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 1. ADMINISTRATION PART XII. Advisory Commission on State Emergency Communications CHAPTER 255.Finance 1 TAC sec.255.7 The Advisory Commission on State Emergency Communications adopts an amendment to sec.255.7, concerning the collection and remittance of 9-1-1 emergency service fees and equalization surcharges, without changes to the proposed text as published in the July 30, 1996, issue of the Texas Register (21 TexReg 7207). The rule is amended to allow new remitters of surcharges and fees to pay on a quarterly basis immediately after the first month rather than having to remit monthly for a year. The amendment provides clarification on collection and remittance of 9-1-1 emergency service fees and equalization surcharges. No comments were received regarding adoption of the amendment. The amendment is adopted under the authority of the Health and Safety Code, Chapter 771, sec.sec.771.071 (e), 771.072, 771.073, 771.075. 771.076, and 771.077, which provide the Advisory Commission on State Emergency Communications with the authority to establish collection procedures for 9-1-1 service fees and surcharges by service providers. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1996. TRD-9615533 James D. Goerke Executive Director Advisory Commission on State Emergency Communications Effective date: November 14, 1996 Proposal publication date: July 30, 1996 For further information, please call: (512) 305-6911 TITLE 28. INSURANCE PART I. Texas Department of Insurance CHAPTER 7.Corporate and Financial Regulation SUBCHAPTER P. Licensing and Examination of Third Party Administrators 28 TAC sec.7.1617 The commissioner of insurance adopts new sec.7.1617, concerning school district health coverage contracts, with changes to the proposed text as published in the September 3, 1996, issue of the Texas Register (21 TexReg 8378). A public hearing on the proposed section was requested and held on October 16, 1996. Texas Education Code, sec.22.004 prohibits a school district from contracting with any person to assist the school district in obtaining or managing the district's group health benefits for its employees until the person provides the school district audited financial statements showing the financial condition of the person. The Texas Education Code further provides that any person who enters into a contract with a school district to assist the district in obtaining or managing the coverage must provide annual audited financial statements showing the financial condition of the person to the school district. The audited financial reports provided for by Texas Education Code, sec.22.004 are to be made in accordance with rules adopted by the commissioner of insurance or the state auditor. The adopted section implements this requirement for third party administrators. The adopted section defines how the audited financial statements required by Texas Education Code, sec.22.004, shall be prepared. Such reports shall be prepared by an independent certified public accountant or accounting firm that meets the requirements of Insurance Code, Article 1.15A, in accordance with the generally accepted auditing standards and the generally accepted accounting principles adopted by the American Institute of Certified Public Accountants. The agency received four letters commenting on the new section. There were two comments against the proposal to require any audited financial reports prepared for a school district under Texas Education Code, sec.22.004 to be filed with the department. The department agrees with the comments and deleted proposed subsection (d) from the adopted section. Another comment recommended that the rule be amended to permit persons to file consolidated or unconsolidated financial statements. The agency believes the decision to require consolidated or unconsolidated financial statements rests with others, such as the school district and the accounting rules governing this matter. Another comment requested that the commissioner provide interpretations of certain provisions of the Texas Education Code, sec.22.004. The agency disagrees since it is not authorized to construe the Texas Education Code. Another comment recommended that the department address all persons who are subject to regulation by the department, including agents, and subject to the requirement of Texas Education Code, sec.22.004. The agency considered a broad approach, but chose to use specific rules applicable to certain licensees to avoid conflict or confusion with other laws requiring licensees to provide the department with audited financial statements. Commenting against the section or certain provisions of the section were Sidwell & Associates, Group & Pension Administrators Inc., National Plan Administrators, Inc. J.R. Specialty Services Inc., and Texas Professional