88R23290 BEF-D
By: Ashby, Button, Shine, Clardy, et al. H.B. No. 1718
A BILL TO BE ENTITLED
AN ACT
relating to rural development funds and insurance tax credits for
certain investments in those funds; authorizing fees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle F, Title 4, Government Code, is amended
by adding Chapter 487A to read as follows:
CHAPTER 487A. RURAL DEVELOPMENT FUNDS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 487A.0001. GENERAL DEFINITIONS. In this chapter:
(1) "Closing date" means the date a rural development
fund has collected all of the amounts described by Section
487A.0056(a)(1).
(2) "Historically underutilized business" means a
business certified by the comptroller under Chapter 2161 as a
historically underutilized business.
(3) "Rural area" means an area:
(A) other than a municipality with a population
of more than 50,000 or an urbanized area contiguous and adjacent to
the municipality; or
(B) determined to be rural in character by the
United States Department of Agriculture.
(4) "Rural development fund" means an entity approved
by the comptroller as a rural development fund.
Sec. 487A.0002. DEFINITION: AFFILIATE. (a) In this
chapter, "affiliate" means an entity that directly or indirectly
through one or more intermediaries controls, is controlled by, or
is under common control with another entity.
(b) For purposes of Subsection (a), an entity is controlled
by another entity if the controlling entity:
(1) holds, directly or indirectly, the majority voting
or ownership interest in the controlled entity; or
(2) has control over the day-to-day operations of the
controlled entity by contract or by law.
Sec. 487A.0003. DEFINITION: CREDIT-ELIGIBLE CAPITAL
CONTRIBUTION. (a) In this chapter and subject to Subsection (b),
"credit-eligible capital contribution" means an investment of cash
that equals the amount specified on a tax credit certificate issued
by the comptroller under Section 487A.0055(2) made by an entity
that is subject to state insurance tax liability, as defined by
Section 232.0001, Insurance Code.
(b) An investment made by an entity qualifies as a
credit-eligible capital contribution only if the entity making the
investment receives in exchange for the investment:
(1) an equity interest in a rural development fund; or
(2) at par value or premium, a debt instrument that has
a maturity date of at least five years from the closing date and a
repayment schedule that is no faster than level principal
amortization over five years.
Sec. 487A.0004. DEFINITION: GROWTH INVESTMENT. (a) In
this chapter and subject to Subsection (b), "growth investment"
means any capital or equity investment by a rural development fund
in a targeted small business or any loan by a rural development fund
to a targeted small business with a stated maturity date of at least
one year after the date of issuance.
(b) A loan by a rural development fund to a targeted small
business is a growth investment only if the targeted small business
obtains an affidavit from the chief executive officer or equivalent
position of the targeted small business attesting that the targeted
small business sought and was denied similar financing from a
commercial bank.
Sec. 487A.0005. DEFINITION: INVESTMENT AUTHORITY. (a) In
this chapter, "investment authority" means the amount stated on the
notice issued under Section 487A.0055(1) approving the rural
development fund.
(b) At least 65 percent of a rural development fund's
investment authority must consist of credit-eligible capital
contributions.
Sec. 487A.0006. DEFINITION: JOBS CREATED. (a) In this
chapter, "jobs created" means, with respect to a targeted small
business, employment positions that:
(1) are created by the targeted small business;
(2) are located in this state;
(3) require at least 35 hours of work each week; and
(4) were not located in this state at the time of the
initial growth investment in the targeted small business.
(b) The number of jobs created by a targeted small business
is calculated each year by subtracting the number of employment
positions in this state at the targeted small business at the time
of the initial growth investment in the targeted small business
from the monthly average of those employment positions for that
year. If the number calculated under this subsection is less than
zero, the number shall be reported as zero.
(c) The monthly average of employment positions for a year
is calculated by adding the number of employment positions existing
on the last day of each month of the year and dividing that sum by
12.
(d) An employment position that meets the requirements of
Subsection (a) shall be multiplied by two for purposes of
calculating the number of jobs created by a targeted small business
if the targeted small business is located in a rural area and is a
historically underutilized business.
