Published on:

A New Ad Valorem Tax Exemption for Minerals Owned by Charities

Governor Abbot has signed House Bill 456, passed by the Legislature, granting certain charities an exemption from ad valorem taxes on their oil and gas royalties, effective January 1, 2024. The bill amends Tax Code Section 11.18(a), which provides ad valorem tax exemptions for charitable organizations, including churches and educational institutions. The bill amends the statute to provide an ad valorem tax exemption for mineral and royalty interests, but only for some charitable organizations.

The exemption applies to the following types of charitable organizations who provide services without regard to ability to pay, but only if the mineral or royalty interest (i) is not severed from the surface estate (i.e., is under land owned by the charity), or (ii) was donated to the charity:

  • a charity providing medical care;
  • a charity providing support for orphans, delinquent, dependent or handicapped children in need of residential care; abused or battered spouses or children in need of temporary shelter; the impoverished; or victims of natural disaster;
  • a charity that provides facilities to address special needs of elderly persons;
  • a charity that promotes or operates a museum, zoo, library, theater of the dramatic or performing arts, symphony orchestra or choir;
  • a charity that answers fire alarms and extinguishes fires with no compensation to the members of the organization (a volunteer fire department);
  • a charity that provides permanent housing and related social, health care, and educational facilities for persons who are 62 years of age or older;
  • a charity that provides 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 (and meets other requirements in the statute);
  • a charity that provides 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 either without regard to the residents’ ability to pay or in which at least 4% of the retirement community’s combined net resident revenue is provided in charitable care to its residents.

The Comptroller’s fiscal note that accompanied the bill said it was not able to calculate the cost of the bill to the State treasury, because there are 157,000 charitable organizations in the State. “he number of organizations that perform the qualifying charitable functions, and with a mineral interest in place, and the value of those properties that would be exempt under this bill is unknown. Consequently, the cost of the bill cannot be estimated.”


Contact Information