Texas 2023 - 88th Regular

Texas House Bill HB1718 Compare Versions

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1	1	88R23290 BEF-D
2	2	By: Ashby, Button, Shine, Clardy, et al. H.B. No. 1718
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to rural development funds and insurance tax credits for
8	8	certain investments in those funds; authorizing fees.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Subtitle F, Title 4, Government Code, is amended
11	11	by adding Chapter 487A to read as follows:
12	12	CHAPTER 487A. RURAL DEVELOPMENT FUNDS
13	13	SUBCHAPTER A. GENERAL PROVISIONS
14	14	Sec. 487A.0001. GENERAL DEFINITIONS. In this chapter:
15	15	(1) "Closing date" means the date a rural development
16	16	fund has collected all of the amounts described by Section
17	17	487A.0056(a)(1).
18	18	(2) "Historically underutilized business" means a
19	19	business certified by the comptroller under Chapter 2161 as a
20	20	historically underutilized business.
21	21	(3) "Rural area" means an area:
22	22	(A) other than a municipality with a population
23	23	of more than 50,000 or an urbanized area contiguous and adjacent to
24	24	the municipality; or
25	25	(B) determined to be rural in character by the
26	26	United States Department of Agriculture.
27	27	(4) "Rural development fund" means an entity approved
28	28	by the comptroller as a rural development fund.
29	29	Sec. 487A.0002. DEFINITION: AFFILIATE. (a) In this
30	30	chapter, "affiliate" means an entity that directly or indirectly
31	31	through one or more intermediaries controls, is controlled by, or
32	32	is under common control with another entity.
33	33	(b) For purposes of Subsection (a), an entity is controlled
34	34	by another entity if the controlling entity:
35	35	(1) holds, directly or indirectly, the majority voting
36	36	or ownership interest in the controlled entity; or
37	37	(2) has control over the day-to-day operations of the
38	38	controlled entity by contract or by law.
39	39	Sec. 487A.0003. DEFINITION: CREDIT-ELIGIBLE CAPITAL
40	40	CONTRIBUTION. (a) In this chapter and subject to Subsection (b),
41	41	"credit-eligible capital contribution" means an investment of cash
42	42	that equals the amount specified on a tax credit certificate issued
43	43	by the comptroller under Section 487A.0055(2) made by an entity
44	44	that is subject to state insurance tax liability, as defined by
45	45	Section 232.0001, Insurance Code.
46	46	(b) An investment made by an entity qualifies as a
47	47	credit-eligible capital contribution only if the entity making the
48	48	investment receives in exchange for the investment:
49	49	(1) an equity interest in a rural development fund; or
50	50	(2) at par value or premium, a debt instrument that has
51	51	a maturity date of at least five years from the closing date and a
52	52	repayment schedule that is no faster than level principal
53	53	amortization over five years.
54	54	Sec. 487A.0004. DEFINITION: GROWTH INVESTMENT. (a) In
55	55	this chapter and subject to Subsection (b), "growth investment"
56	56	means any capital or equity investment by a rural development fund
57	57	in a targeted small business or any loan by a rural development fund
58	58	to a targeted small business with a stated maturity date of at least
59	59	one year after the date of issuance.
60	60	(b) A loan by a rural development fund to a targeted small
61	61	business is a growth investment only if the targeted small business
62	62	obtains an affidavit from the chief executive officer or equivalent
63	63	position of the targeted small business attesting that the targeted
64	64	small business sought and was denied similar financing from a
65	65	commercial bank.
66	66	Sec. 487A.0005. DEFINITION: INVESTMENT AUTHORITY. (a) In
67	67	this chapter, "investment authority" means the amount stated on the
68	68	notice issued under Section 487A.0055(1) approving the rural
69	69	development fund.
70	70	(b) At least 65 percent of a rural development fund's
71	71	investment authority must consist of credit-eligible capital
72	72	contributions.
73	73	Sec. 487A.0006. DEFINITION: JOBS CREATED. (a) In this
74	74	chapter, "jobs created" means, with respect to a targeted small
75	75	business, employment positions that:
76	76	(1) are created by the targeted small business;
77	77	(2) are located in this state;
78	78	(3) require at least 35 hours of work each week; and
79	79	(4) were not located in this state at the time of the
80	80	initial growth investment in the targeted small business.
81	81	(b) The number of jobs created by a targeted small business
82	82	is calculated each year by subtracting the number of employment
83	83	positions in this state at the targeted small business at the time
84	84	of the initial growth investment in the targeted small business
85	85	from the monthly average of those employment positions for that
86	86	year. If the number calculated under this subsection is less than
87	87	zero, the number shall be reported as zero.
88	88	(c) The monthly average of employment positions for a year
89	89	is calculated by adding the number of employment positions existing
90	90	on the last day of each month of the year and dividing that sum by
91	91	12.
92	92	(d) An employment position that meets the requirements of
93	93	Subsection (a) shall be multiplied by two for purposes of
94	94	calculating the number of jobs created by a targeted small business
95	95	if the targeted small business is located in a rural area and is a
96	96	historically underutilized business.
