LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session February 6, 1997 TO: Honorable Bill Ratliff, Chair IN RE: Senate Bill No. 95 Committee on Finance By: Patterson, Jerry Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB95 ( Relating to the immediate qualification for an ad valorem tax exemption for a church or other nonprofit organization.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB95-As Introduced Under current school funding statutes, the bill could result in increased costs to the state in state aid for public education. When calculating state aid for public education, the state must recognize the loss in local property value due to exemptions granted to qualified organizations within the school district. Depending on a school district s wealth per student, this could result in an increased cost to state-funded public education. FISCAL ANALYSIS The Texas Constitution and the Property Tax Code currently provide that an organization qualifying as a charitable organization is entitled to an exemption from taxation of the buildings and personal property owned and used exclusively by the organization. To receive this exemption, a charitable organization must be operated in a way that does not result in private gain. Certain organizations also must be organized as nonprofit corporations as defined by the Texas Non-Profit Corporation Act. This bill would exempt organizations providing support to the elderly and handicapped under Section 11.18 (d) (3) and (13) of the Property Tax Code from the requirement hat they be organized as nonprofit corporations to qualify as charitable organizations. Section 403.302, Government Code, requires the Comptroller to conduct a property value study to determine the total taxable value for each school district. Total taxable value is an element in the state's school funding formula. Passage of this bill could cause a reduction in a school district taxable values reported to the Commissioner of Education by the Comptroller. METHODOLOGY In a hypothetical school district that qualifies for both tier-one and tier-two state aid for public education, it would cost the state one dollar for each dollar of local tax revenue loss due to the proration formula contained in the bill. Passage of this bill could also reduce other local taxing units taxable values and reduced the amount of their local tax levies. Local taxing units would include Cities, Counties and Special Districts. Source: Agencies: 304 Comptroller of Public Accounts LBB Staff: JK ,RR ,BR