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 voting or management
1-17 interests of the other person, whether through rights, options,
1-18 convertible 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 voting or management interests of the other person;
1-22 (C) a person 10 percent or more of the
1-23 outstanding voting securities or other voting or management
1-24 interests of which 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 in this
4-9 state, other than advertising, promotion, and sales operations
4-10 which may be conducted outside of this state; or
4-11 (ii) in the case of a start-up company,
4-12 establish and support business operations in this state, other than
4-13 advertising, promotion, and sales operations which may be conducted
4-14 outside of this state;
4-15 (D) has not more than 100 employees and:
4-16 (i) employs at least 80 percent of its
4-17 employees in this state; or
4-18 (ii) pays 80 percent of its payroll to
4-19 employees in this state;
4-20 (E) is primarily engaged in:
4-21 (i) manufacturing, processing, or
4-22 assembling products;
4-23 (ii) conducting research and development;
4-24 or
4-25 (iii) providing services; and
4-26 (F) is not primarily engaged in:
5-1 (i) retail sales;
5-2 (ii) real estate development;
5-3 (iii) the business of insurance, banking,
5-4 or lending; or
5-5 (iv) the provision of professional
5-6 services provided by accountants, attorneys, or physicians.
5-7 (10) "Qualified debt instrument" means a debt
5-8 instrument issued by a certified capital company, at par value or a
5-9 premium, that:
5-10 (A) has an original maturity date of at least
5-11 five years after the date of issuance;
5-12 (B) has a repayment schedule that is not faster
5-13 than a level principal amortization over five years; and
5-14 (C) has no interest, distribution, or payment
5-15 features that are related to the profitability of the certified
5-16 capital company or the performance of the certified capital
5-17 company's investment portfolio.
5-18 (11) "Qualified distribution" means any distribution
5-19 or payment from certified capital by a certified capital company in
5-20 connection with:
5-21 (A) the reasonable costs and expenses of
5-22 forming, syndicating, managing, and operating the company, provided
5-23 that the distribution or payment is not made directly or indirectly
5-24 to a certified investor, including:
5-25 (i) reasonable and necessary fees paid for
5-26 professional services, including legal and accounting services,
6-1 related to the formation and operation of the company; and
6-2 (ii) an annual management fee in an amount
6-3 that does not exceed two and one-half percent of the certified
6-4 capital of the company; and
6-5 (B) any projected increase in federal or state
6-6 taxes, including penalties and interest related to state and
6-7 federal income taxes, of the equity owners of the company resulting
6-8 from the earnings or other tax liability of the company to the
6-9 extent that the increase is related to the ownership, management,
6-10 or operation of the company.
6-11 (12) "Qualified investment" means the investment of
6-12 cash by a certified capital company in a qualified business for the
6-13 purchase of any debt, debt participation, equity, or hybrid
6-14 security of any nature or description, including a debt instrument
6-15 or security that has the characteristics of debt but that provides
6-16 for conversion into equity or equity participation instruments such
6-17 as options or warrants.
6-18 (13) "State premium tax liability" means:
6-19 (A) any liability incurred by any person under
6-20 Subchapter A of this chapter; or
6-21 (B) if the tax liability imposed under
6-22 Subchapter A of this chapter on January 1, 2001, is eliminated or
6-23 reduced, any tax liability imposed on an insurance company or other
6-24 person that had premium tax liability under Subchapter A of this
6-25 chapter on that date.
6-26 (14) "Strategic investment area" means an area of this
7-1 state that qualifies as a strategic investment area under
7-2 Subchapter O, Chapter 171, Tax Code, or, after the expiration of
7-3 that subchapter, an area that qualified as a strategic investment
7-4 area under that subchapter immediately before its expiration.
7-5 (15) "Strategic investment business" means a qualified
7-6 business that has its principal business operations located in one
7-7 or more strategic investment areas and intends to maintain business
7-8 operations in the strategic investment areas after receipt of the
7-9 investment by the certified capital company.