Benefit Administrators Association. There were no comments in support of the section. The new section is adopted under the Insurance Code, Articles 21.07-6 and 1.03A, and Texas Education Code, sec.22.004. Article 21.07-6, sec.2 authorizes the commissioner to adopt rules that are appropriate for the augmentation and implementation of the regulation of third party administrators. Article 1.03A provides that the commissioner may adopt rules to execute the duties and functions of the department. The section is required by Texas Education Code, sec.22.004(d) which requires the commissioner of insurance to adopt rules concerning the audited financial statements required by Texas Education Code, sec.22.004. sec.7.1617. School District Group Health Coverage Contracts. (a) Scope and Introduction. This section only applies to third party administrators that assist a school district in obtaining or managing a policy or contract for group health benefits for a school district. Texas Education Code, sec.22.004(a) requires each school district to make available to its employees group health coverage. Texas Education Code, sec.22.004(b) requires a school district to obtain an audited financial report showing the financial condition of any person before the school district may contract with the person regarding the obtaining or managing the policy or contract for such health coverage. Texas Education Code, sec.22.004(c) requires a person that has contracted with a school district to provide an annual audited financial statement to the school district showing the financial condition of the person. Texas Education Code, sec.22.004(d) requires such audited financial statements to be in accordance with rules adopted by the commissioner of insurance or state auditor as applicable. Since third party administrators are licensed by the Texas Department of Insurance, this section implements the requirement of Texas Education Code, sec.22.004(d) for third party administrators. Insurers and other entities regulated by the department and that assist a school district in obtaining or managing the policy or contract are also subject to Texas Education Code, sec. 22.004. This section does not affect the duty of other entities regulated by the department to comply with the provisions of Texas Education Code, sec.22.004. (b) Definitions. The terms "Accountant," "Generally Accepted Auditing Standards," and "Generally Accepted Accounting Principles" have the same meaning described for those terms in sec.7.85 of this title (relating to Audited Financial Reports). (c) Audited Financial Statements. Audited financial statements required by subsection (a) of this section shall be audited by an accountant. Such audit must be done in accordance with Generally Accepted Auditing Standards and the resulting report must attest that the financial condition of the third party administrator is fairly presented in accordance with Generally Accepted Accounting Principles or disclose discrepancies therefrom. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 23, 1996. TRD-9615494 Caroline Scott General Counsel and Chief Clerk Texas Department of Insurance Effective date: November 13, 1996 Proposal publication date: September 3, 1996 For further information, please call: (512) 463-6327 CHAPTER 13.Miscellaneous Insurers SUBCHAPTER D.Risk Retention Group and Purchasing Groups 28 TAC sec.13.312, sec.13.313 (Editor's Note: House Bill 1461, 73rd Legislature, 1993, provided for the transfer of certain tax rules from the Texas Department of Insurance to the Comptroller of Public Accounts effective September 1, 1993. The original Rule Conversion was published in the October 19, 1993, issue of the Texas Register (18 TexReg 7296). In the process of transferring specific tax reporting rules, 28 TAC sec.13.312 and sec.13.313 were inadvertently transferred to Title 34 and were designated as sec.3.818 and sec.3.819. 34 TAC 3.818 (previously 28 TAC sec.13.312) addresses regulatory fees, and sets the amount for filing fees for risk retention groups and purchasing groups as authorized by the Insurance Code Article 21.54, sec.sec.3(f) 4(c) and 7(a). 