1-1 By: Junell, Naishtat (Senate Sponsor - Montford) H.B. No. 3104
1-2 (In the Senate - Received from the House April 25, 1995;
1-3 April 26, 1995, read first time and referred to Committee on
1-4 Economic Development; May 12, 1995, reported favorably by the
1-5 following vote: Yeas 10, Nays 0; May 12, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to an exemption of certain charitable gift annuities from
1-9 regulation under the Insurance Code.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 2(b), Article 1.14-1, Insurance Code, is
1-12 amended to read as follows:
1-13 (b) The provisions of this section do not apply to:
1-14 (1) the <1. The> lawful transaction of surplus lines
1-15 insurance pursuant to Article 1.14-2;<.>
1-16 (2) the <2. The> lawful transaction of reinsurance by
1-17 insurers;<.>
1-18 (3) transactions <3. Transactions> in this state
1-19 involving a policy lawfully solicited, written, and delivered
1-20 outside of this state covering only subjects of insurance not
1-21 resident, located, or expressly to be performed in this state at
1-22 the time of issuance, and which transactions are subsequent to the
1-23 issuance of such policy;<.>
1-24 (4) transactions <4. Transactions> involving
1-25 contracts of insurance independently procured through negotiations
1-26 occurring entirely outside of this state which are reported and on
1-27 which premium tax is paid in accordance with this Article;<.>
1-28 (5) transactions <5. Transactions> in this state
1-29 involving group life, health or accident insurance (other than
1-30 credit insurance) and group annuities where the master policy of
1-31 such groups was lawfully issued and delivered in a state in which
1-32 the company was authorized to do an insurance business and such
1-33 transactions are authorized by other statutes of this state;<.>
1-34 (6) lawful <6. Lawful> transactions by servicing
1-35 companies of the Texas workers' compensation employers' rejected
1-36 risk fund pursuant to Section 4.08, Article 5.76-2;<.>
1-37 (7) management <7. Management> and accounting
1-38 activities in this state on behalf of a non-admitted captive
1-39 insurance company that insures solely directors' and officers'
1-40 liability insurance for the directors and officers of its parent
1-41 and affiliated companies and/or the risks of its parent and
1-42 affiliated companies; provided, that this<. This> provision does
1-43 not exempt any insured or insurer from the payment of any
1-44 applicable tax on premiums or any other applicable provision in
1-45 this code; or
1-46 (8) the issuance of qualified charitable gift
1-47 annuities under Article 1.14-1A of this code.
1-48 SECTION 2. Chapter 1, Insurance Code, is amended by adding
1-49 Article 1.14-1A to read as follows:
1-50 Art. 1.14-1A. CHARITABLE GIFT ANNUITIES
1-51 Sec. 1. DEFINITIONS. In this article:
1-52 (1) "Charitable gift annuity" means a transfer of cash
1-53 or other property by a donor to a charitable organization in return
1-54 for an annuity payable over one or two lives, under which the
1-55 actuarial value of the annuity is less than the value of the cash
1-56 or other property transferred and the difference in value
1-57 constitutes a charitable deduction for federal tax purposes.
1-58 (2) "Charitable organization" means an entity
1-59 described by:
1-60 (A) Section 501(c)(3), Internal Revenue Code of
1-61 1986 (26 U.S.C. Section 501(c)(3)); or
1-62 (B) Section 170(c), Internal Revenue Code of
1-63 1986 (26 U.S.C. Section 170(c)).
1-64 (3) "Qualified charitable gift annuity" means a
1-65 charitable gift annuity described by Section 501(m)(5), Internal
1-66 Revenue Code of 1986 (26 U.S.C. Section 501(m)(5)), and Section
1-67 514(c)(5), Internal Revenue Code of 1986 (26 U.S.C. Section
1-68 514(c)(5)), that is issued by a charitable organization that on the
2-1 date of the annuity agreement:
2-2 (A) has a minimum of $100,000 in unrestricted
2-3 cash, cash equivalents, or publicly traded securities, exclusive of
2-4 the assets funding the annuity agreement; and
2-5 (B) has been in continuous operation for at
2-6 least three years or is a successor or affiliate of a charitable
2-7 organization that has been in continuous operation for at least
2-8 three years.