7-10 Art. 4.52. DUTIES OF COMPTROLLER; RULES. The comptroller
7-11 shall administer this subchapter and may adopt rules and forms as
7-12 necessary to implement this subchapter.
7-13 Art. 4.53. CERTIFICATION. (a) The comptroller by rule
7-14 shall establish the application procedures for certified capital
7-15 companies.
7-16 (b) An applicant must file an application in the form
7-17 prescribed by the comptroller accompanied by a nonrefundable
7-18 application fee of $7,500. The application must include an audited
7-19 balance sheet of the applicant, with an unqualified opinion from an
7-20 independent certified public accountant, as of a date not more than
7-21 35 days before the date of the application.
7-22 (c) To qualify as a certified capital company:
7-23 (1) the applicant must have, at the time of
7-24 application for certification, an equity capitalization of at
7-25 least $500,000 in the form of unencumbered cash or cash
7-26 equivalents;
8-1 (2) at least two principals or persons employed to
8-2 manage the funds of the applicant must have at least four years of
8-3 experience in the venture capital industry; and
8-4 (3) the applicant must satisfy any additional
8-5 requirement imposed by the comptroller by rule.
8-6 (d) The comptroller shall review the application,
8-7 organizational documents, and business history of each applicant
8-8 and shall ensure that the applicant satisfies the requirements of
8-9 this subchapter.
8-10 (e) Not later than the 30th day after the date an
8-11 application is filed, the comptroller shall:
8-12 (1) issue the certification; or
8-13 (2) refuse to issue the certification and communicate
8-14 in detail to the applicant the grounds for the refusal, including
8-15 suggestions for the removal of those grounds.
8-16 Art. 4.54. MANAGEMENT BY CERTAIN ENTITIES PROHIBITED.
8-17 (a) An insurance company, group of insurance companies, or other
8-18 persons who may have state premium tax liability or the affiliates
8-19 of the insurance companies or other persons may not, directly or
8-20 indirectly:
8-21 (1) manage a certified capital company;
8-22 (2) beneficially own, whether through rights, options,
8-23 convertible interests, or otherwise, more than 10 percent of the
8-24 outstanding voting securities of a certified capital company; or
8-25 (3) control the direction of investments for a
8-26 certified capital company.
9-1 (b) Subsection (a) of this article applies without regard to
9-2 whether the insurance company or other person or the affiliate of
9-3 the insurance company or other person is licensed by or transacts
9-4 business in this state.
9-5 (c) This article does not preclude a certified investor,
9-6 insurance company, or any other party from exercising its legal
9-7 rights and remedies, including interim management of a certified
9-8 capital company, if authorized by law, with respect to a certified
9-9 capital company that is in default of its statutory or contractual
9-10 obligations to the certified investor, insurance company, or other
9-11 party.
9-12 Art. 4.55. OFFERING MATERIAL USED BY CERTIFIED CAPITAL
9-13 COMPANY. Any offering material involving the sale of securities of
9-14 the certified capital company must include the following statement:
9-15 By authorizing the formation of a certified capital
9-16 company, the State of Texas does not endorse the
9-17 quality of management or the potential for earnings of
9-18 the company and is not liable for damages or losses to
9-19 a certified investor in the company. Use of the word
9-20 "certified" in an offering does not constitute a
9-21 recommendation or endorsement of the investment by the
9-22 comptroller of public accounts. If applicable
9-23 provisions of law are violated, the State of Texas may
9-24 require forfeiture of unused premium tax credits and
9-25 repayments of used premium tax credits.
9-26 Art. 4.56. REQUIREMENTS FOR CONTINUANCE OF CERTIFICATION.
