TANO Final 2013 Texas Legislature Report

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As of 6-18-2013, by Richard W. Meyer, Public Policy Advisor, Texas Association of Nonprofit Organizations

The Texas Legislature ended its 83rd Regular Session on May 27, and numerous bills were presented as listed here that directly or indirectly affect the interests of nonprofit organizations. The following summary lists bills and issues that were tracked by TANO and that should be of concern to leaders in the nonprofit sector in Texas. Almost 6,000 bills were filed, 1,436 were passed and sent to the Governor, and the Governor vetoed 26. The state’s budget, education, infrastructure and growth challenges occupied most of the legislators’ attention during the 140-day Regular Session.

Bills that passed are underlined in bold or are marked as PASSED and are effective September 1, 2013 unless otherwise noted.

A “Status” notation following a bill listing indicates the status of a bill that did not pass as of the end of the session.

Your opinions and comments on this report are welcomed and may be directed to Rick Meyer or Robert Pinhero, TANO Vice-Chair for Public Policy, or Barry Silverberg, TANO CEO.

Highlights from the 2013 session

Important issues monitored by TANO during the 2013 Regular Session include:

(1) Texas Nonprofit Council proposal in SB 993 passes

The Texas Nonprofit Council is established within state government to continue the past four years’ work of a task force of nonprofit leaders (see details of SB 993 below). TANO President Barry Silverberg participated in the task force initiative, supported SB 993 along with allied organizations, and expects the Nonprofit Council to open new avenues for engagement with state government agencies. This legislation is recognition of the important role of the nonprofit sector in the economic and public fabric of the state.  The 14-member council is to make recommendations to improve contracting and collaboration relationships between state agencies and community-based and faith-based organizations and to prepare a biennial report to the state in December of even-numbered years.

(2) Washington IRS controversies regarding Section 501(c)(4) nonprofits parallel attention to the SB 346 debates in the legislature

The dramatic and troubling revelations exposing misconduct by the Internal Revenue Service (IRS) in considering applicants for Section 501(c)(4) tax exemption warrant a closer look at SB 346, vetoed by the Governor amidst debate and criticism surrounding this issue.

A Texas House committee hearing on April 24 regarding SB 346 exposed the ongoing discussions over permissible advocacy activities of a few Section 501(c)(4) nonprofit organizations and their receipt of substantial contributions that some say are directed primarily to political activity.

SB 346 essentially would have treated 501(c)(4) organizations as political committees under Texas campaign reporting laws if they acted as such under this standard: making one or more “political expenditures” that total $25,000 during a calendar year. If a group is determined to fall within SB 346 and thereby has to report as a political committee, the nonprofit would be required to observe the detailed requirements of the Texas Election Code—not a simple process and one with stout legal liability if violated. SB 346 provisions would be triggered if the donors/members or the recipient nonprofit organization(s) “…have reason to know that their payment may be used to make political contributions or political expenditures or may be commingled with other funds used to make political contributions or political expenditures.”

Finally, SB 346 would have required the nonprofit to disclose any donor whose contributions exceed $1,000 during the reporting period—a bit of a shock to nonprofit managers who are accustomed to the current laws and practices that generally do not require public disclosure of donor names or lists.

The Texas debate over SB 346 mirrored ongoing inquiries and investigations on the national level that has involved hearings before U.S. Congress, criminal investigations and considerable debate regarding IRS oversight of tax-exempt groups that engage in advocacy. Expect the entire exempt organizations scheme under Section 501(c) to be examined.

In the SB 346 discussions, its proponents have made it clear they are strictly observing the advocacy rights specified in the U.S. Supreme Court’s 2010 Citizens United case by merely requiring public disclosure of the Texas nonprofits’ funding activities and political expenditures while avoiding outright restrictions on the fundraising, advocacy activities or political expenditures. Transparency is the goal, the Senate and House sponsors emphasized. There are varying estimates of the total amount of nonprofits’ funds spent on direct advocacy by a range of nonprofit groups in the last Texas election cycle, but all agree it is not small and is growing.