34 TAC sec.3.819 (previously 28 TAC sec.13.313) addresses primarily the filing of forms necessary to register a risk retention group or a purchasing group in accordance with Article 21.54, sec.sec.3(b), 4(b) and 7(a). The responsibility for the registration of risk retention groups and purchasing groups remains with TDI. The two referenced sections are an integral part of the regulatory framework for risk retention groups, rather than a part of the tax collection function. The Comptroller and TDI agree that the referenced sections should be retrieved to Title 28 for TDI administration. Therefore, in order to enforce the uniformity of reporting forms in the registration of risk retention and purchasing groups under Article 21.54, TDI requests that 34 TAC sec.3.818 and sec.3.819 be transferred back to Title 28, as sec.13.312 and sec.13.313. The Texas Register is administratively transferring the rules from Title 34., Part I. Comptroller of Public Accounts to Title 28., Part I., Texas Department of Insurance TITLE 30. ENVIRONMENTAL QUALITY PART I. Texas Natural Resource Conservation Commission CHAPTER 106.Exemptions From Permitting SUBCHAPTER A.General Requirements 30 TAC sec.sec.106.1, 106.2, 106.4, 106.6 The commission adopts new sec.sec.106.1, 106.2, 106.4, and 106.6, concerning General Requirements, with changes to the proposed text as published in the July 12, 1996, issue of the Texas Register (21 TexReg 6409). The new sections contain general provisions related to exemptions from air quality permitting requirements. Sections 106.3 and 106.5 are being withdrawn by the commission. This rulemaking action is the first action in the commission's plan to recodify standard exemptions in a new Chapter 106, concerning Exemptions from Permitting. Prior to the construction of a new facility or modification to an existing facility, permit authorization must be obtained from the commission. The Texas Health and Safety Code, the Texas Clean Air Act (TCAA), sec.382.057, allows the commission to exempt types of facilities and changes to permitted facilities from the statutory requirement to obtain a preconstruction permit if the commission determines these types of facilities to be insignificant sources of air contaminants. The commission currently exempts these types of facilities from permitting requirements by the Standard Exemption (SE) List in sec.116.211. Chapter 106 will eventually replace sec.116.211, including the SE List, and will provide a unique section number for each exemption. Chapter 106 will be organized in subchapters containing related exemptions. Exemptions will be added to Chapter 106 in future rulemaking actions through a stepwise process. The majority of the exemptions from the current SE List will be transferred to Chapter 106 unchanged from their current form in future rulemaking actions. Where the commission determines that changes are needed to specific exemptions, they will be proposed for inclusion in this new chapter with those changes. Once all of the exemptions in the current SE List have been duplicated in this new chapter, sec.116.211 will be repealed. Construction or modification of facilities that commences on or after the effective date of a relevant exemption in Chapter 106 must qualify for an exemption under Chapter 106; an exemption in sec.116.211 will no longer be available for use. Until an exemption is listed in the new chapter, the exemptions in sec.116.211 may continue to be used to exempt facilities. This initial action in the recodification process will create a new Subchapter A, which will contain the general requirements related to exemptions currently found in sec.116.211. The rules address the following problem: the current structure of the SE List hampers flexibility and speed in regulatory reform. The SE List is currently contained in one section of the Texas Administrative Code. Texas Register rules prohibit more than one rulemaking proceeding from amending a given section at the same point in time. This prohibition limits any rulemaking activities concerning standard exemptions from occurring any time one or more of the exemptions are being amended. This proposal is the first step in assigning each previous standard exemption a section number. This approach will allow rulemaking to proceed on individual exemptions. A public hearing on the proposal was held on August 8, 1996, in Austin. No oral testimony was presented. Written comments were received from the following 15 commenters: the United States Environmental Protection Agency (EPA), Dupont Gulf Coast Regional Manufacturing Services (DuPont), Amoco Corporation (Amoco), Texas Utilities Services, Inc. (TU), Eastman Chemical Company (Eastman), Union Carbide Corporation (Union Carbide), the City of Dallas, Brown McCarroll & Oaks Hartline (Brown McCarroll), Texas Mid-Continent Oil & Gas Association (TMOGA), EC-Applied, Inc., the Texas Industry Project, Exxon Company, U.S.A., Exxon Chemical Americas, Houston Lighting & Power (HL & P), and the Texas Paper Industry Environmental Council. Dupont, Amoco, TU, Exxon Company, U.S.A., Exxon Chemical Americas, and HL & P stated that they endorsed the comments of the Texas Industry Project. Dupont, Amoco, Brown McCarroll, TMOGA, TU, Eastman, Union Carbide, the Texas Industry Project, Exxon Company, U.S.A., Exxon Chemical Americas, HL & P, and the Texas Paper Industry Environmental Council stated that the addition of "changes to permitted facilities" in the proposed sec.106.2 and sec.106.4 changed the long- standing agency practice of allowing changes at