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 * * * * *