HB 3637 – Niche Property tax exemption

HB 3637 is the enabling legislation for HJR 88, which would allow county commissioners courts to exempt from property taxes the portion of a home’s value added by installing a rainwater harvesting or graywater system. While the stated intent is to promote water conservation, the resolution would complicate the tax code by creating a new, selective exemption. Instead of providing broad tax relief, it rewards certain property owners based on their ability to afford and install niche environmental upgrades—an option not available to many Texans. Renters, lower-income homeowners, and those in dense urban areas where space or infrastructure doesn’t allow for these systems would be effectively excluded from any benefit, while still subsidizing the lost revenue through higher rates or reduced services. The policy could result in a patchwork of exemptions across the state, with different counties adopting different rules, undermining consistency and fairness in taxation. Additionally, it opens the door for further politically favored carve-outs, further eroding the principle of equal treatment under the tax code. It also raises enforcement and verification challenges, as local governments would be tasked with confirming installation details, valuation impact, and compliance, all of which add red tape and administrative costs. From a fiscally conservative, pro-taxpayer standpoint, this measure represents government interference in the tax base and picks winners and losers in the marketplace. For these reasons, TFR opposes HB 3637.