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Signed Into Law
Signed June 20, 2025Effective 2026-01-01
HB2525

Regular Session

Relating to the exemption from ad valorem taxation of certain property owned by a charitable organization that is engaged in providing housing and related facilities and services to persons who are at least 62 years of age.

Government Affairs & Regulatory Compliance Analysis

HB2525: Government Affairs Overview

HB2525 establishes a new property tax exemption pathway for charitable organizations providing housing and services to persons aged 62 and older, effective January 1, 2026. This legislation allows 501(c)(3) entities to qualify for ad valorem tax exemptions if they have existed for at least 20 years (or are under common control of such an entity) and can prove their provision of "charitable housing and services" equals at least 4% of net resident revenue.

Rep. Drew Darby·House Bill·Regular Session

Moderate
Low Cost
Effective:2026-01-01
Business Impact

Who HB2525 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: moderate

Notable regulatory updates (effective 2026-01-01). Consider how these changes may affect your operations.

🏥

Healthcare

Affected business types:

  • Hospitals
  • Healthcare systems
  • Medical practices
  • Health insurance providers
View all healthcare legislation
🏢

Real Estate

Affected business types:

  • Property developers
  • Commercial landlords
  • Property managers
  • Real estate investors
View all real estate legislation

Key Operational Considerations

  • 1Admissions/Intake: Intake personnel must be trained to screen and document residents' "financial need" status upon entry to justify the charitable nature of services provided to them.

Estimated Cost Impact

lowMinimal cost impact anticipated.

Enforcing Agencies

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HB2525
Relating to the exemption from ad valorem taxation of certain property owned by a charitable organization that is engaged in providing housing and rel...
Moderate Urgency
Heavily Contested
House Vote124 - 24
YEA
NAY
84% in favor148 voting
Senate Vote30 - 1
YEA
97% in favor31 voting
25
Total Opposition Votes
Cost Impact
Low
Effective
2026-01-01
Enforcing Agencies
County Appraisal DistrictsTexas Comptroller of Public Acco...
Primary Author: Rep. Drew Darby
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: January 1, 2026
  • Compliance Deadline: April 30, 2026 (Deadline to file Form 50-115 with your County Appraisal District for the 2026 tax year).
  • Agency Rulemaking: The Texas Comptroller must update exemption application forms prior to Jan 1, 2026. Local County Appraisal Districts (CADs) will begin interpreting "ministerial services" and "financial need" valuation immediately upon receipt of 2026 applications.

Immediate Action Plan

  • 1. Conduct a Pro-Forma "4% Test": Immediately calculate if your current charitable housing/services meet 4% of Net Resident Revenue using 2024/2025 data.
  • 2. Define "Financial Need": Adopt a board-approved policy defining financial need (e.g., <300% FPL) to standardize who receives "charitable services."
  • 3. Establish Valuation Methodology: Document the cost-basis for providing social and ministerial services. Do not use "market rate" retail value; use actual cost to the organization to be conservative.
  • 4. Prepare Evidence of Tenure: Secure certified copies of formation documents proving the 20-year history requirement is met.
  • 5. File in Q1 2026: Submit the amended exemption application to the CAD between Jan 1 and April 30, 2026.

Operational Changes Required

Contracts

  • M&A and Governance Agreements: Review all acquisition term sheets. To utilize this exemption for a new facility/entity, you must structure the deal to ensure "common control" by a qualifying organization with a 20-year history.
  • Vendor Service Agreements: If you outsource social, religious, or educational services, amend contracts to require vendors to report the specific value of services provided to residents classified as having "financial need." You will need this data to substantiate the 4% threshold.

Hiring/Training

  • Finance & Accounting: Staff must be trained on the statutory definition of "Net Resident Revenue" (Section 11.1801(a)(2)). This is a specific calculation that differs from standard GAAP revenue recognition.
  • Admissions/Intake: Intake personnel must be trained to screen and document residents' "financial need" status upon entry to justify the charitable nature of services provided to them.

Reporting & Record-Keeping

  • Charitable Sub-Ledger: Create a distinct financial tracking system to capture the value of non-medical charitable services. This includes housing discounts, social services, and ministerial support.
  • 20-Year Verification: Locate and certify Articles of Incorporation or Certificates of Formation dating back 20 years. If relying on "common control," prepare an organizational chart and legal opinion confirming the governance relationship.

Fees & Costs

  • No New State Fees: There are no filing fees for the exemption application.
  • Audit Risk: Budget for potential legal counsel costs to defend the valuation of "ministerial services" if challenged by the CAD.

Strategic Ambiguities & Considerations

The legislation introduces terms that local CADs may interpret restrictively to protect the tax base:

  • 1. Valuation of "Ministerial Services": The law allows these to count toward the 4% test but offers no formula for monetization. CADs may reject arbitrary hourly rates for chaplains or religious services.
  • 2. "Financial Need": The statute does not define a specific income threshold (e.g., % of Federal Poverty Level). Without a bright-line rule from the Comptroller, organizations must define this internally and apply it consistently.
  • 3. "Common Control": While intended to allow expansion, the specific degree of overlapping governance required is not detailed.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

02

Legislative Timeline

This bill's path through the Texas Legislature

Filed
Feb 6, 2025
Passed House
Apr 23, 2025
Passed Senate
May 7, 2025
Signed
Jun 20, 2025
Effective
Jan 1, 2026
TopicsAgingCharitable & Nonprofit OrganizationsHealthHealth--indigent Health CareNursing HomesTaxationTaxation--property-appraisals & Appraisal DistrictsTaxation--property-exemptionsAssisted Living Facilities
03

House Authors

Rep. Drew DarbyRepublican · Primary Author
Joint Authors

Senate Sponsors

Sen. Angela PaxtonRepublican · Primary Sponsor
Cosponsors (1)

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

Related Legislation

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More from Rep. Drew Darby

View all bills by Rep. Drew Darby

Related by Topic

View more Aging legislation
Quick Reference

Frequently Asked Questions

Common questions about HB2525

Q

What does Texas HB2525 do?

HB2525 establishes a new property tax exemption pathway for charitable organizations providing housing and services to persons aged 62 and older, effective January 1, 2026. This legislation allows 501(c)(3) entities to qualify for ad valorem tax exemptions if they have existed for at least 20 years (or are under common control of such an entity) and can prove their provision of "charitable housing and services" equals at least 4% of net resident revenue.

Q

Who authored HB2525?

HB2525 was authored by Texas Representative Drew Darby during the Regular Session.

Q

When was HB2525 signed into law?

HB2525 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce HB2525?

HB2525 is enforced by County Appraisal Districts (Local) and Texas Comptroller of Public Accounts (Oversight).

Q

How significant are the changes in HB2525?

The regulatory priority for HB2525 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of HB2525?

The cost impact of HB2525 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does HB2525 address?

HB2525 addresses topics including aging, charitable & nonprofit organizations, health, health--indigent health care and nursing homes.

Q

What are the key dates for HB2525?

Key dates for HB2525: Effective date is 2026-01-01. Consult with legal counsel regarding applicability.

Q

Which Texas businesses are affected by HB2525?

HB2525 primarily affects healthcare providers and medical facilities, property owners and real estate professionals. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026