97	97	Sec. 487A.0007. DEFINITION: JOBS RETAINED. (a) In this
98	98	chapter, "jobs retained" means, with respect to a targeted small
99	99	business, employment positions that:
100	100	(1) are located in this state, require at least 35
101	101	hours of work each week, and existed before the initial growth
102	102	investment in the targeted small business; and
103	103	(2) would have been lost or moved out of this state had
104	104	a growth investment in the targeted small business not been made, as
105	105	certified in writing by an executive officer of the targeted small
106	106	business to the rural development fund.
107	107	(b) The number of jobs retained by a targeted small business
108	108	is calculated each year based on the monthly average of employment
109	109	positions for that year.
110	110	(c) The monthly average of employment positions for a year
111	111	is calculated by adding the number of employment positions existing
112	112	on the last day of each month of the year and dividing that sum by
113	113	12.
114	114	(d) The reported number of jobs retained for a year may not
115	115	exceed the number reported on the initial report under Section
116	116	487A.0156. The rural development fund shall reduce the number of
117	117	jobs retained for a year if employment at the targeted small
118	118	business is less than the number reported on the initial report.
119	119	(e) An employment position that meets the requirements of
120	120	Subsection (a) shall be multiplied by two for purposes of
121	121	calculating the number of jobs retained by a targeted small
122	122	business if the targeted small business is located in a rural area
123	123	and is a historically underutilized business.
124	124	Sec. 487A.0008. DEFINITION: TARGETED SMALL BUSINESS. (a)
125	125	In this chapter, "targeted small business" means a business that,
126	126	at the time of the initial growth investment in the business:
127	127	(1) had fewer than 250 employees, including any
128	128	persons who would be considered employees under the federal law to
129	129	which 13 C.F.R. Section 121.103(h)(2) applies as a result of the
130	130	application of that provision; and
131	131	(2) has its principal business operations located in
132	132	this state.
133	133	(b) For purposes of this chapter, the principal business
134	134	operations of a business are located at a place where:
135	135	(1) at least 80 percent of the business's employees
136	136	work; or
137	137	(2) employees who are paid at least 80 percent of the
138	138	business's payroll work.
139	139	(c) An out-of-state business that agrees to relocate or hire
140	140	new employees using the proceeds of a growth investment to
141	141	establish principal business operations in this state qualifies as
142	142	a targeted small business if the business satisfies the
143	143	requirements of:
144	144	(1) Subsection (a)(1) at the time of the initial
145	145	growth investment in the business; and
146	146	(2) Subsection (a)(2) not later than the 180th day
147	147	after receiving the initial growth investment or a later date
148	148	agreed to by the comptroller.
149	149	Sec. 487A.0009. RULES. The comptroller shall adopt rules
150	150	necessary to implement, monitor, and evaluate this chapter.
151	151	Sec. 487A.0010. DISPOSITION OF FEES. Application fees
152	152	submitted under Section 487A.0051(b)(7), amounts remitted under
153	153	Section 487A.0151(e), and participation fees collected under
154	154	Section 487A.0157 shall be deposited to the credit of the general
155	155	revenue fund and may be appropriated only to the comptroller for the
156	156	purpose of administering this chapter and Chapter 232, Insurance
157	157	Code.
158	158	SUBCHAPTER B. APPROVAL OF RURAL DEVELOPMENT FUNDS; TAX CREDIT
159	159	CERTIFICATES
160	160	Sec. 487A.0051. APPLICATION. (a) Subject to Section
161	161	487A.0202, the comptroller shall accept applications from entities
162	162	seeking approval as rural development funds.
163	163	(b) An application must include:
164	164	(1) the total investment authority sought by the
165	165	applicant under the applicant's business plan;
166	166	(2) evidence sufficient to prove to the comptroller's
167	167	satisfaction that, as of the date the applicant submits the
168	168	application:
169	169	(A) the applicant or affiliates of the applicant
170	170	have invested, in the aggregate, at least $100 million in nonpublic
171	171	companies located in the United States, including at least $70
172	172	million in nonpublic companies located in rural areas in the United
173	173	States; and
174	174	(B) either:
175	175	(i) at least one principal in a rural
176	176	business investment company licensed under 7 U.S.C. Section 2009cc
177	177	et seq. or a small business investment company licensed under 15
178	178	U.S.C. Section 681 is, and has been for at least four years, an
179	179	officer or employee of the applicant or of an affiliate of the
180	180	applicant on the date the application is submitted; or
181	181	(ii) the applicant or an affiliate of the
182	182	applicant has maintained its principal business operations in this
183	183	state for at least four years preceding September 1, 2023;
184	184	(3) a copy of the rural business investment company
185	185	license or small business investment company license if required by
186	186	Subdivision (2)(B)(i);
187	187	(4) an estimate of the number of jobs created and jobs
188	188	retained that will result from the applicant's growth investments;
189	189	(5) a business plan that includes a revenue impact
190	190	assessment that:
191	191	(A) projects state and local tax revenue to be
192	192	generated by the applicant's proposed growth investments; and
193	193	(B) is prepared by a nationally recognized
194	194	third-party independent economic forecasting firm using a dynamic
195	195	economic forecasting model that analyzes the applicant's business
196	196	plan for the 10-year period following the date the applicant
197	197	submits the application;
198	198	(6) a signed affidavit from each committed investor
199	199	stating the amount of credit-eligible capital contributions the
200	200	investor commits to making; and
201	201	(7) a nonrefundable application fee of $5,000.