Sec. 487A.0007. DEFINITION: JOBS RETAINED. (a) In this
chapter, "jobs retained" means, with respect to a targeted small
business, employment positions that:
(1) are located in this state, require at least 35
hours of work each week, and existed before the initial growth
investment in the targeted small business; and
(2) would have been lost or moved out of this state had
a growth investment in the targeted small business not been made, as
certified in writing by an executive officer of the targeted small
business to the rural development fund.
(b) The number of jobs retained by a targeted small business
is calculated each year based on the monthly average of employment
positions for that year.
(c) The monthly average of employment positions for a year
is calculated by adding the number of employment positions existing
on the last day of each month of the year and dividing that sum by
12.
(d) The reported number of jobs retained for a year may not
exceed the number reported on the initial report under Section
487A.0156. The rural development fund shall reduce the number of
jobs retained for a year if employment at the targeted small
business is less than the number reported on the initial report.
(e) An employment position that meets the requirements of
Subsection (a) shall be multiplied by two for purposes of
calculating the number of jobs retained by a targeted small
business if the targeted small business is located in a rural area
and is a historically underutilized business.
Sec. 487A.0008. DEFINITION: TARGETED SMALL BUSINESS. (a)
In this chapter, "targeted small business" means a business that,
at the time of the initial growth investment in the business:
(1) had fewer than 250 employees, including any
persons who would be considered employees under the federal law to
which 13 C.F.R. Section 121.103(h)(2) applies as a result of the
application of that provision; and
(2) has its principal business operations located in
this state.
(b) For purposes of this chapter, the principal business
operations of a business are located at a place where:
(1) at least 80 percent of the business's employees
work; or
(2) employees who are paid at least 80 percent of the
business's payroll work.
(c) An out-of-state business that agrees to relocate or hire
new employees using the proceeds of a growth investment to
establish principal business operations in this state qualifies as
a targeted small business if the business satisfies the
requirements of:
(1) Subsection (a)(1) at the time of the initial
growth investment in the business; and
(2) Subsection (a)(2) not later than the 180th day
after receiving the initial growth investment or a later date
agreed to by the comptroller.
Sec. 487A.0009. RULES. The comptroller shall adopt rules
necessary to implement, monitor, and evaluate this chapter.
Sec. 487A.0010. DISPOSITION OF FEES. Application fees
submitted under Section 487A.0051(b)(7), amounts remitted under
Section 487A.0151(e), and participation fees collected under
Section 487A.0157 shall be deposited to the credit of the general
revenue fund and may be appropriated only to the comptroller for the
purpose of administering this chapter and Chapter 232, Insurance
Code.
SUBCHAPTER B. APPROVAL OF RURAL DEVELOPMENT FUNDS; TAX CREDIT
CERTIFICATES
Sec. 487A.0051. APPLICATION. (a) Subject to Section
487A.0202, the comptroller shall accept applications from entities
seeking approval as rural development funds.
(b) An application must include:
(1) the total investment authority sought by the
applicant under the applicant's business plan;
(2) evidence sufficient to prove to the comptroller's
satisfaction that, as of the date the applicant submits the
application:
(A) the applicant or affiliates of the applicant
have invested, in the aggregate, at least $100 million in nonpublic
companies located in the United States, including at least $70
million in nonpublic companies located in rural areas in the United
States; and
(B) either:
(i) at least one principal in a rural
business investment company licensed under 7 U.S.C. Section 2009cc
et seq. or a small business investment company licensed under 15
U.S.C. Section 681 is, and has been for at least four years, an
officer or employee of the applicant or of an affiliate of the
applicant on the date the application is submitted; or
(ii) the applicant or an affiliate of the
applicant has maintained its principal business operations in this
state for at least four years preceding September 1, 2023;
(3) a copy of the rural business investment company
license or small business investment company license if required by
Subdivision (2)(B)(i);
(4) an estimate of the number of jobs created and jobs
retained that will result from the applicant's growth investments;
(5) a business plan that includes a revenue impact
assessment that:
(A) projects state and local tax revenue to be
generated by the applicant's proposed growth investments; and
(B) is prepared by a nationally recognized
third-party independent economic forecasting firm using a dynamic
economic forecasting model that analyzes the applicant's business
plan for the 10-year period following the date the applicant
submits the application;
(6) a signed affidavit from each committed investor
stating the amount of credit-eligible capital contributions the
investor commits to making; and
(7) a nonrefundable application fee of $5,000.
