 1 ) the requirements under Section 303 . 0425 are met
17 [ire 4mnff a tt t t e r=r` y 1�te-4!4 s a fire—I-re-ai-4!n jf at- a L e(tr4-a L- ffleet-ing _ F
18 ] ; [ ]
19 ( 2 ) at least •
20 (A) 10 percent of the units in the multifamily
21 residential development are reserved for occupancy as lower income
22 housing units , as defined under Section 303 . 0425 ; and
23 (B ) 40 [-S�] percent of the units in the
24 multifamily residential development are reserved for occupancy as
25 moderate income housing units , as defined under Section 303 . 0425 ;
26 ( 3 ) the corporation delivers to the presiding officer
27 of the governing body of each taxing unit in which the development
5
H . B . No . 2071
1 is to be located written notice of the development , at least 30 days
2 before the date :
3 (A) the corporation takes action to approve a new
4 multifamily residential development or the acquisition of an
5 occupied multifamily residential development ; and
6 (B ) of any public hearing required to be held
7 under this section ;
8 ( 4 ) if a majority of the members of the board are not
9 elected officials , the development is approved by the governing
10 body of the municipality in which the development is located or, if
11 the development is not located in a municipality, the county in
12 which the development is located;
13 ( 5 ) for an occupied multifamily residential
14 development that is acquired by a corporation and not otherwise
15 subject to a land use restriction agreement under Section 2306 . 185 ,
16 Government Code :
17 (A) not less than 15 percent of the total gross
18 cost of the existing development , as shown in the settlement
19 statement , is expended on rehabilitating, renovating,
20 reconstructing, or repairing the development , with initial
21 expenditures and construction activities :
22 ( i ) beginning not later than the first
23 anniversary of the date of the acquisition ; and
24 ( ii ) finishing not later than the third
25 anniversary of the date of the acquisition ; or
26 (B ) at least 25 percent of the units are reserved
27 for occupancy as lower income housing units , as defined under
6
H . B . No . 2071
1 Section 303 . 0425 , and the development is approved by the governing
2 body of the municipality in which the development is located or, if
3 the development is not located in a municipality, the county in
4 which the development is located; and
5 ( 6 ) not less than 30 days before final approval of the
6 development :
7 (A) the corporation or corporation ' s sponsor
8 conducts , or obtains from a professional entity that has experience
9 underwriting affordable multifamily residential developments and
10 does not have a financial interest in the applicable development ,
11 developer, or public facility user, an underwriting assessment of
12 the proposed development that allows the corporation to make a good
13 faith determination that :
14 ( i ) for an occupied multifamily residential
15 development acquired by a corporation, the total annual amount of
16 rent reduction on the income-restricted units provided at the
17 development will be not less than 60 percent of the estimated amount
18 of the annual ad valorem taxes that would be imposed on the property
19 without an exemption under Section 303 . 042 ( c ) for the second,
20 third, and fourth years after the date of acquisition by the
21 corporation ; and
22 ( ii ) for a newly constructed multifamily
23 residential development , the development would not be feasible
24 without the participation of the corporation ; and
25 (B ) the corporation publishes on its Internet
26 website a copy of the underwriting assessment described by
27 Paragraph (A) [i5 y elms—a n el €-affi44i e a eel-n x-Eff l e e-e ti-,an 8-9
7
H . B . No . 2071
1 ,ej�eeizt-t± e E tire—arm-a -fffedt-an€-affii lie effte-] .
2 ( e ) For the purposes of Subsection ( a) [+el}] a "public
3 housing unit" is a residential [ e'• ] unit for which the
4 landlord receives a public housing operating subsidy . It does not
5 include a unit for which payments are made to the landlord under the
6 federal Section 8 Housing Choice Voucher Program .
7 ( f ) Notwithstanding Sections 303 . 042 ( a ) and (b ) and except
8 as otherwise provided by this section [ ] ,
9 during the period [ ec tiffie] that a corporation owns a particular
10 public facility that is a multifamily residential development :
11 ( 1 ) [—] a leasehold or other possessory interest in
12 the real property of the public facility granted by the corporation
13 shall be treated in the same manner as a leasehold or other
14 possessory interest in real property granted by an authority under
15 Section 379B . 011 (b) ; and
16 ( 2 ) the materials used by a person granted a
17 possessory interest described by Subdivision ( 1 ) to improve the
18 real property of the public facility shall be exempt from all sales
19 and use taxes because the materials are for the benefit of the
20 corporation .
