By: Carona S.B. No. 601
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:
1-25 (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) "Allocation date" means the date on which the
2-11 certified investors of a certified capital company are allocated
2-12 certified capital by the comptroller 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 an equity interest in the company or a
2-16 qualified debt instrument issued by the certified capital 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, other than a
2-25 title insurance company, that contributes certified capital
2-26 pursuant to an allocation of premium tax credits under this
3-1 subchapter.
3-2 (6) "Early stage business" means a qualified business
3-3 that satisfies at least one of the following criteria:
3-4 (A) is involved, at the time of a certified
3-5 capital company's first investment, in activities related to the
3-6 development of initial product or service offerings, such as
3-7 prototype development or establishment of initial production or
3-8 service processes;
3-9 (B) was initially organized less than two years
3-10 before the date of the certified capital company's first
3-11 investment; or
3-12 (C) during the fiscal year immediately preceding
3-13 the year of the certified capital company's first investment had,
3-14 on a consolidated basis with its affiliates, gross revenues of not
3-15 more than $2 million as determined in accordance with generally
3-16 accepted accounting principles.
3-17 (7) "Person" means a natural person or entity,
3-18 including a corporation, general or limited partnership, or trust
3-19 or limited liability company.
3-20 (8) "Premium tax credit allocation claim" means a
3-21 claim for allocation of premium tax credits.
3-22 (9) "Qualified business" means a business that, at the
3-23 time of a certified capital company's first investment in the
3-24 business:
3-25 (A) is headquartered in this state and intends
3-26 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;
5-1 (ii) real estate development;
5-2 (iii) the business of insurance, banking,
5-3 or lending; or
5-4 (iv) the provision of professional
5-5 services provided by accountants, attorneys, or physicians.
5-6 (10) "Qualified debt instrument" means a debt
5-7 instrument issued by a certified capital company, at par value or a
5-8 premium, that:
5-9 (A) has an original maturity date of at least
5-10 five years after the date of issuance;
5-11 (B) has a repayment schedule that is not faster
5-12 than a level principal amortization over five years; and
5-13 (C) has no interest, distribution, or payment
5-14 features that are related to the profitability of the certified
5-15 capital company or the performance of the certified capital
5-16 company's investment portfolio.
5-17 (11) "Qualified distribution" means any distribution
5-18 or payment from certified capital by a certified capital company in
5-19 connection with:
5-20 (A) the reasonable costs and expenses of
5-21 forming, syndicating, managing, and operating the company, provided
5-22 that the distribution or payment is not made directly or indirectly
5-23 to a certified investor, including:
5-24 (i) reasonable and necessary fees paid for
5-25 professional services, including legal and accounting services,
5-26 related to the formation and operation of the company; and
6-1 (ii) an annual management fee in an amount
6-2 that does not exceed two and one-half percent of the certified
6-3 capital of the company; and
6-4 (B) any projected increase in federal or state
6-5 taxes, including penalties and interest related to state and
6-6 federal income taxes, of the equity owners of the company resulting
6-7 from the earnings or other tax liability of the company to the
6-8 extent that the increase is related to the ownership, management,
6-9 or operation of the company.
6-10 (12) "Qualified investment" means the investment of
6-11 cash by a certified capital company in a qualified business for the
6-12 purchase of any debt, debt participation, equity, or hybrid
6-13 security of any nature or description, including a debt instrument
6-14 or security that has the characteristics of debt but that provides
6-15 for conversion into equity or equity participation instruments such
6-16 as options or warrants.
6-17 (13) "State premium tax liability" means:
6-18 (A) any liability incurred by any person under
6-19 Subchapter A of this chapter; or
6-20 (B) if the tax liability imposed under
6-21 Subchapter A of this chapter on January 1, 2001, is eliminated or
6-22 reduced, any tax liability imposed on an insurance company or other
6-23 person that had premium tax liability under Subchapter A of this
6-24 chapter on that date.
6-25 Art. 4.52. DUTIES OF COMPTROLLER; RULES. The comptroller
6-26 shall administer this subchapter and may adopt rules and forms as
7-1 necessary to implement this subchapter.
