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Title 1. Property Tax Code
Subtitle C. Taxable Property and Exemptions

Chapter 11. Taxable Property and Exemptions

Subchapter B. Exemptions

Sec. 11.11. Public Property.
Sec. 11.111. Public Property Used to Provide Transitional Housing for Indigent Persons.
Sec. 11.12. Federal Exemptions.
Sec. 11.13. Residence Homestead.
Sec. 11.14. Tangible Personal Property Not Producing Income.
Sec. 11.142. Repealed in 2003.
Sec. 11.145. Income Producing Tangible Personal Property Having Value Less than $500.
Sec. 11.146. Mineral Interest Having Value of Less than $500.
Sec. 11.15. Family Supplies.
Sec. 11.16. Farm Products.
Sec. 11.161. Implements of Husbandry.
Sec. 11.17. Cemeteries.
Sec. 11.18. Charitable Organizations.
Sec. 11.1801. Charity Care and Community Benefits Requirements for Charitable Hospital.
Sec. 11.181. Charitable Organizations Improving Property for Low-Income Housing.
Sec. 11.182. Community Housing Development Organizations Improving Property for Low-Income and Moderate-Income Housing: Property Previously Exempt.
Sec. 11.1825. Organizations Constructing or Rehabilitating Low-Income Housing: Property Not Previously Exempt.
Sec. 11.1826. Monitoring of Compliance With Low-Income and Moderate-Income Housing Exemptions.
Sec. 11.183. Association Providing Assistance to Ambulatory Health Care Centers.
Sec. 11.184. Organizations Engaged Primarily in Performing Charitable Functions.
Sec. 11.185. Colonia Model Subdivision Program.
Sec. 11.19. Youth Spiritual, Mental, and Physical Development Associations.
Sec. 11.20. Religious Organizations.
Sec. 11.201. Additional Tax on Sale of Certain Religious Organization Property.
Sec. 11.21. Schools.
Sec. 11.22. Disabled Veterans.
Sec. 11.23. Miscellaneous Exemptions.
Sec. 11.24. Historic Sites.
Sec. 11.25. Marine Cargo Containers Used Exclusively in International Commerce.
Sec. 11.251. Tangible Personal Property Exempt.
Sec. 11.252. Motor Vehicles Leased for Personal Use.
Sec. 11.26. Limitation of School Tax on Homesteads of Elderly or Disabled.
Sec. 11.261. Limitation of County, Municipal, or Junior College District Tax on Homesteads of Disabled and Elderly.
Sec. 11.27. Solar and Wind-Powered Energy Devices.
Sec. 11.271. Offshore Drilling Equipment Not in Use.
Sec. 11.28. Property Exempted from City Taxation by Agreement.
Sec. 11.29. Intracoastal Waterway Dredge Disposal Site.
Sec. 11.30. Nonprofit Water Supply or Wastewater Service Corporation.
Sec. 11.31. Pollution Control Property.
Sec. 11.32. Certain Water Conservation Initiatives.
Sec. 11.33. Raw Cocoa and Green Coffee Held in Harris County.

[Sections 11.34 to 11.40 reserved for expansion]

Sec. 11.18. Charitable Organizations.

(a) An organization that qualifies as a charitable 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 charitable organization; and

(B) except as permitted by Subsection (b), are used exclusively by qualified charitable organizations; and

(2) the real property owned by the charitable 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 charitable 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 charitable organizations.

(b) Use of exempt property by persons who are not charitable 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 charitable organizations and limited to activities that benefit the beneficiaries of the charitable organizations that own or use the property.

(c) To qualify as a charitable organization for the purposes of this section, an organization, whether operated by an individual, or as a corporation, foundation, trust, or association, must meet the applicable requirements of Subsections (d), (e), (f), and (g).

(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 to elderly persons, including the provision of recreational or social activities and facilities designed to address the special needs of elderly persons, or to the handicapped, 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 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); or

(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.

(e) A charitable organization must be operated in a way that does not result in accrual of distributable profits, realization of private gain resulting from payment of compensation in excess of a reasonable allowance for salary or other compensation for services rendered, or realization of any other form of private gain and, if the organization performs one or more of the charitable functions specified by Subsection (d) other than a function specified by Subdivision (1), (2), (8), (9), (12), (16), or (18), be organized as a nonprofit corporation as defined by the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes).

