1-1 By: Galloway S.B. No. 428 1-2 (In the Senate - Filed February 2, 1995; February 6, 1995, 1-3 read first time and referred to Committee on Finance; 1-4 April 7, 1995, reported favorably by the following vote: Yeas 11, 1-5 Nays 0; April 7, 1995, sent to printer.) 1-6 A BILL TO BE ENTITLED 1-7 AN ACT 1-8 relating to the exemption from ad valorem taxation of property 1-9 owned by certain charitable organizations. 1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-11 SECTION 1. Subsection (d), Section 11.18, Tax Code, is 1-12 amended to read as follows: 1-13 (d) A charitable organization must be organized exclusively 1-14 to perform religious, charitable, scientific, literary, or 1-15 educational purposes and, except as permitted by Subsection (h) of 1-16 this section, engage exclusively in performing one or more of the 1-17 following charitable functions: 1-18 (1) providing medical care without regard to the 1-19 beneficiaries' ability to pay, which in the case of a nonprofit 1-20 hospital means providing charity care and community benefits as set 1-21 forth in Paragraph (A), (B), (C), (D), (E), or (F): 1-22 (A) charity care and government-sponsored 1-23 indigent health care are provided at a level which is reasonable in 1-24 relation to the community needs, as determined through the 1-25 community needs assessment, the available resources of the 1-26 hospital, and the tax-exempt benefits received by the hospital; 1-27 (B) charity care and government-sponsored 1-28 indigent health care are provided in an amount equal to at least 1-29 four percent of the hospital's net patient revenue; 1-30 (C) charity care and government-sponsored 1-31 indigent health care are provided in an amount equal to at least 1-32 100 percent of the hospital's tax-exempt benefits, excluding 1-33 federal income tax; 1-34 (D) a nonprofit hospital that has been 1-35 designated as a disproportionate share hospital under the state 1-36 Medicaid program in either of the previous two fiscal years shall 1-37 be considered to have provided a reasonable amount of charity care 1-38 and government-sponsored indigent health care and shall be deemed 1-39 in compliance with the standards in this subsection; 1-40 (E) for tax years before 1996, charity care and 1-41 community benefits are provided in a combined amount equal to at 1-42 least five percent of the hospital's net patient revenue, provided 1-43 that charity care and government-sponsored indigent health care are 1-44 provided in an amount equal to at least three percent of net 1-45 patient revenue; or 1-46 (F) for tax years after 1995, charity care and 1-47 community benefits are provided in a combined amount equal to at 1-48 least five percent of the hospital's net patient revenue, provided 1-49 that charity care and government-sponsored indigent health care are 1-50 provided in an amount equal to at least four percent of net patient 1-51 revenue; 1-52 (2) providing support or relief to orphans, 1-53 delinquent, dependent, or handicapped children in need of 1-54 residential care, abused or battered spouses or children in need of 1-55 temporary shelter, the impoverished, or victims of natural disaster 1-56 without regard to the beneficiaries' ability to pay; 1-57 (3) providing support to elderly persons or the 1-58 handicapped without regard to the beneficiaries' ability to pay; 1-59 (4) preserving a historical landmark or site; 1-60 (5) promoting or operating a museum, zoo, library, 1-61 theater of the dramatic or performing arts, or symphony orchestra 1-62 or choir; 1-63 (6) promoting or providing humane treatment of 1-64 animals; 1-65 (7) acquiring, storing, transporting, selling, or 1-66 distributing water for public use; 1-67 (8) answering fire alarms and extinguishing fires with 1-68 no compensation or only nominal compensation to the members of the 2-1 organization; 2-2 (9) promoting the athletic development of boys or 2-3 girls under the age of 18 years; 2-4 (10) preserving or conserving wildlife; 2-5 (11) promoting educational development through loans 2-6 or scholarships to students; 2-7 (12) providing halfway house services pursuant to a 2-8 certification as a halfway house by the Board of Pardons and 2-9 Paroles; 2-10 (13) providing permanent housing and related social, 2-11 health care, and educational facilities for persons who are 62 2-12 years of age or older without regard to the residents' ability to 2-13 pay; 