By Solis H.B. No. 3177
77R5343 DLF-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain investments and rate reductions by insurance
1-3 companies and related organizations; providing an administrative
1-4 penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Chapter 4, Insurance Code, is amended by adding
1-7 Subchapter B to read as follows:
1-8 SUBCHAPTER B. PREMIUM TAX CREDIT FOR INVESTMENT IN
1-9 CERTIFIED CAPITAL COMPANY
1-10 Art. 4.51. DEFINITIONS. In this subchapter:
1-11 (1) "Affiliate" of another person means:
1-12 (A) a person who is an affiliate for purposes of
1-13 Section 2, Article 21.49-1 of this code;
1-14 (B) a person who directly or indirectly:
1-15 (i) beneficially owns 10 percent or more
1-16 of the outstanding voting securities or other ownership interests
1-17 of the other person, whether through rights, options, convertible
1-18 interests, or otherwise; or
1-19 (ii) controls or holds power to vote 10
1-20 percent or more of the outstanding voting securities or other
1-21 ownership interests of the other person;
1-22 (C) a person 10 percent or more of the
1-23 outstanding voting securities or other ownership interests of which
1-24 are directly or indirectly:
2-1 (i) beneficially owned by the other
2-2 person, whether through rights, options, convertible interests, or
2-3 otherwise; or
2-4 (ii) controlled or held with power to vote
2-5 by the other person;
2-6 (D) a partnership in which the other person is a
2-7 general partner; or
2-8 (E) an officer, director, employee, or agent of
2-9 the other person, or an immediate family member of the officer,
2-10 director, employee, or agent.
2-11 (2) "Certification date" means the date on which a
2-12 certified capital company is certified under this subchapter.
2-13 (3) "Certified capital" means an investment of cash by
2-14 a certified investor in a certified capital company that fully
2-15 funds the purchase price of either its equity interest in the
2-16 company or a qualified debt instrument issued by the company.
2-17 (4) "Certified capital company" means a partnership,
2-18 corporation, or trust or limited liability company, whether
2-19 organized on a profit or not-for-profit basis, that has as its
2-20 primary business activity the investment of cash in qualified
2-21 businesses and that is certified as meeting the criteria of this
2-22 subchapter.
2-23 (5) "Certified investor" means an insurance company or
2-24 other person that has state premium tax liability that either:
2-25 (A) contributes certified capital pursuant to an
2-26 allocation of premium tax credits under this subchapter; or
2-27 (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;
3-10 (B) was initially organized less than two years
3-11 before the date of the certified capital company's first
3-12 investment; or
3-13 (C) during the fiscal year immediately preceding
3-14 the year of the first investment had, on a consolidated basis with
3-15 its affiliates, gross revenues of not more than $2 million as
3-16 determined in accordance with generally accepted accounting
3-17 principles.
3-18 (7) "Person" means a natural person or entity,
3-19 including a corporation, general or limited partnership, or trust
3-20 or limited liability company.
3-21 (8) "Premium tax credit allocation claim" means a
3-22 claim for allocation of premium tax credits.
3-23 (9) "Qualified business" means a business that, at the
3-24 time of a certified capital company's first investment in the
3-25 business:
3-26 (A) is headquartered in this state and intends
3-27 to remain in this state after receipt of the investment by the
4-1 certified capital company;
4-2 (B) has its principal business operations
4-3 located in this state and intends to maintain business operations
4-4 in this state after receipt of the investment by the certified
4-5 capital company;
4-6 (C) has agreed to use the qualified investment
4-7 primarily to:
4-8 (i) support business operations, other
4-9 than advertising, promotion, and sales operations, in this state;
4-10 or
4-11 (ii) in the case of a start-up company,
4-12 establish and support business operations, other than advertising,
4-13 promotion, and sales operations, in this state;
4-14 (D) has not more than 100 employees and:
4-15 (i) employs at least 80 percent of its
4-16 employees in this state; or
4-17 (ii) pays 80 percent of its payroll to
4-18 employees in this state;
4-19 (E) is primarily engaged in:
4-20 (i) manufacturing, processing, or
4-21 assembling products;
4-22 (ii) conducting research and development;
4-23 or
4-24 (iii) providing services; and
4-25 (F) is not primarily engaged in:
4-26 (i) retail sales;
4-27 (ii) real estate development;
5-1 (iii) the business of insurance, banking,
5-2 or lending; or
5-3 (iv) the provision of professional
5-4 services provided by accountants, attorneys, or physicians.
