Texas 2025 - 89th Regular

Texas House Bill HB4735 Latest Draft

Bill / Introduced Version Filed 03/13/2025

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                            89R5713 CJC-F
 By: Ashby H.B. No. 4735




 A BILL TO BE ENTITLED
 AN ACT
 relating to rural development funds and insurance tax credits for
 certain investments in those funds; authorizing fees.
 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 SECTION 1.  Subtitle F, Title 4, Government Code, is amended
 by adding Chapter 487A to read as follows:
 CHAPTER 487A. RURAL DEVELOPMENT FUNDS
 SUBCHAPTER A. GENERAL PROVISIONS
 Sec. 487A.0001.  GENERAL DEFINITIONS. In this chapter:
 (1)  "Closing date" means the date a rural development
 fund has collected all of the amounts described by Section
 487A.0056(a)(1).
 (2)  "Historically underutilized business" means a
 business certified by the comptroller under Chapter 2161 as a
 historically underutilized business.
 (3)  "Rural area" means an area:
 (A)  other than a municipality with a population
 of more than 50,000 or an urbanized area contiguous and adjacent to
 the municipality; or
 (B)  determined to be rural in character by the
 United States Department of Agriculture.
 (4)  "Rural development fund" means an entity approved
 by the comptroller as a rural development fund.
 Sec. 487A.0002.  DEFINITION: AFFILIATE. (a) In this
 chapter, "affiliate" means an entity that directly or indirectly
 through one or more intermediaries controls, is controlled by, or
 is under common control with another entity.
 (b)  For purposes of Subsection (a), an entity is controlled
 by another entity if the controlling entity:
 (1)  holds, directly or indirectly, the majority voting
 or ownership interest in the controlled entity; or
 (2)  has control over the day-to-day operations of the
 controlled entity by contract or by law.
 Sec. 487A.0003.  DEFINITION: CREDIT-ELIGIBLE CAPITAL
 CONTRIBUTION. In this chapter, "credit-eligible capital
 contribution" means an investment of cash in a rural development
 fund made by an entity that is subject to state insurance tax
 liability, as defined by Section 232.0001, Insurance Code, in
 exchange for which the investor receives:
 (1)  an equity interest in a rural development fund; or
 (2)  at par value or premium, a debt instrument that has
 a maturity date of at least five years from the closing date and a
 repayment schedule that is no faster than level principal
 amortization over five years.
 Sec. 487A.0004.  DEFINITION: GROWTH INVESTMENT.  (a)  In
 this chapter and subject to Subsection (b), "growth investment"
 means any capital or equity investment by a rural development fund
 in a targeted small business or any loan by a rural development fund
 to a targeted small business with a stated maturity date of at least
 one year after the date of issuance.
 (b)  A loan by a rural development fund to a targeted small
 business is a growth investment only if the targeted small business
 obtains an affidavit from the chief executive officer or equivalent
 position of the targeted small business attesting that:
 (1)  the targeted small business sought and was denied
 similar financing from a commercial bank; or
 (2)  the targeted small business was referred to the
 rural development fund by a commercial bank.
 Sec. 487A.0005.  DEFINITION: INVESTMENT AUTHORITY.  In this
 chapter, "investment authority" means the amount stated on the
 notice issued under Section 487A.0055(1) approving the rural
 development fund.
 Sec. 487A.0006.  DEFINITION: JOBS CREATED. (a) In this
 chapter, "jobs created" means, with respect to a targeted small
 business, employment positions that:
 (1)  are created by the targeted small business;
 (2)  are located in this state;
 (3)  subject to Subsection (e), require at least 35
 hours of work each week; and
 (4)  were not located in this state at the time of the
 initial growth investment in the targeted small business.
 (b)  The number of jobs created by a targeted small business
 is calculated each year by subtracting the number of employment
 positions in this state at the targeted small business at the time
 of the initial growth investment in the targeted small business
 from the monthly average of those employment positions for that
 year. If the number calculated under this subsection is less than
 zero, the number shall be reported as zero.
 (c)  The monthly average of employment positions for a year
 is calculated by adding the number of employment positions existing
 on the last day of each month of the year and dividing that sum by
 12.
 (d)  An employment position that meets the requirements of
 Subsection (a) shall be multiplied by two for purposes of
 calculating the number of jobs created by a targeted small business
 if the targeted small business is located in a rural area and is a
 historically underutilized business.
 (e)  An employment position that requires less than 35 hours
 of work each week is considered to meet the requirements of
 Subsection (a) if the number of hours of work each week the job
 requires is considered to constitute full-time employment for
 purposes of the industry standards and practices applicable to the
 targeted small business that created the employment position.
