By: Sibley S.B. No. 899
A BILL TO BE ENTITLED
AN ACT
1-1 relating to certain investments and rate reductions by insurance
1-2 companies and related organizations; providing an administrative
1-3 penalty.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 4, Insurance Code, is amended by adding
1-6 Subchapter B to read as follows:
1-7 SUBCHAPTER B. PREMIUM TAX CREDIT FOR INVESTMENT IN
1-8 CERTIFIED CAPITAL COMPANY
1-9 Art. 4.51. DEFINITIONS. In this subchapter:
1-10 (1) "Affiliate" of another person means:
1-11 (A) a person who is an affiliate for purposes of
1-12 Section 2, Article 21.49-1 of this code;
1-13 (B) a person who directly or indirectly:
1-14 (i) beneficially owns 10 percent or more
1-15 of the outstanding voting securities or other ownership interests
1-16 of the other person, whether through rights, options, convertible
1-17 interests, or otherwise; or
1-18 (ii) controls or holds power to vote 10
1-19 percent or more of the outstanding voting securities or other
1-20 ownership interests of the other person;
1-21 (C) a person 10 percent or more of the
1-22 outstanding voting securities or other ownership interests of which
1-23 are directly or indirectly:
1-24 (i) beneficially owned by the other
2-1 person, whether through rights, options, convertible interests, or
2-2 otherwise; or
2-3 (ii) controlled or held with power to vote
2-4 by the other person;
2-5 (D) a partnership in which the other person is a
2-6 general partner; or
2-7 (E) an officer, director, employee, or agent of
2-8 the other person, or an immediate family member of the officer,
2-9 director, employee, or agent.
2-10 (2) "Certification date" means the date on which a
2-11 certified capital company is certified under this subchapter.
2-12 (3) "Certified capital" means an investment of cash by
2-13 a certified investor in a certified capital company that fully
2-14 funds the purchase price of either its equity interest in the
2-15 company or a qualified debt instrument issued by the company.
2-16 (4) "Certified capital company" means a partnership,
2-17 corporation, or trust or limited liability company, whether
2-18 organized on a profit or not-for-profit basis, that has as its
2-19 primary business activity the investment of cash in qualified
2-20 businesses and that is certified as meeting the criteria of this
2-21 subchapter.
2-22 (5) "Certified investor" means an insurance company or
2-23 other person that has state premium tax liability that either:
2-24 (A) contributes certified capital pursuant to an
2-25 allocation of premium tax credits under this subchapter; or
2-26 (B) becomes irrevocably committed to contribute
3-1 certified capital by preparing and executing a premium tax credit
3-2 allocation claim.
3-3 (6) "Early stage business" means a qualified business
3-4 that:
3-5 (A) is involved, at the time of a certified
3-6 capital company's first investment, in activities related to the
3-7 development of initial product or service offerings, such as
3-8 prototype development or establishment of initial production or
3-9 service processes; or
3-10 (B) was initially organized less than two years
3-11 before the date of the certified capital company's first investment
3-12 and, during the fiscal year immediately preceding the year of the
3-13 first investment had, on a consolidated basis with its affiliates,
3-14 gross revenues of not more than $2 million as determined in
3-15 accordance with generally accepted accounting principles.
3-16 (7) "Person" means a natural person or entity,
3-17 including a corporation, general or limited partnership, or trust
3-18 or limited liability company.
3-19 (8) "Premium tax credit allocation claim" means a
3-20 claim for allocation of premium tax credits.
3-21 (9) "Qualified business" means a business that, at the
3-22 time of a certified capital company's first investment in the
3-23 business:
3-24 (A) is headquartered in this state and intends
3-25 to remain in this state after receipt of the investment by the
3-26 certified capital company;
4-1 (B) has its principal business operations
4-2 located in this state and intends to maintain business operations
4-3 in this state after receipt of the investment by the certified
4-4 capital company;
4-5 (C) has agreed to use the qualified investment
4-6 primarily to:
4-7 (i) support business operations, other
4-8 than advertising, promotion, and sales operations, in this state;
4-9 or
4-10 (ii) in the case of a start-up company,
4-11 establish and support business operations, other than advertising,
4-12 promotion, and sales operations, in this state;
4-13 (D) has not more than 100 employees and employs
4-14 at least 80 percent of its employees in this state;
4-15 (E) is primarily engaged in:
4-16 (i) manufacturing, processing, or
4-17 assembling products;
4-18 (ii) conducting research and development;
4-19 or
4-20 (iii) providing services; and
4-21 (F) is not primarily engaged in:
4-22 (i) retail sales;
4-23 (ii) real estate development;
4-24 (iii) the business of insurance, banking,
4-25 or lending; or
4-26 (iv) the provision of professional
5-1 services provided by accountants, attorneys, or physicians.