7-2 Art. 4.53. CERTIFICATION. (a) The comptroller by rule
7-3 shall establish the application procedures for certified capital
7-4 companies.
7-5 (b) An applicant must file an application in the form
7-6 prescribed by the comptroller accompanied by a nonrefundable
7-7 application fee of $7,500. The application must include an audited
7-8 balance sheet of the applicant, with an unqualified opinion from an
7-9 independent certified public accountant, as of a date not more than
7-10 35 days before the date of the application.
7-11 (c) To qualify as a certified capital company:
7-12 (1) the applicant must have, at the time of
7-13 application for certification, an equity capitalization of at
7-14 least $500,000 in the form of unencumbered cash or cash
7-15 equivalents;
7-16 (2) at least two principals or persons employed to
7-17 manage the funds of the applicant must have at least four years of
7-18 experience in the venture capital industry; and
7-19 (3) the applicant must satisfy any additional
7-20 requirement imposed by the comptroller by rule.
7-21 (d) The comptroller shall review the application,
7-22 organizational documents, and business history of each applicant
7-23 and shall ensure that the applicant satisfies the requirements of
7-24 this subchapter.
7-25 (e) Not later than the 30th day after the date an
7-26 application is filed, the comptroller shall:
8-1 (1) issue the certification; or
8-2 (2) refuse to issue the certification and communicate
8-3 in detail to the applicant the grounds for the refusal, including
8-4 suggestions for the removal of those grounds.
8-5 Art. 4.54. MANAGEMENT BY CERTAIN ENTITIES PROHIBITED.
8-6 (a) An insurance company, group of insurance companies, or other
8-7 persons who may have state premium tax liability or the affiliates
8-8 of the insurance companies or other persons may not, directly or
8-9 indirectly:
8-10 (1) manage a certified capital company;
8-11 (2) beneficially own, whether through rights, options,
8-12 convertible interests, or otherwise, more than 10 percent of the
8-13 outstanding voting securities of a certified capital company; or
8-14 (3) control the direction of investments for a
8-15 certified capital company.
8-16 (b) Not more than one affiliate of the certified investors
8-17 in any certified capital company may provide a guaranty, indemnity,
8-18 bond, insurance policy, or other payment undertaking in favor of
8-19 all of the certified investors of the certified capital company and
8-20 its affiliates.
8-21 (c) Subsection (a) of this article applies without regard to
8-22 whether the insurance company or other person or the affiliate of
8-23 the insurance company or other person is licensed by or transacts
8-24 business in this state.
8-25 (d) This article does not preclude a certified investor, an
8-26 insurance company, or any other party from exercising its legal
9-1 rights and remedies, including interim management of a certified
9-2 capital company, if authorized by law, with respect to a certified
9-3 capital company that is in default of its statutory or contractual
9-4 obligations to the certified investor, insurance company, or other
9-5 party.
9-6 Art. 4.55. OFFERING MATERIAL USED BY CERTIFIED CAPITAL
9-7 COMPANY. Any offering material involving the sale of securities of
9-8 the certified capital company must include the following statement:
9-9 By authorizing the formation of a certified capital
9-10 company, the State of Texas does not endorse the
9-11 quality of management or the potential for earnings of
9-12 the company and is not liable for damages or losses to
9-13 a certified investor in the company. Use of the word
9-14 "certified" in an offering does not constitute a
9-15 recommendation or endorsement of the investment by the
9-16 comptroller of public accounts. If applicable
9-17 provisions of law are violated, the State of Texas may
9-18 require forfeiture of unused premium tax credits and
9-19 repayments of used premium tax credits.
9-20 Art. 4.56. REQUIREMENTS FOR CONTINUANCE OF CERTIFICATION.
9-21 (a) To continue to be certified, a certified capital company
9-22 shall make qualified investments according to the following
9-23 schedule:
9-24 (1) before the third anniversary of its allocation
9-25 date, a company must have made qualified investments in an amount
9-26 cumulatively equal to at least 30 percent of its certified capital;
10-1 and
10-2 (2) before the fifth anniversary of its allocation
10-3 date, a company must have made qualified investments in an amount
10-4 cumulatively equal to at least 50 percent of its certified capital,
10-5 subject to Subsection (b) of this article.
