Adopted Sections An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 28. INSURANCE Part I. Texas Department of Insurance Chapter 5. Property and Casualty Insurance Subchapter A. Automobile Insurance Private Passenger Automobile Liability Insurance Requirements for Underwriting Treatment and Disclosure 28 TAC sec.5.401 The State Board of Insurance of the Texas Department of Insurance adopts an amendment to sec.5.401, concerning requirements regarding underwriting treatment of applicants for private passenger automobile liability insurance who have not had such insurance prior to application, with one change to the proposed text as published in the July 3, 1992, issue of the Texas Register (17 TexReg 4725). The amendment to the section is necessary to continue to provide protection to applicants for private passenger automobile liability insurance who have not had such insurance prior to application. The change made to the proposed amendment as published results in the expiration, by operation of law on August 8, 1992, of subsection (a) as published. The adoption therefore results in the redesignation of proposed subsections (b), (c), (d), (e) and (f) as adopted subsections (a), (b), (c), (d) and (e), respectively. The amendment originally published as subsections (b) and (c) is necessary for two essential reasons: first, to continue the underwriting measures set forth in original subsection (b) of this section through December 31, 1992, while the department continues to gather data to test insurers' contention that applicants lacking prior insurance ("no priors") pose a greater risk of loss than applicants having prior insurance ("priors"), and second, to permanently forbid insurers from using an applicant's lack of prior insurance in determining the appropriate rate to charge such applicant for liability insurance if such "no prior" has not driven an uninsured motor vehicle in Texas for more than 30 days in the 12 months preceding his or her application for insurance. Proposed subsection (c) is adopted as subsection (b), and remains in effect as a permanent subsection to sec.5.401. The adopted amendment is necessary to continue to redress arbitrary and unfair practices used against applicants for private passenger automobile liability insurance who lack prior insurance and to support greater compliance with the Texas Motor Vehicle Safety -Responsibility Act (Texas Civil Statutes, Article 6701h). Certain arbitrary and unfair practices were identified and highlighted by amendments, effective September 1, 1991, strengthening the Texas Motor Vehicle Safety-Responsibility Act, as the board noted in originally approving sec.5. 401. The board found that many uninsured motorists seeking liability insurance were being denied coverage or charged high rates for liability insurance because they lacked such insurance at the time of application. Some of the applicants had not needed or had not been legally required to have liability insurance, because, for example, they had been overseas either in the armed services or for other employment, had driven company cars, or had not used a motor vehicle for transportation for some period prior to their applications. These "no priors" will be permanently protected under adopted subsection (b), which was proposed and published as subsection (c). Other "no prior" applicants lacked prior insurance because they could not afford it, having been out of work or otherwise impoverished. In initially adopting sec.5.401 and making original subsections (a) and (b) temporary, the board intended to gather data to evaluate and determine whether applicants lacking prior insurance present a greater claims risk than applicants possessing prior insurance. The Department of Insurance thereafter developed a "Special Call For Texas Private Passenger Automobile Experience" (Special call) for this purpose. The special call and accompanying instructions were approved for use by the State Board of Insurance on March 18, 1992, after incorporating a number of changes suggested by the Office of Public Insurance Counsel and the auto insurance industry. The special call was developed to obtain experience comparing applicants with no prior insurance to applicants having prior insurance between August 1, 1991 through January 19, 1992. The special call was sent to 34 insurance companies and the completed responses were due May 1, 1992. The staff of the department reported that few insurers had fully complied with the special call and determined that the data which was submitted pursuant to the special call did not conclusively demonstrate that applicants with no prior insurance present a greater claims risk. Although the board did not extend the expiration date of subsection (a) as proposed and published in the July 3, 1992, issue of the Texas Register and permitted subsection (a) to expire on August 8, 1992, the board has approved, contemporaneous with this adoption, a revised special call, to secure credible data on the issue of whether applicants lacking prior insurance present a greater claims risk than applicants possessing prior insurance. Because insurers have failed to provide credible data to support their contention that "no priors" present a greater risk of loss than "priors," the board has indicated that it will consider on a permanent basis a rule including a provision substantially similar to that of subsection (a) as originally published, prohibiting an insurer from using an applicant's lack of prior insurance as the basis for declining coverage or for charging higher rates to the