Texas 2019 - 86th Regular

Texas Senate Bill SB826 Compare Versions

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1	1	86R7668 BEF-D
2	2	By: Hancock S.B. No. 826
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to rural and opportunity funds and insurance tax credits
8	8	for certain investments in those funds; imposing a monetary
9	9	penalty; authorizing fees.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Subtitle F, Title 4, Government Code, is amended
12	12	by adding Chapter 487A to read as follows:
13	13	CHAPTER 487A. RURAL AND OPPORTUNITY FUNDS
14	14	SUBCHAPTER A. GENERAL PROVISIONS
15	15	Sec. 487A.0001. GENERAL DEFINITIONS. In this chapter:
16	16	(1) "Closing date" means the date a rural and
17	17	opportunity fund has collected all of the amounts described by
18	18	Section 487A.0056(a)(1).
19	19	(2) "Growth investment" means any capital or equity
20	20	investment by a rural and opportunity fund in a targeted small
21	21	business or any loan by a rural and opportunity fund to a targeted
22	22	small business with a stated maturity date of at least one year
23	23	after the date of issuance.
24	24	(3) "Office" means the Texas Economic Development and
25	25	Tourism Office.
26	26	(4) "Qualified area" means:
27	27	(A) a rural community as defined by Section
28	28	12.046, Agriculture Code; or
29	29	(B) a qualified opportunity zone as defined by
30	30	Section 1400Z-1, Internal Revenue Code of 1986.
31	31	(5) "Rural and opportunity fund" means an entity
32	32	approved by the office as a rural and opportunity fund.
33	33	Sec. 487A.0002. DEFINITION: AFFILIATE. (a) In this
34	34	chapter, "affiliate" means an entity that directly or indirectly
35	35	through one or more intermediaries controls, is controlled by, or
36	36	is under common control with another entity.
37	37	(b) For purposes of Subsection (a), an entity is controlled
38	38	by another entity if the controlling entity:
39	39	(1) holds, directly or indirectly, the majority voting
40	40	or ownership interest in the controlled entity; or
41	41	(2) has control over the day-to-day operations of the
42	42	controlled entity by contract or by law.
43	43	Sec. 487A.0003. DEFINITION: CREDIT-ELIGIBLE CAPITAL
44	44	CONTRIBUTION. (a) In this chapter and subject to Subsection (b),
45	45	"credit-eligible capital contribution" means an investment of cash
46	46	that equals the amount specified on a tax credit certificate issued
47	47	by the office under Section 487A.0055(2) made by an entity that is
48	48	subject to state insurance tax liability, as defined by Section
49	49	232.0001, Insurance Code.
50	50	(b) An investment made by an entity qualifies as a
51	51	credit-eligible capital contribution only if the entity making the
52	52	investment receives in exchange for the investment:
53	53	(1) an equity interest in the rural and opportunity
54	54	fund; or
55	55	(2) at par value or premium, a debt instrument that has
56	56	a maturity date of at least five years from the closing date and a
57	57	repayment schedule that is no faster than level principal
58	58	amortization over five years.
59	59	Sec. 487A.0004. DEFINITION: INVESTMENT AUTHORITY. (a) In
60	60	this chapter, "investment authority" means the amount stated on the
61	61	notice issued under Section 487A.0055(1) approving the rural and
62	62	opportunity fund.
63	63	(b) At least 65 percent of a rural and opportunity fund's
64	64	investment authority must consist of credit-eligible capital
65	65	contributions.
66	66	Sec. 487A.0005. DEFINITION: JOBS CREATED. (a) In this
67	67	chapter, "jobs created" means, with respect to a targeted small
68	68	business, employment positions that are created by the targeted
69	69	small business, are located in this state, require at least 35 hours
70	70	of work each week, and were not located in this state at the time of
71	71	the initial growth investment in the targeted small business.
72	72	(b) The number of jobs created by a targeted small business
73	73	is calculated each year by subtracting the number of employment
74	74	positions in this state at the targeted small business at the time
75	75	of the initial growth investment in the targeted small business
76	76	from the monthly average of those employment positions for that
77	77	year. If the number calculated under this subsection is less than
78	78	zero, the number shall be reported as zero.