Sec. 487A.0052. DECISION ON APPLICATION. (a) The
comptroller shall make a determination on each application not
later than the 30th day after the date the comptroller receives the
application. The comptroller shall make application
determinations in the order in which applications are received and
shall consider applications received on the same day to be received
simultaneously.
(b) The comptroller shall approve up to $300 million of
investment authority under this chapter.
(c) If a request for investment authority exceeds the limit
under Subsection (b), the comptroller shall reduce the investment
authority and the credit-eligible capital contributions for that
application as necessary to avoid exceeding the limit. If multiple
applications received on the same day request a combined investment
authority that exceeds the limit under Subsection (b), the
comptroller shall proportionally reduce the investment authority
and the credit-eligible capital contributions for those
applications as necessary to avoid exceeding the limit. The
comptroller may not reduce an applicant's investment authority for
any reason other than as authorized by this subsection.
Sec. 487A.0053. GROUNDS FOR DENIAL. The comptroller may
deny an application under this subchapter only if:
(1) the application is incomplete or the application
fee is not paid in full;
(2) the applicant fails to satisfy the requirements of
Section 487A.0051(b)(2);
(3) the revenue impact assessment submitted under
Section 487A.0051(b)(5) does not demonstrate that the applicant's
business plan will result in a positive economic impact on combined
state and local revenue during the 10-year period covered by the
assessment that exceeds the cumulative amount of tax credits that
would be issued to the applicant's investors under Chapter 232,
Insurance Code, if the application were approved;
(4) the credit-eligible capital contributions
described in affidavits submitted under Section 487A.0051(b)(6) do
not equal at least 65 percent of the total amount of investment
authority sought under the applicant's business plan; or
(5) the comptroller has already approved the maximum
amount of investment authority allowed under Section 487A.0052(b).
Sec. 487A.0054. SUBMISSION OF ADDITIONAL INFORMATION
FOLLOWING DENIAL. (a) If the comptroller denies an application,
the applicant may, not later than the 15th day after the date the
comptroller provides notice of denial, provide additional
information to the comptroller to complete, clarify, or cure
defects in the application identified by the comptroller.
(b) If the applicant completes, clarifies, or cures the
defects in its application during the period prescribed by
Subsection (a), the application is considered complete as of the
original submission date.
(c) If the applicant fails to complete, clarify, or cure the
defects in its application during the period prescribed by
Subsection (a), the application is finally denied. An applicant
who wishes to reapply must resubmit an application in full with a
new submission date.
(d) The comptroller shall review and reconsider an
application described by Subsection (a) for which the applicant
provides additional information not later than the 30th day after
the date the applicant provides the information. The comptroller
shall consider that application before any pending applications
submitted after the date that application was originally submitted.
(e) This section does not apply to an application denied as
a result of the applicant's failure to submit with the application
affidavits required by Section 487A.0051(b)(6).
Sec. 487A.0055. APPROVAL BY COMPTROLLER. On approval of an
application, the comptroller shall provide:
(1) written notice to the applicant of the applicant's
approval as a rural development fund, including the amount of the
fund's investment authority; and
(2) a tax credit certificate to each investor whose
affidavit was included in the application and include on the
certificate the amount of the investor's credit-eligible capital
contribution.
Sec. 487A.0056. DUTIES OF FUND FOLLOWING APPROVAL. (a) A
rural development fund shall:
(1) not later than the 60th day after the date the fund
receives the approval notice under Section 487A.0055:
(A) collect the credit-eligible capital
contribution from each investor issued a tax credit certificate
under Section 487A.0055; and
(B) subject to Subsection (b), collect one or
more investments of cash that, when added to the contributions
collected under Paragraph (A), equal the fund's investment
authority; and
(2) not later than the 65th day after the date the fund
receives the approval notice under Section 487A.0055, send to the
comptroller documentation sufficient to prove that the fund has
collected the amounts described in Subdivision (1).
