The pace quickens in the 2013 Texas Legislature as the halfway point passes

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TANO 2013 Public Policy Agenda
TANO Legislative Summary as of 4-2-2013

 With an early consensus regarding the state’s next biennial budget and passage by the Senate of its appropriations bill, the attention of legislators can now be turned to the other 5,700 bills filed and awaiting action in the 2013 session. As of last week, bills that were among the hundreds filed just before the 60th day deadline were still being assigned to House and Senate Committees. Meanwhile, key committees were launching into long committee agendas to hear testimony from interested parties and identify those bills and issues that show the most support and are likely to move ahead in the legislative process in the remaining eight weeks.

TANO is pleased to report that Senate Bill 993, which would create the Texas Nonprofit Council within state government, received a favorable hearing on April 2 in the Senate Health and Human Services Committee and is expected to be heard by the full Senate shortly.  Barry Silverberg, TANO CEO, and Bee Moorhead, Texas Impact Executive Director – co-chairs, legislative Task Force on Improving Relations with Nonprofits – presented oral testimony along with other supporters.  See below for more on SB 993.

This Summary of Issues Affecting Nonprofit Organizations is compiled by Richard W. Meyer, TANO’s Public Policy Advisor.  Your opinions and comments on the bills listed are welcomed and may be directed to Rick Meyer or Robert Pinhero, TANO Vice-Chair for Public Policy. If your organization takes a position on a bill or will actively engage in its consideration, please inform TANO.

Legislative committee work deserves close attention

Be on the alert that House and Senate committees usually do not take a vote on a bill immediately after its first public hearing or the committee deliberations, but instead bills are left pending. At a later date, groups of bills are voted out of committee at one sitting and then proceed to the chamber via a committee calendaring process. Therefore, a bill that appeared to have substantial opposition at the hearing can emerge favorably from the committee, while a bill that appeared to have no public opposition might mysteriously never emerge from the committee. Some bills languish and die in the House Calendars Committee, or are never brought to the Senate floor because of insufficient support to bring it forward for formal floor debate and vote.

Keeping the watch as the 140-day legislative session rolls on

The following listing of bills includes changes since the previous summary. Those bills that appear to be “moving” in the legislative process are listed first, and the bill’s status in committee or before the full House or Senate is listed.

You can access the text of any bill, committee hearing schedules and current status of any bill online at Texas Legislature Online, and also watch some committee hearings or full House and Senate deliberations online as they occur or become available on video archives. The House and Senate generally convene each weekday with committee hearings before and after the floor session ends. There are frequent last-minute “postings” of bills that are added to committee agendas although not previously noticed. Committee meeting time changes, cancellations or hearing room location changes are frequently made with verbal announcements at the close of the day’s proceedings on the House or Senate floor. Be advised to stay tuned.

What to look for in proposed legislation

The TANO bill listings during the session will include currently filed bills of interest and concern to leaders in the nonprofit sector in Texas. In examining proposed legislation, TANO’s board and public policy working group considers the following factors:

Whether a proposed bill strengthens nonprofit organizations’ viability under Texas law or unduly burdens or threatens their status; whether the legal liability of nonprofit board members, officers, staff or volunteers is increased; whether current “charitable immunity” and “good faith” legal protections remain in place; whether laws governing nonprofits are necessary, understandable and based on reasonable public policy concerns; whether nonprofit advocacy is protected;  whether ongoing nonprofit organization operations and finances are complicated by new governmental regulations, and; whether nonprofit organization reporting, disclosure and accountability requirements remain reasonable and balanced.

The “Comment” notations below are the opinions of Richard Meyer and do not necessarily reflect the position of TANO, its board and members, unless so indicated.

April review of status of proposed legislation

Bills pending in the 2013 legislature affect nonprofits in the following areas:*

Regulatory oversight of nonprofit and related organizations

SB 993:  Creates the Texas Profit Council, which is a continuation of the four-year legislative initiative fulfilled by the Task Force on Improving Relations with Nonprofits.  The task force worked with an interagency coordinating group task force to promote the “footprint” of the nonprofit sector in the state government realm by promoting contracting and other relationships with state agencies.  This bill would make permanent a 14-member Nonprofit Council (administered through the Health and Human Services Commission) that would bring recommendations to the legislature in even-numbered years prior to each legislative session.

Status: TANO is pleased to report that Senate Bill 993, which would create the Texas Nonprofit Council within state government, received a favorable hearing on April 2 in the Senate Health and Human Services Committee and is expected to be heard by the full Senate shortly.  Barry Silverberg, TANO CEO, presented oral testimony along with other supporters.  See below for more on SB 993.

