Which businesses must follow Texas's extra licensing rules to run a home health agency?

Plain-English summary

To run a home health agency in Texas, a business that provides health services in patients' homes, you need a license from the Department of Health. Businesses that are not just a single individual (corporations, partnerships, and the like) have to meet some extra application requirements in section 142.005 of the Health and Safety Code. The Department asked the Attorney General to settle three questions about exactly how broadly that section reaches.

The first question was whether the requirement aimed at a "business entity that includes members that are not individuals" applies only to nonprofit corporations. The Department's theory was that only nonprofit corporations have "members" (for-profit corporations have shareholders), so the language must be about nonprofits. The Attorney General disagreed. While "members" does describe a nonprofit corporation, it also describes other business forms, including the then-newer limited liability company, whose owners are likewise called members. The opinion concluded the legislature deliberately used broad language so the requirement would reach every kind of business entity wanting to run a home health agency, for-profit ones included.

The second question was about a "corporation the shares of which are owned by another corporation." Does that mean a corporation where another corporation owns all the shares, or any of the shares? The answer was "any." The version of this law in effect before a 1989 recodification used the word "any." When the Legislature recodifies a statute and labels the change "nonsubstantive," the older wording controls if there is a conflict, so the opinion read "any" back into the current section.

The third question was whether a foreign (out-of-state) corporation that is registered to do business in Texas still has to form a Texas corporation to get a home health agency license. The opinion concluded yes, consistent with the older version of the statute. The Department worried this might conflict with the Business Corporation Act, which says a registered foreign corporation gets "the same, but no greater" rights as a Texas corporation. The opinion concluded there was no conflict: the Business Corporation Act provision is a general rule about foreign corporations, while section 142.005 is a specific rule about home health agencies, and when a specific statute and a general statute clash, the specific one wins. The opinion did not decide whether that requirement is constitutional, since it was not asked.

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. Home health agency regulation in Texas has since moved among agencies (now handled largely by the Health and Human Services Commission rather than the Department of Health), the Texas Business Corporation Act was replaced by the Business Organizations Code, and the cited statutes have been amended, so confirm current law before relying on anything described here.

Background and statutory framework

Chapter 142 of the Health and Safety Code governs home health services, defined generally as providing, for pay or other consideration, a health service in a patient's residence (Health & Safety Code § 142.001(5); see 25 T.A.C. § 115.2; "residence" includes a home, nursing home, or convalescent home). Any "person," defined to include an individual, corporation, or association (§ 142.001(6)), who wants to offer home health services must first obtain a license from the Department of Health (§ 142.002(a); see § 11.001(3)). An applicant must complete the department's application and pay a license fee (§ 142.004(a)(1), (4); see § 142.010). Non-individual applicants must meet the additional requirements in section 142.005, which provides in part that if an applicant proposes to operate a home health agency through a partnership, corporation, or other business entity that includes members that are not individuals, or through a corporation the shares of which are owned by another corporation, the applicant must establish a Texas corporation if it is not already one. The current chapter is a 1989 nonsubstantive codification of former V.T.C.S. article 4447u (Acts 1989, 71st Leg., ch. 678); article 4447u was enacted in 1979 (Acts 1979, 66th Leg., ch. 642) and first gained a provision like section 142.005 in 1987, when section 7A was added by floor amendment to Senate Bill 1371 (Acts 1987, 70th Leg., ch. 1091, § 5), described by its sponsor only as strengthening the licensing procedure.

Question 1: for-profit entities are covered too. The Department believed "business entity that includes members that are not individuals" referred only to nonprofit corporations, reasoning that only nonprofit corporations have "members" while for-profit corporations have shareholders. The opinion disagreed. Although "member" does describe a nonprofit corporation (V.T.C.S. art. 1396-1.02(A)(6), defining "member" as one having membership rights in a not-for-profit corporation), the term can describe other entities as well, such as a limited liability company, a hybrid between a corporation and a partnership whose owners are called members. The opinion noted the limited liability company postdated section 142.005's predecessor, but reasoned the legislature used broad descriptive language rather than a list of specific entity types so the section would apply to every business entity wanting to operate a home health agency. It concluded the phrase encompasses not only nonprofit corporations but also for-profit business entities that include non-individual members.

