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AN ACT
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relating to investment of public funds, including certain |
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expenditures by public institutions of higher education and |
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university systems that are eligible for certain tax credits. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 2256.004(a), Government Code, is amended |
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to read as follows: |
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(a) This subchapter does not apply to: |
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(1) a public retirement system as defined by Section |
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802.001; |
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(2) state funds invested as authorized by Section |
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404.024; |
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(3) an institution of higher education having total |
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endowments of at least $150 [$95] million in book value on September |
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1, 2017 [May 1, 1995]; |
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(4) funds invested by the Veterans' Land Board as |
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authorized by Chapter 161, 162, or 164, Natural Resources Code; |
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(5) registry funds deposited with the county or |
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district clerk under Chapter 117, Local Government Code; or |
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(6) a deferred compensation plan that qualifies under |
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either Section 401(k) or 457 of the Internal Revenue Code of 1986 |
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(26 U.S.C. Section 1 et seq.), as amended. |
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SECTION 2. Section 2256.009(a), Government Code, is amended |
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to read as follows: |
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(a) Except as provided by Subsection (b), the following are |
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authorized investments under this subchapter: |
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(1) obligations, including letters of credit, of the |
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United States or its agencies and instrumentalities; |
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(2) direct obligations of this state or its agencies |
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and instrumentalities; |
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(3) collateralized mortgage obligations directly |
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issued by a federal agency or instrumentality of the United States, |
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the underlying security for which is guaranteed by an agency or |
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instrumentality of the United States; |
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(4) other obligations, the principal and interest of |
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which are unconditionally guaranteed or insured by, or backed by |
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the full faith and credit of, this state or the United States or |
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their respective agencies and instrumentalities, including |
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obligations that are fully guaranteed or insured by the Federal |
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Deposit Insurance Corporation or by the explicit full faith and |
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credit of the United States; |
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(5) obligations of states, agencies, counties, |
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cities, and other political subdivisions of any state rated as to |
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investment quality by a nationally recognized investment rating |
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firm not less than A or its equivalent; [and] |
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(6) bonds issued, assumed, or guaranteed by the State |
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of Israel; and |
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(7) interest-bearing banking deposits that are |
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guaranteed or insured by: |
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(A) the Federal Deposit Insurance Corporation or |
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its successor; or |
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(B) the National Credit Union Share Insurance |
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Fund or its successor. |
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SECTION 3. Section 2256.011, Government Code, is amended by |
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adding Subsection (e) to read as follows: |
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(e) Section 1371.059(c) applies to the execution of a |
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repurchase agreement by an investing entity. |
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SECTION 4. Sections 2256.014(a) and (b), Government Code, |
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are amended to read as follows: |
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(a) A no-load money market mutual fund is an authorized |
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investment under this subchapter if the mutual fund: |
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(1) is registered with and regulated by the Securities |
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and Exchange Commission; |
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(2) provides the investing entity with a prospectus |
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and other information required by the Securities Exchange Act of |
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1934 (15 U.S.C. Section 78a et seq.) or the Investment Company Act |
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of 1940 (15 U.S.C. Section 80a-1 et seq.); and |
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(3) complies with federal Securities and Exchange |
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Commission Rule 2a-7 (17 C.F.R. Section 270.2a-7), promulgated |
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under the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et |
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seq.) [has a dollar-weighted average stated maturity of 90 days or
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fewer; and
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[(4)
includes in its investment objectives the
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maintenance of a stable net asset value of $1 for each share]. |
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(b) In addition to a no-load money market mutual fund |
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permitted as an authorized investment in Subsection (a), a no-load |
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mutual fund is an authorized investment under this subchapter if |
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the mutual fund: |
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(1) is registered with the Securities and Exchange |
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Commission; |
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(2) has an average weighted maturity of less than two |
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years; and |
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(3) either: |
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(A) has a duration of one year or more and is |
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invested exclusively in obligations approved by this subchapter; or |
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(B) has a duration of less than one year and the |
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investment portfolio is limited to investment grade securities, |
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excluding asset-backed securities |
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[(4)
is continuously rated as to investment quality by
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at least one nationally recognized investment rating firm of not
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less than AAA or its equivalent; and
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[(5)
conforms to the requirements set forth in
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Sections 2256.016(b) and (c) relating to the eligibility of
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investment pools to receive and invest funds of investing
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entities]. |
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SECTION 5. Section 2256.015, Government Code, is amended by |
