81(R) HB 1269 - Introduced version

TO:	Honorable Rene Oliveira, Chair, House Committee on Ways & Means

FROM:	John S. O'Brien, Director, Legislative Budget Board

IN RE:	HB1269 by Hughes (Relating to the exemption from ad valorem taxation of property owned by certain organizations engaged primarily in performing charitable functions.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for HB1269, As Introduced: a negative impact of ($420,000) through the biennium ending August 31, 2011.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2010	$0
2011	($420,000)
2012	($488,000)
2013	($521,000)
2014	($558,000)

All Funds, Five-Year Impact:

Fiscal Year	Probable Savings/(Cost) from Foundation School Fund 193	Probable Revenue Gain/(Loss) from School Districts - Net Impact	Probable Revenue Gain/(Loss) from Counties	Probable Revenue Gain/(Loss) from Cities
2010	$0	$0	$0	$0
2011	($420,000)	($139,000)	($178,000)	($152,000)
2012	($488,000)	($108,000)	($188,000)	($160,000)
2013	($521,000)	($121,000)	($201,000)	($170,000)
2014	($558,000)	($133,000)	($215,000)	($182,000)

The bill would amend Chapter 11 of the Tax Code, regarding taxable property and exemptions.

The bill would make an ad valorem taxation exemption for qualified charitable organizations mandatory, if certain conditions are met. Section 11.184(b) of the Code, which currently makes this exemption optional, would be repealed.

The bill would extend an exemption from ad valorem taxation to property owned by corporation that is not a qualified charitable organization, if certain conditions were met. The required conditions include (1) qualifying as a 501(c)(2) organization under federal tax law; (2) holding title to the property, collecting income from the property, and turning the income less expenses over to a qualified charitable organization; and (3) the property would be exempt from ad valorem taxation if it was owned by the qualified charitable organization. The qualified charitable organization would be required to get a determination letter from the Comptroller's Office.

The bill would be effective January 1, 2010.

The bill's requirement of mandatory exemptions for qualifying charitable organizations would create a cost to cities, counties, school districts, and the state through the operation of the school finance formulas. Currently, some taxing units grant the exemption and some do not. The cost was estimated based on a survey of large appraisal districts to determine the value of currently nonexempt property that would be exempted under the bill. The appropriate tax rates were applied to the value losses to estimate the tax revenue losses.

Because of the operation of the hold harmless provisions of HB 1, 79th Legislature, Third Called Session (2006), the school district cost related to the compressed rate would be transferred to the state. Portions of the enrichment cost and the school district debt (facilities) cost would also be transferred to the state after a one-year lag because of the operation of the enrichment and facilities funding formulas. All costs were estimated over the five year projection period.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION


May 2, 2009