Texas 2017 - 85th Regular

Texas Senate Bill SB1295 Compare Versions

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1	1	85R5019 BEF-F
2	2	By: Lucio S.B. No. 1295
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to an insurance premium tax credit for investment in
8	8	certain communities; imposing a monetary penalty; authorizing
9	9	fees.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Subtitle B, Title 3, Insurance Code, is amended
12	12	by adding Chapter 231 to read as follows:
13	13	CHAPTER 231. PREMIUM TAX CREDIT FOR INVESTMENT IN CERTAIN
14	14	COMMUNITIES
15	15	SUBCHAPTER A. GENERAL PROVISIONS
16	16	Sec. 231.001. GENERAL DEFINITIONS. In this chapter:
17	17	(1) "Applicable percentage" means zero percent for the
18	18	first two credit allowance dates, seven percent for the third
19	19	credit allowance date, and eight percent for the next four credit
20	20	allowance dates.
21	21	(2) "Credit allowance date" means, with respect to any
22	22	qualified equity investment:
23	23	(A) the date on which the qualified equity
24	24	investment is initially made; and
25	25	(B) the anniversary of that date in each of the
26	26	six years immediately following that date.
27	27	(3) "Federal tax regulations" means regulations
28	28	adopted under the Internal Revenue Code of 1986 that are applicable
29	29	to the tax year to which the provisions of the code in effect on
30	30	September 1, 2017, applied.
31	31	(4) "Internal Revenue Code" means the Internal Revenue
32	32	Code of 1986 in effect on September 1, 2017, excluding any changes
33	33	made by federal law after that date, but including any regulations
34	34	adopted under that code that are applicable to the tax year to which
35	35	the provisions of the code in effect on that date applied.
36	36	(5) "Investing entity" means an entity, including an
37	37	entity that incurs state premium tax liability, that makes or holds
38	38	a qualified equity investment.
39	39	(6) "Issuer" means a qualified community development
40	40	entity, or a subsidiary or affiliate of a qualified community
41	41	development entity, that issues a qualified equity investment.
42	42	(7) "Low-income community" has the meaning assigned by
43	43	Section 45D, Internal Revenue Code.
44	44	(8) "Metropolitan statistical area" means a core base
45	45	statistical area associated with at least one urbanized area that
46	46	has a population of at least 90,000. A metropolitan statistical
47	47	area comprises the central county or counties containing the core,
48	48	plus adjacent outlying counties having a high degree of social and
49	49	economic integration with the central county or counties as
50	50	measured through commuting.
51	51	(9) "Purchase price" means the amount paid to the
52	52	issuer for a qualified equity investment.
53	53	(10) "Report" means a premium tax report or a report
54	54	under Subchapter G, as applicable.
55	55	(11) "Rural allocation" means the allocation
56	56	described by Section 231.104(c)(1).
57	57	(12) "Rural area" means a county in this state with a
58	58	population less than 90,000.
59	59	(13) "State premium tax liability" means any premium
60	60	tax liability incurred under Chapter 221, 222, 223, 223A, or 224.
61	61	(14) "Statewide low-income community allocation"
62	62	means the allocation described by Section 231.104(c)(4).
63	63	(15) "Texas education allocation" means the
64	64	allocation described by Section 231.104(c)(2).
65	65	(16) "Texas seaport allocation" means the allocation
66	66	described by Section 231.104(c)(3).
67	67	Sec. 231.002. DEFINITION: LONG-TERM DEBT SECURITY. (a) In
68	68	this chapter, "long-term debt security" means a debt instrument
69	69	issued by a qualified community development entity, at par value or
70	70	a premium, with an original maturity date not earlier than the
71	71	seventh year after the date on which the debt instrument is issued,
72	72	with no acceleration of repayment, amortization, or prepayment
73	73	features before its original maturity date.
74	74	(b) The qualified community development entity that issues
75	75	a long-term debt security may not make cash interest payments on the
76	76	security during the period beginning on the date on which the
77	77	security is issued and ending on the final credit allowance date in
78	78	an amount that exceeds the cumulative operating income, as defined
79	79	by federal tax regulations adopted under Section 45D, Internal
80	80	Revenue Code, of the qualified community development entity for
81	81	that period before giving effect to the interest expense of the
82	82	long-term debt security.
83	83	(c) This section does not limit the holder's ability to
84	84	accelerate payments on a long-term debt security in situations in
85	85	which the issuer has defaulted on covenants designed to ensure
86	86	compliance with this chapter or Section 45D, Internal Revenue Code.
