S.B. No. 428
AN ACT
1-1 relating to the exemption from ad valorem taxation of property
1-2 owned by certain charitable organizations.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsection (d), Section 11.18, Tax Code, is
1-5 amended to read as follows:
1-6 (d) A charitable organization must be organized exclusively
1-7 to perform religious, charitable, scientific, literary, or
1-8 educational purposes and, except as permitted by Subsection (h) of
1-9 this section, engage exclusively in performing one or more of the
1-10 following charitable functions:
1-11 (1) providing medical care without regard to the
1-12 beneficiaries' ability to pay, which in the case of a nonprofit
1-13 hospital means providing charity care and community benefits as set
1-14 forth in Paragraph (A), (B), (C), (D), (E), or (F):
1-15 (A) charity care and government-sponsored
1-16 indigent health care are provided at a level which is reasonable in
1-17 relation to the community needs, as determined through the
1-18 community needs assessment, the available resources of the
1-19 hospital, and the tax-exempt benefits received by the hospital;
1-20 (B) charity care and government-sponsored
1-21 indigent health care are provided in an amount equal to at least
1-22 four percent of the hospital's net patient revenue;
1-23 (C) charity care and government-sponsored
1-24 indigent health care are provided in an amount equal to at least
2-1 100 percent of the hospital's tax-exempt benefits, excluding
2-2 federal income tax;
2-3 (D) a nonprofit hospital that has been
2-4 designated as a disproportionate share hospital under the state
2-5 Medicaid program in either of the previous two fiscal years shall
2-6 be considered to have provided a reasonable amount of charity care
2-7 and government-sponsored indigent health care and shall be deemed
2-8 in compliance with the standards in this subsection;
2-9 (E) for tax years before 1996, charity care and
2-10 community benefits are provided in a combined amount equal to at
2-11 least five percent of the hospital's net patient revenue, provided
2-12 that charity care and government-sponsored indigent health care are
2-13 provided in an amount equal to at least three percent of net
2-14 patient revenue; or
2-15 (F) for tax years after 1995, charity care and
2-16 community benefits are provided in a combined amount equal to at
2-17 least five percent of the hospital's net patient revenue, provided
2-18 that charity care and government-sponsored indigent health care are
2-19 provided in an amount equal to at least four percent of net patient
2-20 revenue;
2-21 (2) providing support or relief to orphans,
2-22 delinquent, dependent, or handicapped children in need of
2-23 residential care, abused or battered spouses or children in need of
2-24 temporary shelter, the impoverished, or victims of natural disaster
2-25 without regard to the beneficiaries' ability to pay;
2-26 (3) providing support to elderly persons or the
2-27 handicapped without regard to the beneficiaries' ability to pay;
3-1 (4) preserving a historical landmark or site;
3-2 (5) promoting or operating a museum, zoo, library,
3-3 theater of the dramatic or performing arts, or symphony orchestra
3-4 or choir;
3-5 (6) promoting or providing humane treatment of
3-6 animals;
3-7 (7) acquiring, storing, transporting, selling, or
3-8 distributing water for public use;
3-9 (8) answering fire alarms and extinguishing fires with
3-10 no compensation or only nominal compensation to the members of the
3-11 organization;
3-12 (9) promoting the athletic development of boys or
3-13 girls under the age of 18 years;
3-14 (10) preserving or conserving wildlife;
3-15 (11) promoting educational development through loans
3-16 or scholarships to students;
3-17 (12) providing halfway house services pursuant to a
3-18 certification as a halfway house by the Board of Pardons and
3-19 Paroles;
3-20 (13) providing permanent housing and related social,
3-21 health care, and educational facilities for persons who are 62
3-22 years of age or older without regard to the residents' ability to
3-23 pay;
3-24 (14) promoting or operating an art gallery, museum, or
3-25 collection, in a permanent location or on tour, that is open to the
3-26 public;
3-27 (15) providing for the organized solicitation and
4-1 collection for distributions through gifts, grants, and agreements
4-2 to nonprofit charitable, education, religious, and youth
4-3 organizations that provide direct human, health, and welfare
4-4 services;
4-5 (16) performing biomedical or scientific research or
4-6 biomedical or scientific education for the benefit of the public;
4-7 (17) operating a television station that produces or
4-8 broadcasts educational, cultural, or other public interest
4-9 programming and that receives grants from the Corporation for
4-10 Public Broadcasting under 47 U.S.C. Section 396; or
4-11 (18) in the case of a nonprofit hospital, providing
4-12 health care services without receiving any payment for providing
4-13 those services to inpatients or outpatients from any source
4-14 including but not limited to the patient or person legally
4-15 obligated to support the patient, third-party payors, Medicare,
4-16 Medicaid, or any other state or local indigent care program.
