1-1 By: West (Senate Sponsor - Truan) H.B. No. 137
1-2 (In the Senate - Received from the House May 16, 1997;
1-3 May 16, 1997, read first time and referred to Committee on Finance;
1-4 May 18, 1997, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 13, Nays 0; May 18, 1997,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR H.B. No. 137 By: Truan
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the qualifications of certain charitable organizations
1-11 for an exemption from ad valorem taxation.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Sections 11.18(d) and (e), Tax Code, are amended
1-14 to read as follows:
1-15 (d) A charitable organization must be organized exclusively
1-16 to perform religious, charitable, scientific, literary, or
1-17 educational purposes and, except as permitted by Subsection (h) of
1-18 this section, engage exclusively in performing one or more of the
1-19 following charitable functions:
1-20 (1) providing medical care without regard to the
1-21 beneficiaries' ability to pay, which in the case of a nonprofit
1-22 hospital or hospital system means providing charity care and
1-23 community benefits as set forth in Paragraph (A), (B), (C), (D),
1-24 (E), (F), (G), or (H):
1-25 (A) charity care and government-sponsored
1-26 indigent health care are provided at a level which is reasonable in
1-27 relation to the community needs, as determined through the
1-28 community needs assessment, the available resources of the hospital
1-29 or hospital system, and the tax-exempt benefits received by the
1-30 hospital or hospital system;
1-31 (B) charity care and government-sponsored
1-32 indigent health care are provided in an amount equal to at least
1-33 four percent of the hospital's or hospital system's net patient
1-34 revenue;
1-35 (C) charity care and government-sponsored
1-36 indigent health care are provided in an amount equal to at least
1-37 100 percent of the hospital's or hospital system's tax-exempt
1-38 benefits, excluding federal income tax;
1-39 (D) a nonprofit hospital that has been
1-40 designated as a disproportionate share hospital under the state
1-41 Medicaid program in the current year or in either of the previous
1-42 two fiscal years shall be considered to have provided a reasonable
1-43 amount of charity care and government-sponsored indigent health
1-44 care and shall be deemed in compliance with the standards in this
1-45 subsection;
1-46 (E) for tax years before 1996, 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 or hospital system's net
1-49 patient revenue, provided that charity care and
1-50 government-sponsored indigent health care are provided in an amount
1-51 equal to at least three percent of net patient revenue;
1-52 (F) beginning with the hospital's or hospital
1-53 system's tax year starting after 1995, charity care and community
1-54 benefits are provided in a combined amount equal to at least five
1-55 percent of the hospital's or hospital system's net patient revenue,
1-56 provided that charity care and government-sponsored indigent health
1-57 care are provided in an amount equal to at least four percent of
1-58 net patient revenue;
1-59 (G) a hospital operated on a nonprofit basis
1-60 that is located in a county with a population of less than 50,000
1-61 and in which the entire county or the population of the entire
1-62 county has been designated as a health professionals shortage area
1-63 is considered to be in compliance with the standards provided by
1-64 this subsection; or
2-1 (H) a hospital providing health care services to
2-2 inpatients or outpatients without receiving any payment for
2-3 providing those services from any source, including the patient or
2-4 person legally obligated to support the patient, third-party
2-5 payors, Medicare, Medicaid, or any other state or local indigent
2-6 care program but excluding charitable donations, legacies,
2-7 bequests, or grants or payments for research, is considered to be
2-8 in compliance with the standards provided by this subsection;
2-9 (2) providing support or relief to orphans,
2-10 delinquent, dependent, or handicapped children in need of
2-11 residential care, abused or battered spouses or children in need of
2-12 temporary shelter, the impoverished, or victims of natural disaster
2-13 without regard to the beneficiaries' ability to pay;
2-14 (3) providing support to elderly persons or the
2-15 handicapped without regard to the beneficiaries' ability to pay;
2-16 (4) preserving a historical landmark or site;
2-17 (5) promoting or operating a museum, zoo, library,
2-18 theater of the dramatic or performing arts, or symphony orchestra
2-19 or choir;
2-20 (6) promoting or providing humane treatment of
2-21 animals;
2-22 (7) acquiring, storing, transporting, selling, or
2-23 distributing water for public use;
2-24 (8) answering fire alarms and extinguishing fires with
2-25 no compensation or only nominal compensation to the members of the
2-26 organization;
2-27 (9) promoting the athletic development of boys or
2-28 girls under the age of 18 years;
2-29 (10) preserving or conserving wildlife;
2-30 (11) promoting educational development through loans
2-31 or scholarships to students;
2-32 (12) providing halfway house services pursuant to 20 a
2-33 certification as a halfway house by the Board of Pardons and
2-34 Paroles;
2-35 (13) providing permanent housing and related social,
2-36 health care, and educational facilities for persons who are 62
2-37 years of age or older without regard to the residents' ability to
2-38 pay;
2-39 (14) promoting or operating an art gallery, museum, or
2-40 collection, in a permanent location or on tour, that is open to the
2-41 public;
2-42 (15) providing for the organized solicitation and
2-43 collection for distributions through gifts, grants, and agreements
2-44 to nonprofit charitable, education, religious, and youth
2-45 organizations that provide direct human, health, and welfare
2-46 services;
2-47 (16) performing biomedical or scientific research or
2-48 biomedical or scientific education for the benefit of the public;
2-49 [or]
2-50 (17) operating a television station that produces or
2-51 broadcasts educational, cultural, or other public interest
2-52 programming and that receives grants from the Corporation for
2-53 Public Broadcasting under 47 U.S.C. Section 36;
2-54 (18) providing housing for low-income and
2-55 moderate-income families, for unmarried individuals 62 years of age
2-56 or older, for handicapped individuals, and for families displaced
2-57 by urban renewal, through the use of trust assets that are
2-58 irrevocably and, pursuant to a contract entered into before
2-59 December 31, 1972, contractually dedicated on the sale or
2-60 disposition of the housing to a charitable organization that
2-61 performs charitable functions described by Subdivision (9); or
2-62 (19) providing housing and related services to persons
2-63 who are 62 years of age or older in a retirement community, if the
2-64 retirement community provides independent living services, assisted
2-65 living services, and nursing services to its residents on a single
2-66 campus:
2-67 (A) without regard to the residents' ability to
2-68 pay; or
2-69 (B) in which at least four percent of the
3-1 retirement community's combined net resident revenue is provided in
3-2 charitable care to its residents.
