Relating to the provision of state aid to certain local governments disproportionately affected by the granting of ad valorem tax relief to disabled veterans.
ModeratePlan for compliance
Low Cost
Effective:2025-06-20
Enforcing Agencies
Comptroller of Public Accounts
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 Help Understanding Implementation?
Our government affairs experts can walk you through this bill's specific impact on your operations.
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.
In 2009, the Texas Legislature enacted a law granting a residence homestead property tax exemption to 100 percent or totally disabled veterans. In 2011, the legislature expanded this exemption to include the surviving spouses of these disabled veterans, and in 2015, the legislature established a framework for providing relief to certain local governments disproportionately affected by the granting of property tax relief to such disabled veterans and surviving spouses. Under that framework, municipalities adjacent to a U.S. military installation and counties in which a U.S. military installation is wholly or partly located are eligible to receive disabled veteran assistance payments from the state. However, the bill author has informed the committee that only nine local governments currently meet these eligibility requirements, even though many communities could benefit greatly from these payments. The bill author has also informed the committee that, as the number of disabled veterans using the exemption increases statewide, the burden of higher property taxes shifts to other homeowners and may strain local governments with a high concentration of veterans that do not qualify for the assistance payments. H.B. 2894 seeks to address these issues by expanding the eligibility criteria for these assistance payments to municipalities that are not adjacent to a U.S. military installation but experience property tax revenue loss due to the exemption of an amount equal to or greater than 10 percent of the municipality's general fund revenue in a fiscal year .
CRIMINAL JUSTICE IMPACT
It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS
H.B. 2894 amends the Local Government Code to entitle a municipality other than a municipality adjacent to a U.S. military installation to a disabled veteran assistance payment from the state for a fiscal year if the amount of lost property tax revenue due to the granting of property tax relief to disabled veterans calculated under applicable state law for that fiscal year is equal to or greater than 10 percent of the municipality's general fund revenue for that fiscal year. Accordingly, the bill removes the condition that a municipality be adjacent to a U.S. military installation to be classified as a local government for purposes of statutory provisions relating to the provision of state aid to certain local governments disproportionately affected by the granting of property tax relief for disabled veterans. This removal applies only to the eligibility of a local government to apply for a disabled veteran assistance payment beginning with the fiscal year of the local government that ends in the 2025 tax year.
Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB2894 by Hickland (Relating to the provision of state aid to certain local governments disproportionately affected by the granting of ad valorem tax relief to disabled veterans.), As Introduced
No fiscal implication to the State is anticipated.
The bill would amend Section 140, Local Government Code, to expand the definition of "local government", within the context of disabled veteran assistance payments, to include any municipality rather than only municipalities adjacent to a U.S. military installation. These newly included governments would be eligible for assistance payments ifthe amount of lost ad valorem tax revenue is greater than or equal to 10 percent of the local governments' general fund revenue for that fiscal year.
Although the bill expands the number of eligible local governments, changing the distribution of funds, the amount of funding available for distribution is a sum-certain appropriation. Therefore, this bill alone would have no fiscal impact to the state.
Local Government Impact
The fiscal implications of the bill cannot be determined at this time.
Source Agencies:
304 Comptroller of Public Accounts
LBB Staff:
JMc, KK, LCO, CSmi
Related Legislation
Explore more bills from this author and on related topics
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. Implementation Timeline Effective Date: June 20, 2025 (Immediate effect).
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 urgent is compliance with HB2894?
The compliance urgency for HB2894 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.
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.
Legislative data provided by LegiScanLast updated: November 25, 2025
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