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Signed Into Law
Signed June 16, 2025Effective 2025-09-01
SB4

Regular Session

Relating to an increase in the amount of the exemption of residence homesteads from ad valorem taxation by a school district and the protection of school districts against certain losses in local revenue.

Government Affairs & Regulatory Compliance Analysis

SB4: Government Affairs Overview

SB4 mandates a provisional property tax billing system for the 2025 tax year, contingent on a November 2025 constitutional amendment increasing the school district homestead exemption from $100,000 to $140,000. This legislation forces mortgage servicers, tax software vendors, and school districts to adopt dual-calculation workflows immediately to manage escrow liabilities and potential supplemental billing. If the amendment fails, businesses must be prepared to process a second "Supplemental Tax Bill" in December 2025.

Sen. Paul Bettencourt·Senate Bill·Regular Session

Moderate
Low Cost
Effective:2025-09-01
Enforcing Agencies

County Tax Assessor-Collectors • Local Appraisal Districts • Texas Education Agency (TEA)

Business Impact

Who SB4 Affects

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

Regulatory Priority: moderate

Notable regulatory updates (effective 2025-09-01). Consider how these changes may affect your operations.

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Education

Affected business types:

  • School districts
  • Charter schools
  • Private schools
  • Education service providers
View all education legislation

Key Operational Considerations

  • 1Software Vendors: School districts and counties must amend Master Services Agreements (MSAs) with tax software vendors to mandate delivery of "dual-calculation" patches by September 1, 2025.
  • 2Mortgage Servicing: Customer support staff must be trained on the "Provisional Tax Bill" concept to handle borrower inquiries regarding escrow adjustments and potential shortages.
  • 3Tax Office Staffing: Tax Assessors require contingency staffing plans to manage the potential surge in processing Supplemental Bills in December 2025 and January 2026.

Estimated Cost Impact

lowMinimal cost impact anticipated.

Enforcing Agencies

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SB4
Moderate
Relating to an increase in the amount of the exemption of residence homesteads from ad valorem taxation by a school district and the protection of sch...
Moderate Compliance Urgency
Requires near-term attention
Cost Impact
Low
Effective
2025-09-01
Enforcing Agencies
County Tax Assessor-CollectorsLocal Appraisal DistrictsTEA
Primary Author: Sen. Paul Bettencourt
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: September 1, 2025 (Applies retroactively to the 2025 Tax Year).
  • Compliance Deadline: October 1, 2025 (Tax Assessors must mail "Provisional Tax Bills"). Mortgage servicers must adjust escrow analysis prior to this date.
  • Agency Rulemaking: The TEA Commissioner must publish maximum compressed tax rates by August 1, 2025. A "regulatory gray zone" exists between October 1 (billing) and November 4 (election), where tax liability is legally uncertain.

Immediate Action Plan

  • Software Audit: Contact tax software vendors immediately to confirm their roadmap for implementing the "dual-calculation" and "provisional notice" features by September 1, 2025.
  • Escrow Policy Definition: Mortgage servicers must determine an internal policy for Fall 2025 escrow analysis: collect at the lower rate (risk of shortage) or higher rate (risk of refund).
  • Budget Adjustment: School districts must reserve funds for a potential second tax bill mailing in December 2025.
  • Bond Review: Municipal advisors must verify that reliance on increased state aid (vs. local revenue) complies with existing debt service coverage covenants.

Operational Changes Required

Contracts

  • Software Vendors: School districts and counties must amend Master Services Agreements (MSAs) with tax software vendors to mandate delivery of "dual-calculation" patches by September 1, 2025.
  • Collection Agreements: Contracts between school districts and tax assessor-collectors must be updated to authorize and fund a potential second mailing (Supplemental Bill) in December 2025, should the amendment fail.

Hiring/Training

  • Mortgage Servicing: Customer support staff must be trained on the "Provisional Tax Bill" concept to handle borrower inquiries regarding escrow adjustments and potential shortages.
  • Tax Office Staffing: Tax Assessors require contingency staffing plans to manage the potential surge in processing Supplemental Bills in December 2025 and January 2026.