applicant, if the data obtained as a result of the second special call fails to conclusively establish that applicants lacking prior insurance present a greater claims risk than those possessing prior insurance. The board has indicated that consideration of such a rule will be made under the Insurance Code, Article 21.21, relating to unfair marketing practices. The special call for submitted data requires that forms developed by the department be completed and returned to the department no later than September 30, 1992. The data submission forms will permit the department to obtain data from the voluntary automobile insurance market across Texas territories and among driver classifications in such a manner as to address the issue of whether a risk-based difference between applicants with prior insurance and those without prior insurance exists and supports a conclusion that an applicant's lack of prior insurance is a proper basis for charging higher rates to an applicant without prior insurance coverage, or for declining coverage. The adopted amendments extend specific protections to "no-prior" applicants for private passenger automobile liability insurance. The amendment to sec.5. 401(b) as proposed and published, which upon adoption has been resequenced as subsection (a), extends through December 31, 1992, its provisions which permit those individuals whose lack of insurance at the time of application was used by the insurer as an underwriting criterion to receive the benefit of overcoming the substandard risk classification and to be evaluated at the time of renewal pursuant to underwriting criteria of a carrier at the carrier's lowest applicable rate. Essentially, such individuals will continue to be entitled to be re-underwritten without regard to the "no prior insurance" criteria and to receive the lowest applicable rates of the insurance companies or group of insurance companies to which they apply. New subsection (b), originally published as proposed subsection (c), prohibits all insurers from using an applicant's lack of prior insurance in determining the appropriate rate for private passenger automobile liability insurance where such applicant has not been operating an uninsured vehicle in the State of Texas for more than 30 days during the 12 months immediately preceding the date of the application. Because the board permitted adopted subsection (a) to expire and resequenced proposed subsections (b) and (c) as subsections (a) and (b) respectively, adopted subsections (c), (d), and (e) remain so designated, were not resequenced as proposed and otherwise remain unchanged. Two sets of written comments were received in opposition to the proposed amendments, from State Farm Insurance Companies, and Texas Farmers Companies. During the period for public comment a public hearing was requested and granted. The hearing was conducted on August 5, 1992, under Docket Number R-1922. Other than the commissioner's staff, those commenting on the amendments to sec.5.401 at the hearing included the Office of Public Insurance Counsel and members of the public. A number of written comments were submitted during the comment period to state opposition to extension of subsection (a) as published. A number of reasons were stated for such opposition. First, one commenter stated that extension of subsection (a) as published would be unfair to its company because: that company's new and reinstated applications are twice what they had been a year ago; that company's total auto production for the first six months of 1992 approximated the entire year's production for 1991; and for that company, nearly a third of the "no priors" insured in one of the early months of 1992, had lapsed or been canceled by policyholders, or by the company for undisclosed accidents or violations. The commenter concluded that the extension of subsection (a), as proposed and published, until December 31, 1992 would be unfair to a company as visible and accessible as its company. The department disagrees with the conclusions of the commenter. Economic regulation must be uniform in order to be fair to all members of the regulated industry. It should not be fashioned intentionally to either the benefit or the detriment of a particular regulated industry entity. The department expects each insurer to write its proportionate share of the new business generated by adoption of sec.5.401. This type of proportionate increase cannot be characterized as "unfair," because each insurer is expected to carry its respective share of the new business. As a practical matter, uniform regulation does not always guarantee that each regulated entity will be affected in an identical fashion. However, the department has emphasized its intention to aggressively pursue disciplinary action against any insurer exhibiting conduct which is contrary to the letter and/or intent of this section, and that any aggrieved party should report to the department insurers believed to be noncompliant. Another comment objected to the extension of subsection (a), as proposed and published, until December 31, 1992, on the basis that one company or part of the marketplace should not be asked to support the social goals of the state at the expense of law-abiding policyholders who essentially will be subsidizing the added business. The department disagrees that a single company or part of the marketplace is being asked to support the social goals of the state. The section as a whole is designed to prohibit insurers from using underwriting practices which are unfair to insurance consumers. For