non-permitted facilities, including grandfathered facilities. These commenters stated their belief that the new language proposed in the rules contradicted the commission's statement in the preamble that this action was a recodification of existing rules, and that the proposal had significant fiscal implications to the regulated community as a result. TMOGA and Brown McCarroll suggested language to address this concern. The commission has made changes to the rules so that they are consistent with the existing language in sec.116.211. The changes resolve concerns about notice and fiscal implications. However, the commission will consider whether to re- propose the language in the near future to be consistent with statutory language limiting use of standard exemptions for changes at non-permitted facilities. TMOGA and Brown McCarroll suggested use of the word "modifications" in place of "changes," or suggested changing the references to Subchapter B. The suggestions are no longer necessary due to the revisions which made the rules consistent with current sec.116.211. TMOGA suggested a change in the language regarding the effective date of the new chapter. The commission agrees and has incorporated the suggested change. The City of Dallas commented that it is concerned about confusion to the public and to the affected agencies about the restructuring of the exemptions, especially during the interim period before all exemptions are codified. It recommended that the old exemption number be included with each standard exemption as it is codified into Chapter 106. The commission agrees to include the old exemption number in the recodified exemptions in Chapter 106. Brown McCarroll commented that proposed sec.106.4(a)(1) and (2) should be revised to read as follows: "shall be exempted if it meets the general requirements." The subsection proposed to be changed by this commenter was changed in response to other comments received. Brown McCarroll commented that the words "or modifications" should be added to proposed sec.106.4(d) so that it will read as follows: "After construction or modification of the facility, ...." The basis for the commenter's concern has been addressed by the removal of reference to "changes at permitted facilities" from the rule. Brown McCarroll commented that the commission should justify its imposition of the requirements of sec.116.134 through sec.106.5(c). In light of the commission's response agreeing to limit this rulemaking to recodification of existing rules, the language has been removed and may be re- proposed at a later date. TMOGA commented that the record storage requirements of sec.106.6(e) are impractical at unmanned facilities and submitted suggested language. The final rule will incorporate the language of existing sec.116.117(a) to address the commenter's concern. EC-Applied, Inc. commented that a paragraph regarding netting/offsets for projects with greater than five ton-per-year emissions should be included in the adoption and that the requirements in sec.116.150 need to be mentioned or at least referenced. The commission has added language to remind individuals of the requirements contained in sec.116.150. EPA commented that the agency should not use December 31, 1997, in sec.106.4(b)(3)(B) as EPA has not yet approved a nitrogen oxides waiver for the Houston and Beaumont areas beyond the year 1996. The commission agrees that the comment is accurate with regard to the currently approved SIP. The commission has requested an extension of the waiver to December 31, 1997. If this extension is approved by EPA, the suggested revision would necessitate future revision of this rule to reflect approval of the December 31, 1997 extension. The commission recently adopted two similar rule revisions incorporating the requested extension to December 31, 1997. Also, this portion of the rule will not have any substantive effect until after EPA action on the extension request, because only the used oil burning space heater standard exemption is being incorporated into this chapter for the present time. Should EPA not approve the extension request, the commission will revise all affected rules as appropriate. For these reasons, the commission adopts the rule as proposed. During the October 9, 1996, agenda meeting, staff requested continuation of this item to allow time to address concerns raised with regard to the previous direction received to make the proposal consistent with sec.116.211. The commission has revised the rule to comply with this direction. The new sections are adopted under the Texas Health and Safety Code, the TCAA, sec.382.017, which provides the commission with the authority to adopt rules consistent with the policy and purposes of the TCAA. sec.106.1. Purpose. This chapter identifies facilities or types of facilities which the commission has determined