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adding Subsection (d) to read as follows: |
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(d) Section 1371.059(c) applies to the execution of a |
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guaranteed investment contract by an investing entity. |
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SECTION 6. Sections 2256.016(b) and (f), Government Code, |
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are amended to read as follows: |
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(b) To be eligible to receive funds from and invest funds on |
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behalf of an entity under this chapter, an investment pool must |
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furnish to the investment officer or other authorized |
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representative of the entity an offering circular or other similar |
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disclosure instrument that contains, at a minimum, the following |
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information: |
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(1) the types of investments in which money is allowed |
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to be invested; |
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(2) the maximum average dollar-weighted maturity |
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allowed, based on the stated maturity date, of the pool; |
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(3) the maximum stated maturity date any investment |
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security within the portfolio has; |
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(4) the objectives of the pool; |
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(5) the size of the pool; |
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(6) the names of the members of the advisory board of |
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the pool and the dates their terms expire; |
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(7) the custodian bank that will safekeep the pool's |
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assets; |
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(8) whether the intent of the pool is to maintain a net |
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asset value of one dollar and the risk of market price fluctuation; |
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(9) whether the only source of payment is the assets of |
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the pool at market value or whether there is a secondary source of |
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payment, such as insurance or guarantees, and a description of the |
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secondary source of payment; |
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(10) the name and address of the independent auditor |
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of the pool; |
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(11) the requirements to be satisfied for an entity to |
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deposit funds in and withdraw funds from the pool and any deadlines |
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or other operating policies required for the entity to invest funds |
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in and withdraw funds from the pool; [and] |
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(12) the performance history of the pool, including |
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yield, average dollar-weighted maturities, and expense ratios; and |
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(13) the pool's policy regarding holding deposits in |
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cash. |
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(f) To be eligible to receive funds from and invest funds on |
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behalf of an entity under this chapter, a public funds investment |
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pool that uses amortized cost or fair value accounting [created to
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function as a money market mutual fund] must mark its portfolio to |
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market daily, and, to the extent reasonably possible, stabilize at |
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a $1.00 [$1] net asset value, when rounded and expressed to two |
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decimal places. If the ratio of the market value of the portfolio |
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divided by the book value of the portfolio is less than 0.995 or |
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greater than 1.005, the governing body of the public funds |
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investment pool shall take action as the body determines necessary |
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to eliminate or reduce to the extent reasonably practicable any |
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dilution or unfair result to existing participants, including a |
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sale of portfolio holdings to attempt [shall be sold as necessary] |
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to maintain the ratio between 0.995 and 1.005. In addition to the |
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requirements of its investment policy and any other forms of |
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reporting, a public funds investment pool that uses amortized cost |
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[created to function as a money market mutual fund] shall report |
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yield to its investors in accordance with regulations of the |
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federal Securities and Exchange Commission applicable to reporting |
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by money market funds. |
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SECTION 7. Subchapter A, Chapter 2256, Government Code, is |
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amended by adding Section 2256.0206 to read as follows: |
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Sec. 2256.0206. AUTHORIZED INVESTMENTS: HEDGING |
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TRANSACTIONS. (a) In this section: |
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(1) "Eligible entity" means a political subdivision |
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that has: |
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(A) a principal amount of at least $250 million |
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in: |
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(i) outstanding long-term indebtedness; |
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(ii) long-term indebtedness proposed to be |
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issued; or |
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(iii) a combination of outstanding |
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long-term indebtedness and long-term indebtedness proposed to be |
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issued; and |
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(B) outstanding long-term indebtedness that is |
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rated in one of the four highest rating categories for long-term |
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debt instruments by a nationally recognized rating agency for |
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municipal securities, without regard to the effect of any credit |
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agreement or other form of credit enhancement entered into in |
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connection with the obligation. |
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(2) "Eligible project" has the meaning assigned by |
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Section 1371.001. |
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(3) "Hedging" means acting to protect against economic |
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loss due to price fluctuation of a commodity or related investment |
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by entering into an offsetting position or using a financial |
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agreement or producer price agreement in a correlated security, |
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index, or other commodity. |
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(b) This section prevails to the extent of any conflict |
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between this section and: |
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(1) another law; or |
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(2) an eligible entity's municipal charter, if |
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applicable. |
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(c) The governing body of an eligible entity shall establish |
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the entity's policy regarding hedging transactions. |