Comment:  TANO supports SB 993 and believes it will continue to advance the interests of all nonprofit sector stakeholders within the state government. In a March 30 news release, TANO urged its members and friends to contact Senators and ask for passage of this bill and its referral to the House. No appropriated funds are requested.

SB 849 (=HB 1928)**:  A for-profit corporation may include among its declared purposes “social benefit” purposes involving promoting one or more material positive impacts on society or the environment, such as providing low-income communities with beneficial products or services, promoting economic opportunity, human health, the arts, sciences or advancement of knowledge. See also HB 2565 regarding benefit corporations.

Status: SB 849 passed the Senate.  Referred to the House; Committee assignment pending

Comment: The “benefit corporation” movement originated in Europe, and enabling legislation has passed in a score of states. The shareholders or directors could affirm one or more social benefit purposes in directing the corporation’s operations without violating their common law and statutory duties to first represent the corporation’s shareholders and maximize profits.

HB 412:  Permits a court to enhance (increase) the criminal sentencing period of a person convicted of deceptively holding himself out as a representative of a charitable organization as part of the commission of a crime. Listing nonprofit charities as a “protected class” in the criminal laws is intended to discourage wrongdoers from using and abusing charitable causes as part of criminal activity.

Status: Referred to House Criminal Jurisprudence Committee

HB 2622:  Authorizes creation under Texas law of a low-profit limited liability corporation— “L.3.C.”—a legal entity that has been accepted in a score of other states. It must be organized and operated for a business purpose that significantly furthers one or more religious, charitable, scientific, literary or educational purposes as described in the Internal Revenue Code. The corporation would exist as a nonprofit entity but with the flexibility to be sustained with earned revenues (not contributions) and have the ability to join with other enterprise partners in programs and operations.

Status: Referred to House Business and Industry Committee

Comment:  The “L3C” movement has taken on a life of its own in other states as state legislatures authorized the formation of this new kind of corporation. Often useful in complex, multi-party transactions in which a nonprofit party is required or beneficial, the L3C still faces uncertainty on a case-by-case basis of the application of well-established federal tax constraints on nonprofits in the Internal Revenue Code and Regulations.

HB 3803:  Represents an extensive, comprehensive state regulation of property owner associations and unit owner associations, with detailed governance requirements and the Texas Attorney General’s direct regulation and enforcement of operations and governance, including rulemaking authority in this area. These hundreds of nonprofits would have to comply with this new regulatory regime in addition to the requirements of the existing Texas Nonprofit Corporation Law in Chapter 22, Texas Business Organizations Code.

Status: Referred to House Business and Industry Committee

Comment:  Although they are not Section 501(c)(3) nonprofits, the HOAs and POAs in Texas co-exist with charitable organizations in the legal realm of the Texas Nonprofit Corporation Law (see next section). They are highly organized, some are very large (almost quasi-governmental entities), and they are sensitive to proposed increased regulatory oversight of their operations and governance. If bills such as HB 3803 are passed, it is not unreasonable to be concerned that similar legal regulatory schemes could be extended to 501(c)(3) organizations in the future.

HB 2944:  Enacts similar regulatory oversight laws regarding the boards of timeshare property associations.

Status: Referred to House Business and Industry Committee

Amendments to the Texas Nonprofit Corporation Law, Chapter 22, Business Organizations Code

No bills have been filed that directly affect the Texas Nonprofit Corporation Law, unlike the activity seen in previous legislative sessions. Any change to this law would affect some or all of the nonprofit organizations organized under Texas law.

Fundraising activities of nonprofit organizations

HB 394 (=SB 282):  Amends bingo prize restrictions.

Status: Voted favorably from House Licensing and Administrative Procedures Committee

Comment:  Often, what does not appear is of importance. Unlike past sessions, the current session has not seen the filing of numerous bills to further regulate (or liberalize) the state laws and rules relating to bingo, high-dollar charity auctions, casino night parties, raffles, poker runs, fishing tournaments and similar fundraising activities and charitable solicitations. The questionable charitable purpose of those donated goods collection boxes that are multiplying in shopping area parking lots resulted in new laws in 2011. As a practical matter, what goes on across the state with these kinds of promotions is hard to quantify. State agencies charged with monitoring and enforcing existing laws (the State Comptroller, Office of the Attorney General, and others) often enter the scene when harm has already been done or legal boundaries have been exceeded. Most states have fairly comprehensive registration or licensing of charitable organizations and formalized regulation of charitable solicitations from the public. Texas is among a dozen or so states that have a very “light” regulatory environment for nonprofits.