(f) A charitable organization must:

(1) use its assets in performing the organization's charitable functions or the charitable functions of another charitable organization; and

(2) by charter, bylaw, or other regulation adopted by the organization to govern its affairs direct that on discontinuance of the organization by dissolution or otherwise:

(A) the assets are to be transferred to this state, the United States, or an educational, religious, charitable, or other similar organization that is qualified as a charitable organization under Section 501(c)(3), Internal Revenue Code of 1986, as amended; or

(B) if required for the organization to qualify as a tax-exempt organization under Section 501(c)(12), Internal Revenue Code of 1986, as amended, the assets are to be transferred directly to the organization's members, each of whom, by application for an acceptance of membership in the organization, has agreed to immediately transfer those assets to this state or to an educational, religious, charitable, or other similar organization that is qualified as a charitable organization under Section 501(c)(3), Internal Revenue Code of 1986, as amended, as designated in the bylaws, charter, or regulation adopted by the organization.

(g) A charitable organization that performs a charitable function specified by Subsection (d)(15) must:

(1) be affiliated with a state or national organization that authorizes, approves, or sanctions, volunteer charitable fundraising organizations;

(2) qualify for exemption under Section 501(c)(3), Internal Revenue Code of 1986, as amended;

(3) be governed by a volunteer board of directors; and

(4) distribute contributions to at least five other associations to be used for general charitable purposes, with all recipients meeting the following criteria:

(A) be governed by a volunteer board of directors;

(B) qualify for exemption under Section 501(c)(3), Internal Revenue Code of 1986, as amended;

(C) receive a majority of annual revenue from private or corporate charitable gifts and government agencies; and

(D) provide services without regard to the ability of persons receiving the services to pay for the services.

(h) Performance of noncharitable functions by a charitable organization that owns or uses exempt property does not result in loss of an exemption authorized by this section if those other functions are incidental to the organization's charitable functions. The division of responsibilities between an organization that qualifies as a charitable organization under Subsection (c) and another organization will not disqualify the organizations or any property owned or used by either organization from receiving an exemption under this section if the collaboration furthers the provision of one or more of the charitable functions described in Subsection (d) and if the other organization:

(1) is exempt from federal income taxation under Section 501(a), Internal Revenue Code of 1986, as an organization described by Section 501(c)(3) of that code;

(2) meets the criteria for a charitable organization under Subsections (e) and (f); and

(3) is under common control with the charitable organization described in this subsection.

(i) In this section, "building" includes the land that is reasonably necessary for use of, access to, and ornamentation of the building.

(j) The exemption of an organization preserving or conserving wildlife is limited to land and improvements and may not exceed 1,000 acres in any one county.

(k) In connection with a nursing home or retirement community, for purposes of Subsection (d):

(1) "Assisted living services" means responsible adult supervision of or assistance with routine living functions of an individual in instances where the individual's condition necessitates that supervision or assistance.

(2) "Charity care," "government-sponsored indigent health care," and "net resident revenue" are determined in the same manner for a retirement community or nursing home as for a hospital under Subsection 11.1801(a)(2).

(3) "Nursing care services" includes services provided by nursing personnel, including patient observation, the promotion and maintenance of health, prevention of illness or disability, guidance and counseling to individuals and families, and referral of patients to physicians, other health care providers, or community resources if appropriate.

(4) "Retirement community" means a collection of various types of housing that are under common ownership and designed for habitation by individuals over the age of 62.

(5) "Single campus" means a facility designed to provide multiple levels of retirement housing that is geographically situated on a site at which all levels of housing are contiguous to each other on a single property.

(l) A charitable organization described by Subsection (d)(3) that provides support to elderly persons must engage primarily in performing charitable functions described by Subsection (d)(3), but may engage in other activities that support or are related to its charitable functions.

(m) A property may not be exempted under Subsection (a)(2) for more than five years.

(n) For purposes of Subsection (a)(2), an incomplete improvement is under physical preparation if the charitable 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.

Amended by 1981 Tex. Laws (1st C.S.), p. 127, ch. 13, Sec. 33; amended by 1983 Tex. Laws, p. 2207, ch. 412, Sec. 1; amended by 1985 Tex. Laws, p. 7220, ch. 960, Sec. 1; amended by 1987 Tex. Laws, ch. 430, Sec. 1; amended by 1991 Tex. Laws, p. 1525, ch. 407, Sec. 1; amended by 1993 Tex. Laws, p. 1642, ch. 360, Sec. 5; amended by 1995 Tex. Laws, p. 3186, ch. 471, Sec. 1, and p. 4049, ch. 781, Sec. 4; amended by 1997 Tex. Laws, p. 2358, ch. 715, Sec. 1; p. 3900, ch. 1039, Sec. 7; and p. 5285, ch. 1411, Sec. 1; amended by 1999 Tex. Laws, p. 596, ch. 138, Sec. 1; amended by 1999 Tex. Laws, p. 1127, ch. 266, Sec. 1; amended by 1999 Tex. Laws, p. 3647, ch. 924, Sec. 1; amended by 1999 Tex. Laws, p. 4898, ch. 1443, Sec. 1; amended by 2001 Tex. Laws, p. 4293, ch. 1420, Sec. 18.001(a); amended by HB 2416, 78th Tex. Leg., 2003, effective June 18, 2003.