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(d) An eligible entity may enter into hedging transactions, |
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including hedging contracts, and related security, credit, and |
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insurance agreements in connection with commodities used by an |
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eligible entity in the entity's general operations, with the |
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acquisition or construction of a capital project, or with an |
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eligible project. A hedging transaction must comply with the |
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regulations of the federal Commodity Futures Trading Commission and |
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the federal Securities and Exchange Commission. |
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(e) An eligible entity may pledge as security for and to the |
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payment of a hedging contract or a security, credit, or insurance |
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agreement any general or special revenues or funds the entity is |
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authorized by law to pledge to the payment of any other obligation. |
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(f) Section 1371.059(c) applies to the execution by an |
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eligible entity of a hedging contract and any related security, |
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credit, or insurance agreement. |
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(g) An eligible entity may credit any amount the entity |
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receives under a hedging contract against expenses associated with |
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a commodity purchase. |
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(h) An eligible entity's cost of or payment under a hedging |
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contract or agreement may be considered: |
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(1) an operation and maintenance expense of the |
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eligible entity; |
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(2) an acquisition expense of the eligible entity; |
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(3) a project cost of an eligible project; or |
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(4) a construction expense of the eligible entity. |
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SECTION 8. (a) Section 171.901(4), Tax Code, is amended to |
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read as follows: |
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(4) "Eligible costs and expenses" means qualified |
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rehabilitation expenditures as defined by Section 47(c)(2), |
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Internal Revenue Code, except that the depreciation and tax-exempt |
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use provisions of that section do not apply to costs and expenses |
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incurred by an entity exempt from the tax imposed under this chapter |
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by Section 171.063 or by an institution of higher education or |
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university system as defined by Section 61.003, Education Code, and |
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those costs and expenses are eligible costs and expenses if the |
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other provisions of Section 47(c)(2), Internal Revenue Code, are |
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satisfied. |
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(b) Effective January 1, 2022, Section 171.901(4), Tax |
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Code, is amended to read as follows: |
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(4) "Eligible costs and expenses" means qualified |
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rehabilitation expenditures as defined by Section 47(c)(2), |
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Internal Revenue Code, except that the depreciation and tax-exempt |
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use provisions of that section do not apply to costs and expenses |
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incurred by an entity exempt from the tax imposed under this chapter |
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by Section 171.063, and those costs and expenses are eligible costs |
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and expenses if the other provisions of Section 47(c)(2), Internal |
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Revenue Code, are satisfied. |
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SECTION 9. The changes in law made by this Act apply only to |
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authorized investments of public funds governed by Chapter 2256, |
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Government Code, as amended by this Act, that are made on or after |
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the effective date of this Act. An authorized investment of public |
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funds made before the effective date of this Act is governed by the |
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law in effect immediately before that date, and that law is |
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continued in effect for that purpose. |
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SECTION 10. (a) Section 171.901(4), Tax Code, as amended by |
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Section 8(a) of this Act, applies only to costs and expenses |
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incurred on or after the effective date of this Act. |
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(b) Section 171.901(4), Tax Code, as amended by Section 8(b) |
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of this Act, applies only to costs and expenses incurred on or after |
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January 1, 2022. |
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SECTION 11. This Act takes effect immediately if it |
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receives a vote of two-thirds of all the members elected to each |
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house, as provided by Section 39, Article III, Texas Constitution. |
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If this Act does not receive the vote necessary for immediate |
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effect, this Act takes effect September 1, 2017. |
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______________________________ |
______________________________ |
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President of the Senate |
Speaker of the House |
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I certify that H.B. No. 1003 was passed by the House on April |
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28, 2017, by the following vote: Yeas 134, Nays 0, 2 present, not |
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voting; that the House refused to concur in Senate amendments to |
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H.B. No. 1003 on May 25, 2017, and requested the appointment of a |
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conference committee to consider the differences between the two |
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houses; and that the House adopted the conference committee report |
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on H.B. No. 1003 on May 28, 2017, by the following vote: Yeas 145, |
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Nays 2, 2 present, not voting. |
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______________________________ |
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Chief Clerk of the House |
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I certify that H.B. No. 1003 was passed by the Senate, with |
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amendments, on May 22, 2017, by the following vote: Yeas 30, Nays |
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0; at the request of the House, the Senate appointed a conference |
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committee to consider the differences between the two houses; and |
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that the Senate adopted the conference committee report on H.B. No. |
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1003 on May 28, 2017, by the following vote: Yeas 31, Nays 0. |
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______________________________ |
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Secretary of the Senate |
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APPROVED: __________________ |
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Date |
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__________________ |
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Governor |