ADOPTED RULES 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 4. AGRICULTURE Part I. Texas Department of Agriculture Chapter 5. Quarantines Imported Fire Ant Quarantine 4 TAC sec.5.400, sec.5.401 The Texas Department of Agriculture (the department) adopts amendments to sec.5.400 and sec.5.401, concerning quarantined areas and quarantined articles, without changes to the proposed text as published in the November 7, 1995, issue of the Texas Register (20 TexReg 9238). The amendment to sec.5.400 is adopted in order to stop the artificial movement of Red Imported Fire Ants out of currently infested areas of the state. Surveys conducted by the department indicate Red Imported Fire Ant infestations are present in Ector, Hidalgo, and Willacy counties. The amendment adds these counties to the list of quarantined areas. The amendment to sec.5.401 parallels the language found in 7 Code Federal Regulations sec.301. 81 and sec.301.82. The amendment will remove hay and straw as a quarantined article except baled hay and baled straw stored in direct contact with the ground. The amendment to sec.5.400 will allow the department to quarantine areas infested with Red Imported Fire Ants in an effort to stop the movement of the pest out of currently infested areas of the state. The amendment to sec.5.401 updates the list of regulated articles. No comments were received regarding adoption of the amendments. The amendments are adopted under the Texas Agriculture Code, sec.71.002, which provides the Texas Department of Agriculture with the authority to establish quarantines against diseases and pests found within the state; and sec.71.007, which authorizes the department to adopt rules necessary for the protection of agricultural and horticultural interests. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600681 Dolores Alvarado Hibbs Chief Administrative Law Judge Texas Department of Agriculture Effective date: February 7, 1996 Proposal publication date: November 7, 1995 For further information, please call: (512) 463-7583 Chapter 9. Plant Quality Citrus Fruit Maturity Standards 4 TAC sec.9.30 The Department of Agriculture (the department) adopts the repeal of sec.9. 30, concerning citrus fruit juice content requirements, without changes to the proposed text as published in the August 29, 1995, issue of the Texas Register (19 TexReg 3044). This section is being repealed in order to comply with statutory changes made by the 74th Legislature, Regular Session, 1995, in accordance with Senate Bill 1146. The department is adopting new sec.sec.10.1-10.6 to combine the current citrus fruit juice content requirement regulation, standards for minimum acceptable ratios of soluble solids to anhydrous citric acid in the fruit, and seasonal requirements of citrus fruit for fitness for human consumption into one consolidated rule concerning citrus fruit maturity standards. No comments were received regarding adoption of the repeal. The repeal is adopted under the Texas Agriculture Code, sec.94.003, which provides the Texas Department of Agriculture with the authority to adopt rules as necessary for the efficient enforcement and administration of the Citrus Fruit Maturity Standards. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600682 Dolores Alvarado Hibbs Chief Administrative Law Judge Texas Department of Agriculture Effective date: February 7, 1996 Proposal publication date: August 29, 1995 For further information, please call: (512) 463-7583 Chapter 10. Citrus 4 TAC sec.sec.10.1-10.6 The Texas Department of Agriculture (the department) adopts new sec.sec.10. 1- 10.6, concerning citrus fruit maturity standards, without changes to the proposed text as published in the August 29, 1995, issue of the Texas Register (20 TexReg 6726). The new sections are adopted to establish maturity standards for grapefruit and oranges to ensure that grapefruit or oranges that are immature or otherwise unfit for human consumption are not prepared, received, transported, or offered for sale. The new sections will function to establish minimum acceptable ratios of soluble solids to anhydrous citric acids in the fruit and to establish minimum juice content requirements as they relate to the size of grapefruit and oranges. The new sections also adopted to establish procedures to determine soluble solids and anhydrous citric acid contents in the fruit. No comments were received regarding adoption of the new sections. The new sections are adopted under the Texas Agriculture Code, sec.94.003, which provides the Texas Department of Agriculture with the authority to adopt rules that define maturity standards for grapefruit and oranges. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600683 Dolores Alvarado Hibbs Chief Administrative Law Judge Texas Department of Agriculture Effective date: February 7, 1996 Proposal publication date: August 29, 1995 For further information, please call: (512) 463-7583 TITLE 7. BANKING AND SECURITIES Part V. Office of Consumer Credit Commissioner Chapter 81. Practice and Procedure 7 TAC sec.sec.81.1-81.49 The consumer credit commissioner of Texas (the commissioner) adopts the repeal of the entirety of Chapter 81 of Title 7, specifically 7 TAC sec.sec.81. 1- 81.49, concerning practice and procedure before the Office of Consumer Credit Commissioner, without changes to the proposed text as published in the July 21, 1995, issue of the Texas Register (20 TexReg 5349). Chapter 81 of Title 7 would conflict with adoption of new, omnibus rules governing practice and procedure before the finance commission and each of the three agencies under its jurisdiction, the Office of Consumer Credit Commissioner, the Texas Department of Banking, and the Savings and Loan Department. No comments were received regarding adoption of the repeals. The repeals are adopted under Government Code, sec.2001.004(1) and sec.2.001. 021(b), Texas Civil Statutes, which require all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures and petitions for rule making. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600663 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: February 7, 1996 Proposal publication date: July 21, 1995 For further information, please call: (512) 479-1281 TITLE 16. ECONOMIC REGULATION Part II. Public Utility Commission of Texas Chapter 23. Substantive Rules Records and Reports 16 TAC sec.23.18 The Public Utility Commission of Texas adopts new sec.23.18, with changes to the proposed text as published in the July 21, 1995, issue of the Texas Register (20 TexReg 5360), concerning investment in foreign utility companies (FUCOs) by Texas holding companies which are exempt under sec.3 of the Public Utility Holding Company Act of 1935, codified at 15 U.S.C. 79. Section 715 of the Energy Policy Act of 1992, codified as 15 U.S.C. 79z-5b, contains provisions requiring exempt holding companies owning a FUCO to provide to the SEC certification by every State commission having jurisdiction over the company's electric utility's retail rates that the State commission has "the authority and resources to protect ratepayers subject to its jurisdiction and that it intends to exercise its authority." Before the commission will make such a certification to the SEC, it must have certain information and assurances from the holding company. The rule, sec.23.18, states the policy considerations guiding the commission's deliberations about certification, and specifies the information which the commission requires from the holding company. The commission, in issuing or denying a certification, or withdrawing a previously-issued certification, does not make any judgment about the safety or prudence of any particular FUCO investment, or of the holding company's portfolio of investments. Comments were received, and a public hearing was held on November 27, 1995. Commenters included Texas Utilities (TU), Houston Industries (HI), Central and South West Corporation (CSW), Gulf States Utilities/Entergy (GSU), and the Office of Public Utility Counsel (OPC). All comments submitted, including those not specifically referenced herein, were fully considered by the commission. TUEC, HI, and CSW initially commented that no rule was necessary, because under PURA the commission clearly had the authority to protect ratepayers, that the commission had the necessary resources, and that the commission had no intention of not exercising its authority. This position was not re-urged during the public hearing. HI commented that requiring a filing in any detail might put a utility holding company at a disadvantage compared to an unregulated entity competing in the same international market. The commission has mitigated this result by providing a safe harbor which, if met, would allow the holding company to compete in international markets without advance filings. If the safe harbor is not met, the commission believes that the possibility that ratepayers of a utility might be harmed by a FUCO transaction justifies extra scrutiny, in a process which does not place regulated utilities' affiliates at an unreasonable disadvantage. HI proposed that firms seeking certification, or continuation of certification, be required to submit only an annual letter assuring the commission that ratepayers would be protected, and making certain commitments. Those commitments were those which had been informally in place for more than a year with HI, and were applied to TU's request for certification. HI recommended that if a proposed FUCO investment would put the firm over a stated threshold, or for some other reason a firm could not make the specified undertaking, a more detailed filing, resembling that proposed in the rule as published, could