If voters approve the new cuts, entrepreneurs who own the property their businesses occupy would see their school M&O taxes decrease by 10.7 cents per $100 valuation.
In addition, commercial properties valued at less than $5 million would be protected from excessive year-over-year value upsurges with a 20% cap on how much a property’s appraisal can go up. The cap would be in place for the next three years until lawmakers and voters decide whether to renew it.
It wouldn’t be necessary for a business to be headquartered in Texas in order to get the property tax breaks; any land it owns within the state would qualify to receive the benefits if it doesn’t exceed the value limit.
Here’s an example. A businessman in Corpus Christi saw the value of his office on a prime parcel of waterfront downtown increase by 18% from 2021 to 2022 — and then by 48% from 2022 to 2023, according to tax records. In fact, since 2019, his property has nearly doubled in value.
The property is now worth $638,000. Because that amount is under $5 million, the proposed appraisal cap would apply to his building — and it would take $123,000 off his valuation this year.
Property that doesn’t increase in value more than 20% this year won’t see any benefit from the cap.
Business owners who rent the property they use would not be able to take advantage of the proposed school tax cuts or the 20% appraisal cap, unless they are in a commercial lease that ties rent to property taxes.
But they could take advantage of some of the franchise tax savings, just like businesses that own the property they’re on.
The tax-cuts package would also double the amount of revenue a business could make before it has to start paying franchise taxes from $1.24 million in a year to $2.47 million. The move would remove roughly 67,000 additional small-to-medium businesses from the franchise tax rolls.
Businesses that don’t meet the new threshold for franchise taxes would no longer be required to file $0 tax returns, saving them administrative and labor costs.