5-5 (10) "Qualified debt instrument" means a debt
5-6 instrument issued by a certified capital company, at par value or a
5-7 premium, that:
5-8 (A) has an original maturity date of at least
5-9 five years after the date of issuance;
5-10 (B) has a repayment schedule that is not faster
5-11 than a level principal amortization over five years;
5-12 (C) has an annualized internal rate of return
5-13 that:
5-14 (i) is computed using the purchase price
5-15 of the qualified debt instrument, all payments of principal and
5-16 interest on the qualified debt instrument, and all future tax
5-17 credits projected to be received with respect to the qualified debt
5-18 instrument; and
5-19 (ii) does not exceed by more than 300
5-20 basis points the yield made, on the date of issuance of the
5-21 qualified debt instrument, on the five-year United States Treasury
5-22 security most recently issued, as of that date, by the United
5-23 States Treasury; and
5-24 (D) does not have:
5-25 (i) an equity component; or
5-26 (ii) interest, distribution, or payment
5-27 features or components that are related to the profitability of the
6-1 company or the performance of the company's investment portfolio
6-2 whether the features or components are part of or attached to the
6-3 qualified debt instrument or are distributed or sold separately and
6-4 purchased or obtained by the holder of the qualified debt
6-5 instrument or any of its affiliates.
6-6 (11) "Qualified distribution" means any distribution
6-7 or payment by a certified capital company in connection with:
6-8 (A) the reasonable costs and expenses of
6-9 forming, syndicating, managing, and operating the company, provided
6-10 that the distribution or payment is not made directly or indirectly
6-11 to a certified investor or an affiliate of a certified investor,
6-12 including:
6-13 (i) reasonable and necessary fees paid for
6-14 professional services, including legal and accounting services,
6-15 related to the formation and operation of the company; and
6-16 (ii) an annual management fee in an amount
6-17 that does not exceed two and one-half percent of the value of the
6-18 assets of the company; and
6-19 (B) any projected increase in federal or state
6-20 taxes, including penalties and interest related to state and
6-21 federal income taxes, of the equity owners of the company resulting
6-22 from the earnings or other tax liability of the company to the
6-23 extent that the increase is related to the ownership, management,
6-24 or operation of the company.
6-25 (12) "Qualified investment" means the investment of
6-26 cash by a certified capital company in a qualified business for the
6-27 purchase of any debt, equity, or hybrid security of any nature or
7-1 description, including a debt instrument or security that has the
7-2 characteristics of debt but that provides for conversion into
7-3 equity or equity participation instruments such as options or
7-4 warrants.
7-5 (13) "State premium tax liability" means any liability
7-6 incurred by any person under Subchapter A of this chapter or under
7-7 Article 9.59 of this code.
7-8 Art. 4.52. DUTIES OF COMPTROLLER; RULES. The comptroller
7-9 shall administer this subchapter and may adopt rules and forms as
7-10 necessary to implement this subchapter.
7-11 Art. 4.53. CERTIFICATION. (a) The comptroller by rule
7-12 shall establish the application procedures for certified capital
7-13 companies.
7-14 (b) An applicant must file an application not later than
7-15 April 17, 2002, in the form prescribed by the comptroller
7-16 accompanied by a nonrefundable application fee of $7,500. The
7-17 application must include an audited balance sheet of the applicant,
7-18 with an unqualified opinion from an independent certified public
7-19 accountant, as of a date not more than 35 days before the date of
7-20 the application.
7-21 (c) To qualify as a certified capital company:
7-22 (1) the applicant must have, at the time of
7-23 application for certification, an equity capitalization of at
7-24 least $500,000 in the form of unencumbered cash or cash
7-25 equivalents;
7-26 (2) at least two principals or persons employed to
7-27 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
8-27 the insurance company or other person is licensed by or transacts
9-1 business in this state.
9-2 (c) This article does not preclude a certified investor,
9-3 insurance company, or any other party from exercising its legal
9-4 rights and remedies, including interim management of a certified
9-5 capital company, if authorized by law, with respect to a certified
9-6 capital company that is in default of its statutory or contractual
9-7 obligations to the certified investor, insurance company, or other
9-8 party.
