1-1     By:  Carona                                            S.B. No. 601
 1-2           (In the Senate - Filed February 8, 2001; February 12, 2001,
 1-3     read first time and referred to Committee on Business and Commerce;
 1-4     April 2, 2001, reported adversely, with favorable Committee
 1-5     Substitute by the following vote:  Yeas 5, Nays 1; April 2, 2001,
 1-6     sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 601                   By:  Carona
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to certain investments and rate reductions by insurance
1-11     companies and related organizations; providing an administrative
1-12     penalty.
1-13           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-14           SECTION 1.  Chapter 4, Insurance Code, is amended by adding
1-15     Subchapter B to read as follows:
1-16             SUBCHAPTER B.  PREMIUM TAX CREDIT FOR INVESTMENT IN
1-17                          CERTIFIED CAPITAL COMPANY
1-18           Art. 4.51.  DEFINITIONS.  In this subchapter:
1-19                 (1)  "Affiliate" of another person means:
1-20                       (A)  a person who is an affiliate for purposes of
1-21     Section 2, Article 21.49-1 of this code;
1-22                       (B)  a person who directly or indirectly:
1-23                             (i)  beneficially owns 10 percent or more
1-24     of the outstanding voting securities or other ownership interests
1-25     of the other person, whether through rights, options, convertible
1-26     interests, or otherwise; or
1-27                             (ii)  controls or holds power to vote 10
1-28     percent or more of the outstanding voting securities or other
1-29     ownership interests of the other person;
1-30                       (C)  a person 10 percent or more of the
1-31     outstanding voting securities or other ownership interests of which
1-32     are directly or indirectly:
1-33                             (i)  beneficially owned by the other
1-34     person, whether through rights, options, convertible interests, or
1-35     otherwise; or
1-36                             (ii)  controlled or held with power to vote
1-37     by the other person;
1-38                       (D)  a partnership in which the other person is a
1-39     general partner; or
1-40                       (E)  an officer, director, employee, or agent of
1-41     the other person, or an immediate family member of the officer,
1-42     director, employee, or agent.
1-43                 (2)  "Allocation date" means the date on which the
1-44     certified investors of a certified capital company are allocated
1-45     certified capital by the comptroller under this subchapter.
1-46                 (3)  "Certified capital" means an investment of cash by
1-47     a certified investor in a certified capital company that fully
1-48     funds the purchase price of an equity interest in the company or a
1-49     qualified debt instrument issued by the certified capital company.
1-50                 (4)  "Certified capital company" means a partnership,
1-51     corporation, or trust or limited liability company, whether
1-52     organized on a profit or not-for-profit basis, that has as its
1-53     primary business activity the investment of cash in qualified
1-54     businesses and that is certified as meeting the criteria of this
1-55     subchapter.
1-56                 (5)  "Certified investor" means an insurance company or
1-57     other person that has state premium tax liability, other than a
1-58     title insurance company, that contributes certified capital
1-59     pursuant to an allocation of premium tax credits under this
1-60     subchapter.
1-61                 (6)  "Early stage business" means a qualified business
1-62     that satisfies at least one of the following criteria:
1-63                       (A)  is involved, at the time of a certified
1-64     capital company's first investment, in activities related to the
 2-1     development of initial product or service offerings, such as
 2-2     prototype development or establishment of initial production or
 2-3     service processes;
 2-4                       (B)  was initially organized less than two years
 2-5     before the date of the certified capital company's first
 2-6     investment; or
 2-7                       (C)  during the fiscal year immediately preceding
 2-8     the year of the certified capital company's first investment had,
 2-9     on a consolidated basis with its affiliates, gross revenues of not
2-10     more than $2 million as determined in accordance with generally
2-11     accepted accounting principles.
2-12                 (7)  "Person" means a natural person or entity,
2-13     including a corporation, general or limited partnership, or trust
2-14     or limited liability company.
2-15                 (8)  "Premium tax credit allocation claim" means a
2-16     claim for allocation of premium tax credits.
