Relating to the establishment of the Texas Committee on Foreign Investment to review certain transactions involving certain foreign entities in coordination with the attorney general; creating a civil penalty.

89(R) SB 2117 - House Committee Report version - Bill Text

89R28753 RDS-F

By: Parker, et al.

S.B. No. 2117

(Lambert, et al.)

Substitute the following for S.B. No. 2117:
No.

A BILL TO BE ENTITLED

AN ACT

relating to the establishment of the Texas Committee on Foreign

Investment to review certain transactions involving certain

foreign entities in coordination with the attorney general;

creating a civil penalty.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle B, Title 4, Government Code, is amended

by adding Chapter 426 to read as follows:

CHAPTER 426. TEXAS COMMITTEE ON FOREIGN INVESTMENT

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 426.001. DEFINITIONS. In this chapter:

(1)

"Committee" means the Texas Committee on Foreign

Investment.

(2)

"Control" means, with respect to an entity, the

direct or indirect power, whether or not exercised, to:

(A) direct the activities of the entity;

(B)

make or direct others to make legal

commitments on behalf of the entity; or

(C)

hire or fire a principal decision-maker of

the entity.

(3)

"Covered transaction" means a foreign transaction

that is subject to this chapter in accordance with rules adopted

under Section 426.101.

(4)

"Critical infrastructure" means infrastructure in

one of the following categories:

(A) chemical;

(B) commercial facilities;

(C) communications;

(D) critical manufacturing;

(E) dams;

(F) defense industrial bases;

(G) emergency services;

(H) energy;

(I) financial services;

(J) food and agriculture;

(K) government facilities;

(L) health care and public health;

(M) information technology;

(N) nuclear reactors, materials, and waste;

(O) transportation systems; or

(P) water and wastewater systems.

(5)

"Foreign transaction" means a merger or

acquisition, including a merger or acquisition carried out through

a joint venture, by or with a scrutinized foreign entity that

results in control of a business, real property, or another asset

located in this state by the scrutinized foreign entity.

(6)

"Mitigation agreement" means an agreement

proposed by the attorney general in the manner provided by

Subchapter C to mitigate a national security risk arising from a

covered transaction.

The term includes an amended mitigation

agreement proposed by the attorney general under Section 426.103.

(7) "Scrutinized foreign entity" means:

(A) a person who is not:

(i)

a citizen or national of the United

States; or

(ii)

an alien who is lawfully admitted for

residence in the United States under the federal Immigration and

Nationality Act (8 U.S.C. Section 1101 et seq.);

(B) a foreign government; or

(C) a business entity:

(i)

organized in a foreign country that is

not listed by the Office of the United States Trade Representative

as a signatory to a trade agreement with the United States or under

the laws of a foreign government of a country that is not listed by

the Office of the United States Trade Representative as a signatory

to a trade agreement with the United States;

(ii)

that has its principal place of

business in a foreign country that is not listed by the Office of

the United States Trade Representative as a signatory to a trade

agreement with the United States; or

(iii)

controlled by an entity described by

Subparagraph (i) or (ii).

(8)

"Sensitive personal data" means information,

including health, financial, or biometric information, that may

pose a threat to public safety if obtained by a scrutinized foreign

entity, including by exploiting the information to cause harm or

coerce an individual to perform an act on behalf of the entity.

(9)

"Trade agreement" means any of the following

bilateral, multilateral, or plurilateral trade agreements, as

negotiated by the Office of the United States Trade Representative

and entered into by the United States:

(A) a trade and investment agreement;

(B) a trade in services agreement; or

(C) an environmental goods agreement.

Sec.

426.002.

APPLICABILITY. This chapter does not apply

to:

(1)

a transaction governed exclusively by federal law,

including an international agreement between the United States and

a foreign nation;

(2)

a transaction for which notice has been submitted

to the federal Committee on Foreign Investment in the United States

in the manner provided by 50 U.S.C. Section 4565(b)(1)(C);

(3)

a foreign transaction consisting solely of a

passive ownership interest in an entity that does not result in

control of the entity by a scrutinized foreign entity;

(4)

the sale, transfer, or other acquisition of real

property intended for residential use; or

(5)

the creation, transfer, sale, or other acquisition

of a public security interest that does not grant rights to a

scrutinized foreign entity exceeding those held by other

shareholders.