5-2 (10) "Qualified debt instrument" means a debt
5-3 instrument issued by a certified capital company, at par value or a
5-4 premium, that:
5-5 (A) has an original maturity date of at least
5-6 five years after the date of issuance;
5-7 (B) has a repayment schedule that is not faster
5-8 than a level principal amortization over five years;
5-9 (C) has an annualized internal rate of return
5-10 that:
5-11 (i) is computed using the purchase price
5-12 of the qualified debt instrument, all payments of principal and
5-13 interest on the qualified debt instrument, and all future tax
5-14 credits projected to be received with respect to the qualified debt
5-15 instrument; and
5-16 (ii) does not exceed by more than 300
5-17 basis points the yield made, on the date of issuance of the
5-18 qualified debt instrument, on the five-year United States Treasury
5-19 security most recently issued, as of that date, by the United
5-20 States Treasury; and
5-21 (D) does not have:
5-22 (i) an equity component; or
5-23 (ii) interest, distribution, or payment
5-24 features or components that are related to the profitability of the
5-25 company or the performance of the company's investment portfolio
5-26 whether the features or components are part of or attached to the
6-1 qualified debt instrument or are distributed or sold separately and
6-2 purchased or obtained by the holder of the qualified debt
6-3 instrument or any of its affiliates.
6-4 (11) "Qualified distribution" means any distribution
6-5 or payment by a certified capital company in connection with:
6-6 (A) the reasonable costs and expenses of
6-7 forming, syndicating, managing, and operating the company, provided
6-8 that the distribution or payment is not made directly or indirectly
6-9 to a certified investor or an affiliate of a certified investor,
6-10 including:
6-11 (i) reasonable and necessary fees paid for
6-12 professional services, including legal and accounting services,
6-13 related to the formation and operation of the company; and
6-14 (ii) an annual management fee in an amount
6-15 that does not exceed two and one-half percent of the value of the
6-16 assets of the company; and
6-17 (B) any projected increase in federal or state
6-18 taxes, including penalties and interest related to state and
6-19 federal income taxes, of the equity owners of the company resulting
6-20 from the earnings or other tax liability of the company to the
6-21 extent that the increase is related to the ownership, management,
6-22 or operation of the company.
6-23 (12) "Qualified investment" means the investment of
6-24 cash by a certified capital company in a qualified business for the
6-25 purchase of any debt, equity, or hybrid security of any nature or
6-26 description, including a debt instrument or security that has the
7-1 characteristics of debt but that provides for conversion into
7-2 equity or equity participation instruments such as options or
7-3 warrants.
7-4 (13) "State premium tax liability" means any liability
7-5 incurred by any person under Subchapter A of this chapter or under
7-6 Article 9.59 of this code.
7-7 Art. 4.52. DUTIES OF COMPTROLLER; RULES. The comptroller
7-8 shall administer this subchapter and may adopt rules and forms as
7-9 necessary to implement this subchapter.
7-10 Art. 4.53. CERTIFICATION. (a) The comptroller by rule
7-11 shall establish the application procedures for certified capital
7-12 companies.
7-13 (b) An applicant must file an application not later than
7-14 April 17, 2000, in the form prescribed by the comptroller
7-15 accompanied by a nonrefundable application fee of $7,500. The
7-16 application must include an audited balance sheet of the applicant,
7-17 with an unqualified opinion from an independent certified public
7-18 accountant, as of a date not more than 35 days before the date of
7-19 the application.
7-20 (c) To qualify as a certified capital company:
7-21 (1) the applicant must have, at the time of
7-22 application for certification, an equity capitalization of at
7-23 least $500,000 in the form of unencumbered cash or cash
7-24 equivalents;
7-25 (2) at least two principals or persons employed to
7-26 manage the funds of the applicant must have at least two years of
8-1 experience in the venture capital industry; and
8-2 (3) the applicant must satisfy any additional
8-3 requirement imposed by the comptroller by rule.