202	202	Sec. 487A.0052. DECISION ON APPLICATION. (a) The
203	203	comptroller shall make a determination on each application not
204	204	later than the 30th day after the date the comptroller receives the
205	205	application. The comptroller shall make application
206	206	determinations in the order in which applications are received and
207	207	shall consider applications received on the same day to be received
208	208	simultaneously.
209	209	(b) The comptroller shall approve up to $300 million of
210	210	investment authority under this chapter.
211	211	(c) If a request for investment authority exceeds the limit
212	212	under Subsection (b), the comptroller shall reduce the investment
213	213	authority and the credit-eligible capital contributions for that
214	214	application as necessary to avoid exceeding the limit. If multiple
215	215	applications received on the same day request a combined investment
216	216	authority that exceeds the limit under Subsection (b), the
217	217	comptroller shall proportionally reduce the investment authority
218	218	and the credit-eligible capital contributions for those
219	219	applications as necessary to avoid exceeding the limit. The
220	220	comptroller may not reduce an applicant's investment authority for
221	221	any reason other than as authorized by this subsection.
222	222	Sec. 487A.0053. GROUNDS FOR DENIAL. The comptroller may
223	223	deny an application under this subchapter only if:
224	224	(1) the application is incomplete or the application
225	225	fee is not paid in full;
226	226	(2) the applicant fails to satisfy the requirements of
227	227	Section 487A.0051(b)(2);
228	228	(3) the revenue impact assessment submitted under
229	229	Section 487A.0051(b)(5) does not demonstrate that the applicant's
230	230	business plan will result in a positive economic impact on combined
231	231	state and local revenue during the 10-year period covered by the
232	232	assessment that exceeds the cumulative amount of tax credits that
233	233	would be issued to the applicant's investors under Chapter 232,
234	234	Insurance Code, if the application were approved;
235	235	(4) the credit-eligible capital contributions
236	236	described in affidavits submitted under Section 487A.0051(b)(6) do
237	237	not equal at least 65 percent of the total amount of investment
238	238	authority sought under the applicant's business plan; or
239	239	(5) the comptroller has already approved the maximum
240	240	amount of investment authority allowed under Section 487A.0052(b).
241	241	Sec. 487A.0054. SUBMISSION OF ADDITIONAL INFORMATION
242	242	FOLLOWING DENIAL. (a) If the comptroller denies an application,
243	243	the applicant may, not later than the 15th day after the date the
244	244	comptroller provides notice of denial, provide additional
245	245	information to the comptroller to complete, clarify, or cure
246	246	defects in the application identified by the comptroller.
247	247	(b) If the applicant completes, clarifies, or cures the
248	248	defects in its application during the period prescribed by
249	249	Subsection (a), the application is considered complete as of the
250	250	original submission date.
251	251	(c) If the applicant fails to complete, clarify, or cure the
252	252	defects in its application during the period prescribed by
253	253	Subsection (a), the application is finally denied. An applicant
254	254	who wishes to reapply must resubmit an application in full with a
255	255	new submission date.
256	256	(d) The comptroller shall review and reconsider an
257	257	application described by Subsection (a) for which the applicant
258	258	provides additional information not later than the 30th day after
259	259	the date the applicant provides the information. The comptroller
260	260	shall consider that application before any pending applications
261	261	submitted after the date that application was originally submitted.
262	262	(e) This section does not apply to an application denied as
263	263	a result of the applicant's failure to submit with the application
264	264	affidavits required by Section 487A.0051(b)(6).
265	265	Sec. 487A.0055. APPROVAL BY COMPTROLLER. On approval of an
266	266	application, the comptroller shall provide:
267	267	(1) written notice to the applicant of the applicant's
268	268	approval as a rural development fund, including the amount of the
269	269	fund's investment authority; and
270	270	(2) a tax credit certificate to each investor whose
271	271	affidavit was included in the application and include on the
272	272	certificate the amount of the investor's credit-eligible capital
273	273	contribution.
274	274	Sec. 487A.0056. DUTIES OF FUND FOLLOWING APPROVAL. (a) A
275	275	rural development fund shall:
276	276	(1) not later than the 60th day after the date the fund
277	277	receives the approval notice under Section 487A.0055:
278	278	(A) collect the credit-eligible capital
279	279	contribution from each investor issued a tax credit certificate
280	280	under Section 487A.0055; and
281	281	(B) subject to Subsection (b), collect one or
282	282	more investments of cash that, when added to the contributions
283	283	collected under Paragraph (A), equal the fund's investment
284	284	authority; and
285	285	(2) not later than the 65th day after the date the fund
286	286	receives the approval notice under Section 487A.0055, send to the
287	287	comptroller documentation sufficient to prove that the fund has
288	288	collected the amounts described in Subdivision (1).
