Can a Texas city reduce or repeal the local option homestead exemption it adopted, even if voters vote to lower the city's property tax rate?

Plain-English summary

The Village of Salado adopted a local option homestead exemption that was in place in 2022. This is the percentage discount a city can give homeowners off the taxable value of their home. Village officials worried that the exemption, combined with a possible voter-approved cut to the city's property tax rate, could leave the Village short on money for basic services like police. So they asked whether the Village could lawfully reduce its local option homestead exemption for fiscal year 2025-2026.

The AG said no. The Texas Constitution lets the Legislature bar a local government from reducing or repealing a local option homestead exemption once it adopts one. The Legislature did exactly that in Tax Code subsection 11.13(n-1): a school district, municipality, or county that adopted the exemption "for the 2022 tax year may not reduce the amount of or repeal the exemption." That rule runs through the 2027 tax year and then expires at the end of 2027.

The catch for Salado is that the statute has no escape hatch. There is no exception for a city that wants to lower its exemption because voters approved a reduction in the property tax rate. The plain text sets a floor: whatever exemption the city had for 2022 has to stay at least that high until the 2027 tax year ends.

The AG pointed to two appellate decisions, Kilgore Independent School District v. Anderson and White Deer Independent School District v. Martin, that read a nearly identical earlier version of the statute (keyed to the 2014 tax year and a 2019 expiration) the same way: the Legislature set a floor at the level the exemption stood, and any reduction by the governing body was expressly prohibited. Because the current language differs from the older language only in the dates, the AG found no basis to reach a different result. The Village cannot reduce the rate of its exemption for fiscal year 2025-2026 below the 2022 level, even if voters approve a lower tax rate.

What this means for you

If you are a city, county, or school district official

Based on this opinion, if your jurisdiction had a local option homestead exemption in place for the 2022 tax year, you cannot reduce or repeal it before the 2027 tax year ends. That holds even if a voter-approved tax-rate cut squeezes your budget. The exemption percentage you had for 2022 is a floor until then.

If you are a municipal finance officer planning a budget

The opinion forecloses one budget lever: you cannot raise revenue by trimming a locked-in local option homestead exemption. The AG read § 11.13(n-1) as having no exception for a voter-approved rate reduction, so the interaction between a lower rate and a fixed exemption is something to plan around, not around which to reduce the exemption.

If you are a homeowner in a city with a local option exemption

Under this opinion, the discount your city gave you for 2022 cannot be cut or taken away before the 2027 tax year, regardless of what happens to the tax rate. The exemption is protected as a floor through 2027.

If you are a county tax assessor-collector

The opinion confirms that § 11.13(n-1) freezes a 2022 local option homestead exemption at or above its 2022 level through the 2027 tax year for the adopting taxing unit, with no carve-out for a rate reduction.

Common questions

Q: Can a Texas city lower its homestead exemption to raise money?
A: Not if the city had a local option homestead exemption in place for the 2022 tax year. The AG concluded that Tax Code § 11.13(n-1) bars reducing or repealing it through the 2027 tax year.

Q: What if the voters approve a lower property tax rate?
A: It does not matter. The AG found no exception in the statute for a voter-approved rate reduction. The exemption still cannot be cut below the 2022 level before the 2027 tax year ends.

Q: When does this restriction end?
A: Subsection 11.13(n-1) expires December 31, 2027, so it applies through the 2027 tax year.

Q: Does this apply only to cities?
A: No. By its terms the statute covers a school district, municipality, or county that adopted the exemption for the 2022 tax year.

Q: Has a court read this statute the same way?
A: Yes. The AG cited Kilgore Independent School District v. Anderson and White Deer Independent School District v. Martin, which construed a nearly identical earlier version (keyed to 2014) as setting a floor and expressly prohibiting reductions by the governing body.

Background and statutory framework

The Texas Constitution authorizes a municipality to exempt from taxation a percentage of the market value of a residence homestead (Tex. Const. art. VIII, § 1-b(e)), commonly called the local option homestead exemption. The percentage may not exceed twenty percent, and the exemption amount may not be less than $5,000. The same provision lets the Legislature "by general law" prohibit a political subdivision that adopts the exemption from reducing or repealing it.

The Legislature implemented this in Tax Code subsection 11.13(n), which lets a taxing unit, including an incorporated city or town (§ 1.04(12)), adopt the exemption. In 2023 it added subsection 11.13(n-1): a school district, municipality, or county that adopted the exemption "for the 2022 tax year may not reduce the amount of or repeal the exemption." That provision applies to a tax year beginning on or after January 1, 2023, and expires December 31, 2027.

