87R18085 CLG-F
By: Ordaz Perez, Button, et al. H.B. No. 3271
Substitute the following for H.B. No. 3271:
By: Button C.S.H.B. No. 3271
A BILL TO BE ENTITLED
AN ACT
relating to establishing loan programs to assist certain
micro-businesses by increasing access to capital; authorizing
fees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 481, Government Code, is amended by
adding Subchapters CC and EE to read as follows:
SUBCHAPTER CC. MICRO-BUSINESS DISASTER RECOVERY PROGRAM
Sec. 481.451. DEFINITIONS. In this subchapter:
(1) "Community development financial institution" has
the meaning assigned by 12 U.S.C. Section 4702.
(2) "Declared disaster" has the meaning assigned by
Section 481.551.
(3) "Default rate" means the percentage of
micro-business disaster recovery loans made that did not meet the
payment terms during a period specified by the bank.
(4) "Fund" means the micro-business recovery fund
established under Section 481.452.
(5) "Micro-business" means a corporation,
partnership, sole proprietorship, or other legal entity that:
(A) is domiciled in this state and has at least 95
percent of its employees located in this state;
(B) is formed to make a profit; and
(C) employs not more than 20 employees.
(6) "Micro-business disaster recovery loan" or
"disaster recovery loan" means a loan made by a participating
community development financial institution to micro-businesses
under the program.
(7) "Program" means the micro-business disaster
recovery loan program established under this subchapter.
Sec. 481.452. MICRO-BUSINESS RECOVERY FUND. (a) The
micro-business recovery fund is a dedicated account in the general
revenue fund.
(b) Appropriations for the implementation and
administration of this subchapter and Subchapter EE and any other
amounts received by the bank or state under this subchapter or
Subchapter EE shall be deposited in the fund.
(c) Money in the fund may be appropriated only to the bank
for use in carrying out the purposes of this subchapter and
Subchapter EE.
(d) The financial transactions of the fund are subject to
audit by the state auditor as provided by Chapter 321.
Sec. 481.453. POWERS OF BANK IN ADMINISTERING
MICRO-BUSINESS RECOVERY FUND. In administering the fund, the bank
has the powers necessary to carry out the purposes of this
subchapter and Subchapter EE, including the power to:
(1) make, execute, and deliver contracts,
conveyances, and other instruments necessary to the exercise of its
powers;
(2) invest money at the bank's discretion in
obligations determined proper by the bank, and select and use
depositories for its money;
(3) employ personnel and counsel and pay those persons
from money in the fund legally available for that purpose; and
(4) impose and collect fees and charges in connection
with any transaction and provide for reasonable penalties for
delinquent payment of fees or charges.
Sec. 481.454. ESTABLISHMENT OF LOAN PROGRAM; PURPOSE. (a)
The bank shall establish and administer a revolving loan program as
provided by this subchapter.
(b) The program shall expand access to capital for
qualifying micro-businesses to create jobs in this state.
Sec. 481.455. PROGRAM ADMINISTRATION. (a) The bank, under
the program, shall provide zero interest loans to eligible
community development financial institutions for purposes of
making interest-bearing loans to qualifying micro-businesses that
have difficulty in accessing capital following a declared disaster.
(b) A loan made by an eligible community development
financial institution under the program:
(1) must be made to a micro-business that:
(A) is in good standing under the laws of this
state; and
(B) did not owe delinquent taxes to a taxing unit
of this state before the date of the initial issuance of the
disaster declaration;
(2) may not be made to a micro-business that:
(A) has total revenue that exceeds the amount for
which no franchise tax is due under Section 171.002(d)(2), Tax
Code;
(B) is a franchise;
(C) is a national chain with operations in this
state;
(D) is a lobbying firm; or
(E) is a private equity firm or backed by a
private equity firm; and
(3) must meet any other criteria provided by this
subchapter.
(c) Payments on micro-business disaster recovery loans
shall be made directly to the lending community development
financial institutions. The financial institutions shall use the
loan payment money received from borrowers to make new loans as
provided by this subchapter.
(d) All income received on a loan made by a community
development financial institution participating in the program is
the property of the financial institution. Income received on a
loan includes the payment of interest by a borrower micro-business
and the administrative fees assessed by the community development
financial institution.
(e) A community development financial institution
participating in the program shall repay the bank the zero interest
loans borrowed by the financial institution under the program
quarterly, and the bank or this state is not responsible or liable
for any defaults in micro-business disaster recovery loans made by
the community financial institution.
