By Brimer                                             H.B. No. 3201
         Line and page numbers may not match official copy.
         Bill not drafted by TLC or Senate E&E.
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to exempting certain charitable organizations from
 1-3     ad-valorem taxation.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1. Section 11.18, Property Tax Code, is amended by
 1-6     adding subdivision (21) to read as follows:
 1-7           (d)  A charitable organization must be organized exclusively
 1-8     to perform religious, charitable, scientific, literary, or
 1-9     educational purposes and, except as permitted by Subsections (h)
1-10     and (l) of this section, engage exclusively in performing one or
1-11     more of the following charitable functions:
1-12                 (1)  providing medical care without regard to the
1-13     beneficiaries' ability to pay, which in the case of a nonprofit
1-14     hospital or hospital system means providing charity care and
1-15     community benefits as set forth in Paragraph (A), (B), (C), (D),
1-16     (E), (F), (G), or (H):
1-17                       (A)  charity care and government-sponsored
1-18     indigent health care are provided at a level which is reasonable in
1-19     relation to the community needs, as determined through the
1-20     community needs assessment, the available resources of the hospital
1-21     or hospital system, and the tax-exempt benefits received by the
1-22     hospital or hospital system;
1-23                       (B)  charity care and government-sponsored
 2-1     indigent health care are provided in an amount equal to at least
 2-2     four percent of the hospital's or hospital system's net patient
 2-3     revenue;
 2-4                       (C)  charity care and government-sponsored
 2-5     indigent health care are provided in an amount equal to at least
 2-6     100 percent of the hospital's or hospital system's tax-exempt
 2-7     benefits, excluding federal income tax;
 2-8                       (D)  a nonprofit hospital that has been
 2-9     designated as a disproportionate share hospital under the state
2-10     Medicaid program in the current year or in either of the previous
2-11     two fiscal years shall be considered to have provided a reasonable
2-12     amount of charity care and government-sponsored indigent health
2-13     care and shall be deemed in compliance with the standards in this
2-14     subsection;
2-15                       (E)  for tax years before 1996, charity care and
2-16     community benefits are provided in a combined amount equal to at
2-17     least five percent of the hospital's or hospital system's net
2-18     patient revenue, provided that charity care and
2-19     government-sponsored indigent health care are provided in an amount
2-20     equal to at least three percent of net patient revenue;
2-21                       (F)  beginning with the hospital's or hospital
2-22     system's tax year starting after 1995, charity care and community
2-23     benefits are provided in a combined amount equal to at least five
2-24     percent of the hospital's or hospital system's net patient revenue,
2-25     provided that charity care and government-sponsored indigent health
2-26     care are provided in an amount equal to at least four percent of
 3-1     net patient revenue;
 3-2                       (G)  a hospital operated on a nonprofit basis
 3-3     that is located in a county with a population of less than 50,000
 3-4     and in which the entire county or the population of the entire
 3-5     county has been designated as a health professionals shortage area
 3-6     is considered to be in compliance with the standards provided by
 3-7     this subsection; or
 3-8                       (H)  a hospital providing health care services to
 3-9     inpatients or outpatients without receiving any payment for
3-10     providing those services from any source, including the patient or
3-11     person legally obligated to support the patient, third-party
3-12     payors, Medicare, Medicaid, or any other state or local indigent
3-13     care program but excluding charitable donations, legacies,
3-14     bequests, or grants or payments for research, is considered to be
3-15     in compliance with the standards provided by this subsection;
3-16                 (2)  providing support or relief to orphans,
3-17     delinquent, dependent, or handicapped children in need of
3-18     residential care, abused or battered spouses or children in need of
3-19     temporary shelter, the impoverished, or victims of natural disaster
3-20     without regard to the beneficiaries' ability to pay;
3-21                 (3)  providing support to elderly persons, including
3-22     the provision of recreational or social activities and facilities
3-23     designed to address the special needs of elderly persons, or to the
3-24     handicapped, without regard to the beneficiaries' ability to pay;
3-25                 (4)  preserving a historical landmark or site;
3-26                 (5)  promoting or operating a museum, zoo, library,
 4-1     theater of the dramatic or performing arts, or symphony orchestra
 4-2     or choir;
 4-3                 (6)  promoting or providing humane treatment of
 4-4     animals;
 4-5                 (7)  acquiring, storing, transporting, selling, or
 4-6     distributing water for public use;
 4-7                 (8)  answering fire alarms and extinguishing fires with
 4-8     no compensation or only nominal compensation to the members of the
 4-9     organization;
4-10                 (9)  promoting the athletic development of boys or
4-11     girls under the age of 18 years;
4-12                 (10)  preserving or conserving wildlife;
4-13                 (11)  promoting educational development through loans
4-14     or scholarships to students;
4-15                 (12)  providing halfway house services pursuant to a
4-16     certification as a halfway house by the Board of Pardons and
4-17     Paroles;
4-18                 (13)  providing permanent housing and related social,
4-19     health care, and educational facilities for persons who are 62
4-20     years of age or older without regard to the residents' ability to
4-21     pay;
4-22                 (14)  promoting or operating an art gallery, museum, or
4-23     collection, in a permanent location or on tour, that is open to the
4-24     public;
4-25                 (15)  providing for the organized solicitation and
4-26     collection for distributions through gifts, grants, and agreements
 5-1     to nonprofit charitable, education, religious, and youth
 5-2     organizations that provide direct human, health, and welfare
 5-3     services;
 5-4                 (16)  performing biomedical or scientific research or
 5-5     biomedical or scientific education for the benefit of the public;
