BILL ANALYSIS



H.B. 3104
Insurance Committee
By: Junell
Committee Report (Unamended)
04-05-95



BACKGROUND

     A charitable gift annuity ("CGA") is a fund raising vehicle
that many charities have used for  over a century in Texas.  In the
arrangement, a donor makes a gift to charity in exchange for a
below market annuity for life.  The Internal Revenue Code allows
the donor to make charitable income, gift and estate tax deductions
for the difference between the value of the gift and the value of
the annuity received in return for the gift.  While the Internal
Revenue Code specifically excludes CGAs from the definition of
"commercial type insurance," Texas is silent on the treatment of
CGAs.

     Currently 26 states have statues that address CGAs and 2
states currently have bills pending in their legislatures regarding
CGAs.  Of these 28 states, 13 specifically exempt CGAs from state
regulation.  The remaining 15 require some kind of regulation by a
state entity.  The extent of regulation by these states varies. 
The charitable community has worked with the Texas Department of
Insurance to clarify the law and to recommend this legislation.

PURPOSE

     As proposed, House Bill 3104 will allow well established,
legitimate charities that have been in existence for at least three
years and that hold at least $100,000 in unrestricted liquid assets
to issue CGAs without regulation by the Department of Insurance if
the charities notify the donors that CGAs are not insurance
products and are not subject to sanction for engaging in an
unauthorized insurance business.

RULEMAKING AUTHORITY

     It is the committee's opinion that this bill does not
expressly grant any additional rulemaking authority to a state
officer, department, agency or institution.

SECTION BY SECTION ANALYSIS


SECTION 1.

Amends Section 2(b) of Article 1.14-1 of the Texas Insurance Code
to states that the issuance of qualified charitable gift annuities
does not constitute an insurance business.

SECTION 2.

Amends Article 1.14-1A of the Insurance Code as follows:

Sec. 1:

Defines "charitable gift annuity" and "charitable organization" as
those terms are defined in the Internal Revenue Code.  Defines
"qualified charitable gift annuity" to mean a charitable gift
annuity issued by a charity with a minimum of $100,000 in
unrestricted      liquid assets that has been in existence for at
least three years.



Sec. 2:

States that the issuance of qualified CGAs does not constitute
engaging in the business of insurance.

Sec. 3:

Requires a charity to notify a donor in writing that a qualified
CGA is not insurance and is not subject to regulation by the
Department of Insurance or protected by a guaranty association
affiliated with the Department. 

Sec. 4:

Requires a charity to notify the Department of Insurance in writing
stating that it issues qualified CGAs.

Sec. 5:

States the remedies available to the Department of Insurance for
failure to provided notice.

Sec. 6:

States that the issuance of qualified gift annuities does not
violate certain sections of the Business and Commerce Code.

SECTION 3.

Requires charities currently issuing charitable gift annuities to
notify the Department of Insurance within 90 days of the Act's
effective date.

SECTION 4.

Clarifies existing law.

SECTION 5. Effective Date

SECTION 6. Emergency Clause.

SUMMARY OF COMMITTEE ACTION

     In accordance with House rules H.B. 3104 was heard in a public
hearing on April 5, 1995.
The Chair laid out H.B. 3104 and recognized Representative Junell
to explain the bill.  The Chair recognized the following persons to
testify in support of H.B. 3104:  Pastor Larry Guinn, Texas
Conference of Seventh-Day Adventists; Harvey J. Byram, Seventh-Day
Adventist, Southwestern Union; Karl H. Doerner, Texas Conference
Association of Seventh-Day Adventists; Carol McDonald, Independent
Colleges & Universities of Texas, Inc.; Jackie W. Francy, American
Heart Association, Inc.; Ellen Eisenlohr Dorn, Charitable Accord
and Baptist Foundation of Texas.  The Chair recognized the
following person to testify in opposition to H.B. 3104:
Robert W. Blevins, Texas Life Insurance Association.

     The Chair recognized Representative Counts who moved the
Committee report H.B. 3104 as filed to the full House with the
recommendation that it do pass and be printed.  Representative G.
Lewis seconded the motion and the motion prevailed by the following
vote:  AYES (8); NAYES (0); ABSENT (1); PNV (0).