be required. The commission amends the proposed rule to require the holding company to file an initial corporate undertaking and certain periodic filings. If the holding company exceeds the safe harbor limits, it is required to submit more detailed information on a case-by-case basis if it wishes to retain certification. HI and TU commented that the appropriate safe harbor measure should be 50% of the consolidated net worth of the holding company. The rule is intended to protect utility ratepayers. A key factor is the ability of the utility and its affiliates to raise capital at a reasonable cost. Because the holding company is an important source of the capital invested by the utility, its ability to raise capital (especially equity, the most expensive type of capital) protects the core business and its ratepayers economically. Net worth is a widely used indicator of a firm's overall financial strength and its ability to access the capital markets, and is an appropriate threshold measure. The commission notes also that the provision is only a safe harbor, not a ceiling, and exceeding the limit only raises the possibility of further inquiry by the commission; it does not trigger decertification. The commission amends the proposed rule to make the threshold 30% of consolidated net worth. In addition, two other provisions have been added to the rule to provide further protection for ratepayers. First, the utility will annually file a forecast of its cash flow so that its ability to finance its operations can be monitored. Second, the holding company will promptly notify the Commission if aggregate losses over the previous four quarters attributable to its direct or indirect investments in foreign EWGs and FUCOs exceed a threshold of 5.0% of consolidated retained earnings. OPC commented that the risk to ratepayers does not depend on whether a particular foreign investment is a FUCO or a foreign exempt wholesale generator (EWG). The commission amends the proposed rule to define the safe harbor comparison to be between consolidated net worth and aggregate investments in foreign utilities, whether FUCOs or foreign EWGs. The commission also defines "aggregate investments," which include preliminary development costs. GSU objected to the requirement that the utility demonstrate that a company's FUCO investments have occasioned no negative effect on cost of capital or revenue requirements. The commission believes that this demonstration is necessary and appropriate, and not overly burdensome, when the holding company's investments exceed the safe harbor threshold. HI and TU commented that requiring notification at least 30 days before an investment was finalized was unrealistically long in many fast-moving situations. The commission amends the proposed rule to provide for a good cause exception to that time limit. HI commented that "material change" was not defined. The commission amends the proposed rule to provide a definition. HI and TU commented that much of the material called for by the rule would be sensitive and require protection. OPC agreed, but suggested that once a deal is either abandoned or consummated, the need for confidentiality may vanish. The commission amends the proposed rule to provide for protection of confidential information. OPC suggested that reports similar to those required of exempt holding companies also be required of registered holding companies which are affiliated with Texas jurisdictional utilities. CSW commented that such an extension is not warranted, primarily because adequate protection of ratepayers is afforded by SEC review of registered holding companies' investments. The commission believes that adoption of the extension recommended by OPC is unnecessary at this time unless or until federal legislative amendments occur. OPC suggested requiring that if a filing other than the annual filing is required in connection with a FUCO investment, the size and structure of the investment be reported. It also suggested requiring identification of the FUCO's place in the holding company's structure. The commission amends the proposed rule to incorporate these provisions. OPC commented that ready access, at least by the Commission and OPC, to the books and records of FUCOs would better enable the commission to identify harmful effects on ratepayers occasioned by events concerning a FUCO. The commission amends the proposed rule to require a firm requesting certification to undertake to provide reasonable access to the Commission upon request. OPC commented that an assertion by a firm that it has procedures in place to protect ratepayers is very general, and that a specific description of those procedures would be helpful. The commission amends the proposed rule to include, as one of the undertakings, that the utility will make available the pertinent documents. The new rule is adopted under Texas Civil Statutes, the Public Utility Regulatory Act of 1995, Senate Bill 319, sec.1.101, 74th Legislature, Regular Session 1995, which provide the Public Utility Commission of Texas with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction. The following statute is affected by this rule: the Public Utility Regulatory Act of 1995, Senate Bill 319, 74th Legislature, Regular Session 1995. sec.23.18. Foreign Utility Company Ownership by Exempt Holding Companies (a) Upon request by a holding company which is exempt under sec.3 of the Public Utility Holding Company Act of 1935, codified at 15 United States Code 79, the commission may certify to the SEC that the commission has the authority and resources to protect ratepayers and that it intends to exercise its authority over holding companies owning both a jurisdictional utility and a foreign utility company (FUCO) under the safe harbor provisions of subsection (c) of this section, or the case-by case review provisions of subsection (d) of this section. The commission may also notify the SEC that a previously-issued certification regarding a requesting holding company will be ineffective prospectively. (b) The commission will seek to protect the public interest in having electricity service available to all citizens of the state at just, fair, and reasonable rates that are unaffected by investments by exempt holding companies in foreign utility companies (FUCOs), while avoiding strictures that would place exempt holding companies at a competitive disadvantage in international markets. The commission will consider these policy goals in each decision whether to issue a certification or to notify the SEC that a previously-issued certification is prospectively withdrawn. (c) The following safe harbor provisions shall be applicable to investments in FUCOs by exempt holding companies that are affiliated with electric utilities subject to the regulatory jurisdiction of the commission: (1) The commission shall certify to the SEC that the commission has the authority and resources to protect ratepayers subject to its jurisdiction and that it intends to exercise its authority, provided that all holding companies of electric utilities that are subject to the regulatory jurisdiction of this commission shall have filed with the commission corporate undertakings, signed under oath by an authorized executive officer of the holding company agreeing to adhere to the covenants and to make the filings specified in paragraph (2) of this subsection. (2) The holding company shall adhere to the following covenants: (A) That any indebtedness incurred in relation to the acquisition by the holding company, or by any affiliate of the electric utility, of an ownership interest in a FUCO will be without recourse to the electric utility; (B) That the electric utility, the holding company, or any affiliate of the electric utility will not enter into any agreements under the terms of which the electric utility is obligated to commit funds in order to maintain the financial viability of a FUCO or an affiliate of the electric utility investing in a FUCO; (C) That the electric utility will not provide, directly or indirectly, any guarantees or other forms of credit support for any funds borrowed by the holding company or an affiliate of the electric utility in connection with the acquisition of any ownership interest in a FUCO; (D) That the electric utility, the holding company, or any affiliate of the electric utility will not make any investment in a FUCO under circumstances in which the electric utility would be liable for the debts and/or liabilities of the FUCO incurred as a result of acts or omissions of the FUCO; (E) That the electric utility will maintain and provide a copy to the commission of its accounting policies and procedures that assure that the electric utility is adequately and fairly compensated by the holding company or an affiliate of the electric utility for any use of the electric utility's assets or personnel in furtherance of a FUCO; (F) That the holding company provides the commission reasonable access to books and records and financial statements, or copies thereof, of the FUCO or other affiliate doing business with the FUCO, in English and stated in United States dollars, as the commission may request to: (i) review transactions between the utility and such FUCO or affiliate pursuant to sec.1.271 of the Act; and (ii) review transactions between any affiliate and the FUCO if such affiliate also has transactions directly or indirectly with the utility; (G) That the holding company will file with the commission quarterly a report listing the total amount of the aggregate investments by the holding company and its subsidiaries and the percentage of the holding company's consolidated net worth, from