9-9 Art. 4.55. OFFERING MATERIAL USED BY CERTIFIED CAPITAL
9-10 COMPANY. Any offering material involving the sale of securities of
9-11 the certified capital company must include the following statement:
9-12 By authorizing the formation of a certified capital
9-13 company, the State of Texas does not endorse the
9-14 quality of management or the potential for earnings of
9-15 the company and is not liable for damages or losses to
9-16 a certified investor in the company. Use of the word
9-17 "certified" in an offering does not constitute a
9-18 recommendation or endorsement of the investment by the
9-19 comptroller of public accounts. If applicable
9-20 provisions of law are violated, the State of Texas may
9-21 require forfeiture of unused premium tax credits and
9-22 repayments of used premium tax credits.
9-23 Art. 4.56. REQUIREMENTS FOR CONTINUANCE OF CERTIFICATION.
9-24 (a) To continue to be certified, a certified capital company
9-25 shall make qualified investments according to the following
9-26 schedule:
9-27 (1) before the third anniversary of its certification
10-1 date, a company must have made qualified investments in an amount
10-2 cumulatively equal to at least 30 percent of its certified capital;
10-3 and
10-4 (2) before the fifth anniversary of its certification
10-5 date, a company must have made qualified investments in an amount
10-6 cumulatively equal to at least 50 percent of its certified capital,
10-7 subject to Subsection (b) of this article.
10-8 (b) At least 50 percent of the amount of qualified
10-9 investments required by Subsections (a)(1) and (2) of this article
10-10 must be placed in early stage businesses.
10-11 (c) The aggregate cumulative amount of all qualified
10-12 investments made by the certified capital company after its
10-13 certification date shall be considered in the computation of the
10-14 percentage requirements under this subchapter. Any proceeds
10-15 received from a qualified investment may be invested in another
10-16 qualified investment and count toward any requirement in this
10-17 subchapter with respect to investments of certified capital.
10-18 (d) A business that is classified as a qualified business at
10-19 the time of the first investment in the business by a certified
10-20 capital company remains classified as a qualified business and may
10-21 receive follow-on investments from any certified capital company.
10-22 Except as provided by this subsection, a follow-on investment made
10-23 under this subsection is a qualified investment even though the
10-24 business may not meet the definition of a qualified business at the
10-25 time of the follow-on investment. A follow-on investment does not
10-26 qualify as a qualified investment if, at the time of the follow-on
10-27 investment, the qualified business no longer has its principal
11-1 business operations in this state.
11-2 (e) A qualified investment may not be made at a cost to a
11-3 certified capital company greater than 15 percent of the total
11-4 certified capital of the company at the time of investment.
11-5 (f) If, before the 90th day after the date that a certified
11-6 capital company makes an investment in a qualified business, the
11-7 qualified business moves its principal business operations from
11-8 this state, the investment may not be considered a qualified
11-9 investment for purposes of the percentage requirements under this
11-10 subchapter.
11-11 (g) A certified capital company shall invest any certified
11-12 capital not invested in qualified investments in:
11-13 (1) cash deposited with a federally insured financial
11-14 institution;
11-15 (2) certificates of deposit in a federally insured
11-16 financial institution;
11-17 (3) investment securities that are obligations of the
11-18 United States or its agencies or instrumentalities or obligations
11-19 that are guaranteed fully as to principal and interest by the
11-20 United States;
11-21 (4) investment-grade instruments rated at least "A" or
11-22 its equivalent by a nationally recognized rating organization;
11-23 (5) obligations of this state or any municipality or
11-24 political subdivision of this state; or
11-25 (6) any other investments approved in advance and in
11-26 writing by the comptroller.
11-27 Art. 4.57. EVALUATION OF BUSINESS BY COMPTROLLER. (a) A
12-1 certified capital company may, before making an investment in a
12-2 business, request from the comptroller a written opinion as to
12-3 whether the business in which it proposes to invest is a qualified
12-4 business or an early stage business.
12-5 (b) The comptroller shall, not later than the 15th business
12-6 day after the date of the receipt of a request under Subsection (a)
12-7 of this article, determine whether the business meets the
12-8 definition of a qualified business or an early stage business, as
12-9 applicable, and notify the certified capital company of the
12-10 determination and an explanation of its determination or notify the
12-11 certified capital company that an additional 15 days will be needed
12-12 to review and make the determination.