 Sec. 487A.0007.  DEFINITION: JOBS RETAINED. (a) In this
 chapter, "jobs retained" means, with respect to a targeted small
 business, employment positions that:
 (1)  are located in this state, require at least 35
 hours of work each week, and existed before the initial growth
 investment in the targeted small business; and
 (2)  would have been lost or moved out of this state had
 a growth investment in the targeted small business not been made, as
 certified in writing by an executive officer of the targeted small
 business to the rural development fund.
 (b)  The number of jobs retained by a targeted small business
 is calculated each year based on the monthly average of employment
 positions for that year.
 (c)  The monthly average of employment positions for a year
 is calculated by adding the number of employment positions existing
 on the last day of each month of the year and dividing that sum by
 12.
 (d)  The reported number of jobs retained for a year may not
 exceed the number reported on the initial report under Section
 487A.0156. The rural development fund shall reduce the number of
 jobs retained for a year if employment at the targeted small
 business is less than the number reported on the initial report.
 (e)  An employment position that meets the requirements of
 Subsection (a) shall be multiplied by two for purposes of
 calculating the number of jobs retained by a targeted small
 business if the targeted small business is located in a rural area
 and is a historically underutilized business.
 (f)  Notwithstanding Subsection (a)(1), an employment
 position that requires less than 35 hours of work each week is
 considered to meet the requirements of that subdivision if the
 number of hours of work each week the job requires is considered to
 constitute full-time employment for purposes of the industry
 standards and practices applicable to the targeted small business
 that created the employment position.
 Sec. 487A.0008.  DEFINITION: TARGETED SMALL BUSINESS. (a)
 In this chapter, "targeted small business" means a business that,
 at the time of the initial growth investment in the business:
 (1)  is part of an industry assigned a primary North
 American Industry Classification System code listed under Sector
 11, 21, 22, 23, 31, 32, 33, 42, 48, 49, 54, 56, 62, 72, or 81 of the
 North American Industry Classification System;
 (2)  has fewer than 250 employees, including any
 persons who would be considered employees under the federal law to
 which 13 C.F.R. Section 121.103(h)(2) applies as a result of the
 application of that provision; and
 (3)  has its principal business operations located in
 this state.
 (b)  For purposes of this chapter, the principal business
 operations of a business are located at a place where:
 (1)  at least 65 percent of the business's employees
 work; or
 (2)  employees who are paid at least 65 percent of the
 business's payroll work.
 (c)  An out-of-state business that agrees to relocate or hire
 new employees using the proceeds of a growth investment to
 establish principal business operations in this state qualifies as
 a targeted small business if the business satisfies the
 requirements of:
 (1)  Subsections (a)(1) and (2) at the time of the
 initial growth investment in the business; and
 (2)  Subsection (a)(3) not later than the 180th day
 after receiving the initial growth investment or a later date
 agreed to by the comptroller.
 (d)  Notwithstanding any other provision of this section,
 the comptroller may consider a business other than a business
 described by Subsection (a)(1) to be a targeted small business for
 purposes of this chapter if the comptroller determines the business
 is of significant economic benefit to this state.
 Sec. 487A.0009.  RULES. The comptroller shall adopt rules
 necessary to implement, monitor, and evaluate this chapter.
 Sec. 487A.0010.  DISPOSITION OF FEES. Application fees
 submitted under Section 487A.0051(b)(6), amounts remitted under
 Section 487A.0151(e), and participation fees collected under
 Section 487A.0157 shall be deposited to the credit of the general
 revenue fund and may be appropriated only to the comptroller for the
 purpose of administering this chapter and Chapter 232, Insurance
 Code.
 SUBCHAPTER B. APPROVAL OF RURAL DEVELOPMENT FUNDS; TAX CREDIT
 CERTIFICATES
 Sec. 487A.0051.  APPLICATION. (a) Subject to Section
 487A.0202, the comptroller shall accept applications from entities
 seeking approval as rural development funds.
 (b)  An application must include:
 (1)  the total investment authority sought by the
 applicant under the applicant's business plan;
 (2)  evidence sufficient to prove to the comptroller's
 satisfaction that, as of the date the applicant submits the
 application:
 (A)  the applicant or affiliates of the applicant
 have invested, in the aggregate, at least $100 million in nonpublic
 companies located in the United States, including at least $70
 million in nonpublic companies located in rural areas in the United
 States; and
 (B)  either:
 (i)  at least one principal or affiliate in a
 rural business investment company licensed under 7 U.S.C. Section
 2009cc et seq. or a small business investment company licensed
 under 15 U.S.C. Section 681 is, and has been for at least four
 years, an officer or employee of the applicant or of an affiliate of
 the applicant on the date the application is submitted; or
 (ii)  the applicant is, or is an affiliate
 of, an investment firm based in this state with its principal
 business operations located in this state that has been operating
 for at least seven years and has, within the preceding three-year
 period, received an allocation under Section 45D, Internal Revenue
 Code of 1986;
 (3)  a copy of the rural business investment company
 license or small business investment company license if required by
 Subdivision (2)(B)(i);
 (4)  an estimate of the number of jobs created and jobs
 retained that will result from the applicant's growth investments;
 (5)  a business plan that includes a revenue impact
 assessment that:
 (A)  projects state and local tax revenue to be
 generated by the applicant's proposed growth investments; and
 (B)  is prepared by a nationally recognized
 third-party independent economic forecasting firm using a dynamic
 economic forecasting model that analyzes the applicant's business
 plan for the 10-year period following the date the applicant
 submits the application; and
 (6)  a nonrefundable application fee of $10,000.