the company's most recent SEC form 10Q, represented by such investments: (i) "Aggregate investment" means all amounts invested, or committed to be invested, in exempt wholesale generators located outside the United States (foreign EWGs) and FUCOs, for which there is recourse, directly or indirectly, to the holding company. Among other things, the term shall include preliminary development expenses that culminate in the acquisition of a foreign EWG or a FUCO. (ii) Such report shall be filed no later than ten days following the filing of the 10-Q for the quarter. (H) That in the event the holding company anticipates making any investment in a FUCO that would result in the aggregate investment as defined in subparagraph (G) of this paragraph of such holding company exceeding 30% of the consolidated net worth of such holding company, the holding company shall so advise the commission before a final commitment to ownership of such FUCO is made; (I) That the electric utility will provide, by March 31 of each year, a copy of the electric utility's three-year cash flow forecast; (J) That the holding company will provide to the commission all SEC forms for reporting information related to foreign EWG and FUCO investments, no later than ten days after such forms are provided to the SEC; (K) That the holding company will promptly notify the commission whenever any of the following occurs: (i) it is unable to provide the certifications, undertakings, or documents provided for in this paragraph; (ii) the aggregate investment exceeds 30% of consolidated net worth; (iii) the holding company's operating losses attributable to its direct or indirect investments in foreign EWGs and FUCOs exceeded 5.0% of consolidated retained earnings during the previous four quarters; and (L) That the holding company will comply with the informational filing requirements of subsection (d) of this section in connection with a contemplated investment in a FUCO, unless the commission finds good cause not to require the holding company to provide such additional information. (d) For any occasion for which a holding company has undertaken to notify the commission of an event specified in subsection (c)(2)(H) or (K) of this section, the following provisions apply: (1) The holding company shall provide the following information, to the extent such information is reasonably available at the time of submission of the filing, at least 30 days before the date when it anticipates making a final commitment to ownership of a FUCO not already covered by a certification letter: (A) A description of the proposed investment, including a description of the FUCO assets being acquired, their geographical location, the form of the investment (partnership, joint venture, direct purchase, etc.), the holding company's percentage share of the investment, a description of how the investment will fit into the corporate subsidiary structure, and any other information reasonably necessary in the opinion of the holding company to provide a complete overview of the nature of the proposed investment; (B) Any financial requirements and/or commitments by the holding company or the utility that will be made or assumed as a result of this investment; this information should include, but is not limited to, an estimate of the amount of equity capital to be invested; (C) Any debt obligations resulting from this investment which will provide recourse to the holding company or the utility; (D) The holding company's general corporate objectives regarding diversification and foreign utility investments, and the specific objectives of the proposed FUCO investment; (E) A statement that the utility has effective written policies and accounting procedures which insure that any use by the FUCO of assets or personnel of an affiliate of the utility, or other transactions between the FUCO and an affiliate of the utility shall not negatively affect Texas ratepayers; and a statement that the utility will demonstrate in each subsequent rate proceeding before the commission, and each subsequent audit, that no FUCO investment increased the cost of capital or revenue requirement of the utility; (F) A calculation, based on the holding company's most recent SEC Form 10Q, of aggregate consolidated holding company investments as defined in subsection (c) (2)(G) of this section as a percentage of consolidated holding company net worth, stated both before and after all asset transfers from any affiliate of the utility to FUCOs at fair market value; (G) A statement that the holding company will provide to the commission all SEC forms for reporting information related to foreign EWG and FUCO investments, no later than ten days after such forms are provided to the SEC; and (H) Responses to questions, if any, contained on a commission prescribed form. (2) The notification prescribed in this subsection may be submitted less than 30 days before the date when the holding company anticipates making a final commitment to ownership of a FUCO not already covered by a certification letter upon a showing of good cause. Good cause for purposes of the preceding sentence shall be deemed to include, without limitation, a representation that the holding company lacked the information required to make a submission hereunder at an earlier date or a representation that making the submission at an earlier date would have unreasonably jeopardized the ability of the holding company to go forward with the contemplated investment. (3) In its review of the information provided pursuant to this section, the commission will consider, among other things, the number and magnitude of prior FUCO investments by the holding company, including the diversity among the countries in which such investments are located and other differences between such investments, and the magnitude of the proposed investment and its effect on the diversity of the portfolio. (e) Post-investment reporting. The utility shall comply with the following post-investment reporting obligations: (1) With respect to any investment in a FUCO for which an informational filing was made pursuant to subsection (d)(1) of this section, the utility or holding company shall notify the commission no later than ten days after the holding company makes a final commitment to ownership of a FUCO that such a commitment has been made. Such notice shall include any material corrections, additions, and supplementation of previously-provided information; and (2) For any FUCO investment covered by a certification, the utility or holding company shall notify the commission no later than 30 days after any material change in the circumstances or nature of an investment in a FUCO. Such notice shall include all appropriate corrections, additions, and supplementation of previously-provided information. A material change would include, but is not limited to, any change that would have an adverse impact of greater than 1.0% of consolidated net worth most recently reported; full or partial divestiture of the investment; a catastrophic event that destroys a significant amount of FUCO property or results in loss of life that could result in a significant liability claim; a change in the laws or government policy having a material impact on the FUCO; or an event which would place a significant restriction on the repatriation of earnings of the FUCO. (f) Commission standards for granting or maintaining certification. (1) In general, the commission will issue and continue certification when the aggregate investment in FUCOs and foreign EWGs is less than 30% of the holding company's consolidated net worth, and the company has satisfactorily provided the information and assurances set out in the preceding subsections. (2) With respect to any investment in a FUCO for which an informational filing was made pursuant to subsection (d)(1) of this section, the commission shall determine on a case by case basis whether to issue a certification to the SEC or maintain a previously issued certification. The commission shall endeavor to make such a determination prior to the date when the holding company anticipates having to make a final commitment to ownership of the FUCO. If the commission determines that it does not intend to continue certification, it may inform the SEC that maintaining a previously-issued certification would be inappropriate. (3) The commission shall notify the holding company requesting the certification or retention of certification of its decision within 45 days of receiving the request. If no action is taken by the commission within 45 days of receiving the request, the certification shall be deemed granted or affirmed. (4) Any information submitted by a holding company pursuant to this section may be submitted by the holding company under seal. Each page tendered under seal shall have the words "Confidential Information" typed or stamped on its face. The holding company shall clearly identify each portion of the application alleged to be Confidential Information; identify the exemption to the Open Records Act, Texas Government Code, Chapter 552, applicable to the alleged Confidential Information; and provide a detailed explanation of why the alleged Confidential Information is exempt from public disclosure under the Open Records Act. If the Commission receives an Open Records Act request for disclosure of Confidential Information, then the Executive Director shall promptly so notify the holding company. The Executive Director shall timely request an Attorney General's opinion as to whether the information falls within any of the exemptions identified in Subchapter C of the Open Records Act. The Executive Director shall promptly