12-13 (c) If the comptroller fails to notify the certified capital
12-14 company with respect to the proposed investment within the period
12-15 specified by Subsection (b) of this article, the business in which
12-16 the company proposes to invest is considered to be a qualified
12-17 business or early stage business, as appropriate.
12-18 Art. 4.58. REPORTS TO COMPTROLLER; AUDITED FINANCIAL
12-19 STATEMENT. (a) Each certified capital company shall report to the
12-20 comptroller as soon as practicable after the receipt of certified
12-21 capital:
12-22 (1) the name of each certified investor from whom the
12-23 certified capital was received, including the certified investor's
12-24 insurance premium tax identification number;
12-25 (2) the amount of each certified investor's investment
12-26 of certified capital and premium tax credits; and
12-27 (3) the date on which the certified capital was
13-1 received.
13-2 (b) Not later than January 31 of each year, each certified
13-3 capital company shall report to the comptroller:
13-4 (1) the amount of the company's certified capital at
13-5 the end of the preceding year;
13-6 (2) whether or not the company has invested more than
13-7 15 percent of its total certified capital in any one business;
13-8 (3) each qualified investment that the company made
13-9 during the preceding year and, with respect to each qualified
13-10 investment, the number of employees of the qualified business at
13-11 the time the qualified investment was made; and
13-12 (4) any other information required by the comptroller,
13-13 including any information required by the comptroller to comply
13-14 with Article 4.74 of this code.
13-15 (c) Not later than April 1 of each year, the company shall
13-16 provide to the comptroller an annual audited financial statement
13-17 that includes the opinion of an independent certified public
13-18 accountant. The audit shall address the methods of operation and
13-19 conduct of the business of the company to determine whether:
13-20 (1) the company is complying with this subchapter and
13-21 the rules adopted under this subchapter;
13-22 (2) the funds received by the company have been
13-23 invested as required within the time provided by Article 4.56(a) of
13-24 this code; and
13-25 (3) the company has invested the funds in qualified
13-26 businesses.
13-27 Art. 4.59. RENEWAL. (a) Not later than January 31 of each
14-1 year, each certified capital company shall pay a nonrefundable
14-2 renewal fee of $5,000 to the comptroller.
14-3 (b) Notwithstanding Subsection (a) of this article, a
14-4 renewal fee is not required within six months of the initial
14-5 certification date of a certified capital company.
14-6 Art. 4.60. DISTRIBUTIONS; REPAYMENT OF DEBT. (a) A
14-7 certified capital company may make a qualified distribution at any
14-8 time. To make a distribution or payment, other than a qualified
14-9 distribution, a company must have made qualified investments in an
14-10 amount cumulatively equal to 100 percent of its certified capital.
14-11 (b) Notwithstanding Subsection (a) of this article, a
14-12 company may make repayments of principal and interest on its
14-13 indebtedness without any restriction, including repayments of
14-14 indebtedness of the company on which certified investors earned
14-15 premium tax credits.
14-16 Art. 4.61. ANNUAL REVIEW; DECERTIFICATION. (a) The
14-17 comptroller shall conduct an annual review of each certified
14-18 capital company to:
14-19 (1) ensure that the company continues to satisfy the
14-20 requirements of this subchapter and that the company has not made
14-21 any investment in violation of this subchapter; and
14-22 (2) determine the eligibility status of its qualified
14-23 investments.
14-24 (b) The cost of the annual review shall be paid by each
14-25 certified capital company according to a reasonable fee schedule
14-26 adopted by the comptroller.
14-27 (c) A material violation of Article 4.56, 4.58, or 4.59 of
15-1 this code is grounds for decertification of the certified capital
15-2 company. If the comptroller determines that a company is not in
15-3 compliance with Article 4.56, 4.58, or 4.59 of this code, the
15-4 comptroller shall notify the officers of the company in writing
15-5 that the company may be subject to decertification after the 120th
15-6 day after the date of mailing of the notice, unless the
15-7 deficiencies are corrected and the company returns to compliance
15-8 with those articles.
