Texas 2009 - 81st Regular

Texas Senate Bill SB2127 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	2009S0676-1 03/11/09
2	2	By: Estes S.B. No. 2127
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to consumer protections for clients of exchange
8	8	facilitators for tax-deferred exchanges of real property.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Subtitle C, Title 5, Business & Commerce Code, is
11	11	amended by adding Chapter 106 to read as follows:
12	12	CHAPTER 106. CONSUMER PROTECTIONS FOR CLIENTS OF EXCHANGE
13	13	FACILITATORS
14	14	Sec. 106.001. LEGISLATIVE PURPOSE. The legislature finds
15	15	that ensuring the integrity, trustworthiness, and capacity of
16	16	persons holding themselves out as, or performing or contracting to
17	17	perform the activities of, exchange facilitators is vital to the
18	18	consummation of transactions involving exchange of and
19	19	reinvestment in property located in this state and is in the public
20	20	interest. The purpose of this chapter is to provide consumer
21	21	protections for clients of persons that engage in the activities of
22	22	an exchange facilitator in order to ensure the integrity,
23	23	trustworthiness, and capacity of such persons to engage in those
24	24	activities.
25	25	Sec. 106.002. DEFINITIONS. In this chapter:
26	26	(1)(A) "Exchange facilitator" means a person, other
27	27	than a person described by Paragraph (B), that:
28	28	(i) for a fee facilitates an exchange of
29	29	like kind property by entering into an agreement with a taxpayer by
30	30	which the person acquires from the taxpayer the contractual rights
31	31	to sell the taxpayer's relinquished property located in this state
32	32	and transfers a replacement property to the taxpayer as a qualified
33	33	intermediary, as that term is defined under Treasury Regulation
34	34	Section 1.1031(k)-1(g)(4), or that enters into an agreement with
35	35	the taxpayer to take title to a property in this state as an
36	36	exchange accommodation titleholder, as that term is defined in
37	37	Internal Revenue Service Procedure 2000-37, or that enters into an
38	38	agreement with a taxpayer to act as trustee of a qualified trust or
39	39	as a holder of a qualified escrow as those terms are defined under
40	40	Treasury Regulation Section 1.1031(k)-1(g)(3);
41	41	(ii) maintains an office in this state for
42	42	the purpose of soliciting business to perform any of the activities
43	43	described by Subparagraph (i); or
44	44	(iii) advertises to the public in this
45	45	state the ability or willingness of the person to provide, or
46	46	solicits customers to whom to sell, the services of the person
47	47	described by Subparagraph (i) or services as a qualified
48	48	intermediary, as that term is defined under Treasury Regulation
49	49	Section 1.1031(k)-1(g)(4), in printed publications, direct mail,
50	50	television or radio advertisements, telephone calls, facsimile
51	51	transmissions, electronic mail and messaging, or other electronic
52	52	communications, whether active or passive.
53	53	(B) "Exchange facilitator" does not include any
54	54	of the following persons:
55	55	(i) the taxpayer or a disqualified person,
56	56	as that term is defined under Treasury Regulation Section
57	57	1.1031(k)-1(k), seeking to qualify for the nonrecognition
58	58	provisions of Section 1031 Internal Revenue Code of 1986;
59	59	(ii) a financial institution that is acting
60	60	only as a depository for exchange funds and that is not facilitating
61	61	exchanges;
62	62	(iii) a person that advertises for and
63	63	teaches seminars or classes or otherwise makes presentations to
64	64	attorneys, accountants, real estate professionals, tax
65	65	professionals, or other professionals, when the primary purpose is
66	66	to teach the professionals about tax-deferred exchanges or to train
67	67	them to act as exchange facilitators; or
68	68	(iv) a person licensed as an attorney at law
69	69	by this state.
70	70	(2) "Fee" means compensation of any nature, direct or
71	71	indirect, monetary or in kind, that is received by a person or
72	72	related person as defined by Section 267(b) or 707(b), Internal
73	73	Revenue Code of 1986, for any services relating to or incidental to
74	74	the exchange of like kind property.
75	75	(3) "Financial institution" means any entity the
76	76	operations of which are regulated by an agency of the United States
77	77	Department of the Treasury or the United States Department of
78	78	Housing and Urban Development, a finance agency as defined by
79	79	Chapter 11, Finance Code, the Texas Credit Union Commission and
80	80	credit union department, the Texas Real Estate Commission, or the
81	81	Texas Department of Insurance.
82	82	Sec. 106.003. FINANCIAL ASSURANCES. (a) An exchange
83	83	facilitator must obtain, maintain, and provide to the clients of
84	84	the exchange facilitator the following financial assurances:
85	85	(1) a fidelity bond or fidelity bonds in an amount not
86	86	less than $1 million, executed by a surety company authorized to do
87	87	business in this state and approved by the commissioner of
88	88	insurance for the purpose of issuing bonds under this chapter, or a
89	89	deposit of cash or securities or letters of credit in an amount not
90	90	less than $1 million, with financial institutions; and
91	91	(2) a policy of errors and omissions insurance in an
92	92	amount not less than $250,000, or a deposit of cash or securities or
93	93	letters of credit in an amount not less than $250,000, with
94	94	financial institutions and issuers, as applicable.
95	95	Sec. 106.004. NATURE AND DUTIES OF AN EXCHANGE FACILITATOR.
96	96	A person that engages in the business of providing the services of
97	97	an exchange facilitator is a fiduciary with respect to the parties
98	98	with whom the person contracts to provide services as an exchange
99	99	facilitator. An exchange facilitator has a duty of loyalty and of
100	100	good faith and fair dealing with such parties. A breach of the
101	101	duties or of either duty is actionable by the parties with whom the
102	102	exchange facilitator contracted that suffered a loss due to the
103	103	breach of duty. This section is a clarification of existing law and
104	104	does not create a separate cause of action.
105	105	SECTION 2. This Act applies only to exchange facilitators
106	106	acting under agreements entered into on or after the effective date
107	107	of this Act or under agreements entered into before the effective
108	108	date of this Act that do not become effective as to all other
109	109	parties until on or after that date. Exchange facilitators acting
110	110	under agreements that became effective as to all parties before the
111	111	effective date of this Act are covered by the law in effect on the
112	112	date the agreements became effective, and the former law is
113	113	continued in effect for that purpose.
114	114	SECTION 3. This Act takes effect January 1, 2010.