(a) An association that qualifies as a youth development association as provided by Subsection (d) is entitled to an exemption from taxation of:
(1) the tangible property that:
(A) is owned by the association;
(B) except as permitted by Subsection (b), is used exclusively by qualified youth development associations; and
(C) is reasonably necessary for the operation of the association; and
(2) the real property owned by the youth development association consisting of:
(A) an incomplete improvement that:
(i) is under active construction or other physical preparation; and
(ii) is designed and intended to be used exclusively by qualified youth development associations when complete; and
(B) the land on which the incomplete improvement is located that will be reasonably necessary for the use of the improvement by qualified youth development associations.
(b) Use of exempt tangible property by persons who are not youth development associations qualified as provided by Subsection (d) of this section does not result in the loss of an exemption under this section if the use is incidental to use by qualified associations and benefits the individuals the associations serve.
(c) An association that qualifies as a youth development association as provided by Subsection (d) of this section is entitled to an exemption from taxation of those endowment funds the association owns that are used exclusively for the support of the association and are invested exclusively in bonds, mortgages, or property purchased at a foreclosure sale for the purpose of satisfying or protecting the bonds or mortgages. However, foreclosure-sale property that is held by an endowment fund for longer than the two-year period immediately following purchase at the foreclosure sale is not exempt from taxation.
(d) To qualify as a youth development association for the purposes of this section, an association must:
(1) be organized and operated primarily for the purpose of promoting the threefold spiritual, mental, and physical development of boys, girls, young men, or young women;
(2) be operated in a way that does not result in accrual of distributable profits, realization of private gain resulting from payment of compensation in excess of a reasonable allowance for salary or other compensation for services rendered, or realization of any other form of private gain;
(3) operate in conjunction with a state or national organization that is organized and operated for the same purpose as the association;
(4) use its assets in performing the association's youth development functions or the youth development functions of another youth development association; and
(5) by charter, bylaw, or other regulation adopted by the association to govern its affairs direct that on discontinuance of the association by dissolution or otherwise the assets are to be transferred to this state, the United States, or a charitable, educational, religious, or other similar organization that is qualified as a charitable organization under Section 501(c)(3), Internal Revenue Code of 1954 , as amended. 1
(e) A property may not be exempted under Subsection (a)(2) for more than three years.
(f) For purposes of Subsection (a)(2), an incomplete improvement is under physical preparation if the youth development association has:
(1) engaged in architectural or engineering work, soil testing, land clearing activities, or site improvement work necessary for the construction of the improvement; or
(2) conducted an environmental or land use study relating to the construction of the improvement.
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