21 SECTION 8 . Subchapter B, Chapter 303 , Local Government
22 Code , is amended by adding Sections 303 . 0425 , 303 . 0426 , and
23 303 . 0427 to read as follows :
24 Sec . 303 . 0425 . ADDITIONAL REQUIREMENTS FOR BENEFICIAL TAX
25 TREATMENT RELATING TO CERTAIN PUBLIC FACILITIES . ( a) In this
26 section :
27 ( 1 ) " Developer" means a private entity that constructs
8
H . B . No . 2071
1 a development , including the rehabilitation , renovation,
2 reconstruction , or repair of a development .
3 ( 2 ) "Housing choice voucher program" means the housing
4 choice voucher program under Section 8 , United States Housing Act
5 of 1937 ( 42 U . S . C . Section 1437f) .
6 ( 3 ) "Lower income housing unit " means a residential
7 unit reserved for occupancy by an individual or family earning not
8 more than 60 percent of the area median income , adjusted for family
9 size , as defined by the United States Department of Housing and
10 Urban Development .
11 ( 4 ) "Moderate income housing unit" means a residential
12 unit reserved for occupancy by an individual or family earning not
13 more than 80 percent of the area median income , adjusted for family
14 size , as defined by the United States Department of Housing and
15 Urban Development .
16 ( 5 ) " Public facility user" means a public-private
17 partnership entity or a developer or other private entity that has
18 an ownership interest or a leasehold or other possessory interest
19 in a public facility that is a multifamily residential development .
20 (b ) The percentage of lower and moderate income housing
21 units reserved in each category of units in the development , based
22 on the number of bedrooms per unit , must be the same as the
23 percentage of each category of housing units reserved in the
24 development as a whole .
25 ( c ) The monthly rent charged per unit may not exceed :
26 ( 1 ) for a lower income housing unit , 30 percent of 60
27 percent of the area median income , adjusted for family size , as
9
H . B . No . 2071
1 defined by the United States Department of Housing and Urban
2 Development ; or
3 ( 2 ) for a moderate income housing unit , 30 percent of
4 80 percent of the area median income , adjusted for family size , as
5 defined by the United States Department of Housing and Urban
6 Development .
7 ( d) In calculating the income of an individual or family for
8 a lower or moderate income housing unit , the public facility user
9 must use the definition of annual income described in 24 C . F . R .
10 Section 5 . 609 , as implemented by the United States Department of
11 Housing and Urban Development . If the income of a tenant exceeds an
12 applicable limit at the time of the renewal of a lease agreement for
13 a residential unit , the provisions of Section 42 (g) ( 2 ) ( D) , Internal
14 Revenue Code of 1986 , apply in determining whether the unit may
15 still qualify as a lower or moderate income housing unit
16 ( e ) The public facility user may not :
17 ( 1 ) refuse to rent a residential unit to an individual
18 or family because the individual or family participates in the
19 housing choice voucher program; or
20 ( 2 ) use a financial or minimum income standard that
21 requires an individual or family participating in the housing
22 choice voucher program to have a monthly income of more than 250
23 percent of the individual ' s or family ' s share of the total monthly
24 rent payable for a unit .
25 ( f ) A public facility user may require an individual or
26 family participating in the housing choice voucher program to pay
27 the difference between the monthly rent for the applicable unit and
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H . B . No . 2071
1 the amount of the monthly voucher if the amount of the voucher is
2 less than the rent .
3 ( g) A corporation that owns or leases to a public facility
4 user a public facility used as a multifamily residential
5 development shall publish on its Internet website information about
6 the development ' s :
7 ( 1 ) compliance with the requirements of this section ;
8 and
9 ( 2 ) policies regarding tenant participation in the
10 housing choice voucher program .
11 (h ) The public facility user shall :
12 ( 1 ) affirmatively market available residential units
13 directly to individuals and families participating in the housing
14 choice voucher program; and
15 ( 2 ) notify local housing authorities of the
16 multifamily residential development ' s acceptance of tenants in the
17 housing choice voucher program .