(b) At least 10 percent of the rural development fund's
investment authority must consist of equity investments
contributed directly or indirectly by affiliates of the fund,
including employees, officers, and directors of those affiliates.
Sec. 487A.0057. LAPSE OF APPROVAL. (a) If a rural
development fund fails to comply with the requirements of Section
487A.0056, the fund's approval lapses and the corresponding
investment authority described by Section 487A.0056(a)(1) does not
count toward the limit prescribed by Section 487A.0052(b).
(b) The comptroller shall first award lapsed investment
authority pro rata to each rural development fund whose requested
investment authority was reduced under Section 487A.0052(c). The
rural development fund may allocate the investment authority
awarded under this subsection to the fund's investors in the fund's
discretion. The comptroller may award any remaining investment
authority to new applicants.
SUBCHAPTER C. REDUCTION OR REVOCATION OF TAX CREDITS AND INVESTMENT
AUTHORITY
Sec. 487A.0101. REDUCTION OF TAX CREDITS AND INVESTMENT
AUTHORITY FOR FAILURE TO MAKE REQUIRED GROWTH INVESTMENTS. (a) The
comptroller shall reduce the amount of the tax credit on each tax
credit certificate issued under Subchapter B in connection with an
investment in a rural development fund if the fund fails to invest
at least 60 percent of the fund's investment authority in growth
investments in this state on or before the second anniversary of the
closing date. The amount of the reduction under this subsection for
each tax credit certificate is equal to the amount of the tax credit
stated on the tax credit certificate, multiplied by a fraction:
(1) the numerator of which is equal to 60 percent, less
the percentage of the rural development fund's investment authority
invested in growth investments in this state on the second
anniversary of the closing date; and
(2) the denominator of which is 60 percent.
(b) The comptroller shall reduce a rural development fund's
investment authority by an amount equal to the total amount of
reductions under Subsection (a) for all tax credit certificates.
(c) The comptroller shall reduce the amount of the tax
credit on each tax credit certificate issued under Subchapter B in
connection with an investment in a rural development fund if the
fund fails to invest 100 percent of the fund's investment authority
in growth investments in this state on or before the third
anniversary of the closing date. The amount of the reduction under
this subsection for each tax credit certificate is equal to the
amount of the tax credit stated on the tax credit certificate
remaining after any reduction under Subsection (a), multiplied by a
fraction:
(1) the numerator of which is equal to 100 percent,
less the percentage of the rural development fund's investment
authority remaining after any reduction under Subsection (b) that
is invested in growth investments in this state on the third
anniversary of the closing date; and
(2) the denominator of which is 100 percent.
(d) The comptroller shall reduce a rural development fund's
investment authority by an amount equal to the total amount of
reductions under Subsection (c) for all tax credit certificates.
(e) For purposes of this section:
(1) the amount of growth investments that a rural
development fund may count with respect to a particular targeted
small business, including any amount invested in an affiliate of
the targeted small business, may not exceed $5 million; and
(2) all growth investments must consist of growth
investments in targeted small businesses whose principal business
operations are located in, or are relocated to, a rural area in this
state.
Sec. 487A.0102. REDUCTION OF TAX CREDITS AND INVESTMENT
AUTHORITY FOR FAILURE TO MAINTAIN REQUIRED GROWTH INVESTMENTS. (a)
The comptroller shall reduce the amount of the tax credit on each
tax credit certificate issued under Subchapter B in connection with
an investment in a rural development fund if, after the third
anniversary of the closing date and before the sixth anniversary of
the closing date, the fund fails to maintain growth investments in
this state equal to 100 percent of the fund's investment authority
remaining after any reductions under Sections 487A.0101(b) and (d).
The amount of the reduction under this subsection for each tax
credit certificate is equal to the amount of the tax credit stated
on the tax credit certificate remaining after any reductions under
Sections 487A.0101(a) and (c), multiplied by a fraction:
(1) the numerator of which is equal to 100 percent,
less the percentage of the rural development fund's investment
authority remaining after any reductions under Sections
487A.0101(b) and (d) that is invested in growth investments in this
state on the date of the reduction; and
(2) the denominator of which is 100 percent.