will not make a significant contribution of air contaminants to the atmosphere and pursuant to the Texas Health and Safety Code, the Texas Clean Air Act (TCAA), sec.382.057, are exempt from the permit requirements of the TCAA, sec.382.0518. sec.106.2. Applicability. This chapter applies to facilities or types of facilities listed in this chapter where construction is commenced on or after the effective date of the relevant exemption. Facilities or types of facilities contained in this chapter must qualify for an exemption under this chapter and may not be qualified for an exemption listed in sec.116.211 of this title (relating to Standard Exemption List). Facilities or types of facilities not contained in this chapter may qualify for an exemption under sec.116.211 of this title. sec.106.4. Requirements for Exemption from Permitting. (a) To qualify for an exemption, the following general requirements must be met. (1) Total actual emissions authorized under exemption from the proposed facility shall not exceed 250 tons per year (tpy) of carbon monoxide (CO) or nitrogen oxides (NOx); or 25 tpy of volatile organic compounds (VOC) or sulfur dioxide (SO2) or inhalable particulate matter (PM10); or 25 tpy of any other air contaminant except carbon dioxide, water, nitrogen, methane, ethane, hydrogen, and oxygen. (2) Except as noted in paragraph (3) of this subsection, any facility or group of facilities, which constitutes a new major stationary source, as defined in sec.116.12 of this title (relating to Nonattainment Review Definitions), or any modification which constitutes a major modification, as defined in sec.116.12 of this title, under the new source review requirements of the Federal Clean Air Act (FCAA), Part D (Nonattainment) as amended by the FCAA Amendments of 1990, and regulations promulgated thereunder, must meet the permitting requirements of Chapter 116, Subchapter B of this title (relating to New Source Review Permits) and cannot qualify for an exemption under this chapter. Persons claiming an exemption under this chapter should see the requirements of sec.116.150 of this title (relating to New Major Source or Major Modification in Ozone Nonattainment Area) to ensure that any applicable netting requirements have been satisfied. (3) Any facility or group of facilities, which constitute a stationary source, as defined in sec.116.12 of this title, that emits NOx and is located in the Houston/Galveston ozone nonattainment area (Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, and Waller Counties) or the Beaumont/Port Arthur ozone nonattainment area (Hardin, Jefferson, and Orange Counties) can exceed the major source/major modification level listed in Table 1 of sec.116.12 of this title (relating to Nonattainment Review Definitions) if the following conditions are met. (A) Any new facility or group of facilities, which constitute a new stationary source, as defined in sec.116.12 of this title, and emit NOx in an amount, after netting, exceeding the major source threshold or major modifications exceeding the major modification level for NOx listed in Table 1, shall register by submitting a Form PI-8. (B) The registration shall be submitted prior to commencement of construction, but not later than December 31, 1997. (C) No other applicable limits contained in this section shall be exceeded. (4) Any facility or group of facilities, which constitutes a new major stationary source, as defined in 40 Code of Federal Regulations (CFR) sec.52.21, or any change which constitutes a major modification, as defined in 40 CFR sec.52.21, under the new source review requirements of the FCAA, Part C (Prevention of Significant Deterioration) as amended by the FCAA Amendments of 1990, and regulations promulgated thereunder, must meet the permitting requirements of Chapter 116, Subchapter B of this title and cannot qualify for an exemption under this chapter. (5) Unless at least one facility at an account has been subject to public notification and comment as required in Chapter 116, Subchapter B or Subchapter D of this title (relating to New Source Review Permits or Permit Renewals), total actual emissions from all exempted facilities at an account shall not exceed 250 tpy of CO or NOx; or 25 tpy of VOC or SO2 or PM10; or 25 tpy of any other air contaminant except carbon dioxide, water, nitrogen, methane, ethane, hydrogen, and oxygen. (6) Construction or modification of a facility commenced on or after the effective date of a revision of this section or the effective date of a revision to a specific exemption in this chapter must meet the revised requirements to qualify for an exemption. (7) A proposed facility shall comply with all applicable provisions of the FCAA, sec.111 (Federal New Source Performance Standards) and sec.112 (Hazardous Air Pollutants), and the new source review requirements of