82nd Texas Legislature, 2011 Regular Session As of 7-7-11
SUMMARY OF ISSUES AFFECTING NONPROFIT ORGANIZATIONS
for Texas Association of Nonprofit Organizations
Final Legislative Report for 2011
Compiled by Richard W. Meyer, Attorney at Law
The Texas Legislature ended its 82nd Regular Session on May 30, 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 should be of concern to leaders in the nonprofit sector in Texas. Almost 6,000 bills were filed, and the state’s budget challenges occupied most of the legislators’ attention during the 140-day Regular Session. The First Called Session was intended to complete unfinished budgetary issues and to consider other special subjects designated by the Governor, and it ended June 29.
* Bills that passed are underlined. A notation in italics following
a bill summary indicates the bill’s status at the end of the session.
Important issues monitored by TANO during the 2011 Regular Session include:
- Passage on May 19 of the bill to continue the state’s nonprofit capacity-building task force and inclusion of all stakeholders such as TANO (HB 1965, signed by the Governor)
- Concern from nonprofit leaders regarding proposed expansion of the Attorney General’s investigatory authority over nonprofits, foundations and trusts (HB 2921, SB 342—did not pass)
- Passage of a bill to protect free speech and advocacy rights of individuals and organizations by permitting an accelerated court review and dismissal of a suit that is determined to be without merit (HB 2973, signed by the Governor)
- Passage of a bill that limits disclosures of personal data and internal information that can be required of nonprofits, trusts or foundations that contract with public agencies (HB 3573, signed by the Governor)
- Clarification of health laws regulating non-commercially produced food items that are prepared for sale at organization fundraising events, gatherings, or farmers’ markets (HB 1139, HB 2084, HB 3387—bills did not pass)
- State legislation to roll back the imposition by local governments of “PILOT” fees (payments in lieu of taxes) on property owned by nonprofit, charitable and religious organizations (SB 714, HB 1022—did not pass).
Issues raised in the 2011 First Called Session include:
- State revenues generated by purchases of extra-fee specialty auto license plates will not be diverted to the state’s general fund, as proposed in the Regular Session, but will continue to benefit the organization or cause they advocate, thanks to attention to this issue (SB 1, First Called Session, signed by the Governor).
- Persons registering as lobbyists for nonprofit organizations will see a 50 percent increase in their annual fee, and those representing Section 501(c)(6) organizations will now be able to benefit from this special registration fee category and reduced reporting requirements (SB 1).
Bills considered in the 2011 legislature affected nonprofits in the following areas:*
• Advancing and regulating nonprofit organizations:
HB 1965: The promising nonprofit capacity-building initiative from HB 492 enacted in the 2009 legislative session created the Task Force on Strengthening Nonprofit Capacity. Its work will be continued by HB 1965 along with an expanded Interagency Coordinating Group, now expanded to include executives representing 20 large state agencies. Both groups are tasked with improving contracting relationships with state government, cooperating and collaborating with community and faith-based organizations, identifying duplications in nonprofits’ activities, and identifying gaps in state services that nonprofits could fill. These efforts establish a long-needed “footprint” in the state government realm and advance the nonprofit sector’s importance in public affairs. Passed by House and Senate; signed by the Governor, eff. 9/1/11.
HB 2921 (=SB 342) **: Would significantly expand the authority of the Attorney General’s Office to investigate the internal operations of charitable organizations, without bringing formal criminal or civil charges, if the Attorney General has reason to believe that an unlawful act is occurring or is about to occur. Any charity or foundation could be required to provide, under oath, answers to questions regarding alleged unlawful activity, produce any document maintained and requested, or have its representative personally questioned and examined under oath by state investigators. HB 2921 voted favorably from House State Affairs Committee; no House floor action. SB 342 left pending in Senate Business and Industry Committee.
SB 587: The Attorney General will have venue to bring a Probate Code enforcement or investigatory action in Travis County against a nonprofit entity located anywhere in the state that is claimed to be violating its duties as a charitable trust. Passed Senate and House; signed by the Governor, eff. 9/1/11.