2-14 (14) promoting or operating an art gallery, museum, or 2-15 collection, in a permanent location or on tour, that is open to the 2-16 public; 2-17 (15) providing for the organized solicitation and 2-18 collection for distributions through gifts, grants, and agreements 2-19 to nonprofit charitable, education, religious, and youth 2-20 organizations that provide direct human, health, and welfare 2-21 services; 2-22 (16) performing biomedical or scientific research or 2-23 biomedical or scientific education for the benefit of the public; 2-24 (17) operating a television station that produces or 2-25 broadcasts educational, cultural, or other public interest 2-26 programming and that receives grants from the Corporation for 2-27 Public Broadcasting under 47 U.S.C. Section 396; or 2-28 (18) in the case of a nonprofit hospital, providing 2-29 health care services without receiving any payment for providing 2-30 those services to inpatients or outpatients from any source 2-31 including but not limited to the patient or person legally 2-32 obligated to support the patient, third-party payors, Medicare, 2-33 Medicaid, or any other state or local indigent care program. 2-34 Payment for providing health care services does not include 2-35 charitable donations, legacies, bequests, or grants or payment for 2-36 research. 2-37 For purposes of this subsection, the terms "charity care," 2-38 "government-sponsored indigent health care," "net patient revenue," 2-39 "nonprofit hospital," and "tax-exempt benefits" have the meanings 2-40 set forth in Sections 311.031 and 311.042, Health and Safety Code. 2-41 A determination of the amount of community benefits and charity 2-42 care and government-sponsored indigent health care provided by a 2-43 hospital and the hospital's compliance with the requirements of 2-44 Section 311.045, Health and Safety Code, shall be based on the most 2-45 recently completed and audited prior fiscal year of the hospital. 2-46 The providing of charity care and government-sponsored 2-47 indigent health care in accordance with Paragraph (A) of 2-48 Subdivision (1) shall be guided by the prudent business judgment of 2-49 the hospital which will ultimately determine the appropriate level 2-50 of charity care and government-sponsored indigent health care based 2-51 on the community needs, the available resources of the hospital, 2-52 the tax-exempt benefits received by the hospital, and other factors 2-53 that may be unique to the hospital. These criteria shall not be 2-54 determinative factors, but shall be guidelines contributing to the 2-55 hospital's decision along with other factors which may be unique to 2-56 the hospital. The formulas contained in Paragraphs (B), (C), (E), 2-57 and (F) of Subdivision (1) shall also not be considered 2-58 determinative of a reasonable amount of charity care and 2-59 government-sponsored indigent health care. 2-60 The requirements of this subsection shall not apply to the 2-61 extent a hospital demonstrates that reductions in the amount of 2-62 community benefits, charity care, and government-sponsored indigent 2-63 health care are necessary to maintain financial reserves at a level 2-64 required by a bond covenant, are necessary to prevent the hospital 2-65 from endangering its ability to continue operations, or if the 2-66 hospital, as a result of a natural or other disaster, is required 2-67 substantially to curtail its operations. 2-68 In any fiscal year that a hospital, through unintended 2-69 miscalculation, fails to meet any of the standards in Subdivision 2-70 (1), the hospital shall not lose its tax-exempt status without the 3-1 opportunity to cure the miscalculation in the fiscal year following 3-2 the fiscal year the failure is discovered by both meeting one of 3-3 the standards and providing an additional amount of charity care 3-4 and government-sponsored indigent health care that is equal to the 3-5 shortfall from the previous fiscal year. A hospital may apply this 3-6 provision only once every five years. 3-7 SECTION 2. This Act takes effect January 1, 1996. 3-8 SECTION 3. The importance of this legislation and the 3-9 crowded condition of the calendars in both houses create an 3-10 emergency and an imperative public necessity that the 3-11 constitutional rule requiring bills to be read on three several 3-12 days in each house be suspended, and this rule is hereby suspended. 3-13 * * * * *