1-1 AN ACT
1-2 relating to the qualifications of certain charitable organizations
1-3 for an exemption from ad valorem taxation.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 11.18, Tax Code, is amended by amending
1-6 Subsections (d) and (e) and adding Subsection (k) to read as
1-7 follows:
1-8 (d) A charitable organization must be organized exclusively
1-9 to perform religious, charitable, scientific, literary, or
1-10 educational purposes and, except as permitted by Subsection (h) of
1-11 this section, engage exclusively in performing one or more of the
1-12 following charitable functions:
1-13 (1) providing medical care without regard to the
1-14 beneficiaries' ability to pay, which in the case of a nonprofit
1-15 hospital or hospital system means providing charity care and
1-16 community benefits as set forth in Paragraph (A), (B), (C), (D),
1-17 (E), (F), (G), or (H):
1-18 (A) charity care and government-sponsored
1-19 indigent health care are provided at a level which is reasonable in
1-20 relation to the community needs, as determined through the
1-21 community needs assessment, the available resources of the hospital
1-22 or hospital system, and the tax-exempt benefits received by the
1-23 hospital or hospital system;
1-24 (B) charity care and government-sponsored
2-1 indigent health care are provided in an amount equal to at least
2-2 four percent of the hospital's or hospital system's net patient
2-3 revenue;
2-4 (C) charity care and government-sponsored
2-5 indigent health care are provided in an amount equal to at least
2-6 100 percent of the hospital's or hospital system's tax-exempt
2-7 benefits, excluding federal income tax;
2-8 (D) a nonprofit hospital that has been
2-9 designated as a disproportionate share hospital under the state
2-10 Medicaid program in the current year or in either of the previous
2-11 two fiscal years shall be considered to have provided a reasonable
2-12 amount of charity care and government-sponsored indigent health
2-13 care and shall be deemed in compliance with the standards in this
2-14 subsection;
2-15 (E) for tax years before 1996, 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 or hospital system's net
2-18 patient revenue, provided that charity care and
2-19 government-sponsored indigent health care are provided in an amount
2-20 equal to at least three percent of net patient revenue;
2-21 (F) beginning with the hospital's or hospital
2-22 system's tax year starting after 1995, charity care and community
2-23 benefits are provided in a combined amount equal to at least five
2-24 percent of the hospital's or hospital system's net patient revenue,
2-25 provided that charity care and government-sponsored indigent health
2-26 care are provided in an amount equal to at least four percent of
2-27 net patient revenue;
3-1 (G) a hospital operated on a nonprofit basis
3-2 that is located in a county with a population of less than 50,000
3-3 and in which the entire county or the population of the entire
3-4 county has been designated as a health professionals shortage area
3-5 is considered to be in compliance with the standards provided by
3-6 this subsection; or
3-7 (H) a hospital providing health care services to
3-8 inpatients or outpatients without receiving any payment for
3-9 providing those services from any source, including the patient or
3-10 person legally obligated to support the patient, third-party
3-11 payors, Medicare, Medicaid, or any other state or local indigent
3-12 care program but excluding charitable donations, legacies,
3-13 bequests, or grants or payments for research, is considered to be
3-14 in compliance with the standards provided by this subsection;
3-15 (2) providing support or relief to orphans,
3-16 delinquent, dependent, or handicapped children in need of
3-17 residential care, abused or battered spouses or children in need of
3-18 temporary shelter, the impoverished, or victims of natural disaster
3-19 without regard to the beneficiaries' ability to pay;
3-20 (3) providing support to elderly persons or the
3-21 handicapped without regard to the beneficiaries' ability to pay;
3-22 (4) preserving a historical landmark or site;
3-23 (5) promoting or operating a museum, zoo, library,
3-24 theater of the dramatic or performing arts, or symphony orchestra
3-25 or choir;
3-26 (6) promoting or providing humane treatment of
3-27 animals;
4-1 (7) acquiring, storing, transporting, selling, or
4-2 distributing water for public use;
4-3 (8) answering fire alarms and extinguishing fires with
4-4 no compensation or only nominal compensation to the members of the
4-5 organization;
4-6 (9) promoting the athletic development of boys or
4-7 girls under the age of 18 years;
4-8 (10) preserving or conserving wildlife;
4-9 (11) promoting educational development through loans
4-10 or scholarships to students;
4-11 (12) providing halfway house services pursuant to a
4-12 certification as a halfway house by the Board of Pardons and
4-13 Paroles;
4-14 (13) providing permanent housing and related social,
4-15 health care, and educational facilities for persons who are 62
4-16 years of age or older without regard to the residents' ability to
4-17 pay;
4-18 (14) promoting or operating an art gallery, museum, or
4-19 collection, in a permanent location or on tour, that is open to the
4-20 public;
4-21 (15) providing for the organized solicitation and
4-22 collection for distributions through gifts, grants, and agreements
4-23 to nonprofit charitable, education, religious, and youth
4-24 organizations that provide direct human, health, and welfare
4-25 services;
4-26 (16) performing biomedical or scientific research or
4-27 biomedical or scientific education for the benefit of the public;
5-1 [or]
5-2 (17) operating a television station that produces or
5-3 broadcasts educational, cultural, or other public interest
5-4 programming and that receives grants from the Corporation for
5-5 Public Broadcasting under 47 U.S.C. Section 396;
5-6 (18) providing housing for low-income and
5-7 moderate-income families, for unmarried individuals 62 years of age
5-8 or older, for handicapped individuals, and for families displaced
5-9 by urban renewal, through the use of trust assets that are
5-10 irrevocably and, pursuant to a contract entered into before
5-11 December 31, 1972, contractually dedicated on the sale or
5-12 disposition of the housing to a charitable organization that
5-13 performs charitable functions described by Subdivision (9); or
5-14 (19) providing housing and related services to persons
5-15 who are 62 years of age or older in a retirement community, if the
5-16 retirement community provides independent living services, assisted
5-17 living services, and nursing services to its residents on a single
5-18 campus:
5-19 (A) without regard to the residents' ability to
5-20 pay; or
5-21 (B) in which at least four percent of the
5-22 retirement community's combined net resident revenue is provided in
5-23 charitable care to its residents.