provide to the holding company a copy of an Attorney General opinion regarding the claim of confidentiality. If an Attorney General opinion recommends disclosure of Confidential Information, either in whole or in part, then the Executive Director shall not release such information for ten calendar days, in order to allow the holding company time to pursue any legal remedies that it may have. The holding company may require the execution of an appropriate confidentiality agreement prior to providing access to such confidential information to the Legal Division of the Office of Regulatory Affairs or other interested party. The form of any such confidentiality agreement shall be approved by the Legal Division prior to filing and included with the informational filing. (5) Within 45 days of the effective date of this section, each holding company regarding whose FUCO investments the commission has issued a certification letter shall submit to the commission a letter listing all FUCOs in which the company has invested, and (A) making the covenants set forth in subsection (c) of this section, or (B) satisfying the provisions of subsection (d) of this section. This agency hereby certifies that the section 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 January 17, 1996. TRD-9600675 Paula Mueller Secretary of the Commission Public Utility Commission of Texas Effective date: February 7, 1996 Proposal publication date: July 21, 1995 For further information, please call: (512) 458-0100 TITLE 31. NATURAL RESOURCES AND CONSERVATION Part I. General Land Office Chapter 17. Hearing Procedures for Administrative Penalties and Removal of Unauthorized or Dangerous Structures on State Land 31 TAC sec.17.2 The Texas General Land Office adopts an amendment to sec.17.2, concerning definitions, without changes to the proposed text as published in the November 3, 1995, issue of the Texas Register (20 TexReg 9147). The amendment to this section was made to clarify statutory references to structures or facilities which present an imminent and unreasonable threat to public health, safety or welfare, and for brevity in the rules promulgated pursuant to the Texas Natural Resources Code, Chapter 51. Further, the adopted amendment defines the term "attachment," referenced in the statute and the rules. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Natural Resource Code, sec.51.3021, which provides the commissioner with the authority to make and enforce rules consistent with the law. 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 January 17, 1996. TRD-9600711 Gary Mauro Commissioner, General Land Office General Land Office Effective date: February 7, 1996 Proposal publication date: November 3, 1995 For further information, please call: (512) 305-9129 31 TAC sec.17.41 The Texas General Land Office adopts an amendment to sec.17.41, concerning Compliance or Petition for Judicial Review, without changes to the proposed text as published in the November 3, 1995, issue of the Texas Register (20 TexReg 9147). Texas Natural Resources Code, sec.sec.51.302, et seq, authorizes the commissioner of the General Land Office to assess penalties against any person who constructs, maintains, owns or possesses an unauthorized facility or structure on State land. The commissioner may remove and dispose of unauthorized facilities or structures, as well as any improvement which presents an imminent and unreasonable threat to public health, safety or welfare. The person or entity which constructed, maintained, owned or possessed the unauthorized or dangerous structure may be held liable for any costs, expenses and fees associated with the removal action. These statutory remedies, assessed in a final administrative order issued by the commissioner, allow for effective management and control of State property for the benefit of the public. The adopted amendment establishes procedures to effectively implement and enforce these laws. The adopted amendment also reflects legislative amendments to the Texas Natural Resources Code, sec.51.3021. The amendment conforms the GLO's administrative rules to the amended law and clarify when a person or entity must comply with the commissioner's administrative order. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Natural Resource Code, sec.51.3021, which provides the commissioner with the authority to make and enforce rules consistent with the law. 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 January 17, 1996 TRD-9600710 Gary Mauro Commissioner, General Land Office General Land Office Effective date: February 7, 1996 Proposal publication date: November 3, 1995 For further information, please call: (512) 305-9129 Part X. Texas Water Development Board Chapter 353. Introductory Provisions General Provisions 31 TAC sec.353.15 The Texas Water Development Board (the board) adopts new sec.353.15, concerning a Memorandum of Understanding (MOU) between the Texas Water Development Board and the Texas State Soil and Water Conservation Board (TSSWCB), without changes to the proposed text as published in the December 12, 1995, issue of the Texas Register (20 TexReg 10569). Pursuant to the 1995 Appropriations Act of the Texas Legislature, the board and the TSSWCB are required to develop this MOU to detail the cooperative efforts of the two agencies to improve outreach and service to small communities needing financial and technical assistance from the board. No comments were received regarding adoption of the new section. The new section is adopted under Texas Water Code, sec.6.101, which requires the board to adopt rules necessary to carry out its powers and duties and Texas Water Code, sec.6.104, which requires the board to adopt by rule any memorandum of understanding between the board and any other state agency. 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, January 18, 1996. TRD-9600752 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: December 12, 1995 For further information, please call: (512) 463-7981 Chapter 363. Financial Assistance Programs Subchapter A. General Provisions The Texas Water Development Board (the board) adopts new sec.363.33, concerning Interest Rates for Loan and Purchase of Board's Interest in State Participation Projects and an amendment to sec.363.204, concerning Public Hearings. Amendment to sec.363.204 is adopted with changes to the proposed text as published in the October 17, 1995, issue of the Texas Register (20 TexReg 8399). New sec.363.33 is adopted without changes and will not be republished. New sec.363.33 includes the board's interest rate policy for the Water Development Fund, Water Assistance Fund, and SRF. Amendment to sec.363.204 provides the board an option of utilizing public review and comment period in lieu of holding public hearings before adoption of the Intended Use Plan for the SRF. Adoption of the amendment is in compliance with the Texas Water Code, Chapter 6, sec.6.101. One comment was received on the proposed sections from the Environmental Protection Agency (EPA). The EPA indicated that, in its interpretation of federal law, a public hearing is required for the adoption of the project priority list. Otherwise, the EPA expressed general acceptance of the proposed changes. In response to comments received from the EPA, the proposed amendment to sec.363.204 was modified to reflect that while either a public hearing or period of review and comment will be held for the intended use plan, a public hearing is required for adoption of the priority list. The proposed amendment to sec.363.205, which provided an option for a public review and comment period in lieu of a public hearing prior to adoption of the priority list, was withdrawn. Formal Action by the Board 31 TAC sec.363.33 The new section is adopted under the authority of the Texas Water Code, sec.sec.6.101, 16.342, and 15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including the SRF Program. 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, January 18, 1996. TRD-9600754 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Subchapter B. State Water Pollution Control Revolving Fund Introductory Provisions 31 TAC sec.363.204 The amendment is adopted under the authority of the Texas Water Code, sec.sec.6.101, 16.342, and 15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including the SRF Program. sec.363.204. Public Hearings. In accordance with the Act, the board shall hold public hearings to consider adoption and approval of the priority list and amendments thereto and shall either hold public hearings or allow a period for public review and comment before adoption and approval of the annual intended use plan. 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, January 18, 1996. TRD-9600755 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Subchapter A. General Provisions Prerequisites to Release of State Funds 31 TAC sec.363.42 The Texas Water Development Board (the board) adopts an amendment to sec.363.42, concerning disclosure requirements at loan closing, without changes to the proposed text as published in the December 12, 1995, issue of the Texas Register (20 TexReg 10571). New subparagraph (I) will provide that recipients of Board loans must agree to comply with requirements for continuing disclosure as if the Board were a Participating Underwriter in the manner required by the Securities and Exchange Commission Rule 15c2-12 which became effective July 5, 1995. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Water Code, sec.6.101, which requires the board to adopt rules that are necessary to carry out the powers and duties of the Board under the Texas Water Code and other laws of the state. 