(3) Property owner associations (POAs) again take the heat from critics

Controversy and criticism of one group often spills over and affects the interests of others. This is TANO’s concern, as yet another legislative session featured bills, hearings and unpleasant media coverage regarding the operations of the thousands of Texas property owner associations (POAs), also called home owner associations (HOAs), and condominium owner associations (COAs). Hundreds of thousands of Texans pay monthly fees to these nonprofit community associations as a condition of their ownership of a residential property. The POAs are not IRS Section 501(c)(3) charitable nonprofits but are organized under the same Texas Nonprofit Corporation Law as charities but with different IRS tax-exempt status, usually Section 501(c)(4).

The Austin Business Journal reports that there are 25,000 or more such nonprofit associations in Texas, directly affecting as many as 5 million Texas residents. This network of nonprofits and their managers is represented nationally by the Community Associations Institute. The CAI monitors legislation and regulatory developments in all states, and seeks to retain the associations’ right to collect monthly owner assessments in a timely manner and to increase the flexibility of associations to operate and borrow money within federal and state regulations. The CAI reports that ten states currently have licensing or professional requirements for association managers (Texas has none).

There were a score of POA-specific bills pending in this legislative session, with many others affecting COAs and timeshare associations. Of most concern was HB 3803, which was the subject of a lively hearing on April 8 before the House Business and Industry Committee. This bill and others were the result of many complaints from property owners about the community governance by POAs, arbitrary regulations, rising monthly fees, unaccountability of POA boards and their hired administrators, cases of actual theft and fraud, and a lack of legal recourse to resolve disputes.

Many large POAs cover thousands of residential units and perform quasi-governmental functions such as neighborhood maintenance, refuse collection, recreation facilities, traffic control and issues related directly to the residential units themselves. Most serious is the legal power of an association to foreclose on a residential unit when a lien for unpaid assessments has been properly filed and perfected.

HB 3803 drew attention in that it proposed new regulatory and legal mandates that would be imposed on POAs. These include: detailed directives regarding governance by POA boards beyond that found in the Texas Nonprofit Corporation Law; specifics regarding members’ access to books and records of boards and management companies hired by them; mandatory insurance and fidelity bonding related to the service of volunteer board members; direct regulatory oversight of POAs by the Texas Attorney General’s Office; AG-imposed civil penalties up to $20,000 against individual wrongdoers (up to $250,000 in some instances); and new city and county registration and regulation of POAs. The bill did not advance past the House committee deliberations.

The scale of nonprofit POA operations in Texas and their direct effect on the lives of so many citizens means these issues will remain active. As is often the case, the role of well-intentioned volunteers who serve on the boards and committees of POAs is drawn into question, and burdensome or threatening government regulations will likely discourage their participation. Controversies regarding charitable nonprofits often boil down to issues of governance best practices, transparency, accountability, compliance with the law, and sound fiscal management of the funds of others. It’s no different with the thousands of local owners’ associations operating in Texas.

These POAs and COAs are the first cousins of nonprofit charitable organizations. If some or all of HB 3803-type proposals are adopted and become mandatory for Texas POAs, it is not unreasonable to speculate that this could be a template also to regulate all Texas nonprofit organizations in the future. The problems identified by POA residents and critics might beg for a legislative solution, and these discussions could have unintended consequences for Section 501(c)(3) organizations in Texas.

(4) Legislators devote attention to breaks for volunteers and relief efforts

Increased respect for the important role of volunteers, first-responders, and ad hoc relief groups in assisting people and communities in disasters or with pressing social needs has caught the attention of Texas legislators. A group of bills sought to make it easier for certain licensed persons to assist with disaster relief, allow social service facilities to escape strict permitting in certain situations, or give legal immunity to persons and facilities where socially beneficial work is conducted by volunteers.

The public is familiar with the role and resources of federal response and relief agencies (FEMA) and the state’s emergency preparedness agencies (Texas Division of Emergency Management and Texas Guard). Nonprofit charities like the American Red Cross and Salvation Army are large well-established organizations with formalized operations and trained staff and volunteers. But what of a local group that undertakes hands-on care for abandoned or homeless minors? Or a church facility that provides food and overnight accommodations for the needy? Licensed medical personnel who rush to the scene of an emergency or cross state lines to help others? Or local volunteer fire fighters who respond to dangerous emergencies, often without proper training or the best equipment?

