By: Ordaz Perez, Button, et al. H.B. No. 3271
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to establishing loan programs to assist certain
  micro-businesses by increasing access to capital; authorizing
  fees.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 481, Government Code, is amended by
  adding Subchapters CC and EE to read as follows:
         SUBCHAPTER CC. MICRO-BUSINESS DISASTER RECOVERY PROGRAM
         Sec. 481.451.  DEFINITIONS. In this subchapter:
               (1)  "Community development financial institution" has
  the meaning assigned by 12 U.S.C. Section 4702.
               (2)  "Declared disaster" has the meaning assigned by
  Section 481.551.
               (3)  "Default rate" means the percentage of
  micro-business disaster recovery loans made that did not meet the
  payment terms during a period specified by the bank.
               (4)  "Fund" means the micro-business recovery fund
  established under Section 481.452.
               (5)  "Micro-business" means a corporation,
  partnership, sole proprietorship, or other legal entity that:
                     (A)  is domiciled in this state and has at least 95
  percent of its employees located in this state;
                     (B)  is formed to make a profit; and
                     (C)  employs not more than 20 employees.
               (6)  "Micro-business disaster recovery loan" or
  "disaster recovery loan" means a loan made by a participating
  community development financial institution to micro-businesses
  under the program.
               (7)  "Program" means the micro-business disaster
  recovery loan program established under this subchapter.
         Sec. 481.452.  MICRO-BUSINESS RECOVERY FUND. (a) The
  micro-business recovery fund is a dedicated account in the general
  revenue fund.
         (b)  Appropriations for the implementation and
  administration of this subchapter and Subchapter EE and any other
  amounts received by the bank or state under this subchapter or
  Subchapter EE shall be deposited in the fund.
         (c)  Money in the fund may be appropriated only to the bank
  for use in carrying out the purposes of this subchapter and
  Subchapter EE.
         (d)  The financial transactions of the fund are subject to
  audit by the state auditor as provided by Chapter 321.
         Sec. 481.453.  POWERS OF BANK IN ADMINISTERING
  MICRO-BUSINESS RECOVERY FUND. In administering the fund, the bank
  has the powers necessary to carry out the purposes of this
  subchapter and Subchapter EE, including the power to:
               (1)  make, execute, and deliver contracts,
  conveyances, and other instruments necessary to the exercise of its
  powers;
               (2)  invest money at the bank's discretion in
  obligations determined proper by the bank, and select and use
  depositories for its money;
               (3)  employ personnel and counsel and pay those persons
  from money in the fund legally available for that purpose; and
               (4)  impose and collect fees and charges in connection
  with any transaction and provide for reasonable penalties for
  delinquent payment of fees or charges.
         Sec. 481.454.  ESTABLISHMENT OF LOAN PROGRAM; PURPOSE. (a)  
  The bank shall establish and administer a revolving loan program as
  provided by this subchapter.
         (b)  The program shall expand access to capital for
  qualifying micro-businesses to create jobs in this state.
         Sec. 481.455.  PROGRAM ADMINISTRATION. (a) The bank, under
  the program, shall provide zero interest loans to eligible
  community development financial institutions for purposes of
  making interest-bearing loans to qualifying micro-businesses that
  have difficulty in accessing capital following a declared disaster.
         (b)  A loan made by an eligible community development
  financial institution under the program:
               (1)  must be made to a micro-business that:
                     (A)  is in good standing under the laws of this
  state; and
                     (B)  did not owe delinquent taxes to a taxing unit
  of this state before the date of the initial issuance of the
  disaster declaration;
               (2)  may not be made to a micro-business that:
                     (A)  has total revenue that exceeds the amount for
  which no franchise tax is due under Section 171.002(d)(2), Tax
  Code;
                     (B)  is a franchise;
                     (C)  is a national chain with operations in this
  state;
                     (D)  is a lobbying firm; or
                     (E)  is a private equity firm or backed by a
  private equity firm; and
               (3)  must meet any other criteria provided by this
  subchapter.