the FCAA, Part C and Part D and regulations promulgated thereunder. (8) There are no permits under the same Texas Natural Resource Conservation Commission account number that contain a condition or conditions precluding the use of a standard exemption or an exemption under this chapter. (b) No person shall circumvent by artificial limitations the requirements of sec.116.110 of this title (relating to Applicability). (c) The emissions from the facility shall comply with all rules and regulations of the commission and with the intent of the Texas Clean Air Act (TCAA), including protection of health and property of the public, and all emissions control equipment shall be maintained in good condition and operated properly during operation of the facility. (d) Facilities exempted by this chapter are not exempted from any permits or registrations required by local air pollution control agencies. Any such requirements must be in accordance with TCAA, sec.382.113 and any other applicable law. sec.106.6. Registration of Emissions. (a) An owner or operator may certify and register the maximum emission rates from facilities exempted under this chapter in order to establish enforceable allowable emission rates which are below the emission limitations in sec.106.4 of this title (relating to Requirements for Exemption from Permitting). (b) All representations with regard to construction plans, operating procedures, and maximum emission rates in any certified registration under this section become conditions upon which the exempt facility shall be constructed and operated. (c) It shall be unlawful for any person to vary from such representation if the change will cause a change in the method of control of emissions, the character of the emissions, or will result in an increase in the discharge of the various emissions, unless the certified registration is first revised. (d) The certified registration must include documentation of the basis of emission estimates and a written statement by the registrant certifying that the maximum emission rates listed on the registration reflect the reasonably anticipated maximums for operation of the facility. (e) The certified registration shall be maintained on-site and be provided immediately upon request by representatives of the Texas Natural Resource Conservation Commission or any air pollution control agency having jurisdiction. If the plant site is unmanned, the regional manager may authorize an alternative site to maintain this documentation. Copies of the certified registration shall be included in applications for permits subject to review under the undesignated heads in Chapter 116, Subchapter B of this title (relating to New Source Review Permits). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 23, 1996. TRD-9615610 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: November 15, 1996 Proposal publication date: July 12, 1996 For further information, please call: (512) 239-1966 SUBCHAPTER C. Domestic and Comfort Heating and Cooling 30 TAC sec.106.102 The commission adopts new sec.106.102, concerning Comfort Heating, with changes to the proposed text as published in the July 12, 1996, issue of the Texas Register (21 TexReg 6412). The new section exempts combustion units used exclusively for comfort heating from the preconstruction permitting requirements of the Texas Health and Safety Code, the Texas Clean Air Act (TCAA), sec.382.057 and sec.382.0518. This rulemaking action is part of the commission's plan to recodify standard exemptions in a new Chapter 106, concerning Exemptions from Permitting. This action in the recodification process will create a new sec.106.102, which is a recodification of current Standard Exemption (SE) 3 in sec.116.211, with changes to allow for burning distillate fuel oil and to allow for the burning of used oil in comfort space heaters. Space heaters constructed or modified after the effective date of this section will be subject to the requirements of this new chapter; however, current SE 3 may continue to be used until the effective date of this section. The rule addresses the following problem: a significant opportunity for recycling used oil is to use it for fuel for heating purposes. However, the current standard exemption for comfort heating, SE 3, does not allow for the burning of distillate fuel oil or used oil in space heaters. Thus, the owner/operator of a space heater who wants to burn distillate fuel oil or used oil would be required to obtain a new construction permit. The rule solves this problem by creating sec.106.102, relating to Comfort Heating. A public hearing was held in Austin on August 8, 1996. Oral comments were received at the hearing by individuals representing Innovative Resources and Clean Burn, Inc. Written comments were received from the City of Dallas, the Waste Oil Heating Manufacturers