77R14289 E
By Carona S.B. No. 601
Substitute the following for S.B. No. 601:
By Lewis of Tarrant C.S.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:
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) "Allocation date" means the date on which the
2-12 certified investors of a certified capital company are allocated
2-13 certified capital by the comptroller under this subchapter.
2-14 (3) "Certified capital" means an investment of cash by
2-15 a certified investor in a certified capital company that fully
2-16 funds the purchase price of an equity interest in the company or a
2-17 qualified debt instrument issued by the certified capital company.
2-18 (4) "Certified capital company" means a partnership,
2-19 corporation, or trust or limited liability company, whether
2-20 organized on a profit or not-for-profit basis, that has as its
2-21 primary business activity the investment of cash in qualified
2-22 businesses and that is certified as meeting the criteria of this
2-23 subchapter.
2-24 (5) "Certified investor" means an insurance company or
2-25 other person that has state premium tax liability, other than a
2-26 title insurance company, that contributes certified capital
2-27 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
3-27 certified capital company;
4-1 (B) has its principal business operations
4-2 located in this state and intends to maintain business operations
4-3 in this state after receipt of the investment by the certified
4-4 capital company;
4-5 (C) has agreed to use the qualified investment
4-6 primarily to:
4-7 (i) support business operations in this
4-8 state, other than advertising, promotion, and sales operations
4-9 which may be conducted outside of this state; or
4-10 (ii) in the case of a start-up company,
4-11 establish and support business operations in this state, other than
4-12 advertising, promotion, and sales operations which may be conducted
4-13 outside of 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; and
5-12 (C) has no interest, distribution, or payment
5-13 features that are related to the profitability of the certified
5-14 capital company or the performance of the certified capital
5-15 company's investment portfolio.
5-16 (11) "Qualified distribution" means any distribution
5-17 or payment from certified capital by a certified capital company in
5-18 connection with:
5-19 (A) the reasonable costs and expenses of
5-20 forming, syndicating, managing, and operating the company, provided
5-21 that the distribution or payment is not made directly or indirectly
5-22 to a certified investor, including:
5-23 (i) reasonable and necessary fees paid for
5-24 professional services, including legal and accounting services,
5-25 related to the formation and operation of the company; and
5-26 (ii) an annual management fee in an amount
5-27 that does not exceed two and one-half percent of the certified
6-1 capital of the company; and
6-2 (B) any projected increase in federal or state
6-3 taxes, including penalties and interest related to state and
6-4 federal income taxes, of the equity owners of the company resulting
6-5 from the earnings or other tax liability of the company to the
6-6 extent that the increase is related to the ownership, management,
6-7 or operation of the company.
6-8 (12) "Qualified investment" means the investment of
6-9 cash by a certified capital company in a qualified business for the
6-10 purchase of any debt, debt participation, equity, or hybrid
6-11 security of any nature or description, including a debt instrument
6-12 or security that has the characteristics of debt but that provides
6-13 for conversion into equity or equity participation instruments such
6-14 as options or warrants.
6-15 (13) "State premium tax liability" means:
6-16 (A) any liability incurred by any person under
6-17 Subchapter A of this chapter; or
6-18 (B) if the tax liability imposed under
6-19 Subchapter A of this chapter on January 1, 2001, is eliminated or
6-20 reduced, any tax liability imposed on an insurance company or other
6-21 person that had premium tax liability under Subchapter A of this
6-22 chapter on that date.
6-23 Art. 4.52. DUTIES OF COMPTROLLER; RULES. The comptroller
6-24 shall administer this subchapter and may adopt rules and forms as
6-25 necessary to implement this subchapter.
6-26 Art. 4.53. CERTIFICATION. (a) The comptroller by rule
6-27 shall establish the application procedures for certified capital
7-1 companies.
7-2 (b) An applicant must file an application in the form
7-3 prescribed by the comptroller accompanied by a nonrefundable
7-4 application fee of $7,500. The application must include an audited
7-5 balance sheet of the applicant, with an unqualified opinion from an
7-6 independent certified public accountant, as of a date not more than
7-7 35 days before the date of the application.
7-8 (c) To qualify as a certified capital company:
7-9 (1) the applicant must have, at the time of
7-10 application for certification, an equity capitalization of at
7-11 least $500,000 in the form of unencumbered cash or cash
7-12 equivalents;
7-13 (2) at least two principals or persons employed to
7-14 manage the funds of the applicant must have at least four years of
7-15 experience in the venture capital industry; and
7-16 (3) the applicant must satisfy any additional
7-17 requirement imposed by the comptroller by rule.