289	289	(b) At least 10 percent of the rural development fund's
290	290	investment authority must consist of equity investments
291	291	contributed directly or indirectly by affiliates of the fund,
292	292	including employees, officers, and directors of those affiliates.
293	293	Sec. 487A.0057. LAPSE OF APPROVAL. (a) If a rural
294	294	development fund fails to comply with the requirements of Section
295	295	487A.0056, the fund's approval lapses and the corresponding
296	296	investment authority described by Section 487A.0056(a)(1) does not
297	297	count toward the limit prescribed by Section 487A.0052(b).
298	298	(b) The comptroller shall first award lapsed investment
299	299	authority pro rata to each rural development fund whose requested
300	300	investment authority was reduced under Section 487A.0052(c). The
301	301	rural development fund may allocate the investment authority
302	302	awarded under this subsection to the fund's investors in the fund's
303	303	discretion. The comptroller may award any remaining investment
304	304	authority to new applicants.
305	305	SUBCHAPTER C. REDUCTION OR REVOCATION OF TAX CREDITS AND INVESTMENT
306	306	AUTHORITY
307	307	Sec. 487A.0101. REDUCTION OF TAX CREDITS AND INVESTMENT
308	308	AUTHORITY FOR FAILURE TO MAKE REQUIRED GROWTH INVESTMENTS. (a) The
309	309	comptroller shall reduce the amount of the tax credit on each tax
310	310	credit certificate issued under Subchapter B in connection with an
311	311	investment in a rural development fund if the fund fails to invest
312	312	at least 60 percent of the fund's investment authority in growth
313	313	investments in this state on or before the second anniversary of the
314	314	closing date. The amount of the reduction under this subsection for
315	315	each tax credit certificate is equal to the amount of the tax credit
316	316	stated on the tax credit certificate, multiplied by a fraction:
317	317	(1) the numerator of which is equal to 60 percent, less
318	318	the percentage of the rural development fund's investment authority
319	319	invested in growth investments in this state on the second
320	320	anniversary of the closing date; and
321	321	(2) the denominator of which is 60 percent.
322	322	(b) The comptroller shall reduce a rural development fund's
323	323	investment authority by an amount equal to the total amount of
324	324	reductions under Subsection (a) for all tax credit certificates.
325	325	(c) The comptroller shall reduce the amount of the tax
326	326	credit on each tax credit certificate issued under Subchapter B in
327	327	connection with an investment in a rural development fund if the
328	328	fund fails to invest 100 percent of the fund's investment authority
329	329	in growth investments in this state on or before the third
330	330	anniversary of the closing date. The amount of the reduction under
331	331	this subsection for each tax credit certificate is equal to the
332	332	amount of the tax credit stated on the tax credit certificate
333	333	remaining after any reduction under Subsection (a), multiplied by a
334	334	fraction:
335	335	(1) the numerator of which is equal to 100 percent,
336	336	less the percentage of the rural development fund's investment
337	337	authority remaining after any reduction under Subsection (b) that
338	338	is invested in growth investments in this state on the third
339	339	anniversary of the closing date; and
340	340	(2) the denominator of which is 100 percent.
341	341	(d) The comptroller shall reduce a rural development fund's
342	342	investment authority by an amount equal to the total amount of
343	343	reductions under Subsection (c) for all tax credit certificates.
344	344	(e) For purposes of this section:
345	345	(1) the amount of growth investments that a rural
346	346	development fund may count with respect to a particular targeted
347	347	small business, including any amount invested in an affiliate of
348	348	the targeted small business, may not exceed $5 million; and
349	349	(2) all growth investments must consist of growth
350	350	investments in targeted small businesses whose principal business
351	351	operations are located in, or are relocated to, a rural area in this
352	352	state.
353	353	Sec. 487A.0102. REDUCTION OF TAX CREDITS AND INVESTMENT
354	354	AUTHORITY FOR FAILURE TO MAINTAIN REQUIRED GROWTH INVESTMENTS. (a)
355	355	The comptroller shall reduce the amount of the tax credit on each
356	356	tax credit certificate issued under Subchapter B in connection with
357	357	an investment in a rural development fund if, after the third
358	358	anniversary of the closing date and before the sixth anniversary of
359	359	the closing date, the fund fails to maintain growth investments in
360	360	this state equal to 100 percent of the fund's investment authority
361	361	remaining after any reductions under Sections 487A.0101(b) and (d).
362	362	The amount of the reduction under this subsection for each tax
363	363	credit certificate is equal to the amount of the tax credit stated
364	364	on the tax credit certificate remaining after any reductions under
365	365	Sections 487A.0101(a) and (c), multiplied by a fraction:
366	366	(1) the numerator of which is equal to 100 percent,
367	367	less the percentage of the rural development fund's investment
368	368	authority remaining after any reductions under Sections
369	369	487A.0101(b) and (d) that is invested in growth investments in this
370	370	state on the date of the reduction; and
371	371	(2) the denominator of which is 100 percent.
