Senator Robert "Bob" Deuell, M.D.
The Texas State Senate
District 2

For Immediate Release
July 28, 2003

***CAPITOL UPDATE***

Tax Free Weekend Reminder and Constitutional Amendment Election Information

(AUSTIN) - First of all, I want to remind all my constituents to take advantage of the upcoming tax free weekend. This year's tax holiday will take place on August 1, 2 and 3. The holiday provides exemptions from state and local sales taxes on most clothing and footwear priced at less than $100, which will save shoppers about $8 on every $100 they spend. For more information on the sales tax holiday, please visit the Comptroller's website at www.cpa.state.tx.us.

Over the next few weeks, these articles will focus on the upcoming Constitutional Amendment elections. The election will be held on September 13, and Texans will vote on 22 proposed amendments to the Texas Constitution. The analyses contained in these articles comes from the Texas Legislative Council's "Condensed Analysis of Proposed Constitutional Amendments." To view the entire document, please visit their website at www.tlc.state.tx.us, or feel free to contact my office for a hard copy.

AMENDMENT NO. 1

The constitutional amendment authorizing the Veterans' Land Board to use assets in certain veterans' land and veterans' housing assistance funds to provide veterans homes for the aged or infirm and to make principal, interest, and bond enhancement payments on revenue bonds.

SUMMARY: The proposed amendment would allow the Veterans' Land Board to use excess receipts in the veterans' land fund, the veterans' housing assistance fund, and the veterans' housing assistance fund II to pay the debt service on any revenue bonds issued by the board. Specifically, the board could use those receipts to pay principal and interest and make bond enhancement payments with respect to revenue bonds issued under a veterans homes program or other veterans programs administered by the board, and not solely in connection with its land and housing assistance programs for veterans.

The amendment would also allow the Veterans' Land Board to use excess assets in the three funds to plan and design, operate, maintain, enlarge, or improve veterans homes. This new language would supplement the effect of an earlier constitutional amendment that granted the board similar authority with respect to veterans cemeteries.

ARGUMENTS FOR: Security for revenue bonds issued by the Veterans' Land Board would increase because the debt service on those bonds could be paid with money produced from multiple board programs. Less overall risk associated with the revenue bonds means that the board could obtain a more favorable credit rating and pay interest at a lower rate on the bonds, saving money for the state. The use of excess assets from certain Veterans' Land Board funds would preclude the necessity of issuing more revenue bonds for veterans homes, thus saving money for the state by reducing transaction costs associated with funding the construction of veterans homes. The excess money in the veterans' land and housing assistance programs was primarily paid for by veterans and should be available to assist all veterans programs administered by the Veterans' Land Board.

ARGUMENTS AGAINST: At least some of the money that was formerly earmarked for veterans' land and housing assistance programs may go to entirely different programs administered by the Veterans' Land Board; the board has complete discretion to determine how much money to retain within the land and housing assistance programs. Adoption of the amendment would lead to dilution of money currently reserved for two veterans programs, the land and housing assistance programs, so that it would be spread out over twice as many programs.

AMENDMENT NO. 2

The constitutional amendment to establish a two-year period for the redemption of a mineral interest sold for unpaid ad valorem taxes at a tax sale.

SUMMARY: The proposed amendment to Section 13(c), Article VIII, of the Texas Constitution increases the period in which the former owner of a mineral interest that is sold at a tax sale for unpaid ad valorem taxes may redeem the property from the person who purchased it. The redemption period is increased from six months after the date the purchaser's deed is filed for record to two years after that date. To redeem the property, the former owner must pay to the person who purchased the property the amount the purchaser at the tax sale paid for the property, including the tax deed recording fee and all taxes, penalties, interest, and costs paid, plus an amount not exceeding 25 percent of the aggregate total in the first year of the redemption period or 50 percent of the aggregate total in the second year. The proposed amendment to Section 13(d), Article VIII, of the Texas Constitution makes a conforming change.

The amendment takes effect January 1, 2004, and applies only to the redemption of a mineral interest sold at a tax sale for which the purchaser's deed is filed for record on or after January 1, 2004.