7-18 (d) The comptroller shall review the application,
7-19 organizational documents, and business history of each applicant
7-20 and shall ensure that the applicant satisfies the requirements of
7-21 this subchapter.
7-22 (e) Not later than the 30th day after the date an
7-23 application is filed, the comptroller shall:
7-24 (1) issue the certification; or
7-25 (2) refuse to issue the certification and communicate
7-26 in detail to the applicant the grounds for the refusal, including
7-27 suggestions for the removal of those grounds.
8-1 Art. 4.54. MANAGEMENT BY CERTAIN ENTITIES PROHIBITED.
8-2 (a) An insurance company, group of insurance companies, or other
8-3 persons who may have state premium tax liability or the affiliates
8-4 of the insurance companies or other persons may not, directly or
8-5 indirectly:
8-6 (1) manage a certified capital company;
8-7 (2) beneficially own, whether through rights, options,
8-8 convertible interests, or otherwise, more than 10 percent of the
8-9 outstanding voting securities of a certified capital company; or
8-10 (3) control the direction of investments for a
8-11 certified capital company.
8-12 (b) Subsection (a) of this article applies without regard to
8-13 whether the insurance company or other person or the affiliate of
8-14 the insurance company or other person is licensed by or transacts
8-15 business in this state.
8-16 (c) This article does not preclude a certified investor,
8-17 insurance company, or any other party from exercising its legal
8-18 rights and remedies, including interim management of a certified
8-19 capital company, if authorized by law, with respect to a certified
8-20 capital company that is in default of its statutory or contractual
8-21 obligations to the certified investor, insurance company, or other
8-22 party.
8-23 Art. 4.55. OFFERING MATERIAL USED BY CERTIFIED CAPITAL
8-24 COMPANY. Any offering material involving the sale of securities of
8-25 the certified capital company must include the following statement:
8-26 By authorizing the formation of a certified capital
8-27 company, the State of Texas does not endorse the
9-1 quality of management or the potential for earnings of
9-2 the company and is not liable for damages or losses to
9-3 a certified investor in the company. Use of the word
9-4 "certified" in an offering does not constitute a
9-5 recommendation or endorsement of the investment by the
9-6 comptroller of public accounts. If applicable
9-7 provisions of law are violated, the State of Texas may
9-8 require forfeiture of unused premium tax credits and
9-9 repayments of used premium tax credits.
9-10 Art. 4.56. REQUIREMENTS FOR CONTINUANCE OF CERTIFICATION.
9-11 (a) To continue to be certified, a certified capital company
9-12 shall make qualified investments according to the following
9-13 schedule:
9-14 (1) before the third anniversary of its allocation
9-15 date, a company must have made qualified investments in an amount
9-16 cumulatively equal to at least 30 percent of its certified capital;
9-17 and
9-18 (2) before the fifth anniversary of its allocation
9-19 date, a company must have made qualified investments in an amount
9-20 cumulatively equal to at least 50 percent of its certified capital,
9-21 subject to Subsection (b) of this article.
9-22 (b) At least 50 percent of the amount of qualified
9-23 investments required by Subsection (a)(2) of this article must be
9-24 placed in early stage businesses.
9-25 (c) The aggregate cumulative amount of all qualified
9-26 investments made by the certified capital company after its
9-27 allocation date shall be considered in the computation of the
10-1 percentage requirements under this subchapter. Any proceeds
10-2 received from a qualified investment may be invested in another
10-3 qualified investment and count toward any requirement in this
10-4 subchapter with respect to investments of certified capital.
10-5 (d) A business that is classified as a qualified business at
10-6 the time of the first investment in the business by a certified
10-7 capital company remains classified as a qualified business and may
10-8 receive follow-on investments from any certified capital company.
10-9 Except as provided by this subsection, a follow-on investment made
10-10 under this subsection is a qualified investment even though the
10-11 business may not meet the definition of a qualified business at the
10-12 time of the follow-on investment. A follow-on investment does not
10-13 qualify as a qualified investment if, at the time of the follow-on
10-14 investment, the qualified business no longer has its principal
10-15 business operations in this state.
10-16 (e) A qualified investment may not be made at a cost to a
10-17 certified capital company greater than 15 percent of the total
10-18 certified capital of the company at the time of investment.