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, January 18, 1996. TRD-9600767 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: December 12, 1995 For further information, please call: (512) 463-7981 Subchapter B. State Water Pollution Control Revolving Fund Applications for Assistance 31 TAC sec.363.224, sec.363.225 The Texas Water Development Board (the board) adopts new sec.363.224 and sec.363.225, concerning a Capital Improvements Plan Option for financial assistance through the State Water Pollution Control Revolving Fund (SRF), without changes to the proposed text as published in the October 17, 1995, issue of the Texas Register (20 TexReg 8401). The new sections provide a methodology for funding large borrowers' ongoing capital improvement programs that address the long term process of constructing/financing wastewater infrastructure. New sec.363.224 defines a two step process whereby borrowers can proceed with a project or projects by financing the construction through commercial paper, other interim financing, or system revenues and later close into permanent financing through the SRF. Under the process, borrowers may have their CIP approved by the board for eligibility and later submit financial assistance applications for any portion or combination of portions of projects in the CIP. New sec.363.225 defines the procedure certain borrowers must follow to ensure the availability of project funding. The procedure outlines the need for a resolution and financing agreement from those borrowers needing either $50 million or more in funding or a funding request that drives the timing of a Board bond sale. Binding certain borrowers with a resolution and the financing agreement reduces the additional anticipated risk of larger loans timed for specific refundings resulting in impacts on both the availability of funds and in the bond issuance proceeds, and effects on the SRF cashflow. No comments were received regarding adoption of the new sections. The new sections are adopted under Texas Water Code, sec.6.101 and Texas Water Code, sec.16.342, which requires the board to adopt rules that are necessary to carry out the powers and duties of the Board under the Texas Water Code and other laws of the state. 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, January 18, 1996. TRD-9600750 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Subchapter E. Economically Distressed Areas Program Economically Distressed Areas 31 TAC sec.363.511 The Texas Water Development Board (the board) adopts new sec.363.511, concerning a Memorandum of Understanding (MOU) between the Texas Water Development Board and the Texas Department of Housing and Community Affairs, without changes to the proposed text as published in the October 17, 1995, issue of the Texas Register (20 TexReg 8402). Pursuant to the 1995 Appropriations Act of the Texas Legislature, the board and the Texas Department of Housing and Community Affairs are required to develop this MOU to detail the responsibility of each agency regarding the coordination of funds out of the Economically Distressed Areas Program, administered by the board, and the Colonia Fund, administered by the Texas Department of Housing and Community Affairs so as to maximize delivery of the funds and minimize administrative delay in their expenditure. No comments were received regarding adoption of the new section. The new section is adopted under Texas Water Code, sec.6.104, which requires the board to adopt by rule any memorandum of understanding between the board and any other state agency. 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, January 18, 1996. TRD-9600751 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Chapter 375. State Water Pollution Control Revolving Fund The Texas Water Development Board (the board) adopts amendments to sec.sec.375.1-375.3, 375.14, 375.17, 375.36, 375.38, 375.51, 375.61, 375.75, 375. 86, and 375.102; repeal of sec.sec.375.12, 375.13, 375.19, and 375.87; and new sec.375.19 and sec.375.52, concerning the State Water Pollution Control Revolving Fund. The amendment to sec.375.14 is adopted with changes to the proposed text as published in the October 17, 1995, issue of the Texas Register (20 TexReg 8404). Amendments to sec.sec.375.1-375.3, 375.17, 375.36, 375.38, 375.51, 375.61. 375.75, 375.86, and 375.102; repeal of sec.sec.375.12, 375. 13, 375.19, and 375.87; and new sec.375.19 and sec.375.52 are adopted without changes and will not be republished. When the board originally implemented the SRF program, it was required to pass on to borrowers a number of Federal requirements as long as capitalization grant funds were used to fund projects. These requirements were known as "equivalency" requirements and consisted of a group of 16 requirements from Title II of the Act and a number of other federal requirements that append to all programs using federal funds (crosscutting requirements). The board began the program in 1988 with the specific intent of funding projects to satisfy all of the federal requirements as soon as possible so it could eliminate these requirements for future applicants. By early 1992, the board projected it was near satisfying the adopted new rules for the SRF program (31 TAC Chapter 363, Subchapter B of this title (relating to Financial Assistance Programs)) and began implementing a second tier SRF program, free from all the equivalency requirements. Since then, the board has received an unanticipated capitalization grant of $56 million in fiscal year 1995 as a result of the Federal Appropriations Bill for which it will have to make some loans that will satisfy federal requirements. However, since the new funds are appropriated without the Clean Water Act being reauthorized, loan recipients will only have to satisfy the "crosscutters", and not the equivalency requirements. Because of the additional federal requirements imposed by the equivalency and crosscutter requirements, the board traditionally has and will continue to loan these funds at a lower interest rate than loans under 31 TAC Chapter 363 of this title (relating to Financial Assistance Programs). The amendments reflect that the Board has to make only a limited amount of loans periodically at the reduced rate associated with equivalency and/or crosscutters. Thus, the amendments will establish a procedure to make the lower interest rate funds available to all interested applicants on a first-come, first served basis, with a procedure for prioritizing projects to receive the SRF funds at this lower rate if the number of applications exceeds funds available under this Chapter. Projects which exceed the lower-interest rate funding capacity under this Chapter may be funded through the SRF under 31 TAC Chapter 363 of this title (relating to Financial Assistance Programs). Amendments are also adopted to include the board's interest rate policy and reflect the future interest rate reduction to SRF loans to compensate for the administrative cost recovery charge to be implemented under 31 TAC sec.375.21, Administrative Cost Recovery. The amendments will eliminate several obsolete policy statements from the rules and modify the public involvement requirements for Intended Use Plans to add public notice and comments as an alternative to public hearing. Proposed amendments to Chapter 375 will require compliance with Title II requirements only if required by federal law. One comment was received on the proposed sections from the Environmental Protection Agency (EPA). The EPA indicated that, in its interpretation of federal law, a public hearing is required for the adoption of the project priority list. Otherwise, the EPA expressed general acceptance of the proposed changes. In response to comments received from the EPA, the proposed amendment to sec.375.14 was modified to reflect that while either a public hearing or period of review and comment will be held for the intended use plan, a public hearing is required for adoption of the priority list. The proposed amendment to sec.375.18 was withdrawn. Introductory Provisions 31 TAC sec.sec.375.1-375.3 The amendments are adopted under the authority of the Texas Water Code, sec.6.101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. 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, January 18, 1996. TRD-9600757 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Program Requirements 31 TAC sec.sec.375.12, 375.13, 375.19 The repeals are adopted under the authority of the Texas Water Code, sec.6. 101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. 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, January 18, 1996. TRD-9600758 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 31 TAC sec.sec.375.14, 375.17, 375.19 The amendment and new sections are adopted under the authority of the Texas Water Code, sec.6.101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. sec.375.14. Public Hearings. In accordance with the Act, the board shall hold public hearings to consider adoption of the priority list and amendments thereto and shall either hold public hearings or allow a period for public review and comment before adoption and approval of the annual intended use plan. 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, January 18, 1996. TRD-9600759 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Application for Assistance 31 TAC sec.375.36, sec.375.38 The amendments are adopted under the authority of the Texas Water Code, sec.6.101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. 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, January 18, 1996. TRD-9600760 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Board Action on Application 31 TAC sec.375.51, sec.375.52 The amendment and new section are adopted under the authority of the Texas Water Code, sec.6.101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. 