(b) The comptroller shall reduce a rural development fund's
investment authority by an amount equal to the total amount of
reductions under Subsection (a) for all tax credit certificates.
(c) For purposes of this section:
(1) the amount of growth investments that a rural
development fund may count with respect to a particular targeted
small business, including any amount invested in an affiliate of
the targeted small business, may not exceed $7.5 million;
(2) an investment that is sold or repaid is considered
to be maintained if the rural development fund reinvests an amount
equal to the capital returned or recovered by the fund from the
original investment, excluding any profit realized, in other growth
investments in this state on or before the first anniversary of the
date the capital is returned or recovered; and
(3) an amount received periodically by a rural
development fund is considered to be continually invested in growth
investments if that amount is reinvested in one or more growth
investments by the end of the calendar year following the year of
receipt.
Sec. 487A.0103. REVOCATION OF TAX CREDITS AND INVESTMENT
AUTHORITY FOR CERTAIN DISTRIBUTIONS OR PAYMENTS. (a) The
comptroller shall revoke each tax credit certificate issued under
Subchapter B in connection with an investment in a rural
development fund if, before the fund exits the program under
Section 487A.0151, the fund makes a distribution or payment that
results in the fund having less than the portion of the fund's
investment authority required to be invested in growth investments
in this state under Sections 487A.0101 and 487A.0102:
(1) invested in growth investments in this state; or
(2) available for investment in growth investments and
held in:
(A) cash;
(B) United States Treasury securities;
(C) bonds or notes issued by this state or an
agency or political subdivision of this state; or
(D) a deposit account with a depository
institution headquartered or chartered in this state.
(b) The comptroller shall revoke a rural development fund's
investment authority if the comptroller revokes tax credit
certificates under Subsection (a).
Sec. 487A.0104. REDUCTION OF TAX CREDITS AND INVESTMENT
AUTHORITY FOR RELATED-PARTY INVESTMENTS. (a) The comptroller shall
reduce the amount of the tax credit on each tax credit certificate
issued under Subchapter B in connection with an investment in a
rural development fund if, before the fund exits the program under
Section 487A.0151, the fund makes a growth investment in a targeted
small business that directly or indirectly through an affiliate
owns, has the right to acquire an ownership interest in, makes a
loan to, or makes an investment in the fund, an affiliate of the
fund, or an investor in the fund.
(b) The amount of the reduction under Subsection (a) for
each tax credit certificate is equal to the amount of the tax credit
stated on the tax credit certificate remaining after any reductions
under Sections 487A.0101(a) and (c), multiplied by a fraction:
(1) the numerator of which is the portion of the rural
development fund's investment authority remaining after any
reductions under Sections 487A.0101(b) and (d) that is invested in
growth investments in targeted small businesses described by
Subsection (a); and
(2) the denominator of which is the total amount of the
rural development fund's investment authority remaining after any
reductions under Sections 487A.0101(b) and (d).
(c) The comptroller shall reduce a rural development fund's
investment authority by an amount equal to the total amount of
reductions under Subsection (a) for all tax credit certificates.
(d) Subsection (a) does not apply to investments in publicly
traded securities by a targeted small business or an owner or
affiliate of the targeted small business. For purposes of
Subsection (a), a rural development fund is not considered an
affiliate of a targeted small business solely as a result of the
fund's growth investment in the targeted small business.
Sec. 487A.0105. OPPORTUNITY TO CORRECT VIOLATION. (a)
Before reducing or revoking a tax credit and investment authority
under this subchapter, the comptroller shall notify the rural
development fund of the reasons for the pending reduction or
revocation.
(b) The rural development fund may, not later than the 90th
day after the date the notice is received, correct any violation
outlined in the notice to the satisfaction of the comptroller and
avoid reduction or revocation of the tax credit and investment
authority.
Sec. 487A.0106. ALLOCATION OF REVOKED INVESTMENT
AUTHORITY. (a) The amount of investment authority reduced or
revoked under this subchapter does not count toward the limit on
total investment authority described in Section 487A.0052(b).