The natural reaction of legislators would be to respond to these issues and situations by molding the law to promote useful and well-intentioned volunteer efforts. But proposed legislation can mean waiving certain licensing requirements for medical personnel as with SB 61 (PASSED); exempting volunteer fire fighters from certain training requirements (SB 766); or limits on the legal liability of persons or groups who assist with relief efforts (HB 2319). The Governor signed SB 1267 (PASSED), which limits the liability of persons assisting in state agency firefighting efforts.

This patchwork of well-intentioned legislative responses to real-world good works by ordinary people, which sometimes have unfortunate outcomes, should not distract from considering an end point in granting these waivers, immunities and exceptions. Certainly, unreasonable legal obstacles to responsible volunteerism should be addressed. But careful guidelines and best practices in responding to the needs of youth, the elderly, disaster victims and persons with disabilities should never be compromised. Good intentions do not always produce good results.

(5) Tax exemptions for nonprofits not challenged this session; “PILOT” issues are absent

SB 140 represented 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 legislative analysis, all tax exemptions are viewed 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 that are not collected from tax-exempt entities and their properties. This challenge to nonprofits is not speculative and 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. SB 140 was the subject of a debate in the Senate Finance Committee and considerable media coverage, and bill sponsors promised that these issues will not go away.

“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 was very little “PILOT” activity in the 2013 legislative session, unlike what is being seen in other states.

(6) Trends and opportunities

The “benefit corporation” concept, as reflected by SB 849 (PASSED), originated in Europe, and “B-corp” enabling legislation has passed in a score of states. The shareholders or directors could affirm one or more social benefit purposes in directing a corporation’s operations without violating their common law and statutory duties to first represent the corporation’s shareholders and maximize profits. Some leaders in the charitable sector worry that the consumer could become confused by the messaging of these B-corps, which could appear to have a charitable or nonprofit purpose.

HB 2622 brought the “L3C” movement to Texas. The idea has taken on a life of its own in other states as legislatures authorized the formation of this new kind of corporation. Often useful in complex, multi-party transactions in which a nonprofit entity is a required or beneficial partner, the L3C still faces uncertainty on a case-by-case basis because of the application of well-established federal tax constraints on nonprofits in the Internal Revenue Code and Regulations.

Overerall, there were more opportunities in the 2013 Legislature than threats or challenges to the interests of Texas nonprofit organizations. There was no change to the state’s basic Nonprofit Corporation Law, which is found at Chapter 22, Texas Business Organizations Code. There were no new regulatory or compliance mandates loaded onto the volunteer boards of local nonprofit organizations. Charitable solicitation and fundraising laws (raffles, auctions, bingo) were not expanded. The overall state regulatory environment for Texas nonprofits remains relatively light in comparison to other states.

Factors to consider in reviewing proposed legislation

The TANO bill listings during the session reflect issues and 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 W. Meyer and do not necessarily reflect the position of TANO, its board and members, unless so indicated.

June 2013 final summary of legislation from 2013 session

Bills introduced in the 2013 legislature affected nonprofits in the following areas:*

Regulatory oversight of nonprofit and related organizations

SB 993 (PASSED):  Creates the Texas Nonprofit 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:  Passed the Senate and House; signed by the Governor.

SB 849 (PASSED) (=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.

Status:  Passed Senate and House; signed by the Governor.

HB 2622:  Authorizes creation under Texas law of a low-profit limited liability corporation— “L3C”—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

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

HB 3803:  This long bill, as originally filed, represented new and extensive state regulation of property owner associations and unit owner associations. It included detailed governance requirements and the Texas Attorney General’s direct regulation and enforcement of operations and governance, including rulemaking authority in this area. After considerable opposition from scores of local associations across the state, the bill was trimmed; CSHB 3803 later carried only requirements relating to mandatory fidelity bonds or fidelity insurance for unit owner associations with 20 or more units.

Status:  Reported from the 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. 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. Although HB 3803 was trimmed down by the committee and never received a House vote, similar regulatory schemes could be proposed for 501(c)(3) organizations in the future.

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

 

SB 1372 (PASSED) (=HB 2944):  Enacts similar regulatory oversight laws regarding the boards of timeshare property associations.

Status:  Passed Senate and House; signed by the Governor

 

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

 

SB 1267 (PASSED) (=HB 2751):  Limits the liability of persons assisting state agency firefighting efforts.