2-17                 (9)  "Qualified business" means a business that, at the
2-18     time of a certified capital company's first investment in the
2-19     business:
2-20                       (A)  is headquartered in this state and intends
2-21     to remain in this state after receipt of the investment by the
2-22     certified capital company;
2-23                       (B)  has its principal business operations
2-24     located in this state and intends to maintain business operations
2-25     in this state after receipt of the investment by the certified
2-26     capital company;
2-27                       (C)  has agreed to use the qualified investment
2-28     primarily to:
2-29                             (i)  support business operations, other
2-30     than advertising, promotion, and sales operations, in this state;
2-31     or
2-32                             (ii)  in the case of a start-up company,
2-33     establish and support business operations, other than advertising,
2-34     promotion, and sales operations, in this state;
2-35                       (D)  has not more than 100 employees and:
2-36                             (i)  employs at least 80 percent of its
2-37     employees in this state; or
2-38                             (ii)  pays 80 percent of its payroll to
2-39     employees in this state;
2-40                       (E)  is primarily engaged in:
2-41                             (i)  manufacturing, processing, or
2-42     assembling products;
2-43                             (ii)  conducting research and development;
2-44     or
2-45                             (iii)  providing services; and
2-46                       (F)  is not primarily engaged in:
2-47                             (i)  retail sales;
2-48                             (ii)  real estate development;
2-49                             (iii)  the business of insurance, banking,
2-50     or lending; or
2-51                             (iv)  the provision of professional
2-52     services provided by accountants, attorneys, or physicians.
2-53                 (10)  "Qualified debt instrument" means a debt
2-54     instrument issued by a certified capital company, at par value or a
2-55     premium, that:
2-56                       (A)  has an original maturity date of at least
2-57     five years after the date of issuance;
2-58                       (B)  has a repayment schedule that is not faster
2-59     than a level principal amortization over five years; and
2-60                       (C)  has no interest, distribution, or payment
2-61     features that are related to the profitability of the certified
2-62     capital company or the performance of the certified capital
2-63     company's investment portfolio.
2-64                 (11)  "Qualified distribution" means any distribution
2-65     or payment from certified capital by a certified capital company in
2-66     connection with:
2-67                       (A)  the reasonable costs and expenses of
2-68     forming, syndicating, managing, and operating the company, provided
2-69     that the distribution or payment is not made directly or indirectly
 3-1     to a certified investor, including:
 3-2                             (i)  reasonable and necessary fees paid for
 3-3     professional services, including legal and accounting services,
 3-4     related to the formation and operation of the company; and
 3-5                             (ii)  an annual management fee in an amount
 3-6     that does not exceed two and one-half percent of the certified
 3-7     capital of the company; and
 3-8                       (B)  any projected increase in federal or state
 3-9     taxes, including penalties and interest related to state and
3-10     federal income taxes, of the equity owners of the company resulting
3-11     from the earnings or other tax liability of the company to the
3-12     extent that the increase is related to the ownership, management,
3-13     or operation of the company.
3-14                 (12)  "Qualified investment" means the investment of
3-15     cash by a certified capital company in a qualified business for the
3-16     purchase of any debt, debt participation, equity, or hybrid
3-17     security of any nature or description, including a debt instrument
3-18     or security that has the characteristics of debt but that provides
3-19     for conversion into equity or equity participation instruments such
3-20     as options or warrants.
3-21                 (13)  "State premium tax liability" means:
3-22                       (A)  any liability incurred by any person under
3-23     Subchapter A of this chapter; or
3-24                       (B)  if the tax liability imposed under
3-25     Subchapter A of this chapter on January 1, 2001, is eliminated or
3-26     reduced, any tax liability imposed on an insurance company or other
3-27     person that had premium tax liability under Subchapter A of this
3-28     chapter on that date.
3-29           Art. 4.52.  DUTIES OF COMPTROLLER; RULES.  The comptroller
3-30     shall administer this subchapter and may adopt rules and forms as
3-31     necessary to implement this subchapter.
3-32           Art. 4.53.  CERTIFICATION.  (a)  The comptroller by rule
3-33     shall establish the application procedures for certified capital
3-34     companies.
3-35           (b)  An applicant must file an application in the form
3-36     prescribed by the comptroller accompanied by a nonrefundable
3-37     application fee of $7,500.  The application must include an audited
3-38     balance sheet of the applicant, with an unqualified opinion from an
3-39     independent certified public accountant, as of a date not more than
3-40     35 days before the date of the application.
3-41           (c)  To qualify as a certified capital company:
3-42                 (1)  the applicant must have, at the time of
3-43     application for certification, an equity  capitalization of at
3-44     least $500,000 in the form of unencumbered cash or cash
3-45     equivalents;
3-46                 (2)  at least two principals or persons employed to
3-47     manage the funds of the applicant must have at least four years of
3-48     experience in the venture capital industry; and
3-49                 (3)  the applicant must satisfy any additional
3-50     requirement imposed by the comptroller by rule.
