1-1 By: Barrientos S.B. No. 1007
1-2 (In the Senate - Filed February 28, 2001; March 5, 2001, read
1-3 first time and referred to Committee on Intergovernmental
1-4 Relations; April 26, 2001, reported adversely, with favorable
1-5 Committee Substitute by the following vote: Yeas 4, Nays 0;
1-6 April 26, 2001, sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1007 By: Cain
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the exemption from ad valorem taxation of property
1-11 owned by charitable organizations that provide child-care services.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Subsection (d), Section 11.18, Tax Code, is
1-14 amended to read as follows:
1-15 (d) A charitable organization must be organized exclusively
1-16 to perform religious, charitable, scientific, literary, or
1-17 educational purposes and, except as permitted by Subsections (h)
1-18 and (l) [of this section], engage exclusively in performing one or
1-19 more of the following charitable functions:
1-20 (1) providing medical care without regard to the
1-21 beneficiaries' ability to pay, which in the case of a nonprofit
1-22 hospital or hospital system means providing charity care and
1-23 community benefits as set forth in Paragraph (A), (B), (C), (D),
1-24 (E), (F), (G), or (H):
1-25 (A) charity care and government-sponsored
1-26 indigent health care are provided at a level which is reasonable in
1-27 relation to the community needs, as determined through the
1-28 community needs assessment, the available resources of the hospital
1-29 or hospital system, and the tax-exempt benefits received by the
1-30 hospital or hospital system;
1-31 (B) charity care and government-sponsored
1-32 indigent health care are provided in an amount equal to at least
1-33 four percent of the hospital's or hospital system's net patient
1-34 revenue;
1-35 (C) charity care and government-sponsored
1-36 indigent health care are provided in an amount equal to at least
1-37 100 percent of the hospital's or hospital system's tax-exempt
1-38 benefits, excluding federal income tax;
1-39 (D) a nonprofit hospital that has been
1-40 designated as a disproportionate share hospital under the state
1-41 Medicaid program in the current year or in either of the previous
1-42 two fiscal years shall be considered to have provided a reasonable
1-43 amount of charity care and government-sponsored indigent health
1-44 care and shall be deemed in compliance with the standards in this
1-45 subsection;
1-46 (E) for tax years before 1996, charity care and
1-47 community benefits are provided in a combined amount equal to at
1-48 least five percent of the hospital's or hospital system's net
1-49 patient revenue, provided that charity care and
1-50 government-sponsored indigent health care are provided in an amount
1-51 equal to at least three percent of net patient revenue;
1-52 (F) beginning with the hospital's or hospital
1-53 system's tax year starting after 1995, charity care and community
1-54 benefits are provided in a combined amount equal to at least five
1-55 percent of the hospital's or hospital system's net patient revenue,
1-56 provided that charity care and government-sponsored indigent health
1-57 care are provided in an amount equal to at least four percent of
1-58 net patient revenue;
1-59 (G) a hospital operated on a nonprofit basis
1-60 that is located in a county with a population of less than 50,000
1-61 and in which the entire county or the population of the entire
1-62 county has been designated as a health professionals shortage area
1-63 is considered to be in compliance with the standards provided by
1-64 this subsection; or
2-1 (H) a hospital providing health care services to
2-2 inpatients or outpatients without receiving any payment for
2-3 providing those services from any source, including the patient or
2-4 person legally obligated to support the patient, third-party
2-5 payors, Medicare, Medicaid, or any other state or local indigent
2-6 care program but excluding charitable donations, legacies,
2-7 bequests, or grants or payments for research, is considered to be
2-8 in compliance with the standards provided by this subsection;
2-9 (2) providing support or relief to orphans,
2-10 delinquent, dependent, or handicapped children in need of
2-11 residential care, abused or battered spouses or children in need of
2-12 temporary shelter, the impoverished, or victims of natural disaster
2-13 without regard to the beneficiaries' ability to pay;
2-14 (3) providing support to elderly persons, including
2-15 the provision of recreational or social activities and facilities
2-16 designed to address the special needs of elderly persons, or to the
2-17 handicapped, without regard to the beneficiaries' ability to pay;
2-18 (4) preserving a historical landmark or site;
2-19 (5) promoting or operating a museum, zoo, library,
2-20 theater of the dramatic or performing arts, or symphony orchestra
2-21 or choir;
2-22 (6) promoting or providing humane treatment of
2-23 animals;
2-24 (7) acquiring, storing, transporting, selling, or
2-25 distributing water for public use;
2-26 (8) answering fire alarms and extinguishing fires with
2-27 no compensation or only nominal compensation to the members of the
2-28 organization;
2-29 (9) promoting the athletic development of boys or
2-30 girls under the age of 18 years;
2-31 (10) preserving or conserving wildlife;
2-32 (11) promoting educational development through loans
2-33 or scholarships to students;
2-34 (12) providing halfway house services pursuant to a
2-35 certification as a halfway house by the Board of Pardons and
2-36 Paroles;
2-37 (13) providing permanent housing and related social,
2-38 health care, and educational facilities for persons who are 62
2-39 years of age or older without regard to the residents' ability to
2-40 pay;
2-41 (14) promoting or operating an art gallery, museum, or
2-42 collection, in a permanent location or on tour, that is open to the
2-43 public;
2-44 (15) providing for the organized solicitation and
2-45 collection for distributions through gifts, grants, and agreements
2-46 to nonprofit charitable, education, religious, and youth
2-47 organizations that provide direct human, health, and welfare
2-48 services;
2-49 (16) performing biomedical or scientific research or
2-50 biomedical or scientific education for the benefit of the public;
2-51 (17) operating a television station that produces or
