Texas 2025 - 89th Regular

Texas House Bill HB4735 Compare Versions

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1	1	89R5713 CJC-F
2	2	By: Ashby H.B. No. 4735
3	3
4	4
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to rural development funds and insurance tax credits for
10	10	certain investments in those funds; authorizing fees.
11	11	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
12	12	SECTION 1. Subtitle F, Title 4, Government Code, is amended
13	13	by adding Chapter 487A to read as follows:
14	14	CHAPTER 487A. RURAL DEVELOPMENT FUNDS
15	15	SUBCHAPTER A. GENERAL PROVISIONS
16	16	Sec. 487A.0001. GENERAL DEFINITIONS. In this chapter:
17	17	(1) "Closing date" means the date a rural development
18	18	fund has collected all of the amounts described by Section
19	19	487A.0056(a)(1).
20	20	(2) "Historically underutilized business" means a
21	21	business certified by the comptroller under Chapter 2161 as a
22	22	historically underutilized business.
23	23	(3) "Rural area" means an area:
24	24	(A) other than a municipality with a population
25	25	of more than 50,000 or an urbanized area contiguous and adjacent to
26	26	the municipality; or
27	27	(B) determined to be rural in character by the
28	28	United States Department of Agriculture.
29	29	(4) "Rural development fund" means an entity approved
30	30	by the comptroller as a rural development fund.
31	31	Sec. 487A.0002. DEFINITION: AFFILIATE. (a) In this
32	32	chapter, "affiliate" means an entity that directly or indirectly
33	33	through one or more intermediaries controls, is controlled by, or
34	34	is under common control with another entity.
35	35	(b) For purposes of Subsection (a), an entity is controlled
36	36	by another entity if the controlling entity:
37	37	(1) holds, directly or indirectly, the majority voting
38	38	or ownership interest in the controlled entity; or
39	39	(2) has control over the day-to-day operations of the
40	40	controlled entity by contract or by law.
41	41	Sec. 487A.0003. DEFINITION: CREDIT-ELIGIBLE CAPITAL
42	42	CONTRIBUTION. In this chapter, "credit-eligible capital
43	43	contribution" means an investment of cash in a rural development
44	44	fund made by an entity that is subject to state insurance tax
45	45	liability, as defined by Section 232.0001, Insurance Code, in
46	46	exchange for which the investor receives:
47	47	(1) an equity interest in a rural development fund; or
48	48	(2) at par value or premium, a debt instrument that has
49	49	a maturity date of at least five years from the closing date and a
50	50	repayment schedule that is no faster than level principal
51	51	amortization over five years.
52	52	Sec. 487A.0004. DEFINITION: GROWTH INVESTMENT. (a) In
53	53	this chapter and subject to Subsection (b), "growth investment"
54	54	means any capital or equity investment by a rural development fund
55	55	in a targeted small business or any loan by a rural development fund
56	56	to a targeted small business with a stated maturity date of at least
57	57	one year after the date of issuance.
58	58	(b) A loan by a rural development fund to a targeted small
59	59	business is a growth investment only if the targeted small business
60	60	obtains an affidavit from the chief executive officer or equivalent
61	61	position of the targeted small business attesting that:
62	62	(1) the targeted small business sought and was denied
63	63	similar financing from a commercial bank; or
64	64	(2) the targeted small business was referred to the
65	65	rural development fund by a commercial bank.
66	66	Sec. 487A.0005. DEFINITION: INVESTMENT AUTHORITY. In this
67	67	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	Sec. 487A.0006. DEFINITION: JOBS CREATED. (a) In this
71	71	chapter, "jobs created" means, with respect to a targeted small
72	72	business, employment positions that:
73	73	(1) are created by the targeted small business;
74	74	(2) are located in this state;
75	75	(3) subject to Subsection (e), require at least 35
76	76	hours of work each week; and
77	77	(4) were not located in this state at the time of the
78	78	initial growth investment in the targeted small business.
79	79	(b) The number of jobs created by a targeted small business
80	80	is calculated each year by subtracting the number of employment
81	81	positions in this state at the targeted small business at the time
82	82	of the initial growth investment in the targeted small business
83	83	from the monthly average of those employment positions for that
84	84	year. If the number calculated under this subsection is less than
85	85	zero, the number shall be reported as zero.
86	86	(c) The monthly average of employment positions for a year
87	87	is calculated by adding the number of employment positions existing
88	88	on the last day of each month of the year and dividing that sum by
89	89	12.
90	90	(d) An employment position that meets the requirements of
91	91	Subsection (a) shall be multiplied by two for purposes of
92	92	calculating the number of jobs created by a targeted small business
93	93	if the targeted small business is located in a rural area and is a
94	94	historically underutilized business.
95	95	(e) An employment position that requires less than 35 hours
96	96	of work each week is considered to meet the requirements of
97	97	Subsection (a) if the number of hours of work each week the job
98	98	requires is considered to constitute full-time employment for
99	99	purposes of the industry standards and practices applicable to the
100	100	targeted small business that created the employment position.
101	101	Sec. 487A.0007. DEFINITION: JOBS RETAINED. (a) In this
102	102	chapter, "jobs retained" means, with respect to a targeted small
103	103	business, employment positions that:
104	104	(1) are located in this state, require at least 35
105	105	hours of work each week, and existed before the initial growth
106	106	investment in the targeted small business; and
107	107	(2) would have been lost or moved out of this state had
108	108	a growth investment in the targeted small business not been made, as
109	109	certified in writing by an executive officer of the targeted small
110	110	business to the rural development fund.
