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.