15-9 (d) The comptroller may decertify a certified capital
15-10 company, after opportunity for hearing, if the comptroller finds
15-11 that the company is not in compliance with Article 4.56, 4.58, or
15-12 4.59 of this code at the end of the period established by
15-13 Subsection (c) of this article. Decertification under this
15-14 subsection is effective on receipt of notice of decertification by
15-15 the company. The comptroller shall notify any appropriate state
15-16 agency of the decertification.
15-17 Art. 4.62. ADMINISTRATIVE PENALTY. (a) The comptroller may
15-18 impose an administrative penalty on a certified capital company
15-19 that violates this subchapter.
15-20 (b) The amount of the penalty may not exceed $25,000, and
15-21 each day a violation continues or occurs is a separate violation
15-22 for the purpose of imposing a penalty. The amount of the penalty
15-23 shall be based on:
15-24 (1) the seriousness of the violation, including the
15-25 nature, circumstances, extent, and gravity of the violation;
15-26 (2) the economic harm caused by the violation;
15-27 (3) the history of previous violations;
16-1 (4) the amount necessary to deter a future violation;
16-2 (5) efforts to correct the violation; and
16-3 (6) any other matter that justice may require.
16-4 (c) Certified capital companies assessed penalties under
16-5 this subchapter may request a redetermination as provided in
16-6 Chapter 111, Tax Code.
16-7 (d) The attorney general may sue to collect the penalty.
16-8 (e) A proceeding to impose the penalty is considered to be a
16-9 contested case under Chapter 2001, Government Code.
16-10 Art. 4.63. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS:
16-11 DECERTIFICATION OF COMPANY. (a) Decertification of a certified
16-12 capital company may cause the recapture of premium tax credits
16-13 previously claimed and the forfeiture of future premium tax credits
16-14 to be claimed by certified investors with respect to the company,
16-15 as follows:
16-16 (1) decertification of a company on or before the
16-17 third anniversary of its certification date causes the recapture of
16-18 any premium tax credit previously claimed and the forfeiture of any
16-19 future premium tax credit to be claimed by a certified investor
16-20 with respect to the company;
16-21 (2) for a company that meets the requirements for
16-22 continued certification under Article 4.56(a)(1) of this code and
16-23 subsequently fails to meet the requirements for continued
16-24 certification under Article 4.56(a)(2) of this code, any premium
16-25 tax credit that has been or will be taken by a certified investor
16-26 on or before the third anniversary of the certification date is not
16-27 subject to recapture or forfeiture, but any premium tax credit that
17-1 has been or will be taken by a certified investor after the third
17-2 anniversary of the certification date of the company is subject to
17-3 recapture or forfeiture;
17-4 (3) for a company that has met the requirements for
17-5 continued certification under Articles 4.56(a)(1) and (2) of this
17-6 code and is subsequently decertified, any premium tax credit that
17-7 has been or will be taken by a certified investor on or before the
17-8 fifth anniversary of the certification date is not subject to
17-9 recapture or forfeiture, but any premium tax credit to be taken
17-10 after the fifth anniversary of the certification date is subject to
17-11 forfeiture only if the company is decertified on or before the
17-12 fifth anniversary of its certification date; and
17-13 (4) for a company that has invested an amount
17-14 cumulatively equal to 100 percent of its certified capital in
17-15 qualified investments, any premium tax credit claimed or to be
17-16 claimed by a certified investor is not subject to recapture or
17-17 forfeiture under this article.
17-18 (b) The comptroller shall send written notice to the address
17-19 of each certified investor whose premium tax credit is subject to
17-20 recapture or forfeiture, using the address shown on the last
17-21 premium tax filing.
17-22 Art. 4.64. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS:
17-23 QUALIFIED BUSINESS LEAVES STATE. (a) The comptroller shall adopt
17-24 rules under which premium tax credits previously claimed by
17-25 certified investors are subject to recapture and future premium tax
17-26 credits to be claimed by certified investors are subject to
17-27 forfeiture with respect to an investment made by a certified
18-1 capital company in a qualified business if the qualified business
18-2 fails to maintain its principal business operations in this state
18-3 as required by the rules.
18-4 (b) The rules adopted by the comptroller must specify the
18-5 manner in which the recapture and forfeiture of premium tax credits
18-6 under this article may be apportioned among certified investors in
18-7 a certified capital company.