10-6 (b) At least 50 percent of the amount of qualified
10-7 investments required by Subsections (a)(1) and (2) of this article
10-8 must be placed in early stage businesses.
10-9 (c) The aggregate cumulative amount of all qualified
10-10 investments made by the certified capital company after its
10-11 allocation date shall be considered in the computation of the
10-12 percentage requirements under this subchapter. Any proceeds
10-13 received from a qualified investment may be invested in another
10-14 qualified investment and count toward any requirement in this
10-15 subchapter with respect to investments of certified capital.
10-16 (d) A business that is classified as a qualified business at
10-17 the time of the first investment in the business by a certified
10-18 capital company remains classified as a qualified business and may
10-19 receive follow-on investments from any certified capital company.
10-20 Except as provided by this subsection, a follow-on investment made
10-21 under this subsection is a qualified investment even though the
10-22 business may not meet the definition of a qualified business at the
10-23 time of the follow-on investment. A follow-on investment does not
10-24 qualify as a qualified investment if, at the time of the follow-on
10-25 investment, the qualified business no longer has its principal
10-26 business operations in this state.
11-1 (e) A qualified investment may not be made at a cost to a
11-2 certified capital company greater than 15 percent of the total
11-3 certified capital of the company at the time of investment.
11-4 (f) If, before the 90th day after the date that a certified
11-5 capital company makes an investment in a qualified business, the
11-6 qualified business moves its principal business operations from
11-7 this state, the investment may not be considered a qualified
11-8 investment for purposes of the percentage requirements under this
11-9 subchapter.
11-10 (g) A certified capital company shall invest any certified
11-11 capital not invested in qualified investments only in the
11-12 following:
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) debt instruments rated at least "A" or its
11-22 equivalent by a nationally recognized credit rating organization,
11-23 or issued by, or guaranteed with respect to payment by, an entity
11-24 whose unsecured indebtedness is rated at least "A" or its
11-25 equivalent by a nationally recognized credit rating organization,
11-26 and which indebtedness is not subordinated to other unsecured
12-1 indebtedness of the issuer or the guarantor;
12-2 (5) obligations of this state or any municipality or
12-3 political subdivision of this state; or
12-4 (6) any other investments approved in advance and in
12-5 writing by the comptroller.
12-6 Art. 4.57. EVALUATION OF BUSINESS BY COMPTROLLER. (a) A
12-7 certified capital company may, before making an investment in a
12-8 business, request from the comptroller a written opinion as to
12-9 whether the business in which it proposes to invest is a qualified
12-10 business or an early stage business.
12-11 (b) The comptroller shall, not later than the 15th business
12-12 day after the date of the receipt of a request under Subsection (a)
12-13 of this article, determine whether the business meets the
12-14 definition of a qualified business or an early stage business, as
12-15 applicable, and notify the certified capital company of the
12-16 determination and an explanation of its determination or notify the
12-17 certified capital company that an additional 15 days will be needed
12-18 to review and make the determination.
12-19 (c) If the comptroller fails to notify the certified capital
12-20 company with respect to the proposed investment within the period
12-21 specified by Subsection (b) of this article, the business in which
12-22 the company proposes to invest is considered to be a qualified
12-23 business or early stage business, as appropriate.
12-24 Art. 4.58. REPORTS TO COMPTROLLER; AUDITED FINANCIAL
12-25 STATEMENT. (a) Each certified capital company shall report to the
12-26 comptroller as soon as practicable after the receipt of certified
13-1 capital:
13-2 (1) the name of each certified investor from whom the
13-3 certified capital was received, including the certified investor's
13-4 insurance premium tax identification number;
13-5 (2) the amount of each certified investor's investment
13-6 of certified capital and premium tax credits; and
13-7 (3) the date on which the certified capital was
13-8 received.
