1-1 By: Kuempel (Senate Sponsor - Wentworth) H.B. No. 1978
1-2 (In the Senate - Received from the House April 26, 1999;
1-3 April 27, 1999, read first time and referred to Committee on
1-4 Finance; May 5, 1999, reported favorably by the following vote:
1-5 Yeas 10, Nays 0; May 5, 1999, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to exempting property owned by organizations that provide
1-9 support to elderly persons from ad valorem taxation.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 11.18, Tax Code, is amended by amending
1-12 Subsection (d) and adding Subsection (l) to read as follows:
1-13 (d) A charitable organization must be organized exclusively
1-14 to perform religious, charitable, scientific, literary, or
1-15 educational purposes and, except as permitted by Subsections
1-16 [Subsection] (h) and (l) of this section, engage exclusively in
1-17 performing one or more of the following charitable functions:
1-18 (1) providing medical care without regard to the
1-19 beneficiaries' ability to pay, which in the case of a nonprofit
1-20 hospital or hospital system means providing charity care and
1-21 community benefits as set forth in Paragraph (A), (B), (C), (D),
1-22 (E), (F), (G), or (H):
1-23 (A) charity care and government-sponsored
1-24 indigent health care are provided at a level which is reasonable in
1-25 relation to the community needs, as determined through the
1-26 community needs assessment, the available resources of the hospital
1-27 or hospital system, and the tax-exempt benefits received by the
1-28 hospital or hospital system;
1-29 (B) charity care and government-sponsored
1-30 indigent health care are provided in an amount equal to at least
1-31 four percent of the hospital's or hospital system's net patient
1-32 revenue;
1-33 (C) charity care and government-sponsored
1-34 indigent health care are provided in an amount equal to at least
1-35 100 percent of the hospital's or hospital system's tax-exempt
1-36 benefits, excluding federal income tax;
1-37 (D) a nonprofit hospital that has been
1-38 designated as a disproportionate share hospital under the state
1-39 Medicaid program in the current year or in either of the previous
1-40 two fiscal years shall be considered to have provided a reasonable
1-41 amount of charity care and government-sponsored indigent health
1-42 care and shall be deemed in compliance with the standards in this
1-43 subsection;
1-44 (E) for tax years before 1996, charity care and
1-45 community benefits are provided in a combined amount equal to at
1-46 least five percent of the hospital's or hospital system's net
1-47 patient revenue, provided that charity care and
1-48 government-sponsored indigent health care are provided in an amount
1-49 equal to at least three percent of net patient revenue;
1-50 (F) beginning with the hospital's or hospital
1-51 system's tax year starting after 1995, charity care and community
1-52 benefits are provided in a combined amount equal to at least five
1-53 percent of the hospital's or hospital system's net patient revenue,
1-54 provided that charity care and government-sponsored indigent health
1-55 care are provided in an amount equal to at least four percent of
1-56 net patient revenue;
1-57 (G) a hospital operated on a nonprofit basis
1-58 that is located in a county with a population of less than 50,000
1-59 and in which the entire county or the population of the entire
1-60 county has been designated as a health professionals shortage area
1-61 is considered to be in compliance with the standards provided by
1-62 this subsection; or
1-63 (H) a hospital providing health care services to
1-64 inpatients or outpatients without receiving any payment for
2-1 providing those services from any source, including the patient or
2-2 person legally obligated to support the patient, third-party
2-3 payors, Medicare, Medicaid, or any other state or local indigent
2-4 care program but excluding charitable donations, legacies,
2-5 bequests, or grants or payments for research, is considered to be
2-6 in compliance with the standards provided by this subsection;
2-7 (2) providing support or relief to orphans,
2-8 delinquent, dependent, or handicapped children in need of
2-9 residential care, abused or battered spouses or children in need of
2-10 temporary shelter, the impoverished, or victims of natural
2-11 disaster without regard to the beneficiaries' ability to pay;
2-12 (3) providing support to elderly persons, including
2-13 the provision of recreational or social activities and facilities
2-14 designed to address the special needs of elderly persons, or to 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 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 (17) operating a television station that produces or
2-50 broadcasts educational, cultural, or other public interest
2-51 programming and that receives grants from the Corporation for
2-52 Public Broadcasting under 47 U.S.C. Section 396;
2-53 (18) providing housing for low-income and
2-54 moderate-income families, for unmarried individuals 62 years of age
2-55 or older, for handicapped individuals, and for families displaced
2-56 by urban renewal, through the use of trust assets that are
2-57 irrevocably and, pursuant to a contract entered into before
2-58 December 31, 1972, contractually dedicated on the sale or
2-59 disposition of the housing to a charitable organization that
2-60 performs charitable functions described by Subdivision (9); or
2-61 (19) providing housing and related services to persons
2-62 who are 62 years of age or older in a retirement community, if the
2-63 retirement community provides independent living services, assisted
2-64 living services, and nursing services to its residents on a single
2-65 campus:
2-66 (A) without regard to the residents' ability to
2-67 pay; or
2-68 (B) in which at least four percent of the
2-69 retirement community's combined net resident revenue is provided in
3-1 charitable care to its residents.