Question 2: "any" of the shares, not "all." The opinion considered whether "corporation the shares of which are owned by another corporation" means another corporation owns any of the shares or all of them. The predecessor statute (V.T.C.S. art. 4447u, § 7A(a)) read "a corporation in which any of the stock is owned by another corporation" (Acts 1987, 70th Leg., ch. 1091, § 5). Because a former statute controls when it conflicts with a nonsubstantive revision made on a proposal from the Texas Legislative Council (Johnson v. City of Fort Worth, 774 S.W.2d 653, 654-55 (Tex. 1989)), the opinion read "any" into section 142.005. So the phrase refers to a corporation in which another corporation owns any of the shares.

Question 3: foreign corporations must form a Texas corporation. The opinion concluded that, to the extent section 142.005(a)(1) is ambiguous, the predecessor statute is instructive: it required an applicant to establish a Texas corporation if the applicant is not a Texas corporation, which the opinion read as requiring a foreign corporation to form a Texas corporation to be licensed as a home health agency (construing the current statute consistently; Johnson, 774 S.W.2d at 654-55). The Department pointed out that this might contravene Texas Business Corporation Act article 8.02(A), under which a registered foreign corporation enjoys "the same, but no greater, rights and privileges as a domestic corporation organized for" the same purposes. The opinion found no conflict: article 8.02 concerns foreign corporations generally, while section 142.005 concerns only foreign corporations wanting to operate a home health agency, making article 8.02 the more general statute. When a general statute and a special statute conflict, the special statute prevails as an exception (Gov't Code § 311.026(b); AG Opinions JM-1237 (1990), WW-482 (1958)). The opinion did not consider whether section 142.005(a)(1) is constitutional.

Common questions

Does the home-health licensing rule for business entities apply to for-profit companies?
Yes. The opinion concluded the rule for a "business entity that includes members that are not individuals" reaches for-profit entities too, including limited liability companies, not just nonprofit corporations.

If another corporation owns just some shares of my company, does the extra rule apply?
Yes. The opinion concluded the statute covers a corporation in which another corporation owns any of the shares, not only one wholly owned by another corporation.

Can an out-of-state corporation get a Texas home health agency license without forming a Texas corporation?
No. The opinion concluded a foreign corporation must establish a Texas corporation to be licensed as a home health agency under section 142.005(a)(1).

Doesn't that conflict with the rule that registered foreign corporations get the same rights as Texas corporations?
The opinion concluded it does not. The Business Corporation Act provision is a general rule, while the home-health statute is a specific one, and a specific statute prevails over a general one.

Citations

• Health & Safety Code ch. 142 (home health services); § 142.001 (definitions of "home health service," "person," "residence"); § 142.002(a) (license required); § 142.004 (application and fee); § 142.005 (additional requirements for non-individual applicants; § 142.005(a), (a)(1)); § 142.010 (fee ranges); § 11.001(3) (definition of "department")
• 25 T.A.C. § 115.2
• V.T.C.S. art. 4447u, § 7A (predecessor statute); V.T.C.S. art. 1396-1.02(A)(6) (nonprofit "member")
• Texas Business Corporation Act art. 8.02(A) (registered foreign corporations); Gov't Code § 311.026(b) (special statute prevails over general)
• Acts 1989, 71st Leg., ch. 678; Acts 1979, 66th Leg., ch. 642; Acts 1987, 70th Leg., ch. 1091, § 5
• Johnson v. City of Fort Worth, 774 S.W.2d 653 (Tex. 1989)
• Attorney General Opinions JM-1237 (1990), WW-482 (1958)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0205
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1993/dm0205.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; garbled case names were verified against the official reporters. The linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

February 25, 1993

David Smith, M.D.
Commissioner
Texas Department of Health
1100 West 49th Street
Austin, Texas 78756-3199