18-8 (c) The comptroller shall send written notice to the address
18-9 of each certified investor whose premium tax credit is subject to
18-10 recapture or forfeiture, using the address shown on the last
18-11 premium tax filing.
18-12 Art. 4.65. INDEMNITY AGREEMENTS AND INSURANCE AUTHORIZED. A
18-13 certified capital company may agree to indemnify, or purchase
18-14 insurance for the benefit of, a certified investor for losses
18-15 resulting from the recapture or forfeiture of premium tax credits
18-16 under Article 4.63 or 4.64 of this code.
18-17 Art. 4.66. PREMIUM TAX CREDIT. (a) A certified investor
18-18 who makes an investment of certified capital shall in the year of
18-19 investment earn a vested credit against state premium tax liability
18-20 equal to 100 percent of the certified investor's investment of
18-21 certified capital, subject to the limits imposed by this
18-22 subchapter. A certified investor may take up to 10 percent of the
18-23 vested premium tax credit in any taxable year of the certified
18-24 investor.
18-25 (b) The credit to be applied against state premium tax
18-26 liability in any one year may not exceed the state premium tax
18-27 liability of the certified investor for the taxable year. Any
19-1 unused credit against state premium tax liability may be carried
19-2 forward indefinitely until the premium tax credits are used.
19-3 (c) A certified investor claiming a credit against state
19-4 premium tax liability earned through an investment in a company is
19-5 not required to pay any additional retaliatory tax levied under
19-6 Article 21.46 of this code as a result of claiming that credit. An
19-7 investment made under this subchapter is a "Texas investment" for
19-8 purposes of Subchapter A of this chapter.
19-9 Art. 4.67. PREMIUM TAX CREDIT ALLOCATION CLAIM FORM. (a) A
19-10 premium tax credit allocation claim must be prepared and executed
19-11 by a certified investor on a form provided by the comptroller. The
19-12 certified capital company must file the claim with the comptroller
19-13 not later than August 17, 2002. The premium tax credit allocation
19-14 claim form must include an affidavit of the certified investor
19-15 under which the certified investor becomes legally bound and
19-16 irrevocably committed to make an investment of certified capital in
19-17 a certified capital company in the amount allocated even if the
19-18 amount allocated is less than the amount of the claim, subject only
19-19 to the receipt of an allocation under Article 4.69 of this code.
19-20 (b) A certified investor may not claim a premium tax credit
19-21 under Article 4.66 of this code for an investment that has not been
19-22 funded, even if the certified investor has committed to fund the
19-23 investment.
19-24 Art. 4.68. TOTAL LIMIT ON CREDITS. (a) The total amount of
19-25 certified capital for which premium tax credits may be allowed
19-26 under this subchapter for all years in which premium tax credits
19-27 are allowed is $200 million.
20-1 (b) The total amount of certified capital for which premium
20-2 tax credits may be allowed for all certified investors under this
20-3 subchapter may not exceed the amount that would entitle all
20-4 certified investors in certified capital companies to take total
20-5 credits of $20 million in a year.
20-6 (c) A certified capital company and its affiliates may not
20-7 file premium tax credit allocation claims in excess of the maximum
20-8 amount of certified capital for which premium tax credits may be
20-9 allowed as provided in this article.
20-10 Art. 4.69. PRO RATA ALLOCATION OF CREDITS. (a) This
20-11 article applies only if the total premium tax credits claimed by
20-12 all certified investors exceeds the total limits on premium tax
20-13 credits established by Article 4.68(a) of this code.
20-14 (b) The comptroller shall allocate the total amount of
20-15 premium tax credits allowed under this subchapter to certified
20-16 investors in certified capital companies on a pro rata basis in
20-17 accordance with this article.
20-18 (c) The pro rata allocation for each certified investor
20-19 shall be the product of:
20-20 (1) a fraction, the numerator of which is the amount
20-21 of the premium tax credit allocation claim filed on behalf of the
20-22 investor and the denominator of which is the total amount of all
20-23 premium tax credit allocation claims filed on behalf of all
20-24 certified investors; and
20-25 (2) the total amount of certified capital for which
20-26 premium tax credits may be allowed under this subchapter.