that reason, the department is unwilling to assume, in the absence of clear, compelling, and credible data, that the rule results in subsidization of persons with no prior insurance by persons who had prior insurance. Two commenters objected to the extension of subsection (a), as proposed and published, until December 31, 1992, on the basis that its extension cannot be justified, since anyone who failed to obtain insurance during the interim effective period of the subsection is violating the law despite having had ample opportunity to obtain insurance. Although the department agrees that one of the objectives of the temporary provisions of the subsection has been in part attained, it does not agree with the conclusion of the commenter, and further believes that this issue can be appropriately resolved only when the relative added risk or absence of added risk attributable to so called "no priors" has been conclusively established by the board. Two commenters urged that the data obtained in the department's original special call indicated a difference in loss experience between persons having no prior insurance and those who did have prior insurance, and for that reason the extension of subsection (a) would be contrary to established data. The department disagrees with this conclusion, and points out that at a board meeting on June 15, 1992, a departmental summary of data received in response to the special call indicated that insurer response to the special call was not sufficient to determine or establish the relative risk of persons with prior insurance in relation to those who did not have prior insurance. The testimony of the department's consulting actuary supported the conclusion that the limited response to the original special data call resulted in data that was not credible. One comment emphasized that permitting subsection (a), as proposed and published, to expire on August 8, 1992, will return incentive to drivers to maintain insurance. The department responds that it has not received any evidence to indicate that failure to extend the rule will necessarily provide an incentive to comply with the safety responsibility law. The department has, however, structured a second special call for data so that information may be obtained indicating the average length of time policies remain in force. This information will permit a determination of whether a large number of insureds are letting policies lapse after initially obtaining coverage. Although the department does not agree with many of the conclusions reached by the commenters to the amendment for subsection (a) as proposed and published, the adoption of amendment to this section reflects a decision by the board to permit subsection (a) as proposed and published to expire by operation of law on August 8, 1992. That expiration is accompanied by the board's announcement that it will consider on a permanent basis under the Insurance Code, Article 21.21, a provision, substantially similar to that of the subsection which was permitted to expire, prohibiting an insurer from using an applicant's lack of prior insurance as the basis for declining coverage or for charging higher rates to the applicant. One comment urged that the purpose of subsection (b), as proposed and published, and underwriting provisions associated with it, have already been met and for that reason extension of such provisions through December 31, 1992, is unnecessary. The department responds that extending the effective date of that subsection is necessary to cover persons insured under any annual policies which were issued prior to the date of industry's voluntary compliance with sec.5.401 which began January 20, 1992. For this reason, the adoption extends the provisions of subsection (b), as proposed and published, through December 31, 1992, as adopted subsection (a). The board had published a proposal to amend adopted subsection (c), (d), and (e), only by resequencing them as subsections (d),(e), and (f), respectively. The board did not resequence these subsections because it allowed subsection (a) to expire and resequence proposed subsections (b) and (c) as subsections (a) and (b). Nevertheless, the board received comments seeking repeal of adopted subsections (c),(d), and (e). One comment urged that subsection (c) be repealed as unnecessary because its purposes have been served. The department disagrees, and points out that application of subsection (c) as adopted previously goes beyond the immediate issue of no prior insurance. The provision is intended to prohibit an insurance company from stigmatizing an insurance consumer based on the type of carrier previously providing coverage. For that reason, the board makes no change to the provisions of subsection (c) as originally adopted. One comment suggested that subsection (d) be repealed as unnecessary and undesirable because it invites drivers into the inadequately rated assigned risk plan, and may conflict with the plan rule which requires rejection by at least one insurer. The department disagrees, and points out that subsection (d) as adopted previously was designed to provide fair and equitable treatment of insureds. Consumers should at a minimum be informed of the availability of lower priced coverage through the assigned risk plan. The department does not believe this disclosure is in conflict with the rules of the assigned risk plan requiring rejection by at least one insurer. For that reason, the board makes no change to the provisions of subsection (d) as originally adopted. One comment stated the