10-19 (f) If, before the 90th day after the date that a certified
10-20 capital company makes an investment in a qualified business, the
10-21 qualified business moves its principal business operations from
10-22 this state, the investment may not be considered a qualified
10-23 investment for purposes of the percentage requirements under this
10-24 subchapter.
10-25 (g) A certified capital company shall invest any certified
10-26 capital not invested in qualified investments only in the
10-27 following:
11-1 (1) cash deposited with a federally insured financial
11-2 institution;
11-3 (2) certificates of deposit in a federally insured
11-4 financial institution;
11-5 (3) investment securities that are obligations of the
11-6 United States or its agencies or instrumentalities or obligations
11-7 that are guaranteed fully as to principal and interest by the
11-8 United States;
11-9 (4) debt instruments rated at least "A" or its
11-10 equivalent by a nationally recognized credit rating organization,
11-11 or issued by, or guaranteed with respect to payment by, an entity
11-12 whose unsecured indebtedness is rated at least "A" or its
11-13 equivalent by a nationally recognized credit rating organization,
11-14 and which indebtedness is not subordinated to other unsecured
11-15 indebtedness of the issuer or the guarantor;
11-16 (5) obligations of this state or any municipality or
11-17 political subdivision of this state; or
11-18 (6) any other investments approved in advance and in
11-19 writing by the comptroller.
11-20 Art. 4.57. EVALUATION OF BUSINESS BY COMPTROLLER. (a) A
11-21 certified capital company may, before making an investment in a
11-22 business, request from the comptroller a written opinion as to
11-23 whether the business in which it proposes to invest is a qualified
11-24 business or an early stage business.
11-25 (b) The comptroller shall, not later than the 15th business
11-26 day after the date of the receipt of a request under Subsection (a)
11-27 of this article, determine whether the business meets the
12-1 definition of a qualified business or an early stage business, as
12-2 applicable, and notify the certified capital company of the
12-3 determination and an explanation of its determination or notify the
12-4 certified capital company that an additional 15 days will be needed
12-5 to review and make the determination.
12-6 (c) If the comptroller fails to notify the certified capital
12-7 company with respect to the proposed investment within the period
12-8 specified by Subsection (b) of this article, the business in which
12-9 the company proposes to invest is considered to be a qualified
12-10 business or early stage business, as appropriate.
12-11 Art. 4.58. REPORTS TO COMPTROLLER; AUDITED FINANCIAL
12-12 STATEMENT. (a) Each certified capital company shall report to the
12-13 comptroller as soon as practicable after the receipt of certified
12-14 capital:
12-15 (1) the name of each certified investor from whom the
12-16 certified capital was received, including the certified investor's
12-17 insurance premium tax identification number;
12-18 (2) the amount of each certified investor's investment
12-19 of certified capital and premium tax credits; and
12-20 (3) the date on which the certified capital was
12-21 received.
12-22 (b) Not later than January 31 of each year, each certified
12-23 capital company shall report to the comptroller:
12-24 (1) the amount of the company's certified capital at
12-25 the end of the preceding year;
12-26 (2) whether or not the company has invested more than
12-27 15 percent of its total certified capital in any one business;
13-1 (3) each qualified investment that the company made
13-2 during the preceding year and, with respect to each qualified
13-3 investment, the number of employees of the qualified business at
13-4 the time the qualified investment was made; and
13-5 (4) any other information required by the comptroller,
13-6 including any information required by the comptroller to comply
13-7 with Article 4.73 of this code.
13-8 (c) Not later than April 1 of each year, the company shall
13-9 provide to the comptroller an annual audited financial statement
13-10 that includes the opinion of an independent certified public
13-11 accountant. The audit shall address the methods of operation and
13-12 conduct of the business of the company to determine whether:
13-13 (1) the company is complying with this subchapter and
13-14 the rules adopted under this subchapter;
13-15 (2) the funds received by the company have been
13-16 invested as required within the time provided by Article 4.56(a) of
13-17 this code; and
13-18 (3) the company has invested the funds in qualified
13-19 businesses.
13-20 Art. 4.59. RENEWAL. (a) Not later than January 31 of each
13-21 year, each certified capital company shall pay a nonrefundable
13-22 renewal fee of $5,000 to the comptroller. If a certified capital
13-23 company fails to pay its renewal fee on or before that date, the
13-24 company must pay, in addition to the renewal fee, a late fee of
13-25 $5,000 to continue its certification.
