By: Galloway S.B. No. 428 A BILL TO BE ENTITLED 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. This Act takes effect January 1, 1996. 6-7 SECTION 3. The importance of this legislation and the 6-8 crowded condition of the calendars in both houses create an 6-9 emergency and an imperative public necessity that the 6-10 constitutional rule requiring bills to be read on three several 6-11 days in each house be suspended, and this rule is hereby suspended. 6-12 COMMITTEE AMENDMENT NO. 1 6-13 Amend S.B. 428 as follows: 6-14 (1) Insert a new Section 2 to read as follows: 6-15 SECTION 2. Section 23.55, Tax Code, is amended by adding 6-16 Subsection (j) to read as follows: 6-17 (j) The sanctions provided by Subsection (a) do not apply to 6-18 land owned by an organization that qualifies as a religious 6-19 organization under Section 11.20(c) if the organization converts 6-20 the land to a use for which the land is eligible for an exemption 6-21 under Section 11.20 within five years. 6-22 (2) Strike existing Sections 2 and 3 and substitute the 6-23 following: 6-24 SECTION 3. (a) Except as provided by Subsection (b) of this 6-25 section, this Act takes effect immediately. 6-26 (b) Section 1 of this Act takes effect January 1, 1996. 6-27 SECTION 4. The importance of this legislation and the 7-1 crowded condition of the calendars in both houses create an 7-2 emergency and an imperative public necessity that the 7-3 constitutional rule requiring bills to be read on three several 7-4 days in each house be suspended, and this rule is hereby suspended, 7-5 and that this Act take effect and be in force according to its 7-6 terms, and it is so enacted. 7-7 Marchant