111	111	(b) The number of jobs retained by a targeted small business
112	112	is calculated each year based on the monthly average of employment
113	113	positions for that year.
114	114	(c) The monthly average of employment positions for a year
115	115	is calculated by adding the number of employment positions existing
116	116	on the last day of each month of the year and dividing that sum by
117	117	12.
118	118	(d) The reported number of jobs retained for a year may not
119	119	exceed the number reported on the initial report under Section
120	120	487A.0156. The rural development fund shall reduce the number of
121	121	jobs retained for a year if employment at the targeted small
122	122	business is less than the number reported on the initial report.
123	123	(e) An employment position that meets the requirements of
124	124	Subsection (a) shall be multiplied by two for purposes of
125	125	calculating the number of jobs retained by a targeted small
126	126	business if the targeted small business is located in a rural area
127	127	and is a historically underutilized business.
128	128	(f) Notwithstanding Subsection (a)(1), an employment
129	129	position that requires less than 35 hours of work each week is
130	130	considered to meet the requirements of that subdivision if the
131	131	number of hours of work each week the job requires is considered to
132	132	constitute full-time employment for purposes of the industry
133	133	standards and practices applicable to the targeted small business
134	134	that created the employment position.
135	135	Sec. 487A.0008. DEFINITION: TARGETED SMALL BUSINESS. (a)
136	136	In this chapter, "targeted small business" means a business that,
137	137	at the time of the initial growth investment in the business:
138	138	(1) is part of an industry assigned a primary North
139	139	American Industry Classification System code listed under Sector
140	140	11, 21, 22, 23, 31, 32, 33, 42, 48, 49, 54, 56, 62, 72, or 81 of the
141	141	North American Industry Classification System;
142	142	(2) has fewer than 250 employees, including any
143	143	persons who would be considered employees under the federal law to
144	144	which 13 C.F.R. Section 121.103(h)(2) applies as a result of the
145	145	application of that provision; and
146	146	(3) has its principal business operations located in
147	147	this state.
148	148	(b) For purposes of this chapter, the principal business
149	149	operations of a business are located at a place where:
150	150	(1) at least 65 percent of the business's employees
151	151	work; or
152	152	(2) employees who are paid at least 65 percent of the
153	153	business's payroll work.
154	154	(c) An out-of-state business that agrees to relocate or hire
155	155	new employees using the proceeds of a growth investment to
156	156	establish principal business operations in this state qualifies as
157	157	a targeted small business if the business satisfies the
158	158	requirements of:
159	159	(1) Subsections (a)(1) and (2) at the time of the
160	160	initial growth investment in the business; and
161	161	(2) Subsection (a)(3) not later than the 180th day
162	162	after receiving the initial growth investment or a later date
163	163	agreed to by the comptroller.
164	164	(d) Notwithstanding any other provision of this section,
165	165	the comptroller may consider a business other than a business
166	166	described by Subsection (a)(1) to be a targeted small business for
167	167	purposes of this chapter if the comptroller determines the business
168	168	is of significant economic benefit to this state.
169	169	Sec. 487A.0009. RULES. The comptroller shall adopt rules
170	170	necessary to implement, monitor, and evaluate this chapter.
171	171	Sec. 487A.0010. DISPOSITION OF FEES. Application fees
172	172	submitted under Section 487A.0051(b)(6), amounts remitted under
173	173	Section 487A.0151(e), and participation fees collected under
174	174	Section 487A.0157 shall be deposited to the credit of the general
175	175	revenue fund and may be appropriated only to the comptroller for the
176	176	purpose of administering this chapter and Chapter 232, Insurance
177	177	Code.
178	178	SUBCHAPTER B. APPROVAL OF RURAL DEVELOPMENT FUNDS; TAX CREDIT
179	179	CERTIFICATES
180	180	Sec. 487A.0051. APPLICATION. (a) Subject to Section
181	181	487A.0202, the comptroller shall accept applications from entities
182	182	seeking approval as rural development funds.
183	183	(b) An application must include:
184	184	(1) the total investment authority sought by the
185	185	applicant under the applicant's business plan;
186	186	(2) evidence sufficient to prove to the comptroller's
187	187	satisfaction that, as of the date the applicant submits the
188	188	application:
189	189	(A) the applicant or affiliates of the applicant
190	190	have invested, in the aggregate, at least $100 million in nonpublic
191	191	companies located in the United States, including at least $70
192	192	million in nonpublic companies located in rural areas in the United
193	193	States; and
194	194	(B) either:
195	195	(i) at least one principal or affiliate in a
196	196	rural business investment company licensed under 7 U.S.C. Section
197	197	2009cc et seq. or a small business investment company licensed
198	198	under 15 U.S.C. Section 681 is, and has been for at least four
199	199	years, an officer or employee of the applicant or of an affiliate of
200	200	the applicant on the date the application is submitted; or
201	201	(ii) the applicant is, or is an affiliate
202	202	of, an investment firm based in this state with its principal
203	203	business operations located in this state that has been operating
204	204	for at least seven years and has, within the preceding three-year
205	205	period, received an allocation under Section 45D, Internal Revenue
206	206	Code of 1986;
207	207	(3) a copy of the rural business investment company
208	208	license or small business investment company license if required by
209	209	Subdivision (2)(B)(i);
210	210	(4) an estimate of the number of jobs created and jobs
211	211	retained that will result from the applicant's growth investments;
212	212	(5) a business plan that includes a revenue impact
213	213	assessment that:
214	214	(A) projects state and local tax revenue to be
215	215	generated by the applicant's proposed growth investments; and
216	216	(B) is prepared by a nationally recognized
217	217	third-party independent economic forecasting firm using a dynamic
218	218	economic forecasting model that analyzes the applicant's business
219	219	plan for the 10-year period following the date the applicant
220	220	submits the application; and
221	221	(6) a nonrefundable application fee of $10,000.