87	87	Sec. 231.003. DEFINITION: QUALIFIED ACTIVE LOW-INCOME
88	88	COMMUNITY BUSINESS. (a) In this chapter, "qualified active
89	89	low-income community business" has the meaning assigned by Section
90	90	45D, Internal Revenue Code, and Section 1.45D-1 of the federal tax
91	91	regulations.
92	92	(b) A business is considered a qualified active low-income
93	93	community business for the duration of the qualified community
94	94	development entity's investment in, or loan to, the business if the
95	95	entity reasonably expects, at the time it makes the investment or
96	96	loan, that the business will continue to satisfy the requirements
97	97	for being a qualified active low-income community business
98	98	throughout the entire period of the investment or loan.
99	99	Sec. 231.004. DEFINITION: QUALIFIED COMMUNITY DEVELOPMENT
100	100	ENTITY. In this chapter, "qualified community development entity"
101	101	has the meaning assigned by Section 45D, Internal Revenue Code,
102	102	provided that the entity has entered into, for the current year or a
103	103	prior year with an allocation effective date on or after July 1,
104	104	2016, an allocation agreement with the Community Development
105	105	Financial Institutions Fund of the United States Department of the
106	106	Treasury with respect to credits authorized by Section 45D,
107	107	Internal Revenue Code, that includes this state in the service area
108	108	specified in the allocation agreement. The term includes a
109	109	subsidiary or affiliate of a qualified community development entity
110	110	and any other qualified community development entity that is
111	111	controlled by or under common control with a qualified community
112	112	development entity.
113	113	Sec. 231.005. DEFINITION: QUALIFIED EQUITY INVESTMENT. (a)
114	114	An investment is a "qualified equity investment" for purposes of
115	115	this chapter if:
116	116	(1) the investment is an equity investment in, or
117	117	long-term debt security issued by, a qualified community
118	118	development entity;
119	119	(2) the investment is acquired on or after October 1,
120	120	2017, at its original issuance solely in exchange for cash, except
121	121	as provided by Subsection (b);
122	122	(3) not later than the 20th month after the date of
123	123	issuance at least 85 percent of the investment's purchase price is
124	124	used by the issuer to make qualified low-income community
125	125	investments in this state; and
126	126	(4) the investment is designated by the issuer as a
127	127	qualified equity investment under this section and is certified by
128	128	the comptroller as not exceeding the limitations provided by
129	129	Section 231.104.
130	130	(b) A qualified equity investment includes an investment
131	131	that does not satisfy the requirements of Subsection (a)(2) if the
132	132	investment was a qualified equity investment in the hands of a prior
133	133	holder.
134	134	Sec. 231.006. DEFINITION: QUALIFIED LOW-INCOME COMMUNITY
135	135	INVESTMENT. In this chapter, "qualified low-income community
136	136	investment" means an equity investment in, or loan to, a qualified
137	137	active low-income community business made by a qualified community
138	138	development entity.
139	139	Sec. 231.007. DEFINITION: RURAL COMMUNITY DEVELOPMENT
140	140	ENTITY. In this chapter, "rural community development entity" means
141	141	a qualified community development entity:
142	142	(1) whose allocation agreement with the Community
143	143	Development Financial Institutions Fund of the United States
144	144	Department of the Treasury requires the entity to invest at least 25
145	145	percent of that allocation in rural areas; or
146	146	(2) that demonstrates to the comptroller in writing
147	147	that the entity or its affiliates invested at least 25 percent of
148	148	the entity's most recent federal allocation outside the boundaries
149	149	of a metropolitan statistical area.
150	150	Sec. 231.008. RULES. The comptroller shall adopt rules
151	151	necessary to implement this chapter.
152	152	Sec. 231.009. REVIEW BY COMPTROLLER. The comptroller shall
153	153	review the qualified low-income community investments of a
154	154	qualified community development entity not later than the sixth
155	155	month after each anniversary of the investment. In conducting the
156	156	review, the comptroller shall ensure that the qualified community
157	157	development entity has made and maintained the qualified low-income
158	158	community investments required under Sections 231.151(a)(3) and
159	159	(4) to avoid recapture of a credit claimed in connection with a
160	160	qualified equity investment.
161	161	SUBCHAPTER B. PREMIUM TAX CREDIT
162	162	Sec. 231.051. ELIGIBILITY FOR CREDIT. An investing entity
163	163	is eligible for a credit against the entity's state premium tax
164	164	liability in the amount provided by this subchapter and under the
165	165	conditions and limitations provided by this chapter.
166	166	Sec. 231.052. QUALIFICATION. An investing entity is
167	167	eligible for a credit if the investing entity holds a qualified
168	168	equity investment on a credit allowance date.
169	169	Sec. 231.053. AMOUNT OF CREDIT; LIMITATION. (a) The amount
170	170	of credit for a tax year is equal to the credit accrued, as
171	171	determined under Subsection (b), on each credit allowance date:
172	172	(1) that occurs during the tax year; and
173	173	(2) on which the investing entity holds the qualified
174	174	equity investment.
175	175	(b) The amount of credit accrued on a credit allowance date
176	176	equals the applicable percentage for the credit allowance date
177	177	multiplied by the purchase price paid to the issuer of the qualified
178	178	equity investment.
179	179	(c) The total credit claimed for a tax year, including the
180	180	amount of any carryforward under Section 231.054, may not exceed
181	181	the amount of state premium tax liability due for the tax year after
182	182	applying all other applicable tax credits.
183	183	(d) Credits may be applied to the investing entity's
184	184	estimated or final tax payments for the tax year.
185	185	Sec. 231.054. CARRYFORWARD. If an investing entity is
186	186	eligible for a credit that exceeds the limitation under Section
187	187	231.053(c), the investing entity may carry the unused credit
188	188	forward for not more than 20 consecutive tax reports. Credits,
189	189	including credit carryforwards, are considered to be used in the
190	190	following order:
191	191	(1) a credit carryforward under this subchapter; and
192	192	(2) a current year credit.
193	193	Sec. 231.055. ASSIGNMENT PROHIBITED. (a) Except as
194	194	provided by Subsection (b), an investing entity may not convey,
195	195	assign, or transfer the credit allowed under this subchapter to
196	196	another entity.
197	197	(b) A partnership, limited liability company, S
198	198	corporation, or other pass-through entity for federal income tax
199	199	purposes may allocate the credit to the entity's partners, members,
200	200	or shareholders for their direct use in accordance with an
201	201	agreement between the partners, members, or shareholders.
202	202	Sec. 231.056. RETALIATORY TAX. (a) An entity claiming a
203	203	credit under this subchapter is not required to pay any additional
204	204	retaliatory tax levied under Chapter 281 as a result of claiming
205	205	that credit.
206	206	(b) In addition to the exclusion provided by Subsection (a),
207	207	an entity claiming a credit under this subchapter is not required to
208	208	pay any additional tax that may arise as a result of claiming that
209	209	credit.
210	210	SUBCHAPTER C. CERTIFICATION AS QUALIFIED EQUITY INVESTMENT
211	211	Sec. 231.101. APPLICATION FOR CERTIFICATION AS QUALIFIED
212	212	EQUITY INVESTMENT. (a) A qualified community development entity
213	213	that seeks to have an equity investment or long-term debt security
214	214	certified as a qualified equity investment eligible for credits
215	215	under this chapter must apply to the comptroller as provided by this
216	216	section.
217	217	(b) The comptroller shall provide an application date each
218	218	year for applications under Subsection (a). The date may not be
219	219	later than October 2. The comptroller shall consider all
220	220	applications received on or before the application date to be
221	221	received simultaneously on the application date.
222	222	(c) An application under this section must include the
223	223	following:
224	224	(1) evidence of the applicant's certification as a
225	225	qualified community development entity, including evidence of the
226	226	service area of the entity that includes this state;
227	227	(2) a copy of an allocation agreement executed by the
228	228	applicant, or its controlling entity, and the Community Development
229	229	Financial Institutions Fund of the United States Department of the
230	230	Treasury;
231	231	(3) a certificate executed by an executive officer of
232	232	the applicant attesting that the allocation agreement remains in
233	233	effect and has not been revoked or canceled by the Community
234	234	Development Financial Institutions Fund;
235	235	(4) a description of the amount and structure of the
236	236	equity investment or long-term debt security proposed to be
237	237	certified;
238	238	(5) examples of the types of qualified active
239	239	low-income community businesses in which the applicant, its
240	240	controlling entity, or affiliates of its controlling entity have
241	241	invested under the federal New Markets Tax Credit Program or a state
242	242	new markets tax credit program, including written proof that the
243	243	applicant or an affiliate has made at least one qualified
244	244	low-income community investment or a similar loan to a business in a
245	245	low-income census tract in this state;
246	246	(6) evidence that:
247	247	(A) the entity qualifies as a rural community
248	248	development entity, if the entity is applying for a rural
249	249	allocation;
250	250	(B) the entity or the entity's affiliate has
251	251	previously made at least one qualified low-income community
252	252	investment that would meet the investment requirements for a Texas
253	253	education allocation, if the entity is applying for a Texas
254	254	education allocation; or
255	255	(C) the entity or the entity's affiliate has
256	256	previously made at least one qualified low-income community
257	257	investment that would meet the investment requirements for a Texas
258	258	seaport allocation, if the entity is applying for a Texas seaport
259	259	allocation;
260	260	(7) a nonrefundable application fee of $5,000 to be
261	261	paid to the comptroller; and
262	262	(8) the refundable performance deposit required by
263	263	Subchapter E.
264	264	Sec. 231.102. ACTION ON APPLICATION. (a) Not later than
265	265	the 30th day after the date an application under Section 231.101 is
266	266	received, the comptroller shall grant or deny the application in
267	267	full or part.
268	268	(b) If the comptroller denies the application, the
269	269	comptroller shall inform the applicant of the denial.
270	270	(c) If the comptroller denies an application because the
271	271	application is incomplete, the applicant may, not later than the
272	272	15th day after the date the applicant receives notice under
273	273	Subsection (b), provide additional information required by the
274	274	comptroller to complete the application. The comptroller shall
275	275	consider an application completed under this subsection to be
276	276	completed on the date the application was initially submitted.
277	277	(d) If an applicant does not complete an application in the
278	278	time required under Subsection (c), the application is finally
279	279	denied and the applicant must submit a new application if the
280	280	applicant wishes to reapply. The comptroller shall determine the
281	281	application date for the new application without regard to the
282	282	previously denied application.
283	283	Sec. 231.103. CERTIFICATION OF QUALIFIED EQUITY
284	284	INVESTMENT. (a) If an application under Section 231.101 is
285	285	granted, the comptroller shall certify the proposed equity
286	286	investment or long-term debt security as a qualified equity
287	287	investment that is eligible for credits under this chapter, subject
288	288	to Section 231.104.
289	289	(b) The comptroller shall provide written notice of the
290	290	certification to the qualified community development entity.
291	291	(c) The certification of a qualified equity investment is
292	292	effective on the date the comptroller provides notice under
293	293	Subsection (b).
294	294	Sec. 231.104. LIMIT ON CERTIFIED INVESTMENTS. (a) Subject
295	295	to Subsections (b) and (c), the comptroller shall limit the amount
296	296	of qualified equity investments that may be certified under Section
297	297	231.103 to an amount the comptroller estimates will result in not
298	298	more than:
299	299	(1) $60 million in credits being claimed under this
300	300	chapter in any state fiscal year; and
301	301	(2) $300 million in total credits being claimed under
302	302	this chapter.
303	303	(b) The comptroller shall estimate the amounts under
304	304	Subsection (a) without regard to the carryforward provision under
305	305	Section 231.054.
306	306	(c) The comptroller shall allocate 25 percent, or as nearly
307	307	as possible to 25 percent, of the amount available under Subsection
308	308	(a) for each of the following:
309	309	(1) a rural allocation, which may be used only by
310	310	rural community development entities to make qualified low-income
311	311	community investments in rural areas;
312	312	(2) a Texas education allocation, which may be used
313	313	only to make qualified low-income community investments in
314	314	nonprofit or for-profit entities offering primary, secondary, or
315	315	higher education in low-income communities in this state;
316	316	(3) a Texas seaport allocation, which may be used only
317	317	to make qualified low-income community investments in businesses
318	318	operating at a port, harbor, or municipality:
319	319	(A) accessible to seagoing ships that are limited
320	320	to 35 miles from the coastline; and
321	321	(B) located in a low-income community in this
322	322	state; and
323	323	(4) a statewide low-income community allocation,
324	324	which may be used to make qualified low-income community
325	325	investments in any low-income community in this state.
326	326	(d) A qualified community development entity may apply in a
327	327	single application for and receive certification of qualified
328	328	equity investments in more than one allocation category under
329	329	Subsection (c).
330	330	(e) Subject to Subsection (f), if a pending application
331	331	cannot be fully certified due to the limit specified by Subsection
332	332	(a) or (c), the comptroller shall certify the portion that can be
333	333	certified.
334	334	(f) The comptroller shall certify qualified equity
335	335	investments in the order in which applications are received by the
336	336	comptroller. Applications received on or before the application
337	337	date provided under Section 231.101(b) are considered to have been
338	338	received simultaneously on the application date. For applications
339	339	that are complete and received on or before the application date
340	340	provided under Section 231.101(b) and for which the total amounts
341	341	requested cannot be certified because of the limit specified by
342	342	Subsection (a) or (c), the comptroller shall certify qualified
343	343	equity investments in each allocation category under Subsection (c)
344	344	on a pro rata basis based on the ratio of the amount of qualified
345	345	equity investments available in an allocation category to the total
346	346	amount of qualified equity investments requested in that allocation
347	347	category.
348	348	Sec. 231.105. TRANSFER OF INVESTMENT AUTHORITY. A
349	349	qualified community development entity whose application for
350	350	certification of a qualified equity investment is approved under
351	351	this subchapter may transfer all or a portion of its certified
352	352	qualified equity investment authority to its controlling entity or
353	353	to a qualified community development entity controlled by or under
354	354	common control with the transferring entity, if the transferring
355	355	entity:
356	356	(1) provides the information required in the
357	357	application under Section 231.101(c) with respect to the recipient
358	358	of the transfer; and
359	359	(2) notifies the comptroller of the transfer not later
360	360	than the 30th day after the date of the transfer.
361	361	Sec. 231.106. ISSUANCE OF QUALIFIED EQUITY INVESTMENT; FEE.
362	362	(a) Not later than the 20th month after the date the qualified
363	363	community development entity receives notice of certification, the
364	364	entity or a recipient of a transfer under Section 231.105 shall
365	365	issue the qualified equity investment and receive cash in the
366	366	amount certified.
367	367	(b) The qualified community development entity or a
368	368	recipient of a transfer under Section 231.105 must provide the
369	369	comptroller with evidence of the receipt of the cash investment not
370	370	later than the 10th business day after the date the cash investment
371	371	is received.
372	372	(c) At the time the qualified community development entity
373	373	or a recipient of a transfer under Section 231.105 issues the
374	374	qualified equity investment, the qualified community development
375	375	entity or transfer recipient shall pay to the comptroller a fee
376	376	equal to 20 basis points, or 0.2 percent, of the amount issued.
377	377	Fees collected under this subsection may be appropriated only to
378	378	pay the cost of preparing a report under Section 231.302.
379	379	Sec. 231.107. LAPSE OF CERTIFICATION. (a) If the qualified
380	380	community development entity or a recipient of a transfer under
381	381	Section 231.105 does not issue the qualified equity investment and
382	382	receive the cash investment before the 20th month after the date the
383	383	certification notice is received as required by Section 231.106,
384	384	the certification lapses and the qualified community development
385	385	entity or recipient of the transfer may not accept an equity
386	386	investment or issue a long-term debt security as a qualified equity
387	387	investment without reapplying to the comptroller for
388	388	certification.
389	389	(b) If a certification lapses under this section, the
390	390	comptroller shall reissue the previously certified amount, giving
391	391	preference to an applicant for reissuance of certification whose
392	392	proposed amount for certification was previously certified in a
393	393	reduced amount under Section 231.104. If more than one applicant
394	394	for reissuance of certification had its proposed amount reduced,
395	395	the comptroller shall reissue the certified amount to those
396	396	applicants on a pro rata basis, subject to the limits specified by
397	397	Section 231.104.
398	398	(c) After reissuing certifications under Subsection (b),
399	399	the comptroller shall reissue any certified amounts remaining to
400	400	applicants in amounts determined by the comptroller, subject to the
401	401	limits specified by Section 231.104.
402	402	SUBCHAPTER D. RECAPTURE OF CREDIT
403	403	Sec. 231.151. RECAPTURE. (a) Subject to Section 231.152,
404	404	the comptroller shall recapture the amount of a credit claimed on a
405	405	premium tax report filed under Chapter 221, 222, 223, 223A, or 224
406	406	from the investing entity if:
407	407	(1) any amount of a federal tax credit available with
408	408	respect to a qualified equity investment that is eligible for a
409	409	credit under this chapter is recaptured under Section 45D, Internal
410	410	Revenue Code, in which case the comptroller's recapture must be
411	411	proportionate to the federal recapture with respect to the
412	412	qualified equity investment;
413	413	(2) the issuer redeems or makes principal repayment
414	414	with respect to a qualified equity investment before the seventh
415	415	anniversary of the date the qualified equity investment is issued,
416	416	in which case the comptroller's recapture must be proportionate to
417	417	the amount of the redemption or repayment with respect to the
418	418	qualified equity investment;
419	419	(3) the issuer fails to invest an amount equal to 85
420	420	percent of the purchase price of the qualified equity investment in
421	421	qualified low-income community investments in this state not later
422	422	than the 20th month after the date the qualified equity investment
423	423	is issued, in which case the comptroller's recapture may not exceed
424	424	the amount of tax credits associated with the portion of the
425	425	purchase price received but not invested on the date of the
426	426	recapture; or
427	427	(4) the issuer fails to maintain an amount of
428	428	investment equal to 85 percent of the purchase price of the
429	429	qualified equity investment in qualified low-income community
430	430	investments in this state until the last credit allowance date for
431	431	the qualified equity investment, in which case the comptroller's
432	432	recapture may not exceed the amount of tax credits associated with
433	433	the portion of the purchase price received but not maintained in
434	434	qualified low-income community investments on the date of
435	435	recapture.
436	436	(b) For purposes of this chapter, a qualified low-income
437	437	community investment is considered held by an issuer even if the
438	438	investment has been sold or repaid if the issuer reinvests an amount
439	439	equal to the capital returned to or recovered by the issuer from the
440	440	original investment, exclusive of any profits realized, in another
441	441	qualified low-income community investment not later than the 12th
442	442	month after the date the issuer receives the capital.
443	443	(c) An issuer is not required to reinvest capital returned
444	444	from a qualified low-income community investment after the sixth
445	445	anniversary of the date the qualified equity investment whose
446	446	proceeds were used to make the qualified low-income community
447	447	investment was issued. The qualified low-income community
448	448	investment is considered held by the issuer through the seventh
449	449	anniversary of the date the qualified equity investment was issued.
450	450	(d) Periodic amounts received during a calendar year as
451	451	repayment of principal on a loan that is a qualified low-income
452	452	community investment shall be treated as continuously invested in a
453	453	qualified low-income community investment if the amounts are
454	454	reinvested in one or more qualified low-income community
455	455	investments not later than the last day of the following calendar
456	456	year.
457	457	(e) After the seventh anniversary of the date a qualified
458	458	equity investment is issued, the qualified community development
459	459	entity may request that the comptroller certify that tax credits
460	460	associated with the qualified equity investment are not subject to
461	461	recapture under this section.
462	462	(f) Not later than the 60th day after the date the
463	463	comptroller receives a request under Subsection (e), the
464	464	comptroller shall:
465	465	(1) certify in writing to the qualified community
466	466	development entity that tax credits associated with the qualified
467	467	equity investment are not subject to recapture and that the
468	468	qualified community development entity has satisfied all the
469	469	requirements of this chapter; or
470	470	(2) notify the qualified community development entity
471	471	that tax credits associated with the qualified equity investment
472	472	are subject to recapture and that the qualified community
473	473	development entity has not satisfied the requirements of this
474	474	chapter and shall provide a written explanation of the reason for
475	475	that determination.
476	476	(g) After the comptroller certifies under Subsection (f)(1)
477	477	that tax credits associated with a qualified equity investment are
478	478	not subject to recapture:
479	479	(1) the comptroller may not recapture any tax credits
480	480	associated with that qualified equity investment; and
481	481	(2) the qualified community development entity is not
482	482	subject to regulation by the comptroller or to the reporting
483	483	requirements under Section 231.301 in connection with that
484	484	qualified equity investment.
485	485	Sec. 231.152. NOTICE OF NONCOMPLIANCE. (a) The
486	486	comptroller shall notify a qualified community development entity
487	487	and an investing entity that has claimed a credit on a report if the
488	488	credit is subject to recapture under Section 231.151.
489	489	(b) The comptroller may not recapture a credit under this
490	490	subchapter if the qualified community development entity cures the
491	491	noncompliance described by Section 231.151 before the 90th day
492	492	after the date the qualified community development entity receives
493	493	notice under Subsection (a).
494	494	SUBCHAPTER E. SECURITY FOR PERFORMANCE
495	495	Sec. 231.201. SECURITY REQUIRED. (a) Not later than the
496	496	14th day after the date a qualified equity investment is certified
497	497	under Subchapter C, the qualified community development entity that
498	498	received investment authority for the qualified equity investment
499	499	must deposit $500,000 with the comptroller as a refundable
500	500	performance deposit to be deposited as required by Section 231.204.
501	501	(b) This section applies regardless of whether the
502	502	investment authority is for a rural allocation, a Texas education
503	503	allocation, a Texas seaport allocation, or a statewide low-income
504	504	community allocation.
505	505	Sec. 231.202. FAILURE TO PROVIDE SECURITY: LOSS OF
506	506	CERTIFICATION. The comptroller shall revoke the certification of
507	507	the qualified equity investment of a qualified community
508	508	development entity that fails to make a deposit under Section
509	509	231.201.
510	510	Sec. 231.203. FORFEITURE OF SECURITY. (a) A qualified
511	511	community development entity that makes a performance deposit under
512	512	Section 231.201 forfeits the deposit in its entirety if:
513	513	(1) the qualified community development entity or any
514	514	qualified community development entity to which a transfer is made
515	515	under Section 231.105 fails to issue the total amount of qualified
516	516	equity investments certified by the comptroller and receive cash in
517	517	the amount certified under Section 231.103 not later than the date
518	518	specified by Section 231.106; or
519	519	(2) subject to Subsection (b), the qualified community
520	520	development entity or a qualified community development entity to
521	521	which a transfer is made under Section 231.105 that issues a
522	522	qualified equity investment certified under Section 231.103 fails
523	523	to make or maintain the investment required under Sections
524	524	231.151(a)(3) and (4) to avoid recapture of a credit claimed in
525	525	connection with the qualified equity investment.
526	526	(b) A deposit is not subject to forfeiture under Subsection
527	527	(a)(2) if the qualified community development entity cures the
528	528	noncompliance before the 90th day after the date the qualified
529	529	community development entity receives notice under Subsection (c).
530	530	(c) The comptroller shall notify a qualified community
531	531	development entity that made a deposit under Section 231.201 in
532	532	writing if the deposit is subject to forfeiture under this section.
533	533	Sec. 231.204. NEW MARKETS PERFORMANCE GUARANTEE FUND. (a)
534	534	The new markets performance guarantee fund is an interest-bearing
535	535	fund outside the state treasury with the comptroller. The fund
536	536	consists of money the comptroller deposits under Subsection (b).
537	537	The comptroller shall administer the fund.
538	538	(b) The comptroller shall deposit a performance deposit
539	539	made under Section 231.201 to the credit of the new markets
540	540	performance guarantee fund. The deposit must remain on deposit with
541	541	the fund until the comptroller determines that:
542	542	(1) the qualified community development entity has
543	543	complied with the provisions of this chapter; or
544	544	(2) the deposit has been forfeited and will be
545	545	deposited in accordance with Section 231.206.
546	546	Sec. 231.205. RELEASE OF SECURITY. (a) Not earlier than
547	547	the 30th day after the date the requirements that must be satisfied
548	548	to avoid forfeiture of a deposit as described by Section 231.203 are
549	549	satisfied, a qualified community development entity that made the
550	550	deposit may request a refund of the deposit from the comptroller.
551	551	(b) The comptroller shall refund the deposit or, if
552	552	applicable, give notice of noncompliance as described by Section
553	553	231.203 not later than the 30th day after the date of receiving a
554	554	request under Subsection (a).
555	555	Sec. 231.206. DEPOSIT OF FORFEITED SECURITY. The
556	556	comptroller shall deposit in the general revenue fund a deposit
557	557	forfeited under Section 231.203.
558	558	SUBCHAPTER F. EVALUATION OF BUSINESS BY COMPTROLLER
559	559	Sec. 231.251. EVALUATION REQUIRED. (a) Except as provided
560	560	by Subsection (c), a qualified community development entity or a
561	561	recipient of a transfer under Section 231.105 must, before making
562	562	an investment in a business, request a written opinion from the
563	563	comptroller as to whether:
564	564	(1) the business in which the qualified community
565	565	development entity proposes to invest would qualify as a qualified
566	566	active low-income community business under Section 231.003; and
567	567	(2) the location where the qualified community
568	568	development entity proposes to invest would meet the location
569	569	requirements for a rural allocation, a Texas education allocation,
570	570	or a Texas seaport allocation, as applicable.
571	571	(b) Not later than the 10th business day after the date of
572	572	the receipt of a request under Subsection (a), the comptroller
573	573	shall make the requested determinations and issue the written
574	574	opinion, including explanations for the determinations.
575	575	(c) A qualified community development entity or a recipient
576	576	of a transfer under Section 231.105 may, but is not required to,
577	577	request a written opinion under Subsection (a) before making an
578	578	investment in a business if the qualified community development
579	579	entity or transfer recipient concurrently makes a federal qualified
580	580	low-income community investment in the business.
581	581	Sec. 231.252. CONSIDERATION OF FEDERAL TAX LAWS. In
582	582	issuing a written opinion and making other determinations under
583	583	this chapter, the comptroller shall consider Section 45D, Internal
584	584	Revenue Code, and the federal tax regulations issued under that
585	585	code, to the extent that those provisions are applicable.
