Texas 2017 - 85th Regular

Texas House Bill HB89 Compare Versions

Version 1 (Old)

Version 2 (New)

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1		-	By: King of Parker, et al. H.B. No. 89
2		-	(Senate Sponsor - Creighton)
3		-	(In the Senate - Received from the House April 24, 2017;
4		-	April 24, 2017, read first time and referred to Committee on
5		-	Business & Commerce; April 25, 2017, reported favorably by the
6		-	following vote: Yeas 7, Nays 2; April 25, 2017, sent to printer.)
7		-	Click here to see the committee vote
	1	+	H.B. No. 89
8	2
9	3
10		-	A BILL TO BE ENTITLED
11	4		AN ACT
12	5		relating to state contracts with and investments in companies that
13	6		boycott Israel.
14	7		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
15	8		SECTION 1. Subtitle F, Title 10, Government Code, is
16	9		amended by adding Chapter 2270 to read as follows:
17	10		CHAPTER 2270. PROHIBITION ON CONTRACTS WITH COMPANIES BOYCOTTING
18	11		ISRAEL
19	12		Sec. 2270.001. DEFINITIONS. In this chapter:
20	13		(1) "Boycott Israel" has the meaning assigned by
21	14		Section 808.001.
22	15		(2) "Company" has the meaning assigned by Section
23	16		808.001.
24	17		(3) "Governmental entity" has the meaning assigned by
25	18		Section 2251.001.
26	19		Sec. 2270.002. PROVISION REQUIRED IN CONTRACT. A
27	20		governmental entity may not enter into a contract with a company for
28	21		goods or services unless the contract contains a written
29	22		verification from the company that it:
30	23		(1) does not boycott Israel; and
31	24		(2) will not boycott Israel during the term of the
32	25		contract.
33	26		SECTION 2. Subtitle A, Title 8, Government Code, is amended
34	27		by adding Chapter 808 to read as follows:
35	28		CHAPTER 808. PROHIBITION ON INVESTMENT IN COMPANIES THAT BOYCOTT
36	29		ISRAEL
37	30		SUBCHAPTER A. GENERAL PROVISIONS
38	31		Sec. 808.001. DEFINITIONS. In this chapter:
39	32		(1) "Boycott Israel" means refusing to deal with,
40	33		terminating business activities with, or otherwise taking any
41	34		action that is intended to penalize, inflict economic harm on, or
42	35		limit commercial relations specifically with Israel, or with a
43	36		person or entity doing business in Israel or in an
44	37		Israeli-controlled territory, but does not include an action made
45	38		for ordinary business purposes.
46	39		(2) "Company" means a for-profit sole proprietorship,
47	40		organization, association, corporation, partnership, joint
48	41		venture, limited partnership, limited liability partnership, or
49	42		limited liability company, including a wholly owned subsidiary,
50	43		majority-owned subsidiary, parent company, or affiliate of those
51	44		entities or business associations that exists to make a profit.
52	45		(3) "Direct holdings" means, with respect to a
53	46		company, all securities of that company held directly by a state
54	47		governmental entity in an account or fund in which a state
55	48		governmental entity owns all shares or interests.
56	49		(4) "Indirect holdings" means, with respect to a
57	50		company, all securities of that company held in an account or fund,
58	51		such as a mutual fund, managed by one or more persons not employed
59	52		by a state governmental entity, in which the state governmental
60	53		entity owns shares or interests together with other investors not
61	54		subject to the provisions of this chapter. The term does not
62	55		include money invested under a plan described by Section 401(k) or
63	56		457 of the Internal Revenue Code of 1986.
64	57		(5) "Listed company" means a company listed by the
65	58		comptroller under Section 808.051.
66	59		(6) "State governmental entity" means:
67	60		(A) the Employees Retirement System of Texas,
68	61		including a retirement system administered by that system;
69	62		(B) the Teacher Retirement System of Texas;
70	63		(C) the Texas Municipal Retirement System;
71	64		(D) the Texas County and District Retirement
72	65		System;
73	66		(E) the Texas Emergency Services Retirement
74	67		System; and
75	68		(F) the permanent school fund.