3-51           (d)  The comptroller shall review the application,
3-52     organizational documents, and business history of each applicant
3-53     and shall ensure that the applicant satisfies the requirements of
3-54     this subchapter.
3-55           (e)  Not later than the 30th day after the date an
3-56     application is filed, the comptroller shall:
3-57                 (1)  issue the certification; or
3-58                 (2)  refuse to issue the certification and communicate
3-59     in detail to the applicant the grounds for the refusal, including
3-60     suggestions for the removal of those grounds.
3-61           Art. 4.54.  MANAGEMENT BY CERTAIN ENTITIES PROHIBITED.
3-62     (a)  An insurance company, group of insurance companies, or other
3-63     persons who may have state premium tax liability or the affiliates
3-64     of the insurance companies or other persons may not, directly or
3-65     indirectly:
3-66                 (1)  manage a certified capital company;
3-67                 (2)  beneficially own, whether through rights, options,
3-68     convertible interests, or otherwise, more than 10 percent of the
3-69     outstanding voting securities of a certified capital company; or
 4-1                 (3)  control the direction of investments for a
 4-2     certified capital company.
 4-3           (b)  Not more than one affiliate of the certified investors
 4-4     in any certified capital company may provide a guaranty, indemnity,
 4-5     bond, insurance policy, or other payment undertaking in favor of
 4-6     all of the certified investors of the certified capital company and
 4-7     its affiliates.
 4-8           (c)  Subsection (a) of this article applies without regard to
 4-9     whether the insurance company or other person or the affiliate of
4-10     the insurance company or other person is licensed by or transacts
4-11     business in this state.
4-12           (d)  This article does not preclude a certified investor, an
4-13     insurance company, or any other party from exercising its legal
4-14     rights and remedies, including interim management of a certified
4-15     capital company, if authorized by law, with respect to a certified
4-16     capital company that is in default of its statutory or contractual
4-17     obligations to the certified investor, insurance company, or other
4-18     party.
4-19           Art. 4.55.  OFFERING MATERIAL USED BY CERTIFIED CAPITAL
4-20     COMPANY.  Any offering material involving the sale of securities of
4-21     the certified capital company must include the following statement:
4-22           By authorizing the formation of a certified capital
4-23           company, the State of Texas does not endorse the
4-24           quality of management or the potential for earnings of
4-25           the company and is not liable for damages or losses to
4-26           a certified investor in the company.  Use of the word
4-27           "certified" in an offering does not constitute a
4-28           recommendation or endorsement of the investment by the
4-29           comptroller of public accounts.  If applicable
4-30           provisions of law are violated, the State of Texas may
4-31           require forfeiture of unused premium tax credits and
4-32           repayments of used premium tax credits.
4-33           Art. 4.56.  REQUIREMENTS FOR CONTINUANCE OF CERTIFICATION.
4-34     (a)  To continue to be certified, a certified  capital company
4-35     shall make qualified investments according to the following
4-36     schedule:
4-37                 (1)  before the third anniversary of its allocation
4-38     date, a company must have made qualified investments in an amount
4-39     cumulatively equal to at least 30 percent of its certified capital;
4-40     and
4-41                 (2)  before the fifth anniversary of its allocation
4-42     date, a company must have made qualified investments in an amount
4-43     cumulatively equal to at least 50 percent of its certified capital,
4-44     subject to Subsection (b) of this article.
4-45           (b)  At least 50 percent of the amount of qualified
4-46     investments required by Subsections (a)(1) and (2) of this article
4-47     must be placed in early stage businesses.
4-48           (c)  The aggregate cumulative amount of all qualified
4-49     investments made by the certified capital company after its
4-50     allocation date shall be considered in the computation of the
4-51     percentage requirements under this subchapter.  Any proceeds
4-52     received from a qualified investment may be invested in another
4-53     qualified investment and count toward any requirement in this
4-54     subchapter with respect to investments of certified capital.
4-55           (d)  A business that is classified as a qualified business at
4-56     the time of the first investment in the business by a certified
4-57     capital company remains classified as a qualified business and may
4-58     receive follow-on investments from any certified capital company.
4-59     Except as provided by this subsection, a follow-on investment made
4-60     under this subsection is a qualified investment even though the
4-61     business may not meet the definition of a qualified business at the
4-62     time of the follow-on investment.  A follow-on investment does not
4-63     qualify as a qualified investment if, at the time of the follow-on
4-64     investment, the qualified business no longer has its principal
4-65     business operations in this state.