13-9 (b) Not later than January 31 of each year, each certified
13-10 capital company shall report to the comptroller:
13-11 (1) the amount of the company's certified capital at
13-12 the end of the preceding year;
13-13 (2) whether or not the company has invested more than
13-14 15 percent of its total certified capital in any one business;
13-15 (3) each qualified investment that the company made
13-16 during the preceding year and, with respect to each qualified
13-17 investment, the number of employees of the qualified business at
13-18 the time the qualified investment was made; and
13-19 (4) any other information required by the comptroller,
13-20 including any information required by the comptroller to comply
13-21 with Article 4.74 of this code.
13-22 (c) Not later than April 1 of each year, the company shall
13-23 provide to the comptroller an annual audited financial statement
13-24 that includes the opinion of an independent certified public
13-25 accountant. The audit shall address the methods of operation and
13-26 conduct of the business of the company to determine whether:
14-1 (1) the company is complying with this subchapter and
14-2 the rules adopted under this subchapter;
14-3 (2) the funds received by the company have been
14-4 invested as required within the time provided by Article 4.56(a) of
14-5 this code; and
14-6 (3) the company has invested the funds in qualified
14-7 businesses.
14-8 Art. 4.59. RENEWAL. (a) Not later than January 31 of each
14-9 year, each certified capital company shall pay a nonrefundable
14-10 renewal fee of $5,000 to the comptroller. If a certified capital
14-11 company fails to pay its renewal fee on or before that date, the
14-12 company must pay, in addition to the renewal fee, a late fee of
14-13 $5,000 to continue its certification.
14-14 (b) Notwithstanding Subsection (a) of this article, a
14-15 renewal fee is not required within six months of the date on which
14-16 the company's certification is issued under Article 4.53 of this
14-17 code.
14-18 Art. 4.60. DISTRIBUTIONS; REPAYMENT OF DEBT. (a) A
14-19 certified capital company may make a qualified distribution at any
14-20 time. To make a distribution or payment, other than a qualified
14-21 distribution, a company must have made qualified investments in an
14-22 amount cumulatively equal to 100 percent of its certified capital.
14-23 (b) Notwithstanding Subsection (a) of this article, a
14-24 company may make repayments of principal and interest on its
14-25 indebtedness without any restriction, including repayments of
14-26 indebtedness of the company on which certified investors earned
15-1 premium tax credits.
15-2 Art. 4.61. ANNUAL REVIEW; DECERTIFICATION. (a) The
15-3 comptroller shall conduct an annual review of each certified
15-4 capital company to:
15-5 (1) ensure that the company continues to satisfy the
15-6 requirements of this subchapter and that the company has not made
15-7 any investment in violation of this subchapter; and
15-8 (2) determine the eligibility status of its qualified
15-9 investments.
15-10 (b) The cost of the annual review shall be paid by each
15-11 certified capital company according to a reasonable fee schedule
15-12 adopted by the comptroller.
15-13 (c) A material violation of Article 4.56, 4.58, or 4.59 of
15-14 this code is grounds for decertification of the certified capital
15-15 company. If the comptroller determines that a company is not in
15-16 compliance with Article 4.56, 4.58, or 4.59 of this code, the
15-17 comptroller shall notify the officers of the company in writing
15-18 that the company may be subject to decertification after the 120th
15-19 day after the date of mailing of the notice, unless the
15-20 deficiencies are corrected and the company returns to compliance
15-21 with those articles.
15-22 (d) The comptroller may decertify a certified capital
15-23 company, after opportunity for hearing, if the comptroller finds
15-24 that the company is not in compliance with Article 4.56, 4.58, or
15-25 4.59 of this code at the end of the period established by
15-26 Subsection (c) of this article. Decertification under this
16-1 subsection is effective on receipt of notice of decertification by
16-2 the company. The comptroller shall notify any appropriate state
16-3 agency of the decertification.
16-4 Art. 4.62. ADMINISTRATIVE PENALTY. (a) The comptroller may
16-5 impose an administrative penalty on a certified capital company
16-6 that violates this subchapter.