Opinion No. DM-205

Re: Whether section 142.005 of the Health and Safety Code applies to nonprofit corporations and related questions (RQ-491)

Dear Dr. Smith:

Your predecessor-in-office asked this office to construe section 142.005 of the Health and Safety Code. Chapter 142 of the Health and Safety Code applies to home health services, which are defined generally as "the provision, for pay or other consideration, of a health service in a patient's residence."¹ Health & Safety Code § 142.001(5); see also 25 T.A.C. § 115.2. Any person, which term is defined to include an individual, corporation, or association, Health & Safety Code § 142.001(6), that desires to engage in the business of offering home health services first must obtain a license from the Department of Health (the "department"). Id. § 142.002(a); see id. § 11.001(3) (defining "department"). An applicant for a license to offer home health services must, among other things, complete an application as prescribed by the department and pay a license fee. Id. § 142.004(a)(1), (4); see id. § 142.010 (specifying ranges for various license fees that department must set and collect). Non-individual applicants must comply with additional license application requirements, which the legislature has articulated in section 142.005 of the Health and Safety Code. Section 142.005 provides in pertinent part as follows:

(a) If an applicant for a license, other than a renewal or branch office license, proposes to operate a home health agency through a partnership, corporation, or other business entity that includes members that are not individuals, or through a corporation the shares of which are owned by another corporation, the applicant must:

(1) establish a corporation under the laws of this state if the applicant is not a corporation organized under the laws of this state.

The legislature codified the statutory predecessor to chapter 142 of the Health and Safety Code, V.T.C.S. article 4447u, in 1989. See Acts 1989, 71st Leg., ch. 678, § 1, at 2370-71. The legislature expressly stated that the codification was nonsubstantive. See Acts 1989, 71st Leg., ch. 678, § 1 (caption to act). The legislature had enacted article 4447u, V.T.C.S., in 1979. See Acts 1979, 66th Leg., ch. 642, at 1466. Article 4447u did not include a provision similar to section 142.005 of the Health and Safety Code, however, until 1987, when the legislature added section 7A. See Acts 1987, 70th Leg., ch. 1091, § 5, at 3702.

Representative Barton proposed adding section 7A on the floor of the house during the second reading of Senate Bill 1371. See Debate on S.B. 1371 on the Floor of the House, 70th Leg. (May 29, 1987) (statement of Representative Barton) (tape on file with House Committee Coordinator); H.J. of Tex., 70th Leg., at 3899 (1987). Representative Barton stated only that the amendment he proposed would "strengthen licensing procedure." Debate on S.B. 1371 on the Floor of the House, 70th Leg. (May 29, 1987) (statement of Representative Barton) (tape on file with House Committee Coordinator). We were unable to find any additional legislative history indicating the intent of section 142.005's statutory predecessor.

Your predecessor-in-office first asked whether the language in section 142.005(a) regarding a business entity "that includes members that are not individuals" applies only to a nonprofit corporation. Your predecessor stated that the department believes that the quoted language refers only to a nonprofit corporation because a nonprofit corporation is the only type of corporation that has members; a for-profit corporation, on the other hand, has shareholders, not members. We disagree.

Based on our reading of section 142.005, we believe that the legislature intended all non-individual applicants to comply with the additional license application requirements articulated in subsection (a), regardless of the business entity's structure (e.g., limited partnership, general partnership, corporation) or whether the business entity is for-profit or nonprofit. While we agree that "business entity that includes members" describes a nonprofit corporation, see V.T.C.S. art. 1396-1.02(A)(6) (defining "member" as "one having membership rights in a [not-for-profit] corporation in accordance with the provisions of its articles of incorporation or its by-laws"); see also 15 Tex. Jur. 3d Corporations § 502, at 644-45 (1981), we understand that it may describe other business entities as well. For example, we are advised that a limited liability company is a recent hybrid between a corporation and a partnership; the owners of a limited liability company are called members. We understand that the development of the limited liability company postdates the enactment of section 142.005's predecessor; however, in our opinion, the legislature employed broad descriptive language in section 142.005(a) instead of a list of specific types of business entities so that the section would apply to every business entity that desires to operate a home health agency. We conclude, therefore, that "business entity that includes members that are not individuals" in section 142.005(a) of the Health and Safety Code encompasses not only nonprofit corporations but also for-profit business entities that include members that are not individuals.