3-2 For purposes of satisfying Paragraph (F) of Subdivision (1),
3-3 a hospital or hospital system may not change its existing fiscal
3-4 year unless the hospital or hospital system changes its ownership
3-5 or corporate structure as a result of a sale or merger.
3-6 For purposes of this subsection, a hospital that satisfies
3-7 Paragraph (A), (D), (G), or (H) of Subdivision (1) shall be
3-8 excluded in determining a hospital system's compliance with the
3-9 standards provided by Paragraph (B), (C), (E), or (F) of
3-10 Subdivision (1).
3-11 For purposes of this subsection, the terms "charity care,"
3-12 "government-sponsored indigent health care," "health care
3-13 organization," "hospital system," "net patient revenue," "nonprofit
3-14 hospital," and "tax-exempt benefits" have the meanings set forth in
3-15 Sections 311.031 and 311.042, Health and Safety Code. A
3-16 determination of the amount of community benefits and charity care
3-17 and government-sponsored indigent health care provided by a
3-18 hospital or hospital system and the hospital's or hospital system's
3-19 compliance with the requirements of Section 311.045, Health and
3-20 Safety Code, shall be based on the most recently completed and
3-21 audited prior fiscal year of the hospital or hospital system.
3-22 The providing of charity care and government-sponsored
3-23 indigent health care in accordance with Paragraph (A) of
3-24 Subdivision (1) shall be guided by the prudent business judgment of
3-25 the hospital which will ultimately determine the appropriate level
3-26 of charity care and government-sponsored indigent health care based
3-27 on the community needs, the available resources of the hospital,
3-28 the tax-exempt benefits received by the hospital, and other factors
3-29 that may be unique to the hospital, such as the hospital's volume
3-30 of Medicare and Medicaid patients. These criteria shall not be
3-31 determinative factors, but shall be guidelines contributing to the
3-32 hospital's decision along with other factors which may be unique to
3-33 the hospital. The formulas contained in Paragraphs (B), (C), (E),
3-34 and (F) of Subdivision (1) shall also not be considered
3-35 determinative of a reasonable amount of charity care and
3-36 government-sponsored indigent health care.
3-37 The requirements of this subsection shall not apply to the
3-38 extent a hospital or hospital system demonstrates that reductions
3-39 in the amount of community benefits, charity care, and
3-40 government-sponsored indigent health care are necessary to maintain
3-41 financial reserves at a level required by a bond covenant, are
3-42 necessary to prevent the hospital or hospital system from
3-43 endangering its ability to continue operations, or if the hospital
3-44 or hospital system, as a result of a natural or other disaster, is
3-45 required substantially to curtail its operations.
3-46 In any fiscal year that a hospital or hospital system,
3-47 through unintended miscalculation, fails to meet any of the
3-48 standards in Subdivision (1), the hospital or hospital system shall
3-49 not lose its tax-exempt status without the opportunity to cure the
3-50 miscalculation in the fiscal year following the fiscal year the
3-51 failure is discovered by both meeting one of the standards and
3-52 providing an additional amount of charity care and
3-53 government-sponsored indigent health care that is equal to the
3-54 shortfall from the previous fiscal year. A hospital or hospital
3-55 system may apply this provision only once every five years.
3-56 (l) A charitable organization described by Subsection (d)(3)
3-57 that provides support to elderly persons must engage primarily in
3-58 performing charitable functions described by Subsection (d)(3), but
3-59 may engage in other activities that support or are related to its
3-60 charitable functions.
3-61 SECTION 2. (a) This Act takes effect as provided by this
3-62 section, but only if the constitutional amendment proposed by the
3-63 76th Legislature, Regular Session, 1999, to authorize the exemption
3-64 of property of institutions of public charity, as defined by
3-65 general law, from ad valorem taxation, is approved by the voters.
3-66 If that amendment is not approved by the voters, this Act has no
3-67 effect.
3-68 (b) This Act takes effect January 1, 2000, and applies only
3-69 to ad valorem taxes imposed in a tax year that begins on or after
4-1 that date.
4-2 SECTION 3. The importance of this legislation and the
4-3 crowded condition of the calendars in both houses create an
4-4 emergency and an imperative public necessity that the
4-5 constitutional rule requiring bills to be read on three several
4-6 days in each house be suspended, and this rule is hereby suspended.
4-7 * * * * *