76	69		Sec. 808.002. OTHER LEGAL OBLIGATIONS. With respect to
77	70		actions taken in compliance with this chapter, including all good
78	71		faith determinations regarding companies as required by this
79	72		chapter, a state governmental entity and the comptroller are exempt
80	73		from any conflicting statutory or common law obligations, including
81	74		any obligations with respect to making investments, divesting from
82	75		any investment, preparing or maintaining any list of companies, or
83	76		choosing asset managers, investment funds, or investments for the
84	77		state governmental entity's securities portfolios.
85	78		Sec. 808.003. INDEMNIFICATION OF STATE GOVERNMENTAL
86	79		ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an
87	80		action, inaction, decision, divestment, investment, company
88	81		communication, report, or other determination made or taken in
89	82		connection with this chapter, the state shall, without regard to
90	83		whether the person performed services for compensation, indemnify
91	84		and hold harmless for actual damages, court costs, and attorney's
92	85		fees adjudged against, and defend:
93	86		(1) an employee, a member of the governing body, or any
94	87		other officer of a state governmental entity;
95	88		(2) a contractor of a state governmental entity;
96	89		(3) a former employee, a former member of the
97	90		governing body, or any other former officer of a state governmental
98	91		entity who was an employee, member of the governing body, or other
99	92		officer when the act or omission on which the damages are based
100	93		occurred;
101	94		(4) a former contractor of a state governmental entity
102	95		who was a contractor when the act or omission on which the damages
103	96		are based occurred; and
104	97		(5) a state governmental entity.
105	98		Sec. 808.004. NO PRIVATE CAUSE OF ACTION. (a) A person,
106	99		including a member, retiree, or beneficiary of a retirement system
107	100		to which this chapter applies, an association, a research firm, a
108	101		company, or any other person may not sue or pursue a private cause
109	102		of action against the state, a state governmental entity, a current
110	103		or former employee, a member of the governing body, or any other
111	104		officer of a state governmental entity, or a contractor of a state
112	105		governmental entity, for any claim or cause of action, including
113	106		breach of fiduciary duty, or for violation of any constitutional,
114	107		statutory, or regulatory requirement in connection with any action,
115	108		inaction, decision, divestment, investment, company communication,
116	109		report, or other determination made or taken in connection with
117	110		this chapter.
118	111		(b) A person who files suit against the state, a state
119	112		governmental entity, an employee, a member of the governing body,
120	113		or any other officer of a state governmental entity, or a contractor
121	114		of a state governmental entity, is liable for paying the costs and
122	115		attorney's fees of a person sued in violation of this section.
123	116		Sec. 808.005. INAPPLICABILITY OF REQUIREMENTS INCONSISTENT
124	117		WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A state
125	118		governmental entity is not subject to a requirement of this chapter
126	119		if the state governmental entity determines that the requirement
127	120		would be inconsistent with its fiduciary responsibility with
128	121		respect to the investment of entity assets or other duties imposed
129	122		by law relating to the investment of entity assets, including the
130	123		duty of care established under Section 67, Article XVI, Texas
131	124		Constitution.
132	125		Sec. 808.006. RELIANCE ON COMPANY RESPONSE. The
133	126		comptroller and a state governmental entity may rely on a company's
134	127		response to a notice or communication made under this chapter
135	128		without conducting any further investigation, research, or
136	129		inquiry.
137	130		SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
138	131		Sec. 808.051. LISTED COMPANIES. (a) The comptroller shall
139	132		prepare and maintain, and provide to each state governmental
140	133		entity, a list of all companies that boycott Israel. In maintaining
141	134		the list, the comptroller may review and rely, as appropriate in the
142	135		comptroller's judgment, on publicly available information
143	136		regarding companies, including information provided by the state,
144	137		nonprofit organizations, research firms, international
145	138		organizations, and governmental entities.