Applying ordinary statutory construction, the AG explained that the goal is the Legislature's intent as expressed in the enacted text, and "[w]here text is clear, text is determinative" (City of Round Rock v. Rodriguez, 399 S.W.3d 130, 133 (Tex. 2013); Molinet v. Kimbrell, 356 S.W.3d 407, 414 (Tex. 2011); Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009)). Subsection 11.13(n-1) plainly requires a 2022 municipal exemption to stay at or above that level until the end of the 2027 tax year, with no exception when voters approve a tax-rate reduction.

The AG found its reading confirmed by precedent on a nearly identical earlier version of the statute. In Kilgore Independent School District v. Anderson, a school board voted to repeal its local option homestead exemption; the court held the Act's plain language set "a floor for the local option exemption rates at the level they were in 2014 until the end of the 2019 tax year" (No. 12-20-00133-CV, 2020 WL 7635966, at 4-5 (Tex. App.—Tyler Dec. 22, 2020, no pet.)). White Deer Independent School District v. Martin* read the predecessor provision the same way, holding any reduction by the governing body was "expressly prohibited" (596 S.W.3d 855, 865, 869 (Tex. App.—Amarillo 2019, pet. denied)). Because the only difference between that language and the current statute is the relevant dates, the AG saw no basis to distinguish Salado's situation: the Village may not reduce the rate of its local option homestead exemption for fiscal year 2025-2026 below the level adopted for the 2022 tax year, even if voters approve a reduction in the Village's ad valorem tax rate.

Citations and references

Statutes:
- Tex. Const. art. VIII, § 1-b — residence homestead exemptions
- Tex. Tax Code § 11.13 — residence homestead exemption, including subsections (n) and (n-1)

Key cases:
- White Deer Indep. Sch. Dist. v. Martin, 596 S.W.3d 855 (Tex. App.—Amarillo 2019, pet. denied) — predecessor statute set an exemption floor; reductions expressly prohibited
- Kilgore Indep. Sch. Dist. v. Anderson, No. 12-20-00133-CV, 2020 WL 7635966 (Tex. App.—Tyler Dec. 22, 2020, no pet.) — Legislature set a floor on local option exemption rates

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0507
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2026/kp-0507.pdf

Original opinion text

January 23, 2026

The Honorable Brad Buckley, DVM
Chair, House Committee on Public Education
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. KP-0507
Re: Village authority to reduce a Local Option Homestead Exemption (RQ-0594-KP)

Dear Representative Buckley:

On behalf of the Village of Salado, you ask about reducing a local option homestead exemption. The Village adopted a local option homestead exemption that "was in place in 2022." Attachment at 1. As we understand it, Village officials are concerned that the exemption combined with an ad valorem tax rate reduction could leave the Village unable to "fund essential municipal services including the provision of police protection." Id. You thus ask that we review the relevant statute and consider "whether it would be lawful for" the Village to reduce the local option homestead exemption "for Fiscal Year 2025-[20]26." Request Letter at 1; Attachment at 1.

The Texas Constitution authorizes a municipality to exempt from taxation a percentage of the market value of a residence homestead for homeowners in the municipality. See TEX. CONST. art. VIII, § 1-b(e); Tex. Att'y Gen. Op. No. KP-0215 (2018) at 1. This is commonly referred to as the "local option homestead exemption." E.g., White Deer Indep. Sch. Dist. v. Martin, 596 S.W.3d 855, 858, 863 (Tex. App.—Amarillo 2019, pet. denied). "The percentage may not exceed twenty percent," while the amount of the exemption "may not be less than $5,000." TEX. CONST. art. VIII, § 1-b(e). The same provision authorizes the Legislature "by general law" to "prohibit the governing body of a political subdivision that adopts" such an exemption "from reducing the amount of or repealing the exemption." Id.

Consistent with the Texas Constitution, the Legislature enacted Tax Code subsection 11.13(n), which allows a taxing unit to adopt the local option homestead exemption. TEX. TAX CODE § 11.13(n); see also id. § 1.04(12) (providing that a "taxing unit" includes an "incorporated city or town"). In 2023, the Legislature added Tax Code subsection 11.13(n-1) to provide that "[t]he governing body of a school district, municipality, or county that adopted" the local option homestead exemption "for the 2022 tax year may not reduce the amount of or repeal the exemption." Id. § 11.13(n-1). This provision applies "only to an ad valorem tax year that begins on or after January 1, 2023." Act of July 13, 2023, 88th Leg., 2d C.S., ch. 1, § 3.16, 2023 Tex. Gen. Laws 4700, 4706. It expires on December 31, 2027. Id. § 3.01 at 4701; TEX. TAX CODE § 11.13(n-1).