Limits on legal liability; changes to charitable immunity under Chapter 84, Civil Practices and Remedies Code

Various professionals and individuals have been added to this list of professions specifically granted Chapter 84 legal immunity while performing voluntary services.

SB 338 (=HB 444):  Would add licensed social workers to this list.

Status: Referred to Senate State Affairs Committee

Comment:  These “Chapter 84 immunity bills” benefit the nonprofit sector in that volunteers and managers of nonprofits are shielded from personal legal and financial liability if the organization complies with the law’s requirements. The following four bills, however, take a different approach and extend certain legal immunity from liability based on the status of the parties or the type of charitable conduct undertaken—and thereby inadvertently blur the clear purpose of the “Chapter 84” protections.

HB 1652:  Limits the legal liability of the owner of land leased or used by a cooperative group as a “community garden” if the required notification signage is posted.

Status: Referred to House Judiciary and Civil Jurisprudence Committee

HB 3385:  Limits the liability for “agri-tourism” activities when a person participates in educational or recreational activities on agricultural land.

Status: Referred to House Judiciary and Civil Jurisprudence Committee

HB 3476:  Limits the liability of a “sports organization”, as defined.

Status: Referred to House Judiciary and Civil Jurisprudence Committee

HB 2751:  Limits the liability of persons assisting state agency firefighting efforts.

Status: Referred to House Judiciary and Civil Jurisprudence Committee

Exemptions from taxes now extended to nonprofit entities

SB 106:  The Texas Sunset Advisory Commission would periodically undertake a re-examination (“sunset”) of all ad valorem tax exemptions, including the property exemptions enjoyed by charitable organizations.

Status: Referred to Senate Finance Subcommittee

HB 3045 (=SB 140):  The State Comptroller would develop a review schedule of state and local tax preferences and exemptions that reduce government tax revenues to determine if the cost of the preference fulfills its purpose, and recommend its continuation or end. Each tax preference enacted by the legislature after 2014 would be given a six-year “shelf life”, when it would then expire unless reauthorized.

SJR 12:  Would authorize a statewide vote on a constitutional amendment to implement SB 140 on a permanent basis.

Status: Referred to House Ways and Means Committee

HB 1556:  A select state commission would undertake an ongoing scheduled review of every state or local tax preference, exemption, preference, credit or other benefit to determine if it is justified, with every such tax provision being reviewed once every ten years. Any new tax preference enacted would have only a ten-year life cycle and would be subject to legislative renewal.

Status: Referred to House Ways and Means Committee

Comment:  The three bills referenced above reflect a trend nationwide to initiate periodic top-to-bottom reviews of the tax structure of state government and, in particular, to question any tax credit, preference, incentive, exemption or other tax benefit conferred under state law. This approach not only impacts the state tax laws relating to private interests, industry and business groups; it also puts into question the tax exemptions traditionally enjoyed by nonprofit charitable organizations. In Texas, the exemptions are from property taxes, sales and use taxes and the business (franchise) tax. Under this thinking, all tax exemptions are viewed, first, as a “cost” to state government in that they represent tax revenues not received but that may be available to tap in times of tight government budgets. Charitable tax exemptions are seen as the same, and some critics are unhappy with the “cost” of these lost revenues not collected from tax-exempt entities and their properties. This challenge to nonprofits is not speculative but is being played out now in the U.S. Congress, where the individual taxpayer charitable deduction is constantly under attack and is likely to be trimmed to some degree in the near future.  This same scenario could unfold in Texas as these kinds of bills, as listed above, are repeatedly filed and eventually attract support.

HB 440:  Would require a religious organization to file with its local appraisal district a public annual report of its real estate that holds a property tax exemption, list the current use of the property and any income derived from each parcel.

Status: Referred to House Ways and Means Committee

HB 1459:  Property leased to a charitable organization that would qualify for property tax exemption (if the organization owned the property) would be exempt from property taxes if the rent charged for the property on annual basis is not more than five percent of the property’s market value and the property is reasonably necessary for the operations of the organization.

Status: Referred to House Ways and Means Committee

HB 1360:  Property leased to a tax-exempt school could be exempt from property taxes if the lessee’s rental rate reflects a reduced amount equal to the benefit of the property tax exemption to the lessor.

Status: Referred to House Ways and Means Committee

SB 1131 (=SJR 44):  Property leased to a school would be exempt from property tax if the annual rental on the property does not exceed one percent of the property’s market value and the school owns the facility or building on the property.

Status: Referred to Senate Finance Subcommittee

HB 2599:  Property owned by a political organization (as defined under Texas Election Code, Chapter 172) would be exempt from property taxes.