222	222	Sec. 487A.0052. DECISION ON APPLICATION. (a) The
223	223	comptroller shall make a determination on each application not
224	224	later than the 30th day after the date the comptroller receives the
225	225	application. The comptroller shall make application
226	226	determinations in the order in which applications are received and
227	227	shall consider applications received on the same day to be received
228	228	simultaneously.
229	229	(b) The comptroller shall approve up to $300 million of
230	230	investment authority, including up to $150 million of tax credit
231	231	allocation authority described by Section 487A.0055(2), under this
232	232	chapter.
233	233	(c) If a request for investment authority exceeds the limit
234	234	under Subsection (b), the comptroller shall reduce the investment
235	235	authority for that application as necessary to avoid exceeding the
236	236	limit. If multiple applications received on the same day request a
237	237	combined investment authority that exceeds the limit under
238	238	Subsection (b), the comptroller shall proportionally reduce the
239	239	investment authority for those applications as necessary to avoid
240	240	exceeding the limit. The comptroller may not reduce an applicant's
241	241	investment authority for any reason other than as authorized by
242	242	this subsection.
243	243	Sec. 487A.0053. GROUNDS FOR DENIAL. The comptroller may
244	244	deny an application under this subchapter only if:
245	245	(1) the application is incomplete or the application
246	246	fee is not paid in full;
247	247	(2) the applicant fails to satisfy the requirements of
248	248	Section 487A.0051(b)(2);
249	249	(3) the revenue impact assessment submitted under
250	250	Section 487A.0051(b)(5) does not demonstrate that the applicant's
251	251	business plan will result in a positive economic impact on combined
252	252	state and local revenue during the 10-year period covered by the
253	253	assessment that exceeds the cumulative amount of tax credits that
254	254	would be issued to the applicant's investors under Chapter 232,
255	255	Insurance Code, if the application were approved; or
256	256	(4) the comptroller has already approved the maximum
257	257	amount of investment authority allowed under Section 487A.0052(b).
258	258	Sec. 487A.0054. SUBMISSION OF ADDITIONAL INFORMATION
259	259	FOLLOWING DENIAL. (a) If the comptroller denies an application,
260	260	the applicant may, not later than the 15th day after the date the
261	261	comptroller provides notice of denial, provide additional
262	262	information to the comptroller to complete, clarify, or cure
263	263	defects in the application identified by the comptroller.
264	264	(b) If the applicant completes, clarifies, or cures the
265	265	defects in its application during the period prescribed by
266	266	Subsection (a), the application is considered complete as of the
267	267	original submission date.
268	268	(c) If the applicant fails to complete, clarify, or cure the
269	269	defects in its application during the period prescribed by
270	270	Subsection (a), the application is finally denied. An applicant
271	271	who wishes to reapply must resubmit an application in full with a
272	272	new submission date.
273	273	(d) The comptroller shall review and reconsider an
274	274	application described by Subsection (a) for which the applicant
275	275	provides additional information not later than the 30th day after
276	276	the date the applicant provides the information. The comptroller
277	277	shall consider that application before any pending applications
278	278	submitted after the date that application was originally submitted.
279	279	Sec. 487A.0055. APPROVAL BY COMPTROLLER. On approval of an
280	280	application, the comptroller shall provide to the applicant:
281	281	(1) written notice of the applicant's approval as a
282	282	rural development fund, including the amount of the fund's
283	283	investment authority; and
284	284	(2) a tax credit allocation statement that includes on
285	285	the statement the amount of tax credit the applicant is authorized
286	286	to allocate to investors who make credit-eligible capital
287	287	contributions to the rural development fund.
288	288	Sec. 487A.0056. DUTIES OF FUND FOLLOWING APPROVAL; TAX
289	289	CREDIT CERTIFICATES. (a) A rural development fund shall:
290	290	(1) not later than the 60th day after the date the fund
291	291	receives the approval notice under Section 487A.0055, collect the
292	292	credit-eligible capital contributions made to the fund and, subject
293	293	to Subsection (b), one or more investments of cash that, when added
294	294	to the credit-eligible capital contributions, equal the fund's
295	295	investment authority; and
296	296	(2) not later than the 65th day after the date the fund
297	297	receives the approval notice under Section 487A.0055, send to the
298	298	comptroller documentation sufficient to prove that the fund has
299	299	collected the amounts described in Subdivision (1).
300	300	(b) At least 10 percent of the rural development fund's
301	301	investment authority must consist of equity investments
302	302	contributed directly or indirectly by affiliates of the fund,
303	303	including employees, officers, and directors of those affiliates.
