Texas House Bill HB 3637

Texas 2025 - 89th Regular

• Filed: 3/3/25
• Out of House Committee: 5/5/25
• Voted on by House: 5/14/25

Caption

Relating to the authority of a county commissioners court to adopt an exemption from ad valorem taxation by each taxing unit that taxes the property of the portion of the appraised value of a person's property that is attributable to the installation in or on the property of certain water conservation systems.

Summary

HB 3637 authorizes a county commissioners court to adopt an ad valorem tax exemption for the portion of a property’s appraised value that is attributable to installing a rainwater harvesting system or graywater system. The bill defines graywater by reference to the Health and Safety Code and makes the exemption available only if the county chooses to adopt it by order. If adopted, the exemption would apply across all taxing units that tax the property, not just the county itself. The bill is structured as a contingent measure tied to a constitutional amendment. It would take effect on January 1, 2026, but only if voters approve the related amendment authorizing counties to exempt the value associated with these water conservation systems from property taxation. The bill applies only to ad valorem taxes for tax years beginning on or after the effective date.

Impact

HB 3637 would amend the Tax Code by adding Section 11.325 to create a new county-level property tax exemption for the value added by rainwater harvesting and graywater systems. Because the exemption would apply to each taxing unit that taxes the property, it could reduce property tax revenue for counties, school districts, cities, and special districts on affected properties if a county adopts the exemption. The bill would not mandate an exemption statewide; it would give counties discretionary authority to adopt it, subject to voter approval of the companion constitutional amendment.

Sentiment

The bill appears to have received generally favorable support in the House, passing second reading 94-42 and third reading 95-43. Those vote totals suggest broad but not unanimous backing, consistent with a policy aimed at encouraging water conservation while limiting the tax burden on homeowners who install such systems. No committee transcript was provided, so the available record shows support through floor votes rather than detailed committee debate.

Contention

The main point of contention is likely the tax policy tradeoff: supporters may view the exemption as an incentive for water conservation and drought resilience, while opponents may be concerned about reducing the tax base for local governments and other taxing units. Another likely issue is the contingent nature of the bill, since it depends on passage of a constitutional amendment, meaning the policy cannot take effect unless voters approve the companion measure. The close-to-moderate opposition reflected in the House votes suggests some disagreement over whether property tax exemptions are the right tool to promote these systems.