10-1 (a) To continue to be certified, a certified capital company
10-2 shall make qualified investments according to the following
10-3 schedule:
10-4 (1) before the third anniversary of its allocation
10-5 date, a company must have made qualified investments in an amount
10-6 cumulatively equal to at least 30 percent of its certified capital;
10-7 and
10-8 (2) before the fifth anniversary of its allocation
10-9 date, a company must have made qualified investments in an amount
10-10 cumulatively equal to at least 50 percent of its certified capital,
10-11 subject to Subsection (b) of this article.
10-12 (b) At least 50 percent of the amount of qualified
10-13 investments required by Subsection (a)(2) of this article must be
10-14 placed in early stage businesses. At least 30 percent of the
10-15 amount of qualified investments required by Subsections (a)(1) and
10-16 (2) of this article must be placed in a strategic investment
10-17 business.
10-18 (c) The aggregate cumulative amount of all qualified
10-19 investments made by the certified capital company after its
10-20 allocation date shall be considered in the computation of the
10-21 percentage requirements under this subchapter. Any proceeds
10-22 received from a qualified investment may be invested in another
10-23 qualified investment and count toward any requirement in this
10-24 subchapter with respect to investments of certified capital.
10-25 (d) Nothing in this subchapter shall limit an insurance
10-26 company's ownership of nonvoting equity interests in a certified
11-1 capital company.
11-2 (e) A business that is classified as a qualified business at
11-3 the time of the first investment in the business by a certified
11-4 capital company remains classified as a qualified business and may
11-5 receive follow-on investments from any certified capital company.
11-6 Except as provided by this subsection, a follow-on investment made
11-7 under this subsection is a qualified investment even though the
11-8 business may not meet the definition of a qualified business at the
11-9 time of the follow-on investment. A follow-on investment does not
11-10 qualify as a qualified investment if, at the time of the follow-on
11-11 investment, the qualified business no longer has its principal
11-12 business operations in this state.
11-13 (f) A qualified investment may not be made at a cost to a
11-14 certified capital company greater than 15 percent of the total
11-15 certified capital of the company at the time of investment.
11-16 (g) If, before the 90th day after the date that a certified
11-17 capital company makes an investment in a qualified business, the
11-18 qualified business moves its principal business operations from
11-19 this state, the investment may not be considered a qualified
11-20 investment for purposes of the percentage requirements under this
11-21 subchapter.
11-22 (h) A certified capital company shall invest any certified
11-23 capital not invested in qualified investments only in the
11-24 following:
11-25 (1) cash deposited with a federally insured financial
11-26 institution;
12-1 (2) certificates of deposit in a federally insured
12-2 financial institution;
12-3 (3) investment securities that are obligations of the
12-4 United States or its agencies or instrumentalities or obligations
12-5 that are guaranteed fully as to principal and interest by the
12-6 United States;
12-7 (4) debt instruments rated at least "A" or its
12-8 equivalent by a nationally recognized credit rating organization,
12-9 or issued by, or guaranteed with respect to payment by, an entity
12-10 whose unsecured indebtedness is rated at least "A" or its
12-11 equivalent by a nationally recognized credit rating organization,
12-12 and which indebtedness is not subordinated to other unsecured
12-13 indebtedness of the issuer or the guarantor;
12-14 (5) obligations of this state or any municipality or
12-15 political subdivision of this state; or
12-16 (6) any other investments approved in advance and in
12-17 writing by the comptroller.
12-18 Art. 4.57. EVALUATION OF BUSINESS BY COMPTROLLER. (a) A
12-19 certified capital company may, before making an investment in a
12-20 business, request from the comptroller a written opinion as to
12-21 whether the business in which it proposes to invest is a qualified
12-22 business, an early stage business, or a strategic investment
12-23 business.
12-24 (b) The comptroller shall, not later than the 15th business
12-25 day after the date of the receipt of a request under Subsection (a)
12-26 of this article, determine whether the business meets the
13-1 definition of a qualified business, an early stage business, or a
13-2 strategic investment business, as applicable, and notify the
13-3 certified capital company of the determination and an explanation
13-4 of its determination or notify the certified capital company that
13-5 an additional 15 days will be needed to review and make the
13-6 determination.
