H.B. No. 3271
 
 
 
 
AN ACT
  relating to establishing loan programs to assist certain
  micro-businesses by increasing access to capital; authorizing
  fees.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 481, Government Code, is amended by
  adding Subchapter CC to read as follows:
         SUBCHAPTER CC. MICRO-BUSINESS DISASTER RECOVERY PROGRAM
         Sec. 481.451.  DEFINITIONS. In this subchapter:
               (1)  "Community development financial institution" has
  the meaning assigned by 12 U.S.C. Section 4702.
               (2)  "Declared disaster" means:
                     (A)  a declaration of a state of disaster under
  Section 418.014 or 418.108; or
                     (B)  a disaster declared by the president of the
  United States, if any part of this state is named in the federally
  designated disaster area.
               (3)  "Default rate" means the percentage of
  micro-business disaster recovery loans made that did not meet the
  payment terms during a period specified by the bank.
               (4)  "Fund" means the micro-business recovery fund
  established under Section 481.452.
               (5)  "Micro-business" means a corporation,
  partnership, sole proprietorship, or other legal entity that:
                     (A)  is domiciled in this state and has at least 95
  percent of its employees located in this state;
                     (B)  is formed to make a profit; and
                     (C)  employs not more than 20 employees.
               (6)  "Micro-business disaster recovery loan" or
  "disaster recovery loan" means a loan made by a participating
  community development financial institution to micro-businesses
  under the program.
               (7)  "Program" means the micro-business disaster
  recovery loan program established under this subchapter.
         Sec. 481.452.  MICRO-BUSINESS RECOVERY FUND. (a) The
  micro-business recovery fund is a dedicated account in the general
  revenue fund.
         (b)  Appropriations for the implementation and
  administration of this subchapter and any other amounts, including
  federal allocations, received by the bank or state under this
  subchapter shall be deposited in the fund.
         (c)  Money in the fund may be appropriated only to the bank
  for use in carrying out the purposes of this subchapter.
         Sec. 481.453.  POWERS OF BANK IN ADMINISTERING
  MICRO-BUSINESS RECOVERY FUND. In administering the fund, the bank
  has the powers necessary to carry out the purposes of this
  subchapter, including the power to:
               (1)  make, execute, and deliver contracts,
  conveyances, and other instruments necessary to the exercise of its
  powers;
               (2)  invest money at the bank's discretion in
  obligations determined proper by the bank, and select and use
  depositories for its money;
               (3)  employ personnel and counsel and pay those persons
  from money in the fund legally available for that purpose; and
               (4)  impose and collect fees and charges in connection
  with any transaction and provide for reasonable penalties for
  delinquent payment of fees or charges.
         Sec. 481.454.  ESTABLISHMENT OF LOAN PROGRAM; PURPOSE. (a)  
  The bank shall establish and administer a revolving loan program as
  provided by this subchapter.
         (b)  The program shall expand access to capital for
  qualifying micro-businesses to create jobs in this state and
  constitutes a capital access program under Subchapter BB.
         Sec. 481.455.  PROGRAM ADMINISTRATION. (a) The bank, under
  the program, shall provide zero interest loans to eligible
  community development financial institutions for purposes of
  making interest-bearing loans to qualifying micro-businesses that
  have difficulty in accessing capital following a declared disaster.
         (b)  A loan made by an eligible community development
  financial institution under the program:
               (1)  must be made to a micro-business that:
                     (A)  is in good standing under the laws of this
  state; and
                     (B)  did not owe delinquent taxes to a taxing unit
  of this state before the date of the initial issuance of the
  disaster declaration;
               (2)  may not be made to a micro-business that:
                     (A)  has total revenue that exceeds the amount for
  which no franchise tax is due under Section 171.002(d)(2), Tax
  Code;
                     (B)  is a franchise;
                     (C)  is a national chain with operations in this
  state;
                     (D)  is a lobbying firm; or
                     (E)  is a private equity firm or backed by a
  private equity firm; and
               (3)  must meet any other criteria provided by this
  subchapter.