16-7 (b) The amount of the penalty may not exceed $25,000, and
16-8 each day a violation continues or occurs is a separate violation
16-9 for the purpose of imposing a penalty. The amount of the penalty
16-10 shall be based on:
16-11 (1) the seriousness of the violation, including the
16-12 nature, circumstances, extent, and gravity of the violation;
16-13 (2) the economic harm caused by the violation;
16-14 (3) the history of previous violations;
16-15 (4) the amount necessary to deter a future violation;
16-16 (5) efforts to correct the violation; and
16-17 (6) any other matter that justice may require.
16-18 (c) Certified capital companies assessed penalties under
16-19 this subchapter may request a redetermination as provided in
16-20 Chapter 111, Tax Code.
16-21 (d) The attorney general may sue to collect the penalty.
16-22 (e) A proceeding to impose the penalty is considered to be a
16-23 contested case under Chapter 2001, Government Code.
16-24 Art. 4.63. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS:
16-25 DECERTIFICATION OF COMPANY. (a) Decertification of a certified
16-26 capital company may cause the recapture of premium tax credits
17-1 previously claimed and the forfeiture of future premium tax credits
17-2 to be claimed by certified investors with respect to the company,
17-3 as follows:
17-4 (1) decertification of a company on or before the
17-5 third anniversary of its allocation date causes the recapture of
17-6 any premium tax credit previously claimed and the forfeiture of any
17-7 future premium tax credit to be claimed by a certified investor
17-8 with respect to the company;
17-9 (2) for a company that meets the requirements for
17-10 continued certification under Article 4.56(a)(1) of this code and
17-11 subsequently fails to meet the requirements for continued
17-12 certification under Article 4.56(a)(2) of this code, any premium
17-13 tax credit that has been or will be taken by a certified investor
17-14 on or before the third anniversary of the allocation date is not
17-15 subject to recapture or forfeiture, but any premium tax credit that
17-16 has been or will be taken by a certified investor after the third
17-17 anniversary of the allocation date of the company is subject to
17-18 recapture or forfeiture;
17-19 (3) for a company that has met the requirements for
17-20 continued certification under Articles 4.56(a)(1) and (2) of this
17-21 code and is subsequently decertified, any premium tax credit that
17-22 has been or will be taken by a certified investor on or before the
17-23 fifth anniversary of the allocation date is not subject to
17-24 recapture or forfeiture, but any premium tax credit to be taken
17-25 after the fifth anniversary of the allocation date is subject to
17-26 forfeiture only if the company is decertified on or before the
18-1 fifth anniversary of its allocation date; and
18-2 (4) for a company that has invested an amount
18-3 cumulatively equal to 100 percent of its certified capital in
18-4 qualified investments, any premium tax credit claimed or to be
18-5 claimed by a certified investor is not subject to recapture or
18-6 forfeiture under this article.
18-7 (b) The comptroller shall send written notice to the address
18-8 of each certified investor whose premium tax credit is subject to
18-9 recapture or forfeiture, using the address shown on the last
18-10 premium tax filing.
18-11 Art. 4.64. PENALTY IF QUALIFIED BUSINESS LEAVES STATE. In
18-12 the event that a business in which a qualified investment is made
18-13 relocates its principal business operations to another state during
18-14 the term of the certified capital company's investment in such
18-15 business, the cumulative amount of qualified investments made by
18-16 the certified capital company for purposes of satisfying the
18-17 requirements set forth in Article 4.60(a) of this code shall be
18-18 reduced by the amount of the certified capital company's investment
18-19 in the business that has relocated, unless the business
18-20 demonstrates that it has returned its principal business operations
18-21 to this state within three months of such relocation.
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 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.
19-20 Art. 4.67. PREMIUM TAX CREDIT ALLOCATION CLAIM FORM. (a) A
19-21 premium tax credit allocation claim must be prepared and executed
19-22 by a certified investor on a form provided by the comptroller. The
19-23 certified capital company must file the claim with the comptroller
19-24 not later than February 15, 2002. The premium tax credit
19-25 allocation claim form must include an affidavit of the certified
19-26 investor under which the certified investor becomes legally bound
20-1 and irrevocably committed to make an investment of certified
20-2 capital in a certified capital company in the amount allocated even
20-3 if the amount allocated is less than the amount of the claim,
20-4 subject only to the receipt of an allocation under Article 4.69 of
20-5 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 $200 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 $20 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) If the
20-24 total premium tax credits claimed by all certified investors
20-25 exceeds the total limits on premium tax credits established by
20-26 Article 4.68(a) of this code, the comptroller shall allocate the
21-1 total amount of premium tax credits allowed under this subchapter
21-2 to certified investors in certified capital companies on a pro rata
21-3 basis in accordance with this article.
