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.

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. 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).

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 urgent is compliance with HB2525?

The compliance urgency for HB2525 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

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.

ModeratePlan for compliance

Low Cost

Effective:2026-01-01

Enforcing Agencies

County Appraisal Districts (Local) • Texas Comptroller of Public Accounts (Oversight)

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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Legislative Timeline

This bill's path through the Texas Legislature

TopicsAging Charitable & Nonprofit Organizations Health Health--indigent Health Care Nursing Homes Taxation Taxation--property-appraisals & Appraisal Districts Taxation--property-exemptions Assisted Living Facilities

Official Analysis

View HRO Analysis View All Bill Documents

BILL ANALYSIS

H.B. 2525

By: Darby

Ways & Means

Committee Report (Unamended)

BACKGROUND AND PURPOSE

For an organization to qualify for a property tax exemption as a charitable organization, the organization must be engaged exclusively in performing one or more of the charitable functions listed in Tax Code provisions relating to the exemption. As one such type of charitable organization, charitable senior housing providers and retirement communities, in addition to providing permanent housing for older Texans, can often offer various social, healthcare, and educational services that can improve the lives of residents, families, and caregivers. Unfortunately, as the author has informed the committee, some of these organizations have had their property tax exemptions challenged or revoked despite the substantial benefits these organizations provide to seniors. The lack of clarity regarding property tax exemptions can place qualified charitable organizations serving seniors at greater risk of losing their exemptions, which can threaten their ability to provide vital services to a vulnerable population. H.B. 2525 seeks to provide certainty to charitable senior housing organizations that their exemptions will not be arbitrarily revoked by appraisal districts by providing for an exemption for certain organizations engaged in charitable functions involving the provision of charitable housing and services to individuals 62 years of age or older.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

H.B. 2525 amends the Tax Code to revise provisions establishing the charitable functions that qualify an otherwise eligible charitable organization for a property tax exemption for certain property owned or used by the charitable organization. The bill includes among such functions the provision of permanent housing and related social, health care, and educational facilities for persons who are 62 years of age or older as an organization that provides charitable housing and services in an amount that is not less than four percent of the charitable organization's net resident revenue. The bill also makes the following changes with respect to organizations providing housing and related services to persons who are 62 years of age or older in a retirement community:

·removes the function of providing housing and related services to such persons in a retirement community that provides independent living services, assisted living services, and nursing services to its residents on a single campus in which at least four percent of the retirement community's combined net resident revenue is provided in charitable care to its residents; and

·includes instead the function of providing housing and related services to such persons in a retirement community that provides independent living services, assisted living services, and nursing services to its residents on a single campus as an organization that provides charitable housing and services in an amount that is not less than four percent of the charitable organization's net resident revenue.

H.B. 2525 defines "charitable housing and services" as the following provided by a charitable organization to a person 62 years of age or older in financial need:

·housing, including as an independent living facility, assisted living facility, or nursing facility; and

·any service designed to meet the unique needs of a person 62 years of age or older, including ministerial services, government-sponsored indigent health care, social services, health services, educational services, and donations to an organization that qualifies for an exemption for providing for persons 62 years of age or older permanent housing and related social, health care, and educational facilities or housing and related services in a retirement community, as applicable.

H.B. 2525 applies only to a property tax year that begins on or after the bill's effective date.

EFFECTIVE DATE

January 1, 2026.

House Authors

Rep. Drew DarbyRepublican · Primary Author

Joint Authors

Senate Sponsors

Sen. Angela PaxtonRepublican · Primary Sponsor

Cosponsors (1)

Kevin Sparks (R)

Bill Text(with markup)

