CHAPTER 228. PREMIUM TAX CREDIT FOR CERTAIN INVESTMENTS

State Codes and Statutes

Statutes > Texas > Insurance-code > Title-3-department-funds-fees-and-taxes > Chapter-228-premium-tax-credit-for-certain-investments

INSURANCE CODE

TITLE 3. DEPARTMENT FUNDS, FEES, AND TAXES

SUBTITLE B. INSURANCE PREMIUM TAXES

CHAPTER 228. PREMIUM TAX CREDIT FOR CERTAIN INVESTMENTS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 228.001. GENERAL DEFINITIONS. In this chapter:

(1) "Allocation date" means the date on which certified

investors are allocated premium tax credits.

(2) "Certified capital" means cash invested by a certified

investor that fully funds the purchase price of an equity

interest in a certified capital company or a qualified debt

instrument issued by the company.

(3) "Certified capital company" means a partnership,

corporation, or trust or limited liability company, whether

organized on a profit or nonprofit basis, that:

(A) has as the company's primary business activity the

investment of cash in qualified businesses; and

(B) is certified as meeting the criteria of this chapter.

(4) "Certified investor" means an insurer or other person that

has state premium tax liability and that contributes certified

capital pursuant to a premium tax credit allocation under this

chapter.

(5) "Early stage business" means a business described by Section

228.152(a).

(5-a) "Low-income community" has the meaning assigned by Section

45D(e), Internal Revenue Code of 1986.

(6) "Person" means an individual or entity, including a

corporation, general or limited partnership, or trust or limited

liability company.

(7) "Premium tax credit allocation claim" means a claim for

allocation of premium tax credits.

(7-a) "Program One" means the program for allocation and

investment of certified capital under this chapter before January

1, 2007.

(7-b) "Program Two" means the program for allocation and

investment of certified capital under this chapter on or after

January 1, 2007.

(8) "Qualified business" means a business described by Section

228.201.

(9) "Qualified debt instrument" means a debt instrument issued

by a certified capital company, at par value or a premium, that:

(A) has an original maturity date that is a date on or after the

fifth anniversary of the date of issuance;

(B) has a repayment schedule that is not faster than a level

principal amortization over five years; and

that are related to:

(i) the profitability of the company; or

(ii) the performance of the company's investment portfolio.

(10) "Qualified investment" means the investment of cash by a

certified capital company in a qualified business for the

purchase of any debt, debt participation, equity, or hybrid

security of any nature or description, including a debt

instrument or security that has the characteristics of debt but

that provides for conversion into equity or equity participation

instruments such as options or warrants.

(11) "State premium tax liability" means:

(A) any liability incurred by any person under Chapter 221, 222,

223, or 224; or

(B) if the tax liability imposed under Chapter 221, 222, 223, or

224 is eliminated or reduced, any tax liability imposed on an

insurer or other person that had premium tax liability under

Subchapter A, Chapter 4, or Article 9.59 as those laws existed on

January 1, 2003.

(12) "Strategic investment business" means a business described

by Section 228.153(a).

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

87, Sec. 14.001(a), eff. September 1, 2009.

Sec. 228.002. DEFINITION OF AFFILIATE. In this chapter,

"affiliate" of another person means:

(1) a person that is an affiliate for purposes of Section

823.003;

(2) a person that directly or indirectly:

(A) beneficially owns 10 percent or more of the outstanding

voting securities or other voting or management interests of the

other person, whether through rights, options, convertible

interests, or otherwise; or

(B) controls or holds power to vote 10 percent or more of the

outstanding voting securities or other voting or management

interests of the other person;

(3) a person 10 percent or more of the outstanding voting

securities or other voting or management interests of which are

directly or indirectly:

(A) beneficially owned by the other person, whether through

rights, options, convertible interests, or otherwise; or

(B) controlled or held with power to vote by the other person;

(4) a partnership in which the other person is a general

partner;

(5) an officer, director, employee, or agent of the other

person; or

(6) an immediate family member of an officer, director,

employee, or agent described by Subdivision (5).