18 ( i ) Each lease agreement for a residential unit in a
19 multifamily residential development subject to this section must
20 provide that :
21 ( 1 ) the landlord may not retaliate against the tenant
22 or the tenant ' s guests by taking an action because the tenant
23 established, attempted to establish, or participated in a tenant
24 organization ;
25 ( 2 ) the landlord may only choose to not renew the lease
2 6 if the tenant :
27 (A) is in material noncompliance with the lease ,
11
H . B . No . 2071
1 including nonpayment of rent ;
2 (B ) committed one or more substantial violations
3 of the lease ;
4 (C ) failed to provide required information on the
5 income , composition , or eligibility of the tenant ' s household; or
6 ( D) committed repeated minor violations of the
7 lease that :
8 ( i ) disrupt the livability of the property;
9 ( ii ) adversely affect the health and safety
10 of any person or the right to quiet enjoyment of the leased premises
11 and related development facilities ;
12 ( iii ) interfere with the management of the
13 development ; or
14 ( iv) have an adverse financial effect on
15 the development , including the failure of the tenant to pay rent in
16 a timely manner; and
17 ( 3 ) to not renew the lease , the landlord must serve a
18 written notice of proposed nonrenewal on the tenant not later than
19 the 30th day before the effective date of nonrenewal .
20 ( j ) A tenant may not waive the protections provided by
21 Subsection ( i ) .
22 ( k) Requirements under this subchapter relating to the
23 reservation of income-restricted residential units or income
24 restrictions applicable to tenants of a multifamily residential
25 development subject to this subchapter must be documented in a land
26 use restriction agreement or a similar restrictive instrument that :
27 ( 1 ) ensures that the applicable restrictions are in
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1 effect for not less than 10 years ; and
2 ( 2 ) is recorded in the real property records of the
3 county in which the development is located .
4 ( 1 ) An agreement or instrument recorded under Subsection
5 ( k) may be terminated if the development that is the subject of the
6 agreement or instrument :
7 ( 1 ) is the subject of a foreclosure sale ; or
8 ( 2 ) becomes ineligible for an exemption under Section
9 303 . 042 ( c ) for a reason other than the failure to comply with
10 restrictions recorded in the agreement or instrument .
11 Sec . 303 . 0426 . AUDIT REQUIREMENTS FOR CERTAIN MULTIFAMILY
12 RESIDENTIAL DEVELOPMENTS . ( a ) In this section :
13 ( 1 ) " Department" means the Texas Department of Housing
14 and Community Affairs .
15 ( 2 ) " Developer" has the meaning assigned by Section
16 303 . 0425 .
17 ( 3 ) " Public facility user" has the meaning assigned by
18 Section 303 . 0425 .
19 (b ) A public facility user of a multifamily residential
20 development claiming an exemption under Section 303 . 042 ( c ) and to
21 which Section 303 . 0421 applies must annually submit to the
22 department and the chief appraiser of the appraisal district in
23 which the development is located an audit report for a compliance
24 audit , prepared at the expense of the public facility user and
25 conducted by an independent auditor or compliance expert with an
26 established history of providing similar audits on housing
27 compliance matters , to :
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1 ( 1 ) determine whether the public facility user is in
2 compliance with Sections 303 . 0421 and 303 . 0425 ; and
3 ( 2 ) identify the difference in the rent charged for
4 income-restricted residential units and the estimated maximum
5 market rents that could be charged for those units without the rent
6 or income restrictions .
7 ( c ) Not later than the 60th day after the date of receipt of
8 the audit conducted under Subsection (b) , the department shall
9 examine the audit report and publish a report summarizing the
10 findings of the audit . The report must :
11 ( 1 ) be made available on the department ' s Internet
12 website ;
13 ( 2 ) be issued to a public facility user that has an
14 interest in a development that is the subject of an audit , the
15 comptroller, the applicable corporation , the governing body of the
16 corporation ' s sponsor, and, if the corporation ' s sponsor is a
17 housing authority, the elected officials who appointed the housing
18 authority ' s governing board; and
19 ( 3 ) describe in detail the nature of any failure to
20 comply with the requirements in Sections 303 . 0421 and 303 . 0425 .