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, January 18, 1996. TRD-9600761 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Engineering Design 31 TAC sec.375.61 The amendment is adopted under the authority of the Texas Water Code, sec.6.101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. 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, January 18, 1996. TRD-9600762 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Prerequisites to Release of Funds 31 TAC sec.375.75 The amendment is adopted under the authority of the Texas Water Code, sec.6.101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. 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, January 18, 1996. TRD-9600763 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Building Phase 31 TAC sec.375.86 The amendment is adopted under the authority of the Texas Water Code, sec.6.101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. 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, January 18, 1996. TRD-9600764 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 31 TAC sec.375.87 The repeal is adopted under the authority of the Texas Water Code, sec.6. 101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. 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, January 18, 1996. TRD-9600765 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Post Building Phase 31 TAC sec.375.102 The amendment is adopted under the authority of the Texas Water Code, sec.6.101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, including specifically the SRF program. 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, January 18, 1996. TRD-9600766 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-7981 Prerequisites to Release of Funds 31 TAC sec.375.72 The Texas Water Development Board (the board) adopts an amendment to sec.375.72, concerning disclosure requirements at loan closing, without changes to the proposed text as published in the October 12, 1995, issue of the Texas Register (20 TexReg 10571). New subparagraph (I) will provide that recipients of Board loans must agree to comply with requirements for continuing disclosure under the Securities and Exchange Commission Rule 15c2-12 which became effective July 5, 1995. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Water Code, sec.6.101, which requires the board to adopt rules that are necessary to carry out the powers and duties of the Board under the Texas Water Code and other laws of the state. 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, January 18, 1996. TRD-9600768 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: February 8, 1996 Proposal publication date: October 12, 1995 For further information, please call: (512) 463-7981 TITLE 34. PUBLIC FINANCE Part I. Comptroller of Public Accounts Chapter 3. Tax Administration Subchapter Q. Franchise Tax 34 TAC sec.3.397 The Comptroller of Public Accounts adopts the repeal of sec.3.397, concerning requests for franchise tax reports and other information, without changes to the proposed text as published in the October 17, 1995, issue of the Texas Register (20 TexReg 8412). This section is being repealed because the information in it is no longer current. Because the current information is contained in the Open Records Act, a specific franchise tax section is no longer necessary. No comments were received regarding adoption of the repeal. The repeal 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. The repeal implements the Tax Code, sec.171.203 and sec.171.207, and Government Code, sec.sec.552.001 et seq. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600652 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: February 7, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-3725 34 TAC sec.3.402 The Comptroller of Public Accounts adopts the repeal of sec.3.402, concerning limitations on collections and refunds, without changes to the proposed text as published in the October 17, 1995, issue of the Texas Register (20 TexReg 8413). This section is being repealed because the information contained in the section is no longer current due to past changes in the general provisions of the tax code. Because the current information is contained in the general provisions of the Tax Code, a specific franchise tax section is no longer necessary. This information will be addressed in a general rule being drafted by this agency. No comments were received regarding adoption of the repeal. The repeal 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. The repeal implements the Tax Code, sec.sec.111.060, 111.104, 111.201, 111.203, 111.205, and 112.051. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600651 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: February 7, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-3725 34 TAC sec.3.543 The Comptroller of Public Accounts adopts the repeal of sec.3.543, concerning deposit, without changes to the proposed text as published in the October 24, 1995, issue of the Texas Register (20 TexReg 8783). The rule is being repealed because the sections of the law that it interpreted (Tax Code, sec.171.156 and sec.171.157) were repealed, effective January 1, 1994, by House Bill 1892, enacted by the 73rd Legislature, 1993, and the deposits to which the rule related have now been refunded. Therefore, this rule is no longer necessary. No comments were received regarding adoption of the repeal. The repeal 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. The repeal implements the repeal of Tax Code, sec.171.156 and sec.171.157. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600649 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: February 7, 1996 Proposal publication date: October 24, 1995 For further information, please call: (512) 463-3725 34 TAC sec.3.577 The Comptroller of Public Accounts adopts new sec.3.577, concerning credit for sales tax paid on property used in manufacturing, without changes to the proposed text as published in the October 20, 1995, issue of the Texas Register (20 TexReg 8600). The new section is in response to legislation during the 72nd Legislature, 1991, and during the 74th Legislature, 1995, and clarifies that the survivor of a merger may not take credit for tax paid by a non-survivor. No comments were received regarding adoption of the new section. 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. The new section implements the Tax Code, sec.171.0021. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600650 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: February 7, 1996 Proposal publication date: October 20, 1995 For further information, please call: (512) 463-3725 Subchapter AA. Automotive Oil Sales Fee 34 TAC sec.3.701 The Comptroller of Public Accounts adopts an amendment to sec.3.701, concerning the reporting requirements, without changes to the proposed text as published in the October 17, 1995, issue of the Texas Register (20 TexReg 8415). The 74th Legislature amended the Health and Safety Code sec.371 to require distributors to file with the comptroller in the same manner as manufacturers and importers. No comments were received regarding adoption of the amendment. The amendment 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. This amendment implements Texas Health and Safety Code sec.371.062. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600648 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: February 7, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-3725 34 TAC sec.3.702 The Comptroller of Public Accounts adopts an amendment to sec.3.702, concerning definitions and exemptions, without changes to the proposed text as published in the October 17, 1995, issue of the Texas Register (20 TexReg 8416). The 74th Legislature amended the Health and Safety Code, sec.371 to provide new definitions, responsibilities and categories of exemptions for the automotive oil sales fee. This amendment prescribes procedures and records required to claim the exemption. No comments were received regarding adoption of the amendment. The amendment 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. This amendment implements Texas Health and Safety Code, sec.371.003 and sec.371.062. 