         (c)  Payments on micro-business disaster recovery loans
  shall be made directly to the lending community development
  financial institutions.
         (d)  All income received on a loan made by a community
  development financial institution participating in the program is
  the property of the financial institution. Income received on a
  loan includes the payment of interest by a borrower micro-business
  and the administrative fees assessed by the community development
  financial institution.
         (e)  A community development financial institution
  participating in the program shall make payments to the bank on the
  zero interest loans borrowed by the financial institution under the
  program quarterly, and the bank or this state is not responsible or
  liable for any defaults in micro-business disaster recovery loans
  made by the community development financial institution.
         Sec. 481.456.  RULEMAKING. The executive director shall
  adopt rules relating to the implementation of the program and any
  other rules necessary to accomplish the purposes of this
  subchapter, including rules that provide criteria under which
  community development financial institutions may qualify for the
  program.
         Sec. 481.457.  OVERSIGHT. (a) A community development
  financial institution participating in the program shall report
  quarterly to the bank:
               (1)  the names of micro-businesses that have received a
  disaster recovery loan;
               (2)  the current balance of all outstanding disaster
  recovery loans;
               (3)  the default rate on existing disaster recovery
  loans; and
               (4)  any other information the bank requires.
         (b)  A community development financial institution
  participating in the program shall prepare a detailed financial
  statement each quarter and provide a copy to the bank.
         (c)  A community development financial institution shall
  allow the bank to inspect the institution's financial records on
  request for purposes that relate to loans under the program.
         Sec. 481.458.  PROGRAM ANNUAL STATUS REPORT. The bank shall
  prepare an annual status report on the program. The office shall
  include a summary of the report in the report to the legislature
  required by Section 489.107.
         SECTION 2.  The heading to Subchapter BB, Chapter 481,
  Government Code, is amended to read as follows:
  SUBCHAPTER BB.  ACCESS TO CAPITAL PROGRAMS [ACCESS PROGRAM]
         SECTION 3.  Section 481.401, Government Code, is amended by
  amending Subdivisions (3), (7), (8), and (9) and adding Subdivision
  (6-a) to read as follows:
               (3)  "Fund" means the original capital access fund.
               (6-a)  "Original capital access program" means the
  program established under Section 481.405.
               (7)  "Participating financial institution" means a
  financial institution participating in a [the] program.
               (8)  "Program" means an [the capital] access to capital 
  program established by the bank under this subchapter.
               (9)  "Reserve account" means an account established in
  a participating financial institution on approval of the bank in
  which money is deposited to serve as a source of additional revenue
  to reimburse the financial institution for losses on loans enrolled
  in a [the] program.
         SECTION 4.  Section 481.402, Government Code, is amended to
  read as follows:
         Sec. 481.402.  ORIGINAL CAPITAL ACCESS FUND. (a) The
  original capital access fund is a dedicated account in the general
  revenue fund.
         (b)  Appropriations for the implementation and
  administration of the original capital access program [this
  subchapter] and any other amounts received by the state for the
  original capital access program [under this subchapter] shall be
  deposited in the fund.
         (c)  Money in the fund may be appropriated only to the bank
  for use in carrying out the purposes of the original capital access
  program [this subchapter].
         SECTION 5.  Subchapter BB, Chapter 481, Government Code, is
  amended by adding Section 481.403 to read as follows:
         Sec. 481.403.  ACCESS TO CAPITAL PROGRAMS. The bank may
  establish access to capital loan-related programs of the following
  types to promote private access to capital to certain businesses
  with fewer than 500 full-time employees:
               (1)  capital access programs;
               (2)  collateral support programs;
               (3)  loan guarantee programs; and
               (4)  loan participation programs.
         SECTION 6.  The heading to Section 481.404, Government Code,
  is amended to read as follows:
         Sec. 481.404.  POWERS OF BANK IN ADMINISTERING ORIGINAL
  CAPITAL ACCESS FUND.
