By: Taylor, Pea, Fletcher, Oliveira, H.B. No. 831
Sheffield, et al.
A BILL TO BE ENTITLED
AN ACT
relating to the exemption from certain taxation of certain
organizations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 11.18(d), Tax Code, as amended by
Chapters 1034 (H.B. 1742) and 1341 (S.B. 1908), Acts of the 80th
Legislature, Regular Session, 2007, is reenacted and amended to
read as follows:
(d) A charitable organization must be organized exclusively
to perform religious, charitable, scientific, literary, or
educational purposes and, except as permitted by Subsections (h)
and (l), engage exclusively in performing one or more of the
following charitable functions:
(1) providing medical care without regard to the
beneficiaries' ability to pay, which in the case of a nonprofit
hospital or hospital system means providing charity care and
community benefits in accordance with Section 11.1801;
(2) providing support or relief to orphans,
delinquent, dependent, or handicapped children in need of
residential care, abused or battered spouses or children in need of
temporary shelter, the impoverished, or victims of natural disaster
without regard to the beneficiaries' ability to pay;
(3) providing support without regard to the
beneficiaries' ability to pay to:
(A) elderly persons, including the provision of:
(i) recreational or social activities; and
(ii) facilities designed to address the
special needs of elderly persons; [,] or
(B) [to] the handicapped, including training and
employment under 41 U.S.C. Sections 46-48c:
(i) in the production of commodities; or
(ii) in the provision of services [without
regard to the beneficiaries' ability to pay];
(4) preserving a historical landmark or site;
(5) promoting or operating a museum, zoo, library,
theater of the dramatic or performing arts, or symphony orchestra
or choir;
(6) promoting or providing humane treatment of
animals;
(7) acquiring, storing, transporting, selling, or
distributing water for public use;
(8) answering fire alarms and extinguishing fires with
no compensation or only nominal compensation to the members of the
organization;
(9) promoting the athletic development of boys or
girls under the age of 18 years;
(10) preserving or conserving wildlife;
(11) promoting educational development through loans
or scholarships to students;
(12) providing halfway house services pursuant to a
certification as a halfway house by the parole [pardons and
paroles] division of the Texas Department of Criminal Justice;
(13) providing permanent housing and related social,
health care, and educational facilities for persons who are 62
years of age or older without regard to the residents' ability to
pay;
(14) promoting or operating an art gallery, museum, or
collection, in a permanent location or on tour, that is open to the
public;
(15) providing for the organized solicitation and
collection for distributions through gifts, grants, and agreements
to nonprofit charitable, education, religious, and youth
organizations that provide direct human, health, and welfare
services;
(16) performing biomedical or scientific research or
biomedical or scientific education for the benefit of the public;
(17) operating a television station that produces or
broadcasts educational, cultural, or other public interest
programming and that receives grants from the Corporation for
Public Broadcasting under 47 U.S.C. Section 396, as amended;
(18) providing housing for low-income and
moderate-income families, for unmarried individuals 62 years of age
or older, for handicapped individuals, and for families displaced
by urban renewal, through the use of trust assets that are
irrevocably and, pursuant to a contract entered into before
December 31, 1972, contractually dedicated on the sale or
disposition of the housing to a charitable organization that
performs charitable functions described by Subdivision (9);
(19) providing housing and related services to persons
who are 62 years of age or older in a retirement community, if the
retirement community provides independent living services,
assisted living services, and nursing services to its residents on
a single campus:
(A) without regard to the residents' ability to
pay; or
(B) in which at least four percent of the
retirement community's combined net resident revenue is provided in
charitable care to its residents;
(20) providing housing on a cooperative basis to
students of an institution of higher education if:
(A) the organization is exempt from federal
income taxation under Section 501(a), Internal Revenue Code of
1986, as amended, by being listed as an exempt entity under Section
501(c)(3) of that code;
(B) membership in the organization is open to all
students enrolled in the institution and is not limited to those
chosen by current members of the organization;
(C) the organization is governed by its members;
and
(D) the members of the organization share the
responsibility for managing the housing;
(21) acquiring, holding, and transferring unimproved
real property under an urban land bank demonstration program
established under Chapter 379C, Local Government Code, as or on
behalf of a land bank; [or]
(22) acquiring, holding, and transferring unimproved
real property under an urban land bank program established under
Chapter 379E, Local Government Code, as or on behalf of a land bank;
or
(23) providing access to affordable financial
products and services for underserved communities, if the
organization is:
(A) a certified community development financial
institution; and
(B) exempt from federal income taxation under
Section 501(a), Internal Revenue Code of 1986, as amended, by being
listed as an exempt entity under Section 501(c)(3) of that code.