3-3 For purposes of satisfying Paragraph (F) of Subdivision (1),
3-4 a hospital or hospital system may not change its existing fiscal
3-5 year unless the hospital or hospital system changes its ownership
3-6 or corporate structure as a result of a sale or merger.
3-7 For purposes of this subsection, a hospital that satisfies
3-8 Paragraph (A), (D), (G), or (H) of Subdivision (1) shall be
3-9 excluded in determining a hospital system's compliance with the
3-10 standards provided by Paragraph (B), (C), (E), or (F) of
3-11 Subdivision (1).
3-12 For purposes of this subsection, the terms "charity care,"
3-13 "government-sponsored indigent health care," "health care
3-14 organization," "hospital system," "net patient revenue," "nonprofit
3-15 hospital," and "tax-exempt benefits" have the meanings set forth in
3-16 Sections 311.031 and 311.042, Health and Safety Code. A
3-17 determination of the amount of community benefits and charity care
3-18 and government-sponsored indigent health care provided by a
3-19 hospital or hospital system and the hospital's or hospital system's
3-20 compliance with the requirements of Section 311.045, Health and
3-21 Safety Code, shall be based on the most recently completed and
3-22 audited prior fiscal year of the hospital or hospital system.
3-23 The providing of charity care and government-sponsored
3-24 indigent health care in accordance with Paragraph (A) of
3-25 Subdivision (1) shall be guided by the prudent business judgment of
3-26 the hospital which will ultimately determine the appropriate level
3-27 of charity care and government-sponsored indigent health care based
3-28 on the community needs, the available resources of the hospital,
3-29 the tax-exempt benefits received by the hospital, and other factors
3-30 that may be unique to the hospital, such as the hospital's volume
3-31 of Medicare and Medicaid patients. These criteria shall not be
3-32 determinative factors, but shall be guidelines contributing to the
3-33 hospital's decision along with other factors which may be unique to
3-34 the hospital. The formulas contained in Paragraphs (B), (C), (E),
3-35 and (F) of Subdivision (1) shall also not be considered
3-36 determinative of a reasonable amount of charity care and
3-37 government-sponsored indigent health care.
3-38 The requirements of this subsection shall not apply to the
3-39 extent a hospital or hospital system demonstrates that reductions
3-40 in the amount of community benefits, charity care, and
3-41 government-sponsored indigent health care are necessary to maintain
3-42 financial reserves at a level required by a bond covenant, are
3-43 necessary to prevent the hospital or hospital system from
3-44 endangering its ability to continue operations, or if the hospital
3-45 or hospital system, as a result of a natural or other disaster, is
3-46 required substantially to curtail its operations.
3-47 In any fiscal year that a hospital or hospital system,
3-48 through unintended miscalculation, fails to meet any of the
3-49 standards in Subdivision (1), the hospital or hospital system shall
3-50 not lose its tax-exempt status without the opportunity to cure the
3-51 miscalculation in the fiscal year following the fiscal year the
3-52 failure is discovered by both meeting one of the standards and
3-53 providing an additional amount of charity care and
3-54 government-sponsored indigent health care that is equal to the
3-55 shortfall from the previous fiscal year. A hospital or hospital
3-56 system may apply this provision only once every five years.
3-57 (e) A charitable organization must be operated in a way that
3-58 does not result in accrual of distributable profits, realization of
3-59 private gain resulting from payment of compensation in excess of a
3-60 reasonable allowance for salary or other compensation for services
3-61 rendered, or realization of any other form of private gain and, if
3-62 the organization performs one or more of the charitable functions
3-63 specified by Subsection (d) of this section other than a function
3-64 specified in Subdivision (1), (2), (8), (9), (12), [or] (16), or
3-65 (18), be organized as a nonprofit corporation as defined by the
3-66 Texas Non-Profit Corporation Act.