Cross References:

Exemption application form, see Rule Sec. 9.415.
Immediate qualification for property acquired, see Sec. 11.42.
Annual application not required, see Sec. 11.43(c).
Filing deadline for property acquired after January 1, see Sec. 11.43(d).
Late application to correct failure to qualify, see Sec. 11.423.
Late application for exemption for preceding years, see Sec. 11.435.
Prorating taxes for exemption granted after January 1, see Secs. 26.112 and 26.113.
Constitutional authorization, see art. VIII, Sec. 2, Tex. Const.
Economic development corporation, See Sec. 32, Art. 5190.6, V.A.C.S.

Notes:

HB 2416, 78th Tex. Leg, 2003, effective June 18, 2003, applies for the 2003 tax year regardless of whether the property owner applied for the exemption, if the owner qualified for the three years preceding the 2003 tax year. For the 2006 tax year, HB 2416 changes the five years for an incomplete improvement back to three years, effective January 1, 2006.

The chief appraiser's duty to back access property omitted from the appraisal roll whenever an error is discovered is mandatory and not discretionary. A taxing unit may sue the chief appraiser who fails to perform this duty. Back assessment for an erroneously granted exemption is a current year tax, and it is not subject to a taxing unit filing a challenge in the tax year in question. Atascosa County v. Atascosa County Appraisal District, 990 S.W.2d 255 (Tex. 1999).

A non-profit water supply corporation must qualify as a "purely public charity" under art. VIII, Sec. 2, Texas Constitution, as a threshold requirement for exempt status under Sec. 11.18. North Alamo Water Supply v. Willacy County Appraisal District, 804 S.W.2d 894 (Tex. 1991).

Where a lodge organization conducted noncharitable activities, such as social meetings, which were not completely incidental to the charitable activities, the lodge could not qualify for exemption. City of Amarillo v. Amarillo Lodge No. 731, A.F. & A.M., 488 S.W.2d 69 (Tex. 1972).

To meet the constitutional requirement that the organization must be an institution of public charity, the organization must operate without profit, operate wholly for benevolent ends, and must either give relief to those in poverty or distress or assume to a material extent some community duty which otherwise would fall to the community or the state. See, e.g., City of McAllen v. Evangelical Lutheran Good Samaritan Society, 530 S.W.2d 806 (Tex. 1975); San Antonio Conservation Society, Inc. v. City of San Antonio, 455 S.W.2d 743 (Tex. 1970).

Incidental use of portion of a home for the aged for other purposes such as guest facilities, a canteen, a beauty shop, and vending machines does not defeat the tax exemption if the primary use of the home is as an institution of purely public charity. Hilltop Village, Inc. v. Kerrville Independent School District, 426 S.W.2d 943 (Tex. 1968).

To qualify for property tax exemption, an organization's dissolution clause must provide for transfer to another federally exempt organization or to the state of Texas. Transferring to a for-profit organization and to the U. S. Department of Housing and Urban Development does not meet the qualification test for the exemption. Texas VOA Elderly Housing, Inc. v. Montgomery County Appraisal District, 990 S.W.2d 938 (Tex. App.-Beaumont 1999).

An exempt organization must narrowly define the recipients of the organization's dissolved assets to insure that they fit within the Property Tax Code's delineated list of exempt entities. Failure to do so allowed the appraisal district to deny exempt status to the organization, thereby allowing the organization's land to be taxed. Since there is no federal law preemption of this Code requirement, the appraisal district could legally deny the exemption. Mission Palms Retirement Housing, Inc. v. Hidalgo County Appraisal District, 896 S.W.2d 819 (Tex. App.-Corpus Christi 1995, no writ).

The cancellation of an exemption without giving notice to the taxpayer is void, and the failure to give such notice may be raised as a defense to the collection of delinquent taxes. The mere filing of a certified copy of the delinquent tax roll does not create a presumption that notice was in fact delivered where there is evidence to the contrary. Inwood Dad's Club, Inc. v. Aldine Independent School District, 882 S.W.2d 532 (Tex. App.-Houston [1st District] 1994, rehearing denied).

Property used by a charitable organization, not the organization itself, must qualify for a tax exemption to be granted under Sec. 11.18, Tax Code. The organization must use the property in furtherance of its charitable purpose. Baptist Memorials Geriatric Cntr. v. Tom Green County Appraisal Dist., 851 S.W.2d 938 (Tex. App.-Austin 1993, writ denied).