79	79	(c) The monthly average of employment positions for a year
80	80	is calculated by adding together the number of employment positions
81	81	existing on the last day of each month of the year and dividing by
82	82	12.
83	83	Sec. 487A.0006. DEFINITION: JOBS RETAINED. (a) In this
84	84	chapter, "jobs retained" means, with respect to a targeted small
85	85	business, employment positions:
86	86	(1) located in this state requiring at least 35 hours
87	87	of work each week that existed before the initial growth investment
88	88	in the targeted small business; and
89	89	(2) that would have been lost or moved out of this
90	90	state had a growth investment in the targeted small business not
91	91	been made, as certified in writing by an executive officer of the
92	92	targeted small business to the rural and opportunity fund.
93	93	(b) The number of jobs retained by a targeted small business
94	94	is calculated each year based on the monthly average of employment
95	95	positions for that year.
96	96	(c) The monthly average of employment positions for a year
97	97	is calculated by adding together the number of employment positions
98	98	existing on the last day of each month of the year and dividing by
99	99	12.
100	100	(d) The reported number of jobs retained for a year may not
101	101	exceed the number reported on the initial report under Section
102	102	487A.0155. The rural and opportunity fund shall reduce the number
103	103	of jobs retained for a year if employment at the targeted small
104	104	business drops below the number reported on the initial report.
105	105	Sec. 487A.0007. DEFINITION: TARGETED SMALL BUSINESS. (a)
106	106	In this chapter, "targeted small business" means a business that,
107	107	at the time of the initial growth investment in the business:
108	108	(1) had fewer than 250 employees; and
109	109	(2) has its principal business operations located in
110	110	one or more qualified areas in this state.
111	111	(b) For purposes of Subsection (a)(2), the principal
112	112	business operations of a business are located at a place where:
113	113	(1) at least 60 percent of the business's employees
114	114	work; or
115	115	(2) employees who are paid at least 60 percent of the
116	116	business's payroll work.
117	117	(c) An out-of-state business that agrees to relocate or hire
118	118	new employees using the proceeds of a growth investment to
119	119	establish principal business operations in a qualified area in this
120	120	state qualifies as a targeted small business if the business
121	121	satisfies the requirements of:
122	122	(1) Subsection (a)(1) at the time of the initial
123	123	growth investment in the business; and
124	124	(2) Subsection (a)(2) not later than the 180th day
125	125	after receiving the initial growth investment or a later date
126	126	agreed to by the office.
127	127	Sec. 487A.0008. RULES. The office shall adopt rules
128	128	necessary to implement this chapter.
129	129	SUBCHAPTER B. APPROVAL OF RURAL AND OPPORTUNITY FUNDS
130	130	Sec. 487A.0051. APPLICATION. (a) The office shall accept
131	131	applications from entities seeking approval as rural and
132	132	opportunity funds.
133	133	(b) An application must include:
134	134	(1) the total investment authority sought by the
135	135	applicant under the applicant's business plan;
136	136	(2) evidence sufficient to prove to the office's
137	137	satisfaction that, as of the date the applicant submits the
138	138	application:
139	139	(A) the applicant or affiliates of the applicant
140	140	have invested at least $100 million in nonpublic companies, each of
141	141	which is located in a municipality with a population of less than
142	142	50,000 or a county with a population of less than 200,000,
143	143	regardless of whether the municipality or county is located inside
144	144	or outside this state; and
145	145	(B) at least one principal in a rural business
146	146	investment company licensed under 7 U.S.C. Section 2009cc et seq.
147	147	or a small business investment company licensed under 15 U.S.C.
148	148	Section 681 is, and has been for at least four years, an officer or
149	149	employee of the applicant or of an affiliate of the applicant on the
150	150	date the application is submitted;
151	151	(3) a copy of the rural business investment company
152	152	license or small business investment company license described by
153	153	Subdivision (2)(B);
154	154	(4) an estimate of the number of jobs created and jobs
155	155	retained as a result of the applicant's growth investments;
156	156	(5) a business plan that includes a revenue impact
157	157	assessment that:
158	158	(A) projects state and local tax revenue to be
159	159	generated by the applicant's proposed growth investments; and
160	160	(B) is prepared by a nationally recognized third
161	161	party independent economic forecasting firm using a dynamic
162	162	economic forecasting model that analyzes the applicant's business
163	163	plan for the 10-year period following the date the applicant
164	164	submits the application;
165	165	(6) a signed affidavit from each committed investor
166	166	stating the amount of credit-eligible capital contributions the
167	167	investor commits to making; and
168	168	(7) a nonrefundable application fee of $5,000.