 Sec. 487A.0052.  DECISION ON APPLICATION. (a) The
 comptroller shall make a determination on each application not
 later than the 30th day after the date the comptroller receives the
 application. The comptroller shall make application
 determinations in the order in which applications are received and
 shall consider applications received on the same day to be received
 simultaneously.
 (b)  The comptroller shall approve up to $300 million of
 investment authority, including up to $150 million of tax credit
 allocation authority described by Section 487A.0055(2), under this
 chapter.
 (c)  If a request for investment authority exceeds the limit
 under Subsection (b), the comptroller shall reduce the investment
 authority for that application as necessary to avoid exceeding the
 limit. If multiple applications received on the same day request a
 combined investment authority that exceeds the limit under
 Subsection (b), the comptroller shall proportionally reduce the
 investment authority for those applications as necessary to avoid
 exceeding the limit. The comptroller may not reduce an applicant's
 investment authority for any reason other than as authorized by
 this subsection.
 Sec. 487A.0053.  GROUNDS FOR DENIAL. The comptroller may
 deny an application under this subchapter only if:
 (1)  the application is incomplete or the application
 fee is not paid in full;
 (2)  the applicant fails to satisfy the requirements of
 Section 487A.0051(b)(2);
 (3)  the revenue impact assessment submitted under
 Section 487A.0051(b)(5) does not demonstrate that the applicant's
 business plan will result in a positive economic impact on combined
 state and local revenue during the 10-year period covered by the
 assessment that exceeds the cumulative amount of tax credits that
 would be issued to the applicant's investors under Chapter 232,
 Insurance Code, if the application were approved; or
 (4)  the comptroller has already approved the maximum
 amount of investment authority allowed under Section 487A.0052(b).
 Sec. 487A.0054.  SUBMISSION OF ADDITIONAL INFORMATION
 FOLLOWING DENIAL. (a) If the comptroller denies an application,
 the applicant may, not later than the 15th day after the date the
 comptroller provides notice of denial, provide additional
 information to the comptroller to complete, clarify, or cure
 defects in the application identified by the comptroller.
 (b)  If the applicant completes, clarifies, or cures the
 defects in its application during the period prescribed by
 Subsection (a), the application is considered complete as of the
 original submission date.
 (c)  If the applicant fails to complete, clarify, or cure the
 defects in its application during the period prescribed by
 Subsection (a), the application is finally denied. An applicant
 who wishes to reapply must resubmit an application in full with a
 new submission date.
 (d)  The comptroller shall review and reconsider an
 application described by Subsection (a) for which the applicant
 provides additional information not later than the 30th day after
 the date the applicant provides the information. The comptroller
 shall consider that application before any pending applications
 submitted after the date that application was originally submitted.
 Sec. 487A.0055.  APPROVAL BY COMPTROLLER. On approval of an
 application, the comptroller shall provide to the applicant:
 (1)  written notice of the applicant's approval as a
 rural development fund, including the amount of the fund's
 investment authority; and
 (2)  a tax credit allocation statement that includes on
 the statement the amount of tax credit the applicant is authorized
 to allocate to investors who make credit-eligible capital
 contributions to the rural development fund.
 Sec. 487A.0056.  DUTIES OF FUND FOLLOWING APPROVAL; TAX
 CREDIT CERTIFICATES. (a) A rural development fund shall:
 (1)  not later than the 60th day after the date the fund
 receives the approval notice under Section 487A.0055, collect the
 credit-eligible capital contributions made to the fund and, subject
 to Subsection (b), one or more investments of cash that, when added
 to the credit-eligible capital contributions, equal the fund's
 investment authority; and
 (2)  not later than the 65th day after the date the fund
 receives the approval notice under Section 487A.0055, send to the
 comptroller documentation sufficient to prove that the fund has
 collected the amounts described in Subdivision (1).
 (b)  At least 10 percent of the rural development fund's
 investment authority must consist of equity investments
 contributed directly or indirectly by affiliates of the fund,
 including employees, officers, and directors of those affiliates.