372	372	(b) The comptroller shall reduce a rural development fund's
373	373	investment authority by an amount equal to the total amount of
374	374	reductions under Subsection (a) for all tax credit certificates.
375	375	(c) For purposes of this section:
376	376	(1) the amount of growth investments that a rural
377	377	development fund may count with respect to a particular targeted
378	378	small business, including any amount invested in an affiliate of
379	379	the targeted small business, may not exceed $7.5 million;
380	380	(2) an investment that is sold or repaid is considered
381	381	to be maintained if the rural development fund reinvests an amount
382	382	equal to the capital returned or recovered by the fund from the
383	383	original investment, excluding any profit realized, in other growth
384	384	investments in this state on or before the first anniversary of the
385	385	date the capital is returned or recovered; and
386	386	(3) an amount received periodically by a rural
387	387	development fund is considered to be continually invested in growth
388	388	investments if that amount is reinvested in one or more growth
389	389	investments by the end of the calendar year following the year of
390	390	receipt.
391	391	Sec. 487A.0103. REVOCATION OF TAX CREDITS AND INVESTMENT
392	392	AUTHORITY FOR CERTAIN DISTRIBUTIONS OR PAYMENTS. (a) The
393	393	comptroller shall revoke each tax credit certificate issued under
394	394	Subchapter B in connection with an investment in a rural
395	395	development fund if, before the fund exits the program under
396	396	Section 487A.0151, the fund makes a distribution or payment that
397	397	results in the fund having less than the portion of the fund's
398	398	investment authority required to be invested in growth investments
399	399	in this state under Sections 487A.0101 and 487A.0102:
400	400	(1) invested in growth investments in this state; or
401	401	(2) available for investment in growth investments and
402	402	held in:
403	403	(A) cash;
404	404	(B) United States Treasury securities;
405	405	(C) bonds or notes issued by this state or an
406	406	agency or political subdivision of this state; or
407	407	(D) a deposit account with a depository
408	408	institution headquartered or chartered in this state.
409	409	(b) The comptroller shall revoke a rural development fund's
410	410	investment authority if the comptroller revokes tax credit
411	411	certificates under Subsection (a).
412	412	Sec. 487A.0104. REDUCTION OF TAX CREDITS AND INVESTMENT
413	413	AUTHORITY FOR RELATED-PARTY INVESTMENTS. (a) The comptroller shall
414	414	reduce the amount of the tax credit on each tax credit certificate
415	415	issued under Subchapter B in connection with an investment in a
416	416	rural development fund if, before the fund exits the program under
417	417	Section 487A.0151, the fund makes a growth investment in a targeted
418	418	small business that directly or indirectly through an affiliate
419	419	owns, has the right to acquire an ownership interest in, makes a
420	420	loan to, or makes an investment in the fund, an affiliate of the
421	421	fund, or an investor in the fund.
422	422	(b) The amount of the reduction under Subsection (a) for
423	423	each tax credit certificate is equal to the amount of the tax credit
424	424	stated on the tax credit certificate remaining after any reductions
425	425	under Sections 487A.0101(a) and (c), multiplied by a fraction:
426	426	(1) the numerator of which is the portion of the rural
427	427	development fund's investment authority remaining after any
428	428	reductions under Sections 487A.0101(b) and (d) that is invested in
429	429	growth investments in targeted small businesses described by
430	430	Subsection (a); and
431	431	(2) the denominator of which is the total amount of the
432	432	rural development fund's investment authority remaining after any
433	433	reductions under Sections 487A.0101(b) and (d).
434	434	(c) The comptroller shall reduce a rural development fund's
435	435	investment authority by an amount equal to the total amount of
436	436	reductions under Subsection (a) for all tax credit certificates.
437	437	(d) Subsection (a) does not apply to investments in publicly
438	438	traded securities by a targeted small business or an owner or
439	439	affiliate of the targeted small business. For purposes of
440	440	Subsection (a), a rural development fund is not considered an
441	441	affiliate of a targeted small business solely as a result of the
442	442	fund's growth investment in the targeted small business.
443	443	Sec. 487A.0105. OPPORTUNITY TO CORRECT VIOLATION. (a)
444	444	Before reducing or revoking a tax credit and investment authority
445	445	under this subchapter, the comptroller shall notify the rural
446	446	development fund of the reasons for the pending reduction or
447	447	revocation.
448	448	(b) The rural development fund may, not later than the 90th
449	449	day after the date the notice is received, correct any violation
450	450	outlined in the notice to the satisfaction of the comptroller and
451	451	avoid reduction or revocation of the tax credit and investment
452	452	authority.
453	453	Sec. 487A.0106. ALLOCATION OF REVOKED INVESTMENT
454	454	AUTHORITY. (a) The amount of investment authority reduced or
455	455	revoked under this subchapter does not count toward the limit on
456	456	total investment authority described in Section 487A.0052(b).
