LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                               May 24, 2001
  
  
          TO:  Honorable James E. "Pete" Laney, Speaker of the House,
               House of Representatives
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB1689  by Chisum (Relating to an exemption from ad
               valorem taxation for certain organizations engaged
               primarily in performing charitable functions.), As
               Passed 2nd House
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB1689, As Passed 2nd House:  positive impact of $0 through the       *
*  biennium ending August 31, 2003.                                      *
**************************************************************************
  
The bill would amend Chapter 11 of the Tax Code to allow a property tax
exemption for the real and personal property of organizations engaged
primarily in performing charitable functions, if approved by a local
taxing unit.

To qualify for the exemption, an organization would have to obtain a
determination letter from the Comptroller stating that the organization
was engaged primarily in charitable functions.  The chief appraiser would
have to accept the letter as conclusive evidence of eligibility for the
exemption.  A new determination letter would be required every fifth year
after the exemption was granted.  Certain real properties consisting of
land and incomplete improvements could not be exempted for more than
three years.

The Comptroller would be required to charge organizations a fee not to
exceed the administrative costs of performing the duties necessary to
issue a determination under this bill.
  
General Revenue-Related Funds, Five-Year Impact:
  
          ****************************************************
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2002                                   $0  *
          *       2003                                    0  *
          *       2004                                    0  *
          *       2005                                    0  *
          *       2006                                    0  *
          ****************************************************
  
All Funds, Five-Year Impact:
  
**************************************************************************
*Fiscal    Probable Revenue         Probable        Change in Number of  *
* Year      Gain/(Loss) to      Savings/(Cost) to  State Employees from  *
*        General Revenue Fund General Revenue Fund        FY 2001        *
*                0001                 0001                               *
*  2002               $238,235           $(238,235)                  4.0 *
*  2003                216,619            (216,619)                  4.0 *
*  2004                216,619            (216,619)                  4.0 *
*  2005                216,619            (216,619)                  4.0 *
*  2006                216,619            (216,619)                  4.0 *
**************************************************************************
  
The Comptroller's Office would require four additional research staff to
handle the increased workload.  The research staff would determine if
organizations met specific requirements and performed the required
activities to maintain the exemption.  It is anticipated that the
assessment of fees to applicant organizations would offset the
administrative costs of implementing the bill.
  
Fiscal Analysis
  
Passage of the bill could cause a significant loss of taxable value to
local appraisal rolls.  Non-profit organizations performing some
charitable functions, but not exclusively charitable functions,
currently pay property taxes on real and personal property.  An
undetermined number of such organizations could qualify for a total
property tax exemption under the provisions of the bill by meeting the
new standard of engaging primarily in the performance of charitable
functions.
  
  
Methodology
  
In an effort to illustrate a few of the elements of this issue, in 1992
the U.S. Census Bureau reported that there were 2,576 civic, social, and
fraternal organizations in Texas.  Several years ago, the Comptroller's
Office developed an informal estimate of local property tax revenue loss
from such an exemption of approximately $2.6 million annually among all
taxing units.  After a one-year lag, the state would bear the losses of
about $1.4 million per year sustained by school districts.
  
  
Local Government Impact
  
The amount of revenue loss to local governments would depend on the
number of organizations that would apply and qualify under the bill and
on the appraised value of the affected real and personal property.
  
  
Source Agencies:   
LBB Staff:         JK, DB, BR