 (c)  A rural development fund may provide a tax credit
 certificate to an investor that makes a credit-eligible capital
 contribution to the fund. The certificate must include the name of
 the fund, the amount stated on the tax credit allocation statement
 provided to the fund under Section 487A.0055(2), the amount of the
 credit-eligible capital contribution made by the investor, and the
 value of the tax credit conveyed by the certificate. A rural
 development fund may not issue tax credit certificates the value of
 which in the aggregate exceeds the amount stated on the tax credit
 allocation statement provided to the fund under Section
 487A.0055(2).
 Sec. 487A.0057.  LAPSE OF APPROVAL. (a) If a rural
 development fund fails to comply with the requirements of Section
 487A.0056, the fund's approval lapses and the corresponding
 investment authority does not count toward the limit prescribed by
 Section 487A.0052(b).
 (b)  The comptroller shall first award lapsed investment
 authority pro rata to each rural development fund whose requested
 investment authority was reduced under Section 487A.0052(c). The
 rural development fund may allocate the investment authority
 awarded under this subsection to the fund's investors in the fund's
 discretion. The comptroller may award any remaining investment
 authority to new applicants.
 SUBCHAPTER C. REDUCTION OR REVOCATION OF TAX CREDITS AND INVESTMENT
 AUTHORITY
 Sec. 487A.0101.  REDUCTION OF TAX CREDITS AND INVESTMENT
 AUTHORITY FOR FAILURE TO MAKE REQUIRED GROWTH INVESTMENTS. (a) The
 comptroller shall reduce the amount of the tax credit on each tax
 credit certificate issued under Subchapter B in connection with an
 investment in a rural development fund if the fund fails to invest
 at least 60 percent of the fund's investment authority in growth
 investments in this state on or before the second anniversary of the
 closing date. The amount of the reduction under this subsection for
 each tax credit certificate is equal to the amount of the tax credit
 stated on the tax credit certificate, multiplied by a fraction:
 (1)  the numerator of which is equal to 60 percent, less
 the percentage of the rural development fund's investment authority
 invested in growth investments in this state on the second
 anniversary of the closing date; and
 (2)  the denominator of which is 60 percent.
 (b)  The comptroller shall reduce a rural development fund's
 investment authority by an amount equal to the total amount of
 reductions under Subsection (a) for all tax credit certificates.
 (c)  The comptroller shall reduce the amount of the tax
 credit on each tax credit certificate issued under Subchapter B in
 connection with an investment in a rural development fund if the
 fund fails to invest 100 percent of the fund's investment authority
 in growth investments in this state on or before the third
 anniversary of the closing date. The amount of the reduction under
 this subsection for each tax credit certificate is equal to the
 amount of the tax credit stated on the tax credit certificate
 remaining after any reduction under Subsection (a), multiplied by a
 fraction:
 (1)  the numerator of which is equal to 100 percent,
 less the percentage of the rural development fund's investment
 authority remaining after any reduction under Subsection (b) that
 is invested in growth investments in this state on the third
 anniversary of the closing date; and
 (2)  the denominator of which is 100 percent.
 (d)  The comptroller shall reduce a rural development fund's
 investment authority by an amount equal to the total amount of
 reductions under Subsection (c) for all tax credit certificates.
 (e)  For purposes of this section:
 (1)  the amount of growth investments that a rural
 development fund may count with respect to a particular targeted
 small business, including any amount invested in an affiliate of
 the targeted small business, may not exceed $7.5 million; and
 (2)  all growth investments must consist of growth
 investments in targeted small businesses whose principal business
 operations are located in, or are relocated to, a rural area in this
 state.
 (f)  Notwithstanding Subsection (e)(1), for the purpose of
 avoiding a reduction under Subsection (a) or (c), as applicable, a
 rural development fund may count as a growth investment in a
 particular targeted small business the amount of an investment made
 in excess of the limit prescribed by Subsection (e)(1) if the
 investment is made using money attributable to the repayment or
 redemption of a previous growth investment made by the fund to the
 particular targeted small business.
 Sec. 487A.0102.  REDUCTION OF TAX CREDITS AND INVESTMENT
 AUTHORITY FOR FAILURE TO MAINTAIN REQUIRED GROWTH INVESTMENTS. (a)
 The comptroller shall reduce the amount of the tax credit on each
 tax credit certificate issued under Subchapter B in connection with
 an investment in a rural development fund if, after the third
 anniversary of the closing date and before the sixth anniversary of
 the closing date, the fund fails to maintain growth investments in
 this state equal to 100 percent of the fund's investment authority
 remaining after any reductions under Sections 487A.0101(b) and (d).
