LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session April 29, 1999 TO: Honorable Bill Ratliff, Chair, Senate Committee on Finance FROM: John Keel, Director, Legislative Budget Board IN RE: HB1978 by Kuempel (relating to exempting property owned by organizations that provide support to elderly persons from ad valorem taxation), As Engrossed ************************************************************************** * Based on the state's school funding formulas, a reduction in * * taxable values could result in an increase in the cost of state * * aid for public education. * ************************************************************************** Fiscal Analysis The bill would amend the Tax Code by expanding the current qualifying charitable activity of providing support to elderly persons to include providing "recreational or social activities and facilities designed to address the special needs of elderly persons." The bill also would provide an exception to the Tax Code requirement that a qualified charitable organization must engage exclusively in performing one or more of its charitable functions as provided in Section 11.18 of the Tax Code. A charitable organization providing support services to the elderly would be allowed to maintain a property tax exemption on its property and to engage in other activities that support or are related to its charitable functions. The bill would take effect January 1, 2000, contingent on the passage of a constitutional amendment authorizing the exemption of property of institutions of public charity from ad valorem taxation. Methodology and Impact To the extent that some charitable organizations that would not otherwise qualify for existing property tax exemptions qualified under the proposed expanded exemption, passage of this bill would cause a reduction in school district taxable values reported to the Commissioner of Education by the Comptroller's office, resulting in an increase in state public education. If school districts experience a $1,000,000 annual reduction in their property tax base, assuming a tax rate of $1.50 per $100 of taxable value, local school districts would experience an annual of $150,000 in property tax revenue. Local Government Impact County and city taxing units would experience similar losses in property tax revenue as those outlined above for school districts. Source Agencies: 304 Comptroller of Public Accounts, 480 Department of Economic Development LBB Staff: JK, SD, BB, BR