severability clause in subsection (e) be repealed as having no purpose and being not necessary. The department disagrees with such a conclusion and points out that the severability clause may serve a useful purpose in the event of legal action contesting sec.5.401. For this reason, the board makes no change to the provisions of subsection (e) as originally adopted. Several comments made on the record urged that subsections (a) and (b) as proposed and published not be extended until December 31, 1992, but rather that the provisions of sec.5.401, including subsections (a) and (b) as proposed and published, but without any distinctions as temporary subsections, be permanently adopted. In support of such permanent adoption the commenters emphasized that: a steady migration of Texas drivers into the Texas Automobile Insurance Plan continues, despite the fact that the interim provisions have been in place for some time; no credible evidence has been presented by insurers, independently or pursuant to the first special call, to justify discrimination against drivers without prior insurance based on increased risk of claims; suitable alternatives exist to address the possible higher rates of cancellation among "no priors" and costs associated with such cancellations; and marketplace evidence suggests that compliance with the interim provisions set out in sec.5.401 has been less than satisfactory. The board responds that although it agrees with many of the concerns raised in such comments, its decision to permit subsection (a) as originally adopted to expire by operation of law is accompanied by its stated intention to consider authorization for publication of a permanent rule recommended by the staff under the Unfair Competition and Unfair Practices chapter of the Insurance Code (Article 21.21), which will contain provisions substantially similar to the temporary provisions which expired August 8, 1992, to protect all previously uninsured drivers. The members of the general public commenting on the section favored making the rule permanent. Essentially the requests from the general public were that the board prevent insurers from charging higher rates based on lack of prior insurance so that statutorily required liability insurance will be available and affordable to all Texas drivers, and that some practical mechanism be put into place to make information available to consumers about rates and rate structure among companies so that consumers can make informed choices in selecting insurance. The department responds that it currently is putting a database in place to permit retrieval of information that will assist consumers in making informed choices about insurance coverages. In the meantime, the staff of the Department is available to assist individual and business consumers to compare and search for insurance if those consumers are encountering difficulty in obtaining the information necessary to choose coverage. The department also encouraged parties who might be aware of inadequacies in departmental response functions to make that known to the department so that corrective action may be implemented. The board further responds that if there are violations of compliance with the provisions of sec.5.401, every available regulatory resource will be utilized to adequately redress any of the public deprived of automobile insurance at a fair price. The amendment is adopted under the Insurance Code, Article 5.10, which authorizes the State Board of Insurance to make and enforce rules and regulations not inconsistent with the provisions of the Insurance Code, Chapter 5, Subchapter A (Motor Vehicle or Automobile Insurance); the Insurance Code, Article 5.01, which gives the board sole and exclusive authority to determine and prescribe just, reasonable, and adequate rates and rating plans and classification of risks for motor vehicle insurers; the Insurance Code, Article 5.09, which prohibits discrimination or distinctions in favor of an insured having a like hazard, in the charge of premiums for insurance; the Insurance Code, Article 1.04, which provides the board with the authority to determine policy and rules in accordance with the laws of this state; the Insurance Code, Article 21.49-2B, sec.12, which authorizes the board to adopt rules relating to the cancellation and nonrenewal of personal automobile insurance policies; and the Insurance Code, Article 21.49-2, which authorizes the board to prescribe, adopt, promulgate, and enforce reasonable rules and regulations as to the cancellation, nonrenewal, and in certain cases, declination, of certain policies of insurance, including those issued through the Texas Automobile Insurance Plan. The amended section affects the regulation of rates, rating plans, classification of risks, antidiscriminatory provisions, and cancellation and nonrenewal of personal automobile insurance policies under the Insurance Code, Articles 5.01, 5.09, 21.49-2B, and 21.49-2. sec.5.401. Temporary and Permanent Requirements Regarding Underwriting Treatment of and Disclosure to Applicants for Private Passenger Automobile Liability Insurance. (a) Effective until December 31, 1992, each previous "no-prior insurance" applicant who was written in a higher-rated insurance company will be re- underwritten on the applicant's renewal date subject to the underwriting criteria of each company to which the applicant applies at each company's or group of companies' lowest applicable rate. (b) Insurers may not use an applicant's lack of prior insurance in determining the appropriate rate for private