By: Montford S.B. No. 1251
A BILL TO BE ENTITLED
AN ACT
1-1 relating to an exemption of certain charitable gift annuities from
1-2 regulation under the Insurance Code.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 2(b), Article 1.14-1, Insurance Code, is
1-5 amended to read as follows:
1-6 (b) The provisions of this section do not apply to:
1-7 (1) the <1. The> lawful transaction of surplus lines
1-8 insurance pursuant to Article 1.14-2;<.>
1-9 (2) the <2. The> lawful transaction of reinsurance by
1-10 insurers;<.>
1-11 (3) transactions <3. Transactions> in this state
1-12 involving a policy lawfully solicited, written, and delivered
1-13 outside of this state covering only subjects of insurance not
1-14 resident, located, or expressly to be performed in this state at
1-15 the time of issuance, and which transactions are subsequent to the
1-16 issuance of such policy;<.>
1-17 (4) transactions <4. Transactions> involving
1-18 contracts of insurance independently procured through negotiations
1-19 occurring entirely outside of this state which are reported and on
1-20 which premium tax is paid in accordance with this Article;<.>
1-21 (5) transactions <5. Transactions> in this state
1-22 involving group life, health or accident insurance (other than
1-23 credit insurance) and group annuities where the master policy of
2-1 such groups was lawfully issued and delivered in a state in which
2-2 the company was authorized to do an insurance business and such
2-3 transactions are authorized by other statutes of this state;<.>
2-4 (6) lawful <6. Lawful> transactions by servicing
2-5 companies of the Texas worker's compensation employers' rejected
2-6 risk fund pursuant to Section 4.08, Article 5.76-2;<.>
2-7 (7) management <7. Management> and accounting
2-8 activities in this state on behalf of a non-admitted captive
2-9 insurance company that insures solely directors' and officers'
2-10 liability insurance for the directors and officers of its parent
2-11 and affiliated companies and/or the risks of its parent and
2-12 affiliated companies; provided, that this<. This> provision does
2-13 not exempt any insured or insurer from the payment of any
2-14 applicable tax on premiums or any other applicable provision in
2-15 this code; or
2-16 (8) the issuance of qualified charitable gift
2-17 annuities under Article 1.14-1A of this code.
2-18 SECTION 2. Chapter 1, Insurance Code, is amended by adding
2-19 Article 1.14-1A to read as follows:
2-20 Art. 1.14-1A. CHARITABLE GIFT ANNUITIES
2-21 Sec. 1. DEFINITIONS. In this article:
2-22 (1) "Charitable gift annuity" means a transfer of cash
2-23 or other property by a donor to a charitable organization in return
2-24 for an annuity payable over one or two lives, under which the
2-25 actuarial value of the annuity is less than the value of the cash
3-1 or other property transferred and the difference in value
3-2 constitutes a charitable deduction for federal tax purposes.
3-3 (2) "Charitable organization" means an entity
3-4 described by:
3-5 (A) Section 501(c)(3), Internal Revenue Code of
3-6 1986 (26 U.S.C. Section 501(c)(3)); or
3-7 (B) Section 170(c), Internal Revenue Code of
3-8 1986 (26 U.S.C. Section 170(c)).
3-9 (3) "Qualified charitable gift annuity" means a
3-10 charitable gift annuity described by Section 501(m)(5), Internal
3-11 Revenue Code of 1986 (26 U.S.C. Section 501(m)(5)), and Section
3-12 514(c)(5), Internal Revenue Code of 1986 (26 U.S.C. Section
3-13 514(c)(5)), that is issued by a charitable organization that on the
3-14 date of the annuity agreement:
3-15 (A) has a minimum of $100,000 in unrestricted
3-16 cash, cash equivalents, or publicly traded securities, exclusive of
3-17 the assets funding the annuity agreement; and
3-18 (B) has been in continuous operation for at
3-19 least three years or is a successor or affiliate of a charitable
3-20 organization that has been in continuous operation for at least
3-21 three years.
3-22 Sec. 2. NOT INSURANCE. (a) The issuance of a qualified
3-23 charitable gift annuity does not constitute engaging in the
3-24 business of insurance in this state.
3-25 (b) A charitable gift annuity issued before September 1,
4-1 1995, is a qualified charitable gift annuity for purposes of this
4-2 article and Article 1.14-1 of this code, and the issuance of that
4-3 charitable gift annuity does not constitute engaging in the
4-4 business of insurance in this state.
4-5 Sec. 3. NOTICE TO DONOR. (a) When entering into an
4-6 agreement for a qualified charitable gift annuity, the charitable
4-7 organization shall disclose to the donor in writing in the annuity
4-8 agreement that a qualified charitable gift annuity is not insurance
4-9 under the laws of this state and is not subject to regulation by
4-10 the department or protected by a guaranty association affiliated
4-11 with the department.
4-12 (b) The notice provisions required by this section must be
4-13 in a separate paragraph in a print size no smaller than that
4-14 employed in the annuity agreement generally.
4-15 Sec. 4. NOTICE TO DEPARTMENT. (a) A charitable
4-16 organization that issues qualified charitable gift annuities shall
4-17 notify the department's annuities division in writing by the later
4-18 of 90 days after the effective date of this Act or the date on
4-19 which it enters into the organization's first qualified charitable
4-20 gift annuity agreement. The notice must:
4-21 (1) be signed by an officer or director of the
4-22 organization;
4-23 (2) identify the organization; and
4-24 (3) certify that:
4-25 (A) the organization is a charitable
5-1 organization; and
5-2 (B) the annuities issued by the organization are
5-3 qualified charitable gift annuities.
5-4 (b) The organization shall not be required to submit
5-5 additional information except to determine appropriate penalties
5-6 that may be applicable under Section 5 of this article.
5-7 Sec. 5. EFFECT OF FAILURE TO PROVIDE REQUIRED NOTICE. The
5-8 failure of a charitable organization to comply with the notice
5-9 requirements imposed under Section 3 or 4 of this article does not
5-10 prevent a charitable gift annuity that otherwise meets the
5-11 requirements of this article from constituting a qualified
5-12 charitable gift annuity. However, the commissioner may enforce
5-13 performance of the requirements of Sections 3 and 4 of this article
5-14 by sending a letter certified mail, return receipt requested,
5-15 demanding that the charitable organization comply with the
5-16 requirements of Sections 3 and 4 of this article. The department
5-17 may fine the charitable organization in an amount not to exceed
5-18 $1,000 per qualified charitable gift annuity agreement issued until
5-19 such time as the charitable organization complies with Sections 3
5-20 and 4 of this article.
5-21 Sec. 6. NOT UNFAIR OR DECEPTIVE TRADE PRACTICE. The
5-22 issuance of a qualified charitable gift annuity does not constitute
5-23 a violation of Section 15.05, 17.46, or 17.50(a)(3), Business &
5-24 Commerce Code.
5-25 SECTION 3. A charitable organization that is engaged in
6-1 issuing qualified charitable gift annuities in this state on the
6-2 effective date of this Act shall notify the Texas Department of
6-3 Insurance as required under Article 1.14-1A, Insurance Code, as
6-4 added by this Act, not later than 90 days after the effective date
6-5 of this Act.
6-6 SECTION 4. Sections 1(1), 2, and 6, Article 1.14-1A,
6-7 Insurance Code, as added by this Act, and Section 2(b), Article
6-8 1.14-1, Insurance Code, as amended by this Act, are a clarification
6-9 of the law as it existed before the effective date of this Act.
6-10 SECTION 5. This Act takes effect September 1, 1995.
6-11 SECTION 6. 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.