Reporting & Record-Keeping

  • Mandatory Notice: Tax bills mailed in Fall 2025 must include the specific statutory disclaimer mandated by Section 2.14 (*"If the Texas Legislature had not enacted..."*).
  • Dual Liability Tracking: Systems must track two distinct liabilities per account: Scenario A (Amendment Passes) and Scenario B (Amendment Fails) to generate accurate Supplemental Bills if necessary.

Fees & Costs

  • Administrative Costs: Districts face doubled postage and printing costs if the amendment fails and a second billing is required.
  • Escrow Liquidity: Mortgage servicers face significant liquidity risks regarding escrow shortages if they collect based on the lower tax rate and the amendment fails, requiring immediate payment of the Supplemental Bill.

Strategic Ambiguities & Considerations

  • Escrow Collection Standards: The statute mandates how *assessors* calculate bills but is silent on how *mortgage servicers* should calculate escrow payments during the provisional period. It is unclear if federal RESPA guidelines allow collecting for the higher "contingent" amount to prevent shortage.
  • Recapture Payment Schedule: The TEA Commissioner has broad discretion on the installment schedule for recapture payments (March–August 2026). Chapter 49 districts cannot accurately forecast cash flow until TEA releases this guidance in early 2026.

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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.

02

Legislative Timeline

This bill's path through the Texas Legislature

Filed
Feb 6, 2025
Passed Senate
Feb 13, 2025
Passed House
May 21, 2025
Signed
Jun 16, 2025
Effective
Sep 1, 2025
TopicsEducationEducation--primary & SecondaryEducation--primary & Secondary--financeTaxationTaxation--property-appraisals & Appraisal DistrictsTaxation--property-assessment & CollectionTaxation--property-exemptionsTaxation--property-tax RateTaxation--school DistrictProperty InterestsProperty Interests--homesteadEducation Agency, TexasEducation, Commissioner of
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Senate Authors

Sen. Paul BettencourtRepublican · Primary Author
Joint Authors
Coauthors (1)

House Sponsors

Rep. Phil KingRepublican · Primary Sponsor
Joint Sponsors
Cosponsors (102)

Bill Text(with markup)

Showing first 50k characters.

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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Quick Reference

Frequently Asked Questions

Common questions about SB4

Q

What does Texas SB4 do?

SB4 mandates a provisional property tax billing system for the 2025 tax year, contingent on a November 2025 constitutional amendment increasing the school district homestead exemption from $100,000 to $140,000. This legislation forces mortgage servicers, tax software vendors, and school districts to adopt dual-calculation workflows immediately to manage escrow liabilities and potential supplemental billing. If the amendment fails, businesses must be prepared to process a second "Supplemental Tax Bill" in December 2025.

Q

Who authored SB4?

SB4 was authored by Texas Senator Paul Bettencourt during the Regular Session.

Q

When was SB4 signed into law?

SB4 was signed into law by Governor Greg Abbott on June 16, 2025.

Q

Which agencies enforce SB4?

SB4 is enforced by County Tax Assessor-Collectors, Local Appraisal Districts and Texas Education Agency (TEA).

Q

How significant are the changes in SB4?

The regulatory priority for SB4 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of SB4?

The cost impact of SB4 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does SB4 address?

SB4 addresses topics including education, education--primary & secondary, education--primary & secondary--finance, taxation and taxation--property-appraisals & appraisal districts.

Q

What are the key dates for SB4?

Key dates for SB4: Effective date is 2025-09-01. Rulemaking: Calculate and publish maximum compressed tax rates for the 2025-2026 school year assuming the amendment passes. (2025-08-01); Determine monthly payment schedules for recapture credit if a district elects installment payments. (2026-03-15). Consult with legal counsel regarding applicability.

Q

Which Texas businesses are affected by SB4?

SB4 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