1-1 By: Hartnett (Senate Sponsor - Cain) H.B. No. 3001 1-2 (In the Senate - Received from the House May 10, 1999; 1-3 May 10, 1999, read first time and referred to Committee on 1-4 Jurisprudence; May 13, 1999, reported favorably by the following 1-5 vote: Yeas 3, Nays 0; May 13, 1999, sent to printer.) 1-6 A BILL TO BE ENTITLED 1-7 AN ACT 1-8 relating to authorizing certain trusts to convert to nonprofit 1-9 corporations. 1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-11 SECTION 1. Subchapter C, Chapter 112, Property Code, is 1-12 amended by adding Section 112.058 to read as follows: 1-13 Sec. 112.058. CONVERSION OF COMMUNITY TRUST TO NONPROFIT 1-14 CORPORATION. (a) In this section: 1-15 (1) "Assets" means the assets of the component trust 1-16 funds of a community trust. 1-17 (2) "Community trust" means a community trust as 1-18 described by 26 C.F.R. Section 1.170A-9(e)(11) (1999), including 1-19 subsequent amendments. 1-20 (b) A community trust with court approval may transfer the 1-21 assets of the trust to a nonprofit corporation and terminate the 1-22 trust as provided by this section. 1-23 (c) The community trust may transfer assets of the trust to 1-24 a nonprofit corporation only if the nonprofit corporation is 1-25 organized under the Texas Non-Profit Corporation Act (Article 1-26 1396-1.01 et seq., Vernon's Texas Civil Statutes) and organized for 1-27 the same purpose as the community trust. The charter of the 1-28 nonprofit corporation must describe the purpose of the corporation 1-29 and the proposed use of the assets transferred using language 1-30 substantially similar to the language used in the instrument 1-31 creating the community trust. 1-32 (d) To transfer the assets of and terminate a community 1-33 trust under this section, the governing body of the community trust 1-34 must: 1-35 (1) file a petition in a probate court, county court, 1-36 or district court requesting: 1-37 (A) the transfer of the assets of the trust to a 1-38 nonprofit corporation established for the purpose of receiving and 1-39 administering the assets of the trust; and 1-40 (B) the termination of the trust; 1-41 (2) send by first class mail to each trust settlor and 1-42 each trustee of each component trust of the community trust who can 1-43 be located by the exercise of reasonable diligence a copy of the 1-44 governing body's petition and a notice specifying the time and 1-45 place of the court-scheduled hearing on the petition; and 1-46 (3) publish once in a newspaper of general circulation 1-47 in the county in which the proceeding is pending a notice that 1-48 reads substantially similar to the following: 1-49 TO ALL INTERESTED PERSONS: 1-50 (NAME OF COMMUNITY TRUST) HAS FILED A PETITION IN (NAME OF 1-51 COURT) OF (NAME OF COUNTY), TEXAS, REQUESTING PERMISSION TO CONVERT 1-52 TO A NONPROFIT CORPORATION. IF PERMITTED TO CONVERT: 1-53 (1) THE (NAME OF COMMUNITY TRUST) WILL BE TERMINATED; 1-54 AND 1-55 (2) THE ASSETS OF THE TRUST WILL BE: 1-56 (A) TRANSFERRED TO A NONPROFIT CORPORATION WITH 1-57 THE SAME NAME AND CREATED FOR THE SAME PURPOSE AS THE (NAME OF 1-58 COMMUNITY TRUST); AND 1-59 (B) HELD AND ADMINISTERED BY THE CORPORATION AS 1-60 PROVIDED BY THE TEXAS NON-PROFIT CORPORATION ACT (ARTICLE 1396-1.01 1-61 ET SEQ., VERNON'S TEXAS CIVIL STATUTES). 1-62 THE PURPOSE OF THE CONVERSION IS TO ACHIEVE SAVINGS AND USE 1-63 THE MONEY SAVED TO FURTHER THE PURPOSES FOR WHICH THE (NAME OF 1-64 COMMUNITY TRUST) WAS CREATED. 2-1 A HEARING ON THE PETITION IS SCHEDULED ON (DATE AND TIME) AT 2-2 (LOCATION OF COURT). 2-3 FOR ADDITIONAL INFORMATION, YOU MAY CONTACT THE GOVERNING 2-4 BODY OF THE (NAME OF COMMUNITY TRUST) AT (ADDRESS AND TELEPHONE 2-5 NUMBER) OR THE COURT. 2-6 (e) The court shall schedule a hearing on the petition to be 2-7 held after the 10th day after the date the notices required by 2-8 Subsection (d)(2) are deposited in the mail or the date the notice 2-9 required by Subsection (d)(3) is published, whichever is later. 2-10 The hearing must be held at the time and place stated in the 2-11 notices unless the court, for good cause, postpones the hearing. 2-12 If the hearing is postponed, a notice of the rescheduled hearing 2-13 date and time must be posted at the courthouse of the county in 2-14 which the proceeding is pending or at the place in or near the 2-15 courthouse where public notices are customarily posted. 2-16 (f) The court, on a request from the governing body of the 2-17 community trust, may by order require approval from the Internal 2-18 Revenue Service for an asset transfer under this section. If the 2-19 court orders approval from the Internal Revenue Service, the asset 2-20 transfer may occur on the date the governing body of the community 2-21 trust files a notice with the court indicating that the Internal 2-22 Revenue Service has approved the asset transfer. The notice 2-23 required by this subsection must be filed on or before the first 2-24 anniversary of the date the court's order approving the asset 2-25 transfer is signed. If the notice is not filed within the period 2-26 prescribed by this subsection, the court's order is dissolved. 2-27 (g) A court order transferring the assets of and terminating 2-28 a community trust must provide that the duties of each trustee of 2-29 each component trust fund of the community trust are terminated on 2-30 the date the assets are transferred. This subsection does not 2-31 affect the liability of a trustee for acts or omissions that 2-32 occurred before the duties of the trustee are terminated. 2-33 SECTION 2. This Act takes effect September 1, 1999. 2-34 SECTION 3. The importance of this legislation and the 2-35 crowded condition of the calendars in both houses create an 2-36 emergency and an imperative public necessity that the 2-37 constitutional rule requiring bills to be read on three several 2-38 days in each house be suspended, and this rule is hereby suspended. 2-39 * * * * *