         (c)  Payments on micro-business disaster recovery loans
  shall be made directly to the lending community development
  financial institutions. The financial institutions shall use the
  loan payment money received from borrowers to make new loans as
  provided by this subchapter.
         (c-1)  In awarding loans under the program, a community
  development financial institution participating in the program
  shall give preference to applicant micro-businesses that did not
  receive a loan or grant under the Coronavirus Aid, Relief, and
  Economic Security Act (15 U.S.C. Section 9001 et seq.), as amended
  by the Paycheck Protection Program Flexibility Act of 2020 (Pub. L.
  No. 116-142) and the Consolidated Appropriations Act, 2021 (Pub. L.
  No. 116-260).
         (d)  All income received on a loan made by a community
  development financial institution participating in the program is
  the property of the financial institution. Income received on a
  loan includes the payment of interest by a borrower micro-business
  and the administrative fees assessed by the community development
  financial institution.
         (e)  A community development financial institution
  participating in the program shall repay the bank the zero interest
  loans borrowed by the financial institution under the program
  quarterly, and the bank or this state is not responsible or liable
  for any defaults in micro-business disaster recovery loans made by
  the community financial institution.
         Sec. 481.456.  RULEMAKING. The executive director shall
  adopt rules relating to the implementation of the program,
  including:
               (1)  rules establishing eligibility criteria for
  community development financial institutions that want to
  participate in the program; and
               (2)  any other rules necessary to accomplish the
  purposes of this subchapter.
         Sec. 481.457.  OVERSIGHT. (a) A community development
  financial institution participating in the program shall report
  quarterly to the bank:
               (1)  the names of micro-businesses that have received a
  disaster recovery loan;
               (2)  the current balance of all outstanding disaster
  recovery loans;
               (3)  the default rate on existing disaster recovery
  loans; and
               (4)  any other information the bank requires.
         (b)  A community development financial institution
  participating in the program shall prepare a detailed financial
  statement each quarter.
         (c)  A community development financial institution shall
  allow the bank to inspect the institution's financial records on
  request.
         Sec. 481.458.  PROGRAM ANNUAL STATUS REPORT. The bank shall
  issue an annual status report on the program. The bank shall
  deliver its report to the governor, the lieutenant governor, the
  speaker of the house of representatives, and the standing
  committees of the legislature with primary jurisdiction over
  micro-businesses and economic development.
         SUBCHAPTER EE. MICRO-BUSINESS ACCESS TO CAPITAL PROGRAM
         Sec. 481.551.  DEFINITIONS. In this subchapter:
               (1)  "Community development financial institution" has
  the meaning assigned by 12 U.S.C. Section 4702.
               (2)  "Declared disaster" means:
                     (A)  a declaration of a state of disaster under
  Section 418.014 or 418.108; or
                     (B)  a disaster declared by the president of the
  United States, if any part of this state is named in the federally
  designated disaster area.
               (3)  "Fund" means the micro-business recovery fund
  established under Section 481.452.
               (4)  "Micro-business" has the meaning assigned by
  Section 481.451.
               (5)  "Micro-business access to capital loan" means a
  loan that is entitled to be secured by the fund as provided by this
  subchapter.
               (6)  "Participating financial institution" means a
  community development financial institution participating in the
  program.
               (7)  "Program" means the micro-business access to
  capital program established under this subchapter.
               (8)  "Reserve account" means an account established in
  a participating financial institution on approval of the bank in
  which money is deposited to serve as a source of additional revenue
  to reimburse the financial institution for losses on loans enrolled
  in the program.
         Sec. 481.552.  MICRO-BUSINESS ACCESS TO CAPITAL PROGRAM.
  (a) The bank shall establish a micro-business access to capital
  program to assist a participating financial institution in making
  loans to micro-businesses that have suffered economic injury as a
  result of a declared disaster and that face barriers in accessing
  capital.