 The amount of the reduction under this subsection for each tax
 credit certificate is equal to the amount of the tax credit stated
 on the tax credit certificate remaining after any reductions under
 Sections 487A.0101(a) and (c), multiplied by a fraction:
 (1)  the numerator of which is equal to 100 percent,
 less the percentage of the rural development fund's investment
 authority remaining after any reductions under Sections
 487A.0101(b) and (d) that is invested in growth investments in this
 state on the date of the reduction; and
 (2)  the denominator of which is 100 percent.
 (b)  The comptroller shall reduce a rural development fund's
 investment authority by an amount equal to the total amount of
 reductions under Subsection (a) for all tax credit certificates.
 (c)  For purposes of this section:
 (1)  the amount of growth investments that a rural
 development fund may count with respect to a particular targeted
 small business, including any amount invested in an affiliate of
 the targeted small business, may not exceed $15 million, provided
 that once a particular targeted small business has received a total
 of $15 million in growth investments from one or more rural
 development funds, a rural development fund may not count as a
 growth investment any additional investments with respect to that
 targeted small business;
 (2)  an investment that is sold or repaid is considered
 to be maintained if the rural development fund reinvests an amount
 equal to the capital returned or recovered by the fund from the
 original investment, excluding any profit realized, in other growth
 investments in this state on or before the first anniversary of the
 date the capital is returned or recovered; and
 (3)  an amount received periodically by a rural
 development fund is considered to be continually invested in growth
 investments if that amount is reinvested in one or more growth
 investments by the end of the calendar year following the year of
 receipt.
 (d)  For purposes of this section, the refinancing by a rural
 development fund of an existing growth investment received by a
 targeted small business may not be counted by the fund as an
 additional growth investment.
 Sec. 487A.0103.  REVOCATION OF TAX CREDITS AND INVESTMENT
 AUTHORITY FOR CERTAIN DISTRIBUTIONS OR PAYMENTS.  (a) The
 comptroller shall revoke each tax credit certificate issued under
 Subchapter B in connection with an investment in a rural
 development fund if, before the fund exits the program under
 Section 487A.0151, the fund makes a distribution or payment that
 results in the fund having less than the portion of the fund's
 investment authority required to be invested in growth investments
 in this state under Sections 487A.0101 and 487A.0102:
 (1)  invested in growth investments in this state; or
 (2)  available for investment in growth investments and
 held in:
 (A)  cash;
 (B)  United States Treasury securities;
 (C)  bonds or notes issued by this state or an
 agency or political subdivision of this state; or
 (D)  a deposit account with a depository
 institution headquartered or chartered in this state.
 (b)  The comptroller shall revoke a rural development fund's
 investment authority if the comptroller revokes tax credit
 certificates under Subsection (a).
 Sec. 487A.0104.  REDUCTION OF TAX CREDITS AND INVESTMENT
 AUTHORITY FOR RELATED-PARTY INVESTMENTS. (a) The comptroller shall
 reduce the amount of the tax credit on each tax credit certificate
 issued under Subchapter B in connection with an investment in a
 rural development fund if, before the fund exits the program under
 Section 487A.0151, the fund makes a growth investment in a targeted
 small business that directly or indirectly through an affiliate
 owns, has the right to acquire a majority ownership interest in,
 makes a loan to, or makes an investment in the fund, an affiliate of
 the fund, or an investor in the fund.
 (b)  The amount of the reduction under Subsection (a) for
 each tax credit certificate is equal to the amount of the tax credit
 stated on the tax credit certificate remaining after any reductions
 under Sections 487A.0101(a) and (c), multiplied by a fraction:
 (1)  the numerator of which is the portion of the rural
 development fund's investment authority remaining after any
 reductions under Sections 487A.0101(b) and (d) that is invested in
 growth investments in targeted small businesses described by
 Subsection (a); and
 (2)  the denominator of which is the total amount of the
 rural development fund's investment authority remaining after any
 reductions under Sections 487A.0101(b) and (d).
 (c)  The comptroller shall reduce a rural development fund's
 investment authority by an amount equal to the total amount of
 reductions under Subsection (a) for all tax credit certificates.
 (d)  Subsection (a) does not apply to investments in publicly
 traded securities by a targeted small business or an owner or
 affiliate of the targeted small business.  For purposes of
 Subsection (a), a rural development fund is not considered an
 affiliate of a targeted small business solely as a result of the
 fund's growth investment in the targeted small business.
 Sec. 487A.0105.  OPPORTUNITY TO CORRECT VIOLATION. (a)
 Before reducing or revoking a tax credit and investment authority
 under this subchapter, the comptroller shall notify the rural
 development fund of the reasons for the pending reduction or
 revocation.
 (b)  The rural development fund may, not later than the 90th
 day after the date the notice is received, correct any violation
 outlined in the notice to the satisfaction of the comptroller and
 avoid reduction or revocation of the tax credit and investment
 authority.