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

SUBCHAPTER B. ADMINISTRATION AND PROMOTION

Sec. 228.051. ADMINISTRATION BY COMPTROLLER. The comptroller

shall administer this chapter.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.052. RULES; FORMS. The comptroller shall adopt rules

and forms as necessary to implement this chapter, including rules

that:

(1) establish the application procedures for certified capital

companies; and

(2) facilitate the transfer or assignment of premium tax credits

by certified investors.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.053. REPORT TO LEGISLATURE. (a) The comptroller shall

prepare a biennial report concerning the results of the

implementation of this chapter. The report must include:

(1) the number of certified capital companies holding certified

capital;

(2) the amount of certified capital invested in each certified

capital company;

(3) the amount of certified capital the certified capital

company invested in qualified businesses as of January 1, 2006,

and the cumulative total for each subsequent year;

(4) the total amount of tax credits granted under this chapter

for each year that credits have been granted;

(5) the performance of each certified capital company with

respect to renewal and reporting requirements imposed under this

chapter;

(6) with respect to the qualified businesses in which certified

capital companies have invested:

(A) the classification of the qualified businesses according to

the industrial sector and size of the business;

(B) the total number of jobs created by the investment and the

average wages paid for the jobs; and

investment and the average wages paid for the jobs; and

(7) the certified capital companies that have been decertified

or that have failed to renew the certification and the reason for

any decertification.

(b) The comptroller shall file the report with the governor, the

lieutenant governor, and the speaker of the house of

representatives not later than December 15 of each even-numbered

year.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.054. PROMOTION OF PROGRAM. The Texas Economic

Development and Tourism Office shall promote the program

established under this chapter in the Texas Business and

Community Economic Development Clearinghouse.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

SUBCHAPTER C. APPLICATION FOR AND GENERAL OPERATION OF CERTIFIED

CAPITAL COMPANIES

Sec. 228.101. APPLICATION FOR CERTIFICATION. (a) An applicant

for certification must file the application in the form

prescribed by the comptroller. The application must be

accompanied by a nonrefundable application fee of $7,500.

(b) The application must include an audited balance sheet of the

applicant, with an unqualified opinion from an independent

certified public accountant, as of a date not more than 35 days

before the date of the application.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.102. QUALIFICATION. To qualify as a certified capital

company:

(1) the applicant must have, at the time of application for

certification, an equity capitalization of at least $500,000 in

unencumbered cash or cash equivalents;

(2) at least two principals or persons employed to manage the

funds of the applicant must have at least four years of

experience in the venture capital industry; and

(3) the applicant must satisfy any additional requirement

imposed by the comptroller by rule.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.103. MANAGEMENT BY AND CERTAIN OWNERSHIP INTERESTS OF

INSURANCE ENTITIES PROHIBITED. (a) An insurer, group of

insurers, or other persons who may have state premium tax

liability or the insurer's or person's affiliates may not

directly or indirectly:

(1) manage a certified capital company;

(2) beneficially own, whether through rights, options,

convertible interests, or otherwise, more than 10 percent of the

outstanding voting securities of a certified capital company; or

(3) control the direction of investments for a certified capital

company.

(b) Subsection (a) applies without regard to whether the insurer

or other person or the affiliate of the insurer or other person

is authorized by or engages in business in this state.

certified investor, or any other party from exercising its legal

rights and remedies, including interim management of a certified

capital company, if authorized by law, with respect to a

certified capital company that is in default of the company's

statutory or contractual obligations to the insurer, certified

investor, or other party.

(d) This chapter does not limit an insurer's ownership of

nonvoting equity interests in a certified capital company.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.104. ACTION ON APPLICATION. (a) The comptroller

shall:

(1) review the application, organizational documents, and

business history of each applicant; and

(2) ensure that the applicant satisfies the requirements of this

chapter.

(b) Not later than the 30th day after the date an application is

filed, the comptroller shall:

(1) issue the certification; or

(2) refuse to issue the certification and communicate in detail

to the applicant the grounds for the refusal, including

suggestions for the removal of those grounds.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.105. CONTINUATION OF CERTIFICATION. To continue to be

certified, a certified capital company must make qualified

investments according to the schedule established by Section

228.151.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.106. REPORTS TO COMPTROLLER; AUDITED FINANCIAL

STATEMENT. (a) Each certified capital company shall report to

the comptroller as soon as practicable after the receipt of

certified capital:

(1) the name of each certified investor from whom the certified

capital was received, including the certified investor's

insurance premium tax identification number;

(2) the amount of each certified investor's investment of

certified capital and premium tax credits; and

(3) the date on which the certified capital was received.

