H.B. No. 3104
1-1 AN ACT
1-2 relating to an exemption of certain charitable gift annuities from
1-3 regulation under the Insurance Code.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 2(b), Article 1.14-1, Insurance Code, is
1-6 amended to read as follows:
1-7 (b) The provisions of this section do not apply to:
1-8 (1) the <1. The> lawful transaction of surplus lines
1-9 insurance pursuant to Article 1.14-2;<.>
1-10 (2) the <2. The> lawful transaction of reinsurance by
1-11 insurers;<.>
1-12 (3) transactions <3. Transactions> in this state
1-13 involving a policy lawfully solicited, written, and delivered
1-14 outside of this state covering only subjects of insurance not
1-15 resident, located, or expressly to be performed in this state at
1-16 the time of issuance, and which transactions are subsequent to the
1-17 issuance of such policy;<.>
1-18 (4) transactions <4. Transactions> involving
1-19 contracts of insurance independently procured through negotiations
1-20 occurring entirely outside of this state which are reported and on
1-21 which premium tax is paid in accordance with this Article;<.>
1-22 (5) transactions <5. Transactions> in this state
1-23 involving group life, health or accident insurance (other than
2-1 credit insurance) and group annuities where the master policy of
2-2 such groups was lawfully issued and delivered in a state in which
2-3 the company was authorized to do an insurance business and such
2-4 transactions are authorized by other statutes of this state;<.>
2-5 (6) lawful <6. Lawful> transactions by servicing
2-6 companies of the Texas workers' compensation employers' rejected
2-7 risk fund pursuant to Section 4.08, Article 5.76-2;<.>
2-8 (7) management <7. Management> and accounting
2-9 activities in this state on behalf of a non-admitted captive
2-10 insurance company that insures solely directors' and officers'
2-11 liability insurance for the directors and officers of its parent
2-12 and affiliated companies and/or the risks of its parent and
2-13 affiliated companies; provided, that this<. This> provision does
2-14 not exempt any insured or insurer from the payment of any
2-15 applicable tax on premiums or any other applicable provision in
2-16 this code; or
2-17 (8) the issuance of qualified charitable gift
2-18 annuities under Article 1.14-1A of this code.
2-19 SECTION 2. Chapter 1, Insurance Code, is amended by adding
2-20 Article 1.14-1A to read as follows:
2-21 Art. 1.14-1A. CHARITABLE GIFT ANNUITIES
2-22 Sec. 1. DEFINITIONS. In this article:
2-23 (1) "Charitable gift annuity" means a transfer of cash
2-24 or other property by a donor to a charitable organization in return
2-25 for an annuity payable over one or two lives, under which the
3-1 actuarial value of the annuity is less than the value of the cash
3-2 or other property transferred and the difference in value
3-3 constitutes a charitable deduction for federal tax purposes.
3-4 (2) "Charitable organization" means an entity
3-5 described by:
3-6 (A) Section 501(c)(3), Internal Revenue Code of
3-7 1986 (26 U.S.C. Section 501(c)(3)); or
3-8 (B) Section 170(c), Internal Revenue Code of
3-9 1986 (26 U.S.C. Section 170(c)).
3-10 (3) "Qualified charitable gift annuity" means a
3-11 charitable gift annuity described by Section 501(m)(5), Internal
3-12 Revenue Code of 1986 (26 U.S.C. Section 501(m)(5)), and Section
3-13 514(c)(5), Internal Revenue Code of 1986 (26 U.S.C. Section
3-14 514(c)(5)), that is issued by a charitable organization that on the
3-15 date of the annuity agreement:
3-16 (A) has a minimum of $100,000 in unrestricted
3-17 cash, cash equivalents, or publicly traded securities, exclusive of
3-18 the assets funding the annuity agreement; and
3-19 (B) has been in continuous operation for at
3-20 least three years or is a successor or affiliate of a charitable
3-21 organization that has been in continuous operation for at least
3-22 three years.