H.B. No. 2525

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	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.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Section 11.18, Tax Code, is amended by amending
	Subsection (d) and adding Subsection (k-1) to read as follows:
	(d) A charitable organization must be organized exclusively
	to perform religious, charitable, scientific, literary, or
	educational purposes and, except as permitted by Subsections (h)
	and (l), engage exclusively in performing one or more of the
	following charitable functions:
	(1) providing medical care without regard to the
	beneficiaries' ability to pay, which in the case of a nonprofit
	hospital or hospital system means providing charity care and
	community benefits in accordance with Section 11.1801;
	(2) providing support or relief to orphans, delinquent
	or dependent children in need of residential care, children with
	disabilities in need of residential care, abused or battered
	spouses or children in need of temporary shelter, the impoverished,
	or victims of natural disaster without regard to the beneficiaries'
	ability to pay;
	(3) providing support without regard to the
	beneficiaries' ability to pay to:
	(A) elderly persons, including the provision of:
	(i) recreational or social activities; and
	(ii) facilities designed to address the
	special needs of elderly persons; or
	(B) persons with disabilities, including
	training and employment:
	(i) in the production of commodities; or
	(ii) in the provision of services under 41
	U.S.C. Sections 8501-8506;
	(4) preserving a historical landmark or site;
	(5) promoting or operating a museum, zoo, library,
	theater of the dramatic or performing arts, or symphony orchestra
	or choir;
	(6) promoting or providing humane treatment of
	animals;
	(7) acquiring, storing, transporting, selling, or
	distributing water for public use;
	(8) answering fire alarms and extinguishing fires with
	no compensation or only nominal compensation to the members of the
	organization;
	(9) promoting the athletic development of boys or
	girls under the age of 18 years;
	(10) preserving or conserving wildlife;
	(11) promoting educational development through loans
	or scholarships to students;
	(12) providing halfway house services pursuant to a
	certification as a halfway house by the parole division of the Texas
	Department of Criminal Justice;
	(13) providing permanent housing and related social,
	health care, and educational facilities for persons who are 62
	years of age or older:
	(A) without regard to the residents' ability to
	pay; or
	(B) as an organization that provides charitable
	housing and services in an amount that is not less than four percent
	of the charitable organization's net resident revenue;
	(14) promoting or operating an art gallery, museum, or
	collection, in a permanent location or on tour, that is open to the
	public;
	(15) providing for the organized solicitation and
	collection for distributions through gifts, grants, and agreements
	to nonprofit charitable, education, religious, and youth
	organizations that provide direct human, health, and welfare
	services;
	(16) performing biomedical or scientific research or
	biomedical or scientific education for the benefit of the public;
	(17) operating a television station that produces or
	broadcasts educational, cultural, or other public interest
	programming and that receives grants from the Corporation for
	Public Broadcasting under 47 U.S.C. Section 396, as amended;
	(18) providing housing for low-income and
	moderate-income families, for unmarried individuals 62 years of age
	or older, for individuals with disabilities, and for families
	displaced by urban renewal, through the use of trust assets that are
	irrevocably and, pursuant to a contract entered into before
	December 31, 1972, contractually dedicated on the sale or
	disposition of the housing to a charitable organization that
	performs charitable functions described by Subdivision (9);
	(19) providing housing and related services to persons
	who are 62 years of age or older in a retirement community, if the
	retirement community provides independent living services,
	assisted living services, and nursing services to its residents on
	a single campus:
	(A) without regard to the residents' ability to
	pay; [or]
	(B) in which at least four percent of the
	retirement community's combined net resident revenue is provided in
	charitable care to its residents; or
	(C) as an organization that provides charitable
	housing and services in an amount that is not less than four percent
	of the charitable organization's net resident revenue;
	(20) providing housing on a cooperative basis to
	students of an institution of higher education if:
	(A) the organization is exempt from federal
	income taxation under Section 501(a), Internal Revenue Code of
	1986, as amended, by being listed as an exempt entity under Section
	501(c)(3) of that code;
	(B) membership in the organization is open to all
	students enrolled in the institution and is not limited to those
	chosen by current members of the organization;
	(C) the organization is governed by its members;
	and
	(D) the members of the organization share the
	responsibility for managing the housing;
	(21) acquiring, holding, and transferring unimproved
	real property under an urban land bank demonstration program
	established under Chapter 379C, Local Government Code, as or on
	behalf of a land bank;
	(22) acquiring, holding, and transferring unimproved
	real property under an urban land bank program established under
	Chapter 379E, Local Government Code, as or on behalf of a land bank;
	(23) providing housing and related services to
	individuals who:
	(A) are unaccompanied and homeless and have a
	disabling condition; and
	(B) have been continuously homeless for a year or
	more or have had at least four episodes of homelessness in the
	preceding three years;
	(24) operating a radio station that broadcasts
	educational, cultural, or other public interest programming,
	including classical music, and that in the preceding five years has
	received or been selected to receive one or more grants from the
	Corporation for Public Broadcasting under 47 U.S.C. Section 396, as
	amended;
	(25) providing, without regard to the beneficiaries'
	ability to pay, tax return preparation services and assistance with
	other financial matters; or
	(26) providing services related to planning for the
	placement of or placing children in foster or adoptive homes or
	providing support or relief to women who are or may be pregnant and
	who are considering placing their unborn children for adoption.
	(k-1) Notwithstanding any other provision of this section,
	to be entitled to an exemption from taxation under this section as
	an organization that performs a charitable function described by
	Subsection (d)(13) or (19) in the manner described by Subsection
	(d)(13)(B) or (19)(C), respectively, a charitable organization
	must:
	(1) have been in existence for at least 20 years; or
	(2) be under common control with an organization that:
	(A) is described by Subdivision (1); and
	(B) performs a charitable function described by
	Subsection (d).
	SECTION 2. Section 11.18(k), Tax Code, is amended by adding
	Subdivision (1-a) and amending Subdivision (2) to read as follows:
	(1-a) "Charitable housing and services" means the
	following provided by a charitable organization to a person 62
	years of age or older in financial need:
	(A) housing, including as an independent living
	facility, assisted living facility, or nursing facility; and
	(B) any service designed to meet the unique needs
	of a person 62 years of age or older, including:
	(i) ministerial services;
	(ii) government-sponsored indigent health
	care;
	(iii) social services;
	(iv) health services;
	(v) educational services; and
	(vi) donations to an organization that
	qualifies for an exemption under Subsection (d)(13) or (19).
	(2) "Charity care," "government-sponsored indigent
	health care," and "net resident revenue" are determined in the same
	manner for a retirement community or nursing home as "charity
	care," "government-sponsored indigent health care," and "net
	patient revenue," respectively, are determined for a hospital under
	Section 11.1801(a)(2).
	SECTION 3. The changes in law made by this Act apply only to
	an ad valorem tax year that begins on or after the effective date of
	this Act.
	SECTION 4. This Act takes effect January 1, 2026.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