8-4 (d) The comptroller shall review the application,
8-5 organizational documents, and business history of each applicant
8-6 and shall ensure that the applicant satisfies the requirements of
8-7 this subchapter.
8-8 (e) Not later than the 30th day after the date an
8-9 application is filed, the comptroller shall:
8-10 (1) issue the certification; or
8-11 (2) refuse to issue the certification and communicate
8-12 in detail to the applicant the grounds for the refusal, including
8-13 suggestions for the removal of those grounds.
8-14 Art. 4.54. MANAGEMENT BY CERTAIN ENTITIES PROHIBITED.
8-15 (a) An insurance company, group of insurance companies, or other
8-16 persons who may have state premium tax liability or the affiliates
8-17 of the insurance companies or other persons may not, directly or
8-18 indirectly:
8-19 (1) manage a certified capital company;
8-20 (2) beneficially own, whether through rights, options,
8-21 convertible interests, or otherwise, more than 10 percent of the
8-22 outstanding voting securities of a certified capital company; or
8-23 (3) control the direction of investments for a
8-24 certified capital company.
8-25 (b) Subsection (a) of this article applies without regard to
8-26 whether the insurance company or other person or the affiliate of
9-1 the insurance company or other person is licensed by or transacts
9-2 business in this state.
9-3 (c) This article does not preclude a certified investor,
9-4 insurance company, or any other party from exercising its legal
9-5 rights and remedies, including interim management of a certified
9-6 capital company, if authorized by law, with respect to a certified
9-7 capital company that is in default of its statutory or contractual
9-8 obligations to the certified investor, insurance company, or other
9-9 party.
9-10 Art. 4.55. OFFERING MATERIAL USED BY CERTIFIED CAPITAL
9-11 COMPANY. Any offering material involving the sale of securities of
9-12 the certified capital company must include the following statement:
9-13 By authorizing the formation of a certified capital
9-14 company, the State of Texas does not endorse the
9-15 quality of management or the potential for earnings of
9-16 the company and is not liable for damages or losses to
9-17 a certified investor in the company. Use of the word
9-18 "certified" in an offering does not constitute a
9-19 recommendation or endorsement of the investment by the
9-20 comptroller of public accounts. If applicable
9-21 provisions of law are violated, the State of Texas may
9-22 require forfeiture of unused premium tax credits and
9-23 repayments of used premium tax credits.
9-24 Art. 4.56. REQUIREMENTS FOR CONTINUANCE OF CERTIFICATION.
9-25 (a) To continue to be certified, a certified capital company
9-26 shall make qualified investments according to the following
10-1 schedule:
10-2 (1) before the third anniversary of its certification
10-3 date, a company must have made qualified investments in an amount
10-4 cumulatively equal to at least 30 percent of its certified capital;
10-5 and
10-6 (2) before the fifth anniversary of its certification
10-7 date, a company must have made qualified investments in an amount
10-8 cumulatively equal to at least 50 percent of its certified capital,
10-9 subject to Subsection (b) of this article.
10-10 (b) At least 50 percent of the amount of qualified
10-11 investments required by Subsections (a)(1) and (2) of this article
10-12 must be placed in early stage businesses.
10-13 (c) The aggregate cumulative amount of all qualified
10-14 investments made by the certified capital company after its
10-15 certification date shall be considered in the computation of the
10-16 percentage requirements under this subchapter. Any proceeds
10-17 received from a qualified investment may be invested in another
10-18 qualified investment and count toward any requirement in this
10-19 subchapter with respect to investments of certified capital.
10-20 (d) A business that is classified as a qualified business at
10-21 the time of the first investment in the business by a certified
10-22 capital company remains classified as a qualified business and may
10-23 receive follow-on investments from any certified capital company.
10-24 Except as provided by this subsection, a follow-on investment made
10-25 under this subsection is a qualified investment even though the
10-26 business may not meet the definition of a qualified business at the
11-1 time of the follow-on investment. A follow-on investment does not
11-2 qualify as a qualified investment if, at the time of the follow-on
11-3 investment, the qualified business no longer has its principal
11-4 business operations in this state.
11-5 (e) A qualified investment may not be made at a cost to a
11-6 certified capital company greater than 15 percent of the total
11-7 certified capital of the company at the time of investment.