(b) The comptroller shall first award reduced or revoked
investment authority pro rata to each rural development fund whose
requested investment authority was reduced under Section
487A.0052(c). The comptroller may award any remaining investment
authority to new applicants.
SUBCHAPTER D. CERTAIN FUND OPERATIONS
Sec. 487A.0151. APPLICATION TO EXIT PROGRAM. (a) On or
after the sixth anniversary of the closing date, a rural
development fund may apply to the comptroller to exit the program
and no longer be subject to regulation under this chapter. An
application to exit the program must be in a form and comply with
procedures prescribed by the comptroller and include a calculation
of the state reimbursement amount as provided by Section 487A.0153.
(b) The comptroller shall respond to the application not
later than the 30th day after receipt and include confirmation of
the state reimbursement amount.
(c) A rural development fund is eligible to exit the program
under this section if no tax credit certificates related to
investments in the fund have been reduced or revoked and the fund
has not received any reduction or revocation notice that has not
been corrected under Section 487A.0105.
(d) The comptroller may not unreasonably deny an
application under this section. The comptroller shall give the
rural development fund notice of a denial and include in the notice
the reasons for the denial.
(e) Not later than the 60th day after the date the rural
development fund receives confirmation of the state reimbursement
amount under Subsection (b), the fund shall remit to the
comptroller an amount of money equal to the lesser of:
(1) the excess return determined under Section
487A.0152; or
(2) the state reimbursement amount determined under
Section 487A.0153.
Sec. 487A.0152. CALCULATION OF EXCESS RETURN. (a) For
purposes of Section 487A.0151, a rural development fund's excess
return is determined by computing the difference between:
(1) the sum of:
(A) the present value of all growth investments
and other assets held by the fund on the date the fund applies to
exit the program under Section 487A.0151; and
(B) all amounts distributed to the equity holders
of the fund before the fund applies to exit the program under
Section 487A.0151; and
(2) the sum of:
(A) the amount of the fund's original investment
authority; and
(B) an amount equal to any projected increase in
the federal or state tax liability of equity holders of the fund,
including penalties and interest, related to the equity holders'
ownership, management, or operation of the fund.
(b) If the amount computed under Subsection (a) is less than
zero, the excess return is equal to zero.
Sec. 487A.0153. CALCULATION OF STATE REIMBURSEMENT AMOUNT.
For purposes of Section 487A.0151, a rural development fund's state
reimbursement amount is determined by computing the difference
between:
(1) 50 percent of the fund's credit-eligible capital
contributions; and
(2) the product of:
(A) the sum of the annual jobs created and jobs
retained as a result of the fund's growth investments as reported to
the comptroller under Section 487A.0156; and
(B) $20,000.
Sec. 487A.0154. NO REDUCTION OR REVOCATION FOLLOWING EXIT.
The comptroller may not reduce or revoke the amount of a tax credit
on a tax credit certificate related to an investment in a rural
development fund after the fund's exit from the program.
Sec. 487A.0155. EVALUATION OF PROPOSED INVESTMENT. (a) A
rural development fund, before making a growth investment, may
request from the comptroller a written opinion as to whether the
business in which the fund proposes to invest qualifies as a
targeted small business.
(b) Not later than the 15th business day after receiving the
request, the comptroller shall notify the rural development fund of
its determination.
(c) If the comptroller fails to notify the rural development
fund of its determination on or before the 15th business day after
receiving the request, the business in which the fund proposes to
invest is considered to be a targeted small business for purposes of
this chapter.
Sec. 487A.0156. ANNUAL REPORT. (a) A rural development
fund shall submit a report to the comptroller on or before the fifth
business day after each anniversary of the closing date until the
fund has exited the program under Section 487A.0151.