HB 593: The State Auditor would have authority to examine and audit the books and records of any grantee of federal ARRA “stimulus” funds (American Recovery and Reinvestment Act). No committee action.
• Fundraising activities of nonprofit organizations:
HB 457: Charitable organizations conducting raffles will be permitted to expand their efforts with online solicitations to their supporters. Passed by House and Senate; signed by Governor, eff. 5/27/11.
HB 1139: Would define and extend state health regulations and permit requirements applicable to a “cottage food production operation”—non-commercial or home-produced food for limited sale—including “…at an event held or sponsored by a religious or nonprofit organization”. Left pending in the House Public Health Committee. HB 2084 also defines certain “cottage food production operations” with lesser permitting requirements. Passed committee, no House floor action. HB 3387 would regulate similar sales at farmers’ markets. Passed House; left pending in Senate Health and Human Services Committee.
HB 372: In this proposed repeal of a remnant of the English common law—the Rule Against Perpetuities—charitable giving of high-wealth individuals could be affected. The rule prevents personal wealth from being permanently tied up with trusts or other legal instruments in perpetuity and for the benefit of limited beneficiaries or heirs. Reported favorably from House Judiciary and Civil Jurisprudence Committee; no House floor action.
HB 1682: Pressuring or coercing school district employees to participate in charitable giving activities is prohibited. Passed House and Senate; signed by the Governor, eff. 9/1/11.
HB 1806: Regulation of “fishing tournament fraud” and enforcement actions are strengthened. Passed House and Senate; signed by Governor, eff. 5/21/11.
• Amendments to the Texas Non-Profit Corporation Law, Chapter 22, Bus. Org. Code:
SB 748: Makes minor changes to the nonprofit corporation law detailing the procedure for an interested director to disclose a conflict of interest to his/her board before acting on a transaction, contract or other matter. Passed by Senate and House; signed by the Governor, eff. 9/1/11.
• Amendments to charitable immunity statutes in Chapter 84, Civil Practices and Remedies Code:
SB 1846: A nonprofit will be able to access additional types of insurance policies, as well as self-insured plans, to comply with the financial responsibility requirements of Chapter 84 that entitle the organization and its leaders to certain immunity against legal claims. Passed Senate and House, signed by Governor, eff. 5/9/11.
• Various professionals and individuals would be added to the list of persons specifically granted Chapter 84 legal immunity while performing voluntary services:
Social workers, HB 823, no House floor vote. Licensed family/marriage therapists, SB 1336, no committee action.
• Exemptions from state taxes now extended to nonprofit entities, and ‘PILOT’ fees:
SB 1051 (=HB 1308): A select state review commission would periodically review all credits, exemptions and special treatment under the state’s tax laws. SB 1051, left pending in Senate Finance Committee. HB 1308, left pending in House Ways and Means Committee.
HB 3201, HB 784: The Texas Sunset Advisory Commission would periodically undertake a re-examination (“sunset”) of all exemptions under the state’s tax laws, including the exemptions from property, sales and business taxes enjoyed by charitable organizations. HB 3201, left pending in House Ways and Means Committee.
SB 714 (=HB 1022): Drainage fees (PILOTs) imposed by the City of Houston on utility-using tax-exempt properties owned by charitable and religious organizations would be banned by state law. PILOT refers to “payments in lieu of taxes.” SB 714 passed by Senate; no House committee action. On 4/6/2011, the Houston City Council passed an ordinance exempting churches and schools from the previously-enacted drainage fees, in response to the local public outcry and the state legislation referenced above. See also HB 3169.
SB 609: Property-based municipal drainage fees will not be imposed on housing authority properties owned by a municipality. Passed Senate and House; signed by the Governor, eff. 9/1/11.
HB 645: An applicant in behalf of a charitable organization’s request for property tax exemption will not have to list his/her personal identification information on the State Comptroller’s forms. Passed by House and Senate, signed by the Governor, eff. 9/1/11.