SECTION 2. Section 11.184, Tax Code, is amended by amending
Subsection (c) and adding Subsections (l), (m), and (n) to read as
follows:
(c) A [If approved under Subsection (b), a] qualified
charitable organization is entitled to an exemption from taxation
of:
(1) the buildings and other real property and the
tangible personal property that:
(A) are owned by the organization; and
(B) except as permitted by Subsection (d), are
used exclusively by the organization and other organizations
eligible for an exemption from taxation under this section or
Section 11.18; and
(2) the real property owned by the organization
consisting of:
(A) an incomplete improvement that:
(i) is under active construction or other
physical preparation; and
(ii) is designed and intended to be used
exclusively by the organization and other organizations eligible
for an exemption from taxation under this section or Section 11.18;
and
(B) the land on which the incomplete improvement
is located that will be reasonably necessary for the use of the
improvement by the organization and other organizations eligible
for an exemption from taxation under this section or Section 11.18.
(l) Notwithstanding the other provisions of this section, a
corporation that is not a qualified charitable organization is
entitled to an exemption from taxation of property under this
section if:
(1) the corporation is exempt from federal income
taxation under Section 501(a), Internal Revenue Code of 1986, by
being listed as an exempt entity under Section 501(c)(2) of that
code;
(2) the corporation holds title to the property for,
collects income from the property for, and turns over the entire
amount of that income, less expenses, to a qualified charitable
organization; and
(3) the qualified charitable organization would
qualify for an exemption from taxation of the property under this
section if the qualified charitable organization owned the
property.
(m) Before a corporation described by Subsection (l) may
submit an application for an exemption under this section, the
qualified charitable organization for which the corporation holds
title to the property must apply to the comptroller for the
determination described by Subsection (e) with regard to the
qualified charitable organization. The application for the
determination must also include an application to the comptroller
for a determination of whether the corporation meets the
requirements of Subsections (l)(1) and (2). The corporation shall
submit with the application for an exemption under this section a
copy of the determination letter issued by the comptroller. The
chief appraiser shall accept the copy of the letter as conclusive
evidence of the matters described by Subsection (h) as well as of
whether the corporation meets the requirements of Subsections
(l)(1) and (2).
(n) Notwithstanding Subsection (k), in order for a
corporation to continue to receive an exemption under Subsection
(l) after the fifth tax year after the year in which the exemption
is granted, the qualified charitable organization for which the
corporation holds title to property must obtain a new determination
letter and the corporation must reapply for the exemption.