304	304	(c) A rural development fund may provide a tax credit
305	305	certificate to an investor that makes a credit-eligible capital
306	306	contribution to the fund. The certificate must include the name of
307	307	the fund, the amount stated on the tax credit allocation statement
308	308	provided to the fund under Section 487A.0055(2), the amount of the
309	309	credit-eligible capital contribution made by the investor, and the
310	310	value of the tax credit conveyed by the certificate. A rural
311	311	development fund may not issue tax credit certificates the value of
312	312	which in the aggregate exceeds the amount stated on the tax credit
313	313	allocation statement provided to the fund under Section
314	314	487A.0055(2).
315	315	Sec. 487A.0057. LAPSE OF APPROVAL. (a) If a rural
316	316	development fund fails to comply with the requirements of Section
317	317	487A.0056, the fund's approval lapses and the corresponding
318	318	investment authority does not count toward the limit prescribed by
319	319	Section 487A.0052(b).
320	320	(b) The comptroller shall first award lapsed investment
321	321	authority pro rata to each rural development fund whose requested
322	322	investment authority was reduced under Section 487A.0052(c). The
323	323	rural development fund may allocate the investment authority
324	324	awarded under this subsection to the fund's investors in the fund's
325	325	discretion. The comptroller may award any remaining investment
326	326	authority to new applicants.
327	327	SUBCHAPTER C. REDUCTION OR REVOCATION OF TAX CREDITS AND INVESTMENT
328	328	AUTHORITY
329	329	Sec. 487A.0101. REDUCTION OF TAX CREDITS AND INVESTMENT
330	330	AUTHORITY FOR FAILURE TO MAKE REQUIRED GROWTH INVESTMENTS. (a) The
331	331	comptroller shall reduce the amount of the tax credit on each tax
332	332	credit certificate issued under Subchapter B in connection with an
333	333	investment in a rural development fund if the fund fails to invest
334	334	at least 60 percent of the fund's investment authority in growth
335	335	investments in this state on or before the second anniversary of the
336	336	closing date. The amount of the reduction under this subsection for
337	337	each tax credit certificate is equal to the amount of the tax credit
338	338	stated on the tax credit certificate, multiplied by a fraction:
339	339	(1) the numerator of which is equal to 60 percent, less
340	340	the percentage of the rural development fund's investment authority
341	341	invested in growth investments in this state on the second
342	342	anniversary of the closing date; and
343	343	(2) the denominator of which is 60 percent.
344	344	(b) The comptroller shall reduce a rural development fund's
345	345	investment authority by an amount equal to the total amount of
346	346	reductions under Subsection (a) for all tax credit certificates.
347	347	(c) The comptroller shall reduce the amount of the tax
348	348	credit on each tax credit certificate issued under Subchapter B in
349	349	connection with an investment in a rural development fund if the
350	350	fund fails to invest 100 percent of the fund's investment authority
351	351	in growth investments in this state on or before the third
352	352	anniversary of the closing date. The amount of the reduction under
353	353	this subsection for each tax credit certificate is equal to the
354	354	amount of the tax credit stated on the tax credit certificate
355	355	remaining after any reduction under Subsection (a), multiplied by a
356	356	fraction:
357	357	(1) the numerator of which is equal to 100 percent,
358	358	less the percentage of the rural development fund's investment
359	359	authority remaining after any reduction under Subsection (b) that
360	360	is invested in growth investments in this state on the third
361	361	anniversary of the closing date; and
362	362	(2) the denominator of which is 100 percent.
363	363	(d) The comptroller shall reduce a rural development fund's
364	364	investment authority by an amount equal to the total amount of
365	365	reductions under Subsection (c) for all tax credit certificates.
366	366	(e) For purposes of this section:
367	367	(1) the amount of growth investments that a rural
368	368	development fund may count with respect to a particular targeted
369	369	small business, including any amount invested in an affiliate of
370	370	the targeted small business, may not exceed $7.5 million; and
371	371	(2) all growth investments must consist of growth
372	372	investments in targeted small businesses whose principal business
373	373	operations are located in, or are relocated to, a rural area in this
374	374	state.
375	375	(f) Notwithstanding Subsection (e)(1), for the purpose of
376	376	avoiding a reduction under Subsection (a) or (c), as applicable, a
377	377	rural development fund may count as a growth investment in a
378	378	particular targeted small business the amount of an investment made
379	379	in excess of the limit prescribed by Subsection (e)(1) if the
380	380	investment is made using money attributable to the repayment or
381	381	redemption of a previous growth investment made by the fund to the
382	382	particular targeted small business.
383	383	Sec. 487A.0102. REDUCTION OF TAX CREDITS AND INVESTMENT
384	384	AUTHORITY FOR FAILURE TO MAINTAIN REQUIRED GROWTH INVESTMENTS. (a)
385	385	The comptroller shall reduce the amount of the tax credit on each
386	386	tax credit certificate issued under Subchapter B in connection with
387	387	an investment in a rural development fund if, after the third
388	388	anniversary of the closing date and before the sixth anniversary of
389	389	the closing date, the fund fails to maintain growth investments in
390	390	this state equal to 100 percent of the fund's investment authority
391	391	remaining after any reductions under Sections 487A.0101(b) and (d).
392	392	The amount of the reduction under this subsection for each tax
393	393	credit certificate is equal to the amount of the tax credit stated
394	394	on the tax credit certificate remaining after any reductions under
395	395	Sections 487A.0101(a) and (c), multiplied by a fraction:
396	396	(1) the numerator of which is equal to 100 percent,
397	397	less the percentage of the rural development fund's investment
398	398	authority remaining after any reductions under Sections
399	399	487A.0101(b) and (d) that is invested in growth investments in this
400	400	state on the date of the reduction; and
401	401	(2) the denominator of which is 100 percent.