13-7 (c) If the comptroller fails to notify the certified capital
13-8 company with respect to the proposed investment within the period
13-9 specified by Subsection (b) of this article, the business in which
13-10 the company proposes to invest is considered to be a qualified
13-11 business, early stage business, or a strategic investment business,
13-12 as appropriate.
13-13 Art. 4.58. REPORTS TO COMPTROLLER; AUDITED FINANCIAL
13-14 STATEMENT. (a) Each certified capital company shall report to the
13-15 comptroller as soon as practicable after the receipt of certified
13-16 capital:
13-17 (1) the name of each certified investor from whom the
13-18 certified capital was received, including the certified investor's
13-19 insurance premium tax identification number;
13-20 (2) the amount of each certified investor's investment
13-21 of certified capital and premium tax credits; and
13-22 (3) the date on which the certified capital was
13-23 received.
13-24 (b) Not later than January 31 of each year, each certified
13-25 capital company shall report to the comptroller:
13-26 (1) the amount of the company's certified capital at
14-1 the end of the preceding year;
14-2 (2) whether or not the company has invested more than
14-3 15 percent of its total certified capital in any one business;
14-4 (3) each qualified investment that the company made
14-5 during the preceding year and, with respect to each qualified
14-6 investment, the number of employees of the qualified business at
14-7 the time the qualified investment was made; and
14-8 (4) any other information required by the comptroller,
14-9 including any information required by the comptroller to comply
14-10 with Article 4.73 of this code.
14-11 (c) Not later than April 1 of each year, the company shall
14-12 provide to the comptroller an annual audited financial statement
14-13 that includes the opinion of an independent certified public
14-14 accountant. The audit shall address the methods of operation and
14-15 conduct of the business of the company to determine whether:
14-16 (1) the company is complying with this subchapter and
14-17 the rules adopted under this subchapter;
14-18 (2) the funds received by the company have been
14-19 invested as required within the time provided by Article 4.56(a) of
14-20 this code; and
14-21 (3) the company has invested the funds in qualified
14-22 businesses.
14-23 Art. 4.59. RENEWAL. (a) Not later than January 31 of each
14-24 year, each certified capital company shall pay a nonrefundable
14-25 renewal fee of $5,000 to the comptroller. If a certified capital
14-26 company fails to pay its renewal fee on or before that date, the
15-1 company must pay, in addition to the renewal fee, a late fee of
15-2 $5,000 to continue its certification.
15-3 (b) Notwithstanding Subsection (a) of this article, a
15-4 renewal fee is not required within six months of the date on which
15-5 the company's certification is issued under Article 4.53 of this
15-6 code.
15-7 Art. 4.60. DISTRIBUTIONS; REPAYMENT OF DEBT. (a) A
15-8 certified capital company may make a qualified distribution at any
15-9 time. To make a distribution or payment, other than a qualified
15-10 distribution, a company must have made qualified investments in an
15-11 amount cumulatively equal to 100 percent of its certified capital.
15-12 (b) Notwithstanding Subsection (a) of this article, a
15-13 company may make repayments of principal and interest on its
15-14 indebtedness without any restriction, including repayments of
15-15 indebtedness of the company on which certified investors earned
15-16 premium tax credits.
15-17 (c) If a business in which a qualified investment is made
15-18 relocates its principal business operations to another state during
15-19 the term of the certified capital company's investment in the
15-20 business, the cumulative amount of qualified investments made by
15-21 the certified capital company for purposes of satisfying the
15-22 requirements of Subsection (a) of this article only is reduced by
15-23 the amount of the certified capital company's qualified investments
15-24 in the business that has relocated. This subsection does not apply
15-25 if the business demonstrates that it has returned its principal
15-26 business operations to this state not later than the 90th day after
16-1 the date of its relocation.