11-8 (f) If, before the first anniversary of the date that a
11-9 certified capital company makes an investment in a qualified
11-10 business, the qualified business moves its principal business
11-11 operations from this state, the investment may not be considered a
11-12 qualified investment for purposes of the percentage requirements
11-13 under this subchapter.
11-14 (g) A certified capital company shall invest any certified
11-15 capital not invested in qualified investments in:
11-16 (1) cash deposited with a federally insured financial
11-17 institution;
11-18 (2) certificates of deposit in a federally insured
11-19 financial institution;
11-20 (3) investment securities that are obligations of the
11-21 United States or its agencies or instrumentalities or obligations
11-22 that are guaranteed fully as to principal and interest by the
11-23 United States;
11-24 (4) investment-grade instruments rated at least "A" or
11-25 its equivalent by a nationally recognized rating organization;
11-26 (5) obligations of this state or any municipality or
12-1 political subdivision of this state; or
12-2 (6) any other investments approved in advance and in
12-3 writing by the comptroller.
12-4 Art. 4.57. EVALUATION OF BUSINESS BY COMPTROLLER. (a) A
12-5 certified capital company may, before making an investment in a
12-6 business, request from the comptroller a written opinion as to
12-7 whether the business in which it proposes to invest is a qualified
12-8 business or an early stage business.
12-9 (b) The comptroller shall, not later than the 15th business
12-10 day after the date of the receipt of a request under Subsection (a)
12-11 of this article, determine whether the business meets the
12-12 definition of a qualified business or an early stage business, as
12-13 applicable, and notify the certified capital company of the
12-14 determination and an explanation of its determination or notify the
12-15 certified capital company that an additional 15 days will be needed
12-16 to review and make the determination.
12-17 (c) If the comptroller fails to notify the certified capital
12-18 company with respect to the proposed investment within the period
12-19 specified by Subsection (b) of this article, the business in which
12-20 the company proposes to invest is considered to be a qualified
12-21 business or early stage business, as appropriate.
12-22 Art. 4.58. REPORTS TO COMPTROLLER; AUDITED FINANCIAL
12-23 STATEMENT. (a) Each certified capital company shall report to the
12-24 comptroller as soon as practicable after the receipt of certified
12-25 capital:
12-26 (1) the name of each certified investor from whom the
13-1 certified capital was received, including the certified investor's
13-2 insurance premium tax identification number;
13-3 (2) the amount of each certified investor's investment
13-4 of certified capital and premium tax credits; and
13-5 (3) the date on which the certified capital was
13-6 received.
13-7 (b) Not later than January 31 of each year, each certified
13-8 capital company shall report to the comptroller:
13-9 (1) the amount of the company's certified capital at
13-10 the end of the preceding year;
13-11 (2) whether or not the company has invested more than
13-12 15 percent of its total certified capital in any one business;
13-13 (3) each qualified investment that the company made
13-14 during the preceding year and, with respect to each qualified
13-15 investment, the number of employees of the qualified business at
13-16 the time the qualified investment was made; and
13-17 (4) any other information required by the comptroller,
13-18 including any information required by the comptroller to comply
13-19 with Article 4.74 of this code.
13-20 (c) Not later than April 1 of each year, the company shall
13-21 provide to the comptroller an annual audited financial statement
13-22 that includes the opinion of an independent certified public
13-23 accountant. The audit shall address the methods of operation and
13-24 conduct of the business of the company to determine whether:
13-25 (1) the company is complying with this subchapter and
13-26 the rules adopted under this subchapter;
14-1 (2) the funds received by the company have been
14-2 invested as required within the time provided by Article 4.56(a) of
14-3 this code; and
14-4 (3) the company has invested the funds in qualified
14-5 businesses.
14-6 Art. 4.59. RENEWAL. (a) Not later than January 31 of each
14-7 year, each certified capital company shall pay a nonrefundable
14-8 renewal fee of $5,000 to the comptroller.
14-9 (b) Notwithstanding Subsection (a) of this article, a
14-10 renewal fee is not required within six months of the initial
14-11 certification date of a certified capital company.
14-12 Art. 4.60. DISTRIBUTIONS; REPAYMENT OF DEBT. (a) A
14-13 certified capital company may make a qualified distribution at any
14-14 time. To make a distribution or payment, other than a qualified
14-15 distribution, a company must have made qualified investments in an
14-16 amount cumulatively equal to 100 percent of its certified capital.