(b) The report must document the rural development fund's
growth investments and include:
(1) a bank statement showing each growth investment;
(2) the name, location, and industry of each business
receiving a growth investment, including either the determination
notice described by Section 487A.0155 or evidence that the business
qualified as a targeted small business at the time the investment
was made;
(3) the number of jobs created and jobs retained in the
preceding calendar year as a result of the fund's growth
investments as of the last day of that period;
(4) the average annual salary of the jobs described by
Subdivision (3) and evidence of any other monetary or social
benefit to this state as a result of those jobs;
(5) a description, including the amount, of each
growth investment in a targeted small business located in a rural
area made in the 24 months following the closing date; and
(6) any other information the comptroller requires.
(c) A rural development fund may, but is not required to,
include in any report submitted under this section information
about the number of jobs created and jobs retained with respect to a
former growth investment that the fund has exited.
Sec. 487A.0157. PARTICIPATION FEE. (a) A rural
development fund that has not exited the program under Section
487A.0151 before the first day of a state fiscal year shall remit to
the comptroller a participation fee in connection with the state
fiscal year in an amount determined under Subsection (b)(2) to
offset the fiscal impact to the comptroller of administering the
program. The comptroller shall prescribe the date on which the fee
payment is due.
(b) For each state fiscal year, the comptroller shall
determine:
(1) the costs incurred by the comptroller to
administer this chapter and Chapter 232, Insurance Code, less the
amount of application fees submitted under Section 487A.0051(b)(7)
and amounts remitted under Section 487A.0151(e); and
(2) the amount of the participation fee each rural
development fund described by Subsection (a) is required to pay in
connection with the state fiscal year, which is computed by
multiplying the amount determined under Subdivision (1) for the
state fiscal year by a fraction:
(A) the numerator of which is the amount of the
rural development fund's investment authority; and
(B) the denominator of which is the total amount
of investment authority for all rural development funds required to
pay a fee under Subsection (a) in connection with the state fiscal
year.
SUBCHAPTER E. REPORT; CONDITIONS FOR ACCEPTANCE OF CERTAIN
APPLICATIONS
Sec. 487A.0201. REPORT. (a) Before the beginning of the
91st Legislature, Regular Session, the comptroller shall submit to
the lieutenant governor, the speaker of the house of
representatives, and each other member of the legislature a report
on the economic benefits of this chapter.
(b) The report must include an assessment of:
(1) the aggregate effects of growth investments made
under this chapter, including:
(A) the total number of jobs created by all
targeted small businesses, including direct jobs, indirect jobs,
and induced jobs;
(B) the total number of jobs retained by all
targeted small businesses;
(C) the total amount of wages paid in connection
with jobs created and jobs retained by all targeted small
businesses;
(D) the median wage of jobs created and jobs
retained by all targeted small businesses;
(E) the total effect on personal income in this
state, including direct and indirect effects;
(F) the total amount of growth investments;
(G) the gross domestic product of this state
attributable to targeted small businesses;
(H) the total taxable value of property of
targeted small businesses in this state according to tax appraisal
rolls;
(I) the total positive fiscal effect on this
state and local governments in this state; and
(J) the total number and dollar amount of growth
investments in targeted small businesses located in rural areas;
(2) the benefits to this state from cost savings
attributable to jobs created and jobs retained by all targeted
small businesses, including:
(A) Medicaid savings, with savings to this state
and the federal government listed separately;
(B) food assistance program savings;
(C) unemployment insurance payment savings; and
(D) any other savings that can be reasonably
estimated using data available to the comptroller in connection
with some or all targeted small businesses; and
(3) the total positive fiscal effect on this state and
local governments in this state of the benefits described by
Subdivision (2).
(c) The report may not include information that is
confidential by law.
(d) In preparing the portion of the report described by
Subsection (b)(1), the comptroller shall:
(1) use standard, nationally recognized economic
estimation techniques, including economic multipliers; and
(2) base the assessment on data submitted to the
comptroller by each rural development fund.
Sec. 487A.0202. CONDITIONS FOR ACCEPTANCE OF CERTAIN
APPLICATIONS. (a) The comptroller may not accept applications
under Section 487A.0051 after January 1, 2024, unless the total
positive fiscal effects described by Section 487A.0201(b) exceed
the sum of all tax credit certificates issued by the comptroller
under Subchapter B.