"Our ultimate purpose when construing a statute is to discover the Legislature's intent." City of Round Rock v. Rodriguez, 399 S.W.3d 130, 133 (Tex. 2013). Because "the Legislature expresses its intent by the words it enacts and declares to be the law," Molinet v. Kimbrell, 356 S.W.3d 407, 414 (Tex. 2011), "[w]here text is clear, text is determinative of that intent." Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009). Here, of course, subsection 11.13(n-1) plainly demonstrates that a local option homestead exemption adopted by a municipality for the 2022 tax year must stay at (or above) that level until the end of the 2027 tax year. TEX. TAX CODE § 11.13(n-1). Unfortunately, the statute provides no exception when voters approve a reduction in the ad valorem tax rate. Id. This means the Village's governing body may not reduce the rate of the exemption for fiscal year 2025-2026 from that adopted for the 2022 tax year, even when the voters approve a reduction in the Village's ad valorem tax rate.

Precedent likewise confirms this conclusion. In Kilgore Independent School District v. Anderson, for example, the court construed a prior version of subsection 11.13(n-1) after an independent school district's board of trustees voted to repeal its local option homestead exemption. No. 12-20-00133-CV, 2020 WL 7635966, at 1, 3–4 (Tex. App.—Tyler Dec. 22, 2020, no pet.) (mem. op.). At the time, the statute provided "[t]he governing body of a school district, [municipality, or county] that adopted an exemption under Subsection (n) for the 2014 tax year may not reduce the amount or repeal the exemption. This subsection expires December 31, 2019." Id. at 4 (citing Act of May 29, 2015, 84th Leg., R.S., ch. 465, § 1, 2015 Tex. Gen. Laws 1779, 1779 (expired Dec. 31, 2019)). The court held that "[t]he plain language of the Act evidences the Legislative intent to set a floor for the local option exemption rates at the level they were in 2014 until the end of the 2019 tax year." Id. at *5; see also Tex. Att'y Gen. Op. No. KP-0072 (2016) at 2 (concluding the same).

White Deer Independent School District v. Martin also spoke to the predecessor of subsection 11.13(n-1) when a school district voted to reduce the district's local option homestead exemption. 596 S.W.3d at 859. That court construed "the language of the statute [to] indicate[] that the Legislature intended for any [local option homestead exemption] adopted by a school district, municipality, or county for the 2014 tax year to stay at (or above) that level until the end of the 2019 tax year," id. at 865, and any reduction of the exemption by the governing body was "expressly prohibited" by the statute, id. at 869.

At bottom, the language construed in both cases was nearly identical to the current statutory language and differed only as to the relevant dates. Compare Act of May 29, 2015, 84th Leg., R.S., ch. 465, § 1, 2015 Tex. Gen. Laws 1779, 1779 (expired Dec. 31, 2019), with TEX. TAX CODE § 11.13(n-1). We therefore confront no basis on which to distinguish the situation presented by your request. Again, the plain text of Tax Code subsection 11.13(n-1) prevents the Village's governing body from lawfully reducing the rate of its local option homestead exemption for fiscal year 2025-2026, even where voters approve a reduction in the Village's ad valorem tax rate, from that adopted for the 2022 tax year.

S U M M A R Y

Subsection 11.13(n-1) of the Tax Code prohibits the governing body of a school district, municipality, or county from repealing or reducing the local option homestead exemption from the amount that was adopted for the 2022 tax year through the 2027 tax year. Thus, the Village of Salado's governing body may not reduce the rate of its local option homestead exemption for fiscal year 2025-2026 from that adopted for the 2022 tax year.

Very truly yours,

KEN PAXTON
Attorney General of Texas

BRENT WEBSTER, First Assistant Attorney General
LESLEY FRENCH, Chief of Staff
D. FORREST BRUMBAUGH, Deputy Attorney General for Legal Counsel
JOSHUA C. FIVESON, Chair, Opinion Committee
CHRISTY DRAKE-ADAMS, Assistant Attorney General, Opinion Committee