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Signed Into Law
Signed June 20, 2025Effective 2025-06-20
HB2894

Regular Session

Relating to the provision of state aid to certain local governments disproportionately affected by the granting of ad valorem tax relief to disabled veterans.

Government Affairs & Regulatory Compliance Analysis

HB2894: Government Affairs Overview

HB 2894 expands state financial aid to any municipality where disabled veteran tax exemptions cause a revenue loss of at least 10%, removing the requirement that the city be adjacent to a military base. This creates a "zero-sum" financial environment: while newly eligible municipalities may stabilize tax rates with this influx of cash, legacy "Military Cities" face diluted funding, creating a high probability of property tax rate increases for businesses in those jurisdictions to cover the shortfall.

Rep. Hillary Hickland·House Bill·Regular Session

Moderate
Low Cost
Effective:2025-06-20
Business Impact

Who HB2894 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: moderate

Notable regulatory updates (effective 2025-06-20). Consider how these changes may affect your operations.

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Real Estate

Affected business types:

  • Property developers
  • Commercial landlords
  • Property managers
  • Real estate investors
View all real estate legislation

Key Operational Considerations

  • 1Triple Net Leases (NNN): Review lease agreements in "Military Cities" (e.g., Killeen, San Antonio). Anticipate higher pass-through property tax costs due to potential state aid dilution.
  • 2Portfolio Mapping: You must map your real estate assets against two lists:

Estimated Cost Impact

lowMinimal cost impact anticipated.

Enforcing Agencies

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HB2894
Relating to the provision of state aid to certain local governments disproportionately affected by the granting of ad valorem tax relief to disabled v...
Moderate Urgency
Passed with Opposition
House Vote148 - 0
YEA
100% in favor148 voting
Senate Vote30 - 1
YEA
97% in favor31 voting
1
Total Opposition Votes
Cost Impact
Low
Effective
2025-06-20
Enforcing Agencies
Comptroller of Public Accounts
Primary Author: Rep. Hillary Hickland
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: June 20, 2025 (Immediate effect).
  • Compliance Deadline: Q3/Q4 2025. While businesses file no forms, corporate tax teams must engage with local city councils during the Fall 2025 budget cycle to ensure eligible municipalities apply for these funds.
  • Agency Rulemaking: The Comptroller of Public Accounts must finalize application procedures for the new eligibility criteria. Watch for rulemaking regarding the definition of "General Fund Revenue" and pro-ration formulas in Summer 2025.

Immediate Action Plan

  • Audit Portfolio: Immediately categorize all business property locations into "Legacy Recipient," "Newly Eligible," or "Ineligible."
  • Lobby Local Officials: For "Newly Eligible" locations, send a formal letter to the City Manager and Mayor demanding they apply for HB 2894 funds to offset tax burdens.
  • Adjust Accruals: For "Legacy Recipient" locations, increase property tax accruals for the 2026 tax year to account for the likely reduction in state aid and subsequent local rate hikes.
  • Monitor Rulemaking: Subscribe to Texas Comptroller updates specifically regarding Local Government Code Section 140.011 to catch the definition of "General Fund Revenue."

Operational Changes Required

Contracts

  • Triple Net Leases (NNN): Review lease agreements in "Military Cities" (e.g., Killeen, San Antonio). Anticipate higher pass-through property tax costs due to potential state aid dilution.
  • Economic Development Agreements (Chapter 380): Review incentives tied to ad valorem tax abatements. Ensure that a municipality's receipt of state aid does not trigger "clawback" provisions or alter "net benefit" calculations in your agreement.

Hiring/Training

  • Government Affairs/Tax Teams: Staff must be trained to identify the specific population brackets and revenue loss thresholds in Section 2. They must actively monitor city council agendas in newly eligible jurisdictions to ensure the city applies for the funds.

Reporting & Record-Keeping

  • Portfolio Mapping: You must map your real estate assets against two lists:
  • 1. Risk Zones: Legacy military cities likely to lose funding share (budget for tax hikes).
  • 2. Opportunity Zones: Non-military cities with high veteran populations (lobby for application to stabilize taxes).
  • No Direct Filing: Businesses do not file reports with the state; the burden is on the local government.

Fees & Costs

  • Property Tax Liability:
  • Increase Risk: High probability of increased I&S or M&O tax rates in legacy military municipalities due to the "sum-certain" appropriation cap.
  • Stabilization Opportunity: Potential tax rate stabilization in newly eligible municipalities (e.g., rural counties with high veteran populations).

Strategic Ambiguities & Considerations

  • The "Sum-Certain" Dilution: The Legislature expanded the pool of recipients but did not increase the total appropriation. The Comptroller will likely apply a pro-ration formula. If requests exceed available funds, all cities get less. This creates immediate budget holes for cities relying on previous funding levels.
  • Defining "General Fund Revenue": The 10% eligibility threshold relies on the definition of "general fund revenue." Ambiguity exists regarding whether one-time grants, enterprise funds, or capital project funds are included in the denominator. A stricter Comptroller definition could disqualify municipalities you expect to be eligible.
  • Census Data Lag: The bill relies on specific population brackets. Disputes will arise if the Comptroller uses 2020 Census data versus more recent population estimates, potentially disqualifying fast-growing or shrinking municipalities.

Need Compliance Guidance on This Legislation?

JD Key Consulting specializes in Texas regulatory compliance strategy. Work directly with James Dickey—former Chairman of the Republican Party of Texas—to understand this bill's impact on your operations and develop an actionable compliance plan.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Feb 14, 2025
Passed House
Apr 23, 2025
Passed Senate
May 19, 2025
Signed
Jun 20, 2025
Effective
Jun 20, 2025
TopicsCity GovernmentCity Government--financeCounty GovernmentCounty Government--financeDisabilities, Persons WithMilitary & VeteransTaxationTaxation--property-exemptions
03

House Authors

Rep. Hillary HicklandRepublican · Primary Author
Joint Authors
Coauthors (4)

Senate Sponsors

Sen. Peter FloresRepublican · Primary Sponsor
Cosponsors (1)

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

Related Legislation

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More from Rep. Hillary Hickland

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Related by Topic

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Quick Reference

Frequently Asked Questions

Common questions about HB2894

Q

What does Texas HB2894 do?

HB 2894 expands state financial aid to any municipality where disabled veteran tax exemptions cause a revenue loss of at least 10%, removing the requirement that the city be adjacent to a military base. This creates a "zero-sum" financial environment: while newly eligible municipalities may stabilize tax rates with this influx of cash, legacy "Military Cities" face diluted funding, creating a high probability of property tax rate increases for businesses in those jurisdictions to cover the shortfall.

Q

Who authored HB2894?

HB2894 was authored by Texas Representative Hillary Hickland during the Regular Session.

Q

When was HB2894 signed into law?

HB2894 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce HB2894?

HB2894 is enforced by Comptroller of Public Accounts.

Q

How significant are the changes in HB2894?

The regulatory priority for HB2894 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of HB2894?

The cost impact of HB2894 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does HB2894 address?

HB2894 addresses topics including city government, city government--finance, county government, county government--finance and disabilities, persons with.

Q

What are the key dates for HB2894?

Key dates for HB2894: Effective date is 2025-06-20. Consult with legal counsel regarding applicability.

Q

Which Texas businesses are affected by HB2894?

HB2894 primarily affects property owners and real estate professionals. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026