BILL ANALYSIS


                                                        H.B. 3104
                                            By: Junell (Montford)
                                             Economic Development
                                                         05-12-95
                              Senate Committee Report (Unamended)
BACKGROUND

A charitable gift annuity (CGA) is a fundraising 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 two 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, H.B. 3104 exempts certain charitable gift annuities
from regulation under the Insurance Code.

RULEMAKING AUTHORITY

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

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 2(b), Article 1.14-1, Insurance Code, to
add to the list of transactions to which this section does not
apply, the issuance of qualified charitable gift annuities under
Article 1.14-1A of this code. Makes nonsubstantive changes.

SECTION 2. Amends Chapter 1, Insurance Code, by adding Article
1.14-1A, as follows:

            Art. 1.14-1A. CHARITABLE GIFT ANNUITIES

     Sec. 1. DEFINITIONS. Defines "charitable gift annuity,"
     "charitable organization," and "qualified charitable gift
     annuity."
     
     Sec. 2. NOT INSURANCE. (a) Provides that the issuance of a
     qualified charitable gift annuity does not constitute engaging
     in the business of insurance in this state.
     
     (b) Provides that a charitable gift annuity issued before
       September 1, 1995, is a qualified charitable gift annuity
       for purposes of this article and Article 1.14-1 of this
       code, and the issuance of that charitable gift annuity does
       not constitute engaging in the business of insurance in this
       state.
       
       Sec. 3. NOTICE TO DONOR. (a) Provides that the charitable
     organization, when entering into an agreement for a qualified
     charitable gift annuity, shall disclose to the donor in
     writing in the annuity agreement that a qualified charitable
     gift annuity is not insurance under the laws of this state and
     is not subject to regulation by the department or protected by
     a guaranty association affiliated with the department.
     
     (b) Requires the notice provisions required by this section
       to be in a separate paragraph in a print size no smaller
       than that employed in the annuity agreement generally.
       
       Sec. 4. NOTICE TO DEPARTMENT. (a) Requires a charitable
     organization that issues qualified charitable gift annuities
     to notify the department's annuities division in writing by
     the later of 90 days after the effective date of this Act or
     the date on which it enters into the organization's first
     qualified charitable gift annuity agreement. Sets forth
     requirements for the notice.
     
     (b) Prohibits the organization from being required to submit
       additional information except to determine appropriate
       penalties that may be applicable under Section 5 of this
       article.
       
       Sec. 5. EFFECT OF FAILURE TO PROVIDE REQUIRED NOTICE. Provides
     that the failure of a charitable organization to comply with
     the notice requirements imposed under Section 3 or 4 of this
     article does not prevent a charitable gift annuity that
     otherwise meets the requirements of this article from
     constituting a qualified charitable gift annuity. Authorizes
     the commission to enforce performance of the requirements of
     Sections 3 and 4 of this article by sending a letter  by
     certified mail, return receipt requested, demanding that the
     charitable organization comply with the requirements of
     Sections 3 and 4 of this article. Authorizes the department to
     fine the charitable organization in an amount not to exceed
     $1,000 per qualified charitable gift annuity agreement issued
     until such time as the charitable organization complies with
     Sections 3 and 4 of this article.
     
     Sec. 6. NOT UNFAIR OR DECEPTIVE TRADE PRACTICE. Provides that
     the issuance of a qualified charitable gift annuity does not
     constitute a violation of Section 15.05, 17.46, or
     17.50(a)(3), Business and Commerce Code.
     
     SECTION 3.     Requires a charitable organization that is engaged in
issuing qualified charitable gift annuities in this state on the
effective date of this Act to notify the Texas Department of
Insurance as required under Article 1.14-1A, Insurance Code, as
added by this Act, no later than 90 days after the effective date
of this Act.

SECTION 4. Provides that Sections 1(1), 2, and 6, Article 1.14-1A,
Insurance Code, as added by this Act, and Section 2(b), Article
1.14-1, Insurance Code, as amended by this Act, are a clarification
of the law as it existed before the effective date of this Act.

SECTION 5. Emergency clause.
           Effective date: upon passage.