Status: Referred to House Ways and Means Committee

Comment:  The property tax exemptions available to nonprofit organizations in Texas are found generally in Section 11.18 et seq. of the Texas Tax Code. Therefore, any proposed bill amending Section 11.18 and related parts is to be watched. However, over time there have been numerous specific exemptions expressly written into the code (as reflected  in the above bills), so that the original property tax exemption policy expressed in Section 11.18 is becoming bottom-heavy with all the exceptions and is difficult to read and understand. At some point, this general issue will deserve a thoughtful review and possible legislative attention.

HB 697:  Exempts from state sales tax food items sold by a sports booster club as part of its fundraising support of school programs at public events, and also exempts “school spirit merchandise” offered as part of recognized school activities or programs.

Status: Pending in House Ways and Means Committee

HB 2941:  Provides a sales tax exemption for property related to qualified research.

Status: Referred to House Economic and Small Business Development Committee

HB 3767:  Provides a sales tax exemption for materials used in tree planting in public areas.

Status: Referred to House Ways and Means Committee

“PILOT” fees imposed on property of nonprofits

HB 1168:  Property constituting a dedicated cemetery would be exempt from public agency drainage assessments or fees.

Status: Pending in House Natural Resources Committee

Comment:  “PILOT” means payments-in-lieu-of-taxes and reflects a growing trend by state and local governments nationwide to impose various kinds of taxes, assessments and user fees on properties owned by tax-exempt charitable organizations—without calling them taxes. The end result would be to tax the assets of tax-exempt entities, an illogical result (nonprofit advocates argue) because it directly diminishes the resources and the public benefit provided by charitable organizations. In the 2011 session, Texas legislators filed numerous bills to clarify which tax-exempt properties or owners were to be free of locally-imposed PILOT fees, such as the Houston area drainage fees that raised such vocal opposition from charities, private schools, faith-based organizations, and universities. There is very little “anti-PILOT” activity in this legislative session.

Nonprofit board, officer, employee and volunteer issues

HB 22:  Requires undergraduate students at Texas higher education institutions to perform 20 hours of “volunteer” service time as a requirement to graduate. Each college or university would be responsible for identifying eligible nonprofit organizations or causes and to manage recordkeeping to verify the student’s service.

Status: Pending in House Higher Education Committee

Comment:  TANO has publicly expressed concern regarding this bill and whether “mandatory volunteerism” actually fosters a culture of genuine civic involvement and heart-felt personal service. It can take on the appearance of “community service” mandates that are common in court post-conviction probation or parole sentencing. Making this service a requirement for graduation would entail ongoing recordkeeping duties by the recipient charitable organization in alliance with the higher education institutions involved.

HB 746:  This bill would enact the “Uniform Emergency Volunteer Health Practitioners Act”, which is intended to simplify the certification and volunteer work of licensed healthcare professionals who go to a state under a declared emergency, where they are not licensed, to offer services to relief organizations or government response agencies.

Status: Pending in House Homeland Security and Public Service Committee

SB 766:  Exempts volunteer firefighters from meeting certain state and local government certification requirements.

Status: Referred to Senate Intergovernmental Relations Committee

SB 1324:  Exempts from certain licensing laws the “volunteer safety groups” supporting religious organizations and facilities. HB 2535 exempts from licensure security personnel volunteering for a religious organization.

Status: Referred to Senate Criminal Justice Committee

HB 1491(=SB 1130):  Suspends certain dentists from full licensure requirements if performing volunteer services.

Status: Voted from House Public Health Committee

Comment:  The four bills listed above reflect a new trend in that they suspend ordinary licensing and certification requirements for volunteers or in certain situations. While it is  beneficial for legislation to encourage volunteerism at every level, is the public good properly protected by suspending the formal qualifications of certain volunteers?

HB 2811:  Regulates volunteer programs in the Texas Department of Criminal Justice institutions.

Status: Pending in House Corrections Committee

HB 676 & HB 1730:  Requires use of the E-Verify system to clear the employment eligibility of the employees of all state contractors/vendors.

Status: Referred to House State Affairs Committee

HB 954:  Requires an employer or entity receiving any “public subsidy” funding from the state for economic development or job creation to use the E-Verify system to confirm work eligibility of employees. See also HB 2301.

Status: Referred to House State Affairs Committee

Open meetings / open records issues

HB 1933:  The official books and records of condominium associations would be available without restriction to any owner/member or its designee.

Status: Referred to House Business and Industry Committee

HB 2944:  Also extends access to books and records of timeshare property associations.

