SWB H.B. 2383 75(R)BILL ANALYSIS WAYS & MEANS H.B. 2383 By: Hochberg 4-11-97 Committee Report (Amended) BACKGROUND Article VII, Texas Constitution, provides for the taxation of all property in the state, unless exempt as required or permitted by the Constitution. Chapter 11, Tax Code (Taxable Property and Exemptions), provides for certain exemptions to ad valorem taxation (ie. schools, religious organizations, charitable organizations,...) and the qualifications for those exemptions. These provisions include requirements relating to contents of exempt entities' organizational documents. A hyper-technical reading of these provisions may result in denial of exemption applications. PURPOSE This bill standardizes the rules applying to not-for-profit organizations regarding the opportunity to cure nonconforming documentation for exemption status. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1.Amends Section 11.18(f), Tax Code (Charitable Organizations), to state that charitable organizations must use their assets to perform their charitable functions. (Current language states that organizations must pledge their assets for use in performing the organization's charitable functions). Also adds the United States as an eligible recipient of a charitable organization's assets upon dissolution of the organization. SECTION 2.Amends Section 11.19(d), Tax Code (Youth Spiritual, Mental, and Physical Development Associations), to state that youth development associations must use their assets to perform their youth development functions. (Current language states that associations must pledge their assets for use in performing the associations's development functions). Also adds the United States as an eligible recipient of an association's assets upon dissolution of the association. SECTION 3.Amends Section 11.20(c), Tax Code (Religious Organizations), to state that a religious organization must use its assets to perform its religious functions or that of another religious organization. (Current language states that religious organizations must pledge their assets for use in performing the organization's religious functions). Also adds the United States as an eligible recipient of a religious organization's assets upon dissolution of the organization. SECTION 4.Amends Section 11.21(d), Tax Code (Schools), to state that educational organizations must use their assets to perform their educational functions. (Current language states that organizations must pledge their assets for use in performing the organization's educational functions). States that schools must be organized and operated to perform educational functions. Also adds the United States as an eligible recipient of an educational organization's assets upon dissolution of the organization. SECTION 5.Amends Sections 11.421 and 11.422, Tax Code (Qualification of Religious Organization) and (Qualification of a School), to provide conforming language changes. SECTION 6.Amends Subchapter C, Chapter 11, Tax Code, by adding Sections 11.324 and 11.424 as follows: 11.324. QUALIFICATION OF CHARITABLE ORGANIZATION OR YOUTH ASSOCIATION. (a) Provides that an organization that would otherwise be an exempt charitable or youth organization, except for the failure to fulfill the requirements of Sections 11.18(f)(2) or 11.19(d)(5), shall be eligible for the exemption for the tax year if the organization satisfies the requirements of those sections by a timely filing with the chief appraiser of a new completed application of the exemption and an affidavit stating that the organization has complied with the sections. (b) States that if the chief appraiser cancels an exemption for an organization that would otherwise be exempt, which was erroneously allowed because the chief appraiser determines the organization did not satisfy the requirements of Sections 11.18(f)(2) or 11.19(d)(5), the organization is eligible for the exemption if the organization satisfies the requirements of those sections on or before the 30th day after the date the chief appraiser notifies the organization of the cancellation, and files an affidavit stating such. 11.424. CONFLICT BETWEEN GOVERNING REGULATION OF NONPROFIT ORGANIZATION, ASSOCIATION, OR ENTITY AND CONTRACT WITH UNITED STATES. States that an organization that has entered into a contract with the United States, and has a conflict between a provision of the contract and its charter, bylaws, or other regulations adopted by the organization, may comply with the provision of the contract and not lose the organization's eligibility as an exempt organization. SECTION 7.Emergency clause. EXPLANATION OF AMENDMENTS Committee Amendment number one, by Craddick, allows 60 days to satisfy requirements to cure a document deficiency for an ad valorem tax exemption for certain non-profit organizations.