2013 Texas Legislature proposes annual review of exemption benefits

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.