146	139		(b) The comptroller shall update the list annually or more
147	140		often as the comptroller considers necessary, but not more often
148	141		than quarterly, based on information from, among other sources,
149	142		those listed in Subsection (a).
150	143		(c) Not later than the 30th day after the date the list of
151	144		companies that boycott Israel is first provided or updated, the
152	145		comptroller shall file the list with the presiding officer of each
153	146		house of the legislature and the attorney general and post the list
154	147		on a publicly available website.
155	148		Sec. 808.052. IDENTIFICATION OF INVESTMENT IN LISTED
156	149		COMPANIES. Not later than the 30th day after the date a state
157	150		governmental entity receives the list provided under Section
158	151		808.051, the state governmental entity shall notify the comptroller
159	152		of the listed companies in which the state governmental entity owns
160	153		direct holdings or indirect holdings.
161	154		Sec. 808.053. ACTIONS RELATING TO LISTED COMPANY. (a) For
162	155		each listed company identified under Section 808.052, the state
163	156		governmental entity shall send a written notice:
164	157		(1) informing the company of its status as a listed
165	158		company;
166	159		(2) warning the company that it may become subject to
167	160		divestment by state governmental entities after the expiration of
168	161		the period described by Subsection (b); and
169	162		(3) offering the company the opportunity to clarify
170	163		its Israel-related activities.
171	164		(b) Not later than the 90th day after the date the company
172	165		receives notice under Subsection (a), the company must cease
173	166		boycotting Israel in order to avoid qualifying for divestment by
174	167		state governmental entities.
175	168		(c) If, during the time provided by Subsection (b), the
176	169		company ceases boycotting Israel, the comptroller shall remove the
177	170		company from the list maintained under Section 808.051 and this
178	171		chapter will no longer apply to the company unless it resumes
179	172		boycotting Israel.
180	173		(d) If, after the time provided by Subsection (b) expires,
181	174		the company continues to boycott Israel, the state governmental
182	175		entity shall sell, redeem, divest, or withdraw all publicly traded
183	176		securities of the company, except securities described by Section
184	177		808.055, according to the schedule provided by Section 808.054.
185	178		Sec. 808.054. DIVESTMENT OF ASSETS. (a) A state
186	179		governmental entity required to sell, redeem, divest, or withdraw
187	180		all publicly traded securities of a listed company shall comply
188	181		with the following schedule:
189	182		(1) at least 50 percent of those assets must be removed
190	183		from the state governmental entity's assets under management not
191	184		later than the 180th day after the date the company receives notice
192	185		under Section 808.053 or Subsection (b) unless the state
193	186		governmental entity determines, based on a good faith exercise of
194	187		its fiduciary discretion and subject to Subdivision (2), that a
195	188		later date is more prudent; and
196	189		(2) 100 percent of those assets must be removed from
197	190		the state governmental entity's assets under management not later
198	191		than the 360th day after the date the company receives notice under
199	192		Section 808.053 or Subsection (b).
200	193		(b) If a company that ceased boycotting Israel after
201	194		receiving notice under Section 808.053 resumes its boycott, the
202	195		state governmental entity shall send a written notice to the
203	196		company informing it that the state governmental entity will sell,
204	197		redeem, divest, or withdraw all publicly traded securities of the
205	198		company according to the schedule in Subsection (a).
206	199		(c) Except as provided by Subsection (a), a state
207	200		governmental entity may delay the schedule for divestment under
208	201		that subsection only to the extent that the state governmental
209	202		entity determines, in the state governmental entity's good faith
210	203		judgment, and consistent with the entity's fiduciary duty, that
211	204		divestment from listed companies will likely result in a loss in
212	205		value or a benchmark deviation described by Section 808.056(a). If
213	206		a state governmental entity delays the schedule for divestment, the
214	207		state governmental entity shall submit a report to the presiding
215	208		officer of each house of the legislature and the attorney general
216	209		stating the reasons and justification for the state governmental
217	210		entity's delay in divestment from listed companies. The report
218	211		must include documentation supporting its determination that the
219	212		divestment would result in a loss in value or a benchmark deviation
220	213		described by Section 808.056(a), including objective numerical
221	214		estimates. The state governmental entity shall update the report
222	215		every six months.