passenger automobile liability insurance where such applicant has not been operating an uninsured motor vehicle in the State for more than 30 days during the 12 months immediately preceding the date of the application. (c) Applicants for automobile liability insurance currently or previously insured in a higher-rated insurance company or through the Texas Automobile Insurance Plan (the assigned risk plan) will be underwritten without consideration of the applicant's prior insurance carrier. (d) Insurers or agents who make a quote to an applicant with no prior insurance having no more than one accident and one violation within the past three years which quote equals or exceeds the premium available through the assigned risk plan must inform the applicant of the approximate cost of coverage available through the assigned risk plan. (e) If any provision of this section or the application thereof to any person or circumstance is held invalid for any reason, the invalidity shall not affect the other provisions or any other application of said provisions which can be given effect without the invalid provision or application. To this end all provisions of this section are declared to be severable. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 3, 1992. TRD-9212018 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 24, 1992 Proposal publication date: July 3, 1992 For further information, please call: (512) 463-6327 TITLE 34. PUBLIC FINANCE Part I. Comptroller of Public Accounts Chapter 3. Tax Administration Subchapter V. Franchise Tax 34 TAC sec.3.555 The Comptroller of Public Accounts adopts new sec.3.555, concerning earned surplus: computation, with changes to the proposed text as published in the March 3, 1992, issue of the Texas Register (17 TexReg 1597). The new section sets out guidelines for determining reportable federal taxable income and the deductions allowed in computing earned surplus before apportionment pursuant to the Tax Code, sec.171.110. Comments were received from Guaranty Bancshares Inc., the Texas Bankers Association, Independent Bankers Association of Texas, First National Bank of Canadian, Texas Savings & Loan League, Plains National Bank, First National Bank of Valley Mills, First National Bank of Alvin, and Davis, Kinard and Company P.C. These entities requested a more detailed explanation of the securities included in federal obligations in subsection (k) of the proposed section. The comptroller agreed and changes were made to subsection (k) to effect a clarification. Comments were received from the Texas Association of Taxpayers, Inc. on several issues. The association suggested that the reference to the 1991 Form 1120 be changed because some taxpayers might not be eligible to use the 1991 Form 1120. The comptroller agreed and deleted the reference to the 1991 form in subsection (b)(5). The association also suggested that credits which reduce deductions for research and development on the federal income tax return be disregarded in computing earned surplus in accordance with the treatment given jobs credit in subsection (d). The comptroller did not make the suggested changes and made changes to subsection (d) to disallow any reduction of federal taxable income for research and development and similar credits. The association also suggested that the language in subsection (e) be changed to clarify deductions for dividends received from members of a consolidated group with which a corporation filed a consolidated federal income tax return. The comptroller agreed and the language in subsection (e) was changed to clarify the Schedule C deductions allowed. The association also suggested that the section be changed to allow the exclusion of all foreign source income from earned surplus. The comptroller declined to make the suggested change. The association and the Certified Public Accounting Firm of Collis & Ryan suggested that the final sentence of subsection (e) relating to transactions between members of an affiliated group be deleted in its entirety because the sentence is not supported by statutory authority. The association also suggested that subsection (e) gave no standards for use in this determination. The comptroller changed the final sentence in subsection (e) to clarify the standards used in this determination. Panhandle Eastern Corporation suggested that subsection (g)(2) be changed to allow a taxpayer to use a business loss deduction to the extent that it benefits the taxpayer. The comptroller declined to make the suggested change. The Texas Mid-Continent Oil & Gas Association suggested that subsection (b) (3) be changed to allow deductions from earned surplus for dividends from United States domestic corporations that do not transact a substantial portion of business or maintain a substantial portion of assets in the United States. The comptroller agreed and subsection (b)(3) was changed to provide for deductions for such dividends. Comments were also received from United Services Advisors, Inc., requesting that the exclusion of interest and dividends from federal obligations under subsection (k) of the proposed section be extended to distributions by mutual funds to their shareholders. The comptroller declined to make the suggested changes. The new section is adopted 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.3.555. Earned Surplus: Computation. (a) Effective date. 