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