SUBCHAPTER B. TEXAS COMMITTEE ON FOREIGN INVESTMENT

Sec.

426.051.

COMMITTEE; MEMBERSHIP.

(a)

The Texas

Committee on Foreign Investment is established to facilitate the

review of certain foreign transactions as provided by this chapter.

(b) The committee is composed of the following members:

(1)

a representative from the office of the secretary

of state appointed by the secretary of state, who shall serve as

chair;

(2) the following officers or their designees:

(A) the attorney general;

(B) the land commissioner;

(C) the comptroller; and

(D) the commissioner of agriculture; and

(3)

the heads of the following agencies or their

designees:

(A) the Department of Public Safety;

(B) the Public Utility Commission of Texas;

(C)

the Department of Information Resources, or

its successor in functions relating to cybersecurity; and

(D) the Railroad Commission of Texas.

Sec.

426.052.

SUNSET PROVISION.

The committee is subject

to Chapter 325 (Texas Sunset Act).

Unless continued in existence

as provided by that chapter, the committee is abolished and this

chapter expires September 1, 2035.

SUBCHAPTER C. REVIEW OF CERTAIN TRANSACTIONS

Sec.

426.101.

FOREIGN TRANSACTIONS SUBJECT TO REVIEW;

PUBLICATION OF CRITERIA.

(a)

The secretary of state, in

consultation with the committee, shall by rule adopt criteria for

determining whether a foreign transaction is subject to this

chapter. The criteria must be consistent with criteria established

under 50 U.S.C. Section 4565 and provide that a foreign transaction

is subject to this chapter if the transaction:

(1)

exceeds the minimum dollar value or the minimum

ownership percentage as determined by the secretary of state; and

(2) affects at least one of the following concerns:

(A) critical infrastructure in this state;

(B) agricultural land in this state; or

(C)

sensitive personal data of residents of this

state.

(b)

The secretary of state, in consultation with the

committee, may by rule exempt certain transactions from the

requirements of this chapter.

(c)

As soon as practicable after adopting the criteria under

Subsection (a) or an exemption under Subsection (b), the secretary

of state shall publish and maintain the criteria and exemptions on

the secretary of state's Internet website.

Sec.

426.102.

NOTICE; REVIEW; REPORT TO COMMITTEE.

(a)

A

person who intends to enter into a covered transaction shall, not

later than the 45th day before the date of the closing or other

settlement of the transaction, notify the attorney general in the

form and manner prescribed by the attorney general.

(b)

Not later than the 15th day after the date the attorney

general receives notice under Subsection (a), the attorney general

shall complete an initial review of the information provided in the

notice and determine whether further investigation is warranted. If

the attorney general determines that further investigation is

warranted, the attorney general shall conduct a secondary

investigation. The attorney general shall conclude a secondary

investigation not later than the 10th day after the date the

attorney general concludes the initial review.

(c)

On completion of an initial review and, if applicable,

secondary investigation under Subsection (b), and not later than

the 25th day after the date the attorney general receives notice

under Subsection (a), the attorney general shall submit a report

containing the results of the review and investigation to the

committee.

If the attorney general fails to submit a report to the

committee in the manner provided by this subsection, the attorney

general is considered to have determined that a mitigation

agreement is not necessary to protect the state's interests.

Sec.

426.103.

MITIGATION AGREEMENT. (a)

If the attorney

general determines that a mitigation agreement is necessary to

protect the state's interests, the attorney general shall, as soon

as practicable after submitting the report under Section 426.102

but not later than the 30th day after the date the attorney general

receives notice under Section 426.102(a), submit a proposed

mitigation agreement to the committee. The agreement must address

concerns raised in the report and may require a party to a covered

transaction to comply with certain requirements proposed by the

attorney general, including:

(1) data protection protocols;

(2) security clearance requirements;

(3)

restrictions on access by scrutinized foreign

entities to assets that are a part of a covered transaction; and

(4) compliance reporting.

(b)

Not later than the fifth business day after the date the

committee receives a mitigation agreement from the attorney

general, the committee shall adopt or reject the agreement.

