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)

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

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

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.

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

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)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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More from Rep. Drew Darby

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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?