21 (d) If an audit report submitted under Subsection (b)
22 indicates noncompliance with Sections 303 . 0421 and 303 . 0425 , a
23 public facility user :
24 ( 1 ) must be given :
25 (A) written notice from the department or
26 appropriate appraisal district that :
27 ( i ) is provided not later than the 45th day
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1 after the date a report has been submitted under Subsection (b )
2 ( ii ) specifies the reasons for
3 noncompliance ;
4 ( iii ) contains at least one option for a
5 corrective action to resolve the noncompliance ; and
6 ( iv) informs the public facility user that
7 failure to resolve the noncompliance will result in the loss of an
8 exemption under Section 303 . 042 ( c ) ;
9 (B ) 60 days after the date notice is received
10 under this subdivision , to resolve the matter that is the subject of
11 the notice ; and
12 (C ) if a matter that is the subject of a notice
13 provided under this subdivision is not resolved to the satisfaction
14 of the department and the appropriate appraisal district during the
15 period provided by Paragraph (B) , a second notice that informs the
16 public facility user of the loss of the exemption under Section
17 303 . 042 ( c ) due to noncompliance with Sections 303 . 0421 and
18 303 . 0425 ; and
19 ( 2 ) is considered to be in compliance with Sections
20 303 . 0421 and 303 . 0425 if notice under Subdivision ( 1 ) (A) is not
21 provided as specified by Subparagraph ( i ) of that paragraph .
22 ( e ) An exemption under Section 303 . 042 ( c ) does not apply for
23 a tax year in which a multifamily residential development that is
24 owned by a public facility corporation created under this chapter
25 is determined by the department based on an audit conducted under
26 Subsection (b ) to not be in compliance with the requirements of
27 Section 303 . 0421 or 303 . 0425 .
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1 ( f ) The initial audit report required by Subsection (b) is
2 due not later than June 1 of the year following the first
3 anniversary of :
4 ( 1 ) the date of acquisition for an occupied
5 multifamily residential development that is acquired by a
6 corporation ; or
7 ( 2 ) the date a new multifamily residential development
8 first becomes occupied by one or more tenants .
9 ( g) Subsequent audit reports following the issuance of the
10 initial audit report under Subsection ( f ) are due not later than
11 June 1 of each year .
12 (h) An independent auditor or compliance expert may not
13 prepare an audit under Subsection (b ) for more than three
14 consecutive years for the same public facility user . After the
15 third consecutive audit , the independent auditor or compliance
16 expert may prepare an audit only after the second anniversary of the
17 preparation of the third consecutive audit .
18 ( i ) The department shall adopt forms and reporting
19 standards for the auditing process .
20 ( j ) An audit conducted under Subsection (b ) is subject to
21 disclosure under Chapter 552 , Government Code , except that
22 information containing tenant names , unit numbers , or other tenant
23 identifying information may be redacted .
24 Sec . 303 . 0427 . STUDY OF TAX EXEMPTIONS FOR MULTIFAMILY
25 RESIDENTIAL DEVELOPMENTS OWNED BY PUBLIC FACILITY CORPORATIONS .
26 ( a) In this section, "board" means the Legislative Budget Board .
27 (b ) The board shall conduct a study that assesses the
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1 long-term effects on the state ' s funding and revenue , including
2 funding for public education, of ad valorem tax exemptions and
3 sales and use tax exemptions for multifamily housing developments
4 under Sections 303 . 042 ( c) and 303 . 0421 ( f ) .
5 ( c ) Not later than December 10 , 2024 , the board shall submit
6 to the governor , the lieutenant governor, and the speaker of the
7 house of representatives a report on the results of the study . The
8 report must include an estimate of :
9 ( 1 ) the funding or revenue that the state has lost as a
10 result of the exemptions ; and
11 ( 2 ) the potential increase in funding or revenue that
12 would result from the repeal of the exemptions .
13 (d) The board may delegate any authority granted to the
14 board under this section that the board determines is necessary to
15 conduct the study under this section .
16 ( e ) This section expires January 1 , 2025 .
17 SECTION 9 . Section 392 . 005 , Local Government Code , is
18 amended by amending Subsections ( c ) and (d) and adding Subsection
19 ( c-1 ) to read as follows :
20 ( c ) An exemption under this section for a multifamily
21 residential development which is owned by [(r)a ie `==-14m _,
22 ]
23 a housing development corporation [ ,—] or [ ] a similar entity
24 created by a housing authority, other than a public facility
25 corporation created by a housing authority under Chapter 303 , and
26 which does not have at least 20 percent of its residential units
27 reserved for public housing units , applies only if :
17
H . B . No . 2071
1 ( 1 ) the authority holds a public hearing, at a regular
2 meeting of the authority' s governing body, to approve the
3 development ; and
4 ( 2 ) at least 50 percent of the units in the multifamily
5 residential development are reserved for occupancy by individuals
6 and families earning less than 80 percent of the area median
7 [ F-1] income , adjusted for family size .