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) Business loss-A negative amount after apportionment but before any deductions for solar energy devices under the Tax Code, sec.171.107, or investment in an enterprise zone under the Tax Code, sec.171.1015. (2) Corporation-An entity subject to franchise tax under the Tax Code, sec.171. (3) Dividends from a subsidiary, associate, or affiliate that does not transact a substantial portion of its business or maintain a substantial portion of its assets in the United States-Dividends treated as gross income from sources without the United States under the Internal Revenue Code, sec.862, and dividends received from United States corporations that would satisfy the 80% foreign business requirements of Internal Revenue Code, sec.861(c)(1). (4) Internal Revenue Code-The Internal Revenue Code of 1986 in effect for the tax year beginning on or after January 1, 1990, and before January 1, 1991. (5) Schedule C special deductions-The special deductions allowed in computing federal taxable income as listed in column (c) of Form 1120 of the Department of the Treasury Internal Revenue Service. Any limitations on Schedule C deductions imposed for federal income tax purposes will apply in computing such deductions for earned surplus. (c) Accounting methods. In computing earned surplus, a corporation is deemed to have made an election to use the same methods used in filing its federal income tax return. (d) Jobs and other credits. A corporation required to reduce or forego deductions in order to claim credits for federal income tax purposes cannot deduct any amount from reportable federal taxable income based on the reduced or foregone deductions. For example: (1) if a corporation, in computing federal taxable income, reduces the deduction for salaries and wages in order to claim a federal jobs credit, reportable federal taxable income is computed without adjustment of the federal deduction for salaries and wages; (2) if a corporation elects, for federal income tax purposes, to take a foreign tax credit instead of a deduction for foreign income or profits taxes, reportable federal taxable income is computed without a deduction for such taxes. (e) Consolidated income tax returns. For the purposes of this section, if a corporation joins in filing a consolidated federal income tax return, the corporation must compute its earned surplus as though no consolidated federal income tax return were filed. Therefore, taxable income, compensation, and other items must be computed as though a separate federal income tax return had been filed by the corporation. For example, the corporation must eliminate all dividends received from members of the consolidated group with which the corporation filed a consolidated federal income tax return. No special or overt election is required for purposes of this dividend elimination. If the comptroller determines that transactions between members of a controlled group of corporations are not entered into on an arm's-length basis, the comptroller may distribute or allocate income and deductions as necessary to prevent franchise tax avoidance provided such adjustments are authorized by applying the principles in Internal Revenue Code, sec.482, and regulations thereunder. (f) Deductions. In computing earned surplus for each reporting period, a corporation may take Schedule C deductions, deductions under the Internal Revenue Code, sec.sec.78 or 951-964, and other items deducted in computing earned surplus only to the extent each item is included in computing reportable federal taxable income. (g) Business losses. (1) A business loss which is carried forward to a report year must be deducted from apportioned taxable earned surplus after any allowable deductions for enterprise zone projects or solar energy devices. (2) A business loss which is carried forward to a successive year must be applied to the extent of apportioned taxable earned surplus in that succeeding year. (h) Deductions for solar energy devices and investments in enterprise zones. (1) A corporation that elects to take a deduction from apportioned earned surplus for solar energy devices under the Tax Code, sec.171.107, or a deduction for investments in enterprise zones under the Tax Code, sec.171.1015, may not claim a deduction from taxable capital for such item. (2) A deduction from apportioned earned surplus for solar energy devices or investments in enterprise zones may not reduce apportioned earned surplus below zero. Any unused deductions may not be carried over to a subsequent report. (3) No other deduction is allowed in computing reportable federal taxable income with regard to amounts deducted from earned surplus under the Tax Code, sec.171.107 or sec.171.1015. For example, any depreciation or amortization of a solar energy device in computing reportable federal taxable income is not allowed if the deduction under Tax Code, sec.171.107, is claimed. (i) Officer and director compensation. Regarding the add-back of compensation of officers or directors of corporations, managers of limited liability companies, and directors and executive officers of banking corporations see sec.3.558 of this title (relating to Earned Surplus: Officer and Director Compensation). (j) Temporary credit on net taxable earned surplus. (1) A corporation which qualifies and properly elects a temporary credit from net taxable earned surplus under the Tax Code, sec.171.111, may take the credit as a reduction of the tax due on earned surplus. See sec.3.559 of this title (relating to Earned Surplus: Temporary Credit). (2) If the temporary credit is elected on a report, the corporation must pay an additional tax of 0.2% of net taxable capital in addition to the franchise tax due under the Tax Code, sec.171.002. This additional tax is added to tax otherwise due before the provisions of the Tax Code, sec.171.002(d), are applied. In other words, if the amount of tax due after adding this additional tax is less than $100, then no tax is owed for the reporting period. (k) Federal obligations. (1) Dividends and interest received from federal obligations are not included in earned surplus or gross receipts for earned surplus purposes. (2) For purposes of this subsection, the term "federal obligations" means: (A) stocks and other direct obligations of, and obligations unconditionally guaranteed by, the United States government and United States government agencies; and (B) direct obligations of United States government-sponsored agencies. (3) The following words and terms, when used in this subsection, shall have the following meanings, unless the context clearly indicates otherwise. (A) Obligation-Any bond, debenture, security, mortgage-backed security, pass- through certificate, or other evidence of indebtedness of the issuing entity. The term "obligation" does not include a deposit, a repurchase agreement, a loan, a lease, a participation in a loan or pool of loans, a loan collateralized by an obligation of an agency of the United States government, or a loan guaranteed by an agency of the United States government. (B) United States government-Any department and ministry of the federal government including the 12 Federal Reserve Banks. The definition of "United States government" does not include state or local governments or commercial enterprises owned in whole or in part by the United States government. In addition, the term does not include local government entities or commercial enterprises whose obligations are guaranteed by the United States government. (C) United States government agency-An instrumentality of the United States government whose obligations are fully and explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the United States government. These agencies include the Government National Mortgage Association (GNMA), the Veterans Administration (VA), the Federal Housing Administration (FHA), the Farmers Home Administration (FmHA), the Export-Import Bank (Exim Bank), the Overseas Private Investment Corporation (OPIC), the Commodity Credit Corporation (CCC), and the Small Business Administration (SBA). (D) United States government-sponsored agency-Agencies originally established or chartered by the United States government to serve public purposes specified by the United States Congress but whose obligations are not explicitly guaranteed by the full faith and credit of the United States government. These agencies include the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA), the Farm Credit System, the Federal Home Loan Bank System, and the Student Loan Marketing Association (SLMA). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 2, 1992. TRD-9211968 Martin Cherry Chief, General Law Section Comptroller of Public Accounts Effective date: September 23, 1992 Proposal publication date: March 3, 1992 For further information, please call: (512) 463-4028 TITLE 37. PUBLIC SAFETY AND CORRECTIONS Part XIII. Texas Commission on Fire Protection Chapter 420. Administration Practice and Procedure 37 TAC sec.420.93, sec.420.95 The Texas Commission on Fire Protection adopts the repeal of sec.420.93 and sec.420.95, concerning final decisions and orders and administrative finality, without changes to the proposed text as published in the July 24, 1992, issue of the Texas Register (17 TexReg 5189). The repeals are necessary to delete obsolete and contradictory language and to allow a more efficient administration of the commissions' duties concerning contested cases arising under the Texas Government Code, Chapter 419. The repealed sections will be replaced by new sections which define the decision-making authority of the executive director and state fire marshal in contested cases and provides for an appellate procedure of those decisions to the commission. No comments were received regarding adoption of the repeals. The repeals are adopted under the Texas Government Code, sec.419.008, which provides the Texas Commission on Fire Protection with authority to adopt rules for the administration of its powers and duties. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 3, 1992. TRD-9212051 Jack Woods General Counsel Texas Commission on Fire Protection Effective date: September 25, 1992 Proposal publication date: July 24, 1992 For further information, please call: (512) 873-1700 TITLE 40. SOCIAL SERVICES AND ASSISTANCE Part XVIX. Texas Department of Protective and Regulatory Services (Editor's Note: House Bill 7, 72nd Legislature, First Called Session, (Texas Civil Statutes, Article 4413 (503)) created the Texas Department of Protective and Regulatory Services effective September 1, 1992. The bill transfers all functions, programs, and activities related to the child protective services program, including adoption and foster care from the Texas Department of Human Services and investigations of abuse and neglect from the Texas Department of Mental Health and Mental Retardation. The Texas Register is administratively transferring or duplicating the following rules listed in the table below from Title 40, Part I. Texas Department of Human Services and Title 25. Part II. Texas Department of Mental Health and Mental Retardation to the Texas Department of Protective and Regulatory Services. The table lists the new section number and the old section number that correspond to them.)