402	402	(b) The comptroller shall reduce a rural development fund's
403	403	investment authority by an amount equal to the total amount of
404	404	reductions under Subsection (a) for all tax credit certificates.
405	405	(c) For purposes of this section:
406	406	(1) the amount of growth investments that a rural
407	407	development fund may count with respect to a particular targeted
408	408	small business, including any amount invested in an affiliate of
409	409	the targeted small business, may not exceed $15 million, provided
410	410	that once a particular targeted small business has received a total
411	411	of $15 million in growth investments from one or more rural
412	412	development funds, a rural development fund may not count as a
413	413	growth investment any additional investments with respect to that
414	414	targeted small business;
415	415	(2) an investment that is sold or repaid is considered
416	416	to be maintained if the rural development fund reinvests an amount
417	417	equal to the capital returned or recovered by the fund from the
418	418	original investment, excluding any profit realized, in other growth
419	419	investments in this state on or before the first anniversary of the
420	420	date the capital is returned or recovered; and
421	421	(3) an amount received periodically by a rural
422	422	development fund is considered to be continually invested in growth
423	423	investments if that amount is reinvested in one or more growth
424	424	investments by the end of the calendar year following the year of
425	425	receipt.
426	426	(d) For purposes of this section, the refinancing by a rural
427	427	development fund of an existing growth investment received by a
428	428	targeted small business may not be counted by the fund as an
429	429	additional growth investment.
430	430	Sec. 487A.0103. REVOCATION OF TAX CREDITS AND INVESTMENT
431	431	AUTHORITY FOR CERTAIN DISTRIBUTIONS OR PAYMENTS. (a) The
432	432	comptroller shall revoke each tax credit certificate issued under
433	433	Subchapter B in connection with an investment in a rural
434	434	development fund if, before the fund exits the program under
435	435	Section 487A.0151, the fund makes a distribution or payment that
436	436	results in the fund having less than the portion of the fund's
437	437	investment authority required to be invested in growth investments
438	438	in this state under Sections 487A.0101 and 487A.0102:
439	439	(1) invested in growth investments in this state; or
440	440	(2) available for investment in growth investments and
441	441	held in:
442	442	(A) cash;
443	443	(B) United States Treasury securities;
444	444	(C) bonds or notes issued by this state or an
445	445	agency or political subdivision of this state; or
446	446	(D) a deposit account with a depository
447	447	institution headquartered or chartered in this state.
448	448	(b) The comptroller shall revoke a rural development fund's
449	449	investment authority if the comptroller revokes tax credit
450	450	certificates under Subsection (a).
451	451	Sec. 487A.0104. REDUCTION OF TAX CREDITS AND INVESTMENT
452	452	AUTHORITY FOR RELATED-PARTY INVESTMENTS. (a) The comptroller shall
453	453	reduce the amount of the tax credit on each tax credit certificate
454	454	issued under Subchapter B in connection with an investment in a
455	455	rural development fund if, before the fund exits the program under
456	456	Section 487A.0151, the fund makes a growth investment in a targeted
457	457	small business that directly or indirectly through an affiliate
458	458	owns, has the right to acquire a majority ownership interest in,
459	459	makes a loan to, or makes an investment in the fund, an affiliate of
460	460	the fund, or an investor in the fund.
461	461	(b) The amount of the reduction under Subsection (a) for
462	462	each tax credit certificate is equal to the amount of the tax credit
463	463	stated on the tax credit certificate remaining after any reductions
464	464	under Sections 487A.0101(a) and (c), multiplied by a fraction:
465	465	(1) the numerator of which is the portion of the rural
466	466	development fund's investment authority remaining after any
467	467	reductions under Sections 487A.0101(b) and (d) that is invested in
468	468	growth investments in targeted small businesses described by
469	469	Subsection (a); and
470	470	(2) the denominator of which is the total amount of the
471	471	rural development fund's investment authority remaining after any
472	472	reductions under Sections 487A.0101(b) and (d).
473	473	(c) The comptroller shall reduce a rural development fund's
474	474	investment authority by an amount equal to the total amount of
475	475	reductions under Subsection (a) for all tax credit certificates.
476	476	(d) Subsection (a) does not apply to investments in publicly
477	477	traded securities by a targeted small business or an owner or
478	478	affiliate of the targeted small business. For purposes of
479	479	Subsection (a), a rural development fund is not considered an
480	480	affiliate of a targeted small business solely as a result of the
481	481	fund's growth investment in the targeted small business.
482	482	Sec. 487A.0105. OPPORTUNITY TO CORRECT VIOLATION. (a)
483	483	Before reducing or revoking a tax credit and investment authority
484	484	under this subchapter, the comptroller shall notify the rural
485	485	development fund of the reasons for the pending reduction or
486	486	revocation.
487	487	(b) The rural development fund may, not later than the 90th
488	488	day after the date the notice is received, correct any violation
489	489	outlined in the notice to the satisfaction of the comptroller and
490	490	avoid reduction or revocation of the tax credit and investment
491	491	authority.
492	492	Sec. 487A.0106. ALLOCATION OF REVOKED INVESTMENT
493	493	AUTHORITY. (a) The amount of investment authority reduced or
494	494	revoked under this subchapter does not count toward the limit on
495	495	total investment authority described in Section 487A.0052(b).