16-2 Art. 4.61. ANNUAL REVIEW; DECERTIFICATION. (a) The
16-3 comptroller shall conduct an annual review of each certified
16-4 capital company to:
16-5 (1) ensure that the company continues to satisfy the
16-6 requirements of this subchapter and that the company has not made
16-7 any investment in violation of this subchapter; and
16-8 (2) determine the eligibility status of its qualified
16-9 investments.
16-10 (b) The cost of the annual review shall be paid by each
16-11 certified capital company according to a reasonable fee schedule
16-12 adopted by the comptroller.
16-13 (c) A material violation of Article 4.56, 4.58, or 4.59 of
16-14 this code is grounds for decertification of the certified capital
16-15 company. If the comptroller determines that a company is not in
16-16 compliance with Article 4.56, 4.58, or 4.59 of this code, the
16-17 comptroller shall notify the officers of the company in writing
16-18 that the company may be subject to decertification after the 120th
16-19 day after the date of mailing of the notice, unless the
16-20 deficiencies are corrected and the company returns to compliance
16-21 with those articles.
16-22 (d) The comptroller may decertify a certified capital
16-23 company, after opportunity for hearing, if the comptroller finds
16-24 that the company is not in compliance with Article 4.56, 4.58, or
16-25 4.59 of this code at the end of the period established by
16-26 Subsection (c) of this article. Decertification under this
17-1 subsection is effective on receipt of notice of decertification by
17-2 the company. The comptroller shall notify any appropriate state
17-3 agency of the decertification.
17-4 Art. 4.62. ADMINISTRATIVE PENALTY. (a) The comptroller may
17-5 impose an administrative penalty on a certified capital company
17-6 that violates this subchapter.
17-7 (b) The amount of the penalty may not exceed $25,000, and
17-8 each day a violation continues or occurs is a separate violation
17-9 for the purpose of imposing a penalty. The amount of the penalty
17-10 shall be based on:
17-11 (1) the seriousness of the violation, including the
17-12 nature, circumstances, extent, and gravity of the violation;
17-13 (2) the economic harm caused by the violation;
17-14 (3) the history of previous violations;
17-15 (4) the amount necessary to deter a future violation;
17-16 (5) efforts to correct the violation; and
17-17 (6) any other matter that justice may require.
17-18 (c) Certified capital companies assessed penalties under
17-19 this subchapter may request a redetermination as provided in
17-20 Chapter 111, Tax Code.
17-21 (d) The attorney general may sue to collect the penalty.
17-22 (e) A proceeding to impose the penalty is considered to be a
17-23 contested case under Chapter 2001, Government Code.
17-24 Art. 4.63. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS:
17-25 DECERTIFICATION OF COMPANY. (a) Decertification of a certified
17-26 capital company may cause the recapture of premium tax credits
18-1 previously claimed and the forfeiture of future premium tax credits
18-2 to be claimed by certified investors with respect to the company,
18-3 as follows:
18-4 (1) decertification of a company on or before the
18-5 third anniversary of its allocation date causes the recapture of
18-6 any premium tax credit previously claimed and the forfeiture of any
18-7 future premium tax credit to be claimed by a certified investor
18-8 with respect to the company;
18-9 (2) for a company that meets the requirements for
18-10 continued certification under Article 4.56(a)(1) of this code and
18-11 subsequently fails to meet the requirements for continued
18-12 certification under Article 4.56(a)(2) of this code, any premium
18-13 tax credit that has been or will be taken by a certified investor
18-14 on or before the third anniversary of the allocation date is not
18-15 subject to recapture or forfeiture, but any premium tax credit that
18-16 has been or will be taken by a certified investor after the third
18-17 anniversary of the allocation date of the company is subject to
18-18 recapture or forfeiture;
18-19 (3) for a company that has met the requirements for
18-20 continued certification under Articles 4.56(a)(1) and (2) of this
18-21 code and is subsequently decertified, any premium tax credit that
18-22 has been or will be taken by a certified investor on or before the
18-23 fifth anniversary of the allocation date is not subject to
18-24 recapture or forfeiture, but any premium tax credit to be taken
18-25 after the fifth anniversary of the allocation date is subject to
18-26 forfeiture only if the company is decertified on or before the
19-1 fifth anniversary of its allocation date; and
19-2 (4) for a company that has invested an amount
19-3 cumulatively equal to 100 percent of its certified capital in
19-4 qualified investments, any premium tax credit claimed or to be
19-5 claimed by a certified investor is not subject to recapture or
19-6 forfeiture under this article.