Status:  Passed Senate and House; signed by the Governor

 

SB 338 (=HB 444):  Would add licensed social workers to the list of professions specifically granted Chapter 84 legal immunity while performing voluntary services.

Status:  Passed Senate; voted favorably from House Committee on Judiciary and Civil Jurisprudence

 

SB 1050:  Would add licensed marriage and family counselors to this list.

Status:  Referred to the Senate State Affairs Committee

Comment:  These “Chapter 84 immunity bills” benefit the nonprofit sector because volunteers and managers of nonprofits are then shielded from personal legal and financial liability if the organization complies with the law’s requirements. The following five 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:  Left pending in the 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:  Passed the House; referred to Senate State Affairs Committee

 

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

Status:  Passed the House; referred to Senate State Affairs Committee

 

HB 2319:  A church providing an overnight or homeless shelter to children would be immune from civil legal liability.

Status:  Reported favorably from the House committee; awaiting House vote

 

HB 332:  Grants immunity from legal liability to persons donating volunteer services to the Texas Parks and Wildlife Department for acts relating to operating a department vehicle or motor-driven equipment.

Status:  Passed House; left pending in Senate State Affairs Committee

 

Nonprofit board, officer, employee and volunteer issues

SB 61 (PASSED):  Permits issuance of a “military limited volunteer license” to military physicians licensed in other states who perform voluntary services for the indigent without pay.

Status:  Passed by Senate and House; signed by the Governor

 

HB 746 (PASSED):  This bill would enact the “Uniform Emergency Volunteer Health Practitioners Act”, which is intended to simplify the certification 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:  Passed House and Senate; signed by the Governor.

 

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

Status:  Passed the House and Senate; signed by the Governor

 

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

Status:  Passed the Senate; reported favorably from the House Licensing and Administrative Procedures 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

Comment:  The 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:  Passed the House; referred to Senate Criminal Justice 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

 

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 record keeping to verify the student’s service.

Status:  Pending in the House Higher Education Committee

Comment:  TANO 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 record keeping duties by the recipient charitable organization in alliance with the higher education institutions involved. The nonprofits receiving these services would become the keepers and reporters of the students’ compliance in what essentially would be a required course for graduation. Also unresolved is the selection of “approved” nonprofit agencies and whether unpopular or controversial causes could be banned as eligible for service hours.

 

Open meetings / open records issues

SB 895 (PASSED):  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:  Passed the Senate and House; signed by the Governor

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.

 

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

Status:  Action pending in the 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 (PASSED) (=SB 282):  Amends bingo prize restrictions.

Status:  Passed House and Senate; signed by the Governor

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 charitable solicitations.

Exemptions from taxes now extended to nonprofit entities

SB 140 (=HB 3045):  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:  SB 140 pending in the Senate Finance Committee.

 

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

See also HB 537, similar to SB 106.

 

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

 

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

 

SB 193 (PASSED):  Certain property used to provide low-income housing is exempt from property tax.

Status:  Passed Senate and House; signed by the Governor.

 

HB 294 (PASSED):  Tax exemption for property devoted to housing for the homeless.

Status:  Passed House and Senate; signed by the Governor.

 

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 an 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 (=SB 1455):  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:  Passed House; pending in Senate Finance 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 3767:  Property is exempt from property taxes if owned by a charitable organization that uses the property in growing or maintaining trees for public beautification.

Status:  Referred to the House Ways and Means Committee

 

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 exemptions expressly written into the code (as reflected in the above proposed 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 (PASSED):  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:  Passed the House and Senate; signed by the Governor

 

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

Status:  Pending in the 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:  Awaits House vote

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. There was very little “anti-PILOT” activity in this legislative session.

Public advocacy / Ethics Commission (lobbying) issues

SB 346 (VETOED):  Seeks to regulate the claimed improper political activities and expenditures by certain Section 501(c)(4) nonprofit organizations by classifying them as “political committees” under the Texas Election Code; would require them to file disclosure reports regarding any donor exceeding $1,000 if the organization had $25,000 or more in such political contributions or expenditures in a calendar year.

Status:  Passed Senate; passed House; vetoed by the Governor

Comment:  See the notice on SB 346 at the top of this summary.   The Governor also vetoed a related bill, SB 219, which at one time carried language similar to SB 346.