 Sec. 487A.0106.  ALLOCATION OF REVOKED INVESTMENT
 AUTHORITY. (a) The amount of investment authority reduced or
 revoked under this subchapter does not count toward the limit on
 total investment authority described in Section 487A.0052(b).
 (b)  The comptroller shall first award reduced or revoked
 investment authority pro rata to each rural development fund whose
 requested investment authority was reduced under Section
 487A.0052(c). The comptroller may award any remaining investment
 authority to new applicants.
 SUBCHAPTER D. CERTAIN FUND OPERATIONS
 Sec. 487A.0151.  APPLICATION TO EXIT PROGRAM. (a) On or
 after the sixth anniversary of the closing date, a rural
 development fund may apply to the comptroller to exit the program
 and no longer be subject to regulation under this chapter.  An
 application to exit the program must be in a form and comply with
 procedures prescribed by the comptroller and include a calculation
 of the state reimbursement amount as provided by Section 487A.0153.
 (b)  The comptroller shall respond to the application not
 later than the 30th day after receipt and include confirmation of
 the state reimbursement amount.
 (c)  A rural development fund is eligible to exit the program
 under this section if no tax credit certificates related to
 investments in the fund have been reduced or revoked and the fund
 has not received any reduction or revocation notice that has not
 been corrected under Section 487A.0105.
 (d)  The comptroller may not unreasonably deny an
 application under this section. The comptroller shall give the
 rural development fund notice of a denial and include in the notice
 the reasons for the denial.
 (e)  Not later than the 60th day after the date the rural
 development fund receives confirmation of the state reimbursement
 amount under Subsection (b), the fund shall remit to the
 comptroller an amount of money equal to the lesser of:
 (1)  the excess return determined under Section
 487A.0152; or
 (2)  the state reimbursement amount determined under
 Section 487A.0153.
 Sec. 487A.0152.  CALCULATION OF EXCESS RETURN.  (a) For
 purposes of Section 487A.0151, a rural development fund's excess
 return is determined by computing the difference between:
 (1)  the sum of:
 (A)  the present value of all growth investments
 and other assets held by the fund on the date the fund applies to
 exit the program under Section 487A.0151; and
 (B)  all amounts distributed to the equity holders
 of the fund before the fund applies to exit the program under
 Section 487A.0151; and
 (2)  the sum of:
 (A)  the amount of the fund's original investment
 authority; and
 (B)  an amount equal to any projected increase in
 the federal or state tax liability of equity holders of the fund,
 including penalties and interest, related to the equity holders'
 ownership, management, or operation of the fund.
 (b)  If the amount computed under Subsection (a) is less than
 zero, the excess return is equal to zero.
 Sec. 487A.0153.  CALCULATION OF STATE REIMBURSEMENT AMOUNT.
 For purposes of Section 487A.0151, a rural development fund's state
 reimbursement amount is determined by computing the difference
 between:
 (1)  the credit-eligible capital contributions made to
 the fund; and
 (2)  the product of:
 (A)  the sum of the annual jobs created and jobs
 retained as a result of the fund's growth investments as reported to
 the comptroller under Section 487A.0156; and
 (B)  $30,000.
 Sec. 487A.0154.  NO REDUCTION OR REVOCATION FOLLOWING EXIT.
 The comptroller may not reduce or revoke the amount of a tax credit
 on a tax credit certificate related to an investment in a rural
 development fund after the fund's exit from the program.
 Sec. 487A.0155.  EVALUATION OF PROPOSED INVESTMENT.  (a) A
 rural development fund, before making a growth investment, may
 request from the comptroller a written opinion as to whether the
 business in which the fund proposes to invest qualifies as a
 targeted small business.
 (b)  Not later than the 15th business day after receiving the
 request, the comptroller shall notify the rural development fund of
 its determination.
 (c)  If the comptroller fails to notify the rural development
 fund of its determination on or before the 15th business day after
 receiving the request, the business in which the fund proposes to
 invest is considered to be a targeted small business for purposes of
 this chapter.
 Sec. 487A.0156.  ANNUAL REPORT.  (a) A rural development
 fund shall submit a report to the comptroller on or before the 60th
 business day after each anniversary of the closing date until the
 fund has exited the program under Section 487A.0151.
 (b)  The report must document the rural development fund's
 growth investments and include:
 (1)  a bank statement showing each growth investment;
 (2)  the name, location, and industry of each business
 receiving a growth investment, including either the determination
 notice described by Section 487A.0155 or evidence that the business
 qualified as a targeted small business at the time the investment
 was made;
 (3)  the number of jobs created and jobs retained in the
 preceding calendar year as a result of the fund's growth
 investments as of the last day of that period;
 (4)  the average annual salary of the jobs described by
 Subdivision (3) and evidence of any other monetary or social
 benefit to this state as a result of those jobs;
 (5)  a description, including the amount, of each
 growth investment in a targeted small business located in a rural
 area made in the 24 months following the closing date; and
 (6)  any other information the comptroller requires.