21-4 (b) The pro rata allocation for each certified investor
21-5 shall be the product of:
21-6 (1) a fraction, the numerator of which is the amount
21-7 of the premium tax credit allocation claim filed on behalf of the
21-8 investor and the denominator of which is the total amount of all
21-9 premium tax credit allocation claims filed on behalf of all
21-10 certified investors; and
21-11 (2) the total amount of certified capital for which
21-12 premium tax credits may be allowed under this subchapter.
21-13 (c) Not later than March 1, 2002, the comptroller shall
21-14 notify each certified capital company of the amount of tax credits
21-15 allocated to each certified investor. Each certified capital
21-16 company shall notify each certified investor of their premium tax
21-17 credit allocation.
21-18 (d) If a certified capital company does not receive an
21-19 investment of certified capital equaling the amount of premium tax
21-20 credits allocated to a certified investor for which it filed a
21-21 premium tax credit allocation claim before the end of the 10th
21-22 business day after the date of receipt of notice of allocation, the
21-23 company shall notify the comptroller by overnight common carrier
21-24 delivery service and that portion of capital allocated to the
21-25 certified investor shall be forfeited. The comptroller shall
21-26 reallocate the forfeited capital among the certified investors in
22-1 the other certified capital companies that originally received an
22-2 allocation so that the result after reallocation is the same as if
22-3 the initial allocation under this article had been performed
22-4 without considering the premium tax credit allocation claims that
22-5 were subsequently forfeited.
22-6 (e) The maximum amount of certified capital for which
22-7 premium tax credit allocation claims may be filed on behalf of any
22-8 one certified investor and its affiliates, whether by one or more
22-9 certified capital companies, may not exceed the greater of:
22-10 (1) $10 million; or
22-11 (2) 15 percent of the maximum aggregate amount
22-12 available under Article 4.68(a) of this code.
22-13 Art. 4.70. TREATMENT OF CREDITS AND CAPITAL. In any case
22-14 under this code or another insurance law of this state in which the
22-15 assets of a certified investor are examined or considered, the
22-16 certified capital may be treated as an admitted asset, subject to
22-17 the applicable statutory valuation procedures.
22-18 Art. 4.71. IMPACT OF TAX CREDITS CLAIMED BY A CERTIFIED
22-19 INVESTOR ON INSURANCE RATES. A certified investor is not required
22-20 to reduce the amount of premium tax included by the investor in
22-21 connection with ratemaking for any insurance contract written in
22-22 this state because of a reduction in the investor's Texas premium
22-23 tax derived from the credit granted under this subchapter.
22-24 Art. 4.72. TRANSFERABILITY OF CREDIT. (a) The comptroller
22-25 shall adopt rules to facilitate the transfer or assignment of
22-26 premium tax credits by certified investors. A certified investor
23-1 may transfer or assign premium tax credits only in compliance with
23-2 the rules adopted under this subsection.
23-3 (b) The transfer or assignment of a premium tax credit does
23-4 not affect the schedule for taking the premium tax credit under
23-5 this subchapter.
23-6 Art. 4.73. PROMOTION. The Texas Department of Economic
23-7 Development shall promote the program established under this
23-8 subchapter in the Texas Business and Community Economic Development
23-9 Clearinghouse.