 

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:  Action pending in the 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.

Status:  Referred to Senate State Affairs Committee

 

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

HB 970 (PASSED):  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:  Passed House and Senate; signed by the Governor

 

HB 1382 (PASSED):  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:  Passed the House and Senate; signed by the Governor

 

HB 1392 (PASSED):  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:  Passed the House and Senate; signed by the Governor

 

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:  Reported 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:  Reported favorably from the 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’s 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 “farm-to-table” bills were the subject of a lively discussion on April 10 before the House Agriculture and Livestock Committee, with local health authorities and inspectors taking a hard line based on their concern over public safety from unregulated food products.

 

Other Bills

SB 403 (=HB 1221):  A “healthy corner store” could be established and operated by a community development agency in a qualified “food desert”, receive loans and funding through existing community development financial institutions (CDFIs) and participate in SNAP and WIC food programs. See also HB 725.

Status:  SB 403 reported favorably from Senate Government Organizations Committee; on Senate intent calendar

 

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:  Action pending in the House Judiciary and Civil Jurisprudence Subcommittee

 

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:  Action pending in House Land and Resource Management Committee

 

SCR 12 (PASSED):  Designates pecan pie as the Official Pie of Texas.

Status:  Passed the Senate and House; signed by the Governor

Comment:  The Senate debate on this resolution produced differences of opinion whether a pecan pie containing chocolate ingredients (chocolate chips or popular “brownie pecan pie” recipe variations) disqualifies the dish as true and official pecan pie.

 

HCR 36 (PASSED):  Designates February 16 of each year as Homemade Pie Day in Texas.

Status:  Passed the House and Senate; signed by the Governor

_____________________

*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; and 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

 

Lessons Learned

  • Many legislative and regulatory proposals have unintended consequences for nonprofit organizations. Legislators and their staffs are generally uninformed about the operations and real interests of nonprofits.
  • Most “reform” proposals mean more reporting, compliance and governance time and administrative expense for nonprofits. Nonprofits are judged harshly if administrative/operations expenses consume too large a percentage of their total budget.
  • Volunteer board members and other good people must not be discouraged by lengthy, confusing or threatening governmental regulations that make service risky. Criminal penalties attached to reform legislation scare away informed and qualified leaders who otherwise might have served on a board.
  • One size does not fit all. Many “reform” proposals are intended to cure mis-steps by large nonprofits or national associations. But reforms often land hard on good people doing good work in local communities across America.
  • The burgeoning social enterprise sector is composed of innovators and risk-takers who are investing in new ideas, new markets and new forms of nonprofit operations based on a hybrid business model. These leaders should be given breathing room by government regulators.
  • Complex governmental regulations will discourage start-ups and the efforts of good people with good ideas. True, there may be redundancies and duplications of nonprofit efforts in any community, but every successful and acclaimed nonprofit organization probably started with one person with one idea…and it grew and grew…and now serves the common good. All our efforts should be to that end.

          

Resources to be Informed and Involved

Texas Issues:

www.tano.org   Statewide voice for nonprofit organizations, Austin

www.capitol.state.tx.us   State website to track legislation, statutes and agency rules

www.texascbar.org   Resources for assisting community organizations

www.onestarfoundation.org   State agency for volunteerism and service opportunities

 

National Issues:

www.councilofnonprofits.org   National Council of Nonprofits, Washington, D.C.

www.independentsector.org   Independent Sector, Washington, D.C.

www.nonprofitpanel.org   Independent Sector’s response to Congressional proposals

www.nasconet.org   National Association of State Charity Officials, the regulators

www.nvoad.org   National coalition of volunteer disaster relief agencies

www.philanthropy.com   The Chronicle of Philanthropy, current news

www.urban.org   The Urban Institute, research studies and statistics

Advocacy Rights and Lobbying by Nonprofits:

www.clpi.org   Center for Lobbying in the Public Interest

www.afj.org   Alliance for Justice

Social Entrepreneurship:

www.se-alliance.org   Social Enterprise Alliance promotes innovative nonprofits

www.caseatduke.org   Duke University, source materials for social enterprise issues

www.bcorporation.net/publicpolicy   Background on B-corps and L3C entities