169	169	Sec. 487A.0052. DECISION ON APPLICATION. (a) The office
170	170	shall make a determination on each application not later than the
171	171	30th day after the date the office receives the application. The
172	172	office shall make application determinations in the order in which
173	173	applications are received and shall consider applications received
174	174	on the same day to be received simultaneously.
175	175	(b) The office may approve investment authority under this
176	176	chapter in amounts that would allow not more than $35 million in tax
177	177	credits to be claimed under Section 232.0053, Insurance Code, in
178	178	any calendar year, excluding any credit carryforwards under Section
179	179	232.0054, Insurance Code.
180	180	(c) If a request for investment authority exceeds the
181	181	limitation under Subsection (b), the office shall reduce the
182	182	investment authority and the credit-eligible capital contributions
183	183	for that application as necessary to avoid exceeding the limit. If
184	184	multiple applications received on the same day request a combined
185	185	investment authority that exceeds the limit under Subsection (b),
186	186	the office shall proportionally reduce the investment authority and
187	187	the credit-eligible capital contributions for those applications
188	188	as necessary to avoid exceeding the limit. The office may not
189	189	reduce an applicant's investment authority for any reason other
190	190	than as authorized by this subsection.
191	191	Sec. 487A.0053. GROUNDS FOR DENIAL. The office may deny an
192	192	application under this subchapter only if:
193	193	(1) the application is incomplete or the application
194	194	fee is not paid in full;
195	195	(2) the applicant fails to satisfy the requirements of
196	196	Section 487A.0051(b)(2);
197	197	(3) the revenue impact assessment submitted under
198	198	Section 487A.0051(b)(5) does not demonstrate that the applicant's
199	199	business plan will result in a positive economic impact on combined
200	200	state and local revenue during the 10-year period covered by the
201	201	assessment that exceeds the cumulative amount of tax credits that
202	202	would be issued to the applicant's investors under Chapter 232,
203	203	Insurance Code, if the application were approved;
204	204	(4) the credit-eligible capital contributions
205	205	described in affidavits submitted under Section 487A.0051(b)(6) do
206	206	not equal at least 65 percent of the total amount of investment
207	207	authority sought under the applicant's business plan; or
208	208	(5) the office has already approved the maximum amount
209	209	of investment authority allowed under Section 487A.0052(b).
210	210	Sec. 487A.0054. SUBMISSION OF ADDITIONAL INFORMATION
211	211	FOLLOWING DENIAL. (a) If the office denies an application the
212	212	applicant may, not later than the 15th day after the date the office
213	213	provides notice of denial, provide additional information to the
214	214	office to complete, clarify, or cure defects in the application
215	215	identified by the office.
216	216	(b) If the applicant completes, clarifies, or cures the
217	217	defects in its application during the period prescribed by
218	218	Subsection (a), the application is considered complete as of the
219	219	original submission date.
220	220	(c) If the applicant fails to complete, clarify, or cure the
221	221	defects in its application during the period prescribed by
222	222	Subsection (a), the application is finally denied. An applicant
223	223	who wishes to reapply must resubmit an application in full with a
224	224	new submission date.
225	225	(d) The office shall review and reconsider an application
226	226	described by Subsection (a) for which the applicant provides
227	227	additional information not later than the 30th day after the date
228	228	the applicant provides the information. The office shall consider
229	229	that application before any pending applications submitted after
230	230	the date that application was originally submitted.
231	231	(e) This section does not apply to an application denied as
232	232	a result of the applicant's failure to submit with the application
233	233	affidavits required by Section 487A.0051(b)(6).