2-52 broadcasts educational, cultural, or other public interest
2-53 programming and that receives grants from the Corporation for
2-54 Public Broadcasting under 47 U.S.C. Section 396, as amended [and
2-55 its subsequent amendments];
2-56 (18) providing housing for low-income and
2-57 moderate-income families, for unmarried individuals 62 years of age
2-58 or older, for handicapped individuals, and for families displaced
2-59 by urban renewal, through the use of trust assets that are
2-60 irrevocably and, pursuant to a contract entered into before
2-61 December 31, 1972, contractually dedicated on the sale or
2-62 disposition of the housing to a charitable organization that
2-63 performs charitable functions described by Subdivision (9);
2-64 (19) providing housing and related services to persons
2-65 who are 62 years of age or older in a retirement community, if the
2-66 retirement community provides independent living services, assisted
2-67 living services, and nursing services to its residents on a single
2-68 campus:
2-69 (A) without regard to the residents' ability to
3-1 pay; or
3-2 (B) in which at least four percent of the
3-3 retirement community's combined net resident revenue is provided in
3-4 charitable care to its residents; [or]
3-5 (20) providing housing on a cooperative basis to
3-6 students of an institution of higher education if:
3-7 (A) the organization is exempt from federal
3-8 income taxation under Section 501(a), [of the] Internal Revenue
3-9 Code of 1986, as amended [and its subsequent amendments], by being
3-10 listed as an exempt entity under Section 501(c)(3) of that code;
3-11 (B) membership in the organization is open to
3-12 all students enrolled in the institution and is not limited to
3-13 those chosen by current members of the organization;
3-14 (C) the organization is governed by its members;
3-15 and
3-16 (D) the members of the organization share the
3-17 responsibility for managing the housing; or
3-18 (21) providing child care for all or part of the day,
3-19 directly by the organization in a child-care facility licensed by
3-20 the Department of Protective and Regulatory Services, through a
3-21 contract with a child-care facility licensed by that department, or
3-22 in association with a provider of a Head Start program, as defined
3-23 by Section 72.001, Human Resources Code, that provides educational
3-24 services to children in a child-care facility licensed by that
3-25 department, if the organization provides the child care using:
3-26 (A) donated funds, state funds, federal funds,
3-27 or a combination of those funds, without regard to the
3-28 beneficiaries' ability to pay; or
3-29 (B) money derived from fees paid for the child
3-30 care on a sliding scale based on the beneficiaries' ability to pay.
3-31 For purposes of satisfying Paragraph (F) of Subdivision (1),
3-32 a hospital or hospital system may not change its existing fiscal
3-33 year unless the hospital or hospital system changes its ownership
3-34 or corporate structure as a result of a sale or merger.
3-35 For purposes of this subsection, a hospital that satisfies
3-36 Paragraph (A), (D), (G), or (H) of Subdivision (1) shall be
3-37 excluded in determining a hospital system's compliance with the
3-38 standards provided by Paragraph (B), (C), (E), or (F) of
3-39 Subdivision (1).
3-40 For purposes of this subsection, the terms "charity care,"
3-41 "government-sponsored indigent health care," "health care
3-42 organization," "hospital system," "net patient revenue," "nonprofit
3-43 hospital," and "tax-exempt benefits" have the meanings set forth in
3-44 Sections 311.031 and 311.042, Health and Safety Code. A
3-45 determination of the amount of community benefits and charity care
3-46 and government-sponsored indigent health care provided by a
3-47 hospital or hospital system and the hospital's or hospital system's
3-48 compliance with the requirements of Section 311.045, Health and
3-49 Safety Code, shall be based on the most recently completed and
3-50 audited prior fiscal year of the hospital or hospital system.
3-51 The providing of charity care and government-sponsored
3-52 indigent health care in accordance with Paragraph (A) of
3-53 Subdivision (1) shall be guided by the prudent business judgment of
3-54 the hospital which will ultimately determine the appropriate level
3-55 of charity care and government-sponsored indigent health care based
3-56 on the community needs, the available resources of the hospital,
3-57 the tax-exempt benefits received by the hospital, and other factors
3-58 that may be unique to the hospital, such as the hospital's volume
3-59 of Medicare and Medicaid patients. These criteria shall not be
3-60 determinative factors, but shall be guidelines contributing to the
3-61 hospital's decision along with other factors which may be unique to
3-62 the hospital. The formulas contained in Paragraphs (B), (C), (E),
3-63 and (F) of Subdivision (1) shall also not be considered
3-64 determinative of a reasonable amount of charity care and
3-65 government-sponsored indigent health care.
3-66 The requirements of this subsection shall not apply to the
3-67 extent a hospital or hospital system demonstrates that reductions
3-68 in the amount of community benefits, charity care, and
3-69 government-sponsored indigent health care are necessary to maintain
4-1 financial reserves at a level required by a bond covenant, are
4-2 necessary to prevent the hospital or hospital system from
4-3 endangering its ability to continue operations, or if the hospital
4-4 or hospital system, as a result of a natural or other disaster, is
4-5 required substantially to curtail its operations.
4-6 In any fiscal year that a hospital or hospital system,
4-7 through unintended miscalculation, fails to meet any of the
4-8 standards in Subdivision (1), the hospital or hospital system shall
4-9 not lose its tax-exempt status without the opportunity to cure the
4-10 miscalculation in the fiscal year following the fiscal year the
4-11 failure is discovered by both meeting one of the standards and
4-12 providing an additional amount of charity care and
4-13 government-sponsored indigent health care that is equal to the
4-14 shortfall from the previous fiscal year. A hospital or hospital
4-15 system may apply this provision only once every five years.
4-16 SECTION 2. This Act takes effect January 1, 2002, and
4-17 applies only to an ad valorem tax year that begins on or after that
4-18 date.
4-19 * * * * *