457	457	(b) The comptroller shall first award reduced or revoked
458	458	investment authority pro rata to each rural development fund whose
459	459	requested investment authority was reduced under Section
460	460	487A.0052(c). The comptroller may award any remaining investment
461	461	authority to new applicants.
462	462	SUBCHAPTER D. CERTAIN FUND OPERATIONS
463	463	Sec. 487A.0151. APPLICATION TO EXIT PROGRAM. (a) On or
464	464	after the sixth anniversary of the closing date, a rural
465	465	development fund may apply to the comptroller to exit the program
466	466	and no longer be subject to regulation under this chapter. An
467	467	application to exit the program must be in a form and comply with
468	468	procedures prescribed by the comptroller and include a calculation
469	469	of the state reimbursement amount as provided by Section 487A.0153.
470	470	(b) The comptroller shall respond to the application not
471	471	later than the 30th day after receipt and include confirmation of
472	472	the state reimbursement amount.
473	473	(c) A rural development fund is eligible to exit the program
474	474	under this section if no tax credit certificates related to
475	475	investments in the fund have been reduced or revoked and the fund
476	476	has not received any reduction or revocation notice that has not
477	477	been corrected under Section 487A.0105.
478	478	(d) The comptroller may not unreasonably deny an
479	479	application under this section. The comptroller shall give the
480	480	rural development fund notice of a denial and include in the notice
481	481	the reasons for the denial.
482	482	(e) Not later than the 60th day after the date the rural
483	483	development fund receives confirmation of the state reimbursement
484	484	amount under Subsection (b), the fund shall remit to the
485	485	comptroller an amount of money equal to the lesser of:
486	486	(1) the excess return determined under Section
487	487	487A.0152; or
488	488	(2) the state reimbursement amount determined under
489	489	Section 487A.0153.
490	490	Sec. 487A.0152. CALCULATION OF EXCESS RETURN. (a) For
491	491	purposes of Section 487A.0151, a rural development fund's excess
492	492	return is determined by computing the difference between:
493	493	(1) the sum of:
494	494	(A) the present value of all growth investments
495	495	and other assets held by the fund on the date the fund applies to
496	496	exit the program under Section 487A.0151; and
497	497	(B) all amounts distributed to the equity holders
498	498	of the fund before the fund applies to exit the program under
499	499	Section 487A.0151; and
500	500	(2) the sum of:
501	501	(A) the amount of the fund's original investment
502	502	authority; and
503	503	(B) an amount equal to any projected increase in
504	504	the federal or state tax liability of equity holders of the fund,
505	505	including penalties and interest, related to the equity holders'
506	506	ownership, management, or operation of the fund.
507	507	(b) If the amount computed under Subsection (a) is less than
508	508	zero, the excess return is equal to zero.
509	509	Sec. 487A.0153. CALCULATION OF STATE REIMBURSEMENT AMOUNT.
510	510	For purposes of Section 487A.0151, a rural development fund's state
511	511	reimbursement amount is determined by computing the difference
512	512	between:
513	513	(1) 50 percent of the fund's credit-eligible capital
514	514	contributions; and
515	515	(2) the product of:
516	516	(A) the sum of the annual jobs created and jobs
517	517	retained as a result of the fund's growth investments as reported to
518	518	the comptroller under Section 487A.0156; and
519	519	(B) $20,000.
520	520	Sec. 487A.0154. NO REDUCTION OR REVOCATION FOLLOWING EXIT.
521	521	The comptroller may not reduce or revoke the amount of a tax credit
522	522	on a tax credit certificate related to an investment in a rural
523	523	development fund after the fund's exit from the program.
524	524	Sec. 487A.0155. EVALUATION OF PROPOSED INVESTMENT. (a) A
525	525	rural development fund, before making a growth investment, may
526	526	request from the comptroller a written opinion as to whether the
527	527	business in which the fund proposes to invest qualifies as a
528	528	targeted small business.
529	529	(b) Not later than the 15th business day after receiving the
530	530	request, the comptroller shall notify the rural development fund of
531	531	its determination.
532	532	(c) If the comptroller fails to notify the rural development
533	533	fund of its determination on or before the 15th business day after
534	534	receiving the request, the business in which the fund proposes to
535	535	invest is considered to be a targeted small business for purposes of
536	536	this chapter.
537	537	Sec. 487A.0156. ANNUAL REPORT. (a) A rural development
538	538	fund shall submit a report to the comptroller on or before the fifth
539	539	business day after each anniversary of the closing date until the
540	540	fund has exited the program under Section 487A.0151.
541	541	(b) The report must document the rural development fund's
542	542	growth investments and include:
543	543	(1) a bank statement showing each growth investment;
544	544	(2) the name, location, and industry of each business
545	545	receiving a growth investment, including either the determination
546	546	notice described by Section 487A.0155 or evidence that the business
547	547	qualified as a targeted small business at the time the investment
548	548	was made;
549	549	(3) the number of jobs created and jobs retained in the
550	550	preceding calendar year as a result of the fund's growth
551	551	investments as of the last day of that period;
552	552	(4) the average annual salary of the jobs described by
553	553	Subdivision (3) and evidence of any other monetary or social
554	554	benefit to this state as a result of those jobs;
555	555	(5) a description, including the amount, of each
556	556	growth investment in a targeted small business located in a rural
557	557	area made in the 24 months following the closing date; and
558	558	(6) any other information the comptroller requires.