Status: Referred to House Business and Industry Committee

SB 895:  Extends full public access to the books and records of a nonprofit entity supporting the Cancer Prevention and Research Institute of Texas program (CPRIT).

Status: Referred to Senate Open Government Committee

Comment:  SB 895 demonstrates that a separately chartered nonprofit organization that exists solely to support a public entity usually—at the end of a controversy—is deemed to be a quasi-governmental entity and thereby subject to the open meetings/open records laws that must be observed by government agencies.

Public advocacy / Ethics Commission (lobbying) issues

HB 905:  Forbids former legislators from lobbying for two years, except if lobbying for nonprofit organizations, disabilities groups and low-income advocacy groups, and if acting without compensation.

Status: Referred to House Elections Committee

SB 1254:  Extends the same lobbying restriction to former state agency executive heads.

Status: Referred to Senate State Affairs Committee

SCR 2:  Urges the Texas Legislature to advance an amendment to the U.S. Constitution to reverse the U.S. Supreme Court’s decision in Citizens United v. Federal Election Commission, which removed many prior restrictions on the advocacy activities and fundraising of corporations, unions, political committees, and nonprofit organizations that advance a particular cause or issue.

Volunteer food preparation for sale by organizations; farmers’ market food regulation

HB 970:  Expands the new health regulations from the 2011 session and definitions of “cottage food products” produced by individuals in a home or other location for direct sale to consumers; prohibits local governments from enacting land use regulations to limit such activity in a “home”.

Status: Pending in House Public Health Committee

HB 910:  This bill addresses a health department’s temporary food establishment permit that could be granted to a farmer, vendor or other food preparer selling products at a local farmers’ market. This proposal follows efforts in the 2011 legislative session to clarify the line between formal commercial food product permitting versus occasional permit-exempt sales by volunteer and charitable groups and individuals.

Status: Voted favorably from House Public Health Committee

HB 1382:  The public health services would have no authority to regulate or license food samples offered at a farmers market or related cooking demonstrations offering samples although current sanitary standards are preserved.

Status: Referred to House Agriculture and Livestock Committee

SB 1392:  The state health department must provide a definitive answer within 30 days to a request for a determination whether a proposed food preparation or sale activity falls within food inspection or licensing regulations.

Status: Voted favorably from House Public Health Committee

HB 1393:  The kinds of food preparation or sales operations conducted in a “home” (defined in the bill) are clarified with reference to existing state health department inspection laws.

Status: Referred to House Agriculture and Livestock Committee

HB 2113:  Regulates “cottage food products” by prohibiting use of an ingredient not intended for human consumption, such as an edible decoration.

Status: Referred to House Public Health Committee

Comment:  The bills listed above reflect a re-heating of the 2011 session’s “home baker” debates and the controversies and hostile public reaction to state health department proposed regulations issued in 2012. While these may seem to be obscure issues about innocent and well-intentioned, home-based foodies versus overbearing government regulators, nonprofit organizations are pulled into the mix. The real concern is the level at which state and local health officials should regulate, monitor, inspect or license home-produced foods (whether for incidental sale or fundraising efforts), food-related activities at the ever-popular local farmers’ markets, raw dairy product sales, large-attendance gatherings with volunteered foods, inspection and licensing (or not) of church kitchens, and a host of real world activities that occur every day in every community. These bills are the ingredients for further discussions and no recipe for quick resolution.

Other Bills

HB 1362:  Expands the existing “loanstar” loan fund that promotes beneficial financing terms for energy efficient systems for charitable organizations and houses of worship.

Status: Referred to House Energy Resources Committee

HB 2189:  The return of an attempt to modify the English common law “rule against perpetuities”, following an attempt to repeal it in the 2011 session.

Status: Referred to House Judiciary and Civil Jurisprudence Committee

HB 371:  Makes qualified nonprofit corporations eligible to receive ownership of remainder right-of-way properties determined by TXDOT to be unusable for its purposes.

Status: Pending in House Land and Resource Management Committee

SB 403:  A “healthy corner store” could be established and operated by a community development agency in a qualified “food desert” and participate in SNAP and WIC food programs. See also HB 725.

Status: Pending in Senate Agriculture, Rural Affairs, Homeland Committee

*Above list does not include bills introduced relating to the following: Nonprofit hospitals, health care or health plans; credit unions; electric or agricultural cooperatives; private and charter schools and colleges; quasi-public nonprofit entities. This summary does not track the state budget, legislative appropriations or riders, or other legislative funding related to the bills and issues included.

**Many bills have an identical “companion” bill in the other house bearing a different bill number. Access bills, background information and current status at Texas Legislature Online: www.capitol.state.tx.us