         SECTION 7.  Section 481.405, Government Code, is amended to
  read as follows:
         Sec. 481.405.  ORIGINAL CAPITAL ACCESS PROGRAM. (a) The
  original [bank shall establish a] capital access program has been
  established by the bank to assist a participating financial
  institution in making loans to businesses and nonprofit
  organizations that face barriers in accessing capital.
         (b)  The bank shall use money in the fund to make a deposit in
  a participating financial institution's reserve account in an
  amount specified by this subchapter to be a source of money the
  institution may receive as reimbursement for losses attributable to
  loans in the original capital access program.
         (c)  The bank shall determine the eligibility of a financial
  institution to participate in the original capital access program
  and may set a limit on the number of eligible financial institutions
  that may participate in the original capital access program.
         (d)  To participate in the original capital access program,
  an eligible financial institution must enter into a participation
  agreement with the bank that sets out the terms and conditions under
  which the bank will make contributions to the institution's reserve
  account and specifies the criteria for a loan to qualify as a
  capital access loan under the original capital access program.
         (e)  To qualify as a capital access loan under the original
  capital access program, a loan must:
               (1)  be made to a small or medium-sized business or to a
  nonprofit organization;
               (2)  be used by the business or nonprofit organization
  for any project, activity, or enterprise in this state that fosters
  economic development; and
               (3)  meet any other criteria provided by this
  subchapter.
         SECTION 8.  Section 481.406, Government Code, is amended to
  read as follows:
         Sec. 481.406.  RULEMAKING AUTHORITY. (a) The executive
  director may [shall] adopt rules relating to the implementation of
  any [the] program established under this subchapter and any other
  rules necessary to accomplish the purposes of this subchapter.
         (b)  The rules for the original capital access program may:
               (1)  provide for criteria under which a certain line of
  credit issued by an eligible financial institution to a small or
  medium-sized business or nonprofit organization qualifies to
  participate in the original capital access program; and
               (2)  authorize a consortium of financial institutions
  to participate in the original capital access program subject to
  common underwriting guidelines.
         (c) [(b)]  To qualify for participation in the original
  capital access program, a line of credit must:
               (1)  be an account at a financial institution under
  which the financial institution agrees to lend money to a person
  from time to time to finance one or more projects, activities, or
  enterprises that are authorized by this subchapter; and
               (2)  contain the same restrictions, to the extent
  possible, that are placed on a capital access loan under the
  original capital access program that is not a line of credit.
         SECTION 9.  Section 481.407, Government Code, is amended to
  read as follows:
         Sec. 481.407.  PROVISIONS RELATING TO CAPITAL ACCESS LOAN
  UNDER ORIGINAL CAPITAL ACCESS PROGRAM. (a) Except as otherwise
  provided by this subchapter, the bank may not determine the
  recipient, amount, or interest rate of a capital access loan under
  the original capital access program or the fees or other
  requirements related to the loan.
         (b)  A loan under the original capital access program is not
  eligible to be enrolled under this subchapter if the loan is for:
               (1)  construction or purchase of residential housing;
               (2)  simple real estate investments, excluding the
  development or improvement of commercial real estate occupied by
  the borrower's business or organization; or
               (3)  inside bank transactions, as defined by the policy
  board.
         (c)  The borrower of a capital access loan under the original
  capital access program must apply the loan to working capital or to
  the purchase, construction, or lease of capital assets, including
  buildings and equipment used by the business or nonprofit
  organization. Working capital uses include the cost of exporting,
  accounts receivable, payroll, inventory, and other financing needs
  of the business or organization.
         (d)  A capital access loan under the original capital access
  program may be sold on the secondary market with no recourse to the
  bank or to the loan loss reserve correspondent to the loan and under
  conditions as may be determined by the bank.
