LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION May 2, 2009 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.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION
May 2, 2009
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
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
Honorable Rene Oliveira, Chair, House Committee on Ways & Means
Honorable Rene Oliveira, Chair, House Committee on Ways & Means
John S. O'Brien, Director, Legislative Budget Board
John S. O'Brien, Director, Legislative Budget Board
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
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.
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.
General Revenue-Related Funds, Five-Year Impact: 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)
2010 $0
2011 ($420,000)
2012 ($488,000)
2013 ($521,000)
2014 ($558,000)
All Funds, Five-Year Impact: Fiscal Year Probable Savings/(Cost) fromFoundation School Fund193 Probable Revenue Gain/(Loss) fromSchool Districts - Net Impact Probable Revenue Gain/(Loss) fromCounties Probable Revenue Gain/(Loss) fromCities 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)
Fiscal Year Probable Savings/(Cost) fromFoundation School Fund193 Probable Revenue Gain/(Loss) fromSchool Districts - Net Impact Probable Revenue Gain/(Loss) fromCounties Probable Revenue Gain/(Loss) fromCities 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)
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)
Fiscal Analysis
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 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.
Methodology
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.
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.
Local Government Impact
The estimated fiscal implication to units of local government is reflected in the table above.
Source Agencies: 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: JOB, MN, SD, SJS
JOB, MN, SD, SJS