2005 Texas Legislative Summary

79th Texas Legislature, 2005 Regular Session

Compiled for the Texas Association of Nonprofit Organizations
End of Session Report – 6/24/2005
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 2005 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 2005 legislature affected nonprofits in the following areas:*

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

SB 1215 (=HB 3417) **: Would impose federal-type (Sarbanes-Oxley) practices and liabilities on nonprofit corporations having annual revenues in excess of $500,000, including formal annual audit or CPA review procedures; penalties for noncompliance
Status: Passed Senate 4-21-05; left in House Business & Industry CommitteeHB 3417 left pending in House Business & Industry Committee 4-12

HB 3437: State Comptroller would be given oversight and enforcement powers over nonprofit corporations with broad authority to make agency rules for enforcement
Status: left in Business & Industry Committee

HB 1620: Allows for a court award of attorney’s fees to the prevailing party when a nonprofit’s director is sued for misconduct
Status: left in Business & Industry Committee 3-29-05

HB 1319 (=SB 586): Non-substantive amendments to Article 1396 and other laws
Status: PASSED; effective 1-1-06

Note: Effective Jan. 1, 2006, all of Article 1396 will be found in Chapter 22, Business Organizations Code.

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

HB 507: Limits liability of volunteer health care providers
Status: left in House Civil Practices Committee

HB 654-655: Insurance coverage for liability of volunteer health care providers who may be retired and unlicensed could be provided by nonprofit or faith-based organizations
Status: HB 654 PASSED; effective 5-27-05, HB 655 PASSED; effective 5-30-05

HB 1577 Limits liability of physicians assistants
Status: PASSED; effective 6-17-05

• Exemptions from state taxes now extended to nonprofit entities:

HB 3 (property tax/school finance reform and business tax bill): Would impose a new tax on all payrolls, business tax on most business entities, and increases sales tax;   House version passed exempts nonprofit Sec.501(c)(3) corporations, small businesses, and government employers from the taxes
Status: House and Senate versions not reconciled by end of session

HB 117-118-119 (=HB 229): Exemptions from corporate/sales/property taxes enjoyed by nonprofit corporations would periodically face “sunset” (be canceled) unless renewed by the legislature
Status: left in Ways & Means Committee 1-31-05

HB 155: “Sunset” process every six years for nonprofits’ exemption from state taxes
Status: left in Ways & Means Committee 1-31-05

HB 2095: Nonprofit entities assisting a local economic development agency would be exempt from property taxes
Status: left pending in Ways & Means Committee

• Nonprofit board, officer, employee and volunteer issues:

SB 876 (=HB 2268): Requires a nonprofit’s board to prepare corporation’s annual financial report within 180 days of end of fiscal year
Status: passed Senate; withdrawn from House floor before voting; HB 2268 left in Business & Industry Committee

SB 1576: Criminal penalties for misinformation given intentionally to an outside auditor
Status: left in Senate Criminal Justice Committee 3-22-05

HB 84: Criminal background checks would be required for volunteers involved in children’s sports programs
Status: left in House Civil Practices Committee

• Open meetings/open records issues:

SB 452 (=SB 727): Building and Procurement Commission loses oversight of state agencies’ compliance with OR/OM laws, costs and procedures to Attorney General
Status: PASSED; effective 9-1-05

• Advocacy/Ethics Commission (lobbying) issues:


• Other nonprofit organization issues:

HB 2839: Authorizes county jails to contract with nonprofit corporations, higher education institutions, and private sector prison operators to use inmate labor
Status:   PASSED; effective 9-1-05

HB 129 (=HB 508, HB 2839, SB 154, SB 159, SB 951) : Permits a county to direct jail inmate labor for use by a local nonprofit designated as performing work in the public interest
Status: PASSED; effective 6-18-05


*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/property owners 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 bills at Texas Legislature Online, www.capitol.state.tx.us

© 2005, Richard W. Meyer, All Rights Reserved.