2023 Texas Statutes › Tax Code › Title 1 - Property Tax Code › Subtitle C - Taxable Property and Exemptions › Chapter 11 - Taxable Property and Exemptions › Subchapter B. Exemptions › Section 11.1801. Charity Care and Community Benefits Requirements for Charitable Hospital

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.
Acts 1979, 66th Leg., p. 2236, ch. 841, Sec. 1, eff. Jan. 1, 1980.  Amended by Acts 1981, 67th Leg., 1st C.S., p. 127, ch. 13, Sec. 33, eff. Jan. 1, 1982;  Acts 1983, 68th Leg., p. 2207, ch. 412, Sec. 1, eff. Jan. 1, 1984;  Acts 1985, 69th Leg., ch. 960, Sec. 1, eff. Jan. 1, 1986;  Acts 1987, 70th Leg., ch. 430, Sec. 1, eff. Jan. 1, 1988;  Acts 1991, 72nd Leg., ch. 407, Sec. 1, eff. Jan. 1, 1992.  Amended by Acts 1993, 73rd Leg., ch. 360, Sec. 5, eff. Sept. 1, 1993;  Acts 1995, 74th Leg., ch. 471, Sec. 1, eff. Jan. 1, 1996;  Acts 1995, 74th Leg., ch. 781, Sec. 4, eff. Sept. 1, 1995;  Acts 1997, 75th Leg., ch. 715, Sec. 1, eff. Jan. 1, 1998;  Acts 1997, 75th Leg., ch. 1039, Sec. 7, eff. Jan. 1, 1998;  Acts 1997, 75th Leg., ch. 1411, Sec. 1, eff. June 20, 1997;  Acts 1999, 76th Leg., ch. 138, Sec. 1, eff. May 18, 1999;  Acts 1999, 76th Leg., ch. 266, Sec. 1, eff. Jan. 1, 2000;  Acts 1999, 76th Leg., ch. 924, Sec. 1, eff. Jan. 1, 2000;  Acts 1999, 76th Leg., ch. 1443, Sec. 1, eff. Sept. 1, 1999;  Acts 2001, 77th Leg., ch. 669, Sec. 118, eff. Sept. 1, 2001;  Acts 2001, 77th Leg., ch. 1420, Sec. 18.001(a), eff. Sept. 1, 2001.