HB 5266

relating to the authority of the attorney general to investigate
violations of law by certain local governments and to take action
against those local governments to enforce the law.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1.  Chapter 402, Government Code, is amended by
adding Subchapter D to read as follows:
SUBCHAPTER D. VIOLATIONS OF LAW BY LOCAL GOVERNMENT
Sec. 402.101.  DEFINITIONS.  In this subchapter:
(1)  "Local government" means a municipality or county.
(2)  "No-new-revenue tax rate" means the
no-new-revenue tax rate calculated under Chapter 26, Tax Code.
Sec. 402.102.  ATTORNEY GENERAL INVESTIGATION AND ACTION.
(a) The attorney general may investigate an alleged violation of
(b)  The attorney general may bring an action in the name of
the state against a local government if the attorney general
determines after conducting an investigation under Subsection (a)
that the local government violated a law.
Sec. 402.103.  ENFORCEMENT ACTIONS DURING PENDENCY OF
ACTION.  During the pendency of an action brought under this
subchapter, with respect to a local government defending the
(1)  the comptroller shall withhold payment of any
money due to the local government under Section 321.502 or 323.502,
(2)  the local government may not adopt an ad valorem
tax rate that exceeds the local government's no-new-revenue tax
(3)  the local government may not receive state grant
funds and any pending application for such funds shall be denied.
Sec. 402.104.  BURDEN OF PROOF; INITIAL HEARING.  (a) A local
government defending an action brought under this subchapter has
the burden of proof to establish by a preponderance of the evidence
that the local government complied with the law the alleged
violation of which is the subject of the action.
(b)  The court of original jurisdiction shall set an action
brought under this subchapter for an initial hearing not later than
the 30th day after the date the local government defending the
action was served with process for the action.
Sec. 402.105.  JURISDICTION; APPEAL.  (a) The First Business
Court Division has exclusive original jurisdiction of an action
(b)  The Fifteenth Court of Appeals has exclusive appellate
jurisdiction of an action brought under this subchapter.  A party
must appeal the action not later than the 30th day after the date
Sec. 402.106.  RESOLUTION OF ACTION IN FAVOR OF ATTORNEY
GENERAL.  (a) If the attorney general prevails in an action brought
(1)  the local government defending the action may not,
during the five state fiscal years following the year in which the
(A)  adopt an ad valorem tax rate that exceeds the
local government's no-new-revenue tax rate; or
(B)  receive state grant funds; and
(2)  the court issuing the final judgment resolving the
action shall provide in the judgment that the state is entitled to
recover from the local government defending the action a penalty
equal to the balance of the suspense account maintained for the
local government under Section 321.501 or 323.501, Tax Code, as
applicable, that exists on the date the judgment is signed.
(b)  The comptroller shall, on receipt of a copy of the final
judgment in an action brought under this subchapter that includes a
provision described by Subsection (a)(2), deposit the balance of
the suspense account maintained for the local government defending
the action under Section 321.501 or 323.501, Tax Code, as
applicable, as of the date the judgment is signed to the credit of
Sec. 402.107.  RESOLUTION OF ACTION IN FAVOR OF LOCAL
GOVERNMENT.  If a local government prevails in an action brought
under this subchapter, the comptroller shall, notwithstanding any
other law, immediately send to the local government the balance of
the suspense account maintained for the local government under
Section 321.501 or 323.501, Tax Code, as applicable, as of the date
the judgment resolving the action is signed.
SECTION 2.  Subchapter D, Chapter 402, Government Code, as
added by this Act, applies only to an alleged violation of law that
occurs on or after the effective date of this Act.
SECTION 3.  This Act takes effect September 1, 2025.