234	234	Sec. 487A.0055. APPROVAL BY OFFICE. On approval of an
235	235	application, the office shall provide:
236	236	(1) written notice to the applicant of the applicant's
237	237	approval as a rural and opportunity fund, including the amount of
238	238	the fund's investment authority; and
239	239	(2) a tax credit certificate to each investor whose
240	240	affidavit was included in the application and include on the
241	241	certificate the amount of the investor's credit-eligible capital
242	242	contribution.
243	243	Sec. 487A.0056. DUTIES OF FUND FOLLOWING APPROVAL. (a) A
244	244	rural and opportunity fund shall:
245	245	(1) not later than the 60th day after the date the fund
246	246	receives the approval notice under Section 487A.0055:
247	247	(A) collect the credit-eligible capital
248	248	contribution from each investor issued a tax credit certificate
249	249	under Section 487A.0055; and
250	250	(B) subject to Subsection (b), collect one or
251	251	more investments of cash that, when added to the contributions
252	252	collected under Paragraph (A), equal the fund's investment
253	253	authority; and
254	254	(2) not later than the 65th day after the date the fund
255	255	receives the approval notice under Section 487A.0055, send to the
256	256	office documentation sufficient to prove that the fund has
257	257	collected the amounts described in Subdivision (1).
258	258	(b) At least 10 percent of the rural and opportunity fund's
259	259	investment authority must consist of equity investments
260	260	contributed directly or indirectly by affiliates of the fund,
261	261	including employees, officers, and directors of those affiliates.
262	262	Sec. 487A.0057. LAPSE OF APPROVAL. (a) If a rural and
263	263	opportunity fund fails to comply with the requirements of Section
264	264	487A.0056, the fund's approval lapses and the corresponding
265	265	investment authority described by Section 487A.0056(a)(1) does not
266	266	count toward the limit prescribed by Section 487A.0052(b).
267	267	(b) The office shall first award lapsed investment
268	268	authority pro rata to each rural and opportunity fund whose
269	269	requested investment authority was reduced under Section
270	270	487A.0052(c). The rural and opportunity fund may allocate the
271	271	investment authority awarded under this subsection to the fund's
272	272	investors in the fund's discretion. The office may award any
273	273	remaining investment authority to new applicants.
274	274	Sec. 487A.0058. DISPOSITION OF APPLICATION FEES.
275	275	Application fees submitted to the office under Section
276	276	487A.0051(b)(7) shall be deposited to the credit of the general
277	277	revenue fund and may be appropriated only to the office for the
278	278	purpose of administering this chapter.
279	279	SUBCHAPTER C. REVOCATION OF TAX CREDIT CERTIFICATE
280	280	Sec. 487A.0101. GROUNDS FOR REVOCATION. (a) The office
281	281	shall revoke a tax credit certificate issued under Subchapter B in
282	282	connection with an investment in a rural and opportunity fund if,
283	283	before the fund exits the program under Section 487A.0151, the
284	284	fund:
285	285	(1) subject to Subsection (b), fails to invest at
286	286	least 60 percent of the fund's investment authority in growth
287	287	investments in this state on or before the second anniversary of the
288	288	closing date and 100 percent of the fund's investment authority in
289	289	growth investments in this state on or before the third anniversary
290	290	of the closing date;
291	291	(2) subject to Subsection (c) and after making the
292	292	investments necessary to avoid revocation under Subdivision (1),
293	293	fails to maintain growth investments equal to 100 percent of the
294	294	fund's investment authority until the sixth anniversary of the
295	295	closing date;
296	296	(3) makes a distribution or payment that results in
297	297	the fund having less than 100 percent of its investment authority
298	298	invested in growth investments in this state or available for
299	299	investment in growth investments and held in cash or marketable
300	300	securities; or
301	301	(4) subject to Subsection (d), makes a growth
302	302	investment in a targeted small business that directly or indirectly
303	303	through an affiliate owns, has the right to acquire an ownership
304	304	interest in, makes a loan to, or makes an investment in the fund, an
305	305	affiliate of the fund, or an investor in the fund.