559	559	(c) A rural development fund may, but is not required to,
560	560	include in any report submitted under this section information
561	561	about the number of jobs created and jobs retained with respect to a
562	562	former growth investment that the fund has exited.
563	563	Sec. 487A.0157. PARTICIPATION FEE. (a) A rural
564	564	development fund that has not exited the program under Section
565	565	487A.0151 before the first day of a state fiscal year shall remit to
566	566	the comptroller a participation fee in connection with the state
567	567	fiscal year in an amount determined under Subsection (b)(2) to
568	568	offset the fiscal impact to the comptroller of administering the
569	569	program. The comptroller shall prescribe the date on which the fee
570	570	payment is due.
571	571	(b) For each state fiscal year, the comptroller shall
572	572	determine:
573	573	(1) the costs incurred by the comptroller to
574	574	administer this chapter and Chapter 232, Insurance Code, less the
575	575	amount of application fees submitted under Section 487A.0051(b)(7)
576	576	and amounts remitted under Section 487A.0151(e); and
577	577	(2) the amount of the participation fee each rural
578	578	development fund described by Subsection (a) is required to pay in
579	579	connection with the state fiscal year, which is computed by
580	580	multiplying the amount determined under Subdivision (1) for the
581	581	state fiscal year by a fraction:
582	582	(A) the numerator of which is the amount of the
583	583	rural development fund's investment authority; and
584	584	(B) the denominator of which is the total amount
585	585	of investment authority for all rural development funds required to
586	586	pay a fee under Subsection (a) in connection with the state fiscal
587	587	year.
588	588	SUBCHAPTER E. REPORT; CONDITIONS FOR ACCEPTANCE OF CERTAIN
589	589	APPLICATIONS
590	590	Sec. 487A.0201. REPORT. (a) Before the beginning of the
591	591	91st Legislature, Regular Session, the comptroller shall submit to
592	592	the lieutenant governor, the speaker of the house of
593	593	representatives, and each other member of the legislature a report
594	594	on the economic benefits of this chapter.
595	595	(b) The report must include an assessment of:
596	596	(1) the aggregate effects of growth investments made
597	597	under this chapter, including:
598	598	(A) the total number of jobs created by all
599	599	targeted small businesses, including direct jobs, indirect jobs,
600	600	and induced jobs;
601	601	(B) the total number of jobs retained by all
602	602	targeted small businesses;
603	603	(C) the total amount of wages paid in connection
604	604	with jobs created and jobs retained by all targeted small
605	605	businesses;
606	606	(D) the median wage of jobs created and jobs
607	607	retained by all targeted small businesses;
608	608	(E) the total effect on personal income in this
609	609	state, including direct and indirect effects;
610	610	(F) the total amount of growth investments;
611	611	(G) the gross domestic product of this state
612	612	attributable to targeted small businesses;
613	613	(H) the total taxable value of property of
614	614	targeted small businesses in this state according to tax appraisal
615	615	rolls;
616	616	(I) the total positive fiscal effect on this
617	617	state and local governments in this state; and
618	618	(J) the total number and dollar amount of growth
619	619	investments in targeted small businesses located in rural areas;
620	620	(2) the benefits to this state from cost savings
621	621	attributable to jobs created and jobs retained by all targeted
622	622	small businesses, including:
623	623	(A) Medicaid savings, with savings to this state
624	624	and the federal government listed separately;
625	625	(B) food assistance program savings;
626	626	(C) unemployment insurance payment savings; and
627	627	(D) any other savings that can be reasonably
628	628	estimated using data available to the comptroller in connection
629	629	with some or all targeted small businesses; and
630	630	(3) the total positive fiscal effect on this state and
631	631	local governments in this state of the benefits described by
632	632	Subdivision (2).
633	633	(c) The report may not include information that is
634	634	confidential by law.
635	635	(d) In preparing the portion of the report described by
636	636	Subsection (b)(1), the comptroller shall:
637	637	(1) use standard, nationally recognized economic
638	638	estimation techniques, including economic multipliers; and
639	639	(2) base the assessment on data submitted to the
640	640	comptroller by each rural development fund.
641	641	Sec. 487A.0202. CONDITIONS FOR ACCEPTANCE OF CERTAIN
642	642	APPLICATIONS. (a) The comptroller may not accept applications
643	643	under Section 487A.0051 after January 1, 2024, unless the total
644	644	positive fiscal effects described by Section 487A.0201(b) exceed
645	645	the sum of all tax credit certificates issued by the comptroller
646	646	under Subchapter B.
647	647	(b) The comptroller shall resume accepting applications
648	648	under Section 487A.0051 when the condition provided by Subsection
649	649	(a) is satisfied.