Association (WOHMA), and Houston Lighting and Power (HL & P). WOHMA commented that Texas should adopt regulations that are consistent with the federal regulations, and that the current Texas proposal differs from the federal regulations in two respects: it imposes a combined 1.0 million British thermal units per hour (Btu/hr) limit on each account, and it requires that the combustion gases from the heater be vented through an unobstructed vertical vent. The restrictions were imposed to meet the requirements of Texas Clean Air Act, sec.382.057, which requires a demonstration that the facility will not make a significant contribution of air contaminants to the atmosphere. The commission has mandated that all exemptions be demonstrated to be protective of human health and the environment. These requirements ensure that the exemption meets those stated goals. WOHMA and an individual recommended that sec.106.102(2) be changed to specify the vertical vent height in lieu of an unobstructed stack to avoid conflicts with required fire and safety codes. The commission agrees, and has incorporated the proposed language in this adoption. An individual commented that the rule does not specify what happens if the owner or operator wants to exceed the 1.0 million Btu limitation at a site. The exemption does not authorize the installation of multiple units above 1.0 million Btu limitation utilizing used oil as a fuel. However, additional units could be authorized by applying for a permit. The City of Dallas commented that it is concerned about confusion to the public and to the affected agencies about the restructuring of the exemptions, especially during the interim period before all exemptions are codified. It recommended that the old exemption number be included with each standard exemption as it is codified into Chapter 106. The commission agrees to include the old exemption number in the recodified exemptions in Chapter 106. HL & P commented that the term "distillate fuel oil" should be replaced by "diesel fuel, kerosene, or heating oil (and any other fuels which the commission considers as distillate fuel oil)." The commission intends that the term "distillate fuel oil" include diesel fuel, kerosene, and heating oil Grades 4 and lighter. The commission intends for the term to exclude heavier residual oils such as Grades 5 and 6 fuel oil. The commission agrees with this comment and has revised the rule accordingly. HL & P commented that it is not necessary to require that distillate fuel oil contain less than 0.3% sulfur to prevent significant emissions of sulfur dioxide (SOtype-name="sub">2), nor is it necessary to prevent adverse impacts on ambient air quality. The commission agrees with the comment and has deleted the limitation on sulfur content in distillate fuel oil. HL & P commented that approved fuels should be limited to a maximum sulfur content of 0.5% so that all Grade Number 2 diesel fuels can be burned. The limitation of sulfur in distillate fuel oil has been removed. HL & P commented that sec.106.102(1) should be rewritten to ensure that total combustion of used oil in space heaters does not exceed 1.0 million Btu/hr while clarifying that there is no limit on the total capacity of space heaters at an account if an owner or operator is not burning used oil. The last sentence of sec.106.102 specifies that the additional requirements in sec.106.102(1)-(3) are applicable only to space heaters burning used oil as a fuel. HL & P commented that sec.106.102(2) should be rewritten as follows to allow additional operating flexibility while insuring that emissions do not result in adverse off-property impacts: "(2) the heater(s) must be located at least 100 feet from the nearest property line if the combustion gases from the heater(s) are not vented to the ambient air through an unobstructed vertical vent...." Rather than place a distance criteria that could be impractical for some small businesses to meet, the commission is proposing to provide additional flexibility in the rule by allowing an increased stack height if there are caps or obstructions on the stack to insure that the off-property impacts will be acceptable. HL & P commented that the commission should clarify what constitutes "used oil" in order to allow diesel fuel to be burned that has been removed from the fuel tanks of other plant equipment such as emergency diesel generators. Used diesel taken out of equipment is not used oil, but would be authorized since fuel oil is an authorized fuel now for space heaters. The new section is adopted under the Texas Health and Safety Code, the TCAA, sec.382.017, which provides the commission with the authority to adopt rules consistent with the policy and purposes of the TCAA. sec.106.102. Comfort Heating (Previously SE 3). This section exempts combustion units designed and used exclusively