By: Carona S.B. No. 891

(In the Senate - Filed February 23, 2011; March 23, 2011, read first time and referred to Committee on Economic Development; May 10, 2011, reported adversely, with favorable Committee Substitute by the following vote: Yeas 4, Nays 1; May 10, 2011, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 891 By: Jackson

A BILL TO BE ENTITLED

AN ACT

relating to certain investments in certain Texas businesses by insurance companies and related organizations.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 228.001, Insurance Code, is amended by adding Subdivisions (5-b), (5-c), (7-c), and (7-d) and amending Subdivisions (7-a) and (7-b) to read as follows:

(5-b) "Match" means cash invested or lent to a qualified business by another party that is not a certified capital company contemporaneously with, or subsequent to, a qualified investment in the qualified business. The term includes cash invested or lent to a qualified business by the certified capital company or its affiliates that would otherwise be a qualified investment but that is made with funds that are not certified capital.

(5-c) "Net profit realized on qualified investments" means the sum of all funds returned to a certified capital company in repayment, sale, or exchange of the company's qualified investments in excess of the sum of the cost basis of such qualified investments. To compute the net profit realized on qualified investments, all of the certified capital company's qualified investments are aggregated such that gains on qualified investments are netted against losses on qualified investments.

(7-a) "Profit share percentage" means a payment in an amount equal to 20 percent of the net profit realized on qualified investments.

(7-b) "Program One" means the program for allocation and investment of certified capital under this chapter before January 1, 2007.

(7-c) [(7-b)] "Program Two" means the program for allocation and investment of certified capital under this chapter on or after January 1, 2007.

(7-d) "Program Three" means the program for allocation and investment of certified capital under this chapter on or after September 1, 2011.

SECTION 2. Subchapter B, Chapter 228, Insurance Code, is amended by adding Section 228.0525 to read as follows:

Sec. 228.0525. ACCEPTANCE OF PREMIUM TAX ALLOCATION CLAIMS. The rules adopted under Section 228.052 must provide that the comptroller shall accept premium tax credit allocation claims on behalf of certified investors with respect to Program Three not later than January 1, 2012.

SECTION 3. Section 228.101, Insurance Code, is amended by adding Subsection (c) to read as follows:

(c) With respect to Program Three, an application must include a sworn statement by the managers of the applicant that:

(1) the applicant, if certified as a certified capital company, will, prior to decertification, secure match commitments in an amount equal to at least 150 percent of the company's Program Three allocation; and

(2) Section 228.3021(d) applies to a certified capital company under Program Three.

SECTION 4. Subsection (a), Section 228.107, Insurance Code, is amended to read as follows:

(a) Not later than January 31 of each year, each certified capital company shall pay a nonrefundable renewal fee in an amount set by the comptroller that is sufficient to reimburse the comptroller for annual administrative costs of the program, not to exceed $15,000 per certified capital company. The comptroller shall notify each certified capital company of the amount of the fee not later than January 31 of the year preceding the year in which the fee is due [of $5,000 to the comptroller].

SECTION 5. Subsection (b), Section 228.157, Insurance Code, is amended to read as follows:

(b) A certified capital company may make a qualified distribution at any time. To make a distribution or payment other than a qualified distribution, a company must have:

(1) made qualified investments in an amount cumulatively equal to 100 percent of the company's certified capital; and

(2) with respect to Program Three, paid the state any applicable profit share percentage and:

(A) secured match investments in an amount equal to at least 150 percent of the company's Program Three allocation under Section 228.101; or

(B) been decertified under Section 228.3021.

SECTION 6. Section 228.251, Insurance Code, is amended by adding Subsection (d) to read as follows:

(d) With respect to credits earned as a result of investments made under Program Three, beginning with the tax report due March 1, 2017, for the 2016 tax year, a certified investor may take up to 25 percent of the vested premium tax credit in any taxable year of the certified investor. The credit may not be applied to estimated payments due in 2016.

SECTION 7. Subsection (b), Section 228.253, Insurance Code, is amended to read as follows:

(b) The certified capital company must have filed the claim with the comptroller on the date on which the comptroller accepted premium tax credit allocation claims on behalf of certified investors with respect to Program One, [or] Program Two, or Program Three, as applicable, under the comptroller's rules.

SECTION 8. Section 228.254, Insurance Code, is amended to read as follows:

Sec. 228.254. TOTAL LIMIT ON PREMIUM TAX CREDITS. (a) The total amount of certified capital for which premium tax credits may be allowed under this chapter for all years in which premium tax credits are allowed is:

(1) $200 million for Program One; [and]

(2) $200 million for Program Two; and

(3) $200 million for Program Three.

(b) The total amount of certified capital for which premium tax credits may be allowed for all certified investors under this chapter may not exceed the amount that would entitle all certified investors in certified capital companies to take total credits of $50 million in a year with respect to Program One, [and] $50 million in a year with respect to Program Two, and $50 million in a year with respect to Program Three.

(c) A certified capital company and the company's affiliates may not file premium tax credit allocation claims with respect to Program One, [or] Program Two, or Program Three, as applicable, in excess of the maximum amount of certified capital for which premium tax credits may be allowed for that program as provided by this section.

SECTION 9. Section 228.255, Insurance Code, is amended to read as follows:

Sec. 228.255. ALLOCATION OF PREMIUM TAX CREDIT. (a) If the total premium tax credits claimed by all certified investors with respect to Program One, [or] Program Two, or Program Three, as applicable, exceeds the total limits on premium tax credits established for that program by Section 228.254(a), the comptroller shall allocate the total amount of premium tax credits allowed under this chapter to certified investors in certified capital companies on a pro rata basis in accordance with this section.

(b) The pro rata allocation for each certified investor shall be the product of:

(1) a fraction, the numerator of which is the amount of the premium tax credit allocation claim filed on behalf of the investor with respect to Program One, [or] Program Two, or Program Three, as applicable, and the denominator of which is the total amount of all premium tax credit allocation claims filed on behalf of all certified investors with respect to that program; and

(2) the total amount of certified capital for which premium tax credits may be allowed with respect to that program under this chapter.

(c) The maximum amount of certified capital for which premium tax credit allocation may be allowed on behalf of a single certified investor and the investor's affiliates with respect to Program One, [or] Program Two, or Program Three, as applicable, whether by one or more certified capital companies, may not exceed the greater of:

(1) $10 million; or

(2) 15 percent of the maximum aggregate amount available with respect to that program under Section 228.254(a).

SECTION 10. Subchapter G, Chapter 228, Insurance Code, is amended by adding Section 228.3021 to read as follows:

Sec. 228.3021. VOLUNTARY DECERTIFICATION OF CERTIFIED CAPITAL COMPANY. (a) The comptroller may decertify a certified capital company on the written request of the company if the comptroller finds that the company has made qualified investments in an amount equal to 100 percent of the company's certified capital.

(b) The comptroller shall notify any appropriate state agency of a decertification of a certified capital company.

(c) On being decertified by the comptroller, a certified capital company is not required to pay the annual renewal fee required by Section 228.107.

(d) With respect to Program Three, a certified capital company may not be decertified under this section before match investments have been made in an amount equal to at least 150 percent of the company's Program Three allocation under Section 228.101.

SECTION 11. Section 228.351, Insurance Code, is amended by adding Subsection (f) to read as follows:

(f) This subchapter does not authorize the recapture and forfeiture of premium tax credits following voluntary decertification of a certified capital company under Section 228.3021.

SECTION 12. This Act takes effect September 1, 2011.

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