         (b)  The bank shall use money in the fund to make a deposit in
  a participating financial institution's reserve account in an
  amount specified by this subchapter to be a source of money the
  institution may receive as reimbursement for losses attributable to
  loans in the program.
         (c)  To participate in the program, a financial institution
  must be an eligible community development financial institution.  
  The bank shall determine the eligibility of a community development
  financial institution to participate in the program and may set a
  limit on the number of eligible community development financial
  institutions that may participate in the program.
         (d)  To participate in the program, an eligible community
  development financial institution must enter into a participation
  agreement with the bank that sets out the terms and conditions under
  which the bank will make contributions to the institution's reserve
  account and specifies the criteria for a loan to qualify as a
  micro-business access to capital loan, including criteria that
  ensures that a micro-business access to capital loan is not unfair
  or abusive to the borrower.
         (e)  To qualify as a micro-business access to capital loan, a
  loan:
               (1)  must be made to a micro-business that:
                     (A)  is in good standing under the laws of this
  state; and
                     (B)  did not owe delinquent taxes to a taxing unit
  of this state before the date of the initial issuance of the
  disaster declaration;
               (2)  may not be made to a micro-business that:
                     (A)  has total revenue that exceeds the amount for
  which no franchise tax is due under Section 171.002(d)(2), Tax
  Code;
                     (B)  is a franchise;
                     (C)  is a national chain with operations in this
  state;
                     (D)  is a lobbying firm; or
                     (E)  is a private equity firm or backed by a
  private equity firm; and
               (3)  must meet any other criteria provided by this
  subchapter.
         (f)  In awarding micro-business access to capital loans
  under the program, a participating financial institution shall give
  preference to applicant micro-businesses that did not receive a
  loan or grant under the Coronavirus Aid, Relief, and Economic
  Security Act (15 U.S.C. Section 9001 et seq.), as amended by the
  Paycheck Protection Program Flexibility Act of 2020 (Pub. L.
  No. 116-142) and the Consolidated Appropriations Act, 2021 (Pub. L.
  No. 116-260).
         Sec. 481.553.  RULEMAKING AUTHORITY. The executive director
  shall adopt rules relating to the implementation of the program and
  any other rules necessary to accomplish the purposes of this
  subchapter.
         Sec. 481.554.  PROVISIONS RELATING TO MICRO-BUSINESS ACCESS
  TO CAPITAL LOAN. (a) Except as otherwise provided by this
  subchapter, the bank may not determine the recipient, amount, or
  interest rate of a micro-business access to capital loan or the fees
  or other requirements related to the loan.
         (b)  A loan is not eligible to be enrolled under this
  subchapter if the loan is for:
               (1)  construction or purchase of residential housing;
               (2)  simple real estate investments, excluding the
  development or improvement of commercial real estate occupied by
  the borrower's business; or
               (3)  inside bank transactions.
         (c)  The borrower of a micro-business access to capital loan
  shall apply the loan to working capital or to the purchase,
  construction, or lease of capital assets, including buildings and
  equipment used by the business. Working capital uses include the
  cost of exporting, accounts receivable, payroll, inventory, and
  other financing needs of the business.
         (d)  A micro-business access to capital loan may be sold on
  the secondary market with no recourse to the bank or to the loan
  loss reserve correspondent to the loan and under conditions as may
  be determined by the bank.
         (e)  When enrolling a loan in the program, a participating
  community development financial institution may specify an amount
  to be covered under the program that is less than the total amount
  of the loan.
         Sec. 481.555.  RESERVE ACCOUNT. (a) On approval by the bank
  and after entering into a participation agreement with the bank, a
  participating community development financial institution making a
  micro-business access to capital loan shall establish a reserve
  account. The reserve account shall be used by the institution only
  to cover any losses arising from a default of a micro-business
  access to capital loan made by the institution under this
  subchapter or as otherwise provided by this subchapter.