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 authority. Issued in Austin, Texas, on January 17, 1996. TRD-9600647 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: February 7, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 463-3725 Chapter 9. Property Tax Administration Subchapter I. Validation Procedures 34 TAC sec.9.4026 The Comptroller of Public Accounts adopts an amendment to sec.9.4026, concerning forms for appraisal of special inventory, with changes to the proposed text as published in the November 21, 1995, issue of the Texas Register (20 TexReg 9675). The amendment deals with the appraisal of dealer's inventories maintained by motor vehicle dealers under the terms of the Tax Code, new sec.23.121 and sec.23.122, (Acts 1995, 74th Legislature, page 4727, Chapter 945). This rule adopts new confidential forms on which motor vehicle dealers are required to report inventories to the county tax assessor-collector and the chief appraiser. The comptroller received the following comments regarding the proposed amendment. The Texas Automobile Dealers Association (TADA) commented that the comptroller should modify Steps 5 and 6 the "Dealer's Motor Vehicle Inventory Declaration/Confidential" form, proposed for adoption by reference to clarify that in Steps 5 and 6 that the amounts reported are the dealer's "net" motor vehicle inventory amounts. The comptroller accepted this suggestion. TADA comments requested a change in Step 6 the "Dealer's Motor Vehicle Inventory Declaration/Confidential" form proposed for adoption by reference to clarify that the amounts reported are for the previous year and the current tax year. The comptroller accepted this suggestion. TADA commented that the "Dealer's Motor Vehicle Inventory Declaration/Confidential" form instructions should be changed. These changes include: a modification of the types of ownership reported; a definition of the term "Net Motor Vehicle Inventory"; and the addition of the word dollar to the description of the sales amount to be reported. The comptroller accepted these suggestions. The Montgomery Central Appraisal District and TADA asked the comptroller to modify the "Dealer's Motor Vehicle Inventory Tax Statement/Confidential" form proposed for adoption by reference, clearly require that the taxpayer send the original form and payments to the taxpayer's County Tax Office and a copy to the taxpayer's County Appraisal District. The comptroller accepted this suggestion. TADA asked the comptroller to modify the "Dealer's Motor Vehicle Inventory Tax Statement/Confidential" form proposed for adoption by reference to include a space in which the taxpayer may report the account number assigned to the taxpayer by the County Appraisal District. The comptroller accepted this suggestion. TADA asked the comptroller to alter Step 3 of the "Dealer's Motor Vehicle Inventory Tax Statement/Confidential" form, proposed for adoption by reference, to replace the term "Aggregate tax rate" with "Unit Property Tax Factor." The comptroller accepted this suggestion. TADA also requested that the comptroller change portions of the "Dealer's Motor Vehicle Inventory Tax Statement" instructions. These changes include deleting the word "written" before "contract"; clarifying that tax payments are filed with the County Tax Assessor Collector and the original tax statement is filed with the County Appraisal District's Chief Appraiser; deleting the word "value" and substituting "unit property tax"; and show a new calculation for the monthly tax due based upon the tax rate set by the taxing unit. The comptroller accepted these suggestions. TADA also asked the comptroller to modify the text of this proposed rule to add the term "motor vehicle" before the word "inventory" throughout the rule so that the rule tracked the recently adopted statutory language. The comptroller accepted this suggestion and changed the proposed rule accordingly. The amendment is adopted under the Tax Code, sec.23.121 and sec.23.122, which requires the comptroller to prescribe the contents and form for motor vehicle inventory subject to ad valorem taxes. The amendment implements the Property Tax Code, sec.23.121 and sec.23.122. sec.9.4026. Forms for Appraisal of Certain Types of Inventory. (a) A property owner may use comptroller Model Forms 23.121 and 23.122 to file a dealer's motor vehicle inventory tax statement and inventory forms as required by Tax Code, sec.23.122. Except as provided by law, all information contained on these forms is confidential. (b) A property owner may use a dealer's motor vehicle inventory tax statement form that sets out the information listed in subsections (c) and (d) of this section in the same language and sequence as the model form. A property owner may use a dealer's motor vehicle inventory declaration form that sets out the information listed in subsections (f) and (g) of this section in the same language and sequence as the model form. (c) If the form is provided by the appraisal district, the dealer's motor vehicle inventory tax statement shall provide the appraisal district's name, address, and telephone number. (d) The dealer's motor vehicle inventory tax statement shall provide the following information: (1) the property owner's name, mailing address, and telephone number; (2) the inventory location; (3) the appraisal district account number if available to the property owner; (4) the name of the person who completes the form; (5) the capacity in which the person who completes the form serves the business; (6) the month and year the information reflects; (7) a description of each vehicle sold, including model year, make, and identification number; (8) the date of sale; (9) the name of purchaser; (10) the type of sale, indicating whether the unit is sold from a dealer's motor vehicle inventory or is a dealer-to-dealer sale, fleet sale, or subsequent sale; (11) the sales price as it appears or would appear on the title documents; (12) the unit property tax value if the unit was sold from the dealer's inventory; (13) the unit property tax factor the owner used to calculate unit property tax value; (14) the number of motor vehicles sold by the owner from the dealer's motor vehicle inventory and the number of motor vehicles sold by the owner as a dealer-to-dealer sale, fleet sale, or subsequent sale during the month for which the statement is filed; (15) the dollar amount of sales made by the owner from the dealer's motor vehicle inventory and the dollar amount of sales made by the owner as a dealer- to-dealer sale, fleet sale, or subsequent sale during the month for which the statement is filed; and (16) the owner's general distinguishing number or numbers. (e) In addition to the information required by subsections (c) and (d) of this section, a dealer's motor vehicle inventory tax statement made available by a chief appraiser as required by subsection (i) of this section shall include the following: (1) information about how to complete and file a dealer's motor vehicle inventory tax statement; (2) a statement of the penalty or penalties provided for a motor vehicle inventory tax statement, for failing to file a dealer's motor vehicle inventory tax statement; (3) a notice of the penalties for making or filing an application containing a false statement; and (4) a statement that the chief appraiser may require the property owner to submit documentation verifying the information in the form. (f) If the form is provided by the appraisal district, the dealer's motor vehicle inventory declaration shall provide the appraisal district's name, address, and telephone number. (g) A dealer's motor vehicle inventory declaration shall require a property owner to provide the following information: (1) the property owner's name, mailing address, and telephone number; (2) the name of the person who completes the form; (3) the capacity in which the person who completes the form serves the business; (4) the inventory location; (5) the appraisal district account number if available to the taxpayer; (6) starting date of business; (7) each of the owner's general distinguishing numbers issued by the Texas Department of Transportation; (8) a statement that the owner is the owner of a dealer's motor vehicle inventory; (9) the number of motor vehicles sold by the owner from the dealer's motor vehicle inventory and the number of motor vehicles sold by the owner as a dealer-to-dealer sale, fleet sale, or subsequent sale during the year or applicable time period for which the declaration is filed; (10) the dollar amount of sales made by the owner from the dealer's motor vehicle inventory and the dollar amount of sales made by the owner as a dealer- to-dealer sale, fleet sale, or subsequent sale during the year or applicable time period for which the declaration is filed; and (11) the market value of the motor vehicle inventory for the current tax year as computed under the Tax Code, sec.23.121. (h) In addition to the information required by subsections (f) and (g) of this section, a dealer's motor vehicle inventory declaration made available by a chief appraiser as required by subsection (i) of this section shall include the following: (1) information about how to complete and file a dealer's motor vehicle inventory declaration; (2) a statement of the penalty or penalties for failing to file a dealer's motor vehicle inventory declaration; and (3) a notice of the penalties prescribed for making or filing an application containing a false statement. (i) A chief appraiser shall make available to a property owner Model Forms 23.121 and 23.122. A chief appraiser may make available a different form for a dealer's motor vehicle inventory tax statement that sets out the information listed in subsections (c) -(e) of this section in the same language and sequence as the model form. (j) A chief appraiser may make available a different dealer's motor vehicle inventory declaration that sets out the information listed in subsections (f)- (h) of this section in the same language and sequence as the model forms. (k) In special circumstances, the chief appraiser may use forms that provide additional information, delete information required by this section, or set out the required information in different language or sequence than that required by this section if the form has been previously approved by the Property Tax Division, Comptroller of Public Accounts. (l) The Comptroller of Public Accounts adopts by reference Model Form 23.121, dealer's motor vehicle inventory declaration, and Model Form 23.122, dealer's motor vehicle inventory tax statement. Copies of the forms are available for public inspection at the Office of the Secretary of State, Texas Register Division, or may be obtained from the Comptroller of Public Accounts, Property Tax Division, P.O. Box 13528, Austin, Texas 78711-3528. 