3-67 (k) In connection with a nursing home or retirement
3-68 community, for purposes of Subsection (d):
3-69 (1) "Assisted living services" means responsible adult
4-1 supervision of or assistance with routine living functions of an
4-2 individual in instances where the individual's condition
4-3 necessitates that supervision or assistance.
4-4 (2) "Charity care," "government-sponsored indigent
4-5 health care," and "net resident revenue" are determined in the same
4-6 manner for a retirement community or nursing home as for a hospital
4-7 under Subsection (d) (1) (B).
4-8 (3) "Nursing care services" includes services provided
4-9 by nursing personnel, including patient observation, the promotion
4-10 and maintenance of health, prevention of illness or disability,
4-11 guidance and counseling to individuals and families, and referral
4-12 of patients to physicians, other health care providers, or
4-13 community resources if appropriate.
4-14 (4) "Retirement community" means a collection of
4-15 various types of housing that are under common ownership and
4-16 designed for habitation by individuals over the age of 62.
4-17 (5) "Single campus" means a facility designed to
4-18 provide multiple levels of retirement housing that is
4-19 geographically situated on a site at which all levels of housing
4-20 are contiguous to each other on a single property.
4-21 SECTION 2. Subchapter B, Chapter 11, Tax Code, is amended by
4-22 adding Section 11.182 to read as follows:
4-23 Sec. 11.182. COMMUNITY HOUSING DEVELOPMENT ORGANIZATIONS
4-24 IMPROVING PROPERTY FOR LOW-INCOME AND MODERATE-INCOME HOUSING.
4-25 (a) An organization is entitled to an exemption from
4-26 taxation of improved or unimproved real property it owns if the
4-27 organization:
4-28 (1) is organized as a community housing development
4-29 organization;
4-30 (2) meets the requirements of a charitable
4-31 organization provided by Sections 11.18(e) and (f);
4-32 (3) owns the property for the purpose of building or
4-33 repairing housing on the property to sell without profit to a
4-34 low-income or moderate-income individual or family satisfying the
4-35 organization's eligibility requirements or to rent without profit
4-36 to such an individual or family; and (4) engages exclusively in the
4-37 building, repair, and sale or rental of housing as described by
4-38 Subdivision (3) and related activities.
4-39 (b) Property owned by the organization may not be exempted
4-40 under Subsection (a) after the third anniversary of the date the
4-41 organization acquires the property unless the organization is
4-42 offering to rent or is renting the property without profit to a
4-43 low-income or moderate-income individual or family satisfying the
4-44 organization's eligibility requirements
4-45 (c) A person claiming an exemption for property described
4-46 under this section must comply with the requirements of Sections
4-47 11.43(a) and (b).
4-48 (d) An organization entitled to an exemption under
4-49 Subsection (a) is also entitled to an exemption from taxation of
4-50 any building or tangible personal property the organization owns
4-51 and uses in the administration of its acquisition, building,
4-52 repair, sale, or rental of property. To qualify for an exemption
4-53 under this subsection, property must be used exclusively by the
4-54 organization, except that another person may use the property for
4-55 activities incidental to the organization's use that benefit the
4-56 beneficiaries of the organization.
4-57 (e) In this section "community housing development
4-58 organization" has the meaning assigned that term by 42 U.S.C.
4-59 Section 12704.
4-60 SECTION 3. Subsection (a), Section 11.436, Tax Code, is
4-61 amended to read as follows:
4-62 (a) An organization that acquires property that qualifies
4-63 for an exemption under Section 11.181(a) or 11.182(a) may apply for
4-64 the exemption for the year of acquisition not later than the 30th
4-65 day after the date the organization acquires the property, and the
4-66 deadline provided by Section 11.43(d) does not apply to the
4-67 application for that year.
4-68 SECTION 4. Subsection (a), Section 26.111, Tax Code, is
4-69 amended to read as follows:
5-1 (a) If an organization acquires taxable property that
5-2 qualifies for and is granted an exemption under Section 11.181(a)
5-3 or 11.182(a) for the year in which the property was acquired, the
5-4 amount of tax due on the property for that year is calculated by
5-5 multiplying the amount of taxes imposed on the property for the
5-6 entire year as provided by Section 26.9 by a fraction, the
5-7 denominator of which is 365 and the numerator of which is the
5-8 number of days in that year before the date the charitable
5-9 organization acquired the property.
5-10 SECTION 5. This Act takes effect January 1, 1998.
5-11 SECTION 6. The importance of this legislation and the
5-12 crowded condition of the calendars in both houses create an
5-13 emergency and an imperative public necessity that the
5-14 constitutional rule requiring bills to be read on three several
5-15 days in each house be suspended, and this rule is hereby suspended.
5-16 * * * * *