4-66           (e)  A qualified investment may not be made at a cost to a
4-67     certified capital company greater than 15 percent of the total
4-68     certified capital of the company at the time of investment.
4-69           (f)  If, before the 90th day after the date that a certified
 5-1     capital company makes an investment in a qualified business, the
 5-2     qualified business moves its principal business operations from
 5-3     this state, the investment may not be considered a qualified
 5-4     investment for purposes of the percentage requirements under this
 5-5     subchapter.
 5-6           (g)  A certified capital company shall invest any certified
 5-7     capital not invested in qualified investments only in the
 5-8     following:
 5-9                 (1)  cash deposited with a federally insured financial
5-10     institution;
5-11                 (2)  certificates of deposit in a federally insured
5-12     financial institution;
5-13                 (3)  investment securities that are obligations of the
5-14     United States or its agencies or instrumentalities or obligations
5-15     that are guaranteed fully as to principal and interest by the
5-16     United States;
5-17                 (4)  debt instruments rated at least "A" or its
5-18     equivalent by a nationally recognized credit rating organization,
5-19     or issued by, or guaranteed with respect to payment by, an entity
5-20     whose unsecured indebtedness is rated at least "A" or its
5-21     equivalent by a nationally recognized credit rating organization,
5-22     and which indebtedness is not subordinated to other unsecured
5-23     indebtedness of the issuer or the guarantor;
5-24                 (5)  obligations of this state or any municipality or
5-25     political subdivision of this state; or
5-26                 (6)  any other investments approved in advance and in
5-27     writing by the comptroller.
5-28           Art. 4.57.  EVALUATION OF BUSINESS BY COMPTROLLER.  (a)  A
5-29     certified capital company may, before making an investment in a
5-30     business, request from the comptroller a written opinion as to
5-31     whether the business in which it proposes to invest is a qualified
5-32     business or an early stage business.
5-33           (b)  The comptroller shall, not later than the 15th business
5-34     day after the date of the receipt of a request under Subsection (a)
5-35     of this article, determine whether the business meets the
5-36     definition of a qualified business or an early stage business, as
5-37     applicable, and  notify the certified capital company of the
5-38     determination and an explanation of its determination or notify the
5-39     certified capital company that an additional 15 days will be needed
5-40     to review and make the determination.
5-41           (c)  If the comptroller fails to notify the certified capital
5-42     company with respect to the proposed investment within the period
5-43     specified by Subsection (b) of this article, the business in which
5-44     the company proposes to invest is considered to be a qualified
5-45     business or early stage business, as appropriate.
5-46           Art. 4.58.  REPORTS TO COMPTROLLER; AUDITED FINANCIAL
5-47     STATEMENT.  (a)  Each certified capital company shall report to the
5-48     comptroller as soon as practicable after the receipt of certified
5-49     capital:
5-50                 (1)  the name of each certified investor from whom the
5-51     certified capital was received, including the certified investor's
5-52     insurance premium tax identification number;
5-53                 (2)  the amount of each certified investor's investment
5-54     of certified capital and premium tax credits; and
5-55                 (3)  the date on which the certified capital was
5-56     received.
5-57           (b)  Not later than January 31 of each year, each certified
5-58     capital company shall report to the comptroller:
5-59                 (1)  the amount of the company's certified capital at
5-60     the end of the preceding year;
5-61                 (2)  whether or not the company has invested more than
5-62     15 percent of its total certified capital in any one business;
5-63                 (3)  each qualified investment that the company made
5-64     during the preceding year and, with respect to each qualified
5-65     investment, the number of employees of the qualified business at
5-66     the time the qualified investment was made; and
5-67                 (4)  any other information required by the comptroller,
5-68     including any information required by the comptroller to comply
5-69     with Article 4.74 of this code.
 6-1           (c)  Not later than April 1 of each year, the company shall
 6-2     provide to the comptroller an annual audited financial statement
 6-3     that includes the opinion of an independent certified public
 6-4     accountant.  The audit shall address the methods of operation and
 6-5     conduct of the business of the company to determine whether:
 6-6                 (1)  the company is complying with this subchapter and
 6-7     the rules adopted under this subchapter;
 6-8                 (2)  the funds received by the company have been
 6-9     invested as required within the time provided by Article 4.56(a) of
6-10     this code; and
6-11                 (3)  the company has invested the funds in qualified
6-12     businesses.
