HBA-ATS S.B. 333 76(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 333
By: Sibley
Insurance
3/22/1999
Engrossed



BACKGROUND AND PURPOSE 

The Texas Insurance Code defines a "charitable gift annuity" as a transfer
of cash or other property by a donor to a charitable organization in return
for an annuity payable over one or two lives, under which the actuarial
value of the annuity is less than the value of the cash or other property
transferred and the difference in value constitutes a charitable deduction
for federal tax purposes.  In essence, the annuitant trades a donation to a
charity for a guaranteed stream of income that continues as long as the
donor lives.  These types of annuities are commonly sold by charitable
organizations, such as charities, churches, foundations, and universities
because of the benefits to both donor and donee. A donor receives tax
deductions and the donee receives the residue of money when the donor dies. 

For more than 50 years, the sale of charitable gift annuities in Texas had
gone unchallenged.  In 1992, relatives of an elderly woman filed lawsuits
in state and federal court challenging the legal right of charitable
organization to issue gift annuities.  The plaintiffs alleged that the
charitable organization had pressured the woman, who suffered from dementia
and Alzheimer's disease, into investing the estate she inherited from her
brother with the organization, a portion of which went to buy charitable
gift annuities from the organization.  In addition, the plaintiffs claimed
that the organization, along with numerous other charitable organizations,
had violated federal and state antitrust laws by fixing the rate of return,
and that the organization had violated several state laws, including the
illegal sale of annuities. 

During the trials, the charitable organization persuaded both the U.S.
Congress and the Texas Legislature to enact legislation specifically
designed to limit the scope of the lawsuit.  In total, four laws were
passed; two by Texas and two by the U.S. Congress.  All four were aimed at
guaranteeing charities the right to issue gift annuities.  The Texas laws
stated that the issuance of a qualified charitable gift annuity does not
constitute engaging in the business of insurance, and that a charitable
gift annuity issued before September 1, 1995, is a qualified charitable
gift annuity for purposes of the Insurance Code.  The law was intended to
apply retroactively.  Although a state judge ruled that the Texas laws
could be applied retroactively to the case and dismissed the case, a
federal court judge ruled that it was unclear whether the Texas laws were
intended to apply to those charitable gift annuities which were being
challenged in pending lawsuits.  S.B. 333 provides that the law applies to
any charitable gift annuity issued before, on, or after its effective date,
including any charitable gift annuity that is the subject of litigation or
another proceeding that is pending before, on, or after its effective date.
This bill also requires any person or entity involved in the issuance of a
qualified charitable gift annuity to have immunity from suit as to any
claim brought by a donor or the donor's heirs or distributees alleging that
the issuance of a charitable gift annuity constitutes engaging in the
business of insurance in this state. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 2, Article 1.14-1A, Insurance Code, by adding
Subsection (c), to require any person or entity involved in the issuance of
a qualified charitable gift annuity to have immunity from suit as to any
claim brought by a donor or the donor's heirs or distributees alleging
that the issuance of a charitable gift annuity constitutes engaging in the
business of insurance in this state.  

SECTION 2.  Amends Article 1.14-1A, Insurance Code, by adding Section 7, as
follows:  

Sec. 7.  TREATMENT OF ANNUITY AS CHARITABLE GIFT ANNUITY; ESTOPPEL.
Requires an annuity that a donor has treated as a charitable gift annuity
in an Internal Revenue Service filing to be considered a qualified
charitable gift annuity issued by a charitable organization,  in any
litigation or other proceeding brought by the donor or the donor's heirs or
distributees. 

SECTION 3.  Amends Subsection (a), Section 51.014, Civil Practice and
Remedies Code, to include an interlocutory order, issued by a district
court, county court at law, or county court, that denies or otherwise fails
to grant a motion for summary judgment that is based on an assertion of
immunity arising under Section 1.14-1A (Charitable Gift Annuities),
Insurance Code, among the enumerated list of interlocutory orders from
which a person is authorized to appeal.  Makes conforming changes.  

SECTION 4.  (a) Provides that Sections 1, 2, 6, and 7, Article 1.14-1A,
Insurance Code; Section 2(b), Article 1.14-1, Insurance Code; and Section
51.014(a)(6), Civil Practice and Remedies Code, apply to any charitable
gift annuity issued before, on, or after the effective date of this Act. 

(b) Provides that this section applies without regard to the effective date
of the legislation enacting Article 1.14-1A, Insurance Code, or any other
legislation that amended Article 1.14-1A, Insurance Code.  

SECTION 5.  Provides that this Act applies to any charitable gift annuity
issued before, on, or after the effective date of this Act, including any
charitable gift annuity that is the subject of litigation or another
proceeding that is pending before, on, or after the effective date of this
Act.  

SECTION 6.Emergency clause.
  Effective date: upon passage.