By Brady H.B. No. 1638 74R4864 JD-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the exemption from ad valorem taxation of property 1-3 owned by certain charitable organizations. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Section 11.18(d), Tax Code, is amended to read as 1-6 follows: 1-7 (d) A charitable organization must be organized exclusively 1-8 to perform religious, charitable, scientific, literary, or 1-9 educational purposes and, except as permitted by Subsection (h) of 1-10 this section, engage exclusively in performing one or more of the 1-11 following charitable functions: 1-12 (1) providing medical care without regard to the 1-13 beneficiaries' ability to pay, which in the case of a nonprofit 1-14 hospital means providing charity care and community benefits as set 1-15 forth in Paragraph (A), (B), (C), (D), (E), or (F): 1-16 (A) charity care and government-sponsored 1-17 indigent health care are provided at a level which is reasonable in 1-18 relation to the community needs, as determined through the 1-19 community needs assessment, the available resources of the 1-20 hospital, and the tax-exempt benefits received by the hospital; 1-21 (B) charity care and government-sponsored 1-22 indigent health care are provided in an amount equal to at least 1-23 four percent of the hospital's net patient revenue; 1-24 (C) charity care and government-sponsored 2-1 indigent health care are provided in an amount equal to at least 2-2 100 percent of the hospital's tax-exempt benefits, excluding 2-3 federal income tax; 2-4 (D) a nonprofit hospital that has been 2-5 designated as a disproportionate share hospital under the state 2-6 Medicaid program in either of the previous two fiscal years shall 2-7 be considered to have provided a reasonable amount of charity care 2-8 and government-sponsored indigent health care and shall be deemed 2-9 in compliance with the standards in this subsection; 2-10 (E) for tax years before 1996, charity care and 2-11 community benefits are provided in a combined amount equal to at 2-12 least five percent of the hospital's net patient revenue, provided 2-13 that charity care and government-sponsored indigent health care are 2-14 provided in an amount equal to at least three percent of net 2-15 patient revenue; or 2-16 (F) for tax years after 1995, charity care and 2-17 community benefits are provided in a combined amount equal to at 2-18 least five percent of the hospital's net patient revenue, provided 2-19 that charity care and government-sponsored indigent health care are 2-20 provided in an amount equal to at least four percent of net patient 2-21 revenue; 2-22 (2) providing support or relief to orphans, 2-23 delinquent, dependent, or handicapped children in need of 2-24 residential care, abused or battered spouses or children in need of 2-25 temporary shelter, the impoverished, or victims of natural disaster 2-26 without regard to the beneficiaries' ability to pay; 2-27 (3) providing support to elderly persons or the 3-1 handicapped without regard to the beneficiaries' ability to pay; 3-2 (4) preserving a historical landmark or site; 3-3 (5) promoting or operating a museum, zoo, library, 3-4 theater of the dramatic or performing arts, or symphony orchestra 3-5 or choir; 3-6 (6) promoting or providing humane treatment of 3-7 animals; 3-8 (7) acquiring, storing, transporting, selling, or 3-9 distributing water for public use; 3-10 (8) answering fire alarms and extinguishing fires with 3-11 no compensation or only nominal compensation to the members of the 3-12 organization; 3-13 (9) promoting the athletic development of boys or 3-14 girls under the age of 18 years; 3-15 (10) preserving or conserving wildlife; 3-16 (11) promoting educational development through loans 3-17 or scholarships to students; 3-18 (12) providing halfway house services pursuant to a 3-19 certification as a halfway house by the Board of Pardons and 3-20 Paroles; 3-21 (13) providing permanent housing and related social, 3-22 health care, and educational facilities for persons who are 62 3-23 years of age or older without regard to the residents' ability to 3-24 pay; 3-25 (14) promoting or operating an art gallery, museum, or 3-26 collection, in a permanent location or on tour, that is open to the 3-27 public; 4-1 (15) providing for the organized solicitation and 4-2 collection for distributions through gifts, grants, and agreements 4-3 to nonprofit charitable, education, religious, and youth 4-4 organizations that provide direct human, health, and welfare 4-5 services; 4-6 (16) performing biomedical or scientific research or 4-7 biomedical or scientific education for the benefit of the public; 4-8 (17) operating a television station that produces or 4-9 broadcasts educational, cultural, or other public interest 4-10 programming and that receives grants from the Corporation for 4-11 Public Broadcasting under 47 U.S.C. Section 396; or 4-12 (18) in the case of a nonprofit hospital, providing 4-13 health care services without receiving any payment for providing 4-14 those services to inpatients or outpatients from any source 4-15 including but not limited to the patient or person legally 4-16 obligated to support the patient, third-party payors, Medicare, 4-17 Medicaid, or any other state or local indigent care program. 4-18 Payment for providing health care services does not include 4-19 charitable donations, legacies, bequests, or grants or payment for 4-20 research. 4-21 For purposes of this subsection, the terms "charity care," 4-22 "government-sponsored indigent health care," "net patient revenue," 4-23 "nonprofit hospital," and "tax-exempt benefits" have the meanings 4-24 set forth in Sections 311.031 and 311.042, Health and Safety Code. 4-25 A determination of the amount of community benefits and charity 4-26 care and government-sponsored indigent health care provided by a 4-27 hospital and the hospital's compliance with the requirements of 5-1 Section 311.045, Health and Safety Code, shall be based on the most 5-2 recently completed and audited prior fiscal year of the hospital. 5-3 The providing of charity care and government-sponsored 5-4 indigent health care in accordance with Paragraph (A) of 5-5 Subdivision (1) shall be guided by the prudent business judgment of 5-6 the hospital which will ultimately determine the appropriate level 5-7 of charity care and government-sponsored indigent health care based 5-8 on the community needs, the available resources of the hospital, 5-9 the tax-exempt benefits received by the hospital, and other factors 5-10 that may be unique to the hospital. These criteria shall not be 5-11 determinative factors, but shall be guidelines contributing to the 5-12 hospital's decision along with other factors which may be unique to 5-13 the hospital. The formulas contained in Paragraphs (B), (C), (E), 5-14 and (F) of Subdivision (1) shall also not be considered 5-15 determinative of a reasonable amount of charity care and 5-16 government-sponsored indigent health care. 5-17 The requirements of this subsection shall not apply to the 5-18 extent a hospital demonstrates that reductions in the amount of 5-19 community benefits, charity care, and government-sponsored indigent 5-20 health care are necessary to maintain financial reserves at a level 5-21 required by a bond covenant, are necessary to prevent the hospital 5-22 from endangering its ability to continue operations, or if the 5-23 hospital, as a result of a natural or other disaster, is required 5-24 substantially to curtail its operations. 5-25 In any fiscal year that a hospital, through unintended 5-26 miscalculation, fails to meet any of the standards in Subdivision 5-27 (1), the hospital shall not lose its tax-exempt status without the 6-1 opportunity to cure the miscalculation in the fiscal year following 6-2 the fiscal year the failure is discovered by both meeting one of 6-3 the standards and providing an additional amount of charity care 6-4 and government-sponsored indigent health care that is equal to the 6-5 shortfall from the previous fiscal year. A hospital may apply this 6-6 provision only once every five years. 6-7 SECTION 2. This Act takes effect January 1, 1996. 6-8 SECTION 3. The importance of this legislation and the 6-9 crowded condition of the calendars in both houses create an 6-10 emergency and an imperative public necessity that the 6-11 constitutional rule requiring bills to be read on three several 6-12 days in each house be suspended, and this rule is hereby suspended.