5-24 For purposes of satisfying Paragraph (F) of Subdivision (1),
5-25 a hospital or hospital system may not change its existing fiscal
5-26 year unless the hospital or hospital system changes its ownership
5-27 or corporate structure as a result of a sale or merger.
6-1 For purposes of this subsection, a hospital that satisfies
6-2 Paragraph (A), (D), (G), or (H) of Subdivision (1) shall be
6-3 excluded in determining a hospital system's compliance with the
6-4 standards provided by Paragraph (B), (C), (E), or (F) of
6-5 Subdivision (1).
6-6 For purposes of this subsection, the terms "charity care,"
6-7 "government-sponsored indigent health care," "health care
6-8 organization," "hospital system," "net patient revenue," "nonprofit
6-9 hospital," and "tax-exempt benefits" have the meanings set forth in
6-10 Sections 311.031 and 311.042, Health and Safety Code. A
6-11 determination of the amount of community benefits and charity care
6-12 and government-sponsored indigent health care provided by a
6-13 hospital or hospital system and the hospital's or hospital system's
6-14 compliance with the requirements of Section 311.045, Health and
6-15 Safety Code, shall be based on the most recently completed and
6-16 audited prior fiscal year of the hospital or hospital system.
6-17 The providing of charity care and government-sponsored
6-18 indigent health care in accordance with Paragraph (A) of
6-19 Subdivision (1) shall be guided by the prudent business judgment of
6-20 the hospital which will ultimately determine the appropriate level
6-21 of charity care and government-sponsored indigent health care based
6-22 on the community needs, the available resources of the hospital,
6-23 the tax-exempt benefits received by the hospital, and other factors
6-24 that may be unique to the hospital, such as the hospital's volume
6-25 of Medicare and Medicaid patients. These criteria shall not be
6-26 determinative factors, but shall be guidelines contributing to the
6-27 hospital's decision along with other factors which may be unique to
7-1 the hospital. The formulas contained in Paragraphs (B), (C), (E),
7-2 and (F) of Subdivision (1) shall also not be considered
7-3 determinative of a reasonable amount of charity care and
7-4 government-sponsored indigent health care.
7-5 The requirements of this subsection shall not apply to the
7-6 extent a hospital or hospital system demonstrates that reductions
7-7 in the amount of community benefits, charity care, and
7-8 government-sponsored indigent health care are necessary to maintain
7-9 financial reserves at a level required by a bond covenant, are
7-10 necessary to prevent the hospital or hospital system from
7-11 endangering its ability to continue operations, or if the hospital
7-12 or hospital system, as a result of a natural or other disaster, is
7-13 required substantially to curtail its operations.
7-14 In any fiscal year that a hospital or hospital system,
7-15 through unintended miscalculation, fails to meet any of the
7-16 standards in Subdivision (1), the hospital or hospital system shall
7-17 not lose its tax-exempt status without the opportunity to cure the
7-18 miscalculation in the fiscal year following the fiscal year the
7-19 failure is discovered by both meeting one of the standards and
7-20 providing an additional amount of charity care and
7-21 government-sponsored indigent health care that is equal to the
7-22 shortfall from the previous fiscal year. A hospital or hospital
7-23 system may apply this provision only once every five years.
7-24 (e) A charitable organization must be operated in a way that
7-25 does not result in accrual of distributable profits, realization of
7-26 private gain resulting from payment of compensation in excess of a
7-27 reasonable allowance for salary or other compensation for services
8-1 rendered, or realization of any other form of private gain and, if
8-2 the organization performs one or more of the charitable functions
8-3 specified by Subsection (d) of this section other than a function
8-4 specified in Subdivision (1), (2), (8), (9), (12), [or] (16), or
8-5 (18), be organized as a nonprofit corporation as defined by the
8-6 Texas Non-Profit Corporation Act.