Taxpayer applying for nursing home exemption must show the nursing home provides a service the government would otherwise be required to provide. Court properly refused to hear taxpayer's claim that other similar nursing homes had been granted the exemption. First Baptist of Amarillo Foundation v. Potter County Appraisal District, 813 S.W.2d 192 (Tex. App.-Amarillo 1991, no writ).

Burden is on taxpayer under this section to show it meets both statutory and constitutional requirements. Exclusive use, like primary use, is a question of fact. Dallas County Appraisal District v. Institute for Aerobics Research, 766 S.W.2d 318 (Tex. App.-Dallas 1989, writ denied).

Where evidence established that water supply corporation's charter did not pledge its assets for performing charitable functions, organization could not qualify for charitable exemption under Sec. 11.18 or art. VIII, Sec. 2, Tex. Const. North Alamo Water Supply Corporation v. Willacy County Appraisal District, 769 S.W.2d 690 (Tex. App.-Corpus Christi 1989), aff'd, 804 S.W.2d 894 (Tex. 1991).

To qualify for property tax exemption, an organization's dissolution clause must provide for transfer to another federally exempt organization or to the state of Texas. Transferring to a for-profit organization and to the U. S. Department of Housing and Urban Development does not meet the qualification test for the exemption. Texas VOA Elderly Housing, Inc. v. Montgomery County Appraisal District, 990 S.W.2d 938 (Tex. App.-Beaumont 1999).

Nursing home was entitled to exemption under Sec. 11.18(d)(13) even though the organization's charter permitted it to engage in other benevolent work of a charitable or religious nature and even though only about ten percent of its patients failed to pay the entire cost of their care. El Paso Central Appraisal District v. Evangelical Lutheran Good Samaritan Society, 762 S.W.2d 207 (Tex. App.-El Paso, 1988, writ denied).

A nursing home met the constitutional and statutory charitable exemption requirements by providing medical care without regard to ability to pay even though substantially more patients paid than those that did not. Because it restricted its assets to charitable functions and offered services to persons who would otherwise become burdens of the state, it qualified regardless of the religious motivations of its operators or its effect on a limited group. Texas Rule of Appellate Procedure 84 providing penalty for frivolous appeals does apply to a government agency. Dallas County Appraisal District v. the Leaves, Inc., 742 S.W.2d 426 (Tex. App.-Dallas 1988, writ denied).

Where a corporation is created for purposes of purchasing and leasing land and buildings to a charitable organization, that corporation is not exempt from taxation because it does not directly perform the required charitable functions. Mere connection with an organization that is exempted from ad valorem taxation is not enough. Erath Central Appraisal District v. Pecan Valley Facilities, Inc., 704 S.W.2d 86 (Tex. App.-Eastland 1985, writ ref'd n.r.e.).

The appraisal district failed to deny the symphony's assertion that operation of the symphony would become the obligation or duty of the City of Dallas if private support for the organization did not exist. Accordingly, sufficient uncontroverted evidence exists in the record to hold that the Symphony Orchestra is a purely public charity entitled to an exemption under Sec. 11.18, Property Tax Code, and art. VIII, Sec. 2(a), Tex. Const. Dallas Symphony Ass'n., Inc. v. Dallas County Appraisal District, 695 S.W.2d 595 (Tex. App.-Dallas 1985, writ ref'd n.r.e.).

If the organization's charter permits it to perform activities other than those specified in Sec. 11.18(c)(1), the exemption is lost. A water supply corporation that amended its bylaws to permit it to perform other community services of benefit to its members in addition to selling water for public use was not entitled to the exemption. Military Highway Water Supply Corp. v. Boone, 688 S.W.2d 648 (Tex. App.-Corpus Christi 1985, no writ).

Trial court had sufficient evidence to find that hospital qualified for exemption from taxation as a charitable organization. Receiving income from paying patients does not destroy the organization's charity status. Any private gain that may result from infrequent medical staff practice of not charging employees or family members for services is de minimus and merely incidental to the hospital's charitable functions. Hospital's compensation arrangement with staff physicians is reasonable under the circumstances, and does not constitute private gain to the doctors. Lamb County Appraisal District v. South Plains Hospital-Clinic, Inc., 688 S.W.2d 896 (Tex. App.-Amarillo 1985, writ ref'd n.r.e.).

A water supply corporation whose bylaws did not provide for a direct transfer of its assets to an entity qualified for exemption under Sec. 501(c)(3) could not qualify for the exemption. Willacy County Appraisal District v. North Alamo Water Supply Corp., 676 S.W.2d 632 (Tex. App.-Corpus Christi 1984, writ ref'd n.r.e.). (Note: In response to this decision, the Texas Legislature amended Sec. 11.18 in 1985 to permit a two-step transfer of assets if required by federal tax regulations, but the final transfer must be to a Sec. 501(c)(3) organization.)