20-27 (d) If, as a result of the pro rata allocation of premium
21-1 tax credits under Subsection (c) of this article, certified
21-2 investors in any certified capital company that submitted premium
21-3 tax credit allocation claims would not be allocated at least $7.5
21-4 million in premium tax credits for all years for which credits are
21-5 allowed, the comptroller:
21-6 (1) may not make any allocation to the certified
21-7 investors of the certified capital company that would receive the
21-8 lowest pro rata allocation and that company may not continue to
21-9 operate as a certified capital company and that company's
21-10 certification under this subchapter terminates;
21-11 (2) shall continue to apply the allocation formula
21-12 established under Subsection (c) of this article, without
21-13 considering the premium tax credit allocation claims filed on
21-14 behalf of the certified investors in the company that was denied an
21-15 allocation under Subdivision (1) of this subsection; and
21-16 (3) shall continue application of the allocation
21-17 formula, as provided by this subsection, until the allocation
21-18 process results in the allocation of at least $7.5 million in
21-19 premium tax credits to the certified investors of each company
21-20 receiving an allocation under this article.
21-21 (e) Not later than September 15, 2002, the comptroller shall
21-22 notify each certified capital company of the amount of tax credits
21-23 allocated to each certified investor. Each certified capital
21-24 company shall notify each certified investor of their premium tax
21-25 credit allocation.
21-26 (f) If a certified capital company does not receive an
21-27 investment of certified capital equaling the amount of premium tax
22-1 credits allocated to a certified investor for which it filed a
22-2 premium tax credit allocation claim before the end of the 10th
22-3 business day after the date of receipt of notice of allocation, the
22-4 company shall notify the comptroller by overnight common carrier
22-5 delivery service and that portion of capital allocated to the
22-6 certified investor shall be forfeited. The comptroller shall
22-7 reallocate the forfeited capital among the certified investors in
22-8 the other certified capital companies that originally received an
22-9 allocation so that the result after reallocation is the same as if
22-10 the initial allocation under this article had been performed
22-11 without considering the premium tax credit allocation claims that
22-12 were subsequently forfeited.
22-13 (g) The maximum amount of certified capital for which a
22-14 premium tax credit allocation may be allowed on behalf of any one
22-15 certified investor and its affiliates, whether by one or more
22-16 certified capital companies, may not exceed $2 million a year.
22-17 Art. 4.70. TREATMENT OF CREDITS AND CAPITAL. In any case
22-18 under this code or another insurance law of this state in which the
22-19 assets of a certified investor are examined or considered, the
22-20 certified capital may be treated as an admitted asset, subject to
22-21 the applicable statutory valuation procedures.
22-22 Art 4.71. IMPACT OF TAX CREDITS CLAIMED BY A CERTIFIED
22-23 INVESTOR ON INSURANCE RATES. A certified investor is not required
22-24 to reduce the amount of premium tax included by the investor in
22-25 connection with ratemaking for any insurance contract written in
22-26 this state because of a reduction in the investor's Texas premium
22-27 tax derived from the credit granted under this subchapter.
23-1 Art. 4.72. TRANSFERABILITY OF CREDIT. (a) A certified
23-2 investor may transfer or assign premium tax credits to:
23-3 (1) an affiliate of the certified investor;
23-4 (2) another entity that may be a certified investor,
23-5 if a merger, acquisition, or total assumption of reinsurance among
23-6 or between the entities occurs; or
23-7 (3) another entity, in connection with a
23-8 rehabilitation or receivership process, if the comptroller, after
23-9 consultation with the commissioner, by order approves the transfer
23-10 or assignment.
23-11 (b) The comptroller shall adopt rules to facilitate the
23-12 transfer or assignment of premium tax credits. A certified
23-13 investor may transfer or assign premium tax credits only in
23-14 compliance with the rules adopted under this subsection.
23-15 (c) The transfer or assignment of a premium tax credit does
23-16 not affect the schedule for taking the premium tax credit under
23-17 this subchapter.
23-18 Art. 4.73. PROMOTION. The Texas Department of Economic
23-19 Development shall promote the program established under this
23-20 subchapter in the Texas Business and Community Economic Development
23-21 Clearinghouse.