14-17 (b) Notwithstanding Subsection (a) of this article, a
14-18 company may make repayments of principal and interest on its
14-19 indebtedness without any restriction, including repayments of
14-20 indebtedness of the company on which certified investors earned
14-21 premium tax credits.
14-22 Art. 4.61. ANNUAL REVIEW; DECERTIFICATION. (a) The
14-23 comptroller shall conduct an annual review of each certified
14-24 capital company to:
14-25 (1) ensure that the company continues to satisfy the
14-26 requirements of this subchapter and that the company has not made
15-1 any investment in violation of this subchapter; and
15-2 (2) determine the eligibility status of its qualified
15-3 investments.
15-4 (b) The cost of the annual review shall be paid by each
15-5 certified capital company according to a reasonable fee schedule
15-6 adopted by the comptroller.
15-7 (c) A material violation of Article 4.56, 4.58, or 4.59 of
15-8 this code is grounds for decertification of the certified capital
15-9 company. If the comptroller determines that a company is not in
15-10 compliance with Article 4.56, 4.58, or 4.59 of this code, the
15-11 comptroller shall notify the officers of the company in writing
15-12 that the company may be subject to decertification after the 120th
15-13 day after the date of mailing of the notice, unless the
15-14 deficiencies are corrected and the company returns to compliance
15-15 with those articles.
15-16 (d) The comptroller may decertify a certified capital
15-17 company, after opportunity for hearing, if the comptroller finds
15-18 that the company is not in compliance with Article 4.56, 4.58, or
15-19 4.59 of this code at the end of the period established by
15-20 Subsection (c) of this article. Decertification under this
15-21 subsection is effective on receipt of notice of decertification by
15-22 the company. The comptroller shall notify any appropriate state
15-23 agency of the decertification.
15-24 Art. 4.62. ADMINISTRATIVE PENALTY. (a) The comptroller may
15-25 impose an administrative penalty on a certified capital company
15-26 that violates this subchapter.
16-1 (b) The amount of the penalty may not exceed $25,000, and
16-2 each day a violation continues or occurs is a separate violation
16-3 for the purpose of imposing a penalty. The amount of the penalty
16-4 shall be based on:
16-5 (1) the seriousness of the violation, including the
16-6 nature, circumstances, extent, and gravity of the violation;
16-7 (2) the economic harm caused by the violation;
16-8 (3) the history of previous violations;
16-9 (4) the amount necessary to deter a future violation;
16-10 (5) efforts to correct the violation; and
16-11 (6) any other matter that justice may require.
16-12 (c) Certified capital companies assessed penalties under
16-13 this Subchapter may request a redetermination as provided in
16-14 Chapter 111, Tax Code.
16-15 (d) The attorney general may sue to collect the penalty.
16-16 (e) A proceeding to impose the penalty is considered to be a
16-17 contested case under Chapter 2001, Government Code.
16-18 Art. 4.63. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS:
16-19 DECERTIFICATION OF COMPANY. (a) Decertification of a certified
16-20 capital company may cause the recapture of premium tax credits
16-21 previously claimed and the forfeiture of future premium tax credits
16-22 to be claimed by certified investors with respect to the company,
16-23 as follows:
16-24 (1) decertification of a company on or before the
16-25 third anniversary of its certification date causes the recapture of
16-26 any premium tax credit previously claimed and the forfeiture of any
17-1 future premium tax credit to be claimed by a certified investor
17-2 with respect to the company;
17-3 (2) for a company that meets the requirements for
17-4 continued certification under Article 4.56(a)(1) of this code and
17-5 subsequently fails to meet the requirements for continued
17-6 certification under Article 4.56(a)(2) of this code, any premium
17-7 tax credit that has been or will be taken by a certified investor
17-8 on or before the third anniversary of the certification date is not
17-9 subject to recapture or forfeiture, but any premium tax credit that
17-10 has been or will be taken by a certified investor after the third
17-11 anniversary of the certification date of the company is subject to
17-12 recapture or forfeiture;
17-13 (3) for a company that has met the requirements for
17-14 continued certification under Articles 4.56(a)(1) and (2) of this
17-15 code and is subsequently decertified, any premium tax credit that
17-16 has been or will be taken by a certified investor on or before the
17-17 fifth anniversary of the certification date is not subject to
17-18 recapture or forfeiture, but any premium tax credit to be taken
17-19 after the fifth anniversary of the certification date is subject to
17-20 forfeiture only if the company is decertified on or before the
17-21 fifth anniversary of its certification date; and
17-22 (4) for a company that has invested an amount
17-23 cumulatively equal to 100 percent of its certified capital in
17-24 qualified investments, any premium tax credit claimed or to be
17-25 claimed by a certified investor is not subject to recapture or
17-26 forfeiture under this article.