8-7 (k) In connection with a nursing home or retirement
8-8 community, for purposes of Subsection (d):
8-9 (1) "Assisted living services" means responsible adult
8-10 supervision of or assistance with routine living functions of an
8-11 individual in instances where the individual's condition
8-12 necessitates that supervision or assistance.
8-13 (2) "Charity care," "government-sponsored indigent
8-14 health care," and "net resident revenue" are determined in the same
8-15 manner for a retirement community or nursing home as for a hospital
8-16 under Subsection (d)(1)(B).
8-17 (3) "Nursing care services" includes services provided
8-18 by nursing personnel, including patient observation, the promotion
8-19 and maintenance of health, prevention of illness or disability,
8-20 guidance and counseling to individuals and families, and referral
8-21 of patients to physicians, other health care providers, or
8-22 community resources if appropriate.
8-23 (4) "Retirement community" means a collection of
8-24 various types of housing that are under common ownership and
8-25 designed for habitation by individuals over the age of 62.
8-26 (5) "Single campus" means a facility designed to
8-27 provide multiple levels of retirement housing that is
9-1 geographically situated on a site at which all levels of housing
9-2 are contiguous to each other on a single property.
9-3 SECTION 2. Subchapter B, Chapter 11, Tax Code, is amended by
9-4 adding Section 11.182 to read as follows:
9-5 Sec. 11.182. COMMUNITY HOUSING DEVELOPMENT ORGANIZATIONS
9-6 IMPROVING PROPERTY FOR LOW-INCOME AND MODERATE-INCOME HOUSING. (a)
9-7 An organization is entitled to an exemption from taxation of
9-8 improved or unimproved real property it owns if the organization:
9-9 (1) is organized as a community housing development
9-10 organization;
9-11 (2) meets the requirements of a charitable
9-12 organization provided by Sections 11.18(e) and (f);
9-13 (3) owns the property for the purpose of building or
9-14 repairing housing on the property to sell without profit to a
9-15 low-income or moderate-income individual or family satisfying the
9-16 organization's eligibility requirements or to rent without profit
9-17 to such an individual or family; and
9-18 (4) engages exclusively in the building, repair, and
9-19 sale or rental of housing as described by Subdivision (3) and
9-20 related activities.
9-21 (b) Property owned by the organization may not be exempted
9-22 under Subsection (a) after the third anniversary of the date the
9-23 organization acquires the property unless the organization is
9-24 offering to rent or is renting the property without profit to a
9-25 low-income or moderate-income individual or family satisfying the
9-26 organization's eligibility requirements.
9-27 (c) A person claiming an exemption for property described
10-1 under this section must comply with the requirements of Sections
10-2 11.43(a) and (b).
10-3 (d) An organization entitled to an exemption under
10-4 Subsection (a) is also entitled to an exemption from taxation of
10-5 any building or tangible personal property the organization owns
10-6 and uses in the administration of its acquisition, building,
10-7 repair, sale, or rental of property. To qualify for an exemption
10-8 under this subsection, property must be used exclusively by the
10-9 organization, except that another person may use the property for
10-10 activities incidental to the organization's use that benefit the
10-11 beneficiaries of the organization.
10-12 (e) In this section "community housing development
10-13 organization" has the meaning assigned that term by 42 U.S.C.
10-14 Section 12704.
10-15 SECTION 3. Subsection (a), Section 11.436, Tax Code, is
10-16 amended to read as follows:
10-17 (a) An organization that acquires property that qualifies
10-18 for an exemption under Section 11.181(a) or 11.182(a) may apply for
10-19 the exemption for the year of acquisition not later than the 30th
10-20 day after the date the organization acquires the property, and the
10-21 deadline provided by Section 11.43(d) does not apply to the
10-22 application for that year.
10-23 SECTION 4. Subsection (a), Section 26.111, Tax Code, is
10-24 amended to read as follows:
10-25 (a) If an organization acquires taxable property that
10-26 qualifies for and is granted an exemption under Section 11.181(a)
10-27 or 11.182(a) for the year in which the property was acquired, the
11-1 amount of tax due on the property for that year is calculated by
11-2 multiplying the amount of taxes imposed on the property for the
11-3 entire year as provided by Section 26.09 by a fraction, the
11-4 denominator of which is 365 and the numerator of which is the
11-5 number of days in that year before the date the charitable
11-6 organization acquired the property.
11-7 SECTION 5. This Act takes effect January 1, 1998.
11-8 SECTION 6. The importance of this legislation and the
11-9 crowded condition of the calendars in both houses create an
11-10 emergency and an imperative public necessity that the
11-11 constitutional rule requiring bills to be read on three several
11-12 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 137 was passed by the House on May
16, 1997, by a non-record vote; and that the House concurred in
Senate amendments to H.B. No. 137 on May 23, 1997, by a non-record
vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 137 was passed by the Senate, with
amendments, on May 21, 1997, by a viva-voce vote.
_______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor