In contrast to the drawn-out standoff of 2023, lawmakers in both chambers of the Texas Legislature appear aligned this session—at least on some of the major components of property tax reform.

As of early May, Senate and House leaders have reached consensus on two core proposals: expanding homestead exemptions and raising the business personal property (BPP) exemption. The agreement lands well ahead of sine die on June 2, signaling a more cooperative path forward this year.

What’s in the Deal?

  • Increasing the homestead exemption from $100k to $140k
  • Increasing the additional exemption for disabled and 65+ from $10k to $60k
  • Increasing the BPP exemption to $125k
  • Increasing state ISD rate compression by $0.068 or $3B total compression

Finding the Middle Ground on BPP

This BPP exemption compromise comes after significant differences between the two chambers. The House had initially proposed a $250,000 exemption, while the Senate leaned toward a more modest $25,000 paired with an inventory tax credit. Ultimately, both sides landed at $125,000—a substantial increase that simplifies administration while still offering meaningful relief to businesses.

Notably, this exemption change is not yet law. Voter approval will be required in November to put it into effect. Additionally, the Legislature has committed to backfilling local school district revenue losses stemming from the higher exemptions.

Still unresolved is tax rate compression—the mechanism by which the state would lower school district tax rates by increasing its share of public education funding. The House has proposed an additional 3-cent reduction beyond what’s already budgeted, which would carry an estimated $2.8 billion price tag. That proposal remains under negotiation as part of the broader budget process.

Budget Context

Both chambers allocated around $6.5 billion for property tax relief in their budget drafts. Governor Abbott, however, has pushed for at least $10 billion in total new relief, a goal that could require further negotiation depending on revenue forecasts and final spending decisions.

What This Means for Commercial Property Owners

While much of the current focus is on homestead exemptions, the business personal property (BPP) tax increase is quietly one of the most significant changes for commercial taxpayers in years.

Who Benefits Most?

  • Small and midsize businesses will likely feel the biggest impact. With the exemption jumping from $2,500 to $125,000, many businesses with minimal equipment or low inventory footprints may now see their BPP tax liability reduced to zero.
  • Service-based businesses—especially those without large inventory holdings—stand to benefit disproportionately since their assets are often concentrated in furniture, fixtures, and equipment, which will now be fully exempt under the new threshold.

What About Large Property Owners?

For larger commercial and industrial property owners, the BPP exemption increase provides modest relief but won’t fundamentally change their tax liability. Most of the tax burden for these owners still lies in real property valuations—land and buildings—not personal property.

That said, the exemption does offer administrative efficiencies. Fewer filings and simpler compliance requirements for assets under the threshold could reduce time and overhead for owners and their tax teams.

A Step, Not a Solution

It’s worth noting that this exemption change doesn’t address the broader structural issues in commercial property taxation—namely, valuation methodology and escalating assessments in fast-growth markets. Those remain unresolved, and values in many markets are still tracking well above historical trends.

Still, this move reflects a legislative willingness to provide tangible relief, even if it’s not a sweeping overhaul. For commercial owners, particularly those operating across multiple Texas jurisdictions, this is a policy shift to watch—especially with voter approval still pending in November.

We’ll continue tracking developments on the tax rate compression front and how the exemption changes may impact local jurisdictions and commercial taxpayers statewide.