ARGUMENTS FOR: Since 1876, the Texas Constitution provided for a two-year redemption period for property sold at a tax sale. Only recently was the constitution amended to limit the redemption period for most property, including a mineral interest, to six months. Unlike information for other real property, the information used to identify and list mineral interests on the tax rolls is often derived from private industry, so it may be outdated or inaccurate. In addition, due to the usual business practices associated with developing a mineral interest, there are frequently numerous fractional owners who depend on the owner of the working interest to pay the taxes on the property. For these reasons, the owner of a mineral interest may not receive timely notice that taxes on the property are delinquent or that the property has been ordered to be sold. Increasing the redemption period from six months to two years, as it was previously, would reduce the chance that the redemption period would expire before the owner of a mineral interest learned that the property had been sold. Current law unfairly distinguishes between residence homesteads and agricultural land on one hand and mineral interests on the other hand for purposes of the right of redemption. There is no principled basis for such a distinction.

ARGUMENTS AGAINST: The amendment would discourage investors from purchasing mineral interests at tax sales and make it more difficult for taxing units to dispose of property at a tax sale. Under current law, a purchaser of a mineral interest at a tax sale is required to wait only six months before obtaining clear title. If the purchaser incurs expenses in developing the minerals and the former owner exercises the right of redemption, the former owner may profit unfairly from the expenses incurred by the purchaser. A prospective purchaser may be reluctant to purchase a mineral interest and wait two years before developing the property, and taxing units would experience costly delays in getting mineral interests back onto their tax rolls. The amendment would not resolve the inequity in current law of having different redemption periods apply to different types of real property. Commercial property would continue to be subject to a shorter redemption period than residence homesteads, agricultural land, and mineral interests.

AMENDMENT NO. 3

The constitutional amendment to authorize the legislature to exempt from ad valorem taxation property owned by a religious organization that is leased for use as a school or that is owned with the intent of expanding or constructing a religious facility.

SUMMARY: The proposed amendment amends Section 2(a), Article VIII, Texas Constitution, to authorize the legislature by general law to exempt from ad valorem taxation the property owned by a religious organization that also owns a place of religious worship, such as a church or temple, if the property is owned for the purpose of expanding the place of religious worship or constructing a new place of religious worship and if the property does not produce any revenue for the religious organization. The amendment also authorizes the legislature by general law to provide eligibility limitations for the exemption and to impose sanctions related to the exemption. In addition, the amendment authorizes the legislature by general law to exempt from ad valorem taxation any property owned by a religious organization that is leased to a person for use as a school that meets the statutory definition for a school that is exempt from taxation.

ARGUMENTS FOR: The proposed amendment permits a religious organization to plan for the growth of its congregation by acquiring property for expansion without incurring ad valorem taxes on the property pending the beginning of construction. The legislature has the authority to impose eligibility limitations for the exemption, including a time limit, and to require the payment of back taxes if the property is not ultimately used for a place of worship. The amendment would allow a religious organization that leases its property for use as a nonprofit school to enjoy the same exemption from taxation as a person who owns property that the person uses as a school. The amendment eliminates an unjustified distinction between property owners who operate schools on their property and property owners who lease their property to others to operate schools and encourages religious organizations to use their property for educational purposes.

ARGUMENTS AGAINST: The Texas Constitution and the Tax Code already allow a religious organization to receive an ad valorem tax exemption for the organization's place of worship, including an exemption for not more than three years while the place is under construction. The amendment's broadening of the exemption to include future expansion or construction of a new place of worship will take property off the tax rolls even though it may not actually be used for religious purposes for years. The Texas Constitution and the Tax Code already provide for an exemption from ad valorem taxation for property a person owns and uses as a school. Allowing a religious organization to receive a tax exemption for property that is leased to another person to be used as a school will encourage religious organizations to use property for nonreligious purposes and discriminate between religious organizations and other property owners who lease property for that purpose. The exemption would also deprive school districts and other local governments of tax revenue and put an unfair burden on other property owners who may be required to pay higher taxes to offset the lost tax revenue.

If you would like to receive the Capitol Update via e-mail, please contact me at bob.deuell@senate.state.tx.us.

To contact Sen. Deuell about the legislative process, contact the Capitol Office at (512) 463-0556 or mail to Sen. Bob Deuell, Texas Senate, P.O. Box 12068, Austin, TX 78711. The website for the Texas Senate is www.Senate.state.tx.us. The e-mail address for Sen. Deuell is: bob.deuell@senate.state.tx.us.

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