2-9 Sec. 2. NOT INSURANCE. (a) The issuance of a qualified
2-10 charitable gift annuity does not constitute engaging in the
2-11 business of insurance in this state.
2-12 (b) A charitable gift annuity issued before September 1,
2-13 1995, is a qualified charitable gift annuity for purposes of this
2-14 article and Article 1.14-1 of this code, and the issuance of that
2-15 charitable gift annuity does not constitute engaging in the
2-16 business of insurance in this state.
2-17 Sec. 3. NOTICE TO DONOR. (a) When entering into an
2-18 agreement for a qualified charitable gift annuity, the charitable
2-19 organization shall disclose to the donor in writing in the annuity
2-20 agreement that a qualified charitable gift annuity is not insurance
2-21 under the laws of this state and is not subject to regulation by
2-22 the department or protected by a guaranty association affiliated
2-23 with the department.
2-24 (b) The notice provisions required by this section must be
2-25 in a separate paragraph in a print size no smaller than that
2-26 employed in the annuity agreement generally.
2-27 Sec. 4. NOTICE TO DEPARTMENT. (a) A charitable
2-28 organization that issues qualified charitable gift annuities shall
2-29 notify the department's annuities division in writing by the later
2-30 of 90 days after the effective date of this Act or the date on
2-31 which it enters into the organization's first qualified charitable
2-32 gift annuity agreement. The notice must:
2-33 (1) be signed by an officer or director of the
2-34 organization;
2-35 (2) identify the organization; and
2-36 (3) certify that:
2-37 (A) the organization is a charitable
2-38 organization; and
2-39 (B) the annuities issued by the organization are
2-40 qualified charitable gift annuities.
2-41 (b) The organization shall not be required to submit
2-42 additional information except to determine appropriate penalties
2-43 that may be applicable under Section 5 of this article.
2-44 Sec. 5. EFFECT OF FAILURE TO PROVIDE REQUIRED NOTICE. The
2-45 failure of a charitable organization to comply with the notice
2-46 requirements imposed under Section 3 or 4 of this article does not
2-47 prevent a charitable gift annuity that otherwise meets the
2-48 requirements of this article from constituting a qualified
2-49 charitable gift annuity. However, the commissioner may enforce
2-50 performance of the requirements of Sections 3 and 4 of this article
2-51 by sending a letter by certified mail, return receipt requested,
2-52 demanding that the charitable organization comply with the
2-53 requirements of Sections 3 and 4 of this article. The department
2-54 may fine the charitable organization in an amount not to exceed
2-55 $1,000 per qualified charitable gift annuity agreement issued until
2-56 such time as the charitable organization complies with Sections 3
2-57 and 4 of this article.
2-58 Sec. 6. NOT UNFAIR OR DECEPTIVE TRADE PRACTICE. The
2-59 issuance of a qualified charitable gift annuity does not constitute
2-60 a violation of Section 15.05, 17.46, or 17.50(a)(3), Business &
2-61 Commerce Code.
2-62 SECTION 3. A charitable organization that is engaged in
2-63 issuing qualified charitable gift annuities in this state on the
2-64 effective date of this Act shall notify the Texas Department of
2-65 Insurance as required under Article 1.14-1A, Insurance Code, as
2-66 added by this Act, not later than 90 days after the effective date
2-67 of this Act.
2-68 SECTION 4. Sections 1(1), 2, and 6, Article 1.14-1A,
2-69 Insurance Code, as added by this Act, and Section 2(b), Article
2-70 1.14-1, Insurance Code, as amended by this Act, are a clarification
3-1 of the law as it existed before the effective date of this Act.
3-2 SECTION 5. The importance of this legislation and the
3-3 crowded condition of the calendars in both houses create an
3-4 emergency and an imperative public necessity that the
3-5 constitutional rule requiring bills to be read on three several
3-6 days in each house be suspended, and this rule is hereby suspended,
3-7 and that this Act take effect and be in force from and after its
3-8 passage, and it is so enacted.
3-9 * * * * *