 5-6                 (17)  operating a television station that produces or
 5-7     broadcasts educational, cultural, or other public interest
 5-8     programming and that receives grants from the Corporation for
 5-9     Public Broadcasting under 47 U.S.C. Section 396 and its subsequent
5-10     amendments;
5-11                 (18)  providing housing for low-income and
5-12     moderate-income families, for unmarried individuals 62 years of age
5-13     or older, for handicapped individuals, and for families displaced
5-14     by urban renewal, through the use of trust assets that are
5-15     irrevocably and, pursuant to a contract entered into before
5-16     December 31, 1972, contractually dedicated on the sale or
5-17     disposition of the housing to a charitable organization that
5-18     performs charitable functions described by Subdivision (9);
5-19                 (19)  providing housing and related services to persons
5-20     who are 62 years of age or older in a retirement community, if the
5-21     retirement community provides independent living services, assisted
5-22     living services, and nursing services to its residents on a single
5-23     campus:
5-24                       (A)  without regard to the residents' ability to
5-25     pay; or
5-26                       (B)  in which at least four percent of the
 6-1     retirement community's combined net resident revenue is provided in
 6-2     charitable care to its residents; or
 6-3                 (20)  providing housing on a cooperative basis to
 6-4     students of an institution of higher education if:
 6-5                       (A)  the organization is exempt from federal
 6-6     income taxation under Section 501(a) of the Internal Revenue Code
 6-7     of 1986, and its subsequent amendments, by being listed as an
 6-8     exempt entity under Section 501(c)(3) of that code;
 6-9                       (B)  membership in the organization is open to
6-10     all students enrolled in the institution and is not limited to
6-11     those chosen by current members of the organization;
6-12                       (C)  the organization is governed by its members;
6-13     and
6-14                       (D)  the members of the organization share the
6-15     responsibility for managing the housing.
6-16           For purposes of satisfying Paragraph (F)  of Subdivision (1),
6-17     a hospital or hospital system may not change its existing fiscal
6-18     year unless the hospital or hospital system changes its ownership
6-19     or corporate structure as a result of a sale or merger.  For
6-20     purposes of this subsection, a hospital that satisfies Paragraph
6-21     (A), (D), (G), or (H) of Subdivision (1) shall be excluded in
6-22     determining a hospital system's compliance with the standards
6-23     provided by Paragraph (B), (C), (E), or (F) of Subdivision (1).
6-24           For purposes of this subsection, the terms "charity care,"
6-25     "government-sponsored indigent health care," "health care
6-26     organization," "hospital system," "net patient revenue," "nonprofit
 7-1     hospital," and "tax-exempt benefits" have the meanings set forth in
 7-2     Sections 311.031 and 311.042, Health and Safety Code.  A
 7-3     determination of the amount of community benefits and charity care
 7-4     and government-sponsored indigent health care provided by a
 7-5     hospital or hospital system and the hospital's or hospital system's
 7-6     compliance with the requirements of Section 311.045, Health and
 7-7     Safety Code, shall be based on the most recently completed and
 7-8     audited prior fiscal year of the hospital or hospital system.
 7-9           The providing of charity care and government-sponsored
7-10     indigent health care in accordance with Paragraph (A)  of
7-11     Subdivision (1)  shall be guided by the prudent business judgment
7-12     of the hospital which will ultimately determine the appropriate
7-13     level of charity care and government-sponsored indigent health care
7-14     based on the community needs, the available resources of the
7-15     hospital, the tax-exempt benefits received by the hospital, and
7-16     other factors that may be unique to the hospital, such as the
7-17     hospital's volume of Medicare and Medicaid patients.  These
7-18     criteria shall not be determinative factors, but shall be
7-19     guidelines contributing to the hospital's decision along with other
7-20     factors which may be unique to the hospital.  The formulas
7-21     contained in Paragraphs (B), (C), (E), and (F) of Subdivision (1)
7-22     shall also not be considered determinative of a reasonable amount
7-23     of charity care and government-sponsored indigent health care.  The
7-24     requirements of this subsection shall not apply to the extent a
7-25     hospital or hospital system demonstrates that reductions in the
7-26     amount of community benefits, charity care, and
 8-1     government-sponsored indigent health care are necessary to maintain
 8-2     financial reserves at a level required by a bond covenant, are
 8-3     necessary to prevent the hospital or hospital system from
 8-4     endangering its ability to continue operations, or if the hospital
 8-5     or hospital system, as a result of a natural or other disaster, is
 8-6     required substantially to curtail its operations.  In any fiscal
 8-7     year that a hospital or hospital system, through unintended
 8-8     miscalculation, fails to meet any of the standards in Subdivision
 8-9     (1), the hospital or hospital system shall not lose its tax-exempt
8-10     status without the opportunity to cure the miscalculation in the
8-11     fiscal year following the fiscal year the failure is discovered by
8-12     both meeting one of the standards and providing an additional
8-13     amount of charity care and government-sponsored indigent health
8-14     care that is equal to the shortfall from the previous fiscal year.
8-15     A hospital or hospital system may apply this provision only once
8-16     every five years.
8-17                 (21)  providing child care for all day or part-day
8-18     directly utilizing charitable funds, state funds or federal funds
8-19     or a combination thereof without regard to the beneficiaries'
8-20     ability to pay or fees to be paid on a sliding fee scale basis in
8-21     facilities licensed by the Texas Department of Protective and
8-22     Regulatory Services or a Head Start program through a federal grant
8-23     in facilities licensed by the Texas Department of Protective and
8-24     Regulatory Services or child care through a contract with
8-25     facilities licensed by the Texas Department of Protective and
8-26     Regulatory Services to provide such care.
 9-1           SECTION 2.  This Act takes effect September 1, 2001.