85R5019 BEF-F

By: Lucio S.B. No. 1295

A BILL TO BE ENTITLED

AN ACT

relating to an insurance premium tax credit for investment in certain communities; imposing a monetary penalty; authorizing fees.

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

SECTION 1. Subtitle B, Title 3, Insurance Code, is amended by adding Chapter 231 to read as follows:

CHAPTER 231. PREMIUM TAX CREDIT FOR INVESTMENT IN CERTAIN

COMMUNITIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 231.001. GENERAL DEFINITIONS. In this chapter:

(1) "Applicable percentage" means zero percent for the first two credit allowance dates, seven percent for the third credit allowance date, and eight percent for the next four credit allowance dates.

(2) "Credit allowance date" means, with respect to any qualified equity investment:

(A) the date on which the qualified equity investment is initially made; and

(B) the anniversary of that date in each of the six years immediately following that date.

(3) "Federal tax regulations" means regulations adopted under the Internal Revenue Code of 1986 that are applicable to the tax year to which the provisions of the code in effect on September 1, 2017, applied.

(4) "Internal Revenue Code" means the Internal Revenue Code of 1986 in effect on September 1, 2017, excluding any changes made by federal law after that date, but including any regulations adopted under that code that are applicable to the tax year to which the provisions of the code in effect on that date applied.

(5) "Investing entity" means an entity, including an entity that incurs state premium tax liability, that makes or holds a qualified equity investment.

(6) "Issuer" means a qualified community development entity, or a subsidiary or affiliate of a qualified community development entity, that issues a qualified equity investment.

(7) "Low-income community" has the meaning assigned by Section 45D, Internal Revenue Code.

(8) "Metropolitan statistical area" means a core base statistical area associated with at least one urbanized area that has a population of at least 90,000. A metropolitan statistical area comprises the central county or counties containing the core, plus adjacent outlying counties having a high degree of social and economic integration with the central county or counties as measured through commuting.

(9) "Purchase price" means the amount paid to the issuer for a qualified equity investment.

(10) "Report" means a premium tax report or a report under Subchapter G, as applicable.

(11) "Rural allocation" means the allocation described by Section 231.104(c)(1).

(12) "Rural area" means a county in this state with a population less than 90,000.

(13) "State premium tax liability" means any premium tax liability incurred under Chapter 221, 222, 223, 223A, or 224.

(14) "Statewide low-income community allocation" means the allocation described by Section 231.104(c)(4).

(15) "Texas education allocation" means the allocation described by Section 231.104(c)(2).

(16) "Texas seaport allocation" means the allocation described by Section 231.104(c)(3).

Sec. 231.002. DEFINITION: LONG-TERM DEBT SECURITY. (a) In this chapter, "long-term debt security" means a debt instrument issued by a qualified community development entity, at par value or a premium, with an original maturity date not earlier than the seventh year after the date on which the debt instrument is issued, with no acceleration of repayment, amortization, or prepayment features before its original maturity date.

(b) The qualified community development entity that issues a long-term debt security may not make cash interest payments on the security during the period beginning on the date on which the security is issued and ending on the final credit allowance date in an amount that exceeds the cumulative operating income, as defined by federal tax regulations adopted under Section 45D, Internal Revenue Code, of the qualified community development entity for that period before giving effect to the interest expense of the long-term debt security.

(c) This section does not limit the holder's ability to accelerate payments on a long-term debt security in situations in which the issuer has defaulted on covenants designed to ensure compliance with this chapter or Section 45D, Internal Revenue Code.

Sec. 231.003. DEFINITION: QUALIFIED ACTIVE LOW-INCOME COMMUNITY BUSINESS. (a) In this chapter, "qualified active low-income community business" has the meaning assigned by Section 45D, Internal Revenue Code, and Section 1.45D-1 of the federal tax regulations.

(b) A business is considered a qualified active low-income community business for the duration of the qualified community development entity's investment in, or loan to, the business if the entity reasonably expects, at the time it makes the investment or loan, that the business will continue to satisfy the requirements for being a qualified active low-income community business throughout the entire period of the investment or loan.

