2003 Texas Legislative Summary

78th Texas Legislature, 2003 Regular Session
Compiled for the Texas Association of Nonprofit Organizations

by Richard W. Meyer, Attorney at Law


In every session of the Texas Legislature, numerous bills are introduced that directly or indirectly affect nonprofit organizations. The following summary indicates bills of most interest and concern to leaders in the nonprofit sector in Texas during the 2003 regular session and takes into account the following factors: Whether a proposed bill strengthens nonprofit organization viability under Texas law or unduly burdens or threatens their status; whether the legal liability of nonprofit board members or 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 disclosure and accountability requirements remain reasonable and balanced.

Bills in the 2003 legislature affected nonprofits in the following areas:*

• Amendments to the Texas Non-Profit Corporation Act, Article 1396:

House Bill 1156 – Among its 823 pages, the bill reorganizes the Nonprofit Corporation Act in a comprehensive rewrite of all laws affecting business organizations. The current nonprofit laws in Article 1396 are dissipated into a larger legal framework called the Business Organizations Code, Chapter 22. PASSED.

• Amendments to Charitable Immunity statutes in Chapter 84, Civil Practices & Remedies Code:

HB 956 –Deletes existing specific references to nonprofit officer/director/trustee liability protections by referring simply to immunity for any “volunteer”; repeals “good faith” legal defense that now protects nonprofit directors and managers in lawsuits.

HB 974 –Would extend Chapter 84 charitable immunity status to Chambers of Commerce by classifying them as “charitable organizations”. PASSED as Senate Bill 360**

• Exemptions from state taxes now extended to nonprofit entities:

HB 827 –The state “sunset” laws now require every government agency and program to undergo examination every 12 years and be specifically reauthorized, or the program or agency vanishes. This bill would expand the process by examining and “sunseting” tax laws and exemptions; and, of most concern, would subject to the “sunset” process, every six years, all exemptions from state taxes now enjoyed by nonprofit and other entities (sales and property tax, franchise tax). Thus, the nonprofit sector would periodically have to muster its forces to keep all existing tax exemptions or lose them.

HB 589 –In response to the state’s tight budget prospects, this bill proposes repeal of nonprofits’ current exemption from state property tax, sales and use tax, and franchise (corporate) taxes, including all nonprofit exemptions now appearing in Subchapter B, Chapter 171, Tax Code (tax exemptions for all charitable, educational and religious entities).

Senate Bill 1773 –A “local nonprofit organization” (not necessarily an incorporated entity) could receive real property tax exemption granted to existing nonprofit corporations qualifying under existing IRS and state law “charitable organization” definitions. There is a great difference between a local nonprofit organization that might merely qualify for formal I.R.S. and state tax-exempt status, versus virtually all existing nonprofits that have earned the formal tax-exempt status by applying for and obtaining such recognized status.

HB 2416 –Would increase from three to six years the time a nonprofit entity could receive property tax exemption for property under development or improvement but not yet actually in use for a tax-exempt purpose. PASSED.

• Nonprofit board, officer, employee and volunteer issues:

HB 4 – The “tort reform” legislation extends certain immunity to volunteers. PASSED.

• Criminal history checks:

SB 443 – Provides an organization with access to criminal records of volunteers of an “activity provider” involving children. This bill is typical of a number of similar proposals that would permit or require nonprofit, social service, civic or sports organizations to obtain and review criminal history records of all persons involved in children’s programs or activities. Most of these well-intentioned bills, however, do not protect the nonprofit organization by directing its review and actions relating to criminal records obtained, nor is adequate immunity given to the organization complying with and acting on the review of criminal history records. PASSED. See also SB 602, HB 828, HB 742 and HB 1652 (=SB 61).

• Insurance coverage:

HB 570 –Sets a limit on damages liability of a nonprofit employer where worker’s medical insurance coverage is carried as a substitute for worker’s compensation coverage.

• Employer notification:

HB 435 –Requires an employer to notify the parents of a mentally incapacitated worker or under-18 worker of the presence of a probationer or parolee in the place of employment. Similar bills are HB 1971 and SB 1073. Passage of such proposals could inhibit the programs of organizations whose operations are designed to serve probationers or parolees.

• Open meetings/open records issues:

HB 2643 –The governing body of an entity that is a party to a contract with the state under which the entity provides a service, or provides a service formerly provided by the state, is defined as a “governmental body” and must observe state open meetings/open records laws with respect to all aspects of that contract. HB 2643 is a return of overbroad proposals from previous sessions that would draw many nonprofits into the intricacies and liabilities of compliance with the open government laws.

HB 3080 –Any nonprofit corporation having voting membership must conduct its membership meetings strictly in accordance with Robert’s Rules of Order Newly Revised (not a simple task for most volunteer board members). The bill also addresses conflicts of interest issues in condominium associations but muddles the Nonprofit Corporation Act by interjecting the Robert’s Rules requirement.

• Advocacy/Ethics Commission (lobbying) issues:

HB 3530 –Would extend the lobbyist registration laws to include any person communicating directly with not only legislators but with any agent, employee, contractor or sub-contractor of the state “to influence the expenditure of state funds” (as well as to influence legislation).   HB 3530 is broadly written and would affect unsuspecting volunteers and nonprofit representatives everywhere.

HB 3222 (=SB 1827) –This proposal returns from previous sessions and pretends to     protect candidates from misrepresentations of a nonprofit’s position with regard the “communications” of a current or former member/ officer/employee, when the communication is without the express consent of the nonprofit or endangers its tax-exempt status;permits the aggrieved politician to prosecute a libel action against the errant communicator (notwithstanding First Amendment constitutional rights re libeling a “public figure”).

• Other nonprofit organization issues:

HB 970 –A county can donate surplus property to eligible nonprofit organizations in certain circumstances. PASSED.

HB 1633 (=SB 805) –Would permit a school district to donate surplus historic buildings and properties to eligible nonprofit organizations or state agency and removes the current restriction that the donated property must be used as a community center. PASSED.


*Above list does not include bills introduced relating to the following:

Nonprofit hospitals, health care or nursing institutions and plans; credit unions; electric or rural cooperatives; condo/homeowners associations; private and charter schools; cemetery corporations; local bingo and gambling proposals; insurance plans/HMOs; quasi-public nonprofit entities.

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

© 2003, Richard W. Meyer, All Rights Reserved.