         (b)  A participating community development financial
  institution that makes a loan enrolled in the program shall require
  the borrower to pay to the institution a fee in an amount that is not
  less than two percent but not more than three percent of the
  principal amount of the loan, which the financial institution shall
  deposit in the reserve account. The institution shall also deposit
  in the reserve account an amount equal to the amount of the fee
  received by the institution from the borrower under this
  subsection. The institution may recover from the borrower all or
  part of the amount the institution is required to pay under this
  subsection in any manner agreed to by the institution and borrower.
         (c)  For each micro-business access to capital loan made by a
  community development financial institution, the institution shall
  certify to the bank, within the period prescribed by the bank, that
  the institution has made a micro-business access to capital loan
  and the amount the institution has deposited in the reserve
  account, including the amount of fees received from the borrower.
         (d)  On receipt of a certification made under Subsection (c)
  and subject to Section 481.556, the bank shall deposit in the
  institution's reserve account for each micro-business access to
  capital loan made by the institution an amount equal to 200 percent
  of the total amount deposited under Subsection (b) for each loan.
         (e)  A participating community development financial
  institution must obtain approval from the bank to withdraw funds
  from the reserve account.
         Sec. 481.556.  LIMITATIONS ON STATE CONTRIBUTION TO RESERVE
  ACCOUNT. (a) The amount deposited by the bank into a participating
  community development financial institution's reserve account for
  any single loan recipient may not exceed $150,000 during a
  three-year period.
         (b)  The maximum amount the bank may deposit into a reserve
  account for each micro-business access to capital loan made under
  this subchapter is the lesser of $35,000 or an amount equal to eight
  percent of the loan amount.
         Sec. 481.557.  RIGHTS OF STATE WITH RESPECT TO RESERVE
  ACCOUNT. (a) All of the money in a reserve account established
  under this subchapter is property of the state.
         (b)  The state is entitled to earn interest on the amount of
  contributions made by the bank, borrower, and institution to a
  reserve account under this subchapter. The bank shall withdraw
  monthly or quarterly from a reserve account the amount of the
  interest earned by the state. The bank shall deposit the amount
  withdrawn under this subsection into the fund.
         (c)  If the amount in a reserve account exceeds an amount
  equal to 33 percent of the balance of the community development
  financial institution's outstanding micro-business access to
  capital loans, the bank may withdraw the excess amount and deposit
  the amount in the fund. A withdrawal of money authorized under this
  subsection may not reduce an active reserve account to an amount
  that is less than $200,000.
         (d)  The bank shall withdraw from the institution's reserve
  account the total amount in the account and any interest earned on
  the account and deposit the amount in the fund when:
               (1)  a community development financial institution is
  no longer eligible to participate in the program or a participation
  agreement entered into under this subchapter expires without
  renewal by the bank or institution;
               (2)  the community development financial institution
  has no outstanding micro-business access to capital loans;
               (3)  the community development financial institution
  has not made a micro-business access to capital loan within the
  preceding 24 months; or
               (4)  the community development financial institution
  fails to submit a report or other document requested by the bank
  within the time or in the manner prescribed.
         Sec. 481.558.  ANNUAL REPORT. A participating community
  development financial institution shall submit an annual report to
  the bank.  The report must:
               (1)  provide information regarding outstanding
  micro-business access to capital loans, micro-business access to
  capital loan losses, and any other information on micro-business
  access to capital loans that the bank considers appropriate;
               (2)  state the total amount of loans for which the bank
  has made a contribution from the fund under this subchapter;
               (3)  include a copy of the institution's most recent
  financial statement; and
               (4)  include information regarding the type of
  micro-businesses with loans under this subchapter.
         Sec. 481.559.  STATUS REPORT. The office shall submit to the
  legislature an annual status report on the program's activities.
         Sec. 481.560.  STATE LIABILITY PROHIBITED. The state is not
  liable to a participating financial institution for payment of the
  principal, the interest, or any late charges on a micro-business
  access to capital loan made under this subchapter.
         SECTION 2.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution. If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2021.