(c)

If the committee adopts the mitigation agreement, the

committee shall deliver the agreement to each party to the covered

transaction.

(d)

If the committee rejects the mitigation agreement, the

attorney general shall, not later than the fifth day after the date

the committee rejects the initial mitigation agreement, prepare an

amended mitigation agreement that addresses the committee's

concerns with the initial agreement.

(e)

If a provision of a mitigation agreement affects title

to a real property interest, the mitigation agreement must:

(1)

require the attorney general to record notice of

the mitigation agreement in each county in which any part of the

real property subject to the provision is located; and

(2)

provide that the mitigation agreement has no

effect if the attorney general does not record notice in the manner

provided by Subdivision (1).

(f)

The committee shall adopt rules providing procedures to

implement this section.

Sec.

426.104.

NO DUTY ON CERTAIN PARTICIPANTS TO REAL

PROPERTY TRANSACTION. Notwithstanding any other provision of this

chapter, this chapter may not be construed to impose a duty or

liability on a person, including a title insurance company, lender,

or real estate professional, who is not:

(1) a party to a covered transaction; or

(2)

a governmental entity on which this chapter

explicitly imposes a duty.

Sec.

426.105.

VIOLATION. A person violates this chapter

if:

(1)

the attorney general determines that a covered

transaction involving the person requires a mitigation agreement;

and

(2) the person knowingly or intentionally:

(A)

executes a covered transaction without

entering into a mitigation agreement; or

(B)

violates a provision of a mitigation

agreement.

Sec.

426.106.

CONFIDENTIALITY.

Notwithstanding any other

law, information the committee obtains during a review under

Section 426.102 or includes in a mitigation agreement under Section

426.103 is confidential and excepted from disclosure under Chapter

552. The information may be used in a proceeding under Subchapter D

at the attorney general's discretion.

SUBCHAPTER D. ENFORCEMENT

Sec.

426.151.

CIVIL PENALTY; INJUNCTION.

(a)

A person who

violates this chapter is liable to the state for a civil penalty in

an amount not to exceed $50,000 for each violation.

(b) The attorney general may bring an action to:

(1)

recover the civil penalty imposed under Subsection

(a); and

(2)

restrain or enjoin a person from violating this

chapter.

(c)

The attorney general may recover reasonable attorney's

fees and other reasonable expenses incurred in bringing an action

under this section.

Sec.

426.152.

DEFENSE. It is a defense to an action brought

under this subchapter that:

(1)

a good-faith dispute exists between the parties to

the mitigation agreement relating to whether an activity by a party

to a mitigation agreement violates a provision of the agreement;

(2)

the party performing the activity provides notice

to the attorney general before performing the activity; and

(3)

the attorney general provides a response to the

notice provided under Subdivision (2) consenting to the activity

described in the notice.

Sec.

426.153.

VENUE. Notwithstanding any other law, the

attorney general may bring an action under this chapter in the

county where all or a substantial part of the assets that are the

subject of the covered transaction are located.

SUBCHAPTER E. ANNUAL REPORT

Sec.

426.201.

ANNUAL REPORT. Not later than September 1 of

each year, the committee shall prepare and submit to the governor,

secretary of state, lieutenant governor, and speaker of the house

of representatives a report that includes:

(1)

the number of transactions reviewed by the

attorney general during the preceding fiscal year;

(2)

an analysis of the measures imposed by the

committee in mitigation agreements entered into under this chapter;

and

(3)

a summary of recommendations for legislative

changes the committee considers appropriate to promote state and

national security.

SECTION 2. Not later than December 1, 2025, the secretary of

state, in consultation with the Texas Committee on Foreign

Investment, shall adopt criteria under Section 426.101, Government

Code, as added by this Act.

SECTION 3. In accordance with Section 16, Article I, Texas

Constitution, Chapter 426, Government Code, as added by this Act,

applies only to a transaction governed by a contract entered into on

or after January 1, 2026. A transaction governed by a contract

entered into before that date is governed by the law in effect on

the date the contract was entered into, and the former law is

continued in effect for that purpose.

SECTION 4. This Act takes effect September 1, 2025.