(b) The comptroller shall resume accepting applications
under Section 487A.0051 when the condition provided by Subsection
(a) is satisfied.
SECTION 2. Subtitle B, Title 3, Insurance Code, is amended
by adding Chapter 232 to read as follows:
CHAPTER 232. TAX CREDIT FOR INVESTMENT IN RURAL DEVELOPMENT FUND
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 232.0001. DEFINITIONS. In this chapter:
(1) "Affiliate" has the meaning assigned by Section
487A.0002, Government Code.
(2) "Closing date" has the meaning assigned by Section
487A.0001, Government Code.
(3) "State insurance tax liability" means any tax
liability incurred under Chapter 221, 222, 223, 223A, 224, 225,
226, or 281.
Sec. 232.0002. RULES. The comptroller shall adopt rules
necessary to implement this chapter.
SUBCHAPTER B. TAX CREDIT
Sec. 232.0051. ELIGIBILITY FOR CREDIT. An entity is
eligible for a credit against the entity's state insurance tax
liability in the amount and under the conditions provided by this
chapter.
Sec. 232.0052. QUALIFICATION. An entity is eligible for a
credit for a tax year if the entity holds a tax credit certificate
issued under Section 487A.0055, Government Code, and the third,
fourth, fifth, or sixth anniversary of the closing date in
connection with which the certificate was issued occurs during the
tax year.
Sec. 232.0053. AMOUNT OF CREDIT; LIMITATION. (a) The
amount of credit for a tax year in connection with a tax credit
certificate described by Section 232.0052 is equal to 25 percent of
the amount of the credit-eligible capital contribution stated on
the certificate.
(b) The total credit claimed for a tax year, including the
amount of any carryforward under Section 232.0054, may not exceed
the amount of state insurance tax liability due for the entity for
the tax year after applying all other applicable tax credits.
(c) Credits may be applied to the entity's estimated or
final tax payments for the tax year.
Sec. 232.0054. CARRYFORWARD. If an entity is eligible for a
credit that exceeds the limitation under Section 232.0053(b), the
entity may carry the unused credit forward and apply the credit to a
subsequent tax report.
Sec. 232.0055. ASSIGNMENT PROHIBITED. (a) Except as
provided by Subsection (b), an entity may not convey, assign, or
transfer the credit allowed under this chapter to another entity.
(b) An entity may convey, assign, or transfer the credit
allowed under this chapter to an affiliate of the entity that is
subject to state insurance tax liability.
Sec. 232.0056. RETALIATORY TAX. An entity claiming a
credit under this chapter is not required to pay any additional
retaliatory tax levied under Chapter 281 as a result of claiming
that credit.
SUBCHAPTER C. RECAPTURE OF CREDIT
Sec. 232.0101. RECAPTURE. The comptroller shall recapture
the amount of a credit claimed on a tax report filed under Chapter
221, 222, 223, 223A, 224, 225, 226, or 281 from an entity if the
amount of the tax credit on the tax credit certificate on which the
credit is based is reduced or revoked under Subchapter C, Chapter
487A, Government Code. The comptroller shall recapture an amount
equal to the amount by which the credit previously claimed exceeds
the amount of the reduction or revocation.
SECTION 3. It is the intent of the legislature that each
growth investment in a targeted small business made by a rural
development fund under Chapter 487A, Government Code, as added by
this Act:
(1) provide patient, growth-oriented investment
capital for purposes including expansion, payroll, inventory, and
training; and
(2) be at a below market rate with flexible terms,
which offers the targeted small business an affordable and
borrower-friendly financing alternative.
SECTION 4. (a) As soon as practicable after this Act
becomes law as provided by Section 2001.006, Government Code, the
comptroller of public accounts shall adopt rules necessary to
implement Chapter 487A, Government Code, as added by this Act, and
Chapter 232, Insurance Code, as added by this Act.
(b) Not later than October 1, 2023, the comptroller of
public accounts shall begin accepting applications under Section
487A.0051(a), Government Code, as added by this Act.
SECTION 5. Chapter 232, Insurance Code, as added by this
Act, applies only to a tax report originally due on or after January
1, 2023.
SECTION 6. 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, 2023.