(b) Not later than January 31 of each year, each certified

capital company shall report to the comptroller:

(1) the amount of the company's certified capital at the end of

the preceding year;

(2) whether or not the company has invested more than 15 percent

of the company's total certified capital in a single business;

(3) each qualified investment that the company made during the

preceding year and, with respect to each qualified investment,

the number of employees of the qualified business at the time the

qualified investment was made; and

(4) any other information required by the comptroller, including

any information required by the comptroller to comply with

Section 228.053.

company shall provide to the comptroller an annual audited

financial statement that includes the opinion of an independent

certified public accountant. The audit must address the methods

of operation and conduct of the business of the company to

determine whether:

(1) the company is complying with this chapter and the rules

adopted under this chapter;

(2) the funds received by the company have been invested as

required within the time provided by Section 228.151; and

(3) the company has invested the funds in qualified businesses.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.107. RENEWAL FEE; LATE FEE; EXCEPTION. (a) Not later

than January 31 of each year, each certified capital company

shall pay a nonrefundable renewal fee of $5,000 to the

comptroller.

(b) If a certified capital company fails to pay the renewal fee

on or before the date specified by Subsection (a), the company

must pay, in addition to the renewal fee, a late fee of $5,000 to

continue the company's certification.

required within six months of the date on which a certified

capital company's initial certification is issued under Section

228.104(b).

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.108. OFFERING MATERIAL USED BY CERTIFIED CAPITAL

COMPANY. Any offering material involving the sale of securities

of the certified capital company must include the following

statement:

By authorizing the formation of a certified capital company, the

State of Texas does not endorse the quality of management or the

potential for earnings of the company and is not liable for

damages or losses to a certified investor in the company. Use of

the word "certified" in an offering does not constitute a

recommendation or endorsement of the investment by the

comptroller of public accounts. If applicable provisions of law

are violated, the State of Texas may require forfeiture of unused

premium tax credits and repayments of used premium tax credits.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

SUBCHAPTER D. INVESTMENT BY CERTIFIED CAPITAL COMPANIES

Sec. 228.151. REQUIRED SCHEDULE OF INVESTMENT. (a) Before the

third anniversary of a certified capital company's allocation

date, the company must make qualified investments in an amount

cumulatively equal to at least 30 percent of the company's

certified capital, subject to Section 228.153(b).

(b) Before the fifth anniversary of a certified capital

company's allocation date, the company must make qualified

investments in an amount cumulatively equal to at least 50

percent of the company's certified capital, subject to Sections

228.152(b) and 228.153(b).

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.152. INVESTMENT IN EARLY STAGE BUSINESS REQUIRED. (a)

In this section, "early stage business" means a qualified

business that:

(1) is involved, at the time of a certified capital company's

first investment, in activities related to the development of

initial product or service offerings, such as prototype

development or establishment of initial production or service

processes;

(2) was initially organized less than two years before the date

of the certified capital company's first investment; or

(3) during the fiscal year immediately preceding the year of the

certified capital company's first investment had, on a

consolidated basis with the business's affiliates, gross revenues

of not more than $2 million as determined in accordance with

generally accepted accounting principles.

(b) A certified capital company must place at least 50 percent

of the amount of qualified investments required by Section

228.151(b) in early stage businesses.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.153. INVESTMENT IN STRATEGIC INVESTMENT BUSINESS

REQUIRED. (a) In this section:

(1) "Strategic investment area" means an area of this state that

qualifies as a strategic investment area under Subchapter O,

Chapter 171, Tax Code, or, after the date that subchapter

expires, an area that qualified as a strategic investment area

under that subchapter immediately before that date.

(2) "Strategic investment business" means a qualified business

that:

(A) has the business's principal business operations located in

one or more strategic investment areas; and

(B) intends to maintain business operations in the strategic

investment areas after receipt of the investment by the certified

capital company.

(b) A certified capital company must place at least 30 percent

of the amount of qualified investments required by Sections

228.151(a) and (b) in a strategic investment business.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.154. CERTIFIED CAPITAL NOT INVESTED IN QUALIFIED

INVESTMENTS. A certified capital company shall invest any

certified capital not invested in qualified investments only in:

(1) cash deposited with a federally insured financial

institution;

(2) certificates of deposit in a federally insured financial

institution;

(3) investment securities that are:

(A) obligations of the United States or agencies or

instrumentalities of the United States; or

(B) obligations that are guaranteed fully as to principal and

interest by the United States;

(4) debt instruments rated at least "A" or the equivalent by a

nationally recognized credit rating organization, or issued by,

or guaranteed with respect to payment by, an entity whose

unsecured indebtedness is rated at least "A" or the equivalent by

a nationally recognized credit rating organization, and which

indebtedness is not subordinated to other unsecured indebtedness

of the issuer or the guarantor;

(5) obligations of this state or a municipality or political

subdivision of this state; or

(6) any other investment approved in advance in writing by the

comptroller.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.155. COMPUTATION OF AMOUNT OF INVESTMENTS. (a) The

aggregate cumulative amount of all qualified investments made by

a certified capital company after the company's allocation date

shall be considered in the computation of the percentage

requirements under this subchapter.

(b) A certified capital company may invest proceeds received

from a qualified investment in another qualified investment, and

that investment counts toward any requirement of this chapter

with respect to investments of certified capital.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.156. LIMIT ON QUALIFIED INVESTMENT. A certified

capital company may not make a qualified investment at a cost to

the company that is greater than 15 percent of the company's

total certified capital at the time of investment.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.157. DISTRIBUTIONS BY CERTIFIED CAPITAL COMPANY. (a)

In this section, "qualified distribution" means any distribution

or payment from certified capital by a certified capital company

in connection with:

(1) the reasonable costs and expenses of forming, syndicating,

managing, and operating the company, provided that the

distribution or payment is not made directly or indirectly to a

certified investor, including:

(A) reasonable and necessary fees paid for professional

services, including legal and accounting services, related to the

company's formation and operation; and

(B) an annual management fee in an amount that does not exceed

2.5 percent of the company's certified capital; and

(2) a projected increase in federal or state taxes, including

penalties and interest related to state and federal income taxes,

of the company's equity owners resulting from the earnings or

other tax liability of the company to the extent that the

increase is related to the ownership, management, or operation of

the company.

(b) A certified capital company may make a qualified

distribution at any time. To make a distribution or payment

other than a qualified distribution, a company must have made

qualified investments in an amount cumulatively equal to 100

percent of the company's certified capital.

relocates the business's principal business operations to another

state during the term of the certified capital company's

investment in the business, the cumulative amount of qualified

investments made by the certified capital company for purposes of

satisfying the requirements of Subsection (b) only is reduced by

the amount of the certified capital company's qualified

investments in the business that has relocated.

(d) Subsection (c) does not apply if the business demonstrates

that the business has returned the business's principal business

operations to this state not later than the 90th day after the

date of the relocation.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.158. REPAYMENT OF DEBT. Notwithstanding Section

228.157(b), a certified capital company may make repayments of

principal and interest on the company's indebtedness without any

restriction, including repaying the company's indebtedness on

which certified investors earned premium tax credits.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

SUBCHAPTER E. QUALIFIED BUSINESS

Sec. 228.201. DEFINITION OF QUALIFIED BUSINESS. (a) In this

chapter, "qualified business" means a business that complies with

this section at the time of a certified capital company's first

investment in the business.

(b) A qualified business must:

(1) be headquartered in this state and intend to remain in this

state after receipt of the certified capital company's

investment; and

(2) have the business's principal business operations located in

this state and intend to maintain business operations in this

state after receipt of the certified capital company's

investment.

investment primarily to:

(1) support business operations in this state, other than

advertising, promotion, and sales operations which may be

conducted outside of this state; or

(2) in the case of a start-up company, establish and support

business operations in this state, other than advertising,

promotion, and sales operations which may be conducted outside of

this state.

(d) A qualified business may not have more than 100 employees

and must:

(1) employ at least 80 percent of the business's employees in

this state; or

(2) pay 80 percent of the business's payroll to employees in

this state.

(e) A qualified business must be primarily engaged in:

(1) manufacturing, processing, or assembling products;

(2) conducting research and development; or

(3) providing services.

(f) A qualified business may not be primarily engaged in:

(1) retail sales;

(2) real estate development;

(3) the business of insurance, banking, or lending; or

(4) the provision of professional services provided by

accountants, attorneys, or physicians.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.202. RELOCATION OF PRINCIPAL BUSINESS OPERATIONS. If,

before the 90th day after the date a certified capital company

makes an investment in a qualified business, the qualified

business moves the business's principal business operations from

this state, the investment may not be considered a qualified

investment for purposes of the percentage requirements under this

chapter.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.203. EVALUATION OF BUSINESS BY COMPTROLLER. (a) A

certified capital company may, before making an investment in a

business, request a written opinion from the comptroller as to

whether the business in which the company proposes to invest is a

qualified business, an early stage business, or a strategic

investment or low-income community business.

(b) Not later than the 15th business day after the date of the

receipt of a request under Subsection (a), the comptroller shall:

(1) determine whether the business meets the definition of a

qualified business, an early stage business, or a strategic

investment or low-income community business, as applicable, and

notify the certified capital company of the determination and

provide an explanation of the determination; or

(2) notify the company that an additional 15 days will be needed

to review the request and make the determination.

company with respect to the proposed investment within the period

specified by Subsection (b), the business in which the company

proposes to invest is considered to be a qualified business, an

early stage business, or a strategic investment or low-income

community business, as appropriate.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

87, Sec. 14.003(a), eff. September 1, 2009.

Sec. 228.204. CONTINUATION OF CLASSIFICATION AS QUALIFIED

BUSINESS; FOLLOW-ON INVESTMENTS AUTHORIZED. (a) A business that

is classified as a qualified business at the time of the first

investment in the business by a certified capital company:

(1) remains classified as a qualified business; and

(2) may receive follow-on investments from any certified capital

company.

(b) Except as provided by Subsection (c), a follow-on investment

made under Subsection (a) is a qualified investment even though

the business may not meet the definition of a qualified business

at the time of the follow-on investment.

investment if, at the time of the follow-on investment, the

qualified business no longer has the business's principal

business operations in this state.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

SUBCHAPTER F. PREMIUM TAX CREDIT

Sec. 228.251. PREMIUM TAX CREDIT. (a) A certified investor who

makes an investment of certified capital shall earn in the year

of investment a vested credit against state premium tax liability

equal to 100 percent of the certified investor's investment of

certified capital, subject to the limits imposed by this chapter.

(b) With respect to credits earned as a result of investments

made under Program One, beginning with the tax report due March

1, 2009, for the 2008 tax year, a certified investor may take up

to 25 percent of the vested premium tax credit in any taxable

year of the certified investor. The credit may not be applied to

estimated payments due in 2008.

made under Program Two, beginning with the tax report due March

1, 2013, for the 2012 tax year, a certified investor may take up

to 25 percent of the vested premium tax credit in any taxable

year of the certified investor. The credit may not be applied to

estimated payments due in 2012.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

87, Sec. 14.004(a), eff. September 1, 2009.

Sec. 228.252. LIMIT ON PREMIUM TAX CREDIT. (a) The credit to

be applied against state premium tax liability of a certified

investor in any one year may not exceed the state premium tax

liability of the investor for the taxable year.

(b) A certified investor may carry forward any unused credit

against state premium tax liability indefinitely until the

premium tax credits are used.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.253. PREMIUM TAX CREDIT ALLOCATION CLAIM REQUIRED. (a)

A certified investor must prepare and execute a premium tax

credit allocation claim on a form provided by the comptroller.

(b) The certified capital company must have filed the claim with

the comptroller on the date on which the comptroller accepted

premium tax credit allocation claims on behalf of certified

investors with respect to Program One or Program Two, as

applicable, under the comptroller's rules.

affidavit of the certified investor under which the certified

investor becomes legally bound and irrevocably committed to make

an investment of certified capital in a certified capital company

in the amount allocated even if the amount allocated is less than

the amount of the claim, subject only to the receipt of an

allocation under Section 228.255.

(d) A certified investor may not claim a premium tax credit

under Section 228.251 for an investment that has not been funded,

without regard to whether the certified investor has committed to

fund the investment.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

87, Sec. 14.005(a), eff. September 1, 2009.

Sec. 228.254. TOTAL LIMIT ON PREMIUM TAX CREDITS. (a) The

total amount of certified capital for which premium tax credits

may be allowed under this chapter for all years in which premium

tax credits are allowed is:

(1) $200 million for Program One; and

(2) $200 million for Program Two.

(b) The total amount of certified capital for which premium tax

credits may be allowed for all certified investors under this

chapter may not exceed the amount that would entitle all

certified investors in certified capital companies to take total

credits of $50 million in a year with respect to Program One and

$50 million in a year with respect to Program Two.

not file premium tax credit allocation claims with respect to

Program One or Program Two, as applicable, in excess of the

maximum amount of certified capital for which premium tax credits

may be allowed for that program as provided by this section.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

87, Sec. 14.006(a), eff. September 1, 2009.

Sec. 228.255. ALLOCATION OF PREMIUM TAX CREDIT. (a) If the

total premium tax credits claimed by all certified investors with

respect to Program One or Program Two, as applicable, exceeds the

total limits on premium tax credits established for that program

by Section 228.254(a), the comptroller shall allocate the total

amount of premium tax credits allowed under this chapter to

certified investors in certified capital companies on a pro rata

basis in accordance with this section.

(b) The pro rata allocation for each certified investor shall be

the product of:

(1) a fraction, the numerator of which is the amount of the

premium tax credit allocation claim filed on behalf of the

investor with respect to Program One or Program Two, as

applicable, and the denominator of which is the total amount of

all premium tax credit allocation claims filed on behalf of all

certified investors with respect to that program; and

(2) the total amount of certified capital for which premium tax

credits may be allowed with respect to that program under this

chapter.

tax credit allocation may be allowed on behalf of a single

certified investor and the investor's affiliates with respect to

Program One or Program Two, as applicable, whether by one or more

certified capital companies, may not exceed the greater of:

(1) $10 million; or

(2) 15 percent of the maximum aggregate amount available with

respect to that program under Section 228.254(a).

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

87, Sec. 14.007(a), eff. September 1, 2009.

Sec. 228.256. TREATMENT OF CREDITS AND CAPITAL. In any case

under this code or another insurance law of this state in which

the assets of a certified investor are examined or considered,

the certified capital may be treated as an admitted asset,

subject to the applicable statutory valuation procedures.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.257. TRANSFERABILITY OF CREDIT. (a) A certified

investor may transfer or assign premium tax credits only in

compliance with the rules adopted under Section 228.052.

(b) The transfer or assignment of a premium tax credit does not

affect the schedule for taking the premium tax credit under this

chapter.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.258. IMPACT OF PREMIUM TAX CREDIT ON INSURANCE

RATEMAKING. A certified investor is not required to reduce the

amount of premium tax included by the investor in connection with

ratemaking for an insurance contract written in this state

because of a reduction in the investor's Texas premium tax

derived from premium tax credits granted under this chapter.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.259. RETALIATORY TAX. A certified investor claiming a

credit against state premium tax liability earned through an

investment in a company is not required to pay any additional

retaliatory tax levied under Chapter 281 as a result of claiming

that credit.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

SUBCHAPTER G. ENFORCEMENT

Sec. 228.301. ANNUAL REVIEW BY COMPTROLLER. (a) The

comptroller shall conduct an annual review of each certified

capital company to:

(1) ensure that the company:

(A) continues to satisfy the requirements of this chapter; and

(B) has not made any investment in violation of this chapter;

and

(2) determine the eligibility status of the company's qualified

investments.

(b) Each certified capital company shall pay the cost of the

annual review according to a reasonable fee schedule adopted by

the comptroller.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.302. DECERTIFICATION OF CERTIFIED CAPITAL COMPANY. (a)

A material violation of Section 228.105, 228.106, 228.107,

228.151, 228.152, 228.153, 228.154, 228.155, 228.156, 228.202, or

228.204 is grounds for decertification of a certified capital

company.

(b) If the comptroller determines that a certified capital

company is not in compliance with a law listed in Subsection (a),

the comptroller shall notify the company's officers in writing

that the company may be subject to decertification after the

120th day after the date the notice is mailed unless the company:

(1) corrects the deficiencies; and

(2) returns to compliance with the law.

after opportunity for hearing, if the comptroller finds that the

company is not in compliance with a law listed in Subsection (a)

at the end of the period established by Subsection (b).

(d) Decertification under this section is effective on receipt

of notice of decertification by the certified capital company.

(e) The comptroller shall notify any appropriate state agency of

a decertification of a certified capital company.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.303. ADMINISTRATIVE PENALTY. (a) The comptroller may

impose an administrative penalty on a certified capital company

that violates this chapter.

(b) The amount of the penalty may not exceed $25,000. Each day a

violation continues or occurs is a separate violation for the

purpose of imposing the penalty. The amount of the penalty shall

be based on:

(1) the seriousness of the violation, including the nature,

circumstances, extent, and gravity of the violation;

(2) the economic harm caused by the violation;

(3) the history of previous violations;

(4) the amount necessary to deter a future violation;

(5) efforts to correct the violation; and

(6) any other matter that justice may require.

chapter may request a redetermination as provided by Chapter 111,

Tax Code.

(d) The attorney general may sue to collect the penalty.

(e) A proceeding to impose the penalty is a contested case under

Chapter 2001, Government Code.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

SUBCHAPTER H. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS

Sec. 228.351. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDIT

FOLLOWING DECERTIFICATION. (a) Decertification of a certified

capital company may, in accordance with this section, cause:

(1) the recapture of premium tax credits previously claimed by

the company's certified investors; and

(2) the forfeiture of future premium tax credits to be claimed

by the investors.

(b) Decertification of a certified capital company on or before

the third anniversary of the company's allocation date causes the

recapture of any premium tax credits previously claimed and the

forfeiture of any future premium tax credits to be claimed by a

certified investor with respect to the company.

for continued certification under Section 228.151(a) and

subsequently fails to meet the requirements for continued

certification under Subsection (b) of that section:

(1) any premium tax credit that has been or will be taken by a

certified investor on or before the third anniversary of the

allocation date is not subject to recapture or forfeiture; and

(2) any premium tax credit that has been or will be taken by a

certified investor after the third anniversary of the company's

allocation date is subject to recapture or forfeiture.

(d) For a certified capital company that has met the

requirements for continued certification under Section 228.151

and is subsequently decertified:

(1) any premium tax credit that has been or will be taken by a

certified investor on or before the fifth anniversary of the

allocation date is not subject to recapture or forfeiture; and

(2) any premium tax credit to be taken after the fifth

anniversary of the allocation date is subject to forfeiture only

if the company is decertified on or before the fifth anniversary

of the company's allocation date.

(e) For a certified capital company that has invested an amount

cumulatively equal to 100 percent of the company's certified

capital in qualified investments, any premium tax credit claimed

or to be claimed by a certified investor is not subject to

recapture or forfeiture under this section.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.352. NOTICE OF RECAPTURE AND FORFEITURE OF PREMIUM TAX

CREDIT. The comptroller shall send written notice to the address

of each certified investor whose premium tax credit is subject to

recapture or forfeiture, using the address shown on the

investor's last premium tax filing.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

Sec. 228.353. INDEMNITY AGREEMENTS AND INSURANCE AUTHORIZED.

(a) A certified capital company may agree to indemnify, or

purchase insurance for the benefit of, a certified investor for

losses resulting from the recapture or forfeiture of premium tax

credits under Section 228.351.

(b) Any guaranty, indemnity, bond, insurance policy, or other

payment undertaking made under this section may not be provided

by more than one certified investor of the certified capital

company or affiliate of the certified investor.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1B.001, eff. April 1, 2009.

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

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