85R8600 YDB-F

By: Capriglione H.B. No. 1295

A BILL TO BE ENTITLED

AN ACT

relating to the disclosure of interested parties by business entities contracting with governmental entities and state agencies; authorizing a civil penalty.

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

SECTION 1. The heading to Section 2252.908, Government Code, is amended to read as follows:

Sec. 2252.908. DISCLOSURE OF INTERESTED PARTIES; CIVIL PENALTY.

SECTION 2. Section 2252.908(a), Government Code, is amended by amending Subdivisions (1), (2), and (3) and adding Subdivisions (1-a), (1-b), (3-a), (3-b), (3-c), and (5) to read as follows:

(1) "Business entity" means any entity recognized by law through which business is conducted with a governmental entity or state agency. The term includes [, including] a sole proprietorship, partnership, or corporation. The term does not include the United States, a federal agency, a state agency, or another governmental entity.

(1-a) "Contract" means a binding agreement between a governmental entity or state agency and a business entity effective on the earlier of the date the governing body of the governmental entity or state agency votes to approve the contract or the date the governmental entity or state agency becomes bound under the contract. The term includes an amendment to or an extension or renewal of the contract.

(1-b) "Controlling interest" means:

(A) an ownership or participating interest in a business entity represented by a unit, percentage, share, stock, or other acknowledgment of ownership or participating interest in an amount that exceeds five percent of the total ownership or participating interest in the business entity;

(B) membership on the board of directors or other governing body of a business entity, provided the composition of the board or governing body does not exceed 10 members; or

(C) service as an officer of a business entity that has not more than four officers or service as one of the four highest ranking officers of a business entity with more than four officers, excluding an officer of a publicly held business entity or its wholly owned subsidiary.

(2) "Governmental entity" means a municipality, county, public school district, open-enrollment charter school, or special-purpose district or authority.

(3) "Interested party" means a person who has a controlling interest in a business entity with whom a governmental entity or state agency contracts or who is an [actively participates in facilitating the contract or negotiating the terms of the contract, including a broker,] intermediary[, adviser, or attorney] for the business entity.

(3-a) "Intermediary" means a person who actively participates in facilitating or negotiating a contract, including a broker, adviser, attorney, or agent for or representative of a business entity, and who:

(A) receives compensation from the business entity for the person's participation;

(B) communicates directly regarding the contract with the governmental entity or state agency for the business entity; and

(C) is not:

(i) an employee of the business entity or of a person with a controlling interest in the business entity; or

(ii) an interested party with a controlling interest in the business entity.

(3-b) "Person" has the meaning assigned by Section 311.005.

(3-c) "Signed" includes the use of any symbol executed or adopted by a person that is evidence of present intent to authenticate a writing, including an electronic signature.

(5) "Value" means, with respect to a contract, the amount of consideration received or to be received by a business entity from a governmental entity or state agency under the contract.

SECTION 3. Section 2252.908, Government Code, is amended by amending Subsections (b), (c), (e), and (f) and adding Subsections (d-1), (e-1), (h), and (i) to read as follows:

(b) This section applies only to a contract of a governmental entity or state agency that requires the expenditure of the governmental entity's or state agency's money and that:

(1) requires an action or vote by the governing body of the entity or agency before the contract may be signed; or

(2) has a value of at least $1 million.

(c) Notwithstanding Subsection (b), this section does not apply to:

(1) a sponsored research contract of an institution of higher education;

(2) an interagency contract of a state agency or an institution of higher education; [or]

(3) a contract related to health and human services if:

(A) the value of the contract cannot be determined at the time the contract is executed; and

(B) any qualified vendor is eligible for the contract;

(4) a contract with a publicly traded business entity, including a wholly owned subsidiary of the business entity;

(5) a contract related to a state of disaster declared by the governor under Section 418.014 that requires an immediate disbursement of state money to preserve or protect the public health or safety, to preserve property, or for public necessity;

(6) a contract that is necessary to prevent unforeseen, imminent damage to public machinery, equipment, or other property;

(7) a contract related to a subsequent sale of a municipal bond after the initial bond sale;

(8) a contract with a federally insured financial institution;

(9) a contract with an electric utility as that term is defined by Section 31.002, Utilities Code;

(10) a contract with a gas utility engaged in the wholesale business of transporting or distributing gas for public consumption;

(11) a contract for an insurance policy regulated by the Texas Department of Insurance that is purchased by a governmental entity or state agency;

(12) an interlocal contract of a local governmental entity; or

(13) a contract related to a public security, as that term is defined by Section 1201.002, that is not a debt.

(d-1) A business entity that submits a disclosure of interested parties under Subsection (d) shall submit a modified disclosure of interested parties for the contract if there is any change from the interested parties previously disclosed. The modified disclosure must be submitted on or before the next anniversary of the date the signed contract was submitted to the governmental entity or state agency under Subsection (d) that occurs after the change in interested parties.

(e) The disclosure of interested parties or modified disclosure of interested parties must be submitted on a form prescribed by the Texas Ethics Commission that includes:

(1) a list of each interested party for the contract of which the contracting business entity is aware; and

(2) a written, unsworn declaration subscribed by [the signature of] the authorized agent of the contracting business entity as true[, acknowledging that the disclosure is made under oath and] under penalty of perjury that is in substantially the following form:

"My name is ________________________________, my

date of birth is _________________, and my address is

_____________, ____________, _________, ____________,

(Street) (City) (State) (Zip Code)

__________________. I declare under penalty of

(Country)

perjury that the foregoing is true and correct.

Executed in _______ County, State of ________, on the ________ day of ________, ________.

(Month) (Year) ____________________ Declarant".

(e-1) The written, unsworn declaration described by Subsection (e)(2) may be executed using the electronic signature of the authorized agent of the contracting business entity.

(f) Not later than the 30th day after the date the parties become bound under a contract for which a disclosure of interested parties is filed or the date a modified disclosure of interested parties is filed [governmental entity or state agency receives a disclosure of interested parties required under this section], the governmental entity or state agency shall submit [a copy of the disclosure] to the Texas Ethics Commission an acknowledgment that the governmental entity or state agency has received the disclosure or modified disclosure, as applicable.

(h) A business entity that fails to submit to a governmental entity or state agency a disclosure of interested parties or modified disclosure of interested parties required by this section is liable for a civil penalty of $500 for the first day the violation occurs and $100 for each additional day the violation occurs, not to exceed the lesser of the total amount prescribed by rule or $10,000. The governmental entity or state agency shall immediately notify the Texas Ethics Commission if a business entity fails to submit a disclosure or modified disclosure on or before the 30th day after the date the disclosure is due. The commission shall immediately provide to the business entity written notice of the violation and civil penalty. If the business entity fails to submit the disclosure or modified disclosure on or before the 10th day after the date the notice is provided, the business entity is liable to this state for the civil penalty.

(i) The attorney general, at the request of the Texas Ethics Commission, may sue to collect a civil penalty imposed under Subsection (h). The attorney general and the commission may recover reasonable expenses incurred in obtaining a civil penalty under that subsection, including investigation and court costs, reasonable attorney's fees, witness fees, and other expenses.

SECTION 4. Not later than December 1, 2017, the Texas Ethics Commission shall adopt rules and modify the disclosure of interested parties form as necessary to comply with the changes in law made by this Act.

SECTION 5. The changes in law made by this Act apply only to a contract entered into or amended on or after January 1, 2018.

SECTION 6. This Act takes effect September 1, 2017.