6-13           Art. 4.59.  RENEWAL.  (a)  Not later than January 31 of each
6-14     year, each certified capital company shall pay a nonrefundable
6-15     renewal fee of $5,000 to the comptroller.  If a certified capital
6-16     company fails to pay its renewal fee on or before that date, the
6-17     company must pay, in addition to the renewal fee, a late fee of
6-18     $5,000 to continue its certification.
6-19           (b)  Notwithstanding Subsection (a) of this article, a
6-20     renewal fee is not required within six months of the date on which
6-21     the company's certification is issued under Article 4.53 of this
6-22     code.
6-23           Art. 4.60.  DISTRIBUTIONS; REPAYMENT OF DEBT.  (a)  A
6-24     certified capital company may make a qualified distribution at any
6-25     time.  To make a distribution or payment, other than a qualified
6-26     distribution, a company must have made qualified investments in an
6-27     amount cumulatively equal to 100 percent of its certified capital.
6-28           (b)  Notwithstanding Subsection (a) of this article, a
6-29     company may make repayments of principal and interest on its
6-30     indebtedness without any restriction, including repayments of
6-31     indebtedness of the company on which certified investors earned
6-32     premium tax credits.
6-33           Art. 4.61.  ANNUAL REVIEW; DECERTIFICATION.  (a)  The
6-34     comptroller shall conduct an annual review of each certified
6-35     capital company to:
6-36                 (1)  ensure that the company continues to satisfy the
6-37     requirements of this subchapter and that the company has not made
6-38     any investment in violation of this subchapter; and
6-39                 (2)  determine the eligibility status of its qualified
6-40     investments.
6-41           (b)  The cost of the annual review shall be paid by each
6-42     certified capital company according to a reasonable fee schedule
6-43     adopted by the comptroller.
6-44           (c)  A material violation of Article 4.56, 4.58, or 4.59 of
6-45     this code is grounds for decertification of the certified capital
6-46     company.  If the comptroller determines that a company is not in
6-47     compliance with Article 4.56, 4.58, or 4.59 of this code, the
6-48     comptroller shall notify the officers of the company in  writing
6-49     that the company may be subject to decertification after the 120th
6-50     day after the date of mailing of the notice, unless the
6-51     deficiencies are corrected and the company returns to compliance
6-52     with those articles.
6-53           (d)  The comptroller may decertify a certified capital
6-54     company, after opportunity for hearing, if the comptroller finds
6-55     that the company is not in compliance with Article 4.56, 4.58, or
6-56     4.59 of this code at the end of the period established by
6-57     Subsection (c) of this article.  Decertification under this
6-58     subsection is effective on receipt of notice of decertification by
6-59     the company.  The comptroller shall notify any appropriate state
6-60     agency of the decertification.
6-61           Art. 4.62.  ADMINISTRATIVE PENALTY.  (a)  The comptroller may
6-62     impose an administrative penalty on a certified capital company
6-63     that violates this subchapter.
6-64           (b)  The amount of the penalty may not exceed $25,000, and
6-65     each day a violation continues or occurs is a separate violation
6-66     for the purpose of imposing a penalty.  The amount of the penalty
6-67     shall be based on:
6-68                 (1)  the seriousness of the violation, including the
6-69     nature, circumstances, extent, and gravity of the violation;
 7-1                 (2)  the economic harm caused by the violation;
 7-2                 (3)  the history of previous violations;
 7-3                 (4)  the amount necessary to deter a future violation;
 7-4                 (5)  efforts to correct the violation; and
 7-5                 (6)  any other matter that justice may require.
 7-6           (c)  Certified capital companies assessed penalties under
 7-7     this subchapter may request a redetermination as provided in
 7-8     Chapter 111, Tax Code.
 7-9           (d)  The attorney general may sue to collect the penalty.
7-10           (e)  A proceeding to impose the penalty is considered to be a
7-11     contested case under Chapter 2001, Government Code.