A women's auxiliary that engaged in historical preservation and other activities was not organized exclusively to perform and to engage in historical landmark preservation, and did not qualify under Sec. 11.18. City of Dallas v. Women's Auxiliary to Dallas County Medical Soc., 620 S.W.2d 695 (Tex. App.-Dallas 1981, writ ref'd n.r.e.).

Article VIII, Sec. 2, Tex. Const. authorizes the legislature to exempt "all buildings used exclusively and owned by . . . institutions of purely public charity." The constitution imposes four limits on the legislature's power to grant exemptions to charitable organizations. Property may only be exempted by statute if it is (1) owned by a charitable organization, (2) exclusively used by the charitable organization, (3) the organization is operated exclusively as a charitable organization, and (4) the organization is an institution of purely public charity. Methodist River Oaks Apartment, Inc. v. City of Waco, 409 S.W.2d 485 (Tex. App.-Waco 1966, writ ref'd n.r.e.), cert. denied, 88 S.Ct. 75, 389 U.S. 848, 19 L.Ed.2d 117 (1967).

A county may not waive taxes, penalties, and interest on real property owned by an individual that houses a nonprofit organization. Op. Tex. Att'y Gen. No. JC-134 (1999).

To qualify for exemption as a biomedical research corporation, an applicant must meet both the requirements of the Texas Constitution's three-part test and Section 11.23(h). Op. Tex. Att'y Gen. No. JM-682 (1987). (Note: The biomedical research corporation exemption has been moved from Sec. 11.23(h) to Sec. 11.18, Tax Code.)

A thrift shop operated by a charitable organization was not entitled to exemption under this section because the property was not used exclusively for one of the listed charitable activities in this section. Op. Tex. Att'y Gen. No. JM-269 (1984).

Section 11.18 requires the organization's charter or bylaws to pledge use of its property for charitable purposes and to provide for distribution of its assets on dissolution to the state or to a charitable entity qualified for exemption from federal tax under Sec. 501(c)(3), Internal Revenue Code. A charter provision stating that an organization's property would not be used for private gain was insufficient under Subsection (c)(3). Op. Tex. Att'y Gen. No. JM-269 (1984).

A non-profit radio station did not qualify under this statute as it was not exclusively performing any of the charitable functions enumerated in Sec. 11.18(c)(1)(A) - (O). Op. Tex. Att'y Gen. No. JM-41 (1983).

A residence owned by a religious organization and used as a home for a needy family could not be exempted under Sec. 11.18 because the organization was not exclusively organized to perform one of the enumerated charitable functions nor did its charter pledge its property for use in charitable functions. Op. Tex. Att'y Gen. No. MW-553 (1982).

A non-profit corporation that provides employment training and assistance to ex-offenders does not fall within Sec. 11.18(c)(1)(C) and, therefore, is not exempt as an institution "providing support to . . . the handicapped without regard to the beneficiaries' ability to pay." Op. Tex. Att'y Gen. No. MW-543 (1982).

The organization must operate exclusively for charitable purposes. A charitable organization must be organized exclusively to perform one of the fifteen functions set out in Section 11.18(c)(1)(A) - (O) to qualify for the exemption. An organization whose charter stated it was organized to "engage in religious, missionary, benevolent, eleemosynary, and scientific undertakings which may be authorized by the Baptist General Convention" was not qualified for the exemption. Op. Tex. Att'y Gen. No. MW-288 (1980).

Sec. 11.1801. Charity Care and Community Benefits Requirements for Charitable Hospital.

(a) To qualify as a charitable organization under Section 11.18(d)(1), a nonprofit hospital or hospital system must provide charity care and community benefits as follows:

(1) charity care and government-sponsored indigent health care must be provided at a level that is reasonable in relation to the community needs, as determined through the community needs assessment, the available resources of the hospital or hospital system, and the tax-exempt benefits received by the hospital or hospital system;

(2) charity care and government-sponsored indigent health care must be provided in an amount equal to at least four percent of the hospital's or hospital system's net patient revenue;

(3) charity care and government-sponsored indigent health care must be provided in an amount equal to at least 100 percent of the hospital's or hospital system's tax-exempt benefits, excluding federal income tax; or

(4) charity care and community benefits must be provided in a combined amount equal to at least five percent of the hospital's or hospital system's net patient revenue, provided that charity care and government-sponsored indigent health care are provided in an amount equal to at least four percent of net patient revenue.

