Proposed Sections
Before an agency may permanently adopt a new or amended section, or repeal an 
existing section, a proposal detailing the action must be published in the Texas 
Register at least 30 days before any action may be taken. The 30-day time period 
gives interested persons an opportunity to review and make oral or written 
comments on the section. Also, in the case of substantive sections, a public 
hearing must be granted if requested by at least 25 persons, a governmental 
subdivision or agency, or an association having at least 25 members.
Symbology in proposed amendments. New language added to an existing section is 
indicated by the use of bold text. [Brackets] indicate deletion of existing 
material within a section.
TITLE 4. AGRICULTURE
Part I. Texas Department of Agriculture
Chapter 28. Texas Agricultural Finance Authority: Loan Guaranty Program
4 TAC sec.sec.28.1-28.10, sec.28.13
The Board of Directors for the Texas Agricultural Finance Authority of the Texas 
Department of Agriculture proposes amendments to sec.sec.28.1-28.10 and sec.28. 
13, concerning procedures for participation in the Texas Agricultural Finance 
Authority (TAFA) Loan Guaranty Program. The amendments generally clarify 
existing procedures and add some new application requirements which will serve 
to allow the TAFA Board and the Credit Review Committee which conducts a 
preliminary review of applications for the loan guaranty program to more 
effectively screen applicants. In addition, the amendments place the final 
approval of loan applicants with the full TAFA Board; restructure the Credit 
Review Committee; and establish procedures for appeal of a denial of an 
application by the Credit Review Committee.
Robert Kennedy, director for agricultural finance, has determined that for the 
first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections.
Mr. Kennedy also has determined that or each year of first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be clarification of procedures for members of the public 
wishing to utilize the TAFA loan guaranty program and increased board 
participation in the loan guaranty approval process. There will be no effect on 
small businesses. There is no anticipated economic cost to persons who are 
required to comply with the sections as proposed.
Comments on the proposal may be submitted to Robert Kennedy, Texas Department of 
Agriculture, P.O. Box 12847, Austin, Texas 78711. Comments must be received no 
later than 30 days from the date of publication of the proposed amendments in 
the Texas Register.
The amendments are proposed under the Texas Agriculture Code Annotated, sec.58. 
023, which provides the TAFA Board of Directors with the authority to adopt 
rules to establish criteria for eligibility of applicants and lenders under the 
TAFA Loan Guaranty Program; and sec.58.022, which provides the board with the 
authority to adopt rules and procedures for administration of the TAFA Loan 
Guaranty Program.
sec.28.1. Authority.  Through action of the Texas Legislature and the approval 
of the Texas voters in the passage of Constitutional Amendment 3 on November 7, 
1989, the Texas Agricultural Finance Authority is authorized to issue general 
obligation bonds and revenue bonds to provide financial assistance to eligible 
agricultural businesses through a direct loan, a loan to lenders,  
<nl>purchasing participations in loans, or<ol> a loan insurance or a loan 
guaranty program.
sec.28.2. Purpose.  The purpose of the Texas Agricultural Finance Authority Loan 
Guaranty Program is to provide financial assistance to eligible agricultural 
businesses that otherwise would not be <nl>provided<ol> [made] and that the 
board of the authority considers to present a reasonable risk and have a 
sufficient likelihood of repayment. The authority is mandated to support the 
expansion, development, and diversification of production, processing, 
marketing, and exporting of Texas agricultural products. These rules establish 
standards of eligibility and the application procedures for a loan guaranty 
program.
sec.28.3. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise.
 Act-The Texas Agricultural Finance [Authority] Act, Texas <nl>Agriculture <ol> 
[Agricultural] Code, Chapter 58.
 Agricultural product -An [agricultural product is an] agricultural, 
horticultural, viticultural, or vegetable product, bees, honey, fish or other 
seafood, planting seed, livestock, a livestock product, a forestry product, 
Poultry, or a poultry product, either in its natural or processed state, or any 
other agricultural product approved by the authority, that has been produced, 
processed, or otherwise had value added to it in this state.
 Application-An application, including supporting documentation and schedules as 
required by the board, for participation in this program.
 Credit review committee-The committee, <nl>consisting of two board members, as 
determined by the board chairman, and the commissioner of agriculture or the 
deputy commissioner of agriculture or the official of the department designated 
by the commissioner of agriculture as being responsible for the department's 
agricultural finance programs<ol> [chaired by the commissioner of the Texas 
Department of Agriculture or his designee].
 Interest rate-The interest rate on a guaranteed loan shall be] determined by 
the board and the participating lender on a project-by-project basis.
 Loan guaranty amount-With respect to loans made by a lender, a sum measured in 
terms of United States dollars[,] that the authority pays to the lender to 
acquire an undivided interest in any loan or, in the case of default by the 
borrower, the authority agrees to pay to the lender, not to exceed the 
percentage as stated in the guaranty agreement.
 Lender-A lending institution, including a bank, banking association, savings 
and loan association, trust company, mortgage company, investment banker, credit 
union, underwriter, life insurance company, or any affiliate of those entities, 
and also <nl>including <ol> [includes] any other financial institution or 
governmental agency that customarily provides financing of agricultural loans or 
mortgages, or any affiliate of such an institution or agency, any non-profit 
certified development company, or any institution that the <nl>board<ol> 
[authority] determines is an experienced and sophisticated lender.
 Staff-The staff of the Texas <nl>Agricultural <ol> [Agriculture] Finance 
Authority <nl>or staff of the department Performing work for the authority.
sec.28.4. Examination of Records. Any party requesting the examination of 
records pursuant to the Open Records Act, Texas Civil Statutes, Article 6252-
17a, shall indicate in writing the specific nature of the document to be viewed, 
and if <nl>copies are <ol> [photocopying is] desired [, the appropriate fee must 
accompany the request].
sec.28.5. Written Communication with the <nl>Authority  [Department]. 
Applications and other written communications to the <nl>authority<ol> 
[department] should be addressed to the attention of the Texas Agricultural 
Finance Authority, in care of Texas Department of Agriculture, P.O. Box 12847, 
Austin, Texas 78711.
sec.28.6. Texas Agricultural Fund.
(a) The fund. The fund, established in the State Treasury, may consist of 
general obligation bond proceeds, appropriations or transfers made to the fund, 
guaranty fees, [and any other] monies received from the operation of the 
program. [and] interest paid on money in the fund <nl>, and any other monies 
received from other sources for the fund<ol>. The board may provide for the 
establishment and maintenance of separate accounts within the fund, including 
loan guaranty program accounts as prescribed by the board.
(b) Loan guaranty. The authority may determine, in the application process, that 
a loan guaranty to a lender would best facilitate the project. Such loan 
guaranty shall not exceed 90% of the total loan, with such percentage being 
determined on a case-by-case basis. The term of the loan may be varied in length 
as determined by an agreement between the authority and the lender. The loan 
guaranty shall not exceed $2 million [except in instances where the maximum is 
established by the board, but in no case shall the loan guaranty exceed 90% of 
the project].
sec.28.7. Project Eligibility Requirements.
(a) Projects. An applicant is eligible <nl>for assistance from<ol> [to submit an 
application to] the Texas Agricultural Finance (the Authority) if the proposed 
project meets the following criteria:
(1) the project provides significant benefits for the expansion, development, 
and diversification of production, processing, marketing, and exporting of Texas 
agricultural products; provided that the board shall give priority to 
agricultural businesses that include producers of Texas agricultural products 
[in the ownership of the businesses]; provided also, that the board  
<nl>will<ol> [should] give preference to [the] applicants, the majority 
ownership of which is held by citizens of the United States; <nl>and if the 
applicant is a corporation, the board will give preference to a corporation 
organized under the laws of the State of Texas with majority ownership by Texas 
residents; <ol> provided further, that the board <nl>will<ol> [shall] give 
preference to applicants who are Texas residents doing business in the state, 
and then to applicants who can demonstrate that the financed activities will 
take place predominantly in the state; provided, finally, that the board will 
also give preference to those agricultural businesses that demonstrate a 
significant new technology or market opportunity for Texas producers;
(2)-(8) (No change.)
(b) Project costs. The proceeds of the guaranteed loan may be used to finance 
costs incurred in connection with the production, processing, marketing, or 
export of Texas agricultural products, including, but not limited to, the costs 
of:
(1)  acquisition of and improvements to land or  <nl>interests<ol> [interest] in 
land;
(2)-(4) (No change.)
(5) acquisition, installation, rehabilitation, operation and maintenance of 
machinery, equipment<nl>,<ol> furnishings, and facilities;
(6)-(12) (No change.)
(c) (No change.)
sec.28.8. Filing Requirements and Consideration of Applications.
(a) (No change.)
(b) Submission of application. All applicants are required to obtain a 
preliminary commitment from a lender before applications will be accepted by the 
authority for credit review. [Authority] staff will be available prior to 
submission of the application to assist applicants in identifying lenders and 
determining  <nl>project<ol> [program] eligibility.
(c) Staff review.<nl> Staff<ol> [The authority's staff] reviews the application 
for completeness and notifies the applicant of any additional information 
required. When all required information has been received, [authority] staff 
will conduct a credit review, evaluate the technical and market feasibility of 
the project, and examine the benefits of the project for Texas agriculture and 
economic growth in the state.
(d) Credit Review Committee.<nl> Staff <ol> [The Authority's staff] will submit 
a report on each application to the Credit Review Committee [, chaired by the 
commissioner or his designee and consisting of department staff and outside 
advisors as determined by the commissioner]. The Credit Review Committee will 
recommend approval or disapproval <nl>of each application <ol> to the <nl>board 
<ol> [commissioner]<nl>; recommendations for approval require an affirmative 
vote of all members of the committee present and voting<ol>. <nl>The Credit 
Review Committee may, in its discretion, impose conditions and requirements in 
connection with approval of an application for a project. Failure or 
unwillingness to satisfy any of these conditions or requirements within a 
reasonable Period of time will constitute denial of the application. whereupon 
the applicant will have the right to appeal as set out in subsection (i) of this 
section.
[(e) Action by commissioner. The commissioner is delegated authority by the 
board to act on behalf of the authority to approve or disapprove each 
application.]
<nl>(e)<ol>[(f)] Notification of approval. Upon conditional approval of the 
application, the Authority will notify the lender in writing identifying the 
terms and conditions of the loan guaranty. <nl>The board may set certain time 
limits regarding the acceptance of loan commitments by the applicant and lender 
and time limits regarding the closing of loans by the applicant and lender; 
however, in no event shall the time period exceed 90 days unless approved by the 
board.<ol> The lender <nl>will prepare<ol> [prepares] the written agreements and 
documents necessary to close the loan guaranty in accordance with the terms and 
conditions set forth in the notice of conditional approval. The Authority will 
send the lender final notice of guaranty approval after review of the closing 
documents. The lender  <nl>will disburse<ol> [disburses] the loan according to 
the terms of the note <nl>or loan agreement<ol>.
<nl>(f)<ol>[(g)] Denial of application. If the application is disapproved, the 
Authority will notify the applicant <nl>and the lender<ol> in writing 
identifying the reasons for denial. The applicant will, in most cases, be given 
30 days to cure the reasons for denial. <nl>After the passage of the time 
specified for cure, if the deficiencies are not cured, a second denial letter 
will be sent from the Authority stating the reasons for final denial.
<nl>(g)<ol>[(h)]  Reporting to the board. <nl>Staff <ol> [The commissioner] 
shall report to the board at each board meeting the status of loans and current 
financial commitment of the Authority.
<nl>(h)<ol>[(i)] Providing false information. An applicant who knowingly 
provides false information in an application is liable to the state and any 
lender involved for any expense incurred by the state or lender that would not 
have been incurred if the applicant had not provided the false information.
<nl>(i) Appeal of a final Credit Review Committee decision. If an application 
does not receive a recommendation of approval by unanimous vote pursuant to 
subsection (d) of this section, following the end of the period allowed under 
subsection (f) of this section to cure deficiencies the applicant may petition 
the board for review filing a written request with the official of the 
department designated by the commissioner of agriculture as being responsible 
for the department's agricultural finance programs within 10 days of the Credit 
Review Committee's Action. The board may grant or deny the appeal at any time 
and take such further action as the board deems appropriate. The board's review 
on appeal is limited to a review of the reasons for denial stated by the Credit 
Review Committee in the second denial letter.
sec.28.9. Contents of Application.
(a) Required information. The application must set forth the information 
necessary for the determination of eligibility and will include the following as 
appropriate to the nature of the loan being requested:
(1)-(6) (No change).
(7) a pro forma balance sheet which incorporates the new financing<nl>, to be 
provided by the applicant and/or the lender<ol>;
(8) pro forma cash flow and income statements for at least three years<nl>, to 
be provided by the applicant and/or the lender<ol>;
(9)-(12) (No change.)
(13) for construction projects, the approximate date construction will commence, 
completion date, and date by which the project will be fully operational; [and]
(14)  documentation that the preliminary design stage has been completed<nl>; 
and<ol> [.]
<nl>(15) disclosure of any and all business affiliations of the applicant, or 
its owners, investors, board members, and management with members of the board 
of the authority, staff, and/or the lender which could present a conflict of 
interest.
(b) Other matters. The applicant must submit any other information as requested 
by the authority in order <nl>for the Texas Agricultural Finance Authority<ol> 
to make a prudent loan decision.
sec.28.10. General Terms and Conditions of the Texas Agriculture Finance 
Authority's Financial Commitment.
(a)-(b) (No change.)
(c)  Maximum amount of loan guaranty. The Authority shall not provide a loan 
guaranty to an applicant, including its affiliates, <nl>that<ol> at any one 
time, [that] exceeds $2 million. The assistance in the form of a loan guaranty 
shall not exceed 90% of the total loan.
(d)-(e) (No change.)
(f)  Maturity. The maturity of the loan guaranty approved by the Authority must 
not exceed the useful life of the collateral and may be [of a] negotiated [term] 
between the Authority and the lender.
(g) (No change.)
(h)  Fees. The board shall adopt a fee schedule which can be used to calculate 
the loan guaranty fee payable by the applicant to the Authority <nl>within 30 
days<ol> [on the date] of closing. A nonrefundable application fee will be 
required in the amount of with the application. If the application is approved, 
the application fee will be considered as part of the loan guaranty fee. <nl>Any 
and all legal fees incurred by the board in issuing a guarantee or participating 
in any loan will be an obligation of the applicant<ol>.
(i) Closing the loan guaranty. The lender, the <nl>applicant <ol> [borrower], 
and the commissioner <nl>of agriculture <ol> or his designee may attend the 
verification and signing of the closing documents as prepared by [the 
Authority's] staff and the lender at the date, time, and location [as] 
determined by the Authority.
(j) Reporting requirements.
(1)  The lender shall report in writing to the Authority as follows:
(A)  notification if the loan is placed on a watch list; [and]
(B)  quarterly monitoring reports indicating loan balance, repayment status, and 
any credit changes reported to lender as indicated on the prescribed form<nl>; 
and <ol> [.]
<nl>(C) notification in the event of any breaches or defaults in the terms, 
conditions, or covenants of the note, loan agreement, or other loan documents.
(2) (No change.)
sec.28.13. Eligible Private Lenders.
(a)-(c) (No change.)
(d) Commitment letter. A lender interested in making a loan guaranteed under the 
[loan guaranty] program must submit an application along with a commitment 
letter to the Authority outlining the terms and conditions of the proposed loan. 
The Letter will show the name of the business, purpose of the loan, amount and 
use of the funds, proposed closing date, and collateral for the loan guaranty 
amount that the lender is seeking from the authority.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116086
Dolores Alvarado Hibbs
Chief Administrative Law Judge
Texas Department of Agriculture
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-7583
       
TITLE 16. ECONOMIC REGULATION
Part II. Public Utility Commission of Texas
Chapter 23. Substantive Rule
Customer Service and Protection
16 TAC sec.23.45
The Public Utility Commission of Texas proposes an amendment to sec.23.45, 
concerning billing. The amendment revises the rendering and form of bills 
requirements to ensure that if the telephone utility bills the customer for 
services provided by a private pay telephone provider that uses automated call 
completion technology to complete operator service calls, the bill shall 
identify the private pay telephone provider whose rates are used to calculate 
the charges for each call listed on the bill.
Suzi Ray, assistant general counsel, has determined that for the first five-year 
period the proposed section is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
section.
Ms. Ray also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be that the end-user customer is properly informed regarding the 
entity who is responsible for setting the rates for the service for which the 
end-user customer is billed. There will be no effect on small businesses. There 
is no anticipated economic cost to utilities that are required to comply with 
the section as proposed.
Ms. Ray has also determined that for each year of the first five years the 
proposed section is in effect there will be no impact on employment in the 
geographical areas affected by implementing the requirements of this section.
Comments on the proposed amendment (14 copies) may be submitted to Mary Ross 
McDonald, Public Utility Commission of Texas, 7800 Shoal Creek Boulevard, 
Austin, Texas 78757, within 30 days after publication. Comments should refer to 
Project Number 10741.
The amendment is proposed under Texas Civil Statutes, Article 1446c, sec.16, 
which provide the Public Utility Commission of Texas with the authority to make 
and to enforce rules reasonably required in the exercise of its powers and 
jurisdiction.
sec.23.45. Billing.
(a)-(e) (No change.)
(f) Rendering and form of bills.
(1) Telephone utilities.
(A) Bills for telephone service shall be rendered monthly unless otherwise 
authorized by the commission, or unless service is rendered for a period of less 
than on month, and shall provide a listing of all charges due and payable 
including outstanding amounts in the same customer class the utility has chosen 
to transfer from a customer's prior delinquent account(s). The utility shall 
provide, at no charge to the customer, a breakdown of local service charges at 
the time the service is initially installed or modified and upon request. 
Additionally, a notice shall be included on the customer's bill offering, at no 
charge to the customer, either an annual or monthly itemized breakdown of all 
local service charges. The itemized breakdown may be provided as a part of the 
customer's bill or as a separate mailing. Itemized toll statements shall be 
included in each bill. If the telephone utility is billing the customer for 
services provided by another telecommunications utility<nl> or for services 
provided by a private pay telephone provider that uses automated call completion 
technology to complete operator service calls<ol>, the bill shall identify the 
utility <nl>or the private pay telephone provider <ol> whose rates are used to 
calculate the charges for each call listed on the bill. Customer billing sent 
through the United States mail shall be sent in an envelope.
(B)-(C) (No change.)
(2)-(3) (No change.)
(g)-(n) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116105
Mary Ross McDonald
Secretary of the Commission
Public Utility Commission of Texas
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 458-0100
       