Sec. 481.456. RULEMAKING. The executive director shall
adopt rules relating to the implementation of the program,
including:
(1) rules establishing eligibility criteria for
community development financial institutions that want to
participate in the program; and
(2) any other rules necessary to accomplish the
purposes of this subchapter.
Sec. 481.457. OVERSIGHT. (a) A community development
financial institution participating in the program shall report
quarterly to the bank:
(1) the names of micro-businesses that have received a
disaster recovery loan;
(2) the current balance of all outstanding disaster
recovery loans;
(3) the default rate on existing disaster recovery
loans; and
(4) any other information the bank requires.
(b) A community development financial institution
participating in the program shall prepare a detailed financial
statement each quarter.
(c) A community development financial institution shall
allow the bank to inspect the institution's financial records on
request.
Sec. 481.458. PROGRAM ANNUAL STATUS REPORT. The bank shall
issue an annual status report on the program. The bank shall
deliver its report to the governor, the lieutenant governor, the
speaker of the house of representatives, and the standing
committees of the legislature with primary jurisdiction over
micro-businesses and economic development.
SUBCHAPTER EE. MICRO-BUSINESS ACCESS TO CAPITAL PROGRAM
Sec. 481.551. DEFINITIONS. In this subchapter:
(1) "Community development financial institution" has
the meaning assigned by 12 U.S.C. Section 4702.
(2) "Declared disaster" means:
(A) a declaration of a state of disaster under
Section 418.014 or 418.108; or
(B) a disaster declared by the president of the
United States, if any part of this state is named in the federally
designated disaster area.
(3) "Fund" means the micro-business recovery fund
established under Section 481.452.
(4) "Micro-business" has the meaning assigned by
Section 481.451.
(5) "Micro-business access to capital loan" means a
loan that is entitled to be secured by the fund as provided by this
subchapter.
(6) "Participating financial institution" means a
community development financial institution participating in the
program.
(7) "Program" means the micro-business access to
capital program established under this subchapter.
(8) "Reserve account" means an account established in
a participating financial institution on approval of the bank in
which money is deposited to serve as a source of additional revenue
to reimburse the financial institution for losses on loans enrolled
in the program.
Sec. 481.552. MICRO-BUSINESS ACCESS TO CAPITAL PROGRAM.
(a) The bank shall establish a micro-business access to capital
program to assist a participating financial institution in making
loans to micro-businesses that have suffered economic injury as a
result of a declared disaster and that face barriers in accessing
capital.
(b) The bank shall use money in the fund to make a deposit in
a participating financial institution's reserve account in an
amount specified by this subchapter to be a source of money the
institution may receive as reimbursement for losses attributable to
loans in the program.
(c) To participate in the program, a financial institution
must be an eligible community development financial institution.
The bank shall determine the eligibility of a community development
financial institution to participate in the program and may set a
limit on the number of eligible community development financial
institutions that may participate in the program.
(d) To participate in the program, an eligible community
development financial institution must enter into a participation
agreement with the bank that sets out the terms and conditions under
which the bank will make contributions to the institution's reserve
account and specifies the criteria for a loan to qualify as a
micro-business access to capital loan, including criteria that
ensures that a micro-business access to capital loan is not unfair
or abusive to the borrower.
(e) To qualify as a micro-business access to capital loan, a
loan:
(1) must be made to a micro-business that:
(A) is in good standing under the laws of this
state; and
(B) did not owe delinquent taxes to a taxing unit
of this state before the date of the initial issuance of the
disaster declaration;
(2) may not be made to a micro-business that:
(A) has total revenue that exceeds the amount for
which no franchise tax is due under Section 171.002(d)(2), Tax
Code;
(B) is a franchise;
(C) is a national chain with operations in this
state;
(D) is a lobbying firm; or
(E) is a private equity firm or backed by a
private equity firm; and
(3) must meet any other criteria provided by this
subchapter.
Sec. 481.553. RULEMAKING AUTHORITY. The executive director
shall adopt rules relating to the implementation of the program and
any other rules necessary to accomplish the purposes of this
subchapter.
Sec. 481.554. PROVISIONS RELATING TO MICRO-BUSINESS ACCESS
TO CAPITAL LOAN. (a) Except as otherwise provided by this
subchapter, the bank may not determine the recipient, amount, or
interest rate of a micro-business access to capital loan or the fees
or other requirements related to the loan.
(b) A loan is not eligible to be enrolled under this
subchapter if the loan is for:
(1) construction or purchase of residential housing;
(2) simple real estate investments, excluding the
development or improvement of commercial real estate occupied by
the borrower's business; or
(3) inside bank transactions.