 (c)  A rural development fund may, but is not required to,
 include in any report submitted under this section information
 about the number of jobs created and jobs retained with respect to a
 former growth investment that the fund has exited.
 Sec. 487A.0157.  PARTICIPATION FEE.  (a) A rural
 development fund that has not exited the program under Section
 487A.0151 before the first day of a state fiscal year shall remit to
 the comptroller a participation fee in connection with the state
 fiscal year in an amount determined under Subsection (b)(2) to
 offset the fiscal impact to the comptroller of administering the
 program. The comptroller shall prescribe the date on which the fee
 payment is due.
 (b)  For each state fiscal year, the comptroller shall
 determine:
 (1)  the costs incurred by the comptroller to
 administer this chapter and Chapter 232, Insurance Code, less the
 amount of application fees submitted under Section 487A.0051(b)(6)
 and amounts remitted under Section 487A.0151(e); and
 (2)  the amount of the participation fee each rural
 development fund described by Subsection (a) is required to pay in
 connection with the state fiscal year, which is computed by
 multiplying the amount determined under Subdivision (1) for the
 state fiscal year by a fraction:
 (A)  the numerator of which is the amount of the
 rural development fund's investment authority; and
 (B)  the denominator of which is the total amount
 of investment authority for all rural development funds required to
 pay a fee under Subsection (a) in connection with the state fiscal
 year.
 (c)  Notwithstanding any other provision of this section,
 the total amount of participation fees collected by the comptroller
 in a state fiscal year may not exceed the amount that is reasonably
 necessary to administer the program in that year, less the amounts
 received by the comptroller under Sections 487A.0051(b)(6) and
 487A.0151(e) in that year.
 SUBCHAPTER E. REPORT; CONDITIONS FOR ACCEPTANCE OF CERTAIN
 APPLICATIONS
 Sec. 487A.0201.  REPORT.  (a) Before the beginning of the
 92nd Legislature, Regular Session, the comptroller shall submit to
 the lieutenant governor, the speaker of the house of
 representatives, and each other member of the legislature a report
 on the economic benefits of this chapter.
 (b)  The report must include an assessment of:
 (1)  the aggregate effects of growth investments made
 under this chapter, including:
 (A)  the total number of jobs created by all
 targeted small businesses, including direct jobs, indirect jobs,
 and induced jobs;
 (B)  the total number of jobs retained by all
 targeted small businesses;
 (C)  the total amount of wages paid in connection
 with jobs created and jobs retained by all targeted small
 businesses;
 (D)  the median wage of jobs created and jobs
 retained by all targeted small businesses;
 (E)  the total effect on personal income in this
 state, including direct and indirect effects;
 (F)  the total amount of growth investments;
 (G)  the gross domestic product of this state
 attributable to targeted small businesses;
 (H)  the total taxable value of property of
 targeted small businesses in this state according to tax appraisal
 rolls;
 (I)  the total positive fiscal effect on this
 state and local governments in this state; and
 (J)  the total number and dollar amount of growth
 investments in targeted small businesses located in rural areas;
 (2)  the benefits to this state from cost savings
 attributable to jobs created and jobs retained by all targeted
 small businesses, including:
 (A)  Medicaid savings, with savings to this state
 and the federal government listed separately;
 (B)  food assistance program savings;
 (C)  unemployment insurance payment savings; and
 (D)  any other savings that can be reasonably
 estimated using data available to the comptroller in connection
 with some or all targeted small businesses; and
 (3)  the total positive fiscal effect on this state and
 local governments in this state of the benefits described by
 Subdivision (2).
 (c)  The report may not include information that is
 confidential by law.
 (d)  In preparing the portion of the report described by
 Subsection (b)(1), the comptroller shall:
 (1)  use standard, nationally recognized economic
 estimation techniques, including economic multipliers; and
 (2)  base the assessment on data submitted to the
 comptroller by each rural development fund.
 (e)  The comptroller may not, for the purpose of preparing
 the report required under this section, require a rural development
 fund to provide any information that is not reasonably obtainable
 by the fund.
 Sec. 487A.0202.  CONDITIONS FOR ACCEPTANCE OF CERTAIN
 APPLICATIONS.  (a) The comptroller may not accept applications
 under Section 487A.0051 after January 1, 2026, unless the total
 positive fiscal effects described by Section 487A.0201(b) exceed
 the sum of all tax credit allocation statements issued by the
 comptroller under Subchapter B.
 (b)  The comptroller shall resume accepting applications
 under Section 487A.0051 when the condition provided by Subsection
 (a) is satisfied.