3-23 Sec. 2. NOT INSURANCE. (a) The issuance of a qualified
3-24 charitable gift annuity does not constitute engaging in the
3-25 business of insurance in this state.
4-1 (b) A charitable gift annuity issued before September 1,
4-2 1995, is a qualified charitable gift annuity for purposes of this
4-3 article and Article 1.14-1 of this code, and the issuance of that
4-4 charitable gift annuity does not constitute engaging in the
4-5 business of insurance in this state.
4-6 Sec. 3. NOTICE TO DONOR. (a) When entering into an
4-7 agreement for a qualified charitable gift annuity, the charitable
4-8 organization shall disclose to the donor in writing in the annuity
4-9 agreement that a qualified charitable gift annuity is not insurance
4-10 under the laws of this state and is not subject to regulation by
4-11 the department or protected by a guaranty association affiliated
4-12 with the department.
4-13 (b) The notice provisions required by this section must be
4-14 in a separate paragraph in a print size no smaller than that
4-15 employed in the annuity agreement generally.
4-16 Sec. 4. NOTICE TO DEPARTMENT. (a) A charitable
4-17 organization that issues qualified charitable gift annuities shall
4-18 notify the department's annuities division in writing by the later
4-19 of 90 days after the effective date of this Act or the date on
4-20 which it enters into the organization's first qualified charitable
4-21 gift annuity agreement. The notice must:
4-22 (1) be signed by an officer or director of the
4-23 organization;
4-24 (2) identify the organization; and
4-25 (3) certify that:
5-1 (A) the organization is a charitable
5-2 organization; and
5-3 (B) the annuities issued by the organization are
5-4 qualified charitable gift annuities.
5-5 (b) The organization shall not be required to submit
5-6 additional information except to determine appropriate penalties
5-7 that may be applicable under Section 5 of this article.
5-8 Sec. 5. EFFECT OF FAILURE TO PROVIDE REQUIRED NOTICE. The
5-9 failure of a charitable organization to comply with the notice
5-10 requirements imposed under Section 3 or 4 of this article does not
5-11 prevent a charitable gift annuity that otherwise meets the
5-12 requirements of this article from constituting a qualified
5-13 charitable gift annuity. However, the commissioner may enforce
5-14 performance of the requirements of Sections 3 and 4 of this article
5-15 by sending a letter by certified mail, return receipt requested,
5-16 demanding that the charitable organization comply with the
5-17 requirements of Sections 3 and 4 of this article. The department
5-18 may fine the charitable organization in an amount not to exceed
5-19 $1,000 per qualified charitable gift annuity agreement issued until
5-20 such time as the charitable organization complies with Sections 3
5-21 and 4 of this article.
5-22 Sec. 6. NOT UNFAIR OR DECEPTIVE TRADE PRACTICE. The
5-23 issuance of a qualified charitable gift annuity does not constitute
5-24 a violation of Section 15.05, 17.46, or 17.50(a)(3), Business &
5-25 Commerce Code.
6-1 SECTION 3. A charitable organization that is engaged in
6-2 issuing qualified charitable gift annuities in this state on the
6-3 effective date of this Act shall notify the Texas Department of
6-4 Insurance as required under Article 1.14-1A, Insurance Code, as
6-5 added by this Act, not later than 90 days after the effective date
6-6 of this Act.
6-7 SECTION 4. Sections 1(1), 2, and 6, Article 1.14-1A,
6-8 Insurance Code, as added by this Act, and Section 2(b), Article
6-9 1.14-1, Insurance Code, as amended by this Act, are a clarification
6-10 of the law as it existed before the effective date of this Act.
6-11 SECTION 5. The importance of this legislation and the
6-12 crowded condition of the calendars in both houses create an
6-13 emergency and an imperative public necessity that the
6-14 constitutional rule requiring bills to be read on three several
6-15 days in each house be suspended, and this rule is hereby suspended,
6-16 and that this Act take effect and be in force from and after its
6-17 passage, and it is so enacted.