496	496	(b) The comptroller shall first award reduced or revoked
497	497	investment authority pro rata to each rural development fund whose
498	498	requested investment authority was reduced under Section
499	499	487A.0052(c). The comptroller may award any remaining investment
500	500	authority to new applicants.
501	501	SUBCHAPTER D. CERTAIN FUND OPERATIONS
502	502	Sec. 487A.0151. APPLICATION TO EXIT PROGRAM. (a) On or
503	503	after the sixth anniversary of the closing date, a rural
504	504	development fund may apply to the comptroller to exit the program
505	505	and no longer be subject to regulation under this chapter. An
506	506	application to exit the program must be in a form and comply with
507	507	procedures prescribed by the comptroller and include a calculation
508	508	of the state reimbursement amount as provided by Section 487A.0153.
509	509	(b) The comptroller shall respond to the application not
510	510	later than the 30th day after receipt and include confirmation of
511	511	the state reimbursement amount.
512	512	(c) A rural development fund is eligible to exit the program
513	513	under this section if no tax credit certificates related to
514	514	investments in the fund have been reduced or revoked and the fund
515	515	has not received any reduction or revocation notice that has not
516	516	been corrected under Section 487A.0105.
517	517	(d) The comptroller may not unreasonably deny an
518	518	application under this section. The comptroller shall give the
519	519	rural development fund notice of a denial and include in the notice
520	520	the reasons for the denial.
521	521	(e) Not later than the 60th day after the date the rural
522	522	development fund receives confirmation of the state reimbursement
523	523	amount under Subsection (b), the fund shall remit to the
524	524	comptroller an amount of money equal to the lesser of:
525	525	(1) the excess return determined under Section
526	526	487A.0152; or
527	527	(2) the state reimbursement amount determined under
528	528	Section 487A.0153.
529	529	Sec. 487A.0152. CALCULATION OF EXCESS RETURN. (a) For
530	530	purposes of Section 487A.0151, a rural development fund's excess
531	531	return is determined by computing the difference between:
532	532	(1) the sum of:
533	533	(A) the present value of all growth investments
534	534	and other assets held by the fund on the date the fund applies to
535	535	exit the program under Section 487A.0151; and
536	536	(B) all amounts distributed to the equity holders
537	537	of the fund before the fund applies to exit the program under
538	538	Section 487A.0151; and
539	539	(2) the sum of:
540	540	(A) the amount of the fund's original investment
541	541	authority; and
542	542	(B) an amount equal to any projected increase in
543	543	the federal or state tax liability of equity holders of the fund,
544	544	including penalties and interest, related to the equity holders'
545	545	ownership, management, or operation of the fund.
546	546	(b) If the amount computed under Subsection (a) is less than
547	547	zero, the excess return is equal to zero.
548	548	Sec. 487A.0153. CALCULATION OF STATE REIMBURSEMENT AMOUNT.
549	549	For purposes of Section 487A.0151, a rural development fund's state
550	550	reimbursement amount is determined by computing the difference
551	551	between:
552	552	(1) the credit-eligible capital contributions made to
553	553	the fund; and
554	554	(2) the product of:
555	555	(A) the sum of the annual jobs created and jobs
556	556	retained as a result of the fund's growth investments as reported to
557	557	the comptroller under Section 487A.0156; and
558	558	(B) $30,000.
559	559	Sec. 487A.0154. NO REDUCTION OR REVOCATION FOLLOWING EXIT.
560	560	The comptroller may not reduce or revoke the amount of a tax credit
561	561	on a tax credit certificate related to an investment in a rural
562	562	development fund after the fund's exit from the program.
563	563	Sec. 487A.0155. EVALUATION OF PROPOSED INVESTMENT. (a) A
564	564	rural development fund, before making a growth investment, may
565	565	request from the comptroller a written opinion as to whether the
566	566	business in which the fund proposes to invest qualifies as a
567	567	targeted small business.
568	568	(b) Not later than the 15th business day after receiving the
569	569	request, the comptroller shall notify the rural development fund of
570	570	its determination.
571	571	(c) If the comptroller fails to notify the rural development
572	572	fund of its determination on or before the 15th business day after
573	573	receiving the request, the business in which the fund proposes to
574	574	invest is considered to be a targeted small business for purposes of
575	575	this chapter.
576	576	Sec. 487A.0156. ANNUAL REPORT. (a) A rural development
577	577	fund shall submit a report to the comptroller on or before the 60th
578	578	business day after each anniversary of the closing date until the
579	579	fund has exited the program under Section 487A.0151.
580	580	(b) The report must document the rural development fund's
581	581	growth investments and include:
582	582	(1) a bank statement showing each growth investment;
583	583	(2) the name, location, and industry of each business
584	584	receiving a growth investment, including either the determination
585	585	notice described by Section 487A.0155 or evidence that the business
586	586	qualified as a targeted small business at the time the investment
587	587	was made;
588	588	(3) the number of jobs created and jobs retained in the
589	589	preceding calendar year as a result of the fund's growth
590	590	investments as of the last day of that period;
591	591	(4) the average annual salary of the jobs described by
592	592	Subdivision (3) and evidence of any other monetary or social
593	593	benefit to this state as a result of those jobs;
594	594	(5) a description, including the amount, of each
595	595	growth investment in a targeted small business located in a rural
596	596	area made in the 24 months following the closing date; and
597	597	(6) any other information the comptroller requires.
