Relating to rural development funds and insurance tax credits for certain investments in those funds; authorizing fees.

89(R) HB 4735 - Engrossed version - Bill Text

89R25787 CJC-F

By: Ashby, Button, King

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) "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.

(3)

"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 (d), 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 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)

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.