13-26 (b) Notwithstanding Subsection (a) of this article, a
13-27 renewal fee is not required within six months of the date on which
14-1 the company's certification is issued under Article 4.53 of this
14-2 code.
14-3 Art. 4.60. DISTRIBUTIONS; REPAYMENT OF DEBT. (a) A
14-4 certified capital company may make a qualified distribution at any
14-5 time. To make a distribution or payment, other than a qualified
14-6 distribution, a company must have made qualified investments in an
14-7 amount cumulatively equal to 100 percent of its certified capital.
14-8 (b) Notwithstanding Subsection (a) of this article, a
14-9 company may make repayments of principal and interest on its
14-10 indebtedness without any restriction, including repayments of
14-11 indebtedness of the company on which certified investors earned
14-12 premium tax credits.
14-13 (c) If a business in which a qualified investment is made
14-14 relocates its principal business operations to another state during
14-15 the term of the certified capital company's investment in the
14-16 business, the cumulative amount of qualified investments made by
14-17 the certified capital company for purposes of satisfying the
14-18 requirements of Subsection (a) of this article only is reduced by
14-19 the amount of the certified capital company's qualified investments
14-20 in the business that has relocated. This subsection does not apply
14-21 if the business demonstrates that it has returned its principal
14-22 business operations to this state not later than the 90th day after
14-23 the date of its relocation.
14-24 Art. 4.61. ANNUAL REVIEW; DECERTIFICATION. (a) The
14-25 comptroller shall conduct an annual review of each certified
14-26 capital company to:
14-27 (1) ensure that the company continues to satisfy the
15-1 requirements of this subchapter and that the company has not made
15-2 any investment in violation of this subchapter; and
15-3 (2) determine the eligibility status of its qualified
15-4 investments.
15-5 (b) The cost of the annual review shall be paid by each
15-6 certified capital company according to a reasonable fee schedule
15-7 adopted by the comptroller.
15-8 (c) A material violation of Article 4.56, 4.58, or 4.59 of
15-9 this code is grounds for decertification of the certified capital
15-10 company. If the comptroller determines that a company is not in
15-11 compliance with Article 4.56, 4.58, or 4.59 of this code, the
15-12 comptroller shall notify the officers of the company in writing
15-13 that the company may be subject to decertification after the 120th
15-14 day after the date of mailing of the notice, unless the
15-15 deficiencies are corrected and the company returns to compliance
15-16 with those articles.
15-17 (d) The comptroller may decertify a certified capital
15-18 company, after opportunity for hearing, if the comptroller finds
15-19 that the company is not in compliance with Article 4.56, 4.58, or
15-20 4.59 of this code at the end of the period established by
15-21 Subsection (c) of this article. Decertification under this
15-22 subsection is effective on receipt of notice of decertification by
15-23 the company. The comptroller shall notify any appropriate state
15-24 agency of the decertification.
15-25 Art. 4.62. ADMINISTRATIVE PENALTY. (a) The comptroller may
15-26 impose an administrative penalty on a certified capital company
15-27 that violates this subchapter.
16-1 (b) The amount of the penalty may not exceed $25,000, and
16-2 each day a violation continues or occurs is a separate violation
16-3 for the purpose of imposing a penalty. The amount of the penalty
16-4 shall be based on:
16-5 (1) the seriousness of the violation, including the
16-6 nature, circumstances, extent, and gravity of the violation;
16-7 (2) the economic harm caused by the violation;
16-8 (3) the history of previous violations;
16-9 (4) the amount necessary to deter a future violation;
16-10 (5) efforts to correct the violation; and
16-11 (6) any other matter that justice may require.
16-12 (c) Certified capital companies assessed penalties under
16-13 this subchapter may request a redetermination as provided in
16-14 Chapter 111, Tax Code.
16-15 (d) The attorney general may sue to collect the penalty.
16-16 (e) A proceeding to impose the penalty is considered to be a
16-17 contested case under Chapter 2001, Government Code.