19-7 (b) The comptroller shall send written notice to the address
19-8 of each certified investor whose premium tax credit is subject to
19-9 recapture or forfeiture, using the address shown on the last
19-10 premium tax filing.
19-11 Art. 4.64. INDEMNITY AGREEMENTS AND INSURANCE AUTHORIZED. A
19-12 certified capital company may agree to indemnify, or purchase
19-13 insurance for the benefit of, a certified investor for losses
19-14 resulting from the recapture or forfeiture of premium tax credits
19-15 under Article 4.63 of this code. Any guaranty, indemnity, bond,
19-16 insurance policy, or other payment undertaking made under this
19-17 article may not be provided by more than one certified investor of
19-18 the certified capital company or affiliate of the certified
19-19 investor.
19-20 Art. 4.65. PREMIUM TAX CREDIT. (a) A certified investor
19-21 who makes an investment of certified capital shall in the year of
19-22 investment earn a vested credit against state premium tax liability
19-23 equal to 100 percent of the certified investor's investment of
19-24 certified capital, subject to the limits imposed by this
19-25 subchapter. A certified investor may take up to 10 percent of the
19-26 vested premium tax credit in any taxable year of the certified
20-1 investor.
20-2 (b) The credit to be applied against state premium tax
20-3 liability in any one year may not exceed the state premium tax
20-4 liability of the certified investor for the taxable year. Any
20-5 unused credit against state premium tax liability may be carried
20-6 forward indefinitely until the premium tax credits are used.
20-7 (c) A certified investor claiming a credit against state
20-8 premium tax liability earned through an investment in a company is
20-9 not required to pay any additional retaliatory tax levied under
20-10 Article 21.46 of this code as a result of claiming that credit. An
20-11 investment made under this subchapter is a "Texas investment" for
20-12 purposes of Subchapter A of this chapter.
20-13 Art. 4.66. PREMIUM TAX CREDIT ALLOCATION CLAIM FORM. (a) A
20-14 premium tax credit allocation claim must be prepared and executed
20-15 by a certified investor on a form provided by the comptroller. The
20-16 certified capital company must file the claim with the comptroller
20-17 not later than February 15, 2002. The premium tax credit
20-18 allocation claim form must include an affidavit of the certified
20-19 investor under which the certified investor becomes legally bound
20-20 and irrevocably committed to make an investment of certified
20-21 capital in a certified capital company in the amount allocated even
20-22 if the amount allocated is less than the amount of the claim,
20-23 subject only to the receipt of an allocation under Article 4.68 of
20-24 this code.
20-25 (b) A certified investor may not claim a premium tax credit
20-26 under Article 4.65 of this code for an investment that has not been
21-1 funded, even if the certified investor has committed to fund the
21-2 investment.
21-3 Art. 4.67. TOTAL LIMIT ON CREDITS. (a) The total amount of
21-4 certified capital for which premium tax credits may be allowed
21-5 under this subchapter for all years in which premium tax credits
21-6 are allowed is $200 million.
21-7 (b) The total amount of certified capital for which premium
21-8 tax credits may be allowed for all certified investors under this
21-9 subchapter may not exceed the amount that would entitle all
21-10 certified investors in certified capital companies to take total
21-11 credits of $20 million in a year.
21-12 (c) A certified capital company and its affiliates may not
21-13 file premium tax credit allocation claims in excess of the maximum
21-14 amount of certified capital for which premium tax credits may be
21-15 allowed as provided in this article.