598	598	(c) A rural development fund may, but is not required to,
599	599	include in any report submitted under this section information
600	600	about the number of jobs created and jobs retained with respect to a
601	601	former growth investment that the fund has exited.
602	602	Sec. 487A.0157. PARTICIPATION FEE. (a) A rural
603	603	development fund that has not exited the program under Section
604	604	487A.0151 before the first day of a state fiscal year shall remit to
605	605	the comptroller a participation fee in connection with the state
606	606	fiscal year in an amount determined under Subsection (b)(2) to
607	607	offset the fiscal impact to the comptroller of administering the
608	608	program. The comptroller shall prescribe the date on which the fee
609	609	payment is due.
610	610	(b) For each state fiscal year, the comptroller shall
611	611	determine:
612	612	(1) the costs incurred by the comptroller to
613	613	administer this chapter and Chapter 232, Insurance Code, less the
614	614	amount of application fees submitted under Section 487A.0051(b)(6)
615	615	and amounts remitted under Section 487A.0151(e); and
616	616	(2) the amount of the participation fee each rural
617	617	development fund described by Subsection (a) is required to pay in
618	618	connection with the state fiscal year, which is computed by
619	619	multiplying the amount determined under Subdivision (1) for the
620	620	state fiscal year by a fraction:
621	621	(A) the numerator of which is the amount of the
622	622	rural development fund's investment authority; and
623	623	(B) the denominator of which is the total amount
624	624	of investment authority for all rural development funds required to
625	625	pay a fee under Subsection (a) in connection with the state fiscal
626	626	year.
627	627	(c) Notwithstanding any other provision of this section,
628	628	the total amount of participation fees collected by the comptroller
629	629	in a state fiscal year may not exceed the amount that is reasonably
630	630	necessary to administer the program in that year, less the amounts
631	631	received by the comptroller under Sections 487A.0051(b)(6) and
632	632	487A.0151(e) in that year.
633	633	SUBCHAPTER E. REPORT; CONDITIONS FOR ACCEPTANCE OF CERTAIN
634	634	APPLICATIONS
635	635	Sec. 487A.0201. REPORT. (a) Before the beginning of the
636	636	92nd Legislature, Regular Session, the comptroller shall submit to
637	637	the lieutenant governor, the speaker of the house of
638	638	representatives, and each other member of the legislature a report
639	639	on the economic benefits of this chapter.
640	640	(b) The report must include an assessment of:
641	641	(1) the aggregate effects of growth investments made
642	642	under this chapter, including:
643	643	(A) the total number of jobs created by all
644	644	targeted small businesses, including direct jobs, indirect jobs,
645	645	and induced jobs;
646	646	(B) the total number of jobs retained by all
647	647	targeted small businesses;
648	648	(C) the total amount of wages paid in connection
649	649	with jobs created and jobs retained by all targeted small
650	650	businesses;
651	651	(D) the median wage of jobs created and jobs
652	652	retained by all targeted small businesses;
653	653	(E) the total effect on personal income in this
654	654	state, including direct and indirect effects;
655	655	(F) the total amount of growth investments;
656	656	(G) the gross domestic product of this state
657	657	attributable to targeted small businesses;
658	658	(H) the total taxable value of property of
659	659	targeted small businesses in this state according to tax appraisal
660	660	rolls;
661	661	(I) the total positive fiscal effect on this
662	662	state and local governments in this state; and
663	663	(J) the total number and dollar amount of growth
664	664	investments in targeted small businesses located in rural areas;
665	665	(2) the benefits to this state from cost savings
666	666	attributable to jobs created and jobs retained by all targeted
667	667	small businesses, including:
668	668	(A) Medicaid savings, with savings to this state
669	669	and the federal government listed separately;
670	670	(B) food assistance program savings;
671	671	(C) unemployment insurance payment savings; and
672	672	(D) any other savings that can be reasonably
673	673	estimated using data available to the comptroller in connection
674	674	with some or all targeted small businesses; and
675	675	(3) the total positive fiscal effect on this state and
676	676	local governments in this state of the benefits described by
677	677	Subdivision (2).
678	678	(c) The report may not include information that is
679	679	confidential by law.
680	680	(d) In preparing the portion of the report described by
681	681	Subsection (b)(1), the comptroller shall:
682	682	(1) use standard, nationally recognized economic
683	683	estimation techniques, including economic multipliers; and
684	684	(2) base the assessment on data submitted to the
685	685	comptroller by each rural development fund.
686	686	(e) The comptroller may not, for the purpose of preparing
687	687	the report required under this section, require a rural development
688	688	fund to provide any information that is not reasonably obtainable
689	689	by the fund.
690	690	Sec. 487A.0202. CONDITIONS FOR ACCEPTANCE OF CERTAIN
691	691	APPLICATIONS. (a) The comptroller may not accept applications
692	692	under Section 487A.0051 after January 1, 2026, unless the total
693	693	positive fiscal effects described by Section 487A.0201(b) exceed
694	694	the sum of all tax credit allocation statements issued by the
695	695	comptroller under Subchapter B.
696	696	(b) The comptroller shall resume accepting applications
697	697	under Section 487A.0051 when the condition provided by Subsection
698	698	(a) is satisfied.