(b) A nonprofit hospital that has been designated as a disproportionate share hospital under the state Medicaid program in the current year or in either of the previous two fiscal years shall be considered to have provided a reasonable amount of charity care and government-sponsored indigent health care and is considered to be in compliance with the standards in Subsection (a).

(c) A hospital operated on a nonprofit basis that is located in a county with a population of less than 58,000 and in which the entire county or the population of the entire county has been designated as a health professionals shortage area is considered to be in compliance with the standards in Subsection (a).

(d) A hospital providing health care services to inpatients or outpatients without receiving any payment for providing those services from any source, including the patient or person legally obligated to support the patient, third-party payors, Medicare, Medicaid, or any other state or local indigent care program but excluding charitable donations, legacies, bequests, or grants or payments for research, is considered to be in compliance with the standards in Subsection (a).

(e) For purposes of complying with Subsection (a)(4), a hospital or hospital system may not change its existing fiscal year unless the hospital or hospital system changes its ownership or corporate structure as a result of a sale or merger.

(f) For purposes of this section, a hospital that complies with Subsection (a)(1) or that is considered to be in compliance with the standards in Subsection (a) under Subsection (b), (c), or (d) shall be excluded in determining a hospital system's compliance with the standards in Subsection (a)(2), (3), or (4).

(g) For purposes of this section, "charity care," "government-sponsored indigent health care," "health care organization," "hospital system," "net patient revenue," "nonprofit hospital," and "tax-exempt benefits" have the meanings assigned by Sections 311.031 and 311.042, Health and Safety Code. A determination of the amount of community benefits and charity care and government-sponsored indigent health care provided by a hospital or hospital system and the hospital's or hospital system's compliance with Section 311.045, Health and Safety Code, shall be based on the most recently completed and audited prior fiscal year of the hospital or hospital system.

(h) The providing of charity care and government-sponsored indigent health care in accordance with Subsection (a)(1) shall be guided by the prudent business judgment of the hospital, which will ultimately determine the appropriate level of charity care and government-sponsored indigent health care based on the community needs, the available resources of the hospital, the tax-exempt benefits received by the hospital, and other factors that may be unique to the hospital, such as the hospital's volume of Medicare and Medicaid patients. These criteria shall not be determinative factors, but shall be guidelines contributing to the hospital's decision along with other factors that may be unique to the hospital. The formulas in Subsections (a)(2), (3), and (4) shall also not be considered determinative of a reasonable amount of charity care and government-sponsored indigent health care.

(i) The requirements of this section shall not apply to the extent a hospital or hospital system demonstrates that reductions in the amount of community benefits, charity care, and government-sponsored indigent health care are necessary to maintain financial reserves at a level required by a bond covenant or are necessary to prevent the hospital or hospital system from endangering its ability to continue operations, or if the hospital or hospital system, as a result of a natural or other disaster, is required substantially to curtail its operations.

(j) In any fiscal year that a hospital or hospital system, through unintended miscalculation, fails to meet any of the standards in Subsection (a) or fails to be considered to be in compliance with the standards in Subsection (a) under Subsection (b), (c), or (d), the hospital or hospital system shall not lose its tax-exempt status without the opportunity to cure the miscalculation in the fiscal year following the fiscal year the failure is discovered by both meeting one of the standards and providing an additional amount of charity care and government-sponsored indigent health care that is equal to the shortfall from the previous fiscal year. A hospital or hospital system may apply this provision only once every five years.

Added by 2001 Tex. Laws, p. 4298, ch. 1420, Sec. 18.001(a).

Cross References:

Annual application required, see Sec. 11.43(b).
Constitutional authorization, see art. VIII, Sec. 2, Tex. Const.

Sec. 11.181. Charitable Organizations Improving Property for
Low-Income Housing.

(a) An organization is entitled to an exemption from taxation of improved or unimproved real property it owns if the organization:

(1) meets the requirements of a charitable organization provided by Sections 11.18(e) and (f);

(2) owns the property for the purpose of building or repairing housing on the property primarily with volunteer labor to sell without profit to an individual or family satisfying the organization's low-income and other eligibility requirements; and

(3) engages exclusively in the building, repair, and sale of housing as described by Subdivision (2), and related activities.

(b) Property may not be exempted under Subsection (a) after the third anniversary of the date the organization acquires the property.

(c) An organization entitled to an exemption under Subsection (a) is also entitled to an exemption from taxation of any building or tangible personal property the organization owns and uses in the administration of its acquisition, building, repair, or sale of property. To qualify for an exemption under this subsection, property must be used exclusively by the charitable organization, except that another individual or organization may use the property for activities incidental to the charitable organization's use that benefit the beneficiaries of the charitable organization.

