Senate Research CenterC.S.S.B. 1476
78R11456 JSA-FBy: West, Royce
Subcommittee on Higher Education
Committee Report (Substituted)


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. 

C.S.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 tax-exempt bond


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


SECTION 1.  Provides that if this Act takes effect before September 1,
2003, Section 53.47(a)(6), Education Code, is amended 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.  Provides that if this Act takes effect on September 1, 2003,
Section 53.47(a), Education Code, is amended by adding Subdivision (6), to
define "qualified nonprofit corporation." 

SECTION 3.  Amends Section 53.47(k), Education Code, 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 to exercise the
powers provided by this subsection.  Provides that on approval by the
city, the nonprofit corporation is authorized to issue revenue bonds and
to loan the proceeds of the bonds to an entity that has assumed the
outstanding bond obligations of a nonprofit corporation if the loan is 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 that created the corporation.  Requires the bonds to be
refunded to have been originally issued as qualified scholarship funding
bonds as that term is defined in Section 150(d)(2), Internal Revenue Code
of 1986, as amended, by a nonprofit corporation while acting under
Subsection (f) and that subsequently made the election permitted under
Section 150(d)(3) of the Internal Revenue Code, as amended; provided,
however, any entity whose bonds are refunded under the provisions hereof
that proposes to issue stock or other evidence of ownership with respect
to such entity is required to provide prior notice of such proposed action
to the Texas Attorney General in sufficient time to permit a full review
of such proposed issuance and the terms thereof.  Requires any refunding
bonds to be solely the obligation of the nonprofit corporation and not to
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, on dissolution of the corporation, all
property owned by the corporation to become the property of the city.
Authorizes a corporation to be incorporated under this subsection by
filing the 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.  Provides that the
corporation, in addition to the specific powers granted under this
subsection, has all powers granted under the Texas Non-profit Corporation
Act that are necessary, incidental, or subordinate to enable the
corporation to carry out the purposes of this subsection.  Deletes text
regarding the expiration of Subsection (a)(6) and the definition of
"qualified nonprofit corporation." 

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