LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 20, 2001
TO: Honorable Frank Madla, Chair, Senate Committee on
Intergovernmental Relations
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB1554 by Barrientos (Relating to an exemption from ad
valorem taxation for certain organizations engaged
primarily in performing charitable functions.), As
Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB1554, As Introduced: negative impact of $(454,854) through the *
* biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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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.
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.
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(238,235) *
* 2003 (216,619) *
* 2004 (216,619) *
* 2005 (216,619) *
* 2006 (216,619) *
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All Funds, Five-Year Impact:
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*Fiscal Probable Savings/(Cost) to Change in Number of State *
* Year General Revenue Fund Employees from FY 2001 *
* 0001 *
* 2002 $(238,235) 4.0 *
* 2003 (216,619) 4.0 *
* 2004 (216,619) 4.0 *
* 2005 (216,619) 4.0 *
* 2006 (216,619) 4.0 *
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The Comptroller's office has determined the above administrative cost.
Fiscal Analysis
Under current law, organizations have to be engaged in "exclusively"
charitable functions to qualify for exemption from ad valorem taxes.
The bill would add a new exemption for organizations "primarily" engaged
in charitable functions.
Methodology
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.
In an effort to illustrate a few of the elements of this issue, in 1992
the 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. 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
provisions of the bill and on the appraised value of the affected real
and personal property.
Source Agencies:
LBB Staff: JK, DB, BR