4-17 Payment for providing health care services does not include
4-18 charitable donations, legacies, bequests, or grants or payment for
4-19 research.
4-20 For purposes of this subsection, the terms "charity care,"
4-21 "government-sponsored indigent health care," "net patient revenue,"
4-22 "nonprofit hospital," and "tax-exempt benefits" have the meanings
4-23 set forth in Sections 311.031 and 311.042, Health and Safety Code.
4-24 A determination of the amount of community benefits and charity
4-25 care and government-sponsored indigent health care provided by a
4-26 hospital and the hospital's compliance with the requirements of
4-27 Section 311.045, Health and Safety Code, shall be based on the most
5-1 recently completed and audited prior fiscal year of the hospital.
5-2 The providing of charity care and government-sponsored
5-3 indigent health care in accordance with Paragraph (A) of
5-4 Subdivision (1) shall be guided by the prudent business judgment of
5-5 the hospital which will ultimately determine the appropriate level
5-6 of charity care and government-sponsored indigent health care based
5-7 on the community needs, the available resources of the hospital,
5-8 the tax-exempt benefits received by the hospital, and other factors
5-9 that may be unique to the hospital. These criteria shall not be
5-10 determinative factors, but shall be guidelines contributing to the
5-11 hospital's decision along with other factors which may be unique to
5-12 the hospital. The formulas contained in Paragraphs (B), (C), (E),
5-13 and (F) of Subdivision (1) shall also not be considered
5-14 determinative of a reasonable amount of charity care and
5-15 government-sponsored indigent health care.
5-16 The requirements of this subsection shall not apply to the
5-17 extent a hospital demonstrates that reductions in the amount of
5-18 community benefits, charity care, and government-sponsored indigent
5-19 health care are necessary to maintain financial reserves at a level
5-20 required by a bond covenant, are necessary to prevent the hospital
5-21 from endangering its ability to continue operations, or if the
5-22 hospital, as a result of a natural or other disaster, is required
5-23 substantially to curtail its operations.
5-24 In any fiscal year that a hospital, through unintended
5-25 miscalculation, fails to meet any of the standards in Subdivision
5-26 (1), the hospital shall not lose its tax-exempt status without the
5-27 opportunity to cure the miscalculation in the fiscal year following
6-1 the fiscal year the failure is discovered by both meeting one of
6-2 the standards and providing an additional amount of charity care
6-3 and government-sponsored indigent health care that is equal to the
6-4 shortfall from the previous fiscal year. A hospital may apply this
6-5 provision only once every five years.
6-6 SECTION 2. Section 23.55, Tax Code, is amended by adding
6-7 Subsection (j) to read as follows:
6-8 (j) The sanctions provided by Subsection (a) of this section
6-9 do not apply to land owned by an organization that qualifies as a
6-10 religious organization under Section 11.20(c) of this code if the
6-11 organization converts the land to a use for which the land is
6-12 eligible for an exemption under Section 11.20 of this code within
6-13 five years.
6-14 SECTION 3. (a) Except as provided by Subsection (b) of this
6-15 section, this Act takes effect immediately.
6-16 (b) Section 1 of this Act takes effect January 1, 1996.
6-17 SECTION 4. The importance of this legislation and the
6-18 crowded condition of the calendars in both houses create an
6-19 emergency and an imperative public necessity that the
6-20 constitutional rule requiring bills to be read on three several
6-21 days in each house be suspended, and this rule is hereby suspended,
6-22 and that this Act take effect and be in force according to its
6-23 terms, and it is so enacted.