586	586	SUBCHAPTER G. REPORTING
587	587	Sec. 231.301. REPORT TO COMPTROLLER. (a) Except as
588	588	provided by this subsection, a qualified community development
589	589	entity that issues a qualified equity investment under Section
590	590	231.106 shall submit an annual report to the comptroller not later
591	591	than the fifth business day after the anniversary of a credit
592	592	allowance date applicable to the investment. The qualified
593	593	community development entity is not required to submit any report
594	594	under this subsection after the annual report following the final
595	595	credit allowance date.
596	596	(b) The report must:
597	597	(1) provide evidence that the qualified community
598	598	development entity has made and maintained the investment required
599	599	under Sections 231.151(a)(3) and (4) to avoid recapture of a credit
600	600	claimed in connection with the qualified equity investment;
601	601	(2) include one or more bank statements for the
602	602	qualified community development entity that reflect each qualified
603	603	low-income community investment made by the qualified community
604	604	development entity in connection with the qualified equity
605	605	investment;
606	606	(3) state the name, location, and industry code of
607	607	each qualified active low-income community business receiving a
608	608	qualified low-income community investment in connection with the
609	609	qualified equity investment;
610	610	(4) state the number of employment positions created
611	611	and retained as a result of each qualified low-income community
612	612	investment made in connection with the qualified equity investment;
613	613	(5) state whether the qualified community development
614	614	entity has been subject to a recapture of any amount of a federal
615	615	tax credit available under Section 45D, Internal Revenue Code, with
616	616	respect to the qualified equity investment; and
617	617	(6) include a copy of the most recent annual report
618	618	submitted by the qualified community development entity to the
619	619	United States Department of the Treasury regarding Section 45D,
620	620	Internal Revenue Code.
621	621	(c) A qualified community development entity that fails to
622	622	submit a report to the comptroller within the time prescribed by
623	623	Subsection (a) shall pay to the comptroller a penalty equal to the
624	624	sum of:
625	625	(1) $25,000; and
626	626	(2) $5,000 for each day the report is not submitted
627	627	after the date the report is due under Subsection (a).
628	628	Sec. 231.302. COMPTROLLER'S REPORT TO LEGISLATURE. (a)
629	629	The comptroller shall contract with an independent researcher at a
630	630	center for education research established under Section 1.005,
631	631	Education Code, to prepare a biennial report with respect to the
632	632	implementation of this chapter.
633	633	(b) The report must include:
634	634	(1) the number of qualified community development
635	635	entities holding certified qualified equity investments;
636	636	(2) the amount of qualified equity investments of each
637	637	qualified community development entity;
638	638	(3) the investments each qualified community
639	639	development entity has made in qualified active low-income
640	640	community businesses as of the most recent annual report submitted
641	641	to the comptroller by the qualified community development entity;
642	642	(4) the total amount of credits earned under this
643	643	chapter;
644	644	(5) the performance of each qualified community
645	645	development entity with respect to reporting requirements imposed
646	646	by this chapter;
647	647	(6) with respect to each qualified active low-income
648	648	community business in which a qualified community development
649	649	entity has invested:
650	650	(A) the classification of the qualified active
651	651	low-income community business according to the industrial sector
652	652	and the size of the business;
653	653	(B) the total number of jobs created by the
654	654	qualified low-income community investment and the average wages
655	655	paid for the jobs; and
656	656	(C) the total number of jobs retained as a result
657	657	of the qualified low-income community investment and the average
658	658	wages paid for the jobs; and
659	659	(7) an analysis of the effect implementation of this
660	660	chapter has had during the period covered by the report on:
661	661	(A) economic activity in this state; and
662	662	(B) state tax revenue.
663	663	(c) The comptroller shall file the report with the governor,
664	664	the lieutenant governor, and the speaker of the house of
665	665	representatives not later than December 15 of each even-numbered
666	666	year.
667	667	SECTION 2. (a) As soon as practicable after the effective
668	668	date of this Act, the comptroller of public accounts shall adopt
669	669	rules necessary to implement the provisions of Chapter 231,
670	670	Insurance Code, as added by this Act.
671	671	(b) The comptroller of public accounts shall provide an
672	672	initial application date under Section 231.101(b), Insurance Code,
673	673	as added by this Act, of October 2, 2017.
674	674	SECTION 3. Subchapter B, Chapter 231, Insurance Code, as
675	675	added by this Act, applies only to a tax report originally due on or
676	676	after January 1, 2018.
677	677	SECTION 4. This Act takes effect September 1, 2017.