         (e)  When enrolling a loan in the original capital access
  program, a participating financial institution may specify an
  amount to be covered under the original capital access program that
  is less than the total amount of the loan.
         SECTION 10.  Section 481.408, Government Code, is amended to
  read as follows:
         Sec. 481.408.  ORIGINAL CAPITAL ACCESS PROGRAM RESERVE
  ACCOUNT. (a) On approval by the bank and after entering into a
  participation agreement with the bank, a participating financial
  institution making a capital access loan under the original capital
  access program shall establish a reserve account. The reserve
  account shall be used by the institution only to cover any losses
  arising from a default of a capital access loan under the original
  capital access program made by the institution under this
  subchapter or as otherwise provided by this subchapter.
         (b)  When a participating financial institution makes a loan
  enrolled in the original capital access program, the institution
  shall require the borrower to pay to the institution a fee in an
  amount that is not less than two percent but not more than three
  percent of the principal amount of the loan, which the financial
  institution shall deposit in the reserve account. The institution
  shall also deposit in the reserve account an amount equal to the
  amount of the fee received by the institution from the borrower
  under this subsection. The institution may recover from the
  borrower all or part of the amount the institution is required to
  pay under this subsection in any manner agreed to by the institution
  and borrower.
         (c)  For each capital access loan under the original capital
  access program made by a financial institution, the institution
  shall certify to the bank, within the period prescribed by the bank,
  that the institution has made a capital access loan, the amount the
  institution has deposited in the reserve account, including the
  amount of fees received from the borrower, and, if applicable, that
  the borrower is financing an enterprise project or is located in or
  financing a project, activity, or enterprise in an area designated
  as an enterprise zone under Chapter 2303.
         (d)  On receipt of a certification made under Subsection (c)
  and subject to Section 481.409, the bank shall deposit in the
  institution's reserve account for each capital access loan made by
  the institution under the original capital access program:
               (1)  an amount equal to the amount deposited by the
  institution for each loan if the institution:
                     (A)  has assets of more than $1 billion; or
                     (B)  has previously enrolled loans in the original
  capital access program that in the aggregate are more than $2
  million;
               (2)  an amount equal to 150 percent of the total amount
  deposited under Subsection (b) for each loan if the institution is
  not described by Subdivision (1); or
               (3)  notwithstanding Subdivisions (1) and (2), an
  amount equal to 200 percent of the total amount deposited under
  Subsection (b) for each loan if:
                     (A)  the borrower is financing an enterprise
  project or is located in or financing a project, activity, or
  enterprise in an area designated as an enterprise zone under
  Chapter 2303;
                     (B)  the borrower is a small or medium-sized
  business or a nonprofit organization that operates or proposes to
  operate a day-care center or a group day-care home, as those terms
  are defined by Section 42.002, Human Resources Code; or
                     (C)  the participating financial institution is a
  community development financial institution, as that term is
  defined by 12 U.S.C. Section 4702, as amended.
         (e)  A participating financial institution must obtain
  approval from the bank to withdraw funds from the reserve account.
         SECTION 11.  Section 481.409, Government Code, is amended to
  read as follows:
         Sec. 481.409.  LIMITATIONS ON STATE CONTRIBUTION TO ORIGINAL
  CAPITAL ACCESS PROGRAM RESERVE ACCOUNT. (a) The amount deposited
  by the bank into a participating financial institution's reserve
  account for any single loan recipient under the original capital
  access program may not exceed $150,000 during a three-year period.
         (b)  The maximum amount the bank may deposit into a reserve
  account for each capital access loan under the original capital
  access program made under this subchapter is the lesser of $35,000
  or an amount equal to:
               (1)  eight percent of the loan amount if:
                     (A)  the borrower is financing an enterprise
  project or is located in or financing a project, activity, or
  enterprise in an area designated as an enterprise zone under
  Chapter 2303;
                     (B)  the borrower is a small or medium-sized
  business or a nonprofit organization that operates or proposes to
  operate a day-care center or a group day-care home, as those terms
  are defined by Section 42.002, Human Resources Code; or
                     (C)  the participating financial institution is a
  community development financial institution, as that term is
  defined by 12 U.S.C. Section 4702, as amended; or
               (2)  six percent of the loan amount for any other
  borrower.
