Texas Senate Bill SB 2541

Texas 2025 - 89th Regular

• Filed: 3/13/25
• Out of Senate Committee: 4/29/25
• Voted on by Senate: 5/6/25
• Out of House Committee: 5/22/25

Caption

Relating to the calculation of the unused increment rate of a taxing unit.

Summary

SB 2541 changes how a taxing unit calculates the “unused increment rate” under Chapter 26 of the Tax Code. The bill revises the timing definitions used in the formula so that “Year 1” becomes the second tax year preceding the current tax year and “Year 2” becomes the immediately preceding tax year. It also removes the third year component from the formula, meaning the unused increment rate will be based on two years of foregone revenue rather than three. The bill applies prospectively. Its changes take effect January 1, 2026, but the revised calculation method is only used for tax years beginning on or after January 1, 2027. Tax years beginning before that date continue under prior law. In practical terms, the measure affects local taxing units and the calculation of tax-related revenue measures tied to unused increment rates, with implications for property tax administration and local government finance.

Impact

SB 2541 amends Section 26.013 of the Tax Code, altering the statutory formula and definitions used to compute a taxing unit’s unused increment rate. By shortening the lookback period from three years to two, the bill changes how foregone revenue is measured for purposes of the calculation. This affects taxing units, local tax officials, and potentially taxpayers in jurisdictions where the unused increment rate is used in tax rate setting or related fiscal calculations.

Sentiment

The bill appears to have generally favorable support in the Legislature, as reflected by its passage through the Senate with comfortable margins on procedural motions and final passage. The available voting history shows more yeas than nays at each stage, suggesting the measure was broadly accepted, though not unanimously. No committee transcript is available, so the discussion record does not show detailed debate or amendments.

Contention

The main point of contention appears to be the policy choice to reduce the calculation from three years to two years of foregone revenue, which could affect the resulting unused increment rate and therefore local revenue calculations. Any opposition likely centers on whether the shorter lookback period is more accurate or whether it changes fiscal outcomes for taxing units and taxpayers. The recorded nays in the Senate indicate some disagreement, but the available materials do not identify specific arguments or sponsors of opposition.