HBA-TBM C.S.H.B. 3015 77(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 3015
By: Crownover, Myra
Pensions & Investments
4/16/2001
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Charitable organizations have begun to recognize the benefit of accepting
stock and stock options in addition to monetary donations in their
fund-raising effort.  Donation of stock provides charities with great
potential gains without great risk.  The options also provide cash-poor
corporations with the means to provide potentially large donations to
charities.  As a result of these types of fund-raising efforts, start-up
companies have begun to issue stock option to charities when the strike
price of the options is low and the potential benefits are significant.
Currently, The Securities Act of Texas does not provide an exemption from
registration under state law for the charitable donation of securities,
which may negate the inherent incentives of stock donation.  C.S.H.B. 3015
exempts the donation of securities to charitable organizations from The
Securities Act.   

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. 

ANALYSIS

C.S.H.B. 3015 amends The Securities Act (Act) to exempt issuance or
transfer of securities by the issuer of its securities (transfer) to a
corporation or association, organized exclusively for religious,
educational, benevolent, fraternal, charitable, or reformatory purposes and
not for pecuniary profit (charitable organization).  The bill sets forth
the following conditions for a transfer to qualify for exemption:   

 _the charitable organization may not provide anything of value for the
transfer other than in the case of any security that is an option payment
of the exercise price of the option to acquire the securities at a price
not to exceed the fair market value of the underlying securities on the
date the option was granted;  
 
 _the transfer may not be made for the purpose of raising capital for the
issuer;  
 
 _no commission or other form of consideration may be paid or provided to a
third party with respect to the transfer; and  
 
 _the transfer may not be directly or indirectly for the purpose of
providing or furthering a scheme in violation of or to evade this Act.   

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001. 

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 3015 differs from the original by replacing references to a
charitable organization with a  corporation or association organized
exclusively for religious, educational, benevolent, fraternal, charitable,
or reformatory purposes and not for pecuniary profit.  The substitute
removes provisions defining "charitable organization" and "option."