March 22, 2025

TO:	Honorable Morgan Meyer, Chair, House Committee on Ways & Means

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	HB2525 by Darby (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.), As Introduced

The bill would expand eligibility for the exemption for certain charitable organizations to include organizations that provide charitable housing and services, in an amount not less than four percent of the organization's net resident revenue, to persons who are at least 62 years of age. The bill would add a definition for “charitable housing and services” and expand the definition of "charity care."

To the extent the bill would result in an increase in the number of organizations eligible for exemption, there would be reduced taxable property value and a cost to the state through the operation of school funding formulas. However, the number of newly-qualifying organizations associated with the bill's provisions is unknown; consequently, the taxable property value loss cannot be determined.

Local Government Impact

Passage of the bill would expand eligibility for the exemption for certain charitable organizations to include organizations that provide charitable housing and services to persons who are at least 62 years of age, with some qualifications. As a result, taxable property values could be reduced. However, the no-new-revenue and voter-approval tax rates as provided by Section 26.04, Tax Code could be higher as a consequence of the reduced taxable value proposed by the bill. If cities, counties, and special districts did not adopt higher rates, local levies would be reduced. If those jurisdictions adopted higher tax rates, the initial revenue loss from the exemption would be offset by increased tax levies from owners of non-exempt property and slightly reduced tax savings from owners of exempt property.

Source Agencies:

304 Comptroller of Public Accounts

LBB Staff:

JMc, KK, SD, BRI

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Frequently Asked Questions

Common questions about HB2525

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. 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).

Who authored HB2525?