(d) For the purposes of Subsection (e), the chief appraiser shall determine the market value of property exempted under Subsection (a) and shall record the market value in the appraisal records.

(e) If the organization that owns improved or unimproved real property that has been exempted under Subsection (a) sells the property to a person other than an individual or family satisfying the organization's low-income or other eligibility requirements, a penalty is imposed on the property equal to the amount of the taxes that would have been imposed on the property in each tax year that the property was exempted from taxation under Subsection (a), plus interest at an annual rate of 12 percent calculated from the dates on which the taxes would have become due.

(f) The charitable organization and the purchaser of the property from that organization are jointly and severally liable for the penalty and interest imposed under Subsection (e). A tax lien in favor of all taxing units for which the penalty is imposed attaches to the property to secure payment of the penalty and interest.

(g) The chief appraiser shall make an entry in the appraisal records for the property against which a penalty under Subsection (e) is imposed and shall deliver written notice of the imposition of the penalty and interest to the charitable organization and to the person who purchased the property from that organization.

Added by 1993 Tex. Laws, p. 1478, ch. 345, Sec. 1.

Cross References:

Annual application required, see Sec. 11.43(c).
Constitutional authorization, see art. VIII, Sec. 2, Tex. Const.
Exception from January 1 qualifications, see Sec. 11.42(a).
Exemption application form, see Sec. 11.436 and Rule Sec. 9.415.
Prorating taxes, see Sec. 26.111.
Model application form, see Rule Sec. 9.415.

Notes:

To qualify for property tax exemption, an organization's dissolution clause must provide for transfer to another federally exempt organization or to the state of Texas. Transferring to a for-profit organization and to the U. S. Department of Housing and Urban Development does not meet the qualification test for the exemption. Texas VOA Elderly Housing, Inc. v. Montgomery County Appraisal District, 990 S.W.2d 938 (Tex. App.-Beaumont 1999).

A nonprofit housing finance corporation created subsidiary corporations to which it loaned money to operate housing projects. The subsidiary corporations were entitled to exemption because the parent corporation had equitable title to the property owned by the corporations. Harris County Appraisal District v. Southeast Texas Housing Finance Corporation, 991 S.W.2d 18 (Tex. App.-Amarillo 1998).

Sec. 11.182. Community Housing Development Organizations Improving Property for Low-Income and Moderate-Income Housing: Property Previously Exempt.

(a) In this section:

(1) "Cash flow" means the amount of money generated by housing project for a fiscal year less the disbursements for that fiscal year for operation and maintenance of the project, including:

(A) standard property maintenance;

(B) debt service;

(C) employee compensation;

(D) fees required by government agencies;

(E) expenses incurred in satisfaction of requirement of lenders, including reserve requirements;

(F) insurance; and

(G) other justifiable expenses related to the operation and maintenance of the project.

(2) "Community housing development organization" has the meaning assigned by 42 U.S.C. Section 12704.

(b) An organization is entitled to an exemption from taxation of improved or unimproved real property it owns if the organization:

(1) is organized as a community housing development organization;

(2) meets the requirements of a charitable organization provided by Sections 11.18(e) and (f);

(3) owns the property for the purpose of building or repairing housing on the property to sell without profit to a low-income or moderate-income individual or family satisfying the organization's eligibility requirements or to rent without profit to such an individual or family; and

(4) engages exclusively in the building, repair, and sale or rental of housing as described by Subdivision (3) and related activities.

(c) Property owned by the organization may not be exempted under Subsection (b) after the third anniversary of the date the organization acquires the property unless the organization is offering to rent or is renting the property without profit to a low-income or moderate-income individual or family satisfying the organization's eligibility requirements.

(d) A multi-family rental property consisting of 36 or more dwelling units owned by the organization that is exempted under Subsection (b) may not be exempted in a subsequent tax year unless in the preceding tax year the organization spent an amount equal to at least 40 percent of the total amount of taxes that would have been imposed on the property without the exemption in that year on social, educational, or economic development services, capital improvement projects, or rend reduction. This subsection does not apply to property acquired by the organization using tax-exempt bond financing after January 1, 1997, and before December 31, 2001.

(e) In addition to meeting the applicable requirements of Subsections (b) and (c), to receive an exemption under Subsection (b) for improved real property that includes a housing project constructed after December 31, 2001, and financed with qualified 501(c)(3) bonds issued under Section 145 of the Internal Revenue Code of 1986, tax-exempt private activity bonds subject to volume cap, or low-income housing tax credits, the organization must:

(1) control 100 percent of the interest in the general partner if the project is owned by a limited partnership;

(2) comply with all rules of and laws administered by the Texas Department of Housing and Community Affairs applicable to community housing development organizations; and

(3) submit annually to the Texas Department of Housing and Community Affairs and to the governing body of each taxing unit for which the project receives an exemption for the housing project evidence demonstrating that the organization spent an amount equal to at least 90 percent of the project's cash flow in the preceding fiscal year as determined by the audit required by Subsection (g), for eligible persons in the county in which the property is located, on social, educational, or economic development services, capital improvement projects, or rent reduction.