306	306	(b) For purposes of Subsection (a)(1):
307	307	(1) the amount of growth investments that a rural and
308	308	opportunity fund may count with respect to a particular targeted
309	309	small business, including any amount invested in an affiliate of
310	310	the targeted small business, may not exceed the greater of $5
311	311	million or 20 percent of the fund's investment authority; and
312	312	(2) at least 85 percent of the required investments
313	313	must be growth investments in targeted small businesses whose
314	314	principal business operations are located in, or are relocated to,
315	315	one or more rural communities as defined by Section 12.046,
316	316	Agriculture Code.
317	317	(c) For purposes of Subsection (a)(2):
318	318	(1) the amount of growth investments that a rural and
319	319	opportunity fund may count with respect to a particular targeted
320	320	small business, including any amount invested in an affiliate of
321	321	the targeted small business, may not exceed the greater of $5
322	322	million or 20 percent of the fund's investment authority;
323	323	(2) an investment that is sold or repaid is considered
324	324	to be maintained if the rural and opportunity fund reinvests an
325	325	amount equal to the capital returned or recovered by the fund from
326	326	the original investment, excluding any profit realized, in another
327	327	growth investment in this state on or before the first anniversary
328	328	of the date the capital is returned or recovered; and
329	329	(3) an amount received periodically by a rural and
330	330	opportunity fund is considered to be continually invested in growth
331	331	investments if that amount is reinvested in one or more growth
332	332	investments by the end of the calendar year following the year of
333	333	receipt.
334	334	(d) Subsection (a)(4) does not apply to investments in
335	335	publicly traded securities by a targeted small business or an owner
336	336	or affiliate of the targeted small business. For purposes of
337	337	Subsection (a)(4), a rural and opportunity fund is not considered
338	338	an affiliate of a targeted small business solely as a result of the
339	339	fund's growth investment in the targeted small business.
340	340	(e) The office shall:
341	341	(1) notify the comptroller when the office revokes a
342	342	tax credit certificate; and
343	343	(2) on request, provide the comptroller with lists of
344	344	valid and revoked tax credit certificates.
345	345	Sec. 487A.0102. OPPORTUNITY TO CORRECT VIOLATION. (a)
346	346	Before revoking a tax credit certificate under this subchapter, the
347	347	office shall notify the rural and opportunity fund of the reasons
348	348	for the pending revocation.
349	349	(b) The rural and opportunity fund may, not later than the
350	350	90th day after the date the notice is received, correct any
351	351	violation outlined in the notice to the satisfaction of the office
352	352	and avoid revocation of the tax credit certificate.
353	353	Sec. 487A.0103. ALLOCATION OF REVOKED INVESTMENT
354	354	AUTHORITY. (a) If a tax credit certificate is revoked under this
355	355	subchapter, the associated investment authority does not count
356	356	toward the limit on total investment authority described in Section
357	357	487A.0052(b).
358	358	(b) The office shall first award revoked investment
359	359	authority pro rata to each rural and opportunity fund whose
360	360	requested investment authority was reduced under Section
361	361	487A.0052(c). The office may award any remaining investment
362	362	authority to new applicants.
363	363	SUBCHAPTER D. CERTAIN FUND OPERATIONS
364	364	Sec. 487A.0151. APPLICATION TO EXIT PROGRAM. (a) On or
365	365	after the sixth anniversary of the closing date, a rural and
366	366	opportunity fund may apply to the office to exit the program and no
367	367	longer be subject to regulation under this chapter.
368	368	(b) The office shall respond to the application not later
369	369	than the 30th day after receipt.
370	370	(c) A rural and opportunity fund is eligible to exit the
371	371	program under this section if no tax credit certificates related to
372	372	investments in the fund have been revoked and the fund has not
373	373	received any revocation notice that has not been corrected under
374	374	Section 487A.0102.
375	375	(d) The office may not unreasonably deny an application
376	376	under this section. The office shall give the rural and opportunity
377	377	fund notice of a denial and include in the notice the reasons for
378	378	the denial.
379	379	Sec. 487A.0152. NO REVOCATION FOLLOWING EXIT. The office
380	380	may not revoke a tax credit certificate related to an investment in
381	381	a rural and opportunity fund after the fund's exit from the program.
