75R11525 JD-D                           

         By West                                                H.B. No. 137

         Substitute the following for H.B. No. 137:

         By Heflin                                          C.S.H.B. No. 137

                                A BILL TO BE ENTITLED

 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.  Sections 11.18(d) and (e), Tax Code, are amended

 1-6     to read as follows:

 1-7           (d)  A charitable organization must be organized exclusively

 1-8     to perform religious, charitable, scientific, literary, or

 1-9     educational purposes and, except as permitted by Subsection (h) of

1-10     this section, engage exclusively in performing one or more of the

1-11     following charitable functions:

1-12                 (1)  providing medical care without regard to the

1-13     beneficiaries' ability to pay, which in the case of a nonprofit

1-14     hospital or hospital system means providing charity care and

1-15     community benefits as set forth in Paragraph (A), (B), (C), (D),

1-16     (E), (F), (G), or (H):

1-17                       (A)  charity care and government-sponsored

1-18     indigent health care are provided at a level which is reasonable in

1-19     relation to the community needs, as determined through the

1-20     community needs assessment, the available resources of the hospital

1-21     or hospital system, and the tax-exempt benefits received by the

1-22     hospital or hospital system;

1-23                       (B)  charity care and government-sponsored

1-24     indigent health care are provided in an amount equal to at least

 2-1     four percent of the hospital's or hospital system's net patient

 2-2     revenue;

 2-3                       (C)  charity care and government-sponsored

 2-4     indigent health care are provided in an amount equal to at least

 2-5     100 percent of the hospital's or hospital system's tax-exempt

 2-6     benefits, excluding federal income tax;

 2-7                       (D)  a nonprofit hospital that has been

 2-8     designated as a disproportionate share hospital under the state

 2-9     Medicaid program in the current year or in either of the previous

2-10     two fiscal years shall be considered to have provided a reasonable

2-11     amount of charity care and government-sponsored indigent health

2-12     care and shall be deemed in compliance with the standards in this

2-13     subsection;

2-14                       (E)  for tax years before 1996, charity care and

2-15     community benefits are provided in a combined amount equal to at

2-16     least five percent of the hospital's or hospital system's net

2-17     patient revenue, provided that charity care and

2-18     government-sponsored indigent health care are provided in an amount

2-19     equal to at least three percent of net patient revenue;

2-20                       (F)  beginning with the hospital's or hospital

2-21     system's tax year starting after 1995, charity care and community

2-22     benefits are provided in a combined amount equal to at least five

2-23     percent of the hospital's or hospital system's net patient revenue,

2-24     provided that charity care and government-sponsored indigent health

2-25     care are provided in an amount equal to at least four percent of

2-26     net patient revenue;

2-27                       (G)  a hospital operated on a nonprofit basis

 3-1     that is located in a county with a population of less than 50,000

 3-2     and in which the entire county or the population of the entire

 3-3     county has been designated as a health professionals shortage area

 3-4     is considered to be in compliance with the standards provided by

 3-5     this subsection; or

 3-6                       (H)  a hospital providing health care services to

 3-7     inpatients or outpatients without receiving any payment for

 3-8     providing those services from any source, including the patient or

 3-9     person legally obligated to support the patient, third-party

3-10     payors, Medicare, Medicaid, or any other state or local indigent

3-11     care program but excluding charitable donations, legacies,

3-12     bequests, or grants or payments for research, is considered to be

3-13     in compliance with the standards provided by this subsection;

3-14                 (2)  providing support or relief to orphans,

3-15     delinquent, dependent, or handicapped children in need of

3-16     residential care, abused or battered spouses or children in need of

3-17     temporary shelter, the impoverished, or victims of natural disaster

3-18     without regard to the beneficiaries' ability to pay;

3-19                 (3)  providing support to elderly persons or the

3-20     handicapped without regard to the beneficiaries' ability to pay;

3-21                 (4)  preserving a historical landmark or site;

3-22                 (5)  promoting or operating a museum, zoo, library,

3-23     theater of the dramatic or performing arts, or symphony orchestra

3-24     or choir;

3-25                 (6)  promoting or providing humane treatment of

3-26     animals;

3-27                 (7)  acquiring, storing, transporting, selling, or

 4-1     distributing water for public use;

 4-2                 (8)  answering fire alarms and extinguishing fires with

 4-3     no compensation or only nominal compensation to the members of the

 4-4     organization;

 4-5                 (9)  promoting the athletic development of boys or

 4-6     girls under the age of 18 years;

 4-7                 (10)  preserving or conserving wildlife;

 4-8                 (11)  promoting educational development through loans

 4-9     or scholarships to students;

4-10                 (12)  providing halfway house services pursuant to a

4-11     certification as a halfway house by the Board of Pardons and

4-12     Paroles;

4-13                 (13)  providing permanent housing and related social,

4-14     health care, and educational facilities for persons who are 62

4-15     years of age or older without regard to the residents' ability to

4-16     pay;

4-17                 (14)  promoting or operating an art gallery, museum, or

4-18     collection, in a permanent location or on tour, that is open to the

4-19     public;