23-10 Art. 4.74. REPORT TO LEGISLATURE. (a) The comptroller
23-11 shall prepare a biennial report with respect to results of the
23-12 implementation of this subchapter. The report must include:
23-13 (1) the number of certified capital companies holding
23-14 certified capital;
23-15 (2) the amount of certified capital invested in each
23-16 certified capital company;
23-17 (3) the amount of certified capital the certified
23-18 capital company has invested in qualified businesses as of January
23-19 1, 2004, and the cumulative total for each subsequent year;
23-20 (4) the total amount of tax credits granted under this
23-21 subchapter for each year that credits have been granted;
23-22 (5) the performance of each certified capital company
23-23 with respect to renewal and reporting requirements imposed under
23-24 this subchapter;
23-25 (6) with respect to the qualified businesses in which
23-26 certified capital companies have invested:
24-1 (A) the classification of the qualified
24-2 businesses according to the industrial sector and the size of the
24-3 business;
24-4 (B) the total number of jobs created by the
24-5 investment and the average wages paid for the jobs; and
24-6 (C) the total number of jobs retained as a
24-7 result of the investment and the average wages paid for the jobs;
24-8 and
24-9 (7) the certified capital companies that have been
24-10 decertified or that have failed to renew the certification and the
24-11 reason for any decertification.
24-12 (b) The comptroller shall file the report with the governor,
24-13 the lieutenant governor, and the speaker of the house of
24-14 representatives not later than December 15 of each even-numbered
24-15 year.
24-16 Art. 4.75. IMPLEMENTATION SUBJECT TO AVAILABLE REVENUE.
24-17 (a) Notwithstanding any other provision of this subchapter, the
24-18 comptroller may implement this subchapter only if the comptroller
24-19 determines, on the basis of a revenue estimate made after the
24-20 adjournment sine die of the regular session of the 77th
24-21 Legislature, that revenues are anticipated in amounts sufficient to
24-22 finance all appropriations made during the regular session of the
24-23 77th Legislature, after making deductions for all reductions in
24-24 taxes, including the reduction in premium tax through premium tax
24-25 credits authorized under this subchapter.
24-26 (b) If the comptroller determines under Subsection (a) of
25-1 this article that revenues are anticipated to support a part, but
25-2 less than all, of the premium tax credits authorized under Article
25-3 4.68 of this code, the comptroller shall:
25-4 (1) reduce the total amount of premium tax credits
25-5 allowed under that article in the amount necessary to comply with
25-6 Subsection (a) of this article; and
25-7 (2) adopt rules as necessary to implement this
25-8 subchapter after the reduction made under Subdivision (1) of this
25-9 subsection.
25-10 (c) Rules adopted under Subsection (b)(2) of this article
25-11 may adjust any deadline or other date established by this
25-12 subchapter as necessary to implement this subchapter as limited by
25-13 this article.
25-14 (d) The comptroller shall notify the governor, lieutenant
25-15 governor, and speaker of the house of representatives of the
25-16 determination made under Subsection (a) of this article.
25-17 SECTION 2. Articles 4.01 through 4.08, 4.10, 4.11, 4.11A,
25-18 4.11B, 4.11C, 4.12, and 4.17, 4.18, and 4.19, Insurance Code, are
25-19 redesignated as Subchapter A, Chapter 4, Insurance Code, and a
25-20 subchapter heading is added to read as follows:
25-21 SUBCHAPTER A. IMPOSITION AND COLLECTION OF TAXES AND FEES
25-22 SECTION 3. (a) Subject to Article 4.75, Insurance Code, as
25-23 added by this Act, the comptroller of public accounts shall, not
25-24 later than the 60th day after the effective date of this Act, adopt
25-25 rules necessary to implement Subchapter B, Chapter 4, Insurance
25-26 Code, as added by this Act. The comptroller shall begin accepting
26-1 applications for certification as a certified capital company under
26-2 that subchapter on November 1, 2001.
26-3 (b) A certified investor may not make an investment with a
26-4 certified capital company under Subchapter B, Chapter 4, Insurance
26-5 Code, as added by this Act, before February 15, 2002.
26-6 SECTION 4. This Act takes effect immediately if it receives
26-7 a vote of two-thirds of all the members elected to each house, as
26-8 provided by Section 39, Article III, Texas Constitution. If this
26-9 Act does not receive the vote necessary for immediate effect, this
26-10 Act takes effect September 1, 2001.