382	382	Sec. 487A.0153. PENALTY FOR CERTAIN DISTRIBUTIONS. (a)
383	383	For purposes of this section:
384	384	(1) the "actual number of jobs created and retained"
385	385	is the number of jobs created and jobs retained as a result of all of
386	386	a rural and opportunity fund's current and former growth
387	387	investments, as reported on the fund's reports submitted under
388	388	Section 487A.0155; and
389	389	(2) the "estimated number of jobs created and
390	390	retained" is the estimated number of jobs created and jobs retained
391	391	included in a rural and opportunity fund's application under
392	392	Section 487A.0051(b)(4) reduced, if applicable, by the same
393	393	percentage as the total investment authority sought under the
394	394	fund's business plan submitted under Section 487A.0051(b)(1) was
395	395	reduced under Section 487A.0052(c).
396	396	(b) A rural and opportunity fund is subject to a penalty in
397	397	the amount provided by Subsection (c) if:
398	398	(1) the fund authorizes a distribution to the fund's
399	399	equity holders in an amount that, when added to all previous
400	400	distributions to the fund's equity holders and any previous
401	401	penalties under this section, exceeds the fund's investment
402	402	authority; and
403	403	(2) the fund's actual number of jobs created and
404	404	retained is less than the fund's estimated number of jobs created
405	405	and retained.
406	406	(c) The amount of the penalty is equal to the amount of the
407	407	authorized distribution multiplied by a fraction:
408	408	(1) the numerator of which is the fund's estimated
409	409	number of jobs created and retained less the fund's actual number of
410	410	jobs created and retained; and
411	411	(2) the denominator of which is the fund's estimated
412	412	number of jobs created and retained.
413	413	(d) Before making a distribution to the fund's equity
414	414	holders, the fund shall deduct the amount of the penalty from the
415	415	amount otherwise authorized to be distributed to the equity holders
416	416	and pay the penalty to the office.
417	417	(e) The office shall deposit penalties received under
418	418	Subsection (d) in the general revenue fund.
419	419	Sec. 487A.0154. EVALUATION OF PROPOSED INVESTMENT. (a) A
420	420	rural and opportunity fund, before making a growth investment, may
421	421	request from the office a written opinion as to whether the business
422	422	in which the fund proposes to invest qualifies as a targeted small
423	423	business.
424	424	(b) Not later than the 15th business day after receiving the
425	425	request, the office shall notify the rural and opportunity fund of
426	426	its determination.
427	427	(c) If the office fails to notify the rural and opportunity
428	428	fund of its determination on or before the 15th business day after
429	429	receiving the request, the business in which the fund proposes to
430	430	invest is considered to be a targeted small business for purposes of
431	431	this chapter.
432	432	Sec. 487A.0155. ANNUAL REPORT. (a) A rural and opportunity
433	433	fund shall submit a report to the office on or before the fifth
434	434	business day after each anniversary of the closing date until the
435	435	fund has exited the program under Section 487A.0151.
436	436	(b) The report must document the rural and opportunity
437	437	fund's growth investments and include:
438	438	(1) a bank statement showing each growth investment;
439	439	(2) the name, location, and industry of each business
440	440	receiving a growth investment, including either the determination
441	441	notice described by Section 487A.0154 or evidence that the business
442	442	qualified as a targeted small business at the time the investment
443	443	was made;
444	444	(3) the number of jobs created and jobs retained in the
445	445	preceding calendar year as a result of the fund's growth
446	446	investments as of the last day of that period;
447	447	(4) the average annual salary of the jobs described by
448	448	Subdivision (3); and
449	449	(5) any other information the office requires.
450	450	(c) A rural and opportunity fund may, but is not required
451	451	to, include in any report submitted under this section information
452	452	about the number of jobs created and jobs retained with respect to a
453	453	former growth investment that the fund has exited.
454	454	SECTION 2. Subtitle B, Title 3, Insurance Code, is amended
455	455	by adding Chapter 232 to read as follows:
456	456	CHAPTER 232. TAX CREDIT FOR INVESTMENT IN RURAL AND OPPORTUNITY
457	457	FUND
458	458	SUBCHAPTER A. GENERAL PROVISIONS
459	459	Sec. 232.0001. DEFINITIONS. In this chapter:
460	460	(1) "Affiliate" has the meaning assigned by Section
461	461	487A.0002, Government Code.
462	462	(2) "Closing date" has the meaning assigned by Section
463	463	487A.0001, Government Code.
464	464	(3) "State insurance tax liability" means any tax
465	465	liability incurred under Chapter 221, 222, 223, 223A, 224, 225,
466	466	226, or 281.
467	467	Sec. 232.0002. RULES. The comptroller shall adopt rules
468	468	necessary to implement this chapter.
469	469	SUBCHAPTER B. TAX CREDIT
470	470	Sec. 232.0051. ELIGIBILITY FOR CREDIT. An entity is
471	471	eligible for a credit against the entity's state insurance tax
472	472	liability in the amount and under the conditions and limitations
473	473	provided by this chapter.
474	474	Sec. 232.0052. QUALIFICATION. An entity is eligible for a
475	475	credit for a tax year if:
476	476	(1) the entity holds a tax credit certificate issued
477	477	under Section 487A.0055, Government Code; and
478	478	(2) the third, fourth, fifth, or sixth anniversary of
479	479	the closing date in connection with which the certificate was
480	480	issued occurs during the tax year.
481	481	Sec. 232.0053. AMOUNT OF CREDIT; LIMITATION. (a) The
482	482	amount of credit for a tax year is equal to 25 percent of the amount
483	483	of the credit-eligible capital contribution stated on the tax
484	484	credit certificate described by Section 232.0052.
485	485	(b) The total credit claimed for a tax year, including the
486	486	amount of any carryforward under Section 232.0054, may not exceed
487	487	the amount of state insurance tax liability due for the entity for
488	488	the tax year after applying all other applicable tax credits.
489	489	(c) Credits may be applied to the entity's estimated or
490	490	final tax payments for the tax year.
491	491	Sec. 232.0054. CARRYFORWARD. If an entity is eligible for a
492	492	credit that exceeds the limitation under Section 232.0053(b), the
493	493	entity may carry the unused credit forward for not more than 20
494	494	consecutive tax reports. Credits, including credit carryforwards,
495	495	are considered to be used in the following order:
496	496	(1) a credit carryforward under this chapter; and
497	497	(2) a current year credit.
498	498	Sec. 232.0055. ASSIGNMENT PROHIBITED. (a) Except as
499	499	provided by Subsection (b), an entity may not convey, assign, or
500	500	transfer the credit allowed under this chapter to another entity.
501	501	(b) An entity may convey, assign, or transfer the credit
502	502	allowed under this chapter to an affiliate of the entity that is
503	503	subject to state insurance tax liability.
504	504	Sec. 232.0056. RETALIATORY TAX. An entity claiming a
505	505	credit under this chapter is not required to pay any additional
506	506	retaliatory tax levied under Chapter 281 as a result of claiming
507	507	that credit.
508	508	SUBCHAPTER C. RECAPTURE OF CREDIT
509	509	Sec. 232.0101. RECAPTURE. The comptroller shall recapture
510	510	the amount of a credit claimed on a tax report filed under Chapter
511	511	221, 222, 223, 223A, 224, 225, 226, or 281 from an entity if the tax
512	512	credit certificate on which the credit is based is revoked under
513	513	Subchapter C, Chapter 487A, Government Code.
514	514	SECTION 3. (a) As soon as practicable after this Act
515	515	becomes law as provided by Section 2001.006, Government Code:
516	516	(1) the Texas Economic Development and Tourism Office
517	517	shall adopt rules necessary to implement Chapter 487A, Government
518	518	Code, as added by this Act; and
519	519	(2) the comptroller of public accounts shall adopt
520	520	rules necessary to implement Chapter 232, Insurance Code, as added
521	521	by this Act.
522	522	(b) Not later than January 1, 2020, the Texas Economic
523	523	Development and Tourism Office shall begin accepting applications
524	524	under Section 487A.0051(a), Government Code, as added by this Act.
525	525	SECTION 4. Chapter 232, Insurance Code, as added by this
526	526	Act, applies only to a tax report originally due on or after January
527	527	1, 2020.
528	528	SECTION 5. This Act takes effect September 1, 2019.