         SECTION 12.  Section 481.410, Government Code, is amended to
  read as follows:
         Sec. 481.410.  STATE'S RIGHTS WITH RESPECT TO ORIGINAL
  CAPITAL ACCESS PROGRAM RESERVE ACCOUNT. (a) All of the money in a
  reserve account established under this subchapter for the original
  capital access program is property of the state.
         (b)  The state is entitled to earn interest on the amount of
  contributions made by the bank, borrower, and institution to a
  reserve account under this subchapter for the original capital
  access program. The bank shall withdraw monthly or quarterly from a
  reserve account for the original capital access program the amount
  of the interest earned by the state. The bank shall deposit the
  amount withdrawn under this subsection into the fund.
         (c)  If the amount in a reserve account for the original
  capital access program exceeds an amount equal to 33 percent of the
  balance of the financial institution's outstanding capital access
  loans under the original capital access program, the bank may
  withdraw the excess amount and deposit the amount in the fund. A
  withdrawal of money authorized under this subsection may not reduce
  an active reserve account for the original capital access program
  to an amount that is less than $200,000.
         (d)  The bank shall withdraw from the institution's reserve
  account under the original capital access program the total amount
  in the account and any interest earned on the account and deposit
  the amount in the fund when:
               (1)  a financial institution is no longer eligible to
  participate in the original capital access program or a
  participation agreement entered into under this subchapter for the
  original capital access program expires without renewal by the bank
  or institution;
               (2)  the financial institution has no outstanding
  capital access loans under the original capital access program;
               (3)  the financial institution has not made a capital
  access loan under the original capital access program within the
  preceding 24 months; or
               (4)  the financial institution fails to submit a report
  or other document requested by the bank for the original capital
  access program within the time or in the manner prescribed.
         SECTION 13.  Section 481.411, Government Code, is amended to
  read as follows:
         Sec. 481.411.  ANNUAL REPORT. A participating financial
  institution shall submit an annual report to the bank. The report
  must, at a minimum:
               (1)  provide information regarding outstanding
  [capital access] loans, [capital access] loan losses, and any other
  information related to participation in a program established under
  this subchapter [on capital access loans] the bank considers
  appropriate;
               (2)  state the total amount of loans for which the bank
  has made a contribution from the fund under this subchapter;
               (3)  include a copy of the institution's most recent
  financial statement; and
               (4)  include information regarding the type and size of
  businesses and nonprofit organizations with [capital access] loans
  under this subchapter.
         SECTION 14.  Section 481.412(a), Government Code, is amended
  to read as follows:
         (a)  The office shall submit to the legislature an annual
  status report on the [program's] activities of all programs
  established under this subchapter.
         SECTION 15.  The heading to Section 481.415, Government
  Code, is amended to read as follows:
         Sec. 481.415.  ALLOCATION AND TRANSFER OF MONEY FROM
  ORIGINAL CAPITAL ACCESS FUND.
         SECTION 16.  Section 481.415(a), Government Code, is amended
  to read as follows:
         (a)  Notwithstanding any other provision of this subchapter,
  the bank may allocate money held in or due to the original capital
  access fund to programs administered by the bank under Section
  489.108 or Subchapter D, Chapter 489. The bank may transfer money
  from the original capital access fund to the Texas product
  development fund or the Texas small business incubator fund.