21-16 Art. 4.68. PRO RATA ALLOCATION OF CREDITS. (a) If the
21-17 total premium tax credits claimed by all certified investors
21-18 exceeds the total limits on premium tax credits established by
21-19 Article 4.67(a) of this code, the comptroller shall allocate the
21-20 total amount of premium tax credits allowed under this subchapter
21-21 to certified investors in certified capital companies on a pro rata
21-22 basis in accordance with this article.
21-23 (b) The pro rata allocation for each certified investor
21-24 shall be the product of:
21-25 (1) a fraction, the numerator of which is the amount
21-26 of the premium tax credit allocation claim filed on behalf of the
22-1 investor and the denominator of which is the total amount of all
22-2 premium tax credit allocation claims filed on behalf of all
22-3 certified investors; and
22-4 (2) the total amount of certified capital for which
22-5 premium tax credits may be allowed under this subchapter.
22-6 (c) Not later than March 1, 2002, the comptroller shall
22-7 notify each certified capital company of the amount of tax credits
22-8 allocated to each certified investor. Each certified capital
22-9 company shall notify each certified investor of their premium tax
22-10 credit allocation.
22-11 (d) If a certified capital company does not receive an
22-12 investment of certified capital equaling the amount of premium tax
22-13 credits allocated to a certified investor for which it filed a
22-14 premium tax credit allocation claim before the end of the 10th
22-15 business day after the date of receipt of notice of allocation, the
22-16 company shall notify the comptroller by overnight common carrier
22-17 delivery service and that portion of capital allocated to the
22-18 certified investor shall be forfeited. The comptroller shall
22-19 reallocate the forfeited capital among the certified investors in
22-20 the other certified capital companies that originally received an
22-21 allocation so that the result after reallocation is the same as if
22-22 the initial allocation under this article had been performed
22-23 without considering the premium tax credit allocation claims that
22-24 were subsequently forfeited.
22-25 (e) The maximum amount of certified capital for which
22-26 premium tax credit allocation may be allowed on behalf of any one
23-1 certified investor and its affiliates, whether by one or more
23-2 certified capital companies, may not exceed the greater of:
23-3 (1) $10 million; or
23-4 (2) 15 percent of the maximum aggregate amount
23-5 available under Article 4.67(a) of this code.
23-6 Art. 4.69. 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. 4.70. 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. 4.71. TRANSFERABILITY OF CREDIT. (a) The comptroller
23-18 shall adopt rules to facilitate the transfer or assignment of
23-19 premium tax credits by certified investors. A certified investor
23-20 may transfer or assign premium tax credits only in compliance with
23-21 the rules adopted under this subsection.
23-22 (b) The transfer or assignment of a premium tax credit does
23-23 not affect the schedule for taking the premium tax credit under
23-24 this subchapter.
23-25 Art. 4.72. PROMOTION. The Texas Department of Economic
23-26 Development shall promote the program established under this
24-1 subchapter in the Texas Business and Community Economic Development
24-2 Clearinghouse.
24-3 Art. 4.73. REPORT TO LEGISLATURE. (a) The comptroller
24-4 shall prepare a biennial report with respect to results of the
24-5 implementation of this subchapter. The report must include:
24-6 (1) the number of certified capital companies holding
24-7 certified capital;
24-8 (2) the amount of certified capital invested in each
24-9 certified capital company;
24-10 (3) the amount of certified capital the certified
24-11 capital company has invested in qualified businesses as of January
24-12 1, 2004, and the cumulative total for each subsequent year;
24-13 (4) the total amount of tax credits granted under this
24-14 subchapter for each year that credits have been granted;
24-15 (5) the performance of each certified capital company
24-16 with respect to renewal and reporting requirements imposed under
24-17 this subchapter;
24-18 (6) with respect to the qualified businesses in which
24-19 certified capital companies have invested:
24-20 (A) the classification of the qualified
24-21 businesses according to the industrial sector and the size of the
24-22 business;
24-23 (B) the total number of jobs created by the
24-24 investment and the average wages paid for the jobs; and
24-25 (C) the total number of jobs retained as a
24-26 result of the investment and the average wages paid for the jobs;
25-1 and
25-2 (7) the certified capital companies that have been
25-3 decertified or that have failed to renew the certification and the
25-4 reason for any decertification.