(c) The borrower of a micro-business access to capital loan
shall apply the loan to working capital or to the purchase,
construction, or lease of capital assets, including buildings and
equipment used by the business. Working capital uses include the
cost of exporting, accounts receivable, payroll, inventory, and
other financing needs of the business.
(d) A micro-business access to capital loan may be sold on
the secondary market with no recourse to the bank or to the loan
loss reserve correspondent to the loan and under conditions as may
be determined by the bank.
(e) When enrolling a loan in the program, a participating
community development financial institution may specify an amount
to be covered under the program that is less than the total amount
of the loan.
Sec. 481.555. RESERVE ACCOUNT. (a) On approval by the bank
and after entering into a participation agreement with the bank, a
participating community development financial institution making a
micro-business access to capital loan shall establish a reserve
account. The reserve account shall be used by the institution only
to cover any losses arising from a default of a micro-business
access to capital loan made by the institution under this
subchapter or as otherwise provided by this subchapter.
(b) A participating community development financial
institution that makes a loan enrolled in the program shall require
the borrower to pay to the institution a fee in an amount that is not
less than two percent but not more than three percent of the
principal amount of the loan, which the financial institution shall
deposit in the reserve account. The institution shall also deposit
in the reserve account an amount equal to the amount of the fee
received by the institution from the borrower under this
subsection. The institution may recover from the borrower all or
part of the amount the institution is required to pay under this
subsection in any manner agreed to by the institution and borrower.
(c) For each micro-business access to capital loan made by a
community development financial institution, the institution shall
certify to the bank, within the period prescribed by the bank, that
the institution has made a micro-business access to capital loan
and the amount the institution has deposited in the reserve
account, including the amount of fees received from the borrower.
(d) On receipt of a certification made under Subsection (c)
and subject to Section 481.556, the bank shall deposit in the
institution's reserve account for each micro-business access to
capital loan made by the institution an amount equal to 200 percent
of the total amount deposited under Subsection (b) for each loan.
(e) A participating community development financial
institution must obtain approval from the bank to withdraw funds
from the reserve account.
Sec. 481.556. LIMITATIONS ON STATE CONTRIBUTION TO RESERVE
ACCOUNT. (a) The amount deposited by the bank into a participating
community development financial institution's reserve account for
any single loan recipient may not exceed $150,000 during a
three-year period.
(b) The maximum amount the bank may deposit into a reserve
account for each micro-business access to capital loan made under
this subchapter is the lesser of $35,000 or an amount equal to eight
percent of the loan amount.
Sec. 481.557. RIGHTS OF STATE WITH RESPECT TO RESERVE
ACCOUNT. (a) All of the money in a reserve account established
under this subchapter is property of the state.
(b) The state is entitled to earn interest on the amount of
contributions made by the bank, borrower, and institution to a
reserve account under this subchapter. The bank shall withdraw
monthly or quarterly from a reserve account the amount of the
interest earned by the state. The bank shall deposit the amount
withdrawn under this subsection into the fund.
(c) If the amount in a reserve account exceeds an amount
equal to 33 percent of the balance of the community development
financial institution's outstanding micro-business access to
capital loans, the bank may withdraw the excess amount and deposit
the amount in the fund. A withdrawal of money authorized under this
subsection may not reduce an active reserve account to an amount
that is less than $200,000.
(d) The bank shall withdraw from the institution's reserve
account the total amount in the account and any interest earned on
the account and deposit the amount in the fund when:
(1) a community development financial institution is
no longer eligible to participate in the program or a participation
agreement entered into under this subchapter expires without
renewal by the bank or institution;
(2) the community development financial institution
has no outstanding micro-business access to capital loans;
(3) the community development financial institution
has not made a micro-business access to capital loan within the
preceding 24 months; or
(4) the community development financial institution
fails to submit a report or other document requested by the bank
within the time or in the manner prescribed.
Sec. 481.558. ANNUAL REPORT. A participating community
development financial institution shall submit an annual report to
the bank. The report must:
(1) provide information regarding outstanding
micro-business access to capital loans, micro-business access to
capital loan losses, and any other information on micro-business
access to capital loans that the bank considers appropriate;
(2) state the total amount of loans for which the bank
has made a contribution from the fund under this subchapter;
(3) include a copy of the institution's most recent
financial statement; and
(4) include information regarding the type of
micro-businesses with loans under this subchapter.
Sec. 481.559. STATUS REPORT. The office shall submit to the
legislature an annual status report on the program's activities.
Sec. 481.560. STATE LIABILITY PROHIBITED. The state is not
liable to a participating financial institution for payment of the
principal, the interest, or any late charges on a micro-business
access to capital loan made under this subchapter.
SECTION 2. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2021.