Shown verbatim: the complete text as captured from the official PDF posted by the Tennessee General Assembly, fetched 2026-09-25. Page and line markers are part of the official record; nothing is edited or removed. This is the chaptered version. The official bill page.
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PUBLIC CHAPTER NO. 1053
SENATE BILL NO. 539
By Stevens, Bailey, Reeves
Substituted for: House Bill No. 753
By Faison, Sherrell, Powell, Renea _Jones
AN ACT to amend Tennessee Code Annotated, Title 7; Title 13; Title 48; Title 49; Title 67 and Title
68, relative to low-income housing.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 67, Chapter 5, Part 6, is amended by adding
the following as a new section:
67-5-608.
(a) Notwithstanding another law to the contrary, multi-unit rental housing that is
subject to government restriction on use must be assessed in a manner that is consistent
with the following methods:
(1) Applying an annual net operating income approach to value that uses
actual income and stabilized operating expenses that are based on the actual history
of the property, when available, and a capitalization rate;
(2) Using a methodology to project income, expenses, and a capitalization
rate that is consistent with the Uniform Standards of Professional Appraisal Practice;
(3) Adjusting the unrestricted market value of the multi-unit rental housing,
computed without regard to a government restriction on use applicable to the multi-
unit rental housing, based on the ratio of the average annual rent of those units of the
property that are subject to government restriction on use to the average annual rent
of comparable multi-unit rental housing that is not subject to government restriction
on use; and
(4) Excluding the amount of low-income housing tax credits received under
Section 42 of the Internal Revenue Code of 1986 (26 U.S.C. § 42), or from a state or
federal program in determining the value attributable to the multi-unit rental housing.
(b) The capitalization rate projected pursuant to subsection (a) must be:
(1) Based on the risks associated with multi-unit rental housing subject to
government restriction on use, including diminished ownership control; income
generating potential; liquidity; the condition of the property; the class of the property;
and the property's location and size;
(2) Equal to or greater than the capitalization rate used for valuing multi-unit
rental housing that is not subject to government restriction on use; and
(3) In the range of fifty (50) to one hundred fifty (150) basis points above the
most recent quarterly survey of the national average capitalization rates of multi-
family properties published by realtyrates.com or a successor organization as
determined by the division of property assessments in consultation with the
Tennessee housing development agency.
S8539
(c) Beginning with tax year 2026 and each tax year thereafter, the division of property
assessments shall publish the capitalization rate range for property assessors to use for that
tax year on its website as soon as practicable after the rates become available.
(d)(1) The owner of multi-unit rental housing shall:
(A) Promptly notify the property assessor if:
(i) The property is subject to government restriction on use, and
if so, whether the owner requests that the property be classified as
multi-unit rental housing subject to government restriction on use;
(ii) The property ceases to be subject to government restriction
on use, and if so, whether the owner of the property requests that the
property's classification as multi-unit rental housing subject to
government restriction on use be withdrawn; or
(iii) A foreclosure action has been brought upon the property;
and
(B) File with the property assessor, on a form prescribed by the state
board of equalization, the information necessary for the multi-unit rental
housing to be assessed based on the methods described in subsection (a).
(2) The notification required by subdivision (d)(1 )(A) must be in writing and
submitted to the property assessor on or before December 31 of the calendar year in
which the applicable circumstance as listed in subdivisions (d)(1 )(A)(i)-(iii) occurred.
(3) If the owner fails to submit the notification pursuant to subdivision (d)(1)(A),
then the owner is liable for any delinquent property taxes, including interest and
penalty, assessed on the property.
(e) As used in this section:
(1) "Government restriction on use" means a limitation on the use of a
specified amount of the individual dwelling units of multi-unit rental housing that
receive a federal, state, or local incentive based on low-income renter restrictions,
including the following government incentives:
(A) A low-income housing tax credit under Section 42 of the Internal
Revenue Code of 1986 (26 U.S.C. § 42);
(B) Financing derived from exempt facility bonds for qualified
residential rental projects under Section 142 of the Internal Revenue Code of
1986 (26 U.S.C. § 142);
(C) A low.;.interest loan under Section 235 or 236 of the National
Housing Act (42 U.S.C. § 3538) or Section 515 of the Housing Act of 1949 (42
U.S.C. § 1485);
(D) A rent subsidy;
(E) A guaranteed loan;
(F) A grant;
(G) A guarantee; or
(H) An agreement entered into for payments in lieu of ad valorem
taxes;
(2) "Low-income" means earning at or below eighty percent (80%) of the area
medran income as defined by the United States department of housing and urban
development for the location of the multi-unit rental housing; and
•·(3) "Multi-unit re!1tal housing":
(A) Means residential property or a project consisting of four (4) or
more individual dwelling units; and
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SB 539
(8) Does not include:
(i) Assisted living facilities; or
(ii) Duplexes or single-family units unless they are classified as
commercial property or included as part of a larger property that is
subject to government restriction on use.
(f) This section applies in a city or county that adopts this section by ordinance or
resolution of the legislative body.
SECTION 2. For purposes of publishing the capitalization rate range and promulgating
application forms and rules, this act takes effect upon becoming a law, the public welfare requiring it.
For all other purposes, this act takes effect July 1, 2026, the public welfare requiring it, and applies
to residential property and projects developed on or after such date.
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SENATE BILL NO. 539
PASSED: April 22, 2026
RAND't\McNALLY
SPEAKER OF THt SENATE
C .,
•
CAMERON SEXTON, SPEAKER
HOUSE OF REPRESENTATIVES
APPROVED this :;;;;.,vd- day of Mo.-i O 2026
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BILL LEE, GOVERNOREvery fact on this page links to its source, starting with the official bill record.