(f) An organization entitled to an exemption under Subsection (b) is also entitled to an exemption from taxation of any building or tangible personal property the organization owns and uses in the administration of its acquisition, building, repair, sale, or rental of property. To qualify for an exemption under this subsection, property must be used exclusively by the organization, except that another person may use the property for activities incidental to the organization's use that benefit the beneficiaries of the organization.

(g) To receive an exemption under Subsection (b) or (f), an organization must annually have an audit prepared by an independent certified public accountant. The audit must include a detailed report on the organization's sources and uses of funds. A copy of the audit must be delivered to the Texas Department of Housing and Community Affairs and to the chief appraiser of the appraisal district in which the property subject to the exemption is located.

(h) Subsections (d) and (e)(3) do not apply to property owned by an organization if:

(1) the entity that provided the financing for the acquisition or construction of the property:

(A) requires the organization to make payments in lieu of taxes to the school district in which the property is located; or

(B) restricts the amount of rent the organization may charge for dwelling units on the property; or

(2) the organization has entered into an agreement with each taxing unit for which the property receives an exemption to spend in each tax year for the purposes provided by Subsection (d) or (e)(3) an amount equal to the total amount of taxes imposed on the property in the tax year preceding the year in which the organization acquired the property.

(i) If any property owned by an organization receiving an exemption under this section has been acquired or sold during the preceding year, such organization shall file by March 31 of the following year with the chief appraiser in the county in which the relevant property is located, on a form promulgated by the comptroller of public accounts, a list of such properties acquired or sold during the preceding year.

(j) An organization may not receive an exemption under Subsection (b) or under Subsection (f), as added by Chapter 1191, Acts of the 77th Legislature, Regular Session, 2001, for property for a tax year beginning on or after January 1, 2004, unless the organization received an exemption under that subsection for that property for any part of the 2003 tax year.

Added by 1997 Tex. Laws, p. 2360, ch. 715, Sec. 2; amended 2001 Tex. Laws, p. 1590, ch. 842, Secs. 2 and 4 and p. 2550, ch. 1191, Sec. 1; amended by HB 3506, 78th Tex. Leg, 2003, effective September 1, 2003; amended by HB 3546, 78th Tex. Leg, 2003, effective January 1, 2004.

Cross References:

Annual application required, see Sec. 11.43(c).
Conflicts with United States government contract, see Sec. 11.424.
Constitutional authorization, see art. VIII, Sec. 2, Tex. Const.
Exception from January 1 qualifications, see Sec. 11.436.
Exemption application form, see Sec. 11.436 and Rule Sec. 9.415.
Prorating taxes, see Sec. 26.111.
Model application form, see Rule Sec. 9.415.

Notes:

Since the company was a qualified subordinate unit of a parent organization, which had federal tax exempt status, there was nothing to indicate any distinction be made between the two entities for tax exemption for purposes of Tax Code Section 11.182 purposes. Orange County Appraisal District v. Agape Neighborhood Improvement, Inc., 57 S.W.3d 597 (Tex. App.-Beaumont 2001, pet. denied).

To qualify for property tax exemption, an organization's dissolution clause must provide for transfer to another federally exempt organization or to the state of Texas. Transferring to a for-profit organization and to the U. S. Department of Housing and Urban Development does not meet the qualification test for the exemption. Texas VOA Elderly Housing, Inc. v. Montgomery County Appraisal District, 990 S.W.2d 938 (Tex. App.-Beaumont 1999).

A nonprofit housing finance corporation created subsidiary corporations to which it loaned money to operate housing projects. The subsidiary corporations were entitled to exemption because the parent corporation had equitable title to the property owned by the corporations. Harris County Appraisal District v. Southeast Texas Housing Finance Corporation, 991 S.W.2d 18 (Tex. App.-Amarillo 1998).

To qualify for an exemption from taxation of its real property under Tax Code Section 11.182, a particular community housing development organization must first satisfy the requirements of Texas Constitution Article VIII, Section 2(a). Then it must satisfy all the requirements of Tax Code Section 11.182. The chief appraiser for the appraisal district in which the particular organization's property is located is authorized to determine in the first instance whether the property is exempt. The burden is on the organization seeking an exemption to show that it is entitled to the exemption. Op. Tex. Att'y Gen. No. JC-0576 (2002).