16-18 Art. 4.63. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS:
16-19 DECERTIFICATION OF COMPANY. (a) Decertification of a certified
16-20 capital company may cause the recapture of premium tax credits
16-21 previously claimed and the forfeiture of future premium tax credits
16-22 to be claimed by certified investors with respect to the company,
16-23 as follows:
16-24 (1) decertification of a company on or before the
16-25 third anniversary of its allocation date causes the recapture of
16-26 any premium tax credit previously claimed and the forfeiture of any
16-27 future premium tax credit to be claimed by a certified investor
17-1 with respect to the company;
17-2 (2) for a company that meets the requirements for
17-3 continued certification under Article 4.56(a)(1) of this code and
17-4 subsequently fails to meet the requirements for continued
17-5 certification under Article 4.56(a)(2) of this code, any premium
17-6 tax credit that has been or will be taken by a certified investor
17-7 on or before the third anniversary of the allocation date is not
17-8 subject to recapture or forfeiture, but any premium tax credit that
17-9 has been or will be taken by a certified investor after the third
17-10 anniversary of the allocation date of the company is subject to
17-11 recapture or forfeiture;
17-12 (3) for a company that has met the requirements for
17-13 continued certification under Articles 4.56(a)(1) and (2) of this
17-14 code and is subsequently decertified, any premium tax credit that
17-15 has been or will be taken by a certified investor on or before the
17-16 fifth anniversary of the allocation date is not subject to
17-17 recapture or forfeiture, but any premium tax credit to be taken
17-18 after the fifth anniversary of the allocation date is subject to
17-19 forfeiture only if the company is decertified on or before the
17-20 fifth anniversary of its allocation date; and
17-21 (4) for a company that has invested an amount
17-22 cumulatively equal to 100 percent of its certified capital in
17-23 qualified investments, any premium tax credit claimed or to be
17-24 claimed by a certified investor is not subject to recapture or
17-25 forfeiture under this article.
17-26 (b) The comptroller shall send written notice to the address
17-27 of each certified investor whose premium tax credit is subject to
18-1 recapture or forfeiture, using the address shown on the last
18-2 premium tax filing.
18-3 Art. 4.64. INDEMNITY AGREEMENTS AND INSURANCE AUTHORIZED. A
18-4 certified capital company may agree to indemnify, or purchase
18-5 insurance for the benefit of, a certified investor for losses
18-6 resulting from the recapture or forfeiture of premium tax credits
18-7 under Article 4.63 of this code. Any guaranty, indemnity, bond,
18-8 insurance policy, or other payment undertaking made under this
18-9 article may not be provided by more than one certified investor of
18-10 the certified capital company or affiliate of the certified
18-11 investor.
18-12 Art. 4.65. PREMIUM TAX CREDIT. (a) A certified investor
18-13 who makes an investment of certified capital shall in the year of
18-14 investment earn a vested credit against state premium tax liability
18-15 equal to 100 percent of the certified investor's investment of
18-16 certified capital, subject to the limits imposed by this
18-17 subchapter. A certified investor may take up to 10 percent of the
18-18 vested premium tax credit in any taxable year of the certified
18-19 investor.
18-20 (b) The credit to be applied against state premium tax
18-21 liability in any one year may not exceed the state premium tax
18-22 liability of the certified investor for the taxable year. Any
18-23 unused credit against state premium tax liability may be carried
18-24 forward indefinitely until the premium tax credits are used.
18-25 (c) A certified investor claiming a credit against state
18-26 premium tax liability earned through an investment in a company is
18-27 not required to pay any additional retaliatory tax levied under
19-1 Article 21.46 of this code as a result of claiming that credit. An
19-2 investment made under this subchapter is a "Texas investment" for
19-3 purposes of Subchapter A of this chapter.
19-4 Art. 4.66. PREMIUM TAX CREDIT ALLOCATION CLAIM FORM. (a) A
19-5 premium tax credit allocation claim must be prepared and executed
19-6 by a certified investor on a form provided by the comptroller. The
19-7 certified capital company must file the claim with the comptroller
19-8 not later than February 15, 2002. The premium tax credit
19-9 allocation claim form must include an affidavit of the certified
19-10 investor under which the certified investor becomes legally bound
19-11 and irrevocably committed to make an investment of certified
19-12 capital in a certified capital company in the amount allocated even
19-13 if the amount allocated is less than the amount of the claim,
19-14 subject only to the receipt of an allocation under Article 4.68 of
19-15 this code.
19-16 (b) A certified investor may not claim a premium tax credit
19-17 under Article 4.65 of this code for an investment that has not been
19-18 funded, even if the certified investor has committed to fund the
19-19 investment.