650	650	SECTION 2. Subtitle B, Title 3, Insurance Code, is amended
651	651	by adding Chapter 232 to read as follows:
652	652	CHAPTER 232. TAX CREDIT FOR INVESTMENT IN RURAL DEVELOPMENT FUND
653	653	SUBCHAPTER A. GENERAL PROVISIONS
654	654	Sec. 232.0001. DEFINITIONS. In this chapter:
655	655	(1) "Affiliate" has the meaning assigned by Section
656	656	487A.0002, Government Code.
657	657	(2) "Closing date" has the meaning assigned by Section
658	658	487A.0001, Government Code.
659	659	(3) "State insurance tax liability" means any tax
660	660	liability incurred under Chapter 221, 222, 223, 223A, 224, 225,
661	661	226, or 281.
662	662	Sec. 232.0002. RULES. The comptroller shall adopt rules
663	663	necessary to implement this chapter.
664	664	SUBCHAPTER B. TAX CREDIT
665	665	Sec. 232.0051. ELIGIBILITY FOR CREDIT. An entity is
666	666	eligible for a credit against the entity's state insurance tax
667	667	liability in the amount and under the conditions provided by this
668	668	chapter.
669	669	Sec. 232.0052. QUALIFICATION. An entity is eligible for a
670	670	credit for a tax year if the entity holds a tax credit certificate
671	671	issued under Section 487A.0055, Government Code, and the third,
672	672	fourth, fifth, or sixth anniversary of the closing date in
673	673	connection with which the certificate was issued occurs during the
674	674	tax year.
675	675	Sec. 232.0053. AMOUNT OF CREDIT; LIMITATION. (a) The
676	676	amount of credit for a tax year in connection with a tax credit
677	677	certificate described by Section 232.0052 is equal to 25 percent of
678	678	the amount of the credit-eligible capital contribution stated on
679	679	the certificate.
680	680	(b) The total credit claimed for a tax year, including the
681	681	amount of any carryforward under Section 232.0054, may not exceed
682	682	the amount of state insurance tax liability due for the entity for
683	683	the tax year after applying all other applicable tax credits.
684	684	(c) Credits may be applied to the entity's estimated or
685	685	final tax payments for the tax year.
686	686	Sec. 232.0054. CARRYFORWARD. If an entity is eligible for a
687	687	credit that exceeds the limitation under Section 232.0053(b), the
688	688	entity may carry the unused credit forward and apply the credit to a
689	689	subsequent tax report.
690	690	Sec. 232.0055. ASSIGNMENT PROHIBITED. (a) Except as
691	691	provided by Subsection (b), an entity may not convey, assign, or
692	692	transfer the credit allowed under this chapter to another entity.
693	693	(b) An entity may convey, assign, or transfer the credit
694	694	allowed under this chapter to an affiliate of the entity that is
695	695	subject to state insurance tax liability.
696	696	Sec. 232.0056. RETALIATORY TAX. An entity claiming a
697	697	credit under this chapter is not required to pay any additional
698	698	retaliatory tax levied under Chapter 281 as a result of claiming
699	699	that credit.
700	700	SUBCHAPTER C. RECAPTURE OF CREDIT
701	701	Sec. 232.0101. RECAPTURE. The comptroller shall recapture
702	702	the amount of a credit claimed on a tax report filed under Chapter
703	703	221, 222, 223, 223A, 224, 225, 226, or 281 from an entity if the
704	704	amount of the tax credit on the tax credit certificate on which the
705	705	credit is based is reduced or revoked under Subchapter C, Chapter
706	706	487A, Government Code. The comptroller shall recapture an amount
707	707	equal to the amount by which the credit previously claimed exceeds
708	708	the amount of the reduction or revocation.
709	709	SECTION 3. It is the intent of the legislature that each
710	710	growth investment in a targeted small business made by a rural
711	711	development fund under Chapter 487A, Government Code, as added by
712	712	this Act:
713	713	(1) provide patient, growth-oriented investment
714	714	capital for purposes including expansion, payroll, inventory, and
715	715	training; and
716	716	(2) be at a below market rate with flexible terms,
717	717	which offers the targeted small business an affordable and
718	718	borrower-friendly financing alternative.
719	719	SECTION 4. (a) As soon as practicable after this Act
720	720	becomes law as provided by Section 2001.006, Government Code, the
721	721	comptroller of public accounts shall adopt rules necessary to
722	722	implement Chapter 487A, Government Code, as added by this Act, and
723	723	Chapter 232, Insurance Code, as added by this Act.
724	724	(b) Not later than October 1, 2023, the comptroller of
725	725	public accounts shall begin accepting applications under Section
726	726	487A.0051(a), Government Code, as added by this Act.
727	727	SECTION 5. Chapter 232, Insurance Code, as added by this
728	728	Act, applies only to a tax report originally due on or after January
729	729	1, 2023.
730	730	SECTION 6. This Act takes effect immediately if it receives
731	731	a vote of two-thirds of all the members elected to each house, as
732	732	provided by Section 39, Article III, Texas Constitution. If this
733	733	Act does not receive the vote necessary for immediate effect, this
734	734	Act takes effect September 1, 2023.