Part III. Texas Alcoholic Beverage Commission
Chapter 55. Bingo Regulations
Bingo Regulation and Tax
16 TAC sec.55.550
The Texas Alcoholic Beverage Commission proposes an amendment to sec.55.550, 
concerning bingo reports. This action is amending the emergency adoption filed 
in the September 10, 1991, issue of the Texas Register (16 TexReg 4892). The 
amendment amends subsections (a) and (b), adds a new subsection (c), reletters 
and amends the present subsections (c) and (e), and reletters the present 
subsection (d). The amendment provides for a quarterly statistical report and a 
monthly bingo gross receipts tax report, provides for monthly payment of the 
bingo gross receipts tax and bingo prize fee, provides for monthly reporting of 
the bingo prize fee, makes returns and reports due on the 25th day of the 
applicable month rather than the 15th day, and specifies an effective date of 
March 1, 1992.
Thomas L. Byrd, supervisor of audit training, has determined that for the first 
five-year period the section is in effect there will be fiscal implications for 
state and local government as a result of enforcing or administering the 
section. This determination is based upon an assumption that the existing 
taxpayer base would not change whether or not this proposed amendment is 
adopted. This assumption and the resulting estimates are disputed and therefore 
subject to revision either way if public comment or other input demonstrates 
that revision is warranted.
For the state government for the first year, the estimated additional cost is 
$47,463, the estimated reduction in costs is $0, and the estimated loss in 
revenue is $1,027,173. For each of the following four years, the estimated 
additional costs is $25,103, the estimated reduction in costs is $0, and the 
estimated loss in revenue is $6,883,336.
For local governments, for each of the first five years there are no estimated 
additional costs, and no estimated reduction in costs. For the first year, 
estimated loss in revenue is $1,148,023. For each of the following four years, 
the estimated loss in revenue is $2,753,334.
Mr. Byrd also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be increased money to available to licensed organizations for 
charitable purposes. There will be no affect on small businesses. There is no 
anticipated net economic cost to persons who are required to comply with the 
section as proposed.
Comments on the proposal may be submitted to Robert Howelton, Director, Bingo 
Division, P. O. Box 13127, Austin, Texas 78711, (512) 465-4924.
The amendment is proposed under Texas Civil Statutes, Article 179d, sec.16(a), 
and sec.23(e) which provide the commission with the authority to adopt rules 
relating to the enforcement and administration of the Bingo Enabling Act.
sec.55.550. Bingo Reports.
(a) Quarterly reports for [gross receipts tax and for] information relating to 
the conduct of bingo games.
(1) An authorized organization holding an annual license, temporary license, or 
a temporary authorization to conduct bingo must file on a form provided by the 
Texas Alcoholic Beverage Commission (commission) a quarterly report for [gross 
receipts taxes and] statistical information relating to the conduct of bingo 
games. The report must be filed with the commission, [the report filed with the 
commission must be accompanied by any tax due,] and the report must be filed on 
or before the <nl>25th <ol> [15th] day of the month following the end of the 
calendar quarter even if there were no gross receipts or gross receipts subject 
to tax for that quarter.
[(2) The first $15,000 of gross receipts each report period is exempt from tax.]
<nl>(2)<ol>[(3)] The report must be signed by the member designated as 
responsible for the filing of reports.
<nl>(b) Monthly bingo gross receipts tax reports.
<nl>(1) An authorized organization holding an annual license temporary license 
or temporary authorization to conduct bingo must file on a form provided by the 
commission a monthly report for bingo gross receipts taxes. The report must be 
filed with the commission, must be accompanied by any tax due, and must be filed 
on or before the 25th day of the following month, even if there were no gross 
receipts or gross receipts subject to tax for the month.
<nl>(2)  The first $15,000 of gross receipts each report period is exempt from 
tax.
<nl>(3) The report must be signed by the member designated as responsible for 
the filing of reports.
<nl>(c)<ol>[(b)]  <nl>Monthly <ol> [Quarterly] reports for fee on prizes.
(1) An authorized organization holding an annual license, temporary license, or 
temporary authorization to conduct bingo must file on a form provided by the 
Texas Alcoholic Beverage Commission a <nl>monthly<ol> [quarterly] report for the 
fees on bingo prizes. The report must be filed with the commission, must be 
accompanied by any fees due, and must be filed on or before the 25th [15th] day 
of the <nl>following <ol> month [following the end of the calendar quarter] even 
if there were no prizes awarded during the <nl>month<ol> [quarter].
(2) The report must be signed by the member designated as responsible for the 
filing of reports.
<nl>(d)<ol>[(c)] Commercial lessor. A person holding an annual license or a 
temporary authorization to lease bingo premises must file on a form provided by 
the Texas Alcoholic Beverage Commission a quarterly report for bingo rental 
taxes and statistical information relating to the leasing of bingo premises. The 
report must be filed with the commission, must be accompanied by any tax due, 
and must be filed on or before the <nl>25th<ol> [15th] day of the month 
following the end of the calendar quarter even if there were no gross rentals 
subject to tax for that quarter.
<nl>(e)<ol>[(d)] Failure to receive forms. The failure of licensees to receive 
forms from the commission does not relieve them from the requirement of filing 
reports and remitting taxes or fees on a timely basis.
<nl>(f) <ol>[(e)] Effective date. This rule, as amended, is effective <nl>March 
1, 1992<ol> [September 1, 1991].
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 20, 1991.
TRD-9116189
Joe Darnall
General Counsel
Texas Alcoholic Beverage Commission
Proposed date of adoption: January 28, 1992
For further information, please call: (512) 465-4904
       
16 TAC sec.55.553
The Texas Alcoholic Beverage Commission proposes an amendment to sec.55.553, 
concerning books and records-distributors and manufacturers. The amendment 
amends subsection (a)(l)(B) to require that general sales invoices contain 
certain additional information and adds subsection (d) adopting a sample general 
sales invoice.
Thomas L. Byrd, supervisor of audit training, has determined that for the first 
of five year period the section is in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section.
Mr. Byrd also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be an enhancement of the ability of licensed authorized 
organizations to better control their inventory of bingo cards and of the 
commission to trace the sales of bingo cards and the inventories of the licensed 
organizations. There will be no affect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the section 
as proposed.
Comments on the proposal may be submitted to Robert Howelton, Director, Bingo 
Division, P. O. Box 13127, Austin, Texas 78711, (512) 465-4924.
The amendment is proposed under Texas Civil Statutes, Article 179d, sec.16(a), 
which provide the commission with the authority to adopt rules for the 
enforcement and administration of the Bingo Enabling Act.
sec.55.553 Books and Records-Distributors and Manufacturers.
(a)  Every licensed distributor and manufacturer must maintain a complete set of 
records including, but not limited to, the following:
(1) sales invoices:
(A) (No change.)
(B) each licensee must use a general sales invoice which sets out the following 
information:
(i) (No change.)
(ii) the customer name <nl>,<ol> [and] business address<nl>, and license 
number<ol>;
(iii) the address to which the items are delivered;
<nl>(iv) [(iii)]  a full description of each item sold <nl>in as much detail as 
shown on the sample general invoice provided for in subsection (d) of this 
section;
<nl>(v)[(iv)] the quantity and sales price of each individual item <nl>in as 
much detail as shown on the sample general invoice provided for in subsection 
(d) of this section;
<nl>(vi)[(v)]   the gross amount of sales to each customer;
<nl>(vii)[(vi)] <nl> the manufacturer's or distributor's license number; and
<nl>(viii)<nl> the name of the common carrier or other shipping agent;
(2)-(5) (No change.)
(b)-(c) (No change.)
(c) Records required by this rule must be maintained for at least four years.
<nl>(d) The commission adopts the following sample general sales invoice.
 This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 20, 1991.
TRD-9116188
Joe Darnall
General Counsel
Texas Alcoholic Beverage Commission
Proposed date of adoption: January 28, 1992
For further information, please call: (512) 465-4909
       
16 TAC sec.55.565
The Texas Alcoholic Beverage Commission proposes new sec.55.565, concerning 
minimum prices for bingo cards. The new section defines "minimum price," 
specifies the minimum prices, and provides that a licensed authorizes 
organization may not charge less than the applicable minimum prices for 
regulation or disposable paper bingo cards.
Thomas L. Byrd, supervision of audit training, has determined that for the first 
five-year period section is in effect there will be no fiscal implications for 
state or local government the section.
Mr. Bryd has also determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be to ensure that competition among licensed organizations does not 
defeat the basic purpose of legalized bingo, the providing of funds for the 
charitable purposes of the licensed organizations. There will be no affect on 
small businesses. There is no anticipated economic cost to persons who are 
required to comply with the section as proposed.
Comments on the proposal may be submitted to Robert Howelton, Director, Bingo 
Director, Bingo Division, P.O. Box 13127, Austin, Texas 78711. The telephone 
number is (512) 465-4924.
The new section is proposed under Texas Civil Statutes, Article 179d, sec.16(d) 
, which provide that the commission may set the price or adopt one or more 
schedules of prices at which bingo cards may be sold or otherwise furnished by a 
licensed authorized organization and under Texas Civil Statutes, Article 179d,  
s16(a), which provide the commission with the authority to adopt rules for the 
enforcement and administration of the Bingo Enabling Act.
sec.55.565. Minimum Prices for Bingo Cards.
(a) Definition. As used in this section, "minimum price" means the lowest price 
which a licensed authorized organization may charge for selling or furnishing an 
ups pad, a single sheet, or a hard card to a player. This section sets minimum 
prices based on the number of cards faces sold and on the prizes awarded at that 
bingo occasion.
(b) Ups pads. Regardless of the number of sheets in an ups pad, the minimum 
price is determined by the number or card faces on all of the sheets in the pad. 
Thus a three on five up pad would have the minimum price for 15 card faces.
(c) Single sheets. The minimum price for single sheet is determined by the 
number of card faces on the sheet.
(d) Hard cards. The minimum price for a hard cards is the minimum price for one 
card face.
(e) Determining applicable minimum price. The minimum price per card face is 
determined by the amount of prizes offered or awarded at a bingo occasion 
according to the following schedule:
[graphic]
(f) Sales below minimum price prohibited. A licensed authorized organization may 
not sell or otherwise furnish an ups pad, a single sheet, or a hard card for 
less than the applicable minimum price specified in this section.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 20, 1991.
TRD-9116187
Joe Darnall
General Counsel
Texas Alcoholic Beverage Commission
Proposed possible date of adoption: January 28, 1992
For further information, please call: (512) 465-4904
       
Part VIII. Texas Racing Commission
Chapter 303. General Provisions
Subchapter B. Powers and Duties of the Commission
16 TAC sec.303.32
The Texas Racing Commission proposes an amendment to sec.303.32, concerning 
power of entry. The amendment clarifies the authority of commission employees 
and Department of Public Safety officers to enter the premises of a licensed 
racetrack to enforce the Texas Racing Act.
Paula Cochran Carter, general counsel for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that the laws of this state relating to racing 
will be enforced. There will be no effect on small businesses as a result of 
enforcing the section. There is no anticipated economic cost to persons who are 
required to comply with the section as proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.3.03, which describes 
the power of entry onto association grounds.
sec.303.32. Power of Entry.
(a) A member <nl>or employee<ol> of the commission, <nl>a steward or judge<ol> 
[a commission investigator or other person authorized by the commission], a 
commissioned officer of the Department of Public Safety <nl>who is assigned to 
work on racing investigations<ol>, [or] a peace officer of the local 
jurisdiction in which the association maintains a place of business<nl>, or 
another person authorized or designated by any such person<ol> may enter an 
office, <nl>a<ol> racetrack, <nl>any area on association grounds,<ol> or <nl>any 
similar area or<ol> other place of business of an association at any time to 
enforce or administer the Act <nl>or commission rules <ol>.
(b) An association <nl>or an officer, employee, or agent of an association may 
not refuse or deny a request to enter under <ol> [that refuses access required 
by] this section <nl>and may not hinder a person who is conducting an 
investigation under or attempting to enforce or administer the Act or commission 
rules<ol> [is subject to disciplinary action by the commission].
[(c) A commissioned officer of the Department of Public Safety who is assigned 
to work on racing investigations may inspect any and all areas of an 
association's grounds to check for violations of rules of the commission.]
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116147
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
16 TAC sec.303.38
The Texas Racing Commission proposes an amendment to sec.303.38, concerning 
cooperation with peace officers. The amendment clarifies the responsibility of 
the commission, its employees, and its licensees to cooperate with law 
enforcement entities in the enforcement of the laws relating to racing.
Paula Cochran Carter, general counsel, for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that the laws of this state relating to racing 
will be enforced. There will be no effect on small businesses as a result of 
enforcing the section. There is no anticipated economic cost to persons who are 
required to comply with the section as proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.3.11, which requires 
commission cooperation with peace officers.
sec.303.38. Cooperation with Peace Officers <nl>and Other Enforcement Entities.  
The commission, its employees, and its licensees shall cooperate with all 
district attorneys, criminal district attorneys, county attorneys, the [Texas] 
Department of Public Safety, the attorney general, and all peace officers 
<nl>who are<ol> [in] enforcing <nl>a criminal law related to racing,<ol> the Act 
<nl>, or a<ol> [and the rules of the] commission <nl>rule<ol>.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116157
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
Subchapter F. Licensing Persons with Criminal Backgrounds
16 TAC sec.303.202
The Texas Racing Commission proposes an amendment to sec.303.202, concerning 
guidelines. The amendment clarifies the commission's guidelines regarding the 
licensing of individuals who have been convicted of criminal homicide.
Paula Cochran Carter, general counsel, for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that the licensees participating in pari-mutuel 
racing are of the qualified to perform the duties of a licensee. There will be 
no effect on small businesses as a result of enforcing the section. There is no 
anticipated economic cost to persons who are required to comply with the section 
as proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and Article 6252-13d, which 
requires commission to issue guidelines regarding the licensing of persons with 
criminal backgrounds.
sec.303.202. Guidelines.  The offenses that the commission considers are 
directly related to a person's present fitness to perform the duties and 
responsibilities associated with a license issued by the commission <nl>are <ol> 
[include]:
(1)-(3) (No change.)
(4)<nl> a criminal homicide offense, as defined by Penal Code, Chapter 19 <ol> 
[murder];
(5)-(10) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116146
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
Chapter 307. Practice and Procedure
Subchapter C. Proceedings by Stewards and Racing Judges
Appeals to Commission
16 TAC sec.307.261
The Texas Racing Commission proposes an amendment to sec.307.261, concerning 
appeal to the commission. The amendment clarifies the procedure for filing an 
appeal form a ruling by the stewards or racing judges.
Paula Cochran Carter, general counsel, for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that the administrative processes of the 
commission are efficient and effective. There will be no effect on small 
businesses as a result of enforcing the section. Because the section would 
require the payment of a fine before the filing of an appeal, there is an 
anticipated economic cost to person who are required to comply with the section 
as proposed. The exact amount of the economic will vary, depending on the amount 
of the fine imposed by the stewards or racing judges.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.3.08, which provides 
that decisions by stewards and racing judges are appealable to the commission in 
accordance with the Administrative Procedure and Texas Register Act; and Texas 
Civil Statutes, Article 6252-13a, sec.4, which authorize the commission to adopt 
rules of practice setting forth the nature and requirements of all formal and 
informal procedures available.
sec.307.261. Appeal to the Commission.
(a)-(d) (No change.)
(e) If a person against whom a fine has been assessed files an appeal of the 
ruling that assesses the fine, the  <nl>person shall pay the fine in accordance 
with these rules. If<ol> [ruling regarding the fine is automatically stayed 
until:]
[(1) the commission acts on the ruling; or]
[(2)] the appeal is [otherwise] disposed of in favor of the <nl>appellant, 
the<ol> commission <nl>shall refund the amount of the fine <ol>.
(f) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116145
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
Chapter 309. Operation of Racetracks
Subchapter C. Greyhound Racetracks
Operations
16 TAC sec.309.352
The Texas Racing Commission proposes an amendment to sec.303.352, concerning 
Texas preference. The amendment corrects a technical error regarding the 
requirements for a greyhound racetrack in contracting with kennel owners.
Paula Cochran Carter, general counsel, for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that the rules of the commission are technically 
correct. There will be no effect on small businesses as a result of enforcing 
the section. There is no anticipated economic cost to persons who are required 
to comply with the section as proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.10.06, which states the 
requirements for contracting with kennel owners.
sec.309.352. Texas Preference.
(a) In contracting with kennel owners for <nl>kennel contracts<ol> [a 
racetrack], an association shall ensure that at least 50% of the kennels with 
whom the association contracts are wholly owned by Texas residents.
(b) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116156
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
Chapter 311. Conduct and Duties of Individual Licensees
Subchapter A. General Provisions
16 TAC sec.311.6
The Texas Racing Commission proposes an amendment to sec.311.6, concerning 
influence of race prohibited. The amendment clarifies the prohibition against 
the possession or use of a device designed to increase or decrease the speed or 
a horse, other than an ordinary riding whip.
Paula Cochran Carter, general counsel for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that pari-mutuel racing is conduct fairly, 
humanely, and with the utmost integrity. There will be no effect on small 
businesses as a result of enforcing the section. There is no anticipated 
economic cost to persons who are required to comply with the section as 
proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.14.03, which authorizes 
the commission to adopt rules prohibiting the illegal influencing of a race.
sec.311.6. Influence of Race Prohibited.
<nl>(a) A licensee may not improperly influence or conspire or attempt to 
improperly influence the results of a race.
<nl>(b) A licensee may not possess on association grounds or use a device 
designated to increase or decrease the speed of a horse other than an ordinary 
riding whip.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116155
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
16 TAC sec.311.7
The Texas Racing Commission proposes an amendment to sec.311.7, concerning 
inhumane treatment. The amendment deletes the reference to the possession or use 
of a device designed to increase or decrease the speed of a horse, other than an 
ordinary riding whip, because this prohibition has been moved to another section 
of the commission's rules.
Paula Cochran Carter, general counsel for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that the rules of the commission are internally 
consistent and nonrepetitive. There will be no effect on small businesses as a 
result of enforcing the section. There is no anticipated economic cost to 
persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.14.03, which authorizes 
the commission to adopt rules prohibiting the illegal influencing of a race.
sec.311.7. Inhumane Treatment.
[(a)] A licensee may not subject a horse or greyhound to cruel or inhumane 
treatment or, through act or neglect, subject a horse or greyhound to 
unnecessary suffering.
[(b)] A licensee may not possess on association grounds or use a device designed 
to increase or decrease the speed of a horse other than an ordinary rider whip.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116154
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
16 TAC sec.311.10
The Texas Racing Commission proposes an amendment to sec.311.10, concerning 
conduct. The amendment clarifies the responsibilities of the commission's 
licensees regarding fire safety in the stable or kennel area, security in the 
stable or kennel area, and the decision-making process by stewards or racing 
judges.
Paula Cochran Carter, general counsel for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that the participants in pari-mutuel racing are 
qualified and that pari-mutuel racing is safe for the participants. There will 
be no effect on small businesses as a result of enforcing the section. There is 
no anticipated economic cost to persons who are required to comply with the 
section as proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.6.06, which authorizes 
the commission to adopt rules relating to the operation of racetracks.
sec.311.10. Conduct.
(a)-(b) (No change.)
<nl>(c) A licensee shall use reasonable diligence and precaution to prevent 
fires in the stable or kennel area. A licensee may not smoke in a stall, near 
greyhound crate, in a feed room or hay storage area, or under a shed row. A 
licensee may not leave an unattended electrical appliance plugged into an outlet 
in the stable or kennel area. A licensee may not leave an electrical outlet or 
electrical cord within the reach of a race animal. A licensee may not lock a 
stall that is occupied by a horse. A licensee may not possess, keep, or 
maintain, in the stable or kennel area:
<nl>(1) an open fire or an oil or gas lamp; or
<nl>(2) a flammable material, such as cleaning fluid or solvent.
<nl>(d) A licensee may not enter or attempt to enter the stable or kennel area 
except through the designated entrances and or attempt to assist another person 
in entering the stable or kennel area except through the designated entrances 
and on showing a valid license badge or temporary pass.
<nl>(e) A licensee may not interfere with, attempt to interfere with, or 
conspire with another to interfere with any decision-making process of the 
stewards or racing judges including, but not limited to, formal and informal 
disciplinary hearings.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116153
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
16 TAC sec.311.16
The Texas Racing Commission proposes an amendment to sec.311.16, concerning 
contraband. The section describes what the commission considers to be contraband 
and subject to seizure by the commission and law enforcement authorities
Paula Cochran Carter, general counsel for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that pari-mutuel racing is safe for the 
participants and is of the utmost integrity. There will be no effect on small 
businesses as a result of enforcing the section. There is no anticipated 
economic cost to persons who are required to comply with the section as 
proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The new section is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.14.03, which authorizes 
the commission to adopt rules prohibiting the illegal influencing of the outcome 
of a race.
sec.311.16. Contraband.
(a) The following items are contraband on a racetrack or association grounds:
(1) a criminal instrument related to racing under the Act;
(2) an electrical shocking device, spur, or similar device or paraphernalia 
designed to increase or decrease the speed of a race animal or to unnaturally 
depress, stimulate, or excite a race animal;
(3) a device prohibited under sec.319.10 of this title (relating to Devices and 
Substances Prohibited), including a hypodermic syringe or hypodermic needle;
(4) a deadly weapon prohibited under sec.311.11 of this title (relating to 
Weapons Prohibited); and
(5) a drug, chemical, or other substance prohibited under:
(A) sec.319.3 of this title (relating to Medication Restricted);
(B) sec.319.7 of this title (relating to Medication Labelling);
(C) sec.319.10 of this title (relating to Devices and Substances Prohibited); or
(D) sec.319.14 of this title (relating to Possession of Controlled Substances).
(b) No person may possess an item of contraband at any time while on a racetrack 
or association grounds. It is an affirmative defense to a rule violation under 
this subsection that:
(1) commission rules expressly state the item was not contraband; or
(2) the possession was expressly authorized on a racetrack or association 
grounds by the Act or commission rules.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116152
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
Subchapter B. Specific Licensees
Licensees for Horse Racing
16 TAC sec.311.159
The Texas Racing Commission proposes an amendment to sec.311.159, concerning 
conduct in stable area. The section describes the responsibilities of licensees 
participating in horse racing regarding their conduct in the stable area.
Paula Cochran Carter, general counsel, for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that the pari-mutuel racing is safe for the 
participants. There will be no effect on small businesses as a result of 
enforcing the section. There is no anticipated economic cost to persons who are 
required to comply with the section as proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The new section is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.6.06, which authorizes 
the commission to adopt rules relating to the operation of racetracks.
sec.311.159. Conduct in Stable Area.
(a) An individual licensee may not sleep in the stable area of an association's 
grounds except in a facility provided for that purpose by the association in 
accordance with commission rules.
(b) An individual licensee may not possess, keep, or maintain a pet in the 
stable area of an association's grounds unless:
(1) the pet is confined and prevented from going at large on association 
grounds; and
(2) the pet is annually vaccinated against rabies.
(c) An individual licensee shall wear a properly fastened helmet, of a type 
approve by the commission, at all time that the individual is mounted on a 
horse.
(d) An individual licensee may not hold a horse in a starting gate unless the 
licensee wears properly fastened headgear, of a type approved by the commission.
(e) Except as otherwise provided by this subsection, an individual licensee may 
not operate a motor vehicle in the stable area during training hours. This 
subsection does not apply to:
(1) a person who has power of entry under the Act,  s3.03;
(2) the stewards;
(3) security personnel employed by the association;
(4) the commission veterinarian;
(5) the racing secretary;
(6) a veterinarian licensed by the commission;
(7) a trainer;
(8) a jockey's agent at a Class 1 racetrack; or
(9) a farrier.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116151
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
Licensees for Greyhound Racing
16 TAC sec.311.171
The Texas Racing Commission proposes an amendment to sec.311.171, concerning 
kennel owners. The section describes the responsibilities of kennel owners 
regarding the use of greyhounds that have been trained with live lures.
Paula Cochran Carter, general counsel, for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that pari-mutuel racing is humane for racing is 
humane for racing greyhounds. There will be no effect on small businesses as a 
result of enforcing the section. There is no anticipated economic cost to 
persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.6.06, which authorizes 
the commission to adopt rules relating to the operation of racetracks.
sec.311.171. Kennel Owners.
(a)-(h) (No change.)
<nl>(i) A kennel owner may not permit a greyhound to be kenneled on association 
grounds, enter a greyhound in a race, or permit a greyhound to be entered in a 
race if the kennel owner knows or can reasonably be expected to know that they 
greyhound was trained with a live lure. Before permitting a greyhound to enter a 
kennel on association grounds, a kennel owner shall use reasonable diligence to 
determined the training methods used for the greyhound.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116150
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
Chapter 313. Officials and Rules of Horse Racing
Subchapter A. Officials
General Provisions
16 TAC sec.313.4
The Texas Racing Commission proposes an amendment to sec.313.4, concerning 
approval of officials. The section describes the procedure for obtaining and 
rescinding commission approval of officials at horse racetracks.
Paula Cochran Carter, general counsel for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that pari-mutuel racing is supervised by qualified 
officials who are of the utmost integrity. There will be no effect on small 
businesses as a result of enforcing the section. There is no anticipated 
economic cost to persons who are required to comply with the section as 
proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.3.07, which authorizes 
the commission to approve all racetrack officials.
sec.313.4. Approval of [Association] Officials.
(a) <nl>Each individual who is designated as an official for<ol> [The commission 
shall approve all association officials to serve at] a race meeting <nl>must be 
approved by the executive secretary before the individual begins acting in an 
official capacity.
(b) Not later than the 30th day before the first day of a race meeting, an 
association shall submit to the executive secretary a document containing the 
name of each individual appointed to serve as an [association] official at the 
race meeting. The <nl>executive secretary<ol> [commission] may require the 
association to submit a brief job description for each of the [association] 
officials for approval by the commission.
<nl>(c) The executive secretary may rescind that the approval of an official if 
the executive secretary determines that:
<nl>(1) the official has violated the Act or a rule of the commission;
<nl>(2) the official has not fulfilled the duties of the position for which the 
official was appointed; or
<nl>(3) the official has engaged in conduct that is inconsistent with the duties 
of the official and that is not in the best interests of racing.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116149
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
Chapter 319. Veterinary Practices and Drug Testing
Subchapter A. General Provisions
16 TAC sec.319.11
The Texas Racing Commission proposed an amendment to sec.319.11, concerning 
powers of inspection, examination, and search and seizure. The amendment 
clarifies the procedures by which the commission conduct searches of persons and 
property involved in pari-mutuel racing and seize contraband and clarifies the 
extent of the consent to searches given by occupational licensees when applying 
for a license from the commission.
Paula Cochran Carter, general counsel for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that pari-mutuel racing is safe and humane for the 
race animals and is conducted in a manner that is fair for the wagers and that 
the illegal influencing of the outcome of a race is minimized or eliminated. 
There will be no fiscal implications for small businesses. There is no 
anticipated economic cost to persons who are required to comply with the section 
as proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711-2080.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules to administer the Texas Racing Act 
and to regulate racing with wagering; and sec.14.03, which authorizes the 
commission to adopt rules to prohibit the illegal influencing of the outcome of 
a race.
sec.319.11. <nl>Powers of Inspection, Examination, and  Search and Seizure.
(a) <nl>A member or employee of the<ol> [The] commission, <nl>a steward <ol> 
[the stewards] or racing <nl>judge<ol> [judges], an <nl>officer of an <ol> 
association, <nl>a commissioned officer of the Department of Public Safety who 
is assigned to work on racing investigations,<ol> or <nl>another<ol> [a] person 
<nl>authorized or <ol> designated by <nl>any such person<ol> [the commission, 
stewards or racing judges, or an association] may enter <nl>an office, a 
racetrack,<ol> any area on association grounds<nl>, or any similar area or other 
place of business of an association at any time<ol> to  <nl>inspect, examine, 
or<ol> search an individual's person and possessions in that area <nl>and to 
seize any contraband or other item that is found, which may be evidence of a 
rule violation or a criminal offense<ol> [to check for violations of the Act or 
a rule of the commission].
<nl>(b)  Any peace office may assist a person acting under the authority of this 
section.
<nl>(c) By applying for, accepting, or holding a license under the Act, an<ol> 
[(b) An] individual licensee[, on accepting a license from the commission,] 
consents to <nl>an inspection, examination, or<ol> [a] search conducted under 
this section <nl>of the licensee's person and possessions while on premises 
covered by this section<ol> and to the seizure of any  <nl>contraband or other 
item that is found which may be evidence of a rule violation or a criminal 
offense<ol> [prohibited hypodermic syringes, hypodermic needles, prohibited 
drugs, chemicals, or other substances, or any electrical device or other device 
that might have the effect of unnaturally depressing, stimulating, or exciting a 
race animal]. <nl>Consent described in this subsection is not:
<nl>(1) effective for a search outside the premises covered by this section;
<nl>(2) effective for a search conducted at a time when no valid license was in 
effect, unless at the time of the search the licensee who was searched claimed 
the existence of a valid license as authority to enter or remain in an area 
covered by this section;
<nl>(3) limited in effect to a prerace or postrace search or a search on a race 
or meeting day; or
<nl>(4) limited in effect to a search based on reasonable cause, reasonable 
suspicion, reasonable grounds, probable cause, or any similar legal standard.
<nl>(d) By applying for, accepting, or holding a temporary pass to enter or 
remain on any restricted area of association grounds, an individual who is not a 
licensee consents to a search conducted under this section of the individual's 
person or possessions in that area and to the seizure of any contraband or other 
item that is found which may be evidence of a rule violation or a criminal 
offense. Consent described in this subsection is not:
<nl>(1) effective for a search outside the restricted area covered by this 
subsection;
<nl>(2) effective for a search conducted at a time when no temporary pass was in 
effect, unless at the time of the search the individual who was searched claimed 
the existence of a valid pass as authority to enter or remain in the restricted 
area covered by this subsection;
<nl>(3) limited in effect to a prerace or postrace search or a search on a race 
or meeting day; or
<nl>(4) limited in effect to a search based on reasonable cause, reasonable 
suspicion, reasonable grounds, probable cause, or any similar legal standard.
<nl>(e) A licensee, an officer, employee, or agent of an association, or holder 
of a temporary pass may not refuse or deny a request by a person acting under 
the authority of this section to enter, inspect, examine or search any property 
that is within an area on association grounds and to seize any contraband or 
other item that is found which may be evidence of a rule violation or a criminal 
offense.
<nl>(f)  An association shall post a sign at each entrance to, but outside of, 
any restricted area of association grounds that gives conspicuous notice of at 
least the following:
<nl>(1) the consent to search given by a licensee under this section;
<nl>(2) the consent to search given by a nonlicensee under this section;
<nl>(3) the felony criminal consequences for refusing or denying a request by a 
person acting under the authority of this section to inspect, examine, or search 
any property that is within a restricted area and to seize any contraband or 
other item that is found which may be evidence of a rule violation or a criminal 
offense; and
<nl>(4) the fact that entry into the restricted area of association grounds is 
forbidden except for a person holding a credential or temporary pass or for 
another person expressly permitted to enter under the Act or commission rules.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116144
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992.
For further information, please call: (512) 794-8461
       
16 TAC sec.319.12
The Texas Racing Commission proposes an amendment to sec.319.12, concerning 
cooperation required. The section clarifies the duties of the commission 
employees and licensees to cooperate with law enforcement agencies regarding the 
investigation or prosecution of a violation of the Texas Racing Act or a 
commission rule regarding illegal medication or possession of contraband.
Paula Cochran Carter, general counsel for the Texas Racing Commission, has 
determined that for the first five-year period the section is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the section.
Ms. Carter also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section is the assurance that pari-mutuel racing is safe for the participants 
and conduct fairly for the benefit of the patrons. There will be no effect on 
small businesses as a result of enforcing the amendment. There is no anticipated 
economic cost to persons who are required to comply with the section as 
proposed.
Comments on the proposal may be submitted before February 1, 1992, to Paula 
Cochran Carter, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711.
The amendment is proposed under Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the commission to adopt rules for conducting racing with 
wagering and to administer the Texas Racing Act; and sec.14.03, which authorize 
the commission to adopt rules to prohibit the illegal influencing of the outcome 
of a race.
sec.319.12. Cooperation Required. <nl> A licensee, an<ol> [An] 
association<nl>,<ol> and each <nl>officer,<ol> employee<nl>, or agent <ol> of an 
association shall cooperate fully with the commission, the Department of Public 
Safety, or other law enforcement agency in the investigation or prosecution of a 
violation of the Act or  <nl>commission<ol> rules [of the commission] regarding 
[prohibited drugs, chemicals, or other substances and drug-related] contraband 
<nl>and any other item which may be evidence of a rule violation or a criminal 
offense.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 9, 1991.
TRD-9116148
Paula Cochran Carter
General Counsel
Texas Racing Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 794-8461
       
TITLE 22. EXAMINING BOARDS
Part IX. State Board of Medical Examiners
Chapter 163. Examinations Required by the Board for Licensure
22 TAC sec.163.3
The Texas State Board of Medical Examiners proposes an amendment to sec.163. 3, 
concerning examinations required by the board for licensure as an M.D. or D.O. 
The board recently voted to accept national boards as a means for licensure in 
Texas. The amendment is proposed to implement that decision.
Ivan Hurwitz, director of administrative services, has determined that for the 
first five-year period the section is in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section.
There will be no local employment impact.
Pat Wood, secretary to the executive director, also has determined that for each 
year of the first five years the section is in effect the public benefit 
anticipated as a result of enforcing the section will be to enable physicians to 
be licensed on the basis of national board examination. There will be no effect 
on small businesses. There is no anticipated economic cost to persons who are 
required to comply with the section as proposed.
Comments on the proposal may be submitted to Pat Wood, P.O. Box 13562, Austin, 
Texas 78711. A public hearing will be held at a later date.
The amendment is proposed under Texas Civil Statutes, Article 4495b, which 
provide the Texas State Board of Medical Examiners with the authority to make 
rules, regulations, and bylaws not inconsistent with this Act as may be 
necessary for the governing of its own proceedings, the performance of its 
duties, the regulation of the practice of medicine in this state, and the 
enforcement of this Act.
sec.163.3. Examinations Required by the Board for Licensure.
(a) Applicants for licensure by examination must have met one of the following 
examination requirements.
<nl>(1) an applicant must have passed USMLE with a score of 75 or better on each 
step within seven years and must have passed the Texas Medical jurisprudence 
examination; or
<nl>(2)<ol>[(1)] Initially, an applicant must sit for Component I of the FLEX or 
Component I and II of the FLEX.] an applicant must have passed FLEX with a score 
of 75 or better on each component within seven years <nl>between June 1985 and 
June 1994 <ol> and must have passed the Texas medical jurisprudence examination; 
or
<nl>(3)<ol>[(2)] an applicant must have passed FLEX in one sitting with a 75% 
weighted average prior to June 1985 and must have passed the Texas medical 
jurisprudence examination; or
<nl>(4)<ol>[(3)] an applicant must have passed the Texas state board examination 
prior to January 1, 1977 <nl>; or<ol>[.]
<nl>(5) an applicant must have passed the National Board of Medical Examiners 
examination and must have passed the Texas medical jurisprudence examination; or
<nl>(6) an applicant must have passed the National Board of Osteopathic Medical 
Examiners examination and must have passed the Texas medical jurisprudence 
examination.
(b) Applicants for licensure by reciprocal endorsement must have met one of the 
following examination requirements:
(1) [An applicant must have passed the Texas medical jurisprudence examination, 
if] the applicant for licensure is a licentiate of a state, territory, or 
province based on passage of one of the following examinations:
(A) National Board of Medical Examiners examination [prior to January 1, 1978; 
or National Board of Medical Examiners examination after January 1, 1978, and 
passage of Day III of the FLEX prior to June 1985, Component II of the FLEX 
prior to June 1988, or SPEX];
(B) National Board of Osteopathic Medical Examiners examination [prior to 
January 1, 1978; or National Board of Osteopathic Medical Examiners examination 
after January 1, 1978, and passage of Day III of the FLEX prior to June 1985, or 
Component II of the FLEX prior to June 1988, or SPEX];
(C) Medical Council of Canada examination after January, 1978, and passage of 
Day III of the FLEX prior to June 1985, Component II of the FLEX [prior to June 
1988], or SPEX; or
(D) state board of licensing examination prior to January 1, 1978; or state 
board licensing examination after January 1, 1978, and passage of Day III of the 
FLEX prior to June 1985, Component II of the FLEX [prior to June 1988], or SPEX; 
with the exception of Florida, Virgin Islands, Guam, <nl>and <ol> Tennessee 
Osteopathic Board <nl>;<ol>[,] or Puerto Rico after June 30, 1963;
(E) with exception being that applicants in subparagraphs <nl>(C) and<ol> [(A)-
](D) of this paragraph who are required to pass Day III of the FLEX prior to 
June 1985, Component II of the FLEX [prior to June 1988], or SPX, are exempt 
from these examinations if they have obtained specialty certification or 
recertification by a board that is a member of the American Board of Medical 
Specialties or the Advisory Board for Osteopathic Specialists.
(2) [an applicant must have passed the Texas medical jurisprudence examination, 
if] he or she is a licentiate of a state, territory, or province based on the 
FLEX examination in one sitting with a 75% weighted average prior to June 1985;
(e) [an applicant must have passed the Texas medical jurisprudence examination 
if] he or she is a licentiate of a state, territory, or province based on FLEX 
(both components of which have been taken within a seven-year period) with a 
score of 75 or better on each component <nl>between June 1985 and June 1994<ol>;
<nl>(4) he or she is a licentiate of a state, territory, or province based on 
USMLE (all steps of which have been taken within a seven-year period) with a 
score of 75 or better on each step;
<nl>(5) all applicants for licensure in Texas must have passed the Texas medical 
jurisprudence examination.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116073
Homer R. Goehrs, M.D.
Executive Director
Texas State Board of Medical Examiners
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 834-7728
       
Chapter 165. Administration of Examinations
22 TAC sec.165.1
The Texas State Board of Medical Examiners proposes an amendment to sec.165. 1, 
concerning administration of examinations. The board recently voted to accept 
USMLE as a means for licensure in Texas. The amendment is proposed to implement 
that decision.
Ivan Hurwitz, director of administrative services, has determined that for the 
first five-year period the section is in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section.
There will be no local employment impact.
Pat Wood, secretary to the executive director, also has determined that for each 
year of the first five years the section is in effect the public benefit 
anticipated as a result of enforcing the section will be to enable physicians to 
be licensed on the basis of USMLE. There will be no effect on small businesses. 
There is no anticipated economic cost to persons who are required to comply with 
the section as proposed.
Comments on the proposal may be submitted to Pat Wood, P.O. Box 13562, Austin, 
Texas 78711. A public hearing will be held at a later date.
The amendment is proposed under Texas Civil Statute, Article 4495b, which 
provide the Texas State Board of Medical Examiners with the authority to make 
rules, regulations, and bylaws not inconsistent with this Act as may be 
necessary for the governing of its own proceedings, the performance of its 
duties, the regulation of the practice of medicine in this state, and the 
enforcement of this Act.
sec.165.1. Examination Administration.
(a) The board shall administer <nl>Step 3 of the United States Medical Licensing 
Examination (USMLE), <ol> the federation licensing examination (FLEX), the 
special purpose examination (SPEX), and the Texas medical jurisprudence 
examination in writing at times and places as designated by the board.
(b)-(c) (No change.)
(d) All <nl>USMLE Step 3, <ol> FLEX<nl>,<ol> and SPEX questions and answers, 
with grades attached, shall be preserved for at least one year at the National 
Board of Medical Examiners offices.
(e)-(f) (No change.)
(g) A graduate of a medical school may sit for <nl>an <ol> [the] examination 14 
month prior to the successful completion of the required graduate training 
program but will not be eligible for licensure until proof is presented to the 
board of having successfully completed the required graduate training.
<nl>(h) An applicant shall not be eligible to sit for the USMLE Step 3 
examination until:
<nl>(1) the application is complete, with the exception of the FBI fingerprint 
card report;
<nl>(2) the applicant has passed the USMLE Step 1 and USMLE Step 2 examinations 
with a grade of 75 on each step within the last seven years; and
<nl>(3) the applicant has made a personal appearance to have his or her required 
original documents inspected by a representative of the board.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116074
Homer R. Goehrs, M.D.
Executive Director
Texas State Board of Medical Examiners
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 834-7728
       
Chapter 171. Institutional Permits
22 TAC sec.171.1
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the State Board of 
Medical Examiners or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The Texas State Board of Medical Examiners proposes the repeal of sec.171.1, 
concerning institutional permits. In order to expedite processing of 
Instructional Permit Applications, extensive rewrite of the section is felt 
necessary; therefore, repeal with simultaneous proposed new wording is 
presented.
Ivan Hurwitz, director of administrative services, has determined that for the 
first five-year period the repeal is in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the repeal.
There will be no local employment impact.
Pat Wood, secretary to the executive director, has determined that for each year 
of the first five years the repeal is in effect the public benefit anticipated 
as a result of enforcing the repeal will be that the repeal of the rule will 
have no effect on the public, other than clarification by omission. There will 
be no effect on small businesses. There is no anticipated economic cost to 
persons who are required to comply with the repeal as proposed.
Comments on the proposal may be submitted to Pat Wood, P.O. Box 13562, Austin, 
Texas 78711. A public hearing will be held at a later date.
The repeal is proposed under Texas Civil Statutes, Article 4495b, which provides 
the Texas State Board of Medical Examiners with the authority to make rules, 
regulations, and bylaws not inconsistent with this act as may be necessary for 
the governing of its own proceedings, the performance of its duties, the 
regulation of the practice of medicine in this state, and the enforcement of 
this act.
sec.171.1. Interns, Residents, or Fellows Permit.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116071
Homer R. Goehrs, M.D.
Executive Director
Texas State Board of Medical Examiners
Earliest possible date of adoption: January 27, 1991
For further information, please call: (512) 834-7728
       
The Texas State Board of Medical Examiners proposes new  s171.1, concerning 
institutional permits. In order to expedite processing of institutional permit 
applications, extensive rewrite of the section is felt necessary; therefore, 
repeal with simultaneous proposed new wording is presented.
Ivan Hurwitz, director of administrative services, has determined that for the 
first five-year period the section is in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section.
There will be no local employment impact.
Pat Wood, secretary to the executive director, has determined that for each year 
of the first five years the section is in effect the public benefit anticipated 
as a result of enforcing the section will be clarification of rules and more 
efficient use of agency time. There will be no effect on small businesses. There 
is no anticipated economic cost to persons who are required to comply with the 
section as proposed.
Comments on the proposal may be submitted to Pat Wood, P.O. Box 13562, Austin, 
Texas 78711. A public hearing will be held at a later date.
The new section is proposed under Texas Civil Statutes, Article 4495b, which 
provides the Texas State Board of Medical Examiners with the authority to make 
rules, regulations, and bylaws not inconsistent with this act as may be 
necessary for the governing of its own proceedings, the performance of its 
duties, the regulation of the practice of medicine in this state, and the 
enforcement of this act.
sec.171.1. Institutional Permits.
(a) Institutional permits may be issued to postgraduate training programs 
approved by the Accreditation Council for Graduate Medical Education, American 
Osteopathic Association, or the Texas State Board of Medical Examiners for 
interns, residents, and postresidency fellows.
(1) An intern is a physician who is in a clearly defined and delineated first 
postgraduate year program.
(2) A resident is a physician who is in a specialized, clearly defined, and 
delineated postgraduate program.
(3) A postresidency fellow is a physician who is in a specialized, clearly 
defined, and delineated postresidency program for additional training in a 
medical specialty or subspecialty delivered in a program approved by the 
Accreditation Council for Graduate Medical Education, the American Osteopathic 
Association, or in a program approved by the Texas State Board of Medical 
Examiners.
(b) The executive director may, upon written request, approve training programs. 
If the executive director does not recommend approval, the program director may 
appeal to the full board for its consideration of the request.
(c) Applicants who have graduated from a medical school approved by the 
Accreditation Council for Graduate Medical Education, or American Osteopathic 
Association must submit:
(1) a completed application and fee 45 days prior to the beginning date of the 
program; and
(2) certification by the director of medical education of the program that the 
internship, residency, or fellowship meets the appropriate definition.
(d) Applicants who have graduated from a medical school outside the United 
States or Canada must submit:
(1) a completed application and fee 45 days prior to the beginning date of the 
program;
(2) a notarized copy of medical school diploma or 5th Pathway Certificate;
(A) copies should be notarized as being a "true copy" of the original document. 
The Notary Public must sign, date, and affix his/her notary seal to the 
document;
(B) if the document is in a foreign language, an official word-for-word 
translation must be furnished. The board's definition of an official translation 
is one prepared by a Government Official, Official Translation Agency, or a 
College or University Official, on official letterhead. The translator must 
certify that it is a "true translation to the best of his/her knowledge, that 
he/she is fluent in the language, and is qualified to translate." He/she must 
sign the translation with his/her signature notarized by a Notary Public. The 
translator's name and title must be typed/printed under the signature;
(3) a notarized copy of a valid ECFMG document, or:
(A) proof of an unrestricted license from another state in the United States or 
Canada; or
(B) proof of citizenship in United States and residency of the State of Texas 
prior to entering medical school as provided in Texas Civil Statutes, Article 
4437(g);
(4)  certification by the director of medical education that the internship, 
residency, or fellowship program meets the appropriate definition; and
(5)  certification by the director of medical education that the original 
medical school diploma, certified medical school transcript from each medical 
school, valid ECFMG document, and an original Dean's certification has been 
inspected.
(e) The board's executive director may, on a case by case basis, allow 
substitute documents where exhaustive efforts have been made to secure the 
required documents.
(f) Institutional permits are issued for a one year period and may be renewed up 
to seven times depending upon the requirements of the physician's specialty 
training program.
(g) Physicians holding an institutional permit must confine their practice of 
medicine to the designated teaching program. The permit may be cancelled if 
sec.3.08 or any other provision of the Medical Practice Act is violated; or if 
the permit is used to practice medicine outside the teaching program.
(h) If the training is terminated for any reason other than illness or other 
reasons acceptable to the board, the permit is void and no additional permit 
will be issued.
(i)  Denial of a permanent Texas license is grounds for revoking or not issuing 
an institutional permit.
(j) Failure of any hospital or medical institution to comply with these 
provisions shall be grounds for the denial of the institutional permit and any 
future permits for persons wishing to serve at that institution.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116072
Homer R. Goehrs, M.D.
Executive Director
Texas State Board of Medical Examiners
Earliest possible date of adoption: January 27, 1991
For further information, please call: (512) 834-7728
       
TITLE 28. INSURANCE
Part I. Texas Department of Insurance
Chapter 1. General Administration
Subchapter D. Effect of Criminal Conduct on Licenses
TAC sec.1.501, sec.1.502
<p The State Board of Insurance of the Texas Department of Insurance proposes 
amendments to 28 TAC sec.1.501 and  s1.502, concerning the effect of criminal 
conduct on licensing of all persons licensed or seeking to be licensed by the 
Texas Department of Insurance. The proposed amendments to this section are 
necessary to implement legislation enacted by the 72nd Legislature, codified as 
the Texas Insurance Code, Article 21.07, 10A and Article 1.14A. These sections 
also implement the provisions of Texas Civil Statutes, Article 6525-13d, sec.4 
and the amendments to these sections are intended to give effect to and 
harmonize Texas Civil Statutes, Article 6252-13d, sec.4, and the Texas Insurance 
Code, Articles 21.07, sec.10A and 1.14A. Section 1.501 describes the purpose and 
scope of these rules and sec.1.502 describes the effect on licensure of criminal 
conduct of licensees, applicants, and corporate officials.
<p Jack Evins, deputy commissioner for licensing, has determined that for the 
first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections. There will be no effect on local employment or local 
economy.
<p Mr. Evins also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be more effective regulation of licensees and the ability to 
disqualify licensees and applicants who should not be licensed and to revoke the 
licenses of licensees who should not continue to maintain their licenses due to 
felony convictions. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the 
proposed sections.
<p Comments on the proposed sections may be submitted to Jack Evins, Deputy 
Commissioner for Licensing, Texas Department of Insurance, Mail Code 105-5A, 333 
Guadalupe, P.O. Box 149104, Austin, Texas 78714-1904.
<p The amendments are proposed under the Texas Insurance Code, Article 1.04, 
which authorizes the State Board of Insurance to issue rules in accordance with 
the laws of this state; Texas Civil Statutes, Article 6252-13d, which 
incorporate Article 6252-13c, and which require the filing of guidelines 
relating to the practice of a licensing authority in carrying out the provisions 
of former Article 6252-13c, now of Article 6252-13d; Texas Insurance Code, 
Article 21.07, sec.10A, which requires that a license may not be issued to 
applicants for a license as insurance agents who have been convicted of a felony 
involving moral turpitude or breach of a fiduciary duty and which allows the 
department to revoke the license of an insurance agent based upon such 
conviction; and Texas Insurance Code, Article 1.14A, which provides that the 
department may not issue a certificate of authority to an insurance company if a 
corporate officer or a member of the board of directors of the company has been 
convicted of a felony involving moral turpitude or breach of a fiduciary duty 
and provides that the department may revoke the certificate of authority of an 
insurance company if a corporate officer or member of the board of directors of 
the company is convicted of a felony involving moral turpitude or breach of a 
fiduciary duty.
sec.1.501. Purpose and Scope. These sections are promulgated to implement Texas 
Civil Statutes, Article 6252-13d, sec.4 <nl>and the Texas Insurance Code, 
Article 21.07, sec.10A.<ol> These sections apply to all persons licensed by the 
<nl>Texas Department of Insurance (referred to as department in these rules)<ol> 
[State Board of Insurance] <nl>subject to the provisions of<ol> [to which] Texas 
Civil Statutes, Article 6252-13d,  s4 [is applicable] <nl>,and to insurance 
agents subject to the provisions of the Texas Insurance Code, Article 21.07, 
sec.10A, and insurance companies subject to the provisions of the Texas 
Insurance Code, Article 1.14A.
sec.1.502. <nl>Effect of Criminal Conduct of <nl>Applicants, Licensees, and 
Corporate Officials on Licensure [Agents or Principals].
(a) The <nl>Texas Department of Insurance<ol> [State Board of Insurance] 
considers it very important that licensees, <nl>all corporate officials, 
including corporate officers and members of boards of directors of insurance 
companies (referred to as corporate officials in these rules),<ol> and license 
<nl>applicants<ol> [candidates] <nl>and all corporate officials of license 
applicants<ol> be honest, trustworthy, and reliable. Accordingly, crimes 
involving moral turpitude, including, but not limited to, fraud, dishonesty, and 
the mishandling of funds are generally of prime importance in determining 
fitness for licensure.
<nl>(1) The special nature of the relationship between agents, insurance 
companies, other insurance-related entities, the corporate officials of such 
entities, and the public with respect to insurance and related businesses 
regulated by the Texas Department of Insurance, requires trust in and reliance 
upon such persons because of the complex and varied nature of insurance and 
insurance-related products which require citizens to place reliance on insurance 
and insurance-related licensees. In light of this special relationship, the 
matters specified in Texas Civil Statutes, Article 6252-13(c), sec.4(b) and (c), 
and described in subsection (b) of this section, will be considered by the Texas 
Department of Insurance in determining whether to grant, deny, suspend, or 
revoke any license under its jurisdiction.
<nl>(2) Where the legislature has set out specific criteria for any license, 
such specific criteria shall be considered by the Texas Department of Insurance 
in considering whether to grant, deny, suspend, or revoke such licenses. In the 
event of any conflict with these rules, those specific statutory criteria shall 
govern licensure under such statutes.
<nl>(3) The department, in considering the matters described in subsection (b) 
of this section, has determined that the serious nature of felony convictions 
involving crimes of moral turpitude or breach of fiduciary duty, bear such a 
strong relationship to the occupations which are licensed by the department, 
that special rules should apply to licensure of persons convicted of such 
crimes. The following rules, therefore, apply to persons convicted of felonies 
involving crimes of moral turpitude or breach of fiduciary duty.
<nl>(A) The department shall not issue a license to any applicant for a license 
as an insurance agent subject to Article 21.07, sec.10A, if the applicant has 
been convicted of a felony involving moral turpitude or breach of a fiduciary 
duty, except as provided in subparagraph (F) of this paragraph.
<nl>(B) The department shall not issue a certificate of authority to any 
applicant for a certificate of authority as an insurance company if a corporate 
official of the company has been convicted of a felony involving moral turpitude 
or breach of a fiduciary duty, except as provided in subparagraph (F) of this 
paragraph.
<nl>(C) The department shall not issue a license to any applicant for any 
license regulated by the department, other than a license as an insurance agent 
subject to Article 21.07, sec.10A, or a certificate of authority as an insurance 
company, if the applicant has been convicted of a felony involving moral 
turpitude or breach of a fiduciary duty, unless the commissioner of insurance 
finds that the other matters set out in subsection (b) of this section outweigh 
the serious nature of a felony conviction involving moral turpitude or breach of 
fiduciary duty when viewed in light of the occupation being licensed, except as 
provided in subparagraph (F) of this paragraph.
<nl>(D) The department shall, after notice and hearing, revoke the certificate 
of authority of an insurance company if a corporate official of the company is 
convicted of a felony involving moral turpitude or breach of a fiduciary duty, 
unless the other factors set forth in subsection (b) of this section outweigh 
the serious nature of the crimes involved when viewed in light of the special 
relationship between an insurance company and the public. The certificate of 
authority may not be reinstated except as provided in subparagraph (F) of this 
paragraph.
<nl>(E) The department shall, after notice and hearing, revoke the license of 
any licensee if the licensee is convicted of a felony involving moral turpitude 
or breach of a fiduciary duty, unless the other factors set forth in subsection 
(b) of this section outweigh the serious nature of the crimes involved when 
viewed in light of the special relationship between the licensee and the public. 
The license may not be reinstated except as provided in subparagraph (F) of this 
paragraph.
<nl>(F) A licensee or applicant whose application for issuance of a license has 
been denied or whose license has been revoked under subparagraph (D) or 
subparagraph (E) of this paragraph, may petition the commissioner of insurance 
for issuance or reinstatement of the license under the following conditions.
<nl>(i)<nl> The licensee or applicant may not make a petition for issuance or 
reinstatement of a license before a date five years after the date of final 
conviction or, if the licensee, applicant, or corporate official of the licensee 
or applicant has been sentenced to prison or probation, five years after the 
date the sentence or probation terminates.
<nl>(ii) <nl> A petition for issuance or reinstatement of a certificate of 
authority may be made at any time after the convicted corporate official is no 
longer a corporate official of the company.
<nl>(iii)<nl> The petition for issuance or reinstatement of a license must set 
forth the following information:
<nl>(I)  the date of final conviction and/or the date the sentence or probation 
terminated; and
<nl>(II) the reasons why the petitioner believes the license should be issued or 
reinstated.
<nl>(iv)<nl> The petition should be filed with the associate commissioner for 
license and investigations.
<nl>(v)<nl> The office of the associate commissioner for license and 
investigations may order an investigation of the facts surrounding the initial 
failure to issue the license or revocation of the license or any other matters 
deemed relevant to the petition.
<nl>(vi)<nl> After notice and hearing, the commissioner of insurance (referred 
to in these rules as the commissioner) shall grant the petition if the 
petitioner demonstrates that it would be in the public interest and that justice 
would be served if the license was issued or reinstated.
<nl>(vii)<nl> In determining whether it would be in the public interest and that 
justice would be best served if the license were to be issued or reinstated, the 
commissioner shall consider:
<nl>(I) those factors set forth in subsection (b) of this section.
<nl>(II) any other matters the commissioner deems relevant to the issuance or 
reinstatement of the license.
[(1) These crimes relate to the special nature of the relationship between 
agents or principals and the public in respect to the insurance and related 
businesses regulated by the State Board of Insurance. The public necessarily 
reposes a great deal of trust in and reliance upon such persons because of the 
complex and varied nature of insurance and related products. It is therefore 
important that such a relationship not be undermined, that agents and principals 
be morally fit, and that the public reputation of agents and principals in 
general be enhanced.]
<ol>[(2)]<nl> (4)  The same factors and crimes are also important respecting the 
various licensees regulated under the State Fire Marshal's Office. Fire 
detection and fire protection systems and devices are often of a technical 
nature. Fire detection and fire protection systems and equipment are often 
installed, serviced and maintained during non-working hours. Moreover, the 
manufacturing, storing, and selling or fireworks requires numerous special 
precautions to maintain a safe environment for the licensees and the public. 
Honesty, trustworthiness, and reliability are therefore of prime importance in 
determining fitness for licensure.
(b) The matters specified in Texas Civil Statutes, Article 6252-13c, sec.4(b) 
and (c), will be considered by the  <nl>Texas Department of Insurance <ol> 
[State Board of Insurance] in determining whether to grant or deny, or suspend 
or revoke any person's license under its jurisdiction, as well as any and all 
other matters which constitute pro per evidence under other law, including 
matters contained in any other valid rule or statute. <nl>The matters specified 
in Texas Civil Statutes, Article 6252-13c, sec.4(b) and (c), recodified as 
Article 6252-13d, sec.1,are listed following.
<nl>(1) In determining whether a criminal conviction directly relates to the 
duties and responsibilities of the licensed occupation, the following matters 
shall be considered:
<nl>(A) the nature and seriousness of the crime;
<nl>(B) the relationship of the crime to the purposes for requiring a license to 
engage in the occupation;
<nl>(C) the extent to which a license might offer an opportunity to engage in 
further criminal activity of the same type as that in which the person 
previously had been involved; and
<nl>(D) the relationship of the crime to the ability, capacity, or fitness 
required to perform the duties and discharge the responsibilities of the 
licensed occupation.
<nl>(2) In addition to the factors listed in paragraph (1) of this subsection, 
the following evidence shall be considered in determining the present fitness of 
a person who has been convicted of a crime:
<nl>(A)  the extent and nature of the person's past criminal activity;
<nl>(B)  the age of the person at the time of the commission of the crime;
<nl>(C) the amount of time that has elapsed since the person's last criminal 
activity;
<nl>(D) the conduct and work activity of the person prior to and following the 
criminal activity;
<nl>(E) evidence of the person's rehabilitation or rehabilitative effort while 
incarcerated or following release; and
<nl>(F) other evidence of the person's present fitness, including letters of 
recommendation from: prosecution, law enforcement, and correctional officers who 
prosecuted, arrested, or had custodial responsibility for the person; the 
sheriff and chief of police in the community where the person resides; and any 
other persons in contact with the convicted person.
<nl>(3) Article 6252-13d,  s1 also provides that it shall be the responsibility 
of the licensee or applicant to the extent possible to secure and provide to the 
commissioner the information referred to in subparagraph (F) of this paragraph. 
The licensee or applicant shall also furnish proof that the licensee or 
applicant has maintained a record of steady employment and has supported the 
licensee's or applicant's dependents where applicable, and has otherwise 
maintained a record of good conduct, and has paid all outstanding court costs, 
supervision fees, fines, and restitution as may have been ordered in all 
criminal cases in which licensee or applicant has been convicted.
(c) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 20, 1991.
TRD-9116192
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-6327
       
Subchapter I. Disclosure of Guaranty Fund Nonparticipation
TAC sec.1.1001
<p The State Board of Insurance of the Texas Department of Insurance proposes an 
amendment to 28 TAC sec.1.001, concerning disclosure of guaranty fund 
nonparticipation. The proposed amendment is necessary to comply with sec.11.08, 
Chapter 242, Acts of the 72nd Legislature, Regular Session, 1991, which amends 
Article 21.28-E, Insurance Code, to exempt fidelity, surety and guaranty bonds 
from the guaranty fund disclosure requirement. The proposed amendment adds to 28 
TAC sec.1.1001(g) which specifies that the disclosure notice is not applicable 
to fidelity, surety or guaranty bonds.
<p Fabian Gomez, director of title and bond, has determined that for the first 
five year period the new section is in effect, there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section.
<p Mr. Gomez also has determined that for each year of the first five years the 
section is in effect, the public benefit anticipated as a result of the adoption 
of this section is effectuating the legislative intent by exempting fidelity, 
surety and guaranty bonds from the disclosure requirem ent. There is no 
anticipated cost to small businesses. There is no anticipated cost to persons 
who are required to comply with the section as proposed.
<p Comments on the proposal may be submitted to Fabian Gomez, Director of T 
Title and Bond, Mail Code 104-1C, P. O. Box 149104, Austin, Texas 78714-9104
<p This amendment is proposed under Texas Insurance Code, Article 1.04, which 
authorizes the State Board of Insurance to determine policy and rules in 
accordance with the laws of this state; and under Insurance Code, Article 21.28-
E(b), which authorizes and requires the State Board of Insurance to administer 
statutory provisions and promulgate statements that must be used by insurers to 
comply with 21.28-E, which requires disclosure of guaranty fund 
nonparticipation.
sec.1.1001. Disclosure of Guaranty Fund Nonparticipation
(a) -(f) (No change.)
<nl>(g)  Fidelity, surety, and guaranty bonds delivered or issued for delivery 
in this state on or after September 1, 1991, need not bear the disclosure notice 
required by subsection (a) of this section.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 20, 1991.
TRD-9116193
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-6327
       
TITLE 31. NATURAL RESOURCES AND CONSERVATION
Part X. Texas Water Development Board
Chapter 355. Research and Planning Fund
Subchapter A. General Research and Planning
31 TAC sec.355.10
The Texas Water Development Board (the board) proposes an amendment to 
sec.355.10, concerning funding limitations for grants for regional and flood 
control planning under the research and planning fund. Section 355.10 is amended 
by adding subsections (e) and (f). Section 355.10(e) allows the board the 
implement regional planning financing of projects in areas outside incorporated 
municipalities where residents are not connected to centralized water or 
wastewater systems, where the Texas Department of Health (the department) or its 
successor has determined that the drinking water supply fails to meet department 
criteria for a community water system and that a nuisance dangerous to the 
public health and safety exists resulting from water supply or sanitation 
problems in the area. The board was appropriated funds Rider Number 8, of the 
board's General Appropriations Bill (House Bill 1, 72nd Legislature, 1991, First 
Called Session) to finance water and wastewater projects in these areas.
Section 355.10(f) allows the board to develop and implement a basin-wide flood 
control program for the Sabine River Basin and a study of a flood control 
program for the Salt Creek portion of the Trinity River Basin. The board was 
appropriated funds Rider Number 11, of the boards General Appropriations Bill 
(House Bill 1, 72nd Legislature, 1991, First Called Session) to provide a 100% 
grant for required studies to be done in conjunction with the Sabine River 
Authority, the Trinity River Authority, and recognized regional or county 
associations.
Susan Morgan, director of finance, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Ms. Morgan also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be simplification of the application procedure for the board's 
financial assistance programs and a resulting increase in the number of projects 
financed by the board funding. There will be no effect on small businesses. 
There is no anticipated economic cost to persons who are required to comply with 
the section as proposed.
The agency has determined there will be no possible impact on local economies.
The amendment is proposed under the Texas Water Code, sec.6.101 and the Texas 
Water Code, Chapter 15, Subchapter F, sec.15.403, which require the board to 
adopt rules necessary to carry out the power and duties of the board and of 
various programs of the research and planning fund.
sec.355.10. Funding Limitations.
(a)-(d) (No change.)
<nl>(e) Grant for regional planning pursuant to the provisions in Rider Number 
8, Emergency Financial Assistance, General Appropriations Bill, (House Bill 1, 
72nd Legislature, 1991, First Called Session), may be up to 100% of the total 
cost of the project.
<nl>(f) Grants for flood control programs pursuant to the provisions in Rider 
Number 11, Emergency Financial Assistance, General Appropriations Bill, (House 
Bill 1, 72nd Legislature, 1991, First Called Session), shall be for 100% of the 
total cost of the required studies.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 20, 1991.
TRD-9116181
Suzanne Schwartz
General Counsel
Texas Water Development Board
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-7981
       
TITLE 34. PUBLIC FINANCE
Part I. Comptroller of Public Accounts
Chapter 1. Central Administration
Practice and Procedure
34 TAC sec.1.12
The Comptroller of Public Accounts proposes an amendment to sec.1.12, concerning 
motion to dismiss petition or set for hearing. The purpose of the amendment is 
to revise and clarify the language concerning motions to dismiss or set for 
hearing. In addition, the agency is given the option of selecting an oral 
hearing when the burden of proof is on the state.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the section is in effect there will be no significant revenue impact on 
the state or local government.
Dr. Plaut also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be in providing new information regarding tax responsibilities. 
This section is adopted under Tax Code, Title 2, and does not require a 
statement of fiscal implications for small businesses. There is no anticipated 
economic cost to persons who are required to comply with the section as 
proposed.
Comments on the proposal may be submitted to Lucy Glover, Manager, Tax 
Administration Division, P.O. Box 13528, Austin, Texas 78711.
The amendment is proposed under Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.1.12. Motion to Dismiss Petition or Set for Hearing.
<nl>(a) The form enclosed with the position letter will offer the taxpayer three 
options.
(1) Motion to dismiss. The taxpayer may accept the conclusions of the position 
letter. The tax liability or refund will be calculated accordingly.
(2) Motion to set for written submission hearing. The taxpayer may reject some 
or all of the conclusions of the position letter and request that the contested 
issues be decided  <nl>in a<ol> [on] written submission <nl>hearing<ol> by an 
administrative law judge. The parties will submit [written] documents and 
arguments <nl>in accordance with the notice of setting issued by the assigned 
administrative law judge, rather than appearing at an oral hearing.
(3) Motion to set for oral hearing.
(A) The taxpayer may reject some or all of the conclusions of the position 
letter and request that the contested issues be decided <nl>after<ol> [by] an 
oral hearing before an administrative law judge.
(B) A taxpayer who believes it will require more than two hours <nl>for the 
parties to present their cases <ol> [to hear its case] must file a written 
request for an extended hearing at the time the motion to set is filed<nl>, <ol> 
and <nl>state<ol> [set out] the reasons <nl>why<ol> more time will be 
required<nl>; however, any party may later request an extended hearing for good 
cause shown.
<nl>(b) In a Controlled Substances Tax case, the taxpayer will also be given the 
option of requesting an oral or written submissions hearing, but of holding the 
case in abeyance until the related criminal proceeding is concluded at the trial 
court level. An order of the trail court deferring adjudication will be deemed a 
conclusion of the trail court proceeding.
<nl>(c) The agency has the option of requesting an oral hearing in any case in 
which the burden of proof is on the state.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116087
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
Chapter 3. Tax Administration
Subchapter O. Franchise Tax
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The Comptroller of Public Accounts proposes the repeal of sec.sec.3.391-3.396, 
3.398-3.400, 3.404, 3.409, 3.414, 3.415, and 3.417, concerning franchise tax. 
The sections are being repealed in order that they can be adopted under the 
Texas Administrative Code, Title 34, Part I, Chapter 3, Subchapter V.
Tom Plaut, chief revenue estimator, has determined that for the first five year 
period the repeals are in effect there will be no revenue impact on the state or 
local government as a result of enforcing or administering the repeals.
Dr. Plaut also has determined that there will be no cost or benefit to the 
public from the repeal of franchise tax rules which will be recodified into a 
format more easily used by the public. The repeals are promulgated under the Tax 
Code, Title 2, and do not require a statement of fiscal implications for small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the repeals as proposed.
Comments on the repeals may be submitted to Lucy Glover, Manager, Tax 
Administration Division, P.O. Box 13528, Austin, Texas 78711.
34 TAC sec.3.391
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.391. Accounting Methods.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116101
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.392
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.392. Optional Short Form Report.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116100
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.393
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.393. Special Reporting Procedures.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116099
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.394
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.394. Foreign Corporation's Additional Tax Deposit (Trust Deposit).
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116098
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.395
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.395. Liability Prior to Certificate of Authority.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116097
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.396
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.396. Changes in Corporate Organization.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116096
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.398
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.398. Release of Liens.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116095
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.399
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.399. Franchise Tax Exemptions.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116094
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.400
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.400. Corporations in Liquidation.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116093
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.404
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.404. Stated Capital.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116092
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.409
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.409. Franchise Tax Deposits (Prepayments).
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116091
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.414
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.414. Exemption for Certain Trade Show Participants.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116090
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.415
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.415. Methods for Estimating Oil and Gas Reserves.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116089
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.3.417
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Comptroller of 
Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the Tax Code, sec.111.002, which provides the 
comptroller with the authority to prescribe, adopt, and enforce rules relating 
to the administration and enforcement of the provisions of the Tax Code, Title 
2.
sec.3.417. Close and S Corporations.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116088
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
Subchapter V. Franchise Tax
34 TAC sec.sec.3.541-3.543, 3.545-3.547, 3.550, 3.552-3.554, 3.559, 3.561, 
3.566, 3.568, 3.570, 3.574
The Comptroller of Public Accounts proposes new sec.sec.3.541-3.543, 3.545-3. 
547, 3.550, 3.552-3.554, 3.559, 3.561, 3.566, 3.568, 3.570, 3.573, and 3.574, 
concerning franchise tax. The new sections replace 34 TAC, Subchapter Q, which 
is being repealed in order that it can be adopted under the Texas Administrative 
Code, Title 34, Part I, Chapter 3, Subchapter V.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the sections in effect there will be no significant revenue impact on the 
state or local government.
Dr. Plaut also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be from the recodification of franchise tax rules into a 
format more easily used by the public, and from the clarification of comptroller 
rules related to House Bill 11 and Senate Bill 543. These sections are adopted 
under the Tax Code, Title 2, and do not require a statement of fiscal 
implications for small businesses. There is no anticipated economic cost to 
persons who are required to comply with the proposed sections.
Comments on the new sections may be submitted to Lucy Glover, Manager, Tax 
Administration Division, P.O. Box 13528, Austin, Texas 78711.
The new sections are proposed under the Tax Code, sec.111.002, which provides 
the comptroller with the authority to prescribe, adopt, and enforce rules 
relating to the administration and enforcement of the provisions of the Tax 
Code, Title 2.
sec.3.541. Exemptions.
(a) Application for exemption.
(1)  It is the responsibility of each corporation that believes it is exempt 
from payment of franchise tax to furnish to the comptroller sufficient evidence 
to establish its exempt status. It is the duty of the taxpayer to place itself 
clearly within the exempt status desired. Doubts regarding exempt status are 
interpreted against the granting of the exemption.
(2) Except as indicated in subsection (e) of this section, each corporation must 
submit to the comptroller:
(A) a request for exemption in writing, indicating the particular provision of 
the Tax Code, Chapter 171, Subchapter B, under which exemption is claimed;
(B) a detailed statement of the corporation's past activities, if any, and its 
future plan of activities, both in relation to the manner in which the 
corporation proposes to implement the purposes clause in its articles of 
incorporation or certificate of authority;
(C) a copy of the articles of incorporation and, for a foreign corporation, a 
copy of the application for a certificate of authority; and
(D) any additional information the comptroller may require to make a 
determination whether the corporation is eligible for a franchise tax exemption.
(b) Actions by comptroller. Upon receipt of an application for exemption, the 
comptroller's representative will review the application and send the taxpayer a 
notification either granting the exemption, denying the exemption, or requesting 
additional information.
(1) If the exemption is granted, the exemption will be effective from the first 
date the corporation was eligible for exemption. However, refunds will not be 
made if the statute of limitations for issuing refunds has run. Also, if the 
first date the corporation was eligible for exemption was not the beginning of a 
privilege period, the corporation must pay through the end of such privilege 
period.
(2) If the exemption is denied or revoked, the corporation may contest the 
denial or revocation by filing all reports due as though the corporation is not 
exempt and:
(A)  paying all amounts of tax, penalty, and interest due and requesting a 
refund hearing pursuant to the Tax Code, sec.111.105;
(B) paying all amounts of tax, penalty, and interest due, accompanying the 
payment with a written protest, and filing suit for the recovery of amounts paid 
pursuant to the Tax Code, sec.112.052; or
(C) requesting that a deficiency determination be issued. If a deficiency 
determination is issued, a redetermination hearing may be requested pursuant to 
the Tax Code, sec.111.009.
(c) Qualification for exemption.
(1) All insurance, surety, guaranty, or fidelity companies that are subject to 
the annual gross premiums tax levied by the Insurance Code, sec.4.10 or 
sec.4.11, or the additional taxes on gross premiums levied under the Insurance 
Code, and that have not been exempted from the gross premiums taxes, are exempt 
from payment of the franchise tax regardless of whether any gross premiums taxes 
are actually paid in any given year. No other franchise tax exemption is allowed 
for any insurance company or surety, guaranty, or fidelity company.
(2) Those corporations organized for the exclusive purpose of promoting the 
public interest of any county, city, town, or other area within the state, must 
show that promotion of the public interest is the exclusive purpose of the 
corporation and not merely an incidental result. A corporation will not be 
considered to be promoting the public interest if it engages in activities to 
promote or protect the private, business, or professional interests of its 
members or patronage.
(3) A nonprofit corporation organized for the purpose of religious worship is an 
incorporated group of people associating for the primary purpose of holding, 
conducting, and sponsoring, according to the rites of the sect, religious 
worship. A corporation supporting and encouraging religion as an incidental 
purpose or an organization with the general purpose of furthering religious work 
or instilling its membership with a religious understanding does not qualify for 
a franchise tax exemption under the Tax Code, sec.171.058, unless all of its 
other purposes and activities are exempt under other provisions of the Tax Code, 
Subchapter B, or this section.
(4) A nonprofit corporation seeking a franchise tax exemption as organized for 
purely public charity will be required to supply evidence that the substantial 
portion of the corporation's activities are devoted to supplying aid and 
assistance to indigent or similarly deserving members of society. If a 
corporation engages in any substantial activity other than public charity, it 
will not be considered as having been organized for purely public charity. A 
corporation also will not be considered as having been organized for purely 
public charity if the public derives only an indirect benefit fro the 
corporation's activities. A corporation is presumed to satisfy this definition 
if it devotes substantially all of its activity to the alleviation of poverty, 
disease, pain, and suffering by providing foods, drugs, treatment, shelter, 
clothing, or counseling to needy persons with funds derived at least in part 
from sources other than fees or charges for its services.
(5) A nonprofit corporation seeking a franchise tax exemption on the basis of 
having been organized for strictly educational purposes must show that it is 
devoted solely to systematic instruction with a regularly scheduled curriculum, 
a regular faculty, and regularly enrolled student body or students in attendance 
at a place where the educational activities are regularly carried on; or has 
activities consisting solely of presenting public discussion groups, forums, 
panels, lectures, or other similar programs. A corporation will not be 
considered as having been organized for strictly educational purposes if 
education is incidental to some other facet of the corporation's activities.
(d) Revocation of exemptions.
(1) Except as provided in paragraph (2) of this subsection, if at any time the 
comptroller has reason to believe that an exempt corporation no longer qualifies 
for exemption, the comptroller's representative will notify the taxpayer that 
its exempt status is under review. The comptroller's representative may request 
additional information necessary to ascertain the continued validity of the 
corporation's exempt status. If the comptroller determines that a corporation is 
no longer entitled to its exemption, notification to that effect will be sent to 
the corporation. The effective date of revocation is the date the corporation no 
longer qualified for the exemption.
(2) For nonprofit corporations granted an exemption under the Tax Code, 
sec.171.063, the revocation of the federal income tax exemption will 
automatically terminate the franchise tax exemption as of the effective date of 
the revocation of the federal tax exemption.
(e) Federal exemption. A corporation that meets the requirements of any 
paragraph of this subsection may establish its exempt status merely by 
furnishing to the comptroller a copy of the exemption letter which it received 
from the Internal Revenue Service.
(1) a nonprofit corporation that has been exempted from the federal income tax 
under the provisions of the Internal Revenue Code, 501(c)(3), (4), (5), (6), or 
(7), as it existed on January 1, 1975; or
(2) for reports due on or after January 1, 1988, any corporation that has been 
exempted under the provisions of the Internal Revenue Code of 1986, 
sec.501(c)(2) and (25), if the entity or entities for which it holds title to 
property are either exempt from or not subject to the franchise tax; and
(3) for each annual period that begins on or after June 2, 1989, and for each 
initial period that on that date has six months or more before expiration and 
for any second period if the change applies to the initial period, a corporation 
that is exempted from federal income tax under the Internal Revenue Code of 
1986, sec.501(c)(16).
(f) Solar energy device. For purposes of the Tax Code, sec.171.056, the term 
"solar energy device" includes, but is not limited to:
(1) devices used in the conversion of solar thermal energy into electrical or 
mechanical power;
(2) devices used in the photovoltaic (solar cell) generation of electricity;
(3)  systems used in the heating of water and the heating and cooling of 
structures by use of solar collectors to gather the sun's energy; and
(4)  heat pumps used as an integral part of a system designed to make the best 
combined use of solar energy and conventional heating.
(g) Exemption for certain trade show participants. See sec.3.542 of this title 
(relating to Exemption: Trade Show) for information concerning exemption under 
the Tax Code, sec.171.084.
(h) Exemption for recycling operation. A corporation engaged solely in the 
business of recycling sludge as defined by Texas Civil Statutes, Article 4477-7, 
Texas Solid Waste Disposal Act, sec.2, is exempt from franchise tax beginning 
with reports due on or after September 1, 1991.
(i)  Exemption for Texas National Research Laboratory Commission Corporation. A 
corporation formed by the Texas National Research Laboratory Commission under 
the Government Code,  s465.008(g), is exempt from franchise tax beginning with 
reports originally due on or after September 1, 1991.
sec.3.542. Exemption: Trade Show.
(a) Trade show exemption. This section is concerned only with the exemption 
under the Tax Code, sec.171.084. See the Tax Code, sec.171.084, for the 
requirements for exemption for certain foreign corporations which participate in 
trade shows in Texas.
(b)  Other exemptions. Section 3.541 of this title (relating to Exemptions) does 
not apply to the exemption under the Tax Code, sec.171.084.
(c)  Notification to comptroller. Corporations need not apply for an exemption 
under the Tax Code, sec.171.084.
(1) If a foreign corporation has obtained a certificate of authority or has 
already notified the comptroller that it is doing business in Texas, the 
corporation must notify the comptroller in writing by the due date of the first 
report for which the corporation is exempt that the report and payment are not 
due because the corporation is exempt under the Tax Code, sec.171.084. After 
such notification, the corporation must notify the comptroller in writing only 
when the corporation no longer qualifies for exemption.
(2) If a foreign corporation has not obtained a certificate of authority and if 
the corporation has not notified the comptroller that it is doing business in 
Texas, the corporation must notify the comptroller in writing only when the 
corporation no longer qualifies for exemption under the Tax Code, sec.171.084. 
There is no need to apply for exemption as long as the corporation qualifies for 
the exemption.
(d) Solicitation periods. If the solicitation of orders is conducted during more 
than five periods during the business period upon which tax is based as set out 
in the Tax Code,  s171.153 and sec.171.1532, the corporation does not qualify 
for exemption. A corporation may be exempt from one component of the franchise 
tax, but not exempt from the other component, because the business upon which 
the tax is based may be different for the two components. For example, assume 
the following corporations meet the requirements of the Tax Code, sec.171.084, 
except possibly the number of periods during which they solicit orders.
(1) A corporation with its fiscal year ending December 31, 1992, which filed a 
1992 annual report, will not have to file and pay a 1993 annual report if it did 
not solicit orders for more than five periods during 1992.
(2) Assume a foreign corporation participated in its first trade show in Texas 
on April 1, 1992, and had not previously obtained a certificate of authority. It 
also participated in trade shows in 1993 on January 1, March 1, May 1, June 1, 
August 1, and October 1. The corporation's fiscal year ends are December 31, 
1992 and 1993. The corporation would be exempt for its initial report and 
payment (covering the tax periods from April 1, 1992-December 31, 1993) because 
it only solicited for one period from April 1, 1992-December 31, 1992 (i.e., the 
business upon which the initial period is based). The corporation would be 
required to file a 1994 annual report and pay tax, however, because it solicited 
for six periods from January 1, 1993-December 31, 1993 (i.e., the period upon 
which the 1994 annual report is based).
(e) One hundred twenty hours. A solicitation period may not exceed 120 
consecutive hours. If the solicitation of orders is conducted during a single 
period of more than 120 consecutive hours, the corporation does not qualify for 
exemption. For example, a corporation which meets the other requirements of the 
Tax Code, sec.171.084, will meet the 120 hours requirement if the solicitation 
occurs Monday-Friday, but will not meet the 120 hours requirement if the 
solicitation occurs Monday-Saturday.
(f) Effective dates. The exemption provided by the Tax Code, sec.171.084, is 
effective for 1988 annual reports and initial reports originally due on or after 
January 1, 1988.
sec.3.543. Deposit.
(a) Each foreign corporation transacting business in Texas is required to pay a 
trust deposit of $500 in cash to the Comptroller of Public Accounts to insure 
the filing of all franchise tax reports and payment of all franchise tax, 
penalties, and interest that may be due by the corporation. The secretary of 
state will collect this deposit at the time the corporation applies for a 
certificate of authority.
(b) The following are exemptions from requirement.
(1) A foreign corporation doing business in Texas, which is required to pay 
franchise tax but is not required to and does not obtain a certificate of 
authority, does not have to pay the trust deposit.
(2) Foreign corporations that are exempt from franchise tax do not have to pay 
the trust deposit as long as the exempt status is in effect.
(3) A foreign corporation which has timely filed all franchise tax reports and 
paid all franchise tax for three consecutive reporting years does not have to 
pay the trust deposit as long as the corporation continues to timely file 
reports and pay the tax.
(c) A letter of exemption from the trust deposit requirement must be filed with 
the application for a certificate of authority in order to avoid paying the 
trust deposit.
(1) A corporation exempt under subsection (b)(2) of this section may obtain a 
letter of exemption from the comptroller by submitting proof of its exemption 
from franchise tax.
(2) A corporation exempt under subsection (b)(3) of this section that wishes to 
obtain a certificate of authority may obtain a letter of exemption from the 
comptroller by simply requesting a letter.
(d) The comptroller will automatically refund the trust deposit to corporations 
that do not owe any additional franchise tax, penalty, or interest and:
(1) have timely filed reports and paid the tax for three consecutive reporting 
years; or
(2) have dissolved, withdrawn, or merged out of existence.
(e)  Except as indicated in subsection (d) of this section, a corporation must 
request in writing the refund of its trust deposit, stating in detail the 
reasons it believes it is due a refund. The comptroller may require additional 
information or documentation in support of the request. The request must be 
signed by an officer of the corporation.
(f) Refunds will be made payable to the corporation.
(g) No interest will be paid on the trust deposit.
sec.3.545. Extensions.
(a) A corporation will be granted an extension to file an annual report on or 
before the next November 15, if the corporation:
(1) requests the extension on or before May 15;
(2)  requests the extension on a form provided by the comptroller; and
(3)  remits with the extension request:
(A) 90% or more of the amount of tax reported as due on the report filed on or 
before November 15; or
(B)  100% of the tax paid in the previous calendar year.
(b) If the last report due for which a corporation paid a tax in the previous 
calendar year was an initial report, the payment provided in subsection 
(a)(3)(B) of this section must equal the greater of:
(1) an amount produced by multiplying the net taxable capital, as required to be 
shown on the initial report by 0.25% for the 1993 and later reports; or
(2) an amount produced by multiplying the net taxable earned surplus, as 
required to be shown on the initial report, by 4.5% for the 1993 and later 
reports.
(c) Any change in the amount of tax due after the end of the previous calendar 
year will not be considered when determining the amount of "tax paid in the 
previous calendar year," as this term is used in this section.
(d) Penalty and interest will be calculated based on the following due dates.
(1) If a corporation is granted an extension and pays at least 100% of the tax 
paid in the previous calendar year on or before May 15, then November 15 will be 
the due date for any additional tax due.
(2) If a corporation is granted an extension and pays on or before May 15, 90% 
or more of the tax which will be reported as due on or before November 15, then 
November 15 will be the due date for any additional amounts due.
(3) If a corporation timely requests an extension but does not qualify for an 
extension under paragraphs (1) or (2) of this subsection, then May 15 is the due 
date for 90% of the tax finally determined to be due and November 15 is the due 
date for 10% of the tax finally determined to be due.
(e) No extensions will be granted for annual franchise tax reports pursuant to 
the Tax Code, sec.111.057.
(f) Corporations seeking an extension for the 1992 annual report must remit with 
the extension request at least 90% of the amount of tax reported as due on the 
report filed on or before November 15, 1992. The option of paying 100% of the 
tax paid in the previous calendar year is not available for the 1992 annual 
report.
sec.3.546. Taxable Capital: Nexus.
(a) A foreign corporation is liable for the franchise tax if it is authorized to 
do business in this state or if it is actually doing business in this state.
(b) A corporation is doing business in this state, for the taxable capital 
component of the franchise tax, when it has sufficient contact with this state 
to be taxed without violating the United States Constitution. A corporation may 
be subject to the taxable capital component, but not subject to the earned 
surplus component, because of Public Law 86-272. See sec.3.554 of this title 
(relating to Earned Surplus: Nexus) for the nexus standards for the earned 
surplus component of the franchise tax.
(c) Some specific activities which constitute doing business in Texas are:
(1) contracting: performance of a contract in Texas regardless of whether the 
corporation brings its own employees into the state, hires local labor, or 
subcontracts with another;
(2) providing services:
(A) providing any service in Texas, regardless of whether the employees, 
independent contractors, agents, or other representatives performing the 
services reside in Texas;
(B) maintaining or repairing property located in Texas whether under warranty or 
by separate contract; or
(C)  installing, erecting, or modifying property in Texas;
(3) inventory in the state: having an inventory in Texas or having spot 
inventory for the convenient delivery to customers, even if the bulk of orders 
are filled from out of state;
(4) solicitation: having employees, independent contractors, agents, or other 
representatives in Texas, regardless of whether they reside in Texas, to promote 
or induce sales of the foreign corporation's goods or services;
(5) dealings in real estate: holding, acquiring, leasing, or disposing of any 
property located in Texas;
(6) shows and performances: the staging of shows, theatrical performances, or 
other events within Texas;
(7) transportation:
(A) carrying passengers or freight (any personal property including oil and gas 
transmitted by pipeline) from one point in Texas to another point within the 
state, if pickup and delivery, regardless of origination or ultimate 
destination, occurs within Texas; or
(B)  having facilities and/or employees, independent contractors, agents, or 
other representatives in Texas, regardless of whether they reside in Texas:
(i) for storage, delivery, or shipment of goods;
(ii)  for servicing, maintaining, or repair of vehicles, trailers, containers, 
and other equipment;
(iii) for coordinating and directing the transportation of passengers or 
freight; or
(iv) for doing any other business of the corporation;
(8) franchisors: entering into one or more contracts with persons, corporations, 
or other business entities located in Texas, by which:
(A) the franchisee is granted the right to engage in the business of offering, 
selling, or distributing goods or services under a marketing plan or system 
prescribed in substantial part by the franchisor; and
(B) the operation of a franchisee's business pursuant to such plan is 
substantially associated with the franchisor's trademark, service mark, trade 
name, logotype, advertising, or other commercial symbol designating the 
franchisor or its affiliate;
(9) processing: assembling, processing, manufacturing, or storing goods in 
Texas;
(10) advertising: entering Texas to purchase, place, or display advertising when 
the advertising is for the benefit of another and in the ordinary course of 
business (e.g., the foreign corporation makes signs and brings them into Texas, 
sets them up, and maintains them);
(11) contracting for processing and shipment: sending materials to a Texas 
manufacturer, processor, repairer, or printer to be processed and stored in 
completed form awaiting orders for their shipment;
(12)  foreign corporations as partners:
(A) acting as a general partner in a general partnership which is doing business 
in Texas;
(B) acting as a general partner in a limited partnership which is doing business 
in Texas (A foreign corporation which is a limited partner in a limited 
partnership is not doing business in Texas.);
(13) loan production activities: soliciting sales contracts or loans, gathering 
financial data, making credit checks, or performing other financial activities 
in Texas through employees, independent contractors, or agents, regardless of 
whether they reside in Texas;
(14) holding companies: maintaining a place of business in Texas or managing, 
directing, and/or performing services in Texas for subsidiaries or investee 
corporations;
(15) place of business: maintaining a place of business in Texas;
(16) federal enclaves: doing business in any area within Texas, even if the area 
is leased by, owned by, ceded to, or under the control of the federal 
government;
(17) consignments: having consigned goods in Texas;
(18) delivering: delivering into Texas items it has sold;
(19) leasing: leasing tangible personal property which is used in Texas.
(d) See sec.3.542 of this title (relating to Exemption: Trade Show) for 
information concerning exemption under the Tax Code, sec.171.084.
sec.3.547. Taxable Capital: Accounting Methods.
(a) Effective date. The provisions of this section apply to franchise tax 
reports originally due on or after January 1, 1988.
(b) Taxable capital application. The provisions of this section apply to the 
determination of gross receipts and surplus for taxable capital.
(c) General rules. The provisions of this subsection apply to both the generally 
accepted accounting principles (GAAP) and federal income tax methods.
(1) A corporation is required to use the same accounting method in computing 
gross receipts as it uses in computing surplus. Accounting method is the method 
of allocating the cost, benefit, or expense of an asset or liability to 
accounting periods.
(2) Regardless of any requirements or allowances under GAAP or the Internal 
Revenue Code, the calculation of franchise tax shall be performed in accordance 
with all applicable provisions of the Tax Code, Chapter 171, and related rules 
of this title.
(3) The financial condition as of the date required by the Tax Code, 
sec.171.153, must be determined by GAAP or other methods required by the Tax 
Code, Chapter 171, and related rules of this title, for all transactions through 
such date.
(4) The filing of a report using either the GAAP method or the federal income 
tax method shall constitute an irrevocable election of such method for the 
reporting period.
(5) A corporation's eligibility to report under the federal income tax method 
will determine whether it can change from the GAAP method to the federal income 
tax method, or vice versa, in a subsequent reporting period. Unless otherwise 
specified in this paragraph, a corporation cannot change accounting methods more 
often than once every four years without the written consent of the comptroller.
(A) A corporation that is eligible to report under the federal income tax method 
may change from the GAAP method to the federal income tax method once every four 
years. The corporation shall revert to the GAAP method within the next four 
years only if it loses its eligibility to use the federal income tax method.
(B) A corporation eligible to report under the federal income tax method may 
change from the federal income tax method to the GAAP method once every four 
years. The corporation cannot change back to the federal income tax method 
during the next four years.
(C) A corporation that loses its eligibility to report under the federal income 
tax method and has to report under the GAAP method may revert to the federal 
income tax method in a subsequent reporting period if it regains its eligibility 
to use that method.
(6) A corporation may not amend its franchise tax report after the due date of 
that report except as indicated in this paragraph. These provisions apply to 
those returns not barred by the statute of limitations.
(A) An amended report may be filed to correct an accounting error. An accounting 
error results from a mathematical mistake, a mistake in the application of 
accounting principles in effect on the date on which the tax is based, or an 
oversight or unintentional misuse of facts that existed on the date on which the 
tax is based. Subsequent events (i.e., events or transactions occurring after 
the date on which the report is based) will not be considered, even if the 
subsequent event provides additional evidence with respect to conditions that 
existed on the date upon which the tax is based.
(B) If the courts invalidate a statutory provision, rule, or agency policy, or 
if the comptroller invalidates a rule or agency policy, a corporation may amend 
reports in accordance with the court or administrative decision. Amendments 
filed under this subparagraph would not be restricted by any other provisions of 
this section.
(7) The cost method of accounting must be used for investments in other 
corporations. Cost is the original valuation of the investment under GAAP, 
without reduction for amortization of goodwill or any other write-downs. 
Beginning May 1, 1989, of any tax period, the investor's share of the pre- 
acquisition retained earnings of a subsidiary or investee may not be excluded 
from the investment cost of that subsidiary or investee. Retained earnings 
represent the accumulated gains and losses of a corporation to date, reduced by 
any dividend distributed to shareholders and any amounts transferred to either 
capital stock or paid-in capital. The cost of an investee may be reduced by 
legally declared dividends of the investee to the extent that such dividends 
exceed the investee's post-acquisition earnings as determined under GAAP.
(8) Transfers of assets must be reported at the transferor's basis, as 
determined under the reporting method used for franchise tax, if allowed by 
GAAP. The transferor's basis may not, however, be reduced by unrealized, 
estimated, or contingent losses for the purposes of this subsection.
(d) Generally accepted accounting principles method.
(1) For purposes of this title, unless the context clearly requires otherwise, 
GAAP means those broad rules of accounting formally accepted by the American 
Institute of Certified Public Accountants (AICPA) or its designees through 
publication of a statement, interpretation, opinion, or research bulletin. If no 
such pronouncement has been published and is effective, such formal acceptance 
may be in the form of a written interpretation of a committee of the AICPA or 
its designee. In cases where no such interpretation has been published and is 
effective, formal acceptance may be through accepted industry accounting 
practices, publications of the Securities and Exchange Commission, publications 
of regulatory agencies, or any other means which may be shown by the taxpayer to 
indicate formal acceptance.
(2) A corporation may report its franchise tax using any allowable method 
without regard to accounting methods used for the general ledger, financial 
statements, or any other financial reports. However, factual assertions made for 
published financial statements will be presumed to be accurate unless the 
corporation or the comptroller can show the assertions are incorrect.
(3) If the majority of the voting stock of a corporation is acquired through a 
purchase, as described under GAAP, the assets and liabilities of the acquired 
corporation must be revalued based on the purchase price using GAAP (i.e., push-
down accounting must be used).
(e) Federal income tax method.
(1) If a corporation is found to be ineligible to use the federal income tax 
method (e.g., as a result of an audit by the comptroller or the Internal Revenue 
Service), the corporation will be required to report its franchise tax using the 
GAAP method.
(2) In determining if taxable capital is less than $1 million for purposes of 
the Tax Code, sec.171.109(c) and  s171.112(c), or if a corporation qualifies to 
report under the Tax Code, sec.171.113, and elects to report using the federal 
income tax method, the corporation must apply the methods used in the last 
federal income tax return originally due on or before the franchise tax report 
is originally due, unless another method is required under a specific provision 
of this title or the Tax Code, Chapter 171.
(3) Income exempt for federal income tax purposes must be included in surplus 
and receipts based on the same method used for similar items on the federal 
income tax return. Expenses which are nondeductible for federal income tax 
purposes may be excluded from surplus, if they are allowable for franchise tax 
purposes, based on the same method used for similar items on the federal income 
tax return.
(f) Temporary credit claim. If a corporation claims a credit under the Tax Code, 
sec.171.111, it must use the same GAAP method in computing taxable capital that 
is used in computing the credit. If the credit is claimed, the corporation may 
not use the federal income tax method in whole or in part in computing taxable 
capital.
sec.3.550. Taxable Capital: Stated Capital.
(a) For franchise tax purposes "stated capital" has the same meaning as defined 
in Texas Business Corporation Act. Texas Business Corporation Act, Article 1.02, 
defines "stated capital" as the sum of:
(1) the par value of all shares of the corporation having a par value that have 
been issued;
(2) the consideration fixed by the corporation in the manner provided by the 
Texas Business Corporation Act, Article 2.15, for all shares of the corporation 
without par value that have been issued, except such part of the consideration 
that is actually received therefor (which part must be less than all of that 
consideration) that the board by resolution adopted no later than 60 days after 
the issuance of those shares may have allocated to surplus; and
(3)  such amounts not included in paragraphs (1) and (2) of this subsection as 
have been transferred to stated capital of the corporation, whether upon the 
payment of a share dividend or upon adoption by the board of directors of a 
resolution directing that all or part of surplus be transferred to stated 
capital, minus all reductions from such sum as have been effected in a manner 
permitted by law.
(b) Treasury shares are included in stated capital until the shares are 
cancelled and restored to the status of authorized but unissued shares in 
accordance with the laws of the state in which a corporation is incorporated. 
See sec.3.551 of this title (relating to Taxable Capital: Surplus) for an 
explanation of how treasury shares affect surplus.
(c)  Redeemable preferred stock is included in stated capital, unless it is 
debt.
sec.3.552. Taxable Capital: In Process of Liquidation.
(a) A corporation in the process of liquidation is required to pay the taxable 
capital component of the franchise tax only upon its issued capital stock, less 
liquidating dividends actually paid to the stockholders. Both the president and 
secretary must, however, execute and file with each tax report filed during the 
period of liquidation an affidavit stipulating that the corporation is in a bona 
fide state of liquidation and also stating the amount of issued capital stock 
and the amount and date(s) of liquidating dividends actually paid to the 
stockholders. There also must be filed with the first tax report due after 
entering into the state of liquidation a copy of the plan of liquidation as 
adopted and ratified by a majority vote of the stockholders. A corporation may 
gain the benefits of the reduced taxable capital for an annual report if it 
enters a bona fide state of liquidation prior to January 1 of the reporting 
year. A corporation may gain the benefits of the reduced taxable capital for an 
initial report if it enters a bona fide state of liquidation prior to the first 
anniversary date of its charter or doing business in Texas or obtaining a 
certificate of authority, whichever one is applicable. If liquidating dividends 
paid prior to January 1 or the first anniversary date of any reporting year 
exceed the amount of issued capital stock, the corporation thereafter will have 
zero for the taxable capital component of the franchise tax.
(b) The terms "process of liquidation" and "bona fide state of liquidation" do 
not include the dissolution of a corporation by merger or consolidation with 
another corporation. The terms mean that the corporation in good faith has begun 
liquidating for the purpose of winding up its business affairs and terminating 
its legal existence. If the corporation does not terminate its business affairs 
and dissolve the corporation in accordance with the plan of liquidation, the 
corporation shall be liable for the difference in the amount of tax reported and 
paid pursuant to the plan of liquidation and the amount of tax that otherwise 
should have been reported and paid, plus applicable penalties and interest on 
such difference.
sec.3.553. Taxable Capital: Oil and Gas Reserves.
(a) The provisions of this section apply only to the computation of taxable 
capital.
(b) Corporations with $1 million or more in taxable capital must choose one of 
the following four methods for estimating the volume of oil and gas reserves to 
be used in amortizing intangible drilling costs for franchise tax reports 
originally due on or after January 1, 1988.
(1) Reserves per Securities Exchange Commission reporting. The estimates of 
reserves used by the corporation in complying with Securities Exchange 
Commission (SEC) Regulation SX 210.4-10, or a subsequent regulation which 
supersedes this regulation.
(2)  Evaluation by registered engineer. An evaluation of the volume of reserves 
performed by a person who is an engineer registered with the State Board of 
Registration for Professional Engineers under Texas Civil Statutes, Article 
3271a, or under a comparable law of the jurisdiction in which the property being 
evaluated is located, and who is proficient in petroleum engineering.
(3)  Volume per ad valorem valuation.
(A) The volume of reserves calculated for ad valorem tax purposes by the central 
appraisal district for the Texas county in which the property being evaluated is 
located.
(B) The volume of reserves calculated for ad valorem tax purposes by a property 
taxing jurisdiction outside of Texas in which the property being evaluated is 
located, provided:
(i) the out-of-state jurisdiction's law requires a complete and full evaluation 
of reserves that is reasonably comparable to that required by Texas law; and
(ii) the other jurisdiction provides corporations a convenient opportunity to 
contest such evaluations prior to formal suit in a court of law and in a manner 
reasonably comparable to that provided under Texas law.
(4) Volume per standard industry reserve estimating equations. An evaluation 
performed by the corporation using the following standard industry reserve 
estimating equations, with the following qualifications.
(A) For oil wells.
(i) Wells under five years old. For wells that have been producing for less than 
five years, the corporation shall calculate oil reserves attributable to the 
corporation's property using the industry standard exponential decline equation.
(ii)  Wells over five years old. For wells that have been producing for over 
five years, the corporation may have the option of using the industry standard 
exponential decline equation as in clause (i) of this subparagraph, or 
calculating oil reserves attributable to the corporation's property using the 
industry standard hyperbolic decline equation.
(iii) All wells.
(I) Calculations using the exponential and hyperbolic decline equations shall be 
based on production data submitted to the Texas Railroad Commission under Texas 
law, or on data comparable to that submitted to the Texas Railroad Commission 
but submitted to another jurisdiction under that jurisdiction's law, where 
applicable.
(II) Production data and estimated decline rates used to calculate reserves for 
ad valorem tax purposes by a central appraisal district for the Texas county in 
which a property is located are acceptable substitutes for such data obtained 
directly from the Texas Railroad Commission. The corporation may obtain 
comparable data used to calculate reserves for ad valorem tax purposes by a 
property taxing jurisdiction outside of Texas in which the property being 
evaluated is located, provided:
(-a-)<ol> the out-of-state jurisdiction's law requires a complete and full 
evaluation of reserves that is reasonably comparable to that required by Texas 
law; and
(-b-) the other jurisdiction provides corporations a convenient opportunity to 
contest such evaluations prior to formal suit in a court of law and in a manner 
reasonably comparable to that provided under Texas law.
(III) All corporations opting to perform their own evaluations using the 
exponential or hyperbolic decline equations shall use an abandonment flow rate 
of 1.5 barrels per day per well. Corporations using a higher abandonment flow 
rate are required to justify such deviations based on regional, economic, or 
well-specific criteria. The burden of proof in supporting such deviations shall 
rest with the corporation.
(B) For gas wells.
(i)  Exponential decline method. For gas wells, the corporation may calculate 
gas reserves attributable to the corporation's property using the industry 
standard exponential decline equation. All corporations electing to use this 
method must use a reasonable abandonment flow rate based on regional, economic, 
or well-specific criteria. The burden of proof in supporting the abandonment 
flow rate shall rest with the corporation.
(ii) P/Z reserves method. As an alternative to using the exponential decline 
equation in clause (i) of this subparagraph, the corporation may calculate gas 
reserves attributable to the corporation's property by using the industry 
standard equation for curve fitting the decline of reservoir pressure versus 
cumulative production. Abandonment pressures must be reasonably related to the 
local pipeline pressures. A graph of p/z versus cumulative production shall be 
extrapolated to the abandonment pressure point. Using this method, reserves 
equal the cumulative production at abandonment minus the cumulative production 
to date.
(iii)  Rules applicable to either method.
(I) Calculations using the exponential decline or the p/z reserves methods shall 
be based on production data submitted to the Texas Railroad Commission under 
Texas law, or on data comparable to that submitted to the Texas Railroad 
Commission but submitted to another jurisdiction under that jurisdiction's laws, 
where applicable.
(II)  Production data and estimated decline rates used to calculate reserves for 
ad valorem tax purposes by the central appraisal district for the Texas county 
in which a property is located are acceptable substitutes for data obtained 
directly from the Texas Railroad Commission. The corporation may obtain 
comparable data used to calculate reserves for ad valorem tax purposes by a 
property taxing jurisdiction outside of Texas in which the property being 
evaluated is located, provided:
(-a-) the out-of-state jurisdiction's law requires a complete and full 
evaluation of reserves that is reasonably comparable to that required by Texas 
law; and
(-b-) the other jurisdiction provides taxpayers a convenient opportunity to 
contest such evaluations prior to formal suit in a court of law and in a manner 
reasonably comparable to that provided under Texas law.
(c) The method chosen to calculate the volume of reserves must be used to 
amortize intangible drilling costs under the successful efforts or full- cost 
methods of accounting, as described in SEC Regulation SX 210.4-10.
(d) Requests made to central appraisal districts for oil and gas reserve volume 
calculated for ad valorem purposes should be made on the form set out in Exhibit 
A as follows. It is the responsibility of each corporation to correctly identify 
the property on which a reserve volume is requested. Appraisal districts will 
only provide an aggregate volume for a property. Each corporation must break out 
its fractional interest in the reserve volume provided by the appraisal 
district.

sec.3.554. Earned Surplus: Nexus.
(a) A foreign corporation is liable for the franchise tax if it is authorized to 
do business in this state or if it is actually doing business in this state.
(b) A corporation is doing business in this state, for the earned surplus 
component of the franchise tax, when it has sufficient contact with this state 
to be taxed without violating the United States Constitution. A corporation may 
be subject to the taxable capital component, but not the earned surplus 
component, because of Public Law 86-272. See sec.3.546 of this title (relating 
to Taxable Capital: Nexus) for the nexus standards for the taxable capital 
component of the franchise tax.
(c) If the only business activity within this state is the solicitation of 
orders for sales of tangible personal property, which orders are sent outside 
the state for approval or rejection, and, if approved, are filled by shipment or 
delivery from a point outside this state, then the corporation is not subject to 
the earned surplus component of the franchise tax.
sec.3.559. Earned Surplus: Temporary Credit.
(a) Provisions. The provisions of this section apply to franchise tax reports 
originally due after January 1, 1992.
(b) Definitions. The following words and terms, when used in this section, shall 
have the following meanings, unless the context clearly indicates otherwise.
(1) Accounting methods-The method of allocating the cost, benefit, or expense of 
an asset or liability to accounting periods. For purposes of the credit under 
sec.171.111, the accounting method used to calculate the temporary difference 
under the Tax Code, sec.171.111, must be in accordance with GAAP. A change in 
accounting method includes the method used to allocate assets and liabilities to 
accounting periods or changes in estimates used in calculating the amount of the 
timing difference under the Tax Code, sec.171.111(b)(1). The disposition of an 
asset or liability through a sale, trade, abandonment, or other similar 
situation is not considered a change in an accounting method.
(2) Correction of an error-For purposes of computing timing differences under 
this section, the correction of an error resulting from mathematical mistakes, 
mistakes in the application of accounting principles, or an oversight or 
unintentional misuse of facts that existed on the computation date.
(3) Generally accepted accounting principles (GAAP)  -For the purposes of this 
title, unless the context clearly requires otherwise, GAAP means those broad 
rules of accounting formally accepted by the American Institute of Certified 
Public Accounts (AICPA) or its designees through publication of a statement, 
opinion, interpretation, research bulletin, and the like.
(4) Investee corporation-A corporation which issues voting stock held by an 
investor.
(5) Timing differences-Temporary differences as defined in Statement of 
Financial Accounting Standards Number 96 (SFAS 96) as amended effective January 
1, 1992, which will reverse at some future date (unless otherwise provided under 
the Tax Code, Chapter 171, this section, or other sections applicable to the Tax 
Code, Chapter 171).
(A)  Events and transactions which do not result in differences between the 
basis of an asset or liability for financial and income tax purposes do not 
qualify as timing differences even if a provision for income tax is required for 
financial accounting purposes.
(B) A timing difference is considered to reverse at some future date if such 
difference results in income, deductions, expenses, or credits for financial 
accounting or federal income tax purposes which offset the difference in basis 
in future accounting years. Differences whose reversal are under the control of 
the taxpayer do not qualify as timing differences.
(C) For the purposes of this section, deferred investment tax credits, allowance 
for funds used during construction, and basis differences for which tax 
provisions are not required under SFAS 96, as amended effective January 1, 1992, 
do not qualify as temporary differences.
(c) Notice of intent.
(1) The notice of intent to preserve the right to claim the temporary credit 
under the Tax Code, sec.171.111, must be submitted to the comptroller on forms 
specified by the comptroller. The for must be filed on or before March 2, 1992 
(because March 1, 1992, falls on a Sunday). The postmark date (or meter-mark 
date, if there is no postmark) on the envelope in which the form is received 
determines the date of filing.
(2) The corporation must submit with the notice of intent the amount of timing 
differences determined under the Tax Code, sec.171.111(b)(1). The amount of such 
differences may be estimated if no final determination of such amount is 
available at the date of filing of the notice of intent. Although corrections of 
errors (as defined in this section) in calculating such timing differences may 
be made on reports within the period of limitations, changes in accounting 
methods will not be considered a correction of an error in calculating such 
differences. The corporation will be liable for any applicable penalty and 
interest if the amount of timing differences determined results in an 
underpayment of tax.
(3) The preservation of the right to claim the credit may not be conveyed, 
assigned, or transferred to another entity.
(d) Electing the credit.
(1) The election to claim the credit is a one-time election. If the election is 
revoked, the credit may not be claimed on any reports originally due on or after 
the date the election is revoked.
(2) A corporation elects the credit by:
(A) properly taking the credit in computing the tax on earned surplus and paying 
the additional tax due under the Tax Code, sec.171.111(h), on a report filed on 
or before the original due date; or
(B) electing the credit on a timely filed extension request and complying with 
the requirements of subparagraph (A) of this paragraph on the report filed on or 
before the extended due date of the report.
(3) If a corporation elects the credit on a report on which the corporation was 
ineligible for the credit based on the provisions of this section or the Tax 
Code, Chapter 171, the corporation is treated as though the election was not 
made. The corporation will be liable for any applicable penalty and interest for 
underpayment of tax.
(4) The allowable credit on reports due within the limitation period as 
specified in sec.3.571 of this title (relating to Statute of Limitations) is 
subject to adjustment even if the initial election to take the credit is outside 
the period of limitations under sec.3.571 of this title.
(e) Computation of the credit.
(1) If the credit under the Tax Code, sec.171.111, is claimed, the corporation 
is required to use the GAAP method in computing taxable capital unless another 
method is required under the Tax Code, Chapter 171, or the sections promulgated 
thereto. If another method is required under the Tax Code, Chapter 171, or the 
franchise tax rules, the corporation must use the required franchise tax methods 
in computing timing differences. For example, a corporation must use the cost 
method of accounting for investments in other corporations in computing timing 
differences. If the credit is claimed, the corporation may not use the federal 
income tax method in whole or in part in computing taxable capital.
(2) The amount subject to the credit determined under the Tax Code, 
sec.171.111(b)(1), is the excess of the basis of qualifying assets and 
liabilities for financial accounting purposes over the basis of qualifying 
assets and liabilities for federal income tax purposes. Amounts not allowed as 
temporary differences under this section or Tax Code, sec.171.111, shall be 
excluded from the computation of the amount subject to credit. The corporation 
must include all assets and liabilities in computing the credit under the Tax 
Code, sec.171.111 (i.e., the corporation can not compute the differences for 
only certain assets and/or liabilities).
(f) Revocation of the election. The election and right to claim the credit under 
the Tax Code, sec.171.111, is revoked at the earliest of the following 
occurrences:
(1) after making a valid election:
(A) the corporation notifies the comptroller in writing that the election is 
revoked;
(B) the corporation fails to claim the credit on a subsequent report or fails to 
report the additional tax due under the Tax Code, sec.171.111(h), on a 
subsequent report; or
(C) the corporation uses the federal income tax method in reporting taxable 
capital; or
(2) when calculating taxable capital, the corporation changes the accounting 
method for any asset or liability used in determining the temporary differences 
under the Tax Code, sec.171.111(b)(1). Other changes in accounting methods are 
subject to the requirements of sec.3.547 of this title (relating to Taxable 
Capital: Accounting Methods); or
(3) the corporation is the nonsurvivor of a merger or consolidation or the 
corporation terminates its existence for any other reason.
(g) Temporary credit. The temporary credit is not available when computing the 
additional tax under the Tax Code, sec.171.0011.
sec.3.561. Enterprise Zones.
(a) Except as otherwise provided in this section, the provisions of this section 
apply to franchise tax reports originally due on or after September 1, 1991.
(b) The following words and terms, when used in this section, shall have the 
following meanings, unless the context clearly indicates otherwise.
(1) Enterprise project-A qualified business designated by the Texas Department 
of Commerce as an enterprise project under the Texas Enterprise Zone Act (Texas 
Civil Statutes, Article 5190.7) that is eligible for the state tax incentives 
provided by law for an enterprise project.
(2) Enterprise zone-An area of the state designated by the Texas Department of 
Commerce as an enterprise zone under the Texas Enterprise Zone Act (Texas Civil 
Statutes, Article 5190.7).
(3)  New job-A new employment position that is:
(A) created by a qualified business that has provided employment to a qualified 
employee of at least 1,040 hours annually; and
(B) intended to be an employment position retained during the period the 
business is designated as an enterprise project.
(4) Qualified business-A person, including a corporation or other entity, that 
the Texas Department of Commerce certifies has met the necessary criteria 
specified under the Texas Enterprise Zone Act (Texas Civil Statutes, Article 
5190.7).
(5) Qualified employee-An employee who works for a qualified business and who 
performs at least 50% of his service for the business within the enterprise 
zone.
(6) Qualified investment-Capital equipment or other investment that qualifies 
for depreciation for federal income tax purposes and that is placed in service 
in the enterprise zone not earlier than the 90th day before the date of 
designation as an enterprise project. The investment must be used in the normal 
course of business in the enterprise zone and must not be removed from the zone, 
except for repair and maintenance.
(c) A corporation may apply for a refund under the Tax Code, sec.171.501, each 
year that it is certified as eligible for refund by the Texas Department of 
Commerce.
(d) The comptroller shall issue a refund under the Tax Code, sec.171.501, after 
receiving certification from the Texas Department of Commerce that a qualified 
business has created 10 or more new jobs for qualified employees in its 
enterprise zone. The 10 or more new jobs must have been created during the 
calendar year containing the accounting year end on which the franchise tax 
report is based. For example, a corporation with a June 30, 1992, accounting 
year end would be eligible for a refund of franchise tax paid on its 1993 annual 
report if 10 or more new jobs are created during the 1992 calendar year.
(e) If a corporation is eligible for a refund under the Tax Code, sec.171.501, 
on its initial report and that report includes a regular annual period, the 
corporation will be entitled to two refunds:
(1) a refund for the initial and second periods; and
(2) a refund for the regular annual period.
(f) Claims for refund under this section must be on the form provided by the 
comptroller for that purpose. The claim must indicate the report year in which 
franchise tax was paid. The claim must include certification from the Texas 
Department of Commerce that 10 or more new jobs have been created during the 
applicable calendar year.
(g) A corporation that the Texas Department of Commerce has certified to be a 
qualified business eligible for a tax deduction may elect to reduce either its 
apportioned taxable capital or apportioned taxable earned surplus in accordance 
with the Tax Code, sec.171.1015, on each report based on a fiscal year during 
all or part of which the corporation is designated an enterprise project. An 
election for an initial period applies to the second tax period and to the first 
regular annual period. This requirement is applicable to the first regular 
annual period whether it is included in the corporation's initial report or 
first annual report. Otherwise, the election will not be binding on the 
corporation for future reports.
(1) The deduction from apportioned taxable capital is limited to 50% of the 
depreciated value of qualified investments. For example, a corporation with a 
June 30 fiscal year end is designated as an enterprise project on January 3, 
1991. The corporation's 1992 annual report (based on its June 10, 1991, fiscal 
year end) would be the first report in which it would be eligible for a taxable 
capital deduction under the Tax Code, sec.171.1015. The deduction would apply to 
qualified investments placed in service in the enterprise zone on or after 
January 3, 1991.
(2) The deduction from apportioned taxable earned surplus is limited to 5.0% of 
the depreciated value of qualified investments. For example, a corporation with 
a June 30 fiscal year end is designated as an enterprise project on January 3, 
1991. The corporation would be eligible for the earned surplus deduction on its 
1992 annual report (based on its June 30, 1991, fiscal year end) under the Tax 
Code, sec.171.1015. The deduction would apply to qualified investments placed in 
service in the enterprise zone on or after January 3, 1991.
(h) A corporation must retain records substantiating its apportioned taxable 
capital or apportioned earned surplus deduction. The records must be verifiable 
by audit and include copies of invoices showing the items purchased, the date of 
purchase, and the cost of the purchase. The records must also reflect the 
depreciated value of the items purchased and show that these items were placed 
in service in the zone after the corporation's designation as an enterprise 
project.
(i)  A corporation receiving its enterprise project designation after August 31, 
1991, cannot claim a tax base deduction under the Tax Code, sec.171.1015, until 
after August 31, 1993. For example, a corporation with a November 30, 1991, 
fiscal year end is designated an enterprise project on September 30, 1991. The 
corporation could not claim the tax base deduction on its 1992 report until 
after August 31, 1993. An amended report would have to be filed at that time.
(j) A corporation receiving its enterprise project designation after August 31, 
1991, cannot claim a tax base deduction on any franchise tax report originally 
due on or before August 31, 1993.
sec.3.566. Title Insurance Holding Companies.
(a) Controlled company. For franchise tax purposes controlled company has the 
same meaning as defined in the Insurance Code, Article 21.49-1.
(b) Eligibility. A title insurance holding company that is subject to the 
Insurance Code, Article 21.49-1, and which controls one or more domestic title 
insurance companies that are subject to the tax on premiums under the Insurance 
Code, Article 9.59, is entitled to a credit against its franchise tax imposed by 
the Tax Code, Chapter 171.
(c) Calculation of the credit.
(1) The credit for each controlled domestic title company is computed by 
multiplying the amount of tax on premiums paid by that company in the most 
recent calendar year ending before the franchise tax report is due, by the 
percentage of ownership of the title insurance holding company in the controlled 
domestic title insurance company.
(2) The percentage of ownership of a controlled domestic title insurance company 
is determined as of the accounting year-end upon which taxable capital is based.
(d) Limitations. No portion of a credit may be used on a report for another 
period.
(e) Additional tax. No credit is allowed against the additional tax computed 
under the Tax Code, sec.171.0011.
(f)  Effective date. The tax credits provided by the Insurance Code, Article 
9.59, apply to the reporting and calculation of franchise taxes for each 
initial, second, and regular annual period beginning on or after January 1, 
1990.
sec.3.568. Changes in Corporate Organization.
(a) Every domestic corporation seeking to dissolve under Texas Business 
Corporation Act, Article 6.07, and every foreign limited liability company 
seeking to withdraw under Texas Limited Liability Company Act, Article 7.10, 
must obtain a certificate (see sec.3.569 of this title (relating to Requests for 
Information)) from the comptroller stating that all taxes administered by the 
comptroller have been paid through the effective date of such dissolution or 
withdrawal.
(b)  Every corporation is required to pay all franchise tax, penalty, and 
interest through the end of the privilege period containing the effective date 
of the dissolution, merger, withdrawal, or reinstatement. A refund will not be 
paid nor credit given to the corporation for the period from the date of 
dissolution, merger, or withdrawal through the end of the privilege period. See 
sec.3.565 of this title (relating to Survivors of Mergers) for possible credit 
to which a survivor of a merger may be entitled. See sec.3.567 of this title 
(relating to Additional Tax on Earned Surplus) for information about the 
additional tax which must be paid before dissolution, merger, or withdrawal.
(c) If a corporation doing business in Texas is dissolved under the laws of its 
state of incorporation, its franchise tax account will be closed as of the date 
of the dissolution, and tax must be paid through the end of the period in which 
the corporation dissolved.
(d) Before the name of a corporation may be changed on the records of the 
comptroller, an amendment to the corporation's charter or certificate of 
authority must be filed with the Texas Secretary of State. A foreign corporation 
without a certificate of authority may change its name on the records of the 
comptroller by filing with the comptroller a copy of the name change document 
filed in the corporation's home state.
sec.3.570. Liens.
(a) Franchise tax liens are filed and recorded in accordance with the Tax Code, 
Chapter 113. If the filing and recording of the lien resulted from a 
corporation's failure to file franchise tax reports and make franchise tax 
payments when due, payment solely of the amount reflected in the lien, as 
recorded, is insufficient to release the lien. Before the lien will be released, 
all delinquent reports must be filed and all taxes, penalties, and interest 
shown to be due must be paid.
(b) A lien is routinely filed in each county in which it is known that the 
delinquent corporation owns property. A lien filed as the result of forfeiture 
of a corporation's corporate privileges in Texas will be routinely and 
automatically released upon revival of the corporation's corporate privileges. 
Revival is accomplished when the corporation files all delinquent franchise tax 
reports and pays all delinquent taxes, penalties and interest. However, a 
corporation must request release of a lien filed against its property under any 
other circumstances.
(c) Where a lien secures more than one lot or tract of land, a release of the 
lien against any one of the lots or tracts owned by a corporation may be given 
by the comptroller in accordance with the provisions of the Tax Code, 
sec.113.008.
(d) If a franchise tax lien is filed and recorded against the property of the 
registered agent of a corporation or other individual, a release will be 
furnished to the individual, discharging him from all responsibility as regards 
the state's lien. The release, however, will expressly maintain and continue in 
full force and effect the state's lien against the property of the corporation.
(e) Where a lien is based on a court judgment in which a specific amount of 
taxes, penalties, and interest is awarded to the state, the judgment and 
franchise tax lien will be released upon payment by the corporation of the 
specific amount awarded by the judgment, plus payment of any court costs awarded 
to the state and of interest from the date of the judgment until the date of 
payment by the corporation.
(f) A franchise tax lien filed after January 1, 1970, is subject to the rule of 
"first in time, first in right," but is cumulative and covers franchise tax 
accruing after filing of the lien. Federal court decisions may vary this rule 
with regard to federal liens.
(1) The comptroller may issue a release as to a particular piece of property 
upon payment of the value of the lien, where the property is sold at a private 
sale (rather than at a foreclosure sale) and the state's lien is inferior to one 
or more prior liens. The "value of the lien" is determined in these 
circumstances by subtracting the amount of all prior liens from the sales price. 
If the total amount of the prior liens is greater than the sales price, a 
release may be given upon payment of a nominal consideration.
(2) A state tax lien is invalidated by a formal foreclosure sale under a deed of 
trust, but not under a judicial foreclosure unless the state was joined as a 
party to the proceedings. Releases are not issued for a state lien which has 
been invalidated by either of these proceedings.
sec.3.573. Special Reporting Procedures.
(a) Petition for special reporting.
(1) Permission to employ a special reporting method will not be granted unless a 
written petition is timely filed. The petition may be submitted in letter form, 
must specify the method of special reporting desired, and should be addressed to 
the Comptroller of Public Accounts, Austin, Texas 78774, Attention: Franchise 
Tax Policy Section. The petition for special reporting must incorporate or have 
attached schedules, statements, or other documentation reflecting the following 
information:
(A) a brief description of the nature of the corporation's primary business 
activities conducted within and, if substantially different, without the State 
of Texas, including indication of the number of states in which business 
activities are conducted;
(B) a brief statement of the reasons the allocation and apportionment provisions 
of the Tax Code, sec.171.106, do not fairly represent the extent of the 
corporation's business done in Texas;
(C) a schedule or schedules showing, as of the corporation's accounting year end 
date in the previous calendar year (or date upon which tax is based for 
corporations filing an initial report), the approximate percentage relationship 
between:
(i)  gross receipts from business done in Texas to total gross receipts from its 
entire business;
(ii) payroll expenses paid for personal services performed in Texas to total 
payroll expenses; and
(iii)  the average value of the corporation's property in Texas to the average 
value of the corporation's property everywhere;
(D) any additional information the comptroller deems necessary to make a 
determination on the petition.
(2) A petition to employ a special reporting method in the initial franchise tax 
report must be filed at least 15 days prior to the original due date of the 
report, and a petition to employ a special reporting method in an annual report 
must be no later than March 1 of the year in which the annual report is due. The 
postmark (or meter mark in the absence of a postmark) on the envelope in which 
the petition is received determines the date of filing. If the comptroller 
requires additional information in order to make a determination on the granting 
of a petition, the information must be submitted within 90 days after the 
original due date of the franchise tax report or the date of the letter 
requesting additional information, whichever is later. If the corporation does 
not timely submit the information, the petition will be considered withdrawn.
(3) A corporation which is granted permission to employ a special reporting 
method is not required to submit subsequent petitions to employ the identical 
method in subsequent annual reports. However, a new petition is required if a 
corporation desires to change from one method of special reporting to another 
method of special reporting. Permission to employ a special reporting method 
will be automatically revoked if the corporation files reports not using the 
special reporting method granted. A corporation granted special reporting may 
file a report using the single factor receipts fraction but use of the single 
factor receipts fraction automatically forfeits the privilege of using a special 
reporting method for subsequent reports unless a new petition is timely 
submitted and a substantial change in the nature of its business has occurred.
(4) It is the responsibility of each corporation granted permission to employ a 
special reporting method to advise the comptroller at least 15 days prior to the 
original due date of its next report of changes in its organizational structure 
or in the manner in which its primary business activities are conducted (e.g., 
merger, consolidation, or other reorganization) which vary from the facts 
presented in its petition for a special method of reporting. Upon receipt 
thereof, the comptroller will advise the corporation whether, in light of such 
changes, a new petition for a special reporting method is required. Failure to 
notify the comptroller will not revoke permission if the corporation is still 
eligible to use the special reporting method granted. However, if the 
comptroller does not receive notification and he discovers the corporation is no 
longer eligible for special reporting, he will revoke permission retroactively 
to the first date the corporation was no longer eligible and apply penalties 
pursuant to the Tax Code, sec.171.362.
(5)  Permission granted to one corporation may not be used for another 
corporation, nor does a corporation succeed to the permission by merger or 
consolidation.
(6) A special reporting method is not effective retroactively, and is granted 
only for a report or reports due subsequent to the filing date of the petition.
(7) Failure of a corporation to receive notification from the comptroller of the 
final determination on its petition does not relieve the corporation of 
responsibility to report and pay the tax on or before the due date, in 
accordance with the statutory formula contained in the Tax Code, sec.171.106. If 
the final determination authorizes use of a special reporting method, the 
corporation will be notified to file an amended report.
(b) Special reporting methods.
(1) Separate accounting means the taxation as a separate entity of a distinctly 
identifiable segment of a corporation, which segment is located entirely within 
Texas and performs all of the corporation's business activities carried on in 
Texas. A corporation will not be granted separate accounting unless it 
demonstrates that the franchise tax due from the segment would be the same as 
that which would be due if the segment were a separately incorporated entity and 
that only separate accounting will fairly represent the corporation's business 
in Texas. The separately accounted for segment must, at a minimum, maintain a 
separate set of books and records of account, including financial statements, 
which reflect the business activities of the segment apart from that of the 
corporation, such as by making provision for overhead and all other proper 
charges. The corporation petitioning for separate accounting must also establish 
as a base amount of taxable capital the net worth at the time the petition is 
due of the segment to be separately accounted for. The net worth of the segment 
is its total assets less liabilities attributable to the segment's operations. 
The corporation will be required to separately accumulate net earnings 
attributable to the segment's operations, allowing only a pro rata share of 
dividends declared by the corporation as a whole to be deducted from the 
segment's annual net earnings. Such pro rata share will be determined based on 
the ratio of the segment's annual net earnings to the corporation's annual net 
earnings as a whole.
(2) The use of the three-factor or alternate two-factor formula, as described in 
subsection (c) of this section, is the usual method of special reporting granted 
by the comptroller. The three-factor or alternate two-factor formula will be 
granted by the comptroller if a corporation meets all requirements for special 
reporting set out in this rule.
(3) The employment of any other method to allocate and apportion a corporation's 
capital will be permitted by the comptroller only in specific cases where 
unusual fact situations (which ordinarily will be unique and nonrecurring) 
produce incongruous results under the special reporting methods authorized by 
the Tax Code, sec.171.108(1) and (2). The burden will be upon the petitioning 
corporation to prove that the statutory apportionment does not fairly represent 
the corporation's percentage of Texas business and that the proposed allocation 
method will equitably allocate its business to Texas.
(c) Three-factor or alternate two-factor formula. The comptroller may approve a 
three-factor formula which allocates a corporation's taxable capital to Texas by 
multiplying such capital by a fraction, the numerator of which is a gross 
receipts factor plus a payroll factor plus a property factor, and the 
denominator of which is three. However, if there is no payroll attributed to 
Texas, or if there is no property attributed to Texas, an alternate two-factor 
formula may be approved in which the numerator does not include a factor for the 
zero item, and the denominator of the fraction must be two. If neither payroll 
nor property is attributable to Texas, a three-factor or alternate two-factor 
formula as otherwise provided in this subsection may not be employed. The 
composition of each of the factors shall be determined as follows.
(1) The gross receipts factor is a fraction, the numerator of which is the 
corporation's gross receipts from its business done in Texas and the denominator 
of which is the corporation's total gross receipts from its entire business, 
both as prescribed in the Tax Code, sec.171.103 and sec.171.105. In determining 
such gross receipts, no distinction shall be made between business income and 
nonbusiness income. Receipts of subsidiaries or other related corporations or 
business entities may not be included in the fraction.
(2)  The payroll factor is a fraction, the numerator of which is the total 
amount of wages, salaries, or other type compensation paid by the corporation to 
its officers and employees for personal services in Texas during its accounting 
year, and the denominator of which is the total such compensation paid 
everywhere during the accounting year. A corporation must include in this 
fraction the total compensation paid by the corporation to its officers and 
employees even though such individuals may also perform some services for the 
corporation's parent, subsidiaries, or other business entities. Compensation is 
not reduced by the amount that is capitalized rather than expensed for book 
purposes. Wages, salaries, or other compensation is paid for personal services 
in Texas if:
(A) the individual's service is performed entirely within Texas;
(B) the individual's service is performed both within and without Texas, but the 
service performed without the State of Texas is incidental to the service within 
Texas; or
(C) some of the service is performed in Texas and:
(i) the base of operations or, if there is no base of operations, the place from 
which the service is directed or controlled is in Texas; or
(ii) the base of operations or the place from which directed or controlled is 
not in any state in which some part of the service is performed, but the 
individual's residence is within Texas.
(3) The property factor is a fraction, the numerator of which is the average 
value of the corporation's real property and tangible personal property owned or 
rented and used in Texas during the corporation's accounting year, and the 
denominator of which is the average value of all the corporation's real property 
and tangible personal property owned or rented and used everywhere during such 
period. Property owned is valued at its original cost; property rented is valued 
at eight times the annual rental rate paid by the corporation less any annual 
rental rate received by the corporation from subrentals. The average value of 
property is determined by averaging the values at the beginning and ending of 
the corporation's accounting year. However, the comptroller may require other 
methods of determining average value if reasonably required to reflect fairly 
the average value of the corporation's property.
(d) Schedules to accompany special reporting. Each franchise tax report 
employing the three-factor formula must be accompanied by a schedule in the 
format shown in Exhibit A, reflecting the exact figures used in arriving at the 
percentage of business in Texas. If the report is based on some other special 
reporting method, a schedule must be furnished showing the figures and other 
details used in arriving at the amount of tax reported by the corporation. The 
phrase "SPECIAL REPORTING" must appear above the corporate name on each report.
(e)  Repeal of special reporting method. The special reporting method previously 
provided for in the Tax Code,  s171.108, has been repealed. The repeal of Tax 
Code, sec.171.108, is effective beginning May 1, 1989, of any tax period. The 
provisions of this rule are continued in effect prior to this date only.
[graphic]
sec.3.574. $100 Prepayments.
(a) Repeal. The $100 franchise tax prepayment required by the Tax Code, 
sec.171.155, is not required for corporations incorporating or applying for a 
certificate of authority after December 31, 1991.
(b) Prepayment.
(1) Prior to and as a precondition to receiving a charter or certificate of 
authority from the Secretary of State of Texas, each domestic corporation 
incorporating under the Texas Business Corporation Act or the Texas Professional 
Corporation Act or a foreign corporation qualifying under the Texas Business 
Corporation Act must make a prepayment in the amount of $100 to the Comptroller 
of Public Accounts. This prepayment will be collected by the secretary of state 
at the time a charter or certificate of authority application is submitted for 
approval.
(2) The $100 prepayment may not be refunded in whole or in part for any reason 
after the charter or certificate of authority has been issued by the secretary 
of state.
(3) Domestic corporations organized under the Texas Nonprofit Corporation Act 
and foreign corporations issued a certificate of authority under such Act are 
not required to pay the initial franchise tax deposit prescribed in this 
section.
(c) Filing the initial franchise tax report. Each corporation subject to this 
section shall file its initial franchise tax report and pay the amount of tax 
shown thereon to be due and payable. The prepayment prescribed by the Tax Code, 
sec.171.155, shall be applied as a credit against the tax computed on the 
initial franchise tax report and subsequent reports. This credit will be 
preprinted on the initial franchise tax report mailed to each corporation.
(d) Extensions. Extensions of time within which to make the prepayment shall not 
be granted.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 18, 1991.
TRD-9116102
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-4028
       
TITLE 37. PUBLIC SAFETY AND CORRECTIONS
Part III. Texas Youth Commission
Chapter 119. Agreements With Other Agencies
Memorandums of Understanding
37 TAC sec.119.5
The Texas Youth Commission (TYC) proposes an amendment to sec.119.5, concerning 
service contracts for dysfunctional families. The purpose of the amendment is to 
require TYC, the Texas Department of Human Services (DHS), and the Texas 
Juvenile Probation Commission (TJPC) to continue complying with the Human 
Resources Code (HRC), sec.71.011(A), as passed by the 71st Texas Legislature. 
The agencies initially complied with the law by adopting sec.72.901 in 1990. The 
amendment also allows the agencies to continue applying the section without 
having to amend it every year. Finally, the amendment clarifies that the MOU is 
operative only in those years when state appropriations are sufficient for the 
agencies to allocate funds for joint contracts for services to dysfunctional 
families.
John Franks, Director of Fiscal, has determined that for the first five-year 
period the proposed section is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
section.
Mr. Franks also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be that dysfunctional families are ensured that they will continue 
receiving coordinated services when the agencies have sufficient funding to 
enter into joint contracts. There will be no effect on small businesses as a 
result of enforcing or administering the section. There is no anticipated 
economic cost to persons who are required to comply with the section.
Comments on the proposal may be submitted to Gail Graham, Texas Youth 
Commission, 4900 North Lamar Boulevard, P.O. Box 4260, Austin, Texas 78765.
The amendment is proposed under the Human Resources Code, sec.71.011(a), which 
provides Texas Youth Commission with the authority to enter into a memorandum of 
understanding with the DHS and TJPC regarding service delivery to dysfunctional 
families.
sec.119.5 Service Contract For Dysfunctional Families.
(a) The Texas Youth Commission adopts by reference a joint memorandum of 
understanding with the Texas Department of Human Services and the Texas Juvenile 
Probation Commission regarding service delivery to dysfunctional families.
(b) The memorandum of understanding was published in the Texas Register<ol> by 
the Texas Department of Human Services on <nl>October 29, 1991, at 16 TexReg 
6126<ol> [July 24, 1990, at (15 TexReg 4198 and 4199)]. Copies of the memorandum 
of understanding are available from the Texas Youth Commission.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 16, 1991.
TRD-9116075
Ron Jackson
Executive Director
Texas Youth Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 483-5244
       
TITLE 40. SOCIAL SERVICES AND ASSISTANCE
Part I. Texas Department of Human Services
Chapter 3. Income Assistance Services
Subchapter G. Resources
The Texas Department of Human Services (DHS) proposes amendments to sec.3. 704 
and sec.3.902, concerning the exclusion of income and resources that are 
exempted by federal law for Native Americans who receive aid to families with 
dependent children (AFDC) and/or food stamp program benefits. The purpose of the 
proposed amendments is to comply with federal regulations.
Burton F. Raiford, interim commissioner, has determined that for the first five-
year period the sections are in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the 
sections.
Mr. Raiford also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be AFDC and food stamp policy that is in compliance with 
federal regulations. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the 
sections as proposed.
Comments on the proposal may be submitted to Rita King at (512) 450-4148 in 
DHS's Client Self-Support Services. Comments on the proposal may be submitted to 
Nancy Murphy, Agency Liaison, Policy and Document Support-353, Texas Department 
of Human Services E-311, P.O. Box 149030, Austin, Texas 78714-9030, within 30 
days of publication in the Texas Register .
40 TAC sec.3.704
amendment is proposed under the Human Resources Code, Title 2, Chapters 22 and 
31, which provides the department with the authority to administer public 
assistance and financial assistance programs.
sec.3.704. Types.
(a) (No change.)
(b) Aid to families with dependent children. Exclusions from resources in AFDC 
are:
(1)-(9)  (No change.)
(10) resources exempted by federal law. DHS exempts government payments by the 
Individual and Family Grant Program or the Small Business Administration 
provided to rebuild a home or replace personal possessions damaged in a 
disaster, if the household is subject to legal sanction if the funds are not 
used as intended. DHS exempts payments made under the following Acts:
(A)-(C) (No change.)
(D) <nl>Passamaquoddy <ol>[Passamagoddy] Tribe, [and] the Penobscot Nation<nl>, 
and the Houlton Band of Malisect Indians <ol>received according to the Maine 
Indian Claims Settlement Act of 1980;
(E)-(I) (No change.)
(11)-(12) (No change.)
(c)-(d) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 19, 1991.
TRD-9116173
Nancy Murphy
Agency liaison, Policy and Document Support
Texas Department of Human Services
Proposed date of adoption: April 1, 1992
For further information, please call:(512) 450-3765
       
Subchapter I. Income
40 TAC sec.3.902
The amendment is proposed under the Human Resources Code, Title 2, Chapters 22 
and 31, which provides the department with the authority to administer public 
assistance and financial assistance programs.
sec.3.902. Types.
(a) (No change.)
(b) Aid to families with dependent children. Exclusions from income for AFDC 
are:
(1)-(9)  (No change.)
(10) native and Indian claims. DHS exempts payments made under the Alaska Native 
Claims Settlement Act (Public Law 92-203, as amended by Public Law 100-241) and 
funds distributed or held in trust by the Indian Claims Commission for members 
of Indian tribes under Public Laws 92-254; 94-540; 94- 114, sec.6;  <nl>95-433; 
96-420;<ol> 98-64, sec.2; and 93-134, sec.7 (as amended by Public Law 97-458, 
sec.4);
(11)-(18) (No change.)
(c)-(d) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 19, 1991.
TRD-9116174
Nancy Murphy
Agency liaison, Policy and Document Support
Texas Department of Human Services
Proposed date of adoption: April 1, 1992
For further information, please call: (512) 450-3765
       
Chapter 72. Memoranda of Understanding with Other State Agencies
Memorandum of Understanding for Child Protective Services
40 TAC sec.72.902
The Texas Department of Human Services proposes an amendment to sec.72.902, 
concerning service delivery to runaway children, in its Memoranda of 
Understanding with Other State Agencies chapter. Section 72.902 adopts 37 TAC 
sec.341.21 by reference. The Juvenile Probation Commission (TJPC) has proposed 
an amendment to 37 TAC sec.341.21 after conducting an annual review of the 
section with DHS as required by law. TJPC's proposed amendment includes changes 
in dates, staff titles, and statutory references, and in the mean number of 
runaways reported for each county in Texas. The purpose of the amendment to 
sec.72.902 is to ensure that the section reflects existing conditions.
Burton F. Raiford, interim commissioner, has determined that for the first five-
year period the proposed section will be in effect there will be no fiscal 
implications for state or local governments as a result of enforcing or 
administering the section.
Mr. Raiford also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the improvement of local coordination of services to runaway 
children. There will be no effect on small businesses as a result of enforcing 
or administering the section. There is no anticipated economic cost to persons 
who are required to comply with the proposed section.
Questions about the content of this proposal may be directed to Thomas Chapmond 
at 450-3309 in the Protective Services for Families and Children Department. 
Comments on the proposal may be submitted to Nancy Murphy, Policy and Document 
Support-348, Texas Department of Human Services E-503, P.O. Box 149030, Austin, 
Texas 78714-9030, within 30 days of publication in the Texas Register.
The amendment is proposed under the Human Resources Code, Title 2, Chapter 22, 
which authorizes the department to administer public assistance programs, and 
Chapter 141, which authorizes the department to enter into a memorandum of 
understanding with the TJPC regarding service delivery to runaway children. 
Memoranda of Understanding for Child Protective Services
sec.72.902. Memorandum of Understanding on Service Delivery to Runaway Children.  
The Texas Department of Human Services (DHS) adopts by reference 37 TAC  s341.21 
(relating to Memorandum of Understanding on Service Delivery to Runaways)  
<nl>as amended effective January 1, 1992<ol>. This memorandum of understanding 
between the Texas Juvenile Probation Commission (TJPC) and DHS provides for TJPC 
and DHS coordination of services to runaway children at the community level.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 19, 1992.
TRD-9116175
Nancy Murphy
Agency liaison, Policy and Document Support
Texas Department of Human Services
Proposed date of adoption: March 1, 1992
For further information, please call: (512) 450-3765
       
Part II. Texas Rehabilitation Commission
Chapter 117. Special Rules and Policies
40 TAC sec.117.2
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas 
Rehabilitation Commission or in the Texas Register office, Room 245, James Earl 
Rudder Building, 1019 Brazos Street, Austin.)
The Texas Rehabilitation Commission proposes the repeal of sec.117.2, concerning 
sick leave pool, as it is be replaced by an update version of the sick leave 
pool approved by the board of the Texas Rehabilitation Commission on December 
12, 1991.
Charles Harrison, comptroller, has determined that for the first five-year 
period the repeal is in effect there will be no fiscal implications for state or 
local government as a result of enforcing or administering the repeal.
Mike Mericle, assistant deputy commissioner, human resource management, also has 
determined that for each year of the first five years the repeal is in effect 
the public benefit anticipated as a result of enforcing the repeal will be the 
repeal the old and replace with an updated sick leave pool policy. There will be 
no effect on small businesses. There is no anticipated economic cost to persons 
who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Mike Mericle, Assistant Deputy 
Commissioner, Human Resources Management, 4900 North Lamar Boulevard, Austin, 
Texas 78751.
The repeal is proposed under Texas Civil Statutes, Article 6252-8e, sec.3 
(Senate Bill 357, 71st Legislature, 1989) and the Texas Human Resources Code, 
Title 7, which provide the Texas Rehabilitation Commission with the authority to 
"...make regulations governing personnel standards, the protection of records 
and confidential information, the manner and form of filing applications, 
eligibility, investigation, and determination for hearings, and other 
regulations necessary to carry out the purpose of this chapter."
sec.117.2. Sick Leave Pool.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 19, 1991.
TRD-9116168
Charles W. Schiesser
Assistance Commissioner
Texas Rehabilitation Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 483-4051
       
The Texas Rehabilitation Commission proposes the new sec.117.2, concerning sick 
leave pool, so that an updated version of the sick leave pool may be available. 
The new policy was approved by the Texas Rehabilitation Commission on December 
12, 1991.
Charles Harrison, comptroller, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Mike Mericle, assistant deputy commissioner, human resource management, also has 
determined that for each year of the first five years the section is in effect 
the public benefit anticipated as a result of enforcing the section will be to 
provide an updated sick leave pool policy for the Texas Rehabilitation 
Commission. There will be no effect on small businesses. There is no anticipated 
economic cost to persons who are required to comply with the section as 
proposed.
Comments on the proposal may be submitted to Mike Mericle, Assistant Deputy 
Commissioner, Human Resources Management, 4900 North Lamar Boulevard, Austin, 
Texas 78751.
The new section is proposed under Texas Civil Statutes, Article 6252-8e, sec.3 
(Senate Bill 357, 71st Legislature, 1989) and the Texas Human Resources Code, 
Title 7, which provide the Texas Rehabilitation Commission with the authority to 
"...make regulations governing personnel standards, the protection of records 
and confidential information, the manner and form of filing applications, 
eligibility, investigation, and determination for hearings, and other 
regulations necessary to carry out the purpose of this chapter."
sec.117.2. Sick Leave Pool.
(a) The commission adopts by reference Commission TRC APPM 23.9, paragraph 9.5, 
General Policies; Sick Leave Pool, and an attached form.
(b) Copies are available for review in Human Resources Management, Texas 
Rehabilitation Commission, 4900 North Lamar Boulevard, Austin, Texas, 78751. 
Copies are available on request.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 19, 1991.
TRD-9116169
Charles W. Schiesser
Assistance Commissioner
Texas Rehabilitation Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 483-4051
       
Part X. Texas Employment Commission
Chapter 301. Unemployment Insurance
40 TAC sec.301.13
The Texas Employment Commission proposes an amendment to  s301.13, concerning 
commission hearings involving coverage and contributions or reimbursements. This 
rule guides the commission and the public in questions involving employer tax 
liability.
J. Ferris Duhon, legal counsel, has determined that for the first five years the 
proposed section is in effect there will be no fiscal implications for state or 
local governments as a result of enforcing or administering the section.
Mr. Duhon also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be clarification and addition of time limitation on current 
procedure allowing motions for reconsideration under the rule being amended. 
There will be no effect on small businesses as a result of enforcing or 
administering the section. There is no anticipated economic cost to persons who 
are required to comply with the section.
Comments on the proposal may be submitted to Carolyn Calhoon, Office of Special 
Counsel, T.E.C. Building, 101 East 15th, Room 660, Austin, Texas 78778, (512) 
463-2291.
The amendment is proposed under Texas Civil Statutes, Article 5221b, which 
provides the Texas Employment Commission with the authority to adopt, amend, or 
rescind such rules as it deems necessary for the effective administration of 
this Act.
sec.301.13. Commission Hearings Involving Coverage and Contributions or 
Reimbursements.
(a)-(i) (No change.)
<nl>(j) Any decision of the commission shall become final 30 days after the date 
of mailing thereof, unless, within such 30 days, the appeal is reopened by 
commission order or a party to the appeal files a written motion for 
reconsideration.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 19, 1991.
TRD-9116163
Carolyn Calhoon
Administrative Technician IV
Texas Employment Commission
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-2291
       
TITLE 43. TRANSPORTATION
Part I. Texas Department of Transportation
Chapter 1. Administration
Conditional Grant Program
43 TAC sec.sec.1.400-1.409
(Editor's Note: The Texas Department of Transportation proposes for permanent 
adoption the new sections it adopts on an emergency basis in this issue. The 
text of the new sections is in the Emergency Rules section of this issue.)
The Texas Department of Transportation proposes new sec. s1.400-1.409, 
concerning a conditional grant program. Section 1.400 describes the department's 
intent which is to establish procedures for the administration of a conditional 
grant program; sec.1.401 describes the program, which is to provide financial 
assistance to eligible minority students who exhibit an aptitude for 
engineering, intend to become civil engineers and work for the department for 
two years after graduation; sec.1.402 defines terms to be used under this 
undesignated head; sec.1.403 describes the eligibility requirements to receive 
financial aid; sec.1. 404 describes how a student applies for a conditional 
grant; sec.1.405 requires eligible students to sign an agreement setting forth 
the terms and conditions of the grant; sec.1.406 describes the type and amount 
of financial assistance that eligible students may receive; sec.1.407 describes 
how a student may receive a stipend as part of a conditional grant; sec.1.408 
describes how a student would be declared in default of the grant agreement; and 
sec.1.409 describes how a student who defaults will repay the conditional grant.
Senate Bill 352, Regular Session, 72nd Legislature, 1991, requires the Texas 
Department of Transportation to establish and administer a conditional grant 
program to provide financial assistance to minority students who exhibited in 
the student's secondary school performance an aptitude for engineering and who 
intend to become civil engineers and work for the department for two academic 
years following graduation. Senate Bill 352 requires the department to make 
conditional grants to eligible students for use beginning with the fall semester 
in 1992. The legislation also requires the department to adopt rules 
implementing the program not later than January 1, 1992.
The Texas Transportation Commission has determined that providing financial 
assistance to minority students conditional upon recipients working for the 
department is in the public interest and furthers the statutory duties and 
responsibilities of the department: increasing the number of minority civil 
engineers qualified for employment with the department; encouraging minorities 
to enter public service and work for the department in a professional capacity; 
and providing greater racial and ethnic diversity among the department's 
professional staff.
The conditional grant program will further serve to help remediate historical 
underrepresentation of minorities in civil engineering by encouraging minority 
students to enter public service and work for the department as civil engineers.
Leslie A Clark, director, Human Resources Division, has determined that there 
will be fiscal implications as a result of enforcing or administering the 
sections. The effect on state government for the first five-year period the 
sections will be in effect will be an estimated additional cost of $200,000 per 
year for the years 1992-1996. There will be no effect on local government for 
the first five-year period the sections will be in effect.
Mr. Clark also has determined that for each year of the first five years the 
sections as proposed are in effect the public benefit anticipated as a result of 
enforcing the sections as proposed will be: providing financial assistance to 
deserving and competent minority students who are pursuing civil engineering 
degrees; increasing the number of qualified minority engineers available for the 
department and Texas workforce employment; and generating more interest and 
awareness about career opportunities in engineering occupations. There will be 
no effect on small businesses. There is no anticipated economic cost to persons 
who are required to comply with the proposed sections. There will be no impact 
on local economies or overall employment as a result of enforcing the proposed 
sections.
Comments on the proposal may be submitted to Mr. Leslie A. Clark, Director, 
Human Resources Division, Texas Department of Transportation, Dewitt C. Greer 
Building, 125 East 11th Street, Austin, Texas 78701; but in any event, no later 
than January 27, 1992.
The Texas Department of Transportation will also conduct a public hearing, 
pursuant to the Administrative Procedure and Texas Register Act, Texas Civil 
Statutes, Article 6252-13a,  s5, to receive data, comments, views, and/or 
testimony concerning the proposed new section.
The public hearing will be held on Thursday, January 9, 1992, at 10 a.m., in the 
first floor hearing room of the Dewitt C. Greer State Highway Building, 11th and 
Brazos, Austin. Any interested person may appear and offer comments or 
testimony, either orally or in writing, however, questioning of witnesses will 
be reserved exclusively to the presiding authority as may be necessary to ensure 
a complete record. While any person with pertinent comments or testimony will be 
granted an opportunity to present them during the course of the hearing, the 
presiding authority reserves the right to restrict testimony in terms of time or 
repetitive content.
The new sections are proposed under Texas Civil Statutes, Article 6666, which 
provides the Texas Transportation Commission with the authority to promulgate 
rules for the conduct of the work of the Texas Department of Transportation, and 
Senate Bill 352, 72nd Legislature, Regular Session, 1991, which requires the 
department to adopt rules implementing a conditional grant program.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 19, 1991.
TRD-9116179
Diane L. Northam
Legal Administrative Assistant
Texas Department of Transportation
Earliest possible date of adoption: January 27, 1992
For further information, please call: (512) 463-8630