88R10369 RDS-D
 
  By: Creighton S.B. No. 2405
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to state contracts with Chinese companies and investments
  in Chinese companies and certain companies doing business with
  China; authorizing a civil penalty.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 2270.0001, Government Code, is amended
  by adding Subdivision (1-a) and amending Subdivision (9) to read as
  follows:
               (1-a)  "Chinese company" means a company that is
  headquartered in China, regardless of whether:
                     (A)  the company's or its parent company's
  securities are publicly traded; or
                     (B)  the company or its parent company is listed
  as a Chinese company on a public stock exchange.
               (9)  "Scrutinized company" means:
                     (A)  a company that:
                           (i)  engages in scrutinized business
  operations described by Section 2270.0052; or
                           (ii)  has been complicit in the Darfur
  genocide during any preceding 20-month period;
                     (B)  a company that engages in scrutinized
  business operations described by Section 2270.0102; [and]
                     (C)  a company that engages in scrutinized
  business operations described by Section 2270.0152; and
                     (D)  a company that engages in scrutinized
  business operations described by Section 2270.0162 or that is a
  Chinese company.
         SECTION 2.  Subchapter A, Chapter 2270, Government Code, is
  amended by adding Section 2270.00015 to read as follows:
         Sec. 2270.00015.  APPLICABILITY. (a)  In this section:
               (1)  "Institution of higher education" has the meaning
  assigned by Section 61.003, Education Code.
               (2)  "Trust company" means the Texas Treasury
  Safekeeping Trust Company.
         (b)  This subchapter applies to an institution of higher
  education and the trust company in the same manner as this
  subchapter applies to an investing entity.
         (c)  Subchapter E, except Section 2270.0205, applies to an
  institution of higher education and the trust company in the same
  manner that the subchapter applies to an investing entity, but only
  to the extent the institution of higher education or trust company
  owns direct or indirect holdings of a company described by Section
  2270.0001(9)(D).
         SECTION 3.  Section 2270.0002, Government Code, is amended
  to read as follows:
         Sec. 2270.0002.  EXCEPTION. Notwithstanding any other law,
  a company that the United States government affirmatively declares
  to be excluded from its federal sanctions regime relating to Sudan,
  its federal sanctions regime relating to Iran, [or] any federal
  sanctions regime relating to a designated foreign terrorist
  organization, or its federal sanctions regime relating to China is
  not subject to divestment or investment prohibition under this
  chapter.
         SECTION 4.  Chapter 2270, Government Code, is amended by
  adding Subchapter D-1 to read as follows:
  SUBCHAPTER D-1. GENERAL PROVISIONS RELATING TO INVESTMENTS IN CHINA
         Sec. 2270.0161.  DEFINITIONS. In this subchapter:
               (1)  "Business operations" means engaging in commerce
  in any form in China, including by acquiring, developing,
  maintaining, owning, selling, possessing, leasing, or operating
  equipment, facilities, personnel, products, services, personal
  property, real property, or any other apparatus of business or
  commerce.
               (2)  "Military equipment" means weapons, arms,
  military supplies, and equipment that readily may be used for
  military purposes, including radar systems and military-grade
  transport vehicles.
         Sec. 2270.0162.  SCRUTINIZED BUSINESS OPERATIONS IN CHINA.
  A company engages in scrutinized business operations in China if:
               (1)  the company has business operations that involve
  contracts with or providing supplies or services to the government
  of China, a company in which the government of China has any direct
  or indirect equity share, a consortium or project commissioned by
  the government of China, or a company involved in a consortium or
  project commissioned by the government of China; or
               (2)  the company supplies military equipment to China.
         SECTION 5.  Sections 2270.0201(a) and (b), Government Code,
  are amended to read as follows:
         (a)  The comptroller shall prepare and maintain a list of all
  scrutinized companies.  The list must be categorized according to:
               (1)  companies that are scrutinized companies under
  Section 2270.0001(9)(A);
               (2)  companies that are scrutinized companies under
  Section 2270.0001(9)(B); [and]
               (3)  companies that are scrutinized companies under
  Section 2270.0001(9)(C); and
               (4)  companies that are scrutinized companies under
  Section 2270.0001(9)(D).
         (b)  In maintaining the list of scrutinized companies under
  Subsection (a), the comptroller may review and rely, as appropriate
  in the comptroller's judgment, on publicly available information
  regarding companies with business operations in Sudan, in Iran,
  [or] with designated foreign terrorist organizations, or in China,
  as applicable, including information provided by the state,
  nonprofit organizations, research firms, international
  organizations, and governmental entities.