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 January 17, 1996. TRD-9600686 Martin E. Cherry Chief, General Law Section Comptroller of Public Accounts Effective date: February 7, 1996 Proposal publication date: November 21, 1995 For further information, please call: (512) 463-3725 34 TAC sec.9.4028 The Comptroller of Public Accounts adopts new sec.9.4028, concerning forms for appraisal of vessel and outboard motor inventories, with changes to the proposed text as published in the December 12, 1995, issue of the Texas Register (20 TexReg 10580). The new rule deals with the appraisal of dealer's inventories maintained by vessel and outboard motor dealers under the terms of the Tax Code, new sec.23. 12D, and sec.23.12E, (House Bill 2940, 74th Legislature, 1995). This rule adopts new confidential forms on which a vessel or outboard motor dealer must report vessel or outboard motor inventories to the county tax assessor-collector and the chief appraiser. The comptroller received the following comments regarding the proposed new rule. The Montgomery Central Appraisal District asked the comptroller to modify the "Dealer's Vessel and Outboard Motor Inventory Tax Statement/Confidential" form proposed for adoption by reference, to clearly require that the taxpayer send the original form and payments to the taxpayer's County Tax Office and send a copy to the taxpayer's County Appraisal District. The comptroller accepted this suggestion. Since the vessel and outboard motor inventory tax law, rule and forms adopted by reference are identical to the motor vehicle dealer inventory tax law, rules and forms, the Property Tax Division has made minor terminology changes in the outboard motor inventory tax rule, forms and instructions so that they mirror the motor vehicle inventory tax rules and forms. This change was undertaken: to insure better tax compliance; to lessen taxpayer, Central Appraisal District and Tax Assessor-Collector confusion; and to allow for the more orderly implementation of this tax appraisal system. The new section is adopted under the Tax Code, sec.11.43(f), which requires the comptroller to prescribe the form and content for vessel and outboard motor inventory subject to ad valorem taxes. The new section implements the Property Tax Code, sec.23.12D and sec.23.12E. sec.9.4028. Forms for Appraisal of Vessel and Outboard Motor Inventory. (a) A property owner subject to this section may use comptroller Model Forms 23.12D and 23.12E to file a dealer's vessel and outboard motor inventory tax statement and inventory declaration as required by Tax Code, sec.23.12D and sec.23.12E. Except as provided by law, all information contained on these forms is confidential. (b) A property owner subject to this section may use a vessel and outboard motor dealer's inventory tax statement form that sets out the information listed in subsections (c) and (d) of this section in the same language and sequence as the model form. A property owner may use a vessel and outboard motor dealer's inventory declaration form that sets out the information listed in subsections (f) and (g) of this section in the same language and sequence as the model form. (c) In order to assist in the accurate reporting of taxable inventories and if the form is provided by the appraisal district, the vessel and outboard motor dealer's inventory tax statement shall provide both the appraisal district's and the county tax office's names, addresses, and telephone numbers. (d) The vessel and outboard motor dealer's inventory tax statement shall provide the following information: (1) the property owner's name, mailing address, and telephone number; (2) the inventory location; (3) the appraisal district account number if available to the property owner; (4) the name of the person who completes the form; (5) the capacity in which the person who completes the form serves the business; (6) the month and year the information reflects; (7) a description of each vessel or outboard motor sold, including model year, make, and applicable identification number; (8) the date of sale; (9) the name of purchaser; (10) the type of sale, indicating whether the unit is sold from a vessel and outboard motor dealer's inventory or is a dealer-to-dealer sale, fleet sale, or subsequent sale; (11) the sales price as it appears or would appear on the applicable title documents; (12) the unit property tax value if the unit was sold from the vessel and outboard motor dealer's inventory; (13) the unit property tax factor the owner used to calculate unit property tax value; (14) the number of units sold by the owner from the vessel and outboard motor dealer's inventory and the number of units sold by the owner as a dealer-to- dealer sale, fleet sale, or subsequent sale during the month for which the statement is filed; (15) the dollar amount of sales made by the owner from the vessel and outboard motor dealer's inventory and the dollar amount of sales made by the owner as a dealer-to-dealer sale, fleet sale, or subsequent sale during the month for which the statement is filed; and (16) the owner's general distinguishing number or numbers. (e) In addition to the information required by subsections (c) and (d) of this section, a vessel and outboard motor dealer's inventory tax statement made available by a chief appraiser as required by subsection (i) of this section shall include the following: (1) information about how to complete and file a vessel and outboard motor dealer's inventory tax statement; (2) a statement of the penalty or penalties provided for a vessel or outboard motor inventory tax statement, for failing to file a special inventory tax statement; (3) a notice of the penalties for making or filing an application containing a false statement; and (4) a statement that the chief appraiser may require the property owner to submit documentation verifying the information in the form. (f) In order to assist in the accurate reporting of taxable inventories and if the form is provided by the appraisal district, the vessel and outboard motor dealer's inventory declaration shall provide both the appraisal district's and the county tax office's names, addresses, and telephone numbers. (g) A vessel and outboard motor dealer's inventory declaration shall require a property owner subject to this section to provide the following information: (1) the property owner's name, mailing address, and telephone number; (2) the name of the person who completes the form; (3) the capacity in which the person who completes the form serves the business; (4) the inventory location; (5) the appraisal district account number if available to the taxpayer; (6) starting date of business; (7) each of the owner's dealer's and manufacturer's numbers issued by the Texas Parks and Wildlife Department; (8) a statement that the owner is the owner of a vessel and outboat motor dealer's inventory; (9) the number of units sold by the owner from the vessel and outboard motor dealer's inventory and the number of units sold by the owner as a dealer-to- dealer sale, fleet sale, or subsequent sale during the year or applicable time period for which the declaration is filed; (10) the dollar amount of sales made by the owner from the vessel and outboard motor dealer's inventory and the dollar amount of sales made by the owner as a dealer-to-dealer sale, fleet sale, or subsequent sale during the year or applicable time period for which the declaration is filed; and (11) the market value of the inventory for the current tax year as computed under the Tax Code, sec.23.12D. (h) In addition to the information required by subsections (f) and (g) of this section, a vessel and outboard motor dealer's inventory declaration made available by a chief appraiser as required by subsection (i) of this section shall include the following: (1) information about how to complete and file a vessel and outboard motor dealer's inventory declaration; (2) a statement of the penalty or penalties for failing to file a vessel and outboard motor dealer's inventory declaration; and (3) a notice of the penalties for making or filing an application containing a false statement. (i) A chief appraiser shall make available to a property owner Model Forms 23.12D and 23.12E. A chief appraiser may make available a different form for a vessel and outboard motor dealer's inventory tax statement that sets out the information listed in subsections (c)-(e) of this section in the same language and sequence as the model form. (j) A chief appraiser may make available a different vessel and outboard motor dealer's inventory declaration that sets out the information listed in subsections (f)-(h) of this section in the same language and sequence as the model forms. (k) In special circumstances, the chief appraiser may use forms that provide additional information, deletes information required by this section, or sets out the required information in different language or sequence than that required by this section if the form has been previously approved by the Property Tax Division, Comptroller of Public Accounts. (l) The Comptroller of Public Accounts adopts by reference: Model Form 23,12D, dealer's vessel and outboard motor inventory declaration; and Model Form 23.12E, dealer's vessel and outboard motor inventory tax statement. Copies of the forms are available for public inspection at the Office of the Secretary of State, Texas Register Division, or may be obtained from the Comptroller of Public Accounts, Property Tax Division, P.O. Box 13528, Austin, Texas 78711-3528. 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 January 17, 1996. TRD-9600685 Martin E. Cherry Chief, General Law Section Comptroller of Public Accounts Effective date: February 7, 1996 Proposal publication date: December 12, 1995 For further information, please call: 463-3725