         SECTION 17.  Section 489.105(b), Government Code, is amended
  to read as follows:
         (b)  The fund consists of:
               (1)  appropriations for the implementation and
  administration of this chapter;
               (2)  investment earnings under the original capital
  access fund established under Section 481.402;
               (3)  fees charged under Subchapter BB, Chapter 481;
               (4)  interest earned on the investment of money in the
  fund;
               (5)  fees charged under this chapter;
               (6)  investment earnings from the programs
  administered by the bank;
               (7)  amounts transferred under Section 2303.504(b), as
  amended by Article 2, Chapter 1134, Acts of the 77th Legislature,
  Regular Session, 2001;
               (8)  investment earnings under the Texas product
  development fund under Section 489.211;
               (9)  investment earnings under the Texas small business
  incubator fund under Section 489.212; and
               (10)  any other amounts received by the state under
  this chapter.
         SECTION 18.  Section 489.108, Government Code, is amended to
  read as follows:
         Sec. 489.108.  PROGRAMS, SERVICES, AND FUNDS UNDER BANK'S
  DIRECTION. Notwithstanding any other law, the bank shall perform
  the duties and functions of the office with respect to the following
  programs, services, and funds:
               (1)  the original capital access program established
  under Section 481.405;
               (2)  the Texas leverage fund;
               (3)  the enterprise zone program established under
  Chapter 2303;
               (4)  the industrial revenue bond program;
               (5)  the defense economic readjustment zone program
  established under Chapter 2310;
               (6)  the Empowerment Zone and Enterprise Community
  grant program established under Section 481.025; and
               (7)  the renewal community program.
         SECTION 19.  Section 489.211(b), Government Code, is amended
  to read as follows:
         (b)  The product fund is composed of proceeds of bonds issued
  under this subchapter, financing application fees, loan
  repayments, guarantee fees, royalty receipts, dividend income,
  money appropriated by the legislature for authorized purposes of
  the product fund, amounts received by the state from loans, loan
  guarantees, and equity investments made under this subchapter,
  amounts received by the state from federal grants or other sources,
  amounts transferred from the original capital access fund under
  Section 481.415, and any other amounts received under this
  subchapter and required by the bank to be deposited in the product
  fund. The product fund contains a program account, an interest and
  sinking account, and other accounts that the bank authorizes to be
  created and maintained. Money in the product fund is available for
  use by the board under this subchapter. Investment earnings under
  the product fund must be transferred to the fund created under
  Section 489.105. Notwithstanding any other provision of this
  subchapter, any money in the product fund may be used for debt
  service.
         SECTION 20.  Section 489.212(b), Government Code, is amended
  to read as follows:
         (b)  The small business fund is composed of proceeds of bonds
  issued under this subchapter, financing application fees, loan
  repayments, guarantee fees, royalty receipts, dividend income,
  money appropriated by the legislature for authorized purposes of
  the small business fund, amounts received by the state from loans,
  loan guarantees, and equity investments made under this subchapter,
  amounts received by the state from federal grants or other sources,
  amounts transferred from the original capital access fund under
  Section 481.415, and any other amounts received under this
  subchapter and required by the bank to be deposited in the small
  business fund. The small business fund contains a project account,
  an interest and sinking account, and other accounts that the bank
  authorizes to be created and maintained. Money in the small
  business fund is available for use by the board under this
  subchapter. Investment earnings under the small business fund must
  be transferred to the fund created under Section 489.105.
  Notwithstanding any other provision of this subchapter, any money
  in the small business fund may be used for debt service.
         SECTION 21.  This Act takes effect immediately if it
  receives a vote of two-thirds of all the members elected to each
  house, as provided by Section 39, Article III, Texas Constitution.
  If this Act does not receive the vote necessary for immediate
  effect, this Act takes effect September 1, 2021.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 3271 was passed by the House on April
  28, 2021, by the following vote:  Yeas 97, Nays 43, 2 present, not
  voting; and that the House concurred in Senate amendments to H.B.
  No. 3271 on May 28, 2021, by the following vote:  Yeas 101, Nays 44,
  1 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 3271 was passed by the Senate, with
  amendments, on May 24, 2021, by the following vote:  Yeas 23, Nays
  6, 1 present, not voting.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor