HBA-NRS S.B. 914 77(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 914
By: Ogden
Higher Education
5/5/2001
Engrossed



BACKGROUND AND PURPOSE 

Current law permits a city to create a higher education authority
(authority) or a nonprofit corporation to exercise powers similar to those
of an authority. The nonprofit organization can issue tax exempt bonds to
buy educational facilities or dormitories within or outside the city that
created the corporation. If the project is a dormitory, the bonds are to be
paid from the rent from the dormitory. The dormitories must be rented
exclusively to students or other persons officially connected with a
university. The educational or dormitory facilities built by an authority
are exempt from ad valorem property taxes. Some cities and private
individuals, through the use of an authority, are financing the
construction of student apartment complexes outside of their
extraterritorial jurisdiction and claiming a property tax exemption. Senate
Bill 914 establishes that educational and student housing facilities owned
by higher education authorities or certain nonprofit entities that are
financed by an authority must have a connection to an educational
institution to qualify for tax exempt status.  

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

Senate Bill 914 amends the Education Code to provide that an educational
facility or housing authority is exempt from taxation if the facility is
owned by a higher education authority (authority), by a nonprofit
corporation created by a city to exercise the powers of an authority, or by
a nonprofit foundation created on behalf of an institution of higher
education, an accredited primary or secondary school, or an authorized
charter school (institution or school), if the facility is financed in
whole or in part under the Higher Education Authority Act (Act), if the
facility is held for the exclusive benefit of an institution or school that
has approved that ownership and financing, if the facility is held for the
exclusive use of the students, faculty, and staff members of the benefitted
institution or school, and if the facility would be exempt from taxation
under other applicable law if the facility were owned by the institution or
school.  

The bill provides that a housing facility is exempt from taxation by a
taxing unit if the facility is owned by an authority created by a
municipality or created on behalf of an institution or school, if the
facility is financed or acquired in whole or in part under the Act, and if
all net revenues derived from the facility are devoted exclusively to the
granting of scholarships in the form of reduced room and board or room or
board changes. The bill requires that the exemption from taxation by a
taxing unit applies only to an authority or nonprofit corporation created
or to be created under the Act by a city if an authority or nonprofit
corporation created by the same city had granted room and board
scholarships prior to September 1, 2001, to students residing in facilities
owned by the authority or nonprofit corporation.  

If the net revenue of a housing facility is devoted exclusively to the
granting of scholarships fails to award scholarships having a value at
least equal to the amount of ad valorem taxes that would have been owed if
the facility had not been exempt, the bill requires the facility to make a
payment in the amount of the taxes that would be due for the proportional
benefit of the applicable taxing jurisdictions in the amount of the
difference between the value of the scholarships and the taxes that
otherwise would have been payable. The bill prohibits this provision from
altering an agreement in existence prior to September 1, 2001, without
permission of the affected taxing authority. The bill requires the local
taxing unit to determine the amount of the difference between the value of
the scholarship and the taxes that would have been payable. 

The bill provides that a housing facility is eligible for a rebate of the
ad valorem property taxes paid to a taxing unit if the facility is owned by
an authority, by a nonprofit corporation created by a city to exercise the
powers of an authority, or by a nonprofit foundation created on behalf of
an institution or school, the facility is financed in whole or in part
under the Act, and all net revenues derived from the facility are devoted
exclusively to the granting of scholarships in the form of reduced room and
board charges or in other lawful forms. The bill requires the governing
body of the taxing unit to determine the amount of the rebate except that
the amount of the rebate is prohibited in any year from exceeding the
lesser of the amount of ad valorem taxes paid to the taxing unit in that
year or the fair market value of scholarships awarded from all net revenue
derived from the facility in the preceding year.  

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001.