699	699	SECTION 2. Subtitle B, Title 3, Insurance Code, is amended
700	700	by adding Chapter 232 to read as follows:
701	701	CHAPTER 232. TAX CREDIT FOR INVESTMENT IN RURAL DEVELOPMENT FUND
702	702	SUBCHAPTER A. GENERAL PROVISIONS
703	703	Sec. 232.0001. DEFINITIONS. In this chapter:
704	704	(1) "Affiliate" has the meaning assigned by Section
705	705	487A.0002, Government Code.
706	706	(2) "Closing date" has the meaning assigned by Section
707	707	487A.0001, Government Code.
708	708	(3) "State insurance tax liability" means any tax
709	709	liability incurred under Chapter 221, 222, 223, 223A, 224, 225,
710	710	226, or 281.
711	711	Sec. 232.0002. RULES. The comptroller shall adopt rules
712	712	necessary to implement this chapter.
713	713	SUBCHAPTER B. TAX CREDIT
714	714	Sec. 232.0051. ELIGIBILITY FOR CREDIT. An entity is
715	715	eligible for a credit against the entity's state insurance tax
716	716	liability in the amount and under the conditions provided by this
717	717	chapter.
718	718	Sec. 232.0052. QUALIFICATION. An entity is eligible for a
719	719	credit for a tax year if the entity holds a tax credit certificate
720	720	provided under Section 487A.0056, Government Code, and the first,
721	721	second, or third anniversary of the closing date in connection with
722	722	which the certificate was issued occurs during the tax year.
723	723	Sec. 232.0053. AMOUNT OF CREDIT; LIMITATION. (a) The
724	724	amount of credit for a tax year in connection with a tax credit
725	725	certificate described by Section 232.0052 is equal to:
726	726	(1) for the first two tax years an entity is eligible
727	727	for the credit, 33 percent of the value of the tax credit conveyed
728	728	by the certificate; and
729	729	(2) for the third tax year an entity is eligible for
730	730	the credit, 34 percent of the value of the tax credit conveyed by
731	731	the certificate.
732	732	(b) The total credit claimed for a tax year, including the
733	733	amount of any carryforward under Section 232.0054, may not exceed
734	734	the amount of state insurance tax liability due for the entity for
735	735	the tax year after applying all other applicable tax credits.
736	736	(c) Credits may be applied to the entity's estimated or
737	737	final tax payments for the tax year.
738	738	Sec. 232.0054. CARRYFORWARD. If an entity is eligible for a
739	739	credit that exceeds the limitation under Section 232.0053(b), the
740	740	entity may carry the unused credit forward and apply the credit to a
741	741	subsequent tax report that is due before the sixth anniversary of
742	742	the closing date in connection with which the credit is claimed.
743	743	Sec. 232.0055. ASSIGNMENT PROHIBITED. (a) Except as
744	744	provided by Subsection (b), an entity may not convey, assign, or
745	745	transfer the credit allowed under this chapter to another entity.
746	746	(b) An entity may convey, assign, or transfer the credit
747	747	allowed under this chapter to an affiliate of the entity that is
748	748	subject to state insurance tax liability.
749	749	Sec. 232.0056. RETALIATORY TAX. An entity claiming a
750	750	credit under this chapter is not required to pay any additional
751	751	retaliatory tax levied under Chapter 281 as a result of claiming
752	752	that credit.
753	753	SUBCHAPTER C. RECAPTURE OF CREDIT
754	754	Sec. 232.0101. RECAPTURE. The comptroller shall recapture
755	755	the amount of a credit claimed on a tax report filed under Chapter
756	756	221, 222, 223, 223A, 224, 225, 226, or 281 from an entity if the
757	757	amount of the tax credit on the tax credit certificate on which the
758	758	credit is based is reduced or revoked under Subchapter C, Chapter
759	759	487A, Government Code. The comptroller shall recapture an amount
760	760	equal to the amount by which the credit previously claimed exceeds
761	761	the amount of the credit remaining after the reduction or
762	762	revocation.
763	763	SECTION 3. It is the intent of the legislature that each
764	764	growth investment in a targeted small business made by a rural
765	765	development fund under Chapter 487A, Government Code, as added by
766	766	this Act:
767	767	(1) provide patient, growth-oriented investment
768	768	capital for purposes including expansion, payroll, inventory, and
769	769	training; and
770	770	(2) be at a below market rate with flexible terms,
771	771	which offers the targeted small business an affordable and
772	772	borrower-friendly financing alternative.
773	773	SECTION 4. (a) As soon as practicable after this Act becomes
774	774	law as provided by Section 2001.006, Government Code, the
775	775	comptroller of public accounts shall adopt rules necessary to
776	776	implement Chapter 487A, Government Code, as added by this Act, and
777	777	Chapter 232, Insurance Code, as added by this Act.
778	778	(b) Not later than October 1, 2025, the comptroller of
779	779	public accounts shall begin accepting applications under Section
780	780	487A.0051(a), Government Code, as added by this Act.
781	781	SECTION 5. Chapter 232, Insurance Code, as added by this
782	782	Act, applies only to a tax report originally due on or after January
783	783	1, 2025.
784	784	SECTION 6. This Act takes effect immediately if it receives
785	785	a vote of two-thirds of all the members elected to each house, as
786	786	provided by Section 39, Article III, Texas Constitution. If this
787	787	Act does not receive the vote necessary for immediate effect, this
788	788	Act takes effect September 1, 2025.