SB 1757: Would amend Tax Code Section 11.18 (which details categories of property uses exempt from property tax) by including academic support for youth, in addition to athletic program support. No hearing in Senate Finance Committee.
• Nonprofit board, officer, employment, volunteer and fundraising issues:
HB 3252, HB 178, HB 202: Organizations contracting with the state must clear employee status through a federal government-certified data verification service. HB 3252 reported favorably from the House State Affairs Committee; HB 178 and 202 left pending. HB 878 includes subcontractors in the required verification process. HB 140, no committee hearing. See also SB 84.
HB 73: Criminal history checks would be required of all state employees, interns, volunteers, contractors and subcontractors related to state agency contracting and spending. Left pending in House State Affairs Committee.
HB 1553: Any public agency or nonprofit employer receiving state funds would have to report the citizenship of any person served by programs. Left pending in House State Affairs Committee.
• Open meetings / open records issues:
HB 3573: Forbids a government entity from entering into a contract with a foundation, trust, or charitable organization with contract terms that also require the disclosure of the race, religion, gender, national origin, age, ethnicity, marital status, sexual orientation, or political affiliation of persons managing or benefitting from the foundation, trust or organization. Passed by House and Senate, signed by the Governor, eff. 9/1/11.
SB 1571: Provides that a nonprofit organization that performs a public function is governed by Government Code, Chapter 552 (public information disclosure laws). Passed Senate committee, Senate floor vote never held.
SB 1829: Limits the scope of public information laws affecting a chamber of commerce or a nonprofit organization that provides economic development services to a public agency. Passed Senate; no action by House State Affairs Committee.
• Public advocacy / Ethics Commission (lobbying) issues:
HB 2973: Provides for an accelerated court review and possible dismissal of a groundless suit against a person or group advocating for basic free-speech rights. Passed House and Senate; signed by the Governor, eff. 9/1/11.
HB 160: Permits a streamlined court review and dismissal of “slap” suits–harassing or groundless lawsuit brought against a complaining person or group critical of another interest group, in a public controversy–and determined by the court to be brought to silence the opponent. No committee action.
HB 508 (= SB 128): Former legislators would be forbidden from lobbying for two years, except if lobbying for nonprofit organizations, disabilities, and low-income advocacy groups, and if acting without compensation. No committee action on either bill.
• Nonprofit social service organization and property owner association issues:
SB 142: A long and comprehensive bill affecting only property owner associations. Passed Senate; no House floor action. See also HB 3347, reported favorably from House Business and Industry Committee. HB 2869, passed by House and Senate, signed by the Governor, eff. 9/1/11. HB 3348, reported favorably from House Business and Industry Committee.
HB 2328: Property owner associations would be regulated by the Texas Finance Commission, with annual registration, reporting requirements and governance standards. Reported favorably from House Business and Industry Committee.
• Other bills:
HB 8: Will effectively ban creation of new “land transfer fees” in Texas. These fees are often recorded as part of permanent subdivision restrictions, which subsequently require payment by the seller of a percentage of the sales price to a designated party each time the parcel is resold. The claim by fee proponents that a small percentage of the fee collected is often designated to benefit a local charitable organization appears outweighed by broad opposition to this hidden fee, which is also the subject of review by federal regulators of residential loans. Passed House and Senate; signed by the Governor, eff. 9/1/11.
HB 1599: Would permit the Texas Corrections Industries (prison industries) to offer its products and services for sale to nonprofit organizations as well as public agencies. Pending in House Corrections Committee.
HB 421: Qualified nonprofit corporations would be eligible to receive ownership of remainder right-of-way properties determined by TXDOT to be unusable for its purposes. No committee action.
*The above list does not include bills introduced relating to the following:
Nonprofit hospitals, health care or nursing institutions and plans; credit unions; electric or agricultural cooperatives; private and charter schools and colleges; cemetery corporations; quasi-public nonprofit entities.
**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
© 2011, Richard W. Meyer, All Rights Reserved.