Your predecessor-in-office next asked whether the language in section 142.005(a) regarding a "corporation the shares of which are owned by another corporation" refers to a corporation in which another corporation owns any of the shares, or whether it refers to a corporation in which another corporation owns all of the shares. In our opinion, the language of the predecessor statute, V.T.C.S. article 4447u, section 7A, is instructive. Prior to codification in 1989, V.T.C.S. article 4447u, section 7A(a) read in pertinent part as follows: "If an applicant for a license . . . proposes to operate a home health agency . . . through a corporation in which any of the stock is owned by another corporation . . . ." Acts 1987, 70th Leg., ch. 1091, § 5, at 3702 (emphasis added). When a conflict exists between a former statute and a revision the legislature has made pursuant to a proposal for nonsubstantive revisions from the Texas Legislative Council, the former statute will control. See Johnson v. City of Fort Worth, 774 S.W.2d 653, 654-55 (Tex. 1989). Consequently, we must read "any" into section 142.005 of the Health and Safety Code. Thus, a "corporation the shares of which are owned by another corporation" in section 142.005 refers to a corporation in which another corporation owns any of the shares.

Finally, your predecessor-in-office asked whether a foreign corporation registered to do business in the State of Texas must establish a domestic corporation to meet the requirements of section 142.005(a)(1) of the Health and Safety Code. To the extent that section 142.005(a)(1) is ambiguous, we believe that the language of V.T.C.S. article 4447u, section 7A is instructive. Prior to codification, subsection (a)(1) required an applicant to "establish a corporation under Texas law if the applicant is not a Texas corporation." Id. In our opinion, article 4447u, section 7A required a foreign corporation to establish a Texas corporation to meet the requirements for licensing as a home health agency. We construe section 142.005 of the Health and Safety Code consistently with its statutory predecessor. See Johnson, 774 S.W.2d at 654-55.

Your predecessor-in-office pointed out that an interpretation of section 142.005(a)(1) that requires a foreign corporation registered to do business in the State of Texas to establish a domestic corporation may contravene article 8.02(A) of the Texas Business Corporation Act. Article 8.02(A) provides that a foreign corporation that has registered in accordance with the Business Corporation Act shall "enjoy the same, but no greater, rights and privileges as a domestic corporation organized for" the same purposes. Because article 8.02 of the Business Corporation Act concerns foreign corporations generally, while section 142.005 of the Health and Safety Code concerns only foreign corporations that desire to operate a home health agency in Texas, article 8.02(A) is a more general statute than section 142.005. If a general statute and a special statute conflict, the special statute prevails as an exception to the general statute. Gov't Code § 311.026(b); Attorney General Opinions JM-1237 (1990) at 4; WW-482 (1958) at 2. Accordingly, this interpretation of section 142.005(a)(1) of the Health and Safety Code does not contravene article 8.02 of the Business Corporation Act.²

SUMMARY

In the context of section 142.005(a) of the Health and Safety Code, "business entity that includes members that are not individuals" encompasses not only nonprofit corporations but also for-profit business entities that include members that are not individuals. Again in the context of section 142.005(a), "corporation the shares of which are owned by another corporation" describes a corporation in which another corporation owns any of the shares. Section 142.005(a)(1) requires a foreign corporation to establish a Texas corporation if the corporation desires to be licensed to operate a home health agency in Texas.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Kymberly K. Oltrogge
Assistant Attorney General

¹ In the context of chapter 142 of the Health and Safety Code, "residence" refers to any place where a person resides, including a home, a nursing home, or a convalescent home for the disabled or aged. Health & Safety Code § 142.001(8); see also 25 T.A.C. § 115.2.

² You do not ask, and therefore we do not consider, whether section 142.005(a)(1) of the Health and Safety Code is constitutional.