25-5 (b) The comptroller shall file the report with the governor,
25-6 the lieutenant governor, and the speaker of the house of
25-7 representatives not later than December 15 of each even-numbered
25-8 year.
25-9 Art. 4.74. IMPLEMENTATION SUBJECT TO AVAILABLE REVENUE.
25-10 (a) Notwithstanding any other provision of this subchapter, the
25-11 comptroller may implement this subchapter only if the comptroller
25-12 determines, on the basis of a revenue estimate made after the
25-13 adjournment sine die of the regular session of the 77th
25-14 Legislature, that revenues are anticipated in amounts sufficient to
25-15 finance all appropriations made during the regular session of the
25-16 77th Legislature, after making deductions for all reductions in
25-17 taxes, including the reduction in premium tax through premium tax
25-18 credits authorized under this subchapter.
25-19 (b) If the comptroller determines under Subsection (a) of
25-20 this article that revenues are anticipated to support a part, but
25-21 less than all, of the premium tax credits authorized under Article
25-22 4.67 of this code, the comptroller shall:
25-23 (1) reduce the total amount of premium tax credits
25-24 allowed under that article in the amount necessary to comply with
25-25 Subsection (a) of this article; and
25-26 (2) adopt rules as necessary to implement this
26-1 subchapter after the reduction made under Subdivision (1) of this
26-2 subsection.
26-3 (c) Rules adopted under Subsection (b)(2) of this article
26-4 may adjust any deadline or other date established by this
26-5 subchapter as necessary to implement this subchapter as limited by
26-6 this article.
26-7 (d) The comptroller shall notify the governor, lieutenant
26-8 governor, and speaker of the house of representatives of the
26-9 determination made under Subsection (a) of this article.
26-10 SECTION 2. Articles 4.01 through 4.08, 4.10, 4.11, 4.11A,
26-11 4.11B, 4.11C, 4.12, 4.17, 4.18, and 4.19, Insurance Code, are
26-12 redesignated as Subchapter A, Chapter 4, Insurance Code, and a
26-13 subchapter heading is added to read as follows:
26-14 SUBCHAPTER A. IMPOSITION AND COLLECTION OF TAXES AND FEES
26-15 SECTION 3. (a) Subject to Article 4.74, Insurance Code, as
26-16 added by this Act, the comptroller of public accounts shall, not
26-17 later than the 60th day after the effective date of this Act, adopt
26-18 rules necessary to implement Subchapter B, Chapter 4, Insurance
26-19 Code, as added by this Act. The comptroller shall begin accepting
26-20 applications for certification as a certified capital company under
26-21 that subchapter on November 1, 2001.
26-22 (b) A certified investor may not make an investment with a
26-23 certified capital company under Subchapter B, Chapter 4, Insurance
26-24 Code, as added by this Act, before February 15, 2002.
26-25 SECTION 4. This Act takes effect immediately if it receives
26-26 a vote of two-thirds of all the members elected to each house, as
27-1 provided by Section 39, Article III, Texas Constitution. If this
27-2 Act does not receive the vote necessary for immediate effect, this
27-3 Act takes effect September 1, 2001.
_______________________________ _______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 601 passed the Senate on
April 4, 2001, by the following vote: Yeas 25, Nays 3, one
present, not voting; and that the Senate concurred in House
amendments on May 15, 2001, by the following vote: Yeas 29,
Nays 0, one present, not voting.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 601 passed the House, with
amendments, on May 10, 2001, by the following vote: Yeas 144,
Nays 0, one present, not voting.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor