§ 40.001.Endowment of Certain Nonprofit Institutions

A collection restriction, narrowly drawn on both sides — which institutions, and which funds.

The institutions covered are nonprofit institutions or facilities licensed under the Health and Safety Code chapters governing nursing and assisted living facilities, or under the Human Resources Code chapter on child-care facilities, that were before the action was filed affiliated with either a tax-exempt nonprofit religious organization of a described kind, or a local Jewish Federation. A program operated by such an institution is also covered.

The affiliation must predate the filing, which prevents an institution acquiring the protection after a claim arises.

What is protected is not the institution but a particular kind of fund. A claimant may not collect damages from an endowment fund, restricted fund, or similar fund or account, or the income derived from its corpus, where four conditions all hold.

The fund is exempt from federal taxation.

The corpus, income or a distribution is used to assist in funding care provided by a licensed nursing institution affiliated with the qualifying organization.

The corpus is derived from donations or grants from third parties or public sources — so money the institution itself set aside is not protected.

The use is temporarily or permanently restricted, either by the donor or grantor — through express language, action, agreement, or the manner in which the donation was solicited — or by the board governing the fund at the time the donation is accepted.

The rationale is about the donors rather than the institution. Money given for a stated charitable purpose was not given to answer a tort judgment, and a restricted gift diverted to damages defeats what the donor intended.

Note the limit of the protection: it is about collection, not liability. The institution can be sued and a judgment entered; what this restricts is the source from which it may be satisfied.