19-20 Art. 4.67. TOTAL LIMIT ON CREDITS. (a) The total amount of
19-21 certified capital for which premium tax credits may be allowed
19-22 under this subchapter for all years in which premium tax credits
19-23 are allowed is $200 million.
19-24 (b) The total amount of certified capital for which premium
19-25 tax credits may be allowed for all certified investors under this
19-26 subchapter may not exceed the amount that would entitle all
19-27 certified investors in certified capital companies to take total
20-1 credits of $20 million in a year.
20-2 (c) A certified capital company and its affiliates may not
20-3 file premium tax credit allocation claims in excess of the maximum
20-4 amount of certified capital for which premium tax credits may be
20-5 allowed as provided in this article.
20-6 Art. 4.68. PRO RATA ALLOCATION OF CREDITS. (a) If the
20-7 total premium tax credits claimed by all certified investors
20-8 exceeds the total limits on premium tax credits established by
20-9 Article 4.67(a) of this code, the comptroller shall allocate the
20-10 total amount of premium tax credits allowed under this subchapter
20-11 to certified investors in certified capital companies on a pro rata
20-12 basis in accordance with this article.
20-13 (b) The pro rata allocation for each certified investor
20-14 shall be the product of:
20-15 (1) a fraction, the numerator of which is the amount
20-16 of the premium tax credit allocation claim filed on behalf of the
20-17 investor and the denominator of which is the total amount of all
20-18 premium tax credit allocation claims filed on behalf of all
20-19 certified investors; and
20-20 (2) the total amount of certified capital for which
20-21 premium tax credits may be allowed under this subchapter.
20-22 (c) Not later than March 1, 2002, the comptroller shall
20-23 notify each certified capital company of the amount of tax credits
20-24 allocated to each certified investor. Each certified capital
20-25 company shall notify each certified investor of their premium tax
20-26 credit allocation.
20-27 (d) If a certified capital company does not receive an
21-1 investment of certified capital equaling the amount of premium tax
21-2 credits allocated to a certified investor for which it filed a
21-3 premium tax credit allocation claim before the end of the 10th
21-4 business day after the date of receipt of notice of allocation, the
21-5 company shall notify the comptroller by overnight common carrier
21-6 delivery service and that portion of capital allocated to the
21-7 certified investor shall be forfeited. The comptroller shall
21-8 reallocate the forfeited capital among the certified investors in
21-9 the other certified capital companies that originally received an
21-10 allocation so that the result after reallocation is the same as if
21-11 the initial allocation under this article had been performed
21-12 without considering the premium tax credit allocation claims that
21-13 were subsequently forfeited.
21-14 (e) The maximum amount of certified capital for which
21-15 premium tax credit allocation may be allowed on behalf of any one
21-16 certified investor and its affiliates, whether by one or more
21-17 certified capital companies, may not exceed the greater of:
21-18 (1) $10 million; or
21-19 (2) 15 percent of the maximum aggregate amount
21-20 available under Article 4.67(a) of this code.
21-21 Art. 4.69. TREATMENT OF CREDITS AND CAPITAL. In any case
21-22 under this code or another insurance law of this state in which the
21-23 assets of a certified investor are examined or considered, the
21-24 certified capital may be treated as an admitted asset, subject to
21-25 the applicable statutory valuation procedures.
21-26 Art. 4.70. IMPACT OF TAX CREDITS CLAIMED BY A CERTIFIED
21-27 INVESTOR ON INSURANCE RATES. A certified investor is not required
22-1 to reduce the amount of premium tax included by the investor in
22-2 connection with ratemaking for any insurance contract written in
22-3 this state because of a reduction in the investor's Texas premium
22-4 tax derived from the credit granted under this subchapter.
22-5 Art. 4.71. TRANSFERABILITY OF CREDIT. (a) The comptroller
22-6 shall adopt rules to facilitate the transfer or assignment of
22-7 premium tax credits by certified investors. A certified investor
22-8 may transfer or assign premium tax credits only in compliance with
22-9 the rules adopted under this subsection.
22-10 (b) The transfer or assignment of a premium tax credit does
22-11 not affect the schedule for taking the premium tax credit under
22-12 this subchapter.
22-13 Art. 4.72. PROMOTION. The Texas Department of Economic
22-14 Development shall promote the program established under this
22-15 subchapter in the Texas Business and Community Economic Development
22-16 Clearinghouse.