8 ( c- 1 ) An exemption under this section for a multifamily
9 residential development which is owned by a public facility
10 corporation created by a housing authority under Chapter 303
11 applies only if :
12 ( 1 ) at least 50 percent of units in the multifamily
13 residential development are reserved for occupancy by individuals
14 and families earning not more than 80 percent of the area median
15 income , adjusted for family size ; and
16 ( 2 ) the development :
17 (A) has at least 20 percent of its residential
18 units reserved for public housing units ;
19 (B ) participates in the Rental Assistance
20 Demonstration program administered by the United States Department
21 of Housing and Urban Development ;
22 (C ) receives financial assistance administered
23 under Chapter 1372 , Government Code , or receives financial
24 assistance from another type of tax-exempt bond; or
25 ( D) receives financial assistance administered
26 under Subchapter DD, Chapter 2306 , Government Code .
27 ( d) For the purposes of Subsections [ `"•-'eaeetien ] ( c ) and
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H . B . No . 2071
1 ( c-1 ) , a "public housing unit " is a residential [off] unit for
2 which the owner receives a public housing operating subsidy . It
3 does not include a unit for which payments are made to the landlord
4 under the federal Section 8 Housing Choice Voucher Program .
5 SECTION 10 . (a) Subject to Subsections (b) , ( c ) , and ( d) of
6 this section, Sections 303 . 0421 and 303 . 0425 , Local Government
7 Code , as added by this Act , apply only to a tax imposed for a tax
8 year beginning on or after the effective date of this Act .
9 (b ) Subject to Subsections ( c) and (d) of this section,
10 Sections 303 . 0421 and 303 . 0425 , Local Government Code , as added by
11 this Act, apply only to a multifamily residential development that
12 is approved on or after the effective date of this Act by a public
13 facility corporation or the sponsor of a public facility
14 corporation, in accordance with Chapter 303 , Local Government Code .
15 A multifamily residential development that was approved by a public
16 facility corporation or the sponsor of a public facility
17 corporation before the effective date of this Act is governed by the
18 law in effect on the date the development was approved by the
19 corporation or sponsor, and the former law is continued in effect
20 for that purpose .
21 ( c ) Subject to Subsection (d) of this section, Section
22 303 . 0421 (d) , Local Government Code , as added by this Act , applies
23 only to an occupied multifamily residential development that is
24 acquired by a public facility corporation on or after the effective
25 date of this Act . An occupied multifamily residential development
26 that is acquired by a public facility corporation before the
27 effective date of this Act is governed by the law in effect on the
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H . B . No . 2071
1 date the development was acquired by the public facility
2 corporation, and the former law is continued in effect for that
3 purpose .
4 (d) Notwithstanding any other provision of this section :
5 ( 1 ) Section 303 . 0426 , Local Government Code , as added
6 by this Act , applies to all multifamily residential developments to
7 which Section 303 . 0421 applies and with respect to which an
8 exemption is sought or claimed under Section 303 . 042 ( c) ; and
9 ( 2 ) the initial audit report required to be submitted
10 under Section 303 . 0426 (b) , Local Government Code , as added by this
11 Act , for a multifamily residential development that was approved or
12 acquired by a public facility corporation before the effective date
13 of this Act must be submitted by the later of :
14 (A) the date established by Section 303 . 0426 ( f ) ,
15 Local Government Code , as added by this Act ; or
16 (B ) June 1 , 2024 .
17 SECTION 11 . Not later than January 1 , 2024 , the Texas
18 Department of Housing and Community Affairs shall adopt rules
19 necessary to implement Section 303 . 0426 , Local Government Code , as
20 added by this Act .
21 SECTION 12 . This Act takes effect immediately if it
22 receives a vote of two-thirds of all the members elected to each
23 house , as provided by Section 39 , Article III , Texas Constitution .
24 If this Act does not receive the vote necessary for immediate
25 effect , this Act takes effect September 1 , 2023
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H . B . No . 2071
President of the Senate Speaker of the House
I certify that H . B . No . 2071 was passed by the House on April
26 , 2023 , by the following vote : Yeas 142 , Nays 5 , 2 present , not
voting; and that the House concurred in Senate amendments to H . B .
No . 2071 on May 25 , 2023 , by the following vote : Yeas 115 , Nays 20 ,
3 present , not voting .
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Chief Clerk of the House
I certify that H . B . No . 2071 was passed by the Senate , with
amendments , on May 19 , 2023 , by the following vote : Yeas 28 , Nays
3 .
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Secretary of the Senate
APPROVED :
Date
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Governor
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