7-12           Art. 4.63.  RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS:
7-13     DECERTIFICATION OF COMPANY.  (a)  Decertification of a certified
7-14     capital company may cause the recapture of premium tax credits
7-15     previously claimed and the forfeiture of future premium tax credits
7-16     to be claimed by certified investors with respect to the company,
7-17     as follows:
7-18                 (1)  decertification of a company on or before the
7-19     third anniversary of its allocation date causes the recapture of
7-20     any premium tax credit previously claimed and the forfeiture of any
7-21     future premium tax credit to be claimed by a certified investor
7-22     with respect to the company;
7-23                 (2)  for a company that meets the requirements for
7-24     continued certification under Article 4.56(a)(1) of this code and
7-25     subsequently fails to meet the requirements for continued
7-26     certification under Article 4.56(a)(2) of this code, any premium
7-27     tax credit that has been or will be taken by a certified investor
7-28     on or before the third anniversary of the allocation date is not
7-29     subject to recapture or forfeiture, but any premium tax credit that
7-30     has been or will be taken by a certified investor after the third
7-31     anniversary of the allocation date of the company is subject to
7-32     recapture or forfeiture;
7-33                 (3)  for a company that has met the requirements for
7-34     continued certification under Articles 4.56(a)(1) and (2) of this
7-35     code and is subsequently decertified, any premium tax credit that
7-36     has been or will be taken by a certified investor on or before the
7-37     fifth anniversary of the allocation date is not subject to
7-38     recapture or forfeiture, but any premium tax credit to be taken
7-39     after the fifth anniversary of the allocation date is subject to
7-40     forfeiture only if the company is decertified on or before the
7-41     fifth anniversary of its allocation date; and
7-42                 (4)  for a company that has invested an amount
7-43     cumulatively equal to 100 percent of its certified capital in
7-44     qualified investments, any premium tax credit claimed or to be
7-45     claimed by a certified investor is not subject to recapture or
7-46     forfeiture under this article.
7-47           (b)  The comptroller shall send written notice to the address
7-48     of each certified investor whose premium tax credit is subject to
7-49     recapture or forfeiture, using the address shown on the last
7-50     premium tax filing.
7-51           Art. 4.64.  PENALTY IF QUALIFIED BUSINESS LEAVES STATE.  In
7-52     the event that a business in which a qualified investment is made
7-53     relocates its principal business operations to another state during
7-54     the term of the certified capital company's investment in such
7-55     business, the cumulative amount of qualified investments made by
7-56     the certified capital company for purposes of satisfying the
7-57     requirements set forth in Article 4.60(a) of this code shall be
7-58     reduced by the amount of the certified capital company's investment
7-59     in the business that has relocated, unless the business
7-60     demonstrates that it has returned its principal business operations
7-61     to this state within three months of such relocation.
7-62           Art. 4.65.  INDEMNITY AGREEMENTS AND INSURANCE AUTHORIZED.  A
7-63     certified capital company may agree to indemnify, or purchase
7-64     insurance for the benefit of, a certified investor for losses
7-65     resulting from the recapture or forfeiture of premium tax credits
7-66     under Article 4.63 of this code.
7-67           Art. 4.66.  PREMIUM TAX CREDIT.  (a)  A certified investor
7-68     who makes an investment of certified capital shall in the year of
7-69     investment earn a vested credit against state premium tax liability
 8-1     equal to 100 percent of the certified investor's investment of
 8-2     certified capital, subject to the limits imposed by this
 8-3     subchapter.  A certified investor may take up to 10 percent of the
 8-4     vested premium tax credit in any taxable year of the certified
 8-5     investor.
 8-6           (b)  The credit to be applied against state premium tax
 8-7     liability in any one year may not exceed the state premium tax
 8-8     liability of the certified investor for the taxable year.  Any
 8-9     unused credit against state premium tax liability may be carried
8-10     forward indefinitely until the premium tax credits are used.
8-11           (c)  A certified investor claiming a credit against state
8-12     premium tax liability earned through an investment in a company is
8-13     not required to pay any additional retaliatory tax levied under
8-14     Article 21.46 of this code as a result of claiming that credit.  An
8-15     investment made under this subchapter is a "Texas investment" for
8-16     purposes of Subchapter A of this chapter.
8-17           Art. 4.67.  PREMIUM TAX CREDIT ALLOCATION CLAIM FORM.  (a)  A
8-18     premium tax credit allocation claim must be prepared and executed
8-19     by a certified investor on a form provided by the comptroller.  The
8-20     certified capital company must file the claim with the comptroller
8-21     not later than February 15, 2002.  The premium tax credit
8-22     allocation claim form must include an affidavit of the certified
8-23     investor under which the certified investor becomes legally bound
8-24     and irrevocably committed to make an investment of certified
8-25     capital in a certified capital company in the amount allocated even
8-26     if the amount allocated is less than the amount of the claim,
8-27     subject only to the receipt of an allocation under Article 4.69 of
8-28     this code.
8-29           (b)  A certified investor may not claim a premium tax credit
8-30     under Article 4.66 of this code for an investment that has not been
8-31     funded, even if the certified investor has committed to fund the
8-32     investment.