23-22 Art. 4.74. REPORT TO LEGISLATURE. (a) The comptroller
23-23 shall prepare a biennial report with respect to results of the
23-24 implementation of this subchapter. The report must include:
23-25 (1) the number of certified capital companies holding
23-26 certified capital;
23-27 (2) the amount of certified capital invested in each
24-1 certified capital company;
24-2 (3) the amount of certified capital the certified
24-3 capital company has invested in qualified businesses as of January
24-4 1, 2004, and the cumulative total for each subsequent year;
24-5 (4) the total amount of tax credits granted under this
24-6 subchapter for each year that credits have been granted;
24-7 (5) the performance of each certified capital company
24-8 with respect to renewal and reporting requirements imposed under
24-9 this subchapter;
24-10 (6) with respect to the qualified businesses in which
24-11 certified capital companies have invested:
24-12 (A) the classification of the qualified
24-13 businesses according to the industrial sector and the size of the
24-14 business;
24-15 (B) the total number of jobs created by the
24-16 investment and the average wages paid for the jobs; and
24-17 (C) the total number of jobs retained as a
24-18 result of the investment and the average wages paid for the jobs;
24-19 and
24-20 (7) the certified capital companies that have been
24-21 decertified or that have failed to renew the certification and the
24-22 reason for any decertification.
24-23 (b) The comptroller shall file the report with the governor,
24-24 the lieutenant governor, and the speaker of the house of
24-25 representatives not later than December 15 of each even-numbered
24-26 year.
24-27 Art. 4.75. IMPLEMENTATION SUBJECT TO AVAILABLE REVENUE. (a)
25-1 Notwithstanding any other provision of this subchapter, the
25-2 comptroller may implement this subchapter only if the comptroller
25-3 determines, on the basis of a revenue estimate made after the
25-4 adjournment sine die of the regular session of the 77th
25-5 Legislature, that revenues are anticipated in amounts sufficient to
25-6 finance all appropriations made during the regular session of the
25-7 77th Legislature, after making deductions for all reductions in
25-8 taxes, including the reduction in premium tax through premium tax
25-9 credits authorized under this subchapter.
25-10 (b) If the comptroller determines under Subsection (a) of
25-11 this article that revenues are anticipated to support a part, but
25-12 less than all, of the premium tax credits authorized under Article
25-13 4.68 of this code, the comptroller shall:
25-14 (1) reduce the total amount of premium tax credits
25-15 allowed under that article in the amount necessary to comply with
25-16 Subsection (a) of this article; and
25-17 (2) adopt rules as necessary to implement this
25-18 subchapter after the reduction made under Subdivision (1) of this
25-19 subsection.
25-20 (c) Rules adopted under Subsection (b)(2) of this article
25-21 may adjust any deadline or other date established by this
25-22 subchapter as necessary to implement this subchapter as limited by
25-23 this article.
25-24 (d) The comptroller shall notify the governor, lieutenant
25-25 governor, and speaker of the house of representatives of the
25-26 determination made under Subsection (a) of this article.
25-27 SECTION 2. Articles 4.01 through 4.08, 4.10, 4.11, 4.11A,
26-1 4.11B, 4.11C, 4.12, and 4.17, 4.18, and 4.19, Insurance Code, are
26-2 redesignated as Subchapter A, Chapter 4, Insurance Code, and a
26-3 subchapter heading is added to read as follows:
26-4 SUBCHAPTER A. IMPOSITION AND COLLECTION OF TAXES AND FEES
26-5 SECTION 3. (a) Subject to Article 4.75, Insurance Code, as
26-6 added by this Act, the comptroller of public accounts shall, not
26-7 later than the 60th day after the effective date of this Act, adopt
26-8 rules necessary to implement Subchapter B, Chapter 4, Insurance
26-9 Code, as added by this Act. The comptroller shall begin accepting
26-10 applications for certification as a certified capital company under
26-11 that subchapter on the 90th day after the effective date of this
26-12 Act.
26-13 (b) A certified investor may not make an investment with a
26-14 certified capital company under Subchapter B, Chapter 4, Insurance
26-15 Code, as added by this Act, before September 1, 2002.
26-16 SECTION 4. This Act takes effect immediately if it receives
26-17 a vote of two-thirds of all the members elected to each house, as
26-18 provided by Section 39, Article III, Texas Constitution. If this
26-19 Act does not receive the vote necessary for immediate effect, this
26-20 Act takes effect September 1, 2001.