Sec. 231.004. DEFINITION: QUALIFIED COMMUNITY DEVELOPMENT ENTITY. In this chapter, "qualified community development entity" has the meaning assigned by Section 45D, Internal Revenue Code, provided that the entity has entered into, for the current year or a prior year with an allocation effective date on or after July 1, 2016, an allocation agreement with the Community Development Financial Institutions Fund of the United States Department of the Treasury with respect to credits authorized by Section 45D, Internal Revenue Code, that includes this state in the service area specified in the allocation agreement. The term includes a subsidiary or affiliate of a qualified community development entity and any other qualified community development entity that is controlled by or under common control with a qualified community development entity.

Sec. 231.005. DEFINITION: QUALIFIED EQUITY INVESTMENT. (a) An investment is a "qualified equity investment" for purposes of this chapter if:

(1) the investment is an equity investment in, or long-term debt security issued by, a qualified community development entity;

(2) the investment is acquired on or after October 1, 2017, at its original issuance solely in exchange for cash, except as provided by Subsection (b);

(3) not later than the 20th month after the date of issuance at least 85 percent of the investment's purchase price is used by the issuer to make qualified low-income community investments in this state; and

(4) the investment is designated by the issuer as a qualified equity investment under this section and is certified by the comptroller as not exceeding the limitations provided by Section 231.104.

(b) A qualified equity investment includes an investment that does not satisfy the requirements of Subsection (a)(2) if the investment was a qualified equity investment in the hands of a prior holder.

Sec. 231.006. DEFINITION: QUALIFIED LOW-INCOME COMMUNITY INVESTMENT. In this chapter, "qualified low-income community investment" means an equity investment in, or loan to, a qualified active low-income community business made by a qualified community development entity.

Sec. 231.007. DEFINITION: RURAL COMMUNITY DEVELOPMENT ENTITY. In this chapter, "rural community development entity" means a qualified community development entity:

(1) whose allocation agreement with the Community Development Financial Institutions Fund of the United States Department of the Treasury requires the entity to invest at least 25 percent of that allocation in rural areas; or

(2) that demonstrates to the comptroller in writing that the entity or its affiliates invested at least 25 percent of the entity's most recent federal allocation outside the boundaries of a metropolitan statistical area.

Sec. 231.008. RULES. The comptroller shall adopt rules necessary to implement this chapter.

Sec. 231.009. REVIEW BY COMPTROLLER. The comptroller shall review the qualified low-income community investments of a qualified community development entity not later than the sixth month after each anniversary of the investment. In conducting the review, the comptroller shall ensure that the qualified community development entity has made and maintained the qualified low-income community investments required under Sections 231.151(a)(3) and (4) to avoid recapture of a credit claimed in connection with a qualified equity investment.

SUBCHAPTER B. PREMIUM TAX CREDIT

Sec. 231.051. ELIGIBILITY FOR CREDIT. An investing entity is eligible for a credit against the entity's state premium tax liability in the amount provided by this subchapter and under the conditions and limitations provided by this chapter.

Sec. 231.052. QUALIFICATION. An investing entity is eligible for a credit if the investing entity holds a qualified equity investment on a credit allowance date.

Sec. 231.053. AMOUNT OF CREDIT; LIMITATION. (a) The amount of credit for a tax year is equal to the credit accrued, as determined under Subsection (b), on each credit allowance date:

(1) that occurs during the tax year; and

(2) on which the investing entity holds the qualified equity investment.

(b) The amount of credit accrued on a credit allowance date equals the applicable percentage for the credit allowance date multiplied by the purchase price paid to the issuer of the qualified equity investment.

(c) The total credit claimed for a tax year, including the amount of any carryforward under Section 231.054, may not exceed the amount of state premium tax liability due for the tax year after applying all other applicable tax credits.

(d) Credits may be applied to the investing entity's estimated or final tax payments for the tax year.

Sec. 231.054. CARRYFORWARD. If an investing entity is eligible for a credit that exceeds the limitation under Section 231.053(c), the investing entity may carry the unused credit forward for not more than 20 consecutive tax reports. Credits, including credit carryforwards, are considered to be used in the following order:

(1) a credit carryforward under this subchapter; and

(2) a current year credit.

Sec. 231.055. ASSIGNMENT PROHIBITED. (a) Except as provided by Subsection (b), an investing entity may not convey, assign, or transfer the credit allowed under this subchapter to another entity.

(b) A partnership, limited liability company, S corporation, or other pass-through entity for federal income tax purposes may allocate the credit to the entity's partners, members, or shareholders for their direct use in accordance with an agreement between the partners, members, or shareholders.

Sec. 231.056. RETALIATORY TAX. (a) An entity claiming a credit under this subchapter is not required to pay any additional retaliatory tax levied under Chapter 281 as a result of claiming that credit.

(b) In addition to the exclusion provided by Subsection (a), an entity claiming a credit under this subchapter is not required to pay any additional tax that may arise as a result of claiming that credit.

SUBCHAPTER C. CERTIFICATION AS QUALIFIED EQUITY INVESTMENT

Sec. 231.101. APPLICATION FOR CERTIFICATION AS QUALIFIED EQUITY INVESTMENT. (a) A qualified community development entity that seeks to have an equity investment or long-term debt security certified as a qualified equity investment eligible for credits under this chapter must apply to the comptroller as provided by this section.

(b) The comptroller shall provide an application date each year for applications under Subsection (a). The date may not be later than October 2. The comptroller shall consider all applications received on or before the application date to be received simultaneously on the application date.

(c) An application under this section must include the following:

(1) evidence of the applicant's certification as a qualified community development entity, including evidence of the service area of the entity that includes this state;

(2) a copy of an allocation agreement executed by the applicant, or its controlling entity, and the Community Development Financial Institutions Fund of the United States Department of the Treasury;

(3) a certificate executed by an executive officer of the applicant attesting that the allocation agreement remains in effect and has not been revoked or canceled by the Community Development Financial Institutions Fund;

(4) a description of the amount and structure of the equity investment or long-term debt security proposed to be certified;

(5) examples of the types of qualified active low-income community businesses in which the applicant, its controlling entity, or affiliates of its controlling entity have invested under the federal New Markets Tax Credit Program or a state new markets tax credit program, including written proof that the applicant or an affiliate has made at least one qualified low-income community investment or a similar loan to a business in a low-income census tract in this state;

(6) evidence that:

(A) the entity qualifies as a rural community development entity, if the entity is applying for a rural allocation;

(B) the entity or the entity's affiliate has previously made at least one qualified low-income community investment that would meet the investment requirements for a Texas education allocation, if the entity is applying for a Texas education allocation; or

(C) the entity or the entity's affiliate has previously made at least one qualified low-income community investment that would meet the investment requirements for a Texas seaport allocation, if the entity is applying for a Texas seaport allocation;

(7) a nonrefundable application fee of $5,000 to be paid to the comptroller; and

(8) the refundable performance deposit required by Subchapter E.

Sec. 231.102. ACTION ON APPLICATION. (a) Not later than the 30th day after the date an application under Section 231.101 is received, the comptroller shall grant or deny the application in full or part.

(b) If the comptroller denies the application, the comptroller shall inform the applicant of the denial.

(c) If the comptroller denies an application because the application is incomplete, the applicant may, not later than the 15th day after the date the applicant receives notice under Subsection (b), provide additional information required by the comptroller to complete the application. The comptroller shall consider an application completed under this subsection to be completed on the date the application was initially submitted.

(d) If an applicant does not complete an application in the time required under Subsection (c), the application is finally denied and the applicant must submit a new application if the applicant wishes to reapply. The comptroller shall determine the application date for the new application without regard to the previously denied application.

Sec. 231.103. CERTIFICATION OF QUALIFIED EQUITY INVESTMENT. (a) If an application under Section 231.101 is granted, the comptroller shall certify the proposed equity investment or long-term debt security as a qualified equity investment that is eligible for credits under this chapter, subject to Section 231.104.

(b) The comptroller shall provide written notice of the certification to the qualified community development entity.

(c) The certification of a qualified equity investment is effective on the date the comptroller provides notice under Subsection (b).

Sec. 231.104. LIMIT ON CERTIFIED INVESTMENTS. (a) Subject to Subsections (b) and (c), the comptroller shall limit the amount of qualified equity investments that may be certified under Section 231.103 to an amount the comptroller estimates will result in not more than:

(1) $60 million in credits being claimed under this chapter in any state fiscal year; and

(2) $300 million in total credits being claimed under this chapter.

(b) The comptroller shall estimate the amounts under Subsection (a) without regard to the carryforward provision under Section 231.054.

(c) The comptroller shall allocate 25 percent, or as nearly as possible to 25 percent, of the amount available under Subsection (a) for each of the following:

(1) a rural allocation, which may be used only by rural community development entities to make qualified low-income community investments in rural areas;

(2) a Texas education allocation, which may be used only to make qualified low-income community investments in nonprofit or for-profit entities offering primary, secondary, or higher education in low-income communities in this state;

(3) a Texas seaport allocation, which may be used only to make qualified low-income community investments in businesses operating at a port, harbor, or municipality:

(A) accessible to seagoing ships that are limited to 35 miles from the coastline; and

(B) located in a low-income community in this state; and

(4) a statewide low-income community allocation, which may be used to make qualified low-income community investments in any low-income community in this state.

(d) A qualified community development entity may apply in a single application for and receive certification of qualified equity investments in more than one allocation category under Subsection (c).

(e) Subject to Subsection (f), if a pending application cannot be fully certified due to the limit specified by Subsection (a) or (c), the comptroller shall certify the portion that can be certified.

(f) The comptroller shall certify qualified equity investments in the order in which applications are received by the comptroller. Applications received on or before the application date provided under Section 231.101(b) are considered to have been received simultaneously on the application date. For applications that are complete and received on or before the application date provided under Section 231.101(b) and for which the total amounts requested cannot be certified because of the limit specified by Subsection (a) or (c), the comptroller shall certify qualified equity investments in each allocation category under Subsection (c) on a pro rata basis based on the ratio of the amount of qualified equity investments available in an allocation category to the total amount of qualified equity investments requested in that allocation category.

Sec. 231.105. TRANSFER OF INVESTMENT AUTHORITY. A qualified community development entity whose application for certification of a qualified equity investment is approved under this subchapter may transfer all or a portion of its certified qualified equity investment authority to its controlling entity or to a qualified community development entity controlled by or under common control with the transferring entity, if the transferring entity:

(1) provides the information required in the application under Section 231.101(c) with respect to the recipient of the transfer; and

(2) notifies the comptroller of the transfer not later than the 30th day after the date of the transfer.

Sec. 231.106. ISSUANCE OF QUALIFIED EQUITY INVESTMENT; FEE. (a) Not later than the 20th month after the date the qualified community development entity receives notice of certification, the entity or a recipient of a transfer under Section 231.105 shall issue the qualified equity investment and receive cash in the amount certified.

(b) The qualified community development entity or a recipient of a transfer under Section 231.105 must provide the comptroller with evidence of the receipt of the cash investment not later than the 10th business day after the date the cash investment is received.

(c) At the time the qualified community development entity or a recipient of a transfer under Section 231.105 issues the qualified equity investment, the qualified community development entity or transfer recipient shall pay to the comptroller a fee equal to 20 basis points, or 0.2 percent, of the amount issued. Fees collected under this subsection may be appropriated only to pay the cost of preparing a report under Section 231.302.

Sec. 231.107. LAPSE OF CERTIFICATION. (a) If the qualified community development entity or a recipient of a transfer under Section 231.105 does not issue the qualified equity investment and receive the cash investment before the 20th month after the date the certification notice is received as required by Section 231.106, the certification lapses and the qualified community development entity or recipient of the transfer may not accept an equity investment or issue a long-term debt security as a qualified equity investment without reapplying to the comptroller for certification.

(b) If a certification lapses under this section, the comptroller shall reissue the previously certified amount, giving preference to an applicant for reissuance of certification whose proposed amount for certification was previously certified in a reduced amount under Section 231.104. If more than one applicant for reissuance of certification had its proposed amount reduced, the comptroller shall reissue the certified amount to those applicants on a pro rata basis, subject to the limits specified by Section 231.104.

(c) After reissuing certifications under Subsection (b), the comptroller shall reissue any certified amounts remaining to applicants in amounts determined by the comptroller, subject to the limits specified by Section 231.104.

SUBCHAPTER D. RECAPTURE OF CREDIT

Sec. 231.151. RECAPTURE. (a) Subject to Section 231.152, the comptroller shall recapture the amount of a credit claimed on a premium tax report filed under Chapter 221, 222, 223, 223A, or 224 from the investing entity if:

(1) any amount of a federal tax credit available with respect to a qualified equity investment that is eligible for a credit under this chapter is recaptured under Section 45D, Internal Revenue Code, in which case the comptroller's recapture must be proportionate to the federal recapture with respect to the qualified equity investment;

(2) the issuer redeems or makes principal repayment with respect to a qualified equity investment before the seventh anniversary of the date the qualified equity investment is issued, in which case the comptroller's recapture must be proportionate to the amount of the redemption or repayment with respect to the qualified equity investment;

(3) the issuer fails to invest an amount equal to 85 percent of the purchase price of the qualified equity investment in qualified low-income community investments in this state not later than the 20th month after the date the qualified equity investment is issued, in which case the comptroller's recapture may not exceed the amount of tax credits associated with the portion of the purchase price received but not invested on the date of the recapture; or

(4) the issuer fails to maintain an amount of investment equal to 85 percent of the purchase price of the qualified equity investment in qualified low-income community investments in this state until the last credit allowance date for the qualified equity investment, in which case the comptroller's recapture may not exceed the amount of tax credits associated with the portion of the purchase price received but not maintained in qualified low-income community investments on the date of recapture.

(b) For purposes of this chapter, a qualified low-income community investment is considered held by an issuer even if the investment has been sold or repaid if the issuer reinvests an amount equal to the capital returned to or recovered by the issuer from the original investment, exclusive of any profits realized, in another qualified low-income community investment not later than the 12th month after the date the issuer receives the capital.

(c) An issuer is not required to reinvest capital returned from a qualified low-income community investment after the sixth anniversary of the date the qualified equity investment whose proceeds were used to make the qualified low-income community investment was issued. The qualified low-income community investment is considered held by the issuer through the seventh anniversary of the date the qualified equity investment was issued.

(d) Periodic amounts received during a calendar year as repayment of principal on a loan that is a qualified low-income community investment shall be treated as continuously invested in a qualified low-income community investment if the amounts are reinvested in one or more qualified low-income community investments not later than the last day of the following calendar year.

(e) After the seventh anniversary of the date a qualified equity investment is issued, the qualified community development entity may request that the comptroller certify that tax credits associated with the qualified equity investment are not subject to recapture under this section.

(f) Not later than the 60th day after the date the comptroller receives a request under Subsection (e), the comptroller shall:

(1) certify in writing to the qualified community development entity that tax credits associated with the qualified equity investment are not subject to recapture and that the qualified community development entity has satisfied all the requirements of this chapter; or

(2) notify the qualified community development entity that tax credits associated with the qualified equity investment are subject to recapture and that the qualified community development entity has not satisfied the requirements of this chapter and shall provide a written explanation of the reason for that determination.

(g) After the comptroller certifies under Subsection (f)(1) that tax credits associated with a qualified equity investment are not subject to recapture:

(1) the comptroller may not recapture any tax credits associated with that qualified equity investment; and

(2) the qualified community development entity is not subject to regulation by the comptroller or to the reporting requirements under Section 231.301 in connection with that qualified equity investment.

Sec. 231.152. NOTICE OF NONCOMPLIANCE. (a) The comptroller shall notify a qualified community development entity and an investing entity that has claimed a credit on a report if the credit is subject to recapture under Section 231.151.

(b) The comptroller may not recapture a credit under this subchapter if the qualified community development entity cures the noncompliance described by Section 231.151 before the 90th day after the date the qualified community development entity receives notice under Subsection (a).

SUBCHAPTER E. SECURITY FOR PERFORMANCE

Sec. 231.201. SECURITY REQUIRED. (a) Not later than the 14th day after the date a qualified equity investment is certified under Subchapter C, the qualified community development entity that received investment authority for the qualified equity investment must deposit $500,000 with the comptroller as a refundable performance deposit to be deposited as required by Section 231.204.

(b) This section applies regardless of whether the investment authority is for a rural allocation, a Texas education allocation, a Texas seaport allocation, or a statewide low-income community allocation.

Sec. 231.202. FAILURE TO PROVIDE SECURITY: LOSS OF CERTIFICATION. The comptroller shall revoke the certification of the qualified equity investment of a qualified community development entity that fails to make a deposit under Section 231.201.

Sec. 231.203. FORFEITURE OF SECURITY. (a) A qualified community development entity that makes a performance deposit under Section 231.201 forfeits the deposit in its entirety if:

(1) the qualified community development entity or any qualified community development entity to which a transfer is made under Section 231.105 fails to issue the total amount of qualified equity investments certified by the comptroller and receive cash in the amount certified under Section 231.103 not later than the date specified by Section 231.106; or

(2) subject to Subsection (b), the qualified community development entity or a qualified community development entity to which a transfer is made under Section 231.105 that issues a qualified equity investment certified under Section 231.103 fails to make or maintain the investment required under Sections 231.151(a)(3) and (4) to avoid recapture of a credit claimed in connection with the qualified equity investment.

(b) A deposit is not subject to forfeiture under Subsection (a)(2) if the qualified community development entity cures the noncompliance before the 90th day after the date the qualified community development entity receives notice under Subsection (c).

(c) The comptroller shall notify a qualified community development entity that made a deposit under Section 231.201 in writing if the deposit is subject to forfeiture under this section.

Sec. 231.204. NEW MARKETS PERFORMANCE GUARANTEE FUND. (a) The new markets performance guarantee fund is an interest-bearing fund outside the state treasury with the comptroller. The fund consists of money the comptroller deposits under Subsection (b). The comptroller shall administer the fund.

(b) The comptroller shall deposit a performance deposit made under Section 231.201 to the credit of the new markets performance guarantee fund. The deposit must remain on deposit with the fund until the comptroller determines that:

(1) the qualified community development entity has complied with the provisions of this chapter; or

(2) the deposit has been forfeited and will be deposited in accordance with Section 231.206.

Sec. 231.205. RELEASE OF SECURITY. (a) Not earlier than the 30th day after the date the requirements that must be satisfied to avoid forfeiture of a deposit as described by Section 231.203 are satisfied, a qualified community development entity that made the deposit may request a refund of the deposit from the comptroller.

(b) The comptroller shall refund the deposit or, if applicable, give notice of noncompliance as described by Section 231.203 not later than the 30th day after the date of receiving a request under Subsection (a).

Sec. 231.206. DEPOSIT OF FORFEITED SECURITY. The comptroller shall deposit in the general revenue fund a deposit forfeited under Section 231.203.

SUBCHAPTER F. EVALUATION OF BUSINESS BY COMPTROLLER

Sec. 231.251. EVALUATION REQUIRED. (a) Except as provided by Subsection (c), a qualified community development entity or a recipient of a transfer under Section 231.105 must, before making an investment in a business, request a written opinion from the comptroller as to whether:

(1) the business in which the qualified community development entity proposes to invest would qualify as a qualified active low-income community business under Section 231.003; and

(2) the location where the qualified community development entity proposes to invest would meet the location requirements for a rural allocation, a Texas education allocation, or a Texas seaport allocation, as applicable.

(b) Not later than the 10th business day after the date of the receipt of a request under Subsection (a), the comptroller shall make the requested determinations and issue the written opinion, including explanations for the determinations.

(c) A qualified community development entity or a recipient of a transfer under Section 231.105 may, but is not required to, request a written opinion under Subsection (a) before making an investment in a business if the qualified community development entity or transfer recipient concurrently makes a federal qualified low-income community investment in the business.

Sec. 231.252. CONSIDERATION OF FEDERAL TAX LAWS. In issuing a written opinion and making other determinations under this chapter, the comptroller shall consider Section 45D, Internal Revenue Code, and the federal tax regulations issued under that code, to the extent that those provisions are applicable.

SUBCHAPTER G. REPORTING

Sec. 231.301. REPORT TO COMPTROLLER. (a) Except as provided by this subsection, a qualified community development entity that issues a qualified equity investment under Section 231.106 shall submit an annual report to the comptroller not later than the fifth business day after the anniversary of a credit allowance date applicable to the investment. The qualified community development entity is not required to submit any report under this subsection after the annual report following the final credit allowance date.

(b) The report must:

(1) provide evidence that the qualified community development entity has made and maintained the investment required under Sections 231.151(a)(3) and (4) to avoid recapture of a credit claimed in connection with the qualified equity investment;

(2) include one or more bank statements for the qualified community development entity that reflect each qualified low-income community investment made by the qualified community development entity in connection with the qualified equity investment;

(3) state the name, location, and industry code of each qualified active low-income community business receiving a qualified low-income community investment in connection with the qualified equity investment;

(4) state the number of employment positions created and retained as a result of each qualified low-income community investment made in connection with the qualified equity investment;

(5) state whether the qualified community development entity has been subject to a recapture of any amount of a federal tax credit available under Section 45D, Internal Revenue Code, with respect to the qualified equity investment; and

(6) include a copy of the most recent annual report submitted by the qualified community development entity to the United States Department of the Treasury regarding Section 45D, Internal Revenue Code.

(c) A qualified community development entity that fails to submit a report to the comptroller within the time prescribed by Subsection (a) shall pay to the comptroller a penalty equal to the sum of:

(1) $25,000; and

(2) $5,000 for each day the report is not submitted after the date the report is due under Subsection (a).

Sec. 231.302. COMPTROLLER'S REPORT TO LEGISLATURE. (a) The comptroller shall contract with an independent researcher at a center for education research established under Section 1.005, Education Code, to prepare a biennial report with respect to the implementation of this chapter.

(b) The report must include:

(1) the number of qualified community development entities holding certified qualified equity investments;

(2) the amount of qualified equity investments of each qualified community development entity;

(3) the investments each qualified community development entity has made in qualified active low-income community businesses as of the most recent annual report submitted to the comptroller by the qualified community development entity;

(4) the total amount of credits earned under this chapter;

(5) the performance of each qualified community development entity with respect to reporting requirements imposed by this chapter;

(6) with respect to each qualified active low-income community business in which a qualified community development entity has invested:

(A) the classification of the qualified active low-income community business according to the industrial sector and the size of the business;

(B) the total number of jobs created by the qualified low-income community investment and the average wages paid for the jobs; and

(C) the total number of jobs retained as a result of the qualified low-income community investment and the average wages paid for the jobs; and

(7) an analysis of the effect implementation of this chapter has had during the period covered by the report on:

(A) economic activity in this state; and

(B) state tax revenue.

(c) The comptroller shall file the report with the governor, the lieutenant governor, and the speaker of the house of representatives not later than December 15 of each even-numbered year.

SECTION 2. (a) As soon as practicable after the effective date of this Act, the comptroller of public accounts shall adopt rules necessary to implement the provisions of Chapter 231, Insurance Code, as added by this Act.

(b) The comptroller of public accounts shall provide an initial application date under Section 231.101(b), Insurance Code, as added by this Act, of October 2, 2017.

SECTION 3. Subchapter B, Chapter 231, Insurance Code, as added by this Act, applies only to a tax report originally due on or after January 1, 2018.

SECTION 4. This Act takes effect September 1, 2017.