SECTION 3. Subchapter B, Chapter 11, Tax Code, is amended by
adding Section 11.231 to read as follows:
Sec. 11.231. NONPROFIT COMMUNITY BUSINESS ORGANIZATION
PROVIDING ECONOMIC DEVELOPMENT SERVICES TO LOCAL COMMUNITY. (a)
In this section, "nonprofit community business organization" means
an organization that meets the following requirements:
(1) the organization has been in existence for at
least the preceding five years;
(2) the organization:
(A) is a nonprofit corporation organized under
the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq.,
Vernon's Texas Civil Statutes) or a nonprofit corporation formed
under the Texas Nonprofit Corporation Law, as described by Section
1.008, Business Organizations Code;
(B) is a nonprofit organization described by
Section 501(c)(6), Internal Revenue Code of 1986; and
(C) is not a statewide organization;
(3) for at least the preceding three years, the
organization has maintained a dues-paying membership of at least 50
members; and
(4) the organization:
(A) has a board of directors elected by the
members;
(B) does not compensate members of the board of
directors for service on the board;
(C) with respect to its activities in this state,
is engaged primarily in performing functions listed in Subsection
(d);
(D) is primarily supported by membership dues and
other income from activities substantially related to its primary
functions;
(E) does not employ a person who is required to
register under Section 305.003, Government Code; and
(F) is not, has not formed, and does not
financially support a political committee as defined by Section
251.001, Election Code.
(b) An association that qualifies as a nonprofit community
business organization as provided by this section is entitled to an
exemption from taxation of:
(1) the buildings and tangible personal property that:
(A) are owned by the nonprofit community business
organization; and
(B) except as permitted by Subsection (c), are
used exclusively by qualified nonprofit community business
organizations to perform their primary functions; and
(2) the real property owned by the nonprofit community
business organization consisting of:
(A) an incomplete improvement that:
(i) is under active construction or other
physical preparation; and
(ii) is designed and intended to be used
exclusively by qualified nonprofit community business
organizations; and
(B) the land on which the incomplete improvement
is located that will be reasonably necessary for the use of the
improvement by qualified nonprofit community business
organizations.
(c) Use of exempt property by persons who are not nonprofit
community business organizations qualified as provided by this
section does not result in the loss of an exemption authorized by
this section if the use is incidental to use by qualified nonprofit
community business organizations and limited to activities that
benefit the beneficiaries of the nonprofit community business
organizations that own or use the property.
(d) To qualify for an exemption under this section, a
nonprofit community business organization must be engaged
primarily in performing one or more of the following functions in
the local community:
(1) promoting the common economic interests of
commercial enterprises;
(2) improving the business conditions of one or more
types of business; or
(3) otherwise providing services to aid in economic
development.
(e) In this section, "building" includes the land that is
reasonably necessary for use of, access to, and ornamentation of
the building.
(f) A property may not be exempted under Subsection (b)(2)
for more than three years.
(g) For purposes of Subsection (b)(2), an incomplete
improvement is under physical preparation if the nonprofit
community business organization has:
(1) engaged in architectural or engineering work, soil
testing, land clearing activities, or site improvement work
necessary for the construction of the improvement; or
(2) conducted an environmental or land use study
relating to the construction of the improvement.
(h) Sections 11.42(d) and 11.43(c) apply to an exemption
under this section in the same manner as those subsections apply to
the exemptions described by those subsections.
(i) This section expires December 31, 2011.
SECTION 4. Subchapter B, Chapter 171, Tax Code, is amended
by adding Section 171.0615 to read as follows:
Sec. 171.0615. EXEMPTION--CERTAIN NONPROFIT LIMITED
LIABILITY COMPANIES. A limited liability company treated as a
disregarded entity for federal tax purposes under Treasury
Regulation Section 301.7701-3 whose sole member is exempted from
federal taxation under Section 501(a), Internal Revenue Code of
1986, by being listed as an exempt organization under Section
501(c)(3) of that code, is exempted from the franchise tax if the
limited liability company is formed solely to carry out the
charitable activities of the limited liability company's sole
member.
SECTION 5. Section 11.184(b), Tax Code, is repealed.
SECTION 6. This Act applies only to an ad valorem tax year
that begins on or after the effective date of this Act.
SECTION 7. To the extent of any conflict, this Act prevails
over another Act of the 81st Legislature, Regular Session, 2009,
relating to nonsubstantive additions to and corrections in enacted
codes.
SECTION 8. This Act takes effect January 1, 2010.