Senate Research Center   S.B. 1476
By: West
Subcommittee on Higher Education
As Filed


Nonprofit student loan corporations provide secondary market financing for
guaranteed student loans to Texas residents and students attending college
in Texas.  The proceeds of bonds issued by these corporations are used to
acquire student loan notes from originating lenders.  The bonds are
payable solely from the repayment and guarantee obligations of the student
loans, with no state or local government obligation or liability. 

In 1996, the Internal Revenue Code was changed to allow a nonprofit
student loan corporation to broaden its purposes to encompass a charitable
activity allowed for other nonprofit entities, and to eliminate the
requirement that net assets be transferred to the federal government on
dissolution of the nonprofit corporation.  Certain steps must be taken by
a nonprofit corporation to change its tax status and broaden its
charitable activities.  No state law exists to allow a nonprofit student
loan corporation to take advantage of the 1996 tax law changes. 

As proposed, S.B. 1476 amends the Education Code to authorize the creation
of nonprofit corporations for the limited purpose of refunding outstanding
tax-exempt bonds and to allow the nonprofit corporations to obtain, along
with other student loan issuers, a portion of the state's taxexempt bond


This bill does not expressly grant any additional rulemaking authority to
a state office, institution, or agency. 


SECTION 1.  Amends Section 53.47(a)(6), Education Code, to provide that
"qualified nonprofit corporation" includes a nonprofit corporation that
issues bonds the proceeds of which are used to refund bonds issued on or
after January 1, 1990, and before January 1, 2001, that qualified as
student loan bonds under Section 144(b), Internal Revenue Code of 1986, as

SECTION 2.  Amends Section 53.47, Education Code, by adding Subsection
(h), to authorize the governing body of a city, by ordinance or
resolution, to authorize the incorporation of a nonprofit corporation
under this chapter to act on behalf of the city as its duly constituted
instrumentality for the purpose of exercising the powers set forth in this
subsection.  Provides that on approval by the city, the nonprofit
corporation is authorized to issue revenue bonds and to loan the proceeds
thereof to an entity that has assumed the outstanding bond obligations of
a nonprofit corporation, the loan being for the limited purpose of
refunding such outstanding bonds.  Provides that in issuing the bonds, the
nonprofit corporation is considered to be acting on behalf of the city by
which it was created.  Requires the bonds to be refunded to have been
originally issued as "qualified scholarship funding bonds" (as defined in
Section 150(d)(2), Internal Revenue Code of 1986, as amended) by a
nonprofit corporation while acting under Subsection (f) hereof and that
subsequently made the election permitted under Section 150(d)(3) of the
Internal Revenue Code, as amended.  Requires any refunding bonds to be
solely the obligation of the nonprofit corporation and not to be or
constitute a debt or obligation of the city.  Requires the ordinance or
resolution of the city authorizing the incorporation of the corporation to
approve the articles of incorporation and any amendments to the articles
of incorporation.  Requires, upon dissolution of the corporation, title to
all property owned by it to be vested in and become the property of the
city.  Authorizes a corporation to be incorporated under this chapter by
filing its articles of incorporation with the secretary of state in the
manner prescribed for the incorporation of nonprofit corporations under
the Texas Non-Profit Corporations Act (Art. 1396-1.01 et seq, V.T.C.S.).
Requires the secretary of state, on filing of the articles of
incorporation, to issue a certificate showing that the corporation is
incorporated under this chapter.  Provides that, except to the extent
provided by this section, Sections 53.131 (Authority's Earnings), 53.14
(Board of Directors), 53.15 (Organization of Board; Quorum; Employees;
Counsel), 53.31 (No Taxing Power), 53.32 (No Power of Eminent Domain),
53.35(a) (relating to bond issuance) and 53.39 (Refunding Bonds) apply to
and govern the corporation, its procedures, and bonds.  Requires the
corporation, in addition to the specific powers granted under this
Subsection (h), to have all powers granted under the Texas Non-profit
Corporation Act that are necessary, incidental, or subordinate in carrying
out the purposes authorized in this subsection. 

SECTION 3.  Repealer:  Section 53.47(k) (establishing a September 1, 2003,
expiration date for Subsection (a)(6)), Education Code. 

SECTION  4.  Effective date:  upon passage or September 1, 2003.