223	216		Sec. 808.055. INVESTMENTS EXEMPTED FROM DIVESTMENT. A
224	217		state governmental entity is not required to divest from any
225	218		indirect holdings in actively or passively managed investment funds
226	219		or private equity funds. The state governmental entity shall
227	220		submit letters to the managers of each investment fund containing
228	221		listed companies requesting that they remove those companies from
229	222		the fund or create a similar actively or passively managed fund with
230	223		indirect holdings devoid of listed companies. If a manager creates
231	224		a similar fund with substantially the same management fees and same
232	225		level of investment risk and anticipated return, the state
233	226		governmental entity may replace all applicable investments with
234	227		investments in the similar fund in a time frame consistent with
235	228		prudent fiduciary standards but not later than the 450th day after
236	229		the date the fund is created.
237	230		Sec. 808.056. AUTHORIZED INVESTMENT IN LISTED COMPANIES.
238	231		(a) A state governmental entity may cease divesting from one or
239	232		more listed companies only if clear and convincing evidence shows
240	233		that:
241	234		(1) the state governmental entity has suffered or will
242	235		suffer a loss in the hypothetical value of all assets under
243	236		management by the state governmental entity as a result of having to
244	237		divest from listed companies under this chapter; or
245	238		(2) an individual portfolio that uses a
246	239		benchmark-aware strategy would be subject to an aggregate expected
247	240		deviation from its benchmark as a result of having to divest from
248	241		listed companies under this chapter.
249	242		(b) A state governmental entity may cease divesting from a
250	243		listed company as provided by this section only to the extent
251	244		necessary to ensure that the state governmental entity does not
252	245		suffer a loss in value or deviate from its benchmark as described by
253	246		Subsection (a).
254	247		(c) Before a state governmental entity may cease divesting
255	248		from a listed company under this section, the state governmental
256	249		entity must provide a written report to the comptroller, the
257	250		presiding officer of each house of the legislature, and the
258	251		attorney general setting forth the reason and justification,
259	252		supported by clear and convincing evidence, for deciding to cease
260	253		divestment or to remain invested in a listed company.
261	254		(d) The state governmental entity shall update the report
262	255		required by Subsection (c) semiannually, as applicable.
263	256		(e) This section does not apply to reinvestment in a company
264	257		that is no longer a listed company.
265	258		Sec. 808.057. PROHIBITED INVESTMENTS. Except as provided
266	259		by Section 808.056, a state governmental entity may not acquire
267	260		securities of a listed company.
268	261		SUBCHAPTER C. REPORT; ENFORCEMENT
269	262		Sec. 808.101. REPORT. Not later than January 5 of each
270	263		year, each state governmental entity shall file a publicly
271	264		available report with the presiding officer of each house of the
272	265		legislature and the attorney general that:
273	266		(1) identifies all securities sold, redeemed,
274	267		divested, or withdrawn in compliance with Section 808.054;
275	268		(2) identifies all prohibited investments under
276	269		Section 808.057; and
277	270		(3) summarizes any changes made under Section 808.055.
278	271		Sec. 808.102. ENFORCEMENT. The attorney general may bring
279	272		any action necessary to enforce this chapter.
280	273		SECTION 3. This Act takes effect September 1, 2017.
281		-	* * * * *
	274	+	______________________________ ______________________________
	275	+	President of the Senate Speaker of the House
	276	+	I certify that H.B. No. 89 was passed by the House on April
	277	+	20, 2017, by the following vote: Yeas 131, Nays 0, 12 present, not
	278	+	voting.
	279	+	______________________________
	280	+	Chief Clerk of the House
	281	+	I certify that H.B. No. 89 was passed by the Senate on April
	282	+	27, 2017, by the following vote: Yeas 27, Nays 4.
	283	+	______________________________
	284	+	Secretary of the Senate
	285	+	APPROVED: _____________________
	286	+	Date
	287	+	_____________________
	288	+	Governor