18-1 (b) The comptroller shall send written notice to the address
18-2 of each certified investor whose premium tax credit is subject to
18-3 recapture or forfeiture, using the address shown on the last
18-4 premium tax filing.
18-5 Art. 4.64. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS:
18-6 QUALIFIED BUSINESS LEAVES STATE. (a) The comptroller shall adopt
18-7 rules under which premium tax credits previously claimed by
18-8 certified investors are subject to recapture and future premium tax
18-9 credits to be claimed by certified investors are subject to
18-10 forfeiture with respect to an investment made by a certified
18-11 capital company in a qualified business if the qualified business
18-12 fails to maintain its principal business operations in this state
18-13 as required by the rules.
18-14 (b) The rules adopted by the comptroller must specify the
18-15 manner in which the recapture and forfeiture of premium tax credits
18-16 under this article may be apportioned among certified investors in
18-17 a certified capital company.
18-18 (c) The comptroller shall send written notice to the address
18-19 of each certified investor whose premium tax credit is subject to
18-20 recapture or forfeiture, using the address shown on the last
18-21 premium tax filing.
18-22 Art. 4.65. INDEMNITY AGREEMENTS AND INSURANCE AUTHORIZED. A
18-23 certified capital company may agree to indemnify, or purchase
18-24 insurance for the benefit of, a certified investor for losses
18-25 resulting from the recapture or forfeiture of premium tax credits
18-26 under Article 4.63 or 4.64 of this code.
19-1 Art. 4.66. PREMIUM TAX CREDIT. (a) A certified investor
19-2 who makes an investment of certified capital shall in the year of
19-3 investment earn a vested credit against state premium tax liability
19-4 equal to 100 percent of the certified investor's investment of
19-5 certified capital, subject to the limits imposed by this
19-6 subchapter. A certified investor may take up to 10 percent of the
19-7 vested premium tax credit in any taxable year of the certified
19-8 investor.
19-9 (b) The credit to be applied against state premium tax
19-10 liability in any one year may not exceed the state premium tax
19-11 liability of the certified investor for the taxable year. Any
19-12 unused credit against state premium tax liability may be carried
19-13 forward indefinitely until the premium tax credits are used.
19-14 (c) A certified investor claiming a credit against state
19-15 premium tax liability earned through an investment in a company is
19-16 not required to pay any additional retaliatory tax levied under
19-17 Article 21.46 of this code as a result of claiming that credit. An
19-18 investment made under this subchapter is a "Texas investment" for
19-19 purposes of Subchapter A of this chapter and Article 9.59 of this
19-20 code.
19-21 Art. 4.67. PREMIUM TAX CREDIT ALLOCATION CLAIM FORM. (a) A
19-22 premium tax credit allocation claim must be prepared and executed
19-23 by a certified investor on a form provided by the comptroller. The
19-24 certified capital company must file the claim with the comptroller
19-25 not later than August 17, 2000. The premium tax credit allocation
19-26 claim form must include an affidavit of the certified investor
20-1 under which the certified investor becomes legally bound and
20-2 irrevocably committed to make an investment of certified capital in
20-3 a certified capital company in the amount allocated even if the
20-4 amount allocated is less than the amount of the claim, subject only
20-5 to the receipt of an allocation under Article 4.69 of this code.
20-6 (b) A certified investor may not claim a premium tax credit
20-7 under Article 4.66 of this code for an investment that has not been
20-8 funded, even if the certified investor has committed to fund the
20-9 investment.
20-10 Art. 4.68. TOTAL LIMIT ON CREDITS. (a) The total amount of
20-11 certified capital for which premium tax credits may be allowed
20-12 under this subchapter for all years in which premium tax credits
20-13 are allowed is $100 million.
20-14 (b) The total amount of certified capital for which premium
20-15 tax credits may be allowed for all certified investors under this
20-16 subchapter may not exceed the amount that would entitle all
20-17 certified investors in certified capital companies to take total
20-18 credits of $10 million in a year.