22-17 Art. 4.73. REPORT TO LEGISLATURE. (a) The comptroller
22-18 shall prepare a biennial report with respect to results of the
22-19 implementation of this subchapter. The report must include:
22-20 (1) the number of certified capital companies holding
22-21 certified capital;
22-22 (2) the amount of certified capital invested in each
22-23 certified capital company;
22-24 (3) the amount of certified capital the certified
22-25 capital company has invested in qualified businesses as of January
22-26 1, 2004, and the cumulative total for each subsequent year;
22-27 (4) the total amount of tax credits granted under this
23-1 subchapter for each year that credits have been granted;
23-2 (5) the performance of each certified capital company
23-3 with respect to renewal and reporting requirements imposed under
23-4 this subchapter;
23-5 (6) with respect to the qualified businesses in which
23-6 certified capital companies have invested:
23-7 (A) the classification of the qualified
23-8 businesses according to the industrial sector and the size of the
23-9 business;
23-10 (B) the total number of jobs created by the
23-11 investment and the average wages paid for the jobs; and
23-12 (C) the total number of jobs retained as a
23-13 result of the investment and the average wages paid for the jobs;
23-14 and
23-15 (7) the certified capital companies that have been
23-16 decertified or that have failed to renew the certification and the
23-17 reason for any decertification.
23-18 (b) The comptroller shall file the report with the governor,
23-19 the lieutenant governor, and the speaker of the house of
23-20 representatives not later than December 15 of each even-numbered
23-21 year.
23-22 Art. 4.74. IMPLEMENTATION SUBJECT TO AVAILABLE REVENUE. (a)
23-23 Notwithstanding any other provision of this subchapter, the
23-24 comptroller may implement this subchapter only if the comptroller
23-25 determines, on the basis of a revenue estimate made after the
23-26 adjournment sine die of the regular session of the 77th
23-27 Legislature, that revenues are anticipated in amounts sufficient to
24-1 finance all appropriations made during the regular session of the
24-2 77th Legislature, after making deductions for all reductions in
24-3 taxes, including the reduction in premium tax through premium tax
24-4 credits authorized under this subchapter.
24-5 (b) If the comptroller determines under Subsection (a) of
24-6 this article that revenues are anticipated to support a part, but
24-7 less than all, of the premium tax credits authorized under Article
24-8 4.67 of this code, the comptroller shall:
24-9 (1) reduce the total amount of premium tax credits
24-10 allowed under that article in the amount necessary to comply with
24-11 Subsection (a) of this article; and
24-12 (2) adopt rules as necessary to implement this
24-13 subchapter after the reduction made under Subdivision (1) of this
24-14 subsection.
24-15 (c) Rules adopted under Subsection (b)(2) of this article
24-16 may adjust any deadline or other date established by this
24-17 subchapter as necessary to implement this subchapter as limited by
24-18 this article.
24-19 (d) The comptroller shall notify the governor, lieutenant
24-20 governor, and speaker of the house of representatives of the
24-21 determination made under Subsection (a) of this article.
24-22 SECTION 2. Articles 4.01 through 4.08, 4.10, 4.11, 4.11A,
24-23 4.11B, 4.11C, 4.12, and 4.17, 4.18, and 4.19, Insurance Code, are
24-24 redesignated as Subchapter A, Chapter 4, Insurance Code, and a
24-25 subchapter heading is added to read as follows:
24-26 SUBCHAPTER A. IMPOSITION AND COLLECTION OF TAXES AND FEES
24-27 SECTION 3. (a) Subject to Article 4.74, Insurance Code, as
25-1 added by this Act, the comptroller of public accounts shall, not
25-2 later than the 60th day after the effective date of this Act, adopt
25-3 rules necessary to implement Subchapter B, Chapter 4, Insurance
25-4 Code, as added by this Act. The comptroller shall begin accepting
25-5 applications for certification as a certified capital company under
25-6 that subchapter on November 1, 2001.
25-7 (b) A certified investor may not make an investment with a
25-8 certified capital company under Subchapter B, Chapter 4, Insurance
25-9 Code, as added by this Act, before February 15, 2002.
25-10 SECTION 4. This Act takes effect immediately if it receives
25-11 a vote of two-thirds of all the members elected to each house, as
25-12 provided by Section 39, Article III, Texas Constitution. If this
25-13 Act does not receive the vote necessary for immediate effect, this
25-14 Act takes effect September 1, 2001.