         SECTION 6.  Section 2270.0203, Government Code, is amended
  to read as follows:
         Sec. 2270.0203.  NOTICE TO LISTED COMPANY ENGAGED IN
  INACTIVE BUSINESS OPERATIONS. For each listed company identified
  under Section 2270.0202 that is engaged in only inactive
  scrutinized business operations, the investing entity shall send a
  written notice informing the company of this chapter and
  encouraging the company to continue to refrain from initiating
  active business operations in Sudan, in Iran, [and] with designated
  foreign terrorist organizations, and in China until it is able to
  avoid being considered a listed company.  The investing entity
  shall continue the correspondence as the entity considers
  necessary, but is not required to initiate correspondence more
  often than semiannually.
         SECTION 7.  Section 2270.0204(b), Government Code, is
  amended to read as follows:
         (b)  The notice shall offer the company the opportunity to
  clarify its Sudan-related, Iran-related, [or] designated foreign
  terrorist organization-related, or China-related activities, as
  applicable, and shall encourage the company, not later than the
  90th day after the date the company receives notice under this
  section, to either cease all scrutinized business operations as
  described by Sections 2270.0052, 2270.0102, [and] 2270.0152, and
  2270.0162, or convert such operations to inactive business
  operations in order to avoid qualifying for divestment by investing
  entities.
         SECTION 8.  Subtitle F, Title 10, Government Code, is
  amended by adding Chapter 2279 to read as follows:
  CHAPTER 2279. PROHIBITION ON CONTRACTS WITH CHINESE COMPANIES
         Sec. 2279.001.  DEFINITIONS. In this chapter:
               (1)  "Chinese company" means a company that is
  headquartered in China, regardless of whether:
                     (A)  the company's or its parent company's
  securities are publicly traded; or
                     (B)  the company or its parent company is listed
  as a Chinese company on a public stock exchange.
               (2)  "Company" means a sole proprietorship,
  organization, association, corporation, partnership, joint
  venture, limited partnership, limited liability partnership, or
  limited liability company, including a wholly owned subsidiary,
  majority-owned subsidiary, parent company, or affiliate of those
  entities or business associations, that exists to make a profit.
               (3)  "State agency" has the meaning assigned by Section
  2151.002.
         Sec. 2279.002.  PROVISION REQUIRED IN CERTAIN CONTRACTS. A
  state agency may not enter into a contract with a vendor for goods
  or services unless the contract contains a written verification
  from the vendor that it is not a Chinese company.
         Sec. 2279.003.  FALSE VERIFICATION; PENALTIES. (a) If a
  state agency determines that a vendor holding a contract with the
  agency was ineligible to have the contract awarded under Section
  2279.002 because the vendor's written verification was false, the
  state agency shall immediately terminate the contract without
  further obligation to the vendor.
         (b)  A vendor described by Subsection (a):
               (1)  is barred from responding to a solicitation for or
  being awarded a contract for goods or services by any state agency;
  and
               (2)  is liable to this state for a civil penalty of
  $10,000.
         (c)  The attorney general may bring an action to recover a
  civil penalty imposed under Subsection (b)(2). The attorney
  general may recover reasonable attorney's fees and court costs in
  bringing an action under this subsection.
         SECTION 9.  (a)  As soon as practicable after the effective
  date of this Act, the comptroller of public accounts shall review
  all contracts entered into under the comptroller's purchasing
  authority and identify any contracts entered into between this
  state and a Chinese company, as defined by Section 2270.0001,
  Government Code, as amended by this Act.  The comptroller of public
  accounts shall prepare a list of all Chinese companies that are a
  party to a contract identified under this section.
         (b)  Not later than September 1, 2024, the comptroller of
  public accounts shall provide the list prepared under Subsection
  (a) of this section to the governor, the lieutenant governor, the
  speaker of the house of representatives, and each member of the
  legislature.
         SECTION 10.  Not later than the 180th day after the effective
  date of this Act, the comptroller of public accounts shall include
  the companies described by Section 2270.0201(a)(4), Government
  Code, as added by this Act, on the list under Section 2270.0201(a),
  Government Code.
         SECTION 11.  Section 2279.002, Government Code, as added by
  this Act, applies only to a contract entered into on or after the
  effective date of this Act. A contract entered into before that
  date is governed by the law in effect on the date the contract was
  entered into, and the former law is continued in effect for that
  purpose.
         SECTION 12.  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, 2023.