8-33           Art. 4.68.  TOTAL LIMIT ON CREDITS.  (a)  The total amount of
8-34     certified capital for which premium tax credits may be allowed
8-35     under this subchapter for all years in which premium tax credits
8-36     are allowed is $200 million.
8-37           (b)  The total amount of certified capital for which premium
8-38     tax credits may be allowed for all certified investors under this
8-39     subchapter may not exceed the amount that would entitle all
8-40     certified investors in certified capital companies to take total
8-41     credits of $20 million in a year.
8-42           (c)  A certified capital company and its affiliates may not
8-43     file premium tax credit allocation claims in excess of the maximum
8-44     amount of certified capital for which premium tax credits may be
8-45     allowed as provided in this article.
8-46           Art. 4.69.  PRO RATA ALLOCATION OF CREDITS.  (a)  If the
8-47     total premium tax credits claimed by all certified investors
8-48     exceeds the total limits on premium tax credits established by
8-49     Article 4.68(a) of this code, the comptroller shall allocate the
8-50     total amount of premium tax credits allowed under this subchapter
8-51     to certified investors in certified capital companies on a pro rata
8-52     basis in accordance with this article.
8-53           (b)  The pro rata allocation for each certified investor
8-54     shall be the product of:
8-55                 (1)  a fraction, the numerator of which is the amount
8-56     of the premium tax credit allocation claim filed on behalf of the
8-57     investor and the denominator of which is the total amount of all
8-58     premium tax credit allocation claims filed on behalf of all
8-59     certified investors; and
8-60                 (2)  the total amount of certified capital for which
8-61     premium tax credits may be allowed under this subchapter.
8-62           (c)  Not later than March 1, 2002, the comptroller shall
8-63     notify each certified capital company of the amount of tax credits
8-64     allocated to each certified investor.  Each certified capital
8-65     company shall notify each certified investor of their premium tax
8-66     credit allocation.
8-67           (d)  If a certified capital company does not receive an
8-68     investment of certified capital equaling the amount of premium tax
8-69     credits allocated to a certified investor for which it filed a
 9-1     premium tax credit allocation claim before the end of the 10th
 9-2     business day after the date of receipt of notice of allocation, the
 9-3     company shall notify the comptroller by overnight common carrier
 9-4     delivery service and that portion of capital allocated to the
 9-5     certified investor shall be forfeited.  The comptroller shall
 9-6     reallocate the forfeited capital among the certified investors in
 9-7     the other certified capital companies that originally received an
 9-8     allocation so that the result after reallocation is the same as if
 9-9     the initial allocation under this article had been performed
9-10     without considering the premium tax credit allocation claims that
9-11     were subsequently forfeited.
9-12           (e)  The maximum amount of certified capital for which
9-13     premium tax credit allocation claims may be filed on behalf of any
9-14     one certified investor and its affiliates, whether by one or more
9-15     certified capital companies, may not exceed the greater of:
9-16                 (1)  $10 million; or
9-17                 (2)  15 percent of the maximum aggregate amount
9-18     available under Article 4.68(a) of this code.
9-19           Art. 4.70.  TREATMENT OF CREDITS AND CAPITAL.  In any case
9-20     under this code or another insurance law of this state in which the
9-21     assets of a certified investor are examined or considered, the
9-22     certified capital may be treated as an admitted asset, subject to
9-23     the applicable statutory valuation procedures.
9-24           Art 4.71.  IMPACT OF TAX CREDITS CLAIMED BY A CERTIFIED
9-25     INVESTOR ON INSURANCE RATES.  A certified investor is not required
9-26     to reduce the amount of premium tax included by the investor in
9-27     connection with ratemaking for any insurance contract written in
9-28     this state because of a reduction in the investor's Texas premium
9-29     tax derived from the credit granted under this subchapter.
9-30           Art. 4.72.  TRANSFERABILITY OF CREDIT.  (a)  The comptroller
9-31     shall adopt rules to facilitate the transfer or assignment of
9-32     premium tax credits by certified investors.  A certified investor
9-33     may transfer or assign premium tax credits only in compliance with
9-34     the rules adopted under this subsection.
9-35           (b)  The transfer or assignment of a premium tax credit does
9-36     not affect the schedule for taking the premium tax credit under
9-37     this subchapter.
9-38           Art. 4.73.  PROMOTION.  The Texas Department of Economic
9-39     Development shall promote the program established under this
9-40     subchapter in the Texas Business and Community Economic Development
9-41     Clearinghouse.
9-42           Art. 4.74.  REPORT TO LEGISLATURE.  (a)  The comptroller
9-43     shall prepare a biennial report with respect to results of the
9-44     implementation of this subchapter.  The report must include:
9-45                 (1)  the number of certified capital companies holding
9-46     certified capital;
9-47                 (2)  the amount of certified capital invested in each
9-48     certified capital company;
9-49                 (3)  the amount of certified capital the certified
9-50     capital company has invested in qualified businesses as of January
9-51     1, 2004, and the cumulative total for each subsequent year;
9-52                 (4)  the total amount of tax credits granted under this
9-53     subchapter for each year that credits have been granted;
9-54                 (5)  the performance of each certified capital company
9-55     with respect to renewal and reporting requirements imposed under
9-56     this subchapter;
9-57                 (6)  with respect to the qualified businesses in which
9-58     certified capital companies have invested:
9-59                       (A)  the classification of the qualified
9-60     businesses according to the industrial sector and the size of the
9-61     business;
9-62                       (B)  the total number of jobs created by the
9-63     investment and the average wages paid for the jobs; and
9-64                       (C)  the total number of jobs retained as a
9-65     result of the investment and the average wages paid for the jobs;
9-66     and
9-67                 (7)  the certified capital companies that have been
9-68     decertified or that have failed to renew the certification and the
9-69     reason for any decertification.
 10-1          (b)  The comptroller shall file the report with the governor,
 10-2    the lieutenant governor, and the speaker of the house of
 10-3    representatives not later than December 15 of each even-numbered
 10-4    year.
 10-5          Art. 4.75.  IMPLEMENTATION SUBJECT TO AVAILABLE REVENUE.
 10-6    (a)  Notwithstanding any other provision of this subchapter, the
 10-7    comptroller may implement this subchapter only if the comptroller
 10-8    determines, on the basis of a revenue estimate made after the
 10-9    adjournment sine die of the regular session of the 77th
10-10    Legislature, that revenues are anticipated in amounts sufficient to
10-11    finance all appropriations made during the regular session of the
10-12    77th Legislature, after making deductions for all reductions in
10-13    taxes, including the reduction in premium tax through premium tax
10-14    credits authorized under this subchapter.
10-15          (b)  If the comptroller determines under Subsection (a) of
10-16    this article that revenues are anticipated to support a part, but
10-17    less than all, of the premium  tax credits authorized under Article
10-18    4.68 of this code, the comptroller shall:
10-19                (1)  reduce the total amount of premium tax credits
10-20    allowed under that article in the amount necessary to comply with
10-21    Subsection (a) of this article; and
10-22                (2)  adopt rules as necessary to implement this
10-23    subchapter after the reduction made under Subdivision (1) of this
10-24    subsection.
10-25          (c)  Rules adopted under Subsection (b)(2) of this article
10-26    may adjust any deadline or other date established by this
10-27    subchapter as necessary to implement this subchapter as limited by
10-28    this article.
10-29          (d)  The comptroller shall notify the governor, lieutenant
10-30    governor, and speaker of the house of representatives of the
10-31    determination made under Subsection (a) of this article.
10-32          SECTION 2.  Articles 4.01 through 4.08, 4.10, 4.11, 4.11A,
10-33    4.11B, 4.11C, 4.12, and 4.17, 4.18, and 4.19, Insurance Code, are
10-34    redesignated as Subchapter A, Chapter 4, Insurance Code, and a
10-35    subchapter heading is added to read as follows:
10-36        SUBCHAPTER A.  IMPOSITION AND COLLECTION OF TAXES AND FEES
10-37          SECTION 3.   (a)  Subject to Article 4.75, Insurance Code, as
10-38    added by this Act, the comptroller of public accounts shall, not
10-39    later than the 60th day after the effective date of this Act, adopt
10-40    rules necessary to implement Subchapter B, Chapter 4, Insurance
10-41    Code, as added by this Act.  The comptroller shall begin accepting
10-42    applications for certification as a certified capital company under
10-43    that subchapter on November 1, 2001.
10-44          (b)  A certified investor may not make an investment with a
10-45    certified capital company under Subchapter B, Chapter 4, Insurance
10-46    Code, as added by this Act, before February 15, 2002.
10-47          SECTION 4.  This Act takes effect immediately if it receives
10-48    a vote of two-thirds of all the members elected to each house, as
10-49    provided by Section 39, Article III, Texas Constitution.  If this
10-50    Act does not receive the vote necessary for immediate effect, this
10-51    Act takes effect September 1, 2001.
10-52                                 * * * * *