BILL ANALYSIS H.B. 2613 By: Craddick April 20, 1995 Committee Report (Unamended) BACKGROUND Section 11.20, Tax Code, exempts from ad valorem taxation property owned by a religious organization and used as an actual place of religious worship. Section 11.20(a)(5) provides for the exemption of an incomplete improvement that is under active construction or other physical preparation and that is designed and intended to be used by the religious organization as a place of religious worship when complete. Pursuant to Section 11.20(f), property qualifying under the "active construction or other physical preparation" standard may be exempted for only two years. The provisions to exempt religious organization property "under active construction or other physical preparation" were added in 1987. Such provisions have served to resolve previous administrative concerns relating to the taxable status of church-owned property during the time required for the establishment of facilities for regular worship. In certain cases, however, a religious organization will acquire land late in the year. Although significant planning and preparation activities required to establish the facilities are initiated and/or completed at the time of the land purchase, the late-year acquisition makes it impossible for actual construction activities to commence by January 1st, the date at which qualification for exemption is determined. Currently, there is inconsistency among appraisal district's interpretation of Section 11.20(a)(5). Some will include planning and preparation activities as "other physical preparation" while others use a more restrictive reading of the language. PURPOSE The bill proposes to define certain activities necessary to be considered "an incomplete improvement under physical preparation" for taxation exemption for religious organizations. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 11.20 (Religious Organizations), Tax Code, by adding Subsection (g) to further define "an incomplete improvement under physical preparation" for purposes of taxation exemption for facilities being established for regular religious worship. SECTION 2. Emergency clause SUMMARY OF COMMITTEE ACTION Public notice was posted in accordance with the rules, and a public hearing was held on April 18, 1995. Representative Craddick explained the bill. By a record vote of 7 ayes, 0 nays, 0 present not voting, and 4 absent, the committee voted to report H.B. 2613 to the House without amendment with the recommendation that it be sent to the Local and Consent Calendar and that it do pass. Testimony received in favor of the bill: Jim Robinson, representing himself William H. Hinson, representing himself James D. Penny, representing First United Methodist Church of Houston