20-19 (c) A certified capital company and its affiliates may not
20-20 file premium tax credit allocation claims in excess of the maximum
20-21 amount of certified capital for which premium tax credits may be
20-22 allowed as provided in this article.
20-23 Art. 4.69. PRO RATA ALLOCATION OF CREDITS. (a) This
20-24 article applies only if the total premium tax credits claimed by
20-25 all certified investors exceeds the total limits on premium tax
20-26 credits established by Article 4.68(a) of this code.
21-1 (b) The comptroller shall allocate the total amount of
21-2 premium tax credits allowed under this subchapter to certified
21-3 investors in certified capital companies on a pro rata basis in
21-4 accordance with this article.
21-5 (c) The pro rata allocation for each certified investor
21-6 shall be the product of:
21-7 (1) a fraction, the numerator of which is the amount
21-8 of the premium tax credit allocation claim filed on behalf of the
21-9 investor and the denominator of which is the total amount of all
21-10 premium tax credit allocation claims filed on behalf of all
21-11 certified investors; and
21-12 (2) the total amount of certified capital for which
21-13 premium tax credits may be allowed under this subchapter.
21-14 (d) If, as a result of the pro rata allocation of premium
21-15 tax credits under Subsection (c) of this article, certified
21-16 investors in any certified capital company that submitted premium
21-17 tax credit allocation claims would not be allocated at least $7.5
21-18 million in premium tax credits for all years for which credits are
21-19 allowed, the comptroller:
21-20 (1) may not make any allocation to the certified
21-21 investors of the certified capital company that would receive the
21-22 lowest pro rata allocation and that company may not continue to
21-23 operate as a certified capital company and that company's
21-24 certification under this subchapter terminates;
21-25 (2) shall continue to apply the allocation formula
21-26 established under Subsection (c) of this article, without
22-1 considering the premium tax credit allocation claims filed on
22-2 behalf of the certified investors in the company that was denied an
22-3 allocation under Subdivision (1) of this subsection; and
22-4 (3) shall continue application of the allocation
22-5 formula, as provided by this subsection, until the allocation
22-6 process results in the allocation of at least $7.5 million in
22-7 premium tax credits to the certified investors of each company
22-8 receiving an allocation under this article.
22-9 (e) Not later than September 15, 2000, the comptroller shall
22-10 notify each certified capital company of the amount of tax credits
22-11 allocated to each certified investor. Each certified capital
22-12 company shall notify each certified investor of their premium tax
22-13 credit allocation.
22-14 (f) If a certified capital company does not receive an
22-15 investment of certified capital equaling the amount of premium tax
22-16 credits allocated to a certified investor for which it filed a
22-17 premium tax credit allocation claim before the end of the 10th
22-18 business day after the date of receipt of notice of allocation, the
22-19 company shall notify the comptroller by overnight common carrier
22-20 delivery service and that portion of capital allocated to the
22-21 certified investor shall be forfeited. The comptroller shall
22-22 reallocate the forfeited capital among the certified investors in
22-23 the other certified capital companies that originally received an
22-24 allocation so that the result after reallocation is the same as if
22-25 the initial allocation under this article had been performed
22-26 without considering the premium tax credit allocation claims that
23-1 were subsequently forfeited.
23-2 (g) The maximum amount of certified capital for which a
23-3 premium tax credit allocation may be allowed on behalf of any one
23-4 certified investor and its affiliates, whether by one or more
23-5 certified capital companies, may not exceed $2 million a year.
23-6 Art. 4.70. TREATMENT OF CREDITS AND CAPITAL. In any case
23-7 under this code or another insurance law of this state in which the
23-8 assets of a certified investor are examined or considered, the
23-9 certified capital may be treated as an admitted asset, subject to
23-10 the applicable statutory valuation procedures.
23-11 Art 4.71. IMPACT OF TAX CREDITS CLAIMED BY A CERTIFIED
23-12 INVESTOR ON INSURANCE RATES. A certified investor is not required
23-13 to reduce the amount of premium tax included by the investor in
23-14 connection with ratemaking for any insurance contract written in
23-15 this state because of a reduction in the investor's Texas premium
23-16 tax derived from the credit granted under this subchapter.
23-17 Art. 4.72. TRANSFERABILITY OF CREDIT. (a) A certified
23-18 investor may transfer or assign premium tax credits to:
23-19 (1) an affiliate of the certified investor;
23-20 (2) another entity that may be a certified investor,
23-21 if a merger, acquisition, or total assumption of reinsurance among
23-22 or between the entities occurs; or
23-23 (3) another entity, in connection with a
23-24 rehabilitation or receivership process, if the comptroller, after
23-25 consultation with the commissioner, by order approves the transfer
23-26 or assignment.
24-1 (b) The comptroller shall adopt rules to facilitate the
24-2 transfer or assignment of premium tax credits. A certified
24-3 investor may transfer or assign premium tax credits only in
24-4 compliance with the rules adopted under this subsection.
24-5 (c) The transfer or assignment of a premium tax credit does
24-6 not affect the schedule for taking the premium tax credit under
24-7 this subchapter.
24-8 Art. 4.73. PROMOTION. The Texas Department of Economic
24-9 Development shall promote the program established under this
24-10 subchapter in the Texas Business and Community Economic Development
24-11 Clearinghouse.
24-12 Art. 4.74. REPORT TO LEGISLATURE. (a) The comptroller
24-13 shall prepare a biennial report with respect to results of the
24-14 implementation of this subchapter. The report must include:
24-15 (1) the number of certified capital companies holding
24-16 certified capital;
24-17 (2) the amount of certified capital invested in each
24-18 certified capital company;
24-19 (3) the amount of certified capital the certified
24-20 capital company has invested in qualified businesses as of January
24-21 1, 2002, and the cumulative total for each subsequent year;
24-22 (4) the total amount of tax credits granted under this
24-23 subchapter for each year that credits have been granted;
24-24 (5) the performance of each certified capital company
24-25 with respect to renewal and reporting requirements imposed under
24-26 this subchapter;
25-1 (6) with respect to the qualified businesses in which
25-2 certified capital companies have invested:
25-3 (A) the classification of the qualified
25-4 businesses according to the industrial sector and the size of the
25-5 business;
25-6 (B) the total number of jobs created by the
25-7 investment and the average wages paid for the jobs; and
25-8 (C) the total number of jobs retained as a
25-9 result of the investment and the average wages paid for the jobs;
25-10 and
25-11 (7) the certified capital companies that have been
25-12 decertified or that have failed to renew the certification and the
25-13 reason for any decertification.
25-14 (b) The comptroller shall file the report with the governor,
25-15 the lieutenant governor, and the speaker of the house of
25-16 representatives not later than December 15 of each even-numbered
25-17 year.
25-18 SECTION 2. Section 6, Article 5.131, Insurance Code, is
25-19 amended to read as follows:
25-20 Sec. 6. DURATION OF REDUCTION. Unless the commissioner
25-21 grants relief under Section 4 or 5 of this article, each rate
25-22 resulting from the reduction required under Section 3 of this
25-23 article remains in effect until January 1, 2003 [2001].
25-24 SECTION 3. Articles 4.01 through 4.08, 4.10, 4.11, 4.11A,
25-25 4.11B, 4.11C, 4.12, and 4.17, 4.18, and 4.19, Insurance Code, are
25-26 redesignated as Subchapter A, Chapter 4, Insurance Code, and a
26-1 subchapter heading is added to read as follows:
26-2 SUBCHAPTER A. IMPOSITION AND COLLECTION OF TAXES AND FEES
26-3 SECTION 4. (a) Not later than the 60th day after the
26-4 effective date of this Act, the comptroller of public accounts of
26-5 the State of Texas shall adopt rules necessary to implement
26-6 Subchapter B, Chapter 4, Insurance Code, as added by this Act. The
26-7 comptroller of public accounts shall begin accepting applications
26-8 for certification as a certified capital company under that
26-9 subchapter on the 90th day after the effective date of this Act.
26-10 (b) A certified investor may not make an investment with a
26-11 certified capital company under Subchapter B, Chapter 4, Insurance
26-12 Code, as added by this Act, before January 1, 2001.
26-13 SECTION 5. This Act does not take effect unless the
26-14 legislature appropriates money specifically for the purpose of
26-15 administering this Act.
26-16 SECTION 6. The importance of this legislation and the
26-17 crowded condition of the calendars in both houses create an
26-18 emergency and an imperative public necessity that the
26-19 constitutional rule requiring bills to be read on three several
26-20 days in each house be suspended, and this rule is hereby suspended,
26-21 and that this Act take effect and be in force from and after its
26-22 passage, and it is so enacted.