LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 7, 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.),
Committee Report 1st House, Substituted
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB1554, Committee Report 1st House, Substituted: 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.
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:
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*Fiscal Probable Revenue Probable Change in Number of *
* Year Gain/(Loss) from Savings/(Cost) from 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 *
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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. The assessment of fees to
applicant organizations would be anticipated to offset the
administrative costs of implementing the bill.
Technology Impact
None.
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 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 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: 304 Comptroller of Public Accounts
LBB Staff: JK, DB, WP, BR