BILL ANALYSIS H.B. 34 By: Metcalf Homeland Security, Public Safety & Veterans' Affairs Committee Report (Unamended) BACKGROUND AND PURPOSE The bill author has informed the committee of the issue of the State of Texas investing in entities tied to countries of concern seen as risks to national security, such as China, Iran, North Korea, and Russia. H.B. 34 seeks to reduce the state's financial exposure to such countries and entities and promote a stance of economic divestment from them by prohibiting the investment of state money in certain countries of concern and in certain private business entities associated with those countries. CRIMINAL JUSTICE IMPACT It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS H.B. 34 amends the Government Code to prohibit an investing entity, as defined under statutory provisions regarding the prohibited investment of public money in certain investments, from acquiring a security issued by a country of concern or an entity owned or controlled by or subject to the jurisdiction of a country of concern, and from investing or making a deposit in a bank with a principal place of business located in a country of concern. The bill authorizes the governor, for purposes of these provisions and after consultation with the public safety director of the Department of Public Safety, to designate a country as a country of concern. The bill requires the governor to consult the state Homeland Security Council to assess the status of a country of concern for purposes of that designation and defines "country of concern" as China, Iran, North Korea, or Russia, or a country designated by the governor under the bill. H.B. 34 establishes that a company is a scrutinized company if it meets one of the following conditions: the company is organized under the laws of, has its principal place of business in the territory of, or is controlled by a country of concern; the company is owned by a country of concern or individuals who are citizens of a country of concern; or the majority of stock or other ownership interest of the company is held or controlled by a country of concern or individuals who are citizens of a country of concern. The bill provides for the inclusion of such a company on the list of scrutinized companies subject to investment prohibitions and divestment requirements for certain investments of public money, which is maintained by the comptroller of public accounts. The bill accordingly makes the exception to divestment or investment prohibition for a company that the U.S. government affirmatively declares to be excluded from its federal sanctions regime applicable with respect to a federal sanctions regime relating to any country of concern. H.B. 34 requires an investing entity, for each listed company identified by the comptroller that is a scrutinized company under the bill's provisions, to send a written notice informing the company of its listed company status and warning the company that it may become subject to divestment by investing entities. The bill requires the notice to offer the company the opportunity, not later than the 90th day after the date the company receives the notice, to change its organizational or ownership structure or location so as to not be a scrutinized company in order to avoid qualifying for such divestment. The bill does the following regarding such a company: if the company makes any applicable changes during that time period, requires the comptroller to remove the company from the list of scrutinized companies and makes provisions regarding the prohibited investment of public money in certain investments no longer applicable to the company unless the company later again becomes a scrutinized company as described by the bill; or if the listed company continues to operate as a scrutinized company as described by the bill after that time period expires, requires the investing entity to sell, redeem, divest, or withdraw all publicly traded securities of the company, except securities that are indirect holdings in actively managed investment funds or private equity funds, according to the schedule provided by statutory provisions governing the divestment of such assets. H.B. 34 requires the comptroller, not later than January 1, 2026, to include on the maintained list of all scrutinized companies the companies identified as such under the bill's provisions. EFFECTIVE DATE September 1, 2025.
BILL ANALYSIS
# BILL ANALYSIS
H.B. 34
By: Metcalf
Homeland Security, Public Safety & Veterans' Affairs
Committee Report (Unamended)
H.B. 34
By: Metcalf
Homeland Security, Public Safety & Veterans' Affairs
Committee Report (Unamended)
BACKGROUND AND PURPOSE The bill author has informed the committee of the issue of the State of Texas investing in entities tied to countries of concern seen as risks to national security, such as China, Iran, North Korea, and Russia. H.B. 34 seeks to reduce the state's financial exposure to such countries and entities and promote a stance of economic divestment from them by prohibiting the investment of state money in certain countries of concern and in certain private business entities associated with those countries.
CRIMINAL JUSTICE IMPACT It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.
RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS H.B. 34 amends the Government Code to prohibit an investing entity, as defined under statutory provisions regarding the prohibited investment of public money in certain investments, from acquiring a security issued by a country of concern or an entity owned or controlled by or subject to the jurisdiction of a country of concern, and from investing or making a deposit in a bank with a principal place of business located in a country of concern. The bill authorizes the governor, for purposes of these provisions and after consultation with the public safety director of the Department of Public Safety, to designate a country as a country of concern. The bill requires the governor to consult the state Homeland Security Council to assess the status of a country of concern for purposes of that designation and defines "country of concern" as China, Iran, North Korea, or Russia, or a country designated by the governor under the bill. H.B. 34 establishes that a company is a scrutinized company if it meets one of the following conditions: the company is organized under the laws of, has its principal place of business in the territory of, or is controlled by a country of concern; the company is owned by a country of concern or individuals who are citizens of a country of concern; or the majority of stock or other ownership interest of the company is held or controlled by a country of concern or individuals who are citizens of a country of concern. The bill provides for the inclusion of such a company on the list of scrutinized companies subject to investment prohibitions and divestment requirements for certain investments of public money, which is maintained by the comptroller of public accounts. The bill accordingly makes the exception to divestment or investment prohibition for a company that the U.S. government affirmatively declares to be excluded from its federal sanctions regime applicable with respect to a federal sanctions regime relating to any country of concern. H.B. 34 requires an investing entity, for each listed company identified by the comptroller that is a scrutinized company under the bill's provisions, to send a written notice informing the company of its listed company status and warning the company that it may become subject to divestment by investing entities. The bill requires the notice to offer the company the opportunity, not later than the 90th day after the date the company receives the notice, to change its organizational or ownership structure or location so as to not be a scrutinized company in order to avoid qualifying for such divestment. The bill does the following regarding such a company: if the company makes any applicable changes during that time period, requires the comptroller to remove the company from the list of scrutinized companies and makes provisions regarding the prohibited investment of public money in certain investments no longer applicable to the company unless the company later again becomes a scrutinized company as described by the bill; or if the listed company continues to operate as a scrutinized company as described by the bill after that time period expires, requires the investing entity to sell, redeem, divest, or withdraw all publicly traded securities of the company, except securities that are indirect holdings in actively managed investment funds or private equity funds, according to the schedule provided by statutory provisions governing the divestment of such assets. H.B. 34 requires the comptroller, not later than January 1, 2026, to include on the maintained list of all scrutinized companies the companies identified as such under the bill's provisions.
EFFECTIVE DATE September 1, 2025.
BACKGROUND AND PURPOSE
The bill author has informed the committee of the issue of the State of Texas investing in entities tied to countries of concern seen as risks to national security, such as China, Iran, North Korea, and Russia. H.B. 34 seeks to reduce the state's financial exposure to such countries and entities and promote a stance of economic divestment from them by prohibiting the investment of state money in certain countries of concern and in certain private business entities associated with those countries.
CRIMINAL JUSTICE IMPACT
It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS
H.B. 34 amends the Government Code to prohibit an investing entity, as defined under statutory provisions regarding the prohibited investment of public money in certain investments, from acquiring a security issued by a country of concern or an entity owned or controlled by or subject to the jurisdiction of a country of concern, and from investing or making a deposit in a bank with a principal place of business located in a country of concern. The bill authorizes the governor, for purposes of these provisions and after consultation with the public safety director of the Department of Public Safety, to designate a country as a country of concern. The bill requires the governor to consult the state Homeland Security Council to assess the status of a country of concern for purposes of that designation and defines "country of concern" as China, Iran, North Korea, or Russia, or a country designated by the governor under the bill.
H.B. 34 establishes that a company is a scrutinized company if it meets one of the following conditions:
the company is organized under the laws of, has its principal place of business in the territory of, or is controlled by a country of concern;
the company is owned by a country of concern or individuals who are citizens of a country of concern; or
the majority of stock or other ownership interest of the company is held or controlled by a country of concern or individuals who are citizens of a country of concern.
The bill provides for the inclusion of such a company on the list of scrutinized companies subject to investment prohibitions and divestment requirements for certain investments of public money, which is maintained by the comptroller of public accounts. The bill accordingly makes the exception to divestment or investment prohibition for a company that the U.S. government affirmatively declares to be excluded from its federal sanctions regime applicable with respect to a federal sanctions regime relating to any country of concern.
H.B. 34 requires an investing entity, for each listed company identified by the comptroller that is a scrutinized company under the bill's provisions, to send a written notice informing the company of its listed company status and warning the company that it may become subject to divestment by investing entities. The bill requires the notice to offer the company the opportunity, not later than the 90th day after the date the company receives the notice, to change its organizational or ownership structure or location so as to not be a scrutinized company in order to avoid qualifying for such divestment. The bill does the following regarding such a company:
if the company makes any applicable changes during that time period, requires the comptroller to remove the company from the list of scrutinized companies and makes provisions regarding the prohibited investment of public money in certain investments no longer applicable to the company unless the company later again becomes a scrutinized company as described by the bill; or
if the listed company continues to operate as a scrutinized company as described by the bill after that time period expires, requires the investing entity to sell, redeem, divest, or withdraw all publicly traded securities of the company, except securities that are indirect holdings in actively managed investment funds or private equity funds, according to the schedule provided by statutory provisions governing the divestment of such assets.
H.B. 34 requires the comptroller, not later than January 1, 2026, to include on the maintained list of all scrutinized companies the companies identified as such under the bill's provisions.
EFFECTIVE DATE
September 1, 2025.