 SECTION 2.  Subtitle B, Title 3, Insurance Code, is amended
 by adding Chapter 232 to read as follows:
 CHAPTER 232. TAX CREDIT FOR INVESTMENT IN RURAL DEVELOPMENT FUND
 SUBCHAPTER A. GENERAL PROVISIONS
 Sec. 232.0001.  DEFINITIONS. In this chapter:
 (1)  "Affiliate" has the meaning assigned by Section
 487A.0002, Government Code.
 (2)  "Closing date" has the meaning assigned by Section
 487A.0001, Government Code.
 (3)  "State insurance tax liability" means any tax
 liability incurred under Chapter 221, 222, 223, 223A, 224, 225,
 226, or 281.
 Sec. 232.0002.  RULES. The comptroller shall adopt rules
 necessary to implement this chapter.
 SUBCHAPTER B. TAX CREDIT
 Sec. 232.0051.  ELIGIBILITY FOR CREDIT. An entity is
 eligible for a credit against the entity's state insurance tax
 liability in the amount and under the conditions provided by this
 chapter.
 Sec. 232.0052.  QUALIFICATION. An entity is eligible for a
 credit for a tax year if the entity holds a tax credit certificate
 provided under Section 487A.0056, Government Code, and the first,
 second, or third anniversary of the closing date in connection with
 which the certificate was issued occurs during the tax year.
 Sec. 232.0053.  AMOUNT OF CREDIT; LIMITATION.  (a) The
 amount of credit for a tax year in connection with a tax credit
 certificate described by Section 232.0052 is equal to:
 (1)  for the first two tax years an entity is eligible
 for the credit, 33 percent of the value of the tax credit conveyed
 by the certificate; and
 (2)  for the third tax year an entity is eligible for
 the credit, 34 percent of the value of the tax credit conveyed by
 the certificate.
 (b)  The total credit claimed for a tax year, including the
 amount of any carryforward under Section 232.0054, may not exceed
 the amount of state insurance tax liability due for the entity for
 the tax year after applying all other applicable tax credits.
 (c)  Credits may be applied to the entity's estimated or
 final tax payments for the tax year.
 Sec. 232.0054.  CARRYFORWARD. If an entity is eligible for a
 credit that exceeds the limitation under Section 232.0053(b), the
 entity may carry the unused credit forward and apply the credit to a
 subsequent tax report that is due before the sixth anniversary of
 the closing date in connection with which the credit is claimed.
 Sec. 232.0055.  ASSIGNMENT PROHIBITED.  (a) Except as
 provided by Subsection (b), an entity may not convey, assign, or
 transfer the credit allowed under this chapter to another entity.
 (b)  An entity may convey, assign, or transfer the credit
 allowed under this chapter to an affiliate of the entity that is
 subject to state insurance tax liability.
 Sec. 232.0056.  RETALIATORY TAX. An entity claiming a
 credit under this chapter is not required to pay any additional
 retaliatory tax levied under Chapter 281 as a result of claiming
 that credit.
 SUBCHAPTER C. RECAPTURE OF CREDIT
 Sec. 232.0101.  RECAPTURE. The comptroller shall recapture
 the amount of a credit claimed on a tax report filed under Chapter
 221, 222, 223, 223A, 224, 225, 226, or 281 from an entity if the
 amount of the tax credit on the tax credit certificate on which the
 credit is based is reduced or revoked under Subchapter C, Chapter
 487A, Government Code. The comptroller shall recapture an amount
 equal to the amount by which the credit previously claimed exceeds
 the amount of the credit remaining after the reduction or
 revocation.
 SECTION 3.  It is the intent of the legislature that each
 growth investment in a targeted small business made by a rural
 development fund under Chapter 487A, Government Code, as added by
 this Act:
 (1)  provide patient, growth-oriented investment
 capital for purposes including expansion, payroll, inventory, and
 training; and
 (2)  be at a below market rate with flexible terms,
 which offers the targeted small business an affordable and
 borrower-friendly financing alternative.
 SECTION 4.  (a) As soon as practicable after this Act becomes
 law as provided by Section 2001.006, Government Code, the
 comptroller of public accounts shall adopt rules necessary to
 implement Chapter 487A, Government Code, as added by this Act, and
 Chapter 232, Insurance Code, as added by this Act.
 (b)  Not later than October 1, 2025, the comptroller of
 public accounts shall begin accepting applications under Section
 487A.0051(a), Government Code, as added by this Act.
 SECTION 5.  Chapter 232, Insurance Code, as added by this
 Act, applies only to a tax report originally due on or after January
 1, 2025.
 SECTION 6.  This Act takes effect immediately if it receives
 a vote of two-thirds of all the members elected to each house, as
 provided by Section 39, Article III, Texas Constitution. If this
 Act does not receive the vote necessary for immediate effect, this
 Act takes effect September 1, 2025.