4-20                 (15)  providing for the organized solicitation and

4-21     collection for distributions through gifts, grants, and agreements

4-22     to nonprofit charitable, education, religious, and youth

4-23     organizations that provide direct human, health, and welfare

4-24     services;

4-25                 (16)  performing biomedical or scientific research or

4-26     biomedical or scientific education for the benefit of the public;

4-27     [or]

 5-1                 (17)  operating a television station that produces or

 5-2     broadcasts educational, cultural, or other public interest

 5-3     programming and that receives grants from the Corporation for

 5-4     Public Broadcasting under 47 U.S.C. Section 396; or

 5-5                 (18)  providing housing for low-income and

 5-6     moderate-income families, for unmarried individuals 62 years of age

 5-7     or older, for handicapped individuals, and for families displaced

 5-8     by urban renewal, through the use of trust assets that are

 5-9     irrevocably and, pursuant to a contract entered into before

5-10     December 31, 1972, contractually dedicated on the sale or

5-11     disposition of the housing to a charitable organization that

5-12     performs charitable functions described by Subdivision (9).

5-13           For purposes of satisfying Paragraph (F) of Subdivision (1),

5-14     a hospital or hospital system may not change its existing fiscal

5-15     year unless the hospital or hospital system changes its ownership

5-16     or corporate structure as a result of a sale or merger.

5-17           For purposes of this subsection, a hospital that satisfies

5-18     Paragraph (A), (D), (G), or (H) of Subdivision (1) shall be

5-19     excluded in determining a hospital system's compliance with the

5-20     standards provided by Paragraph (B), (C), (E), or (F) of

5-21     Subdivision (1).

5-22           For purposes of this subsection, the terms "charity care,"

5-23     "government-sponsored indigent health care," "health care

5-24     organization," "hospital system," "net patient revenue," "nonprofit

5-25     hospital," and "tax-exempt benefits" have the meanings set forth in

5-26     Sections 311.031 and 311.042, Health and Safety Code.  A

5-27     determination of the amount of community benefits and charity care

 6-1     and government-sponsored indigent health care provided by a

 6-2     hospital or hospital system and the hospital's or hospital system's

 6-3     compliance with the requirements of  Section 311.045, Health and

 6-4     Safety Code, shall be based on the most recently completed and

 6-5     audited prior fiscal year of the hospital or hospital system.

 6-6           The providing of charity care and government-sponsored

 6-7     indigent health care in accordance with Paragraph (A) of

 6-8     Subdivision (1) shall be guided by the prudent business judgment of

 6-9     the hospital which will ultimately determine the appropriate level

6-10     of charity care and government-sponsored indigent health care based

6-11     on the community needs, the available resources of the hospital,

6-12     the tax-exempt benefits received by the hospital, and other factors

6-13     that may be unique to the hospital, such as the hospital's volume

6-14     of Medicare and Medicaid patients.  These criteria shall not be

6-15     determinative factors, but shall be guidelines contributing to the

6-16     hospital's decision along with other factors which may be unique to

6-17     the hospital.  The formulas contained in Paragraphs (B), (C), (E),

6-18     and (F) of Subdivision (1) shall also not be considered

6-19     determinative of a reasonable amount of charity care and

6-20     government-sponsored indigent health care.

6-21           The requirements of this subsection shall not apply to the

6-22     extent a hospital or hospital system demonstrates that reductions

6-23     in the amount of community benefits, charity care, and

6-24     government-sponsored indigent health care are necessary to maintain

6-25     financial reserves at a level required by a bond covenant, are

6-26     necessary to prevent the hospital or hospital system from

6-27     endangering its ability to continue operations, or if the hospital

 7-1     or hospital system, as a result of a natural or other disaster, is

 7-2     required substantially to curtail its operations.

 7-3           In any fiscal year that a hospital or hospital system,

 7-4     through unintended miscalculation, fails to meet any of the

 7-5     standards in Subdivision (1), the hospital or hospital system shall

 7-6     not lose its tax-exempt status without the opportunity to cure the

 7-7     miscalculation in the fiscal year following the fiscal year the

 7-8     failure is discovered by both meeting one of the standards and

 7-9     providing an additional amount of charity care and

7-10     government-sponsored indigent health care that is equal to the

7-11     shortfall from the previous fiscal year.  A hospital or hospital

7-12     system may apply this provision only once every five years.

7-13           (e)  A charitable organization must be operated in a way that

7-14     does not result in accrual of distributable profits, realization of

7-15     private gain resulting from payment of compensation in excess of a

7-16     reasonable allowance for salary or other compensation for services

7-17     rendered, or realization of any other form of private gain and, if

7-18     the organization performs one or more of the charitable functions

7-19     specified by Subsection (d) of this section other than a function

7-20     specified in Subdivision (1), (2), (8), (9), (12), [or] (16), or

7-21     (18), be organized as a nonprofit corporation as defined by the

7-22     Texas Non-Profit Corporation Act.

7-23           SECTION 2.  This Act takes effect January 1, 1998.

7-24           SECTION 3.  The importance of this legislation and the

7-25     crowded condition of the calendars in both houses create an

7-26     emergency and an imperative public necessity that the

7-27     constitutional rule requiring bills to be read on three several

 8-1     days in each house be suspended, and this rule is hereby suspended.