for comfort heating purposes employing liquid petroleum gas, natural gas, solid wood, or distillate fuel oil. Distillate fuel oil includes diesel fuel, kerosene, and heating oil Grades 4 and lighter. Distillate fuel oil does not include heavier residual oils such as Grades 5 and 6 fuel oil. Combustion of bark chips, sawdust, wood chips, treated wood, or wood contaminated with chemicals is not included. Used oil that has not been mixed with hazardous waste may be used as fuel in space heaters provided that: (1) the space heater or combination of space heaters at the same account have a maximum capacity of 1.0 Million Btu per hour (MMBtu/hr) provided each individual heater is not greater than 0.5 MMBtu/hr; (2) the combustion gases from the heater(s) are vented to the ambient air in accordance with the following requirements: (A) through an unobstructed vertical vent; or (B) for a stack with a cap; (i) for a flat roof, through a minimum of a three-foot stack; or (ii) for a sloped roof, through a stack that is three feet higher than a point extending ten feet horizontally from the roof; and (3) the heater(s) burns only used oil that the owner or operator generates on- site or used oil received from household do-it-yourself used oil generators. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 23, 1996. TRD-9615608 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: November 15, 1996 Proposal publication date: July 12, 1996 For further information, please call: (512) 239-1966 TITLE 34. PUBLIC FINANCE PART I. Comptrollers of Public Accounts CHAPTER 3.Tax Administration SUBCHAPTER GG.Insurance Tax 34 TAC sec.3.818, sec.3.819 (Editor's Note: House Bill 1461, 73rd Legislature, 1993, provided for the transfer of certain tax rules from the Texas Department of Insurance to the Comptroller of Public Accounts effective September 1, 1993. The original Rule Conversion was published in the October 19, 1993, issue of the Texas Register (18 TexReg 7296). In the process of transferring specific tax reporting rules, 28 TAC sec.13.312 and sec.13.313 were inadvertently transferred to Title 34 and were designated as sec.3.818 and sec.3.819. 34 TAC 3.818 (previously 28 TAC sec.13.312) addresses regulatory fees, and sets the amount for filing fees for risk retention groups and purchasing groups as authorized by the Insurance Code Article 21.54, sec.sec.3(f) 4(c) and 7(a). 34 TAC sec.3.819 (previously 28 TAC sec.13.313) addresses primarily the filing of forms necessary to register a risk retention group or a purchasing group in accordance with Article 21.54, sec.sec.3(b), 4(b) and 7(a). The responsibility for the registration of risk retention groups and purchasing groups remains with TDI. The two referenced sections are an integral part of the regulatory framework for risk retention groups, rather than a part of the tax collection function. The Comptroller and TDI agree that the referenced sections should be retrieved to Title 28 for TDI administration. Therefore, in order to enforce the uniformity of reporting forms in the registration of risk retention and purchasing groups under Article 21.54, TDI requests that 34 TAC sec.3.818 and sec.3.819 be transferred back to Title 28, as sec.13.312 and sec.13.313. The Texas Register is administratively transferring the rules from Title 34., Part I. Comptroller of Public Accounts to Title 28., Part I., Texas Department of Insurance CHAPTER 7.Prepaid Higher Education Tuition Program SUBCHAPTER A.General Rules 34 TAC sec.7.3 The Comptroller of Public Accounts adopts new sec.7.3, concerning tax exempt status requirements, with changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8913). The new section sets forth the requirements of Internal Revenue Code, sec.529. The purpose of this section is to clarify that the program meets the requirements of Internal Revenue Code, sec.529. No comments were received regarding adoption of the new section. Proposed sec.7.3 was changed to clarify that it is not permissible to pledge a prepaid tuition contract. Other grammatical clarifications were made. In addition, a new introductory subsection (a) was added to clarify that the purpose of the section is to meet the requirements of Internal Revenue Code, sec.529, and the subparts following subsection (a) were renumbered to reflect the change. The new section is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The new section implements the Education Code, Chapter 54, Subchapter F. sec.7.3.Tax Exempt Status Requirements. (a) The provisions of this section are intended to meet the requirements of the Internal Revenue Code, sec.529. (b) All payments of amounts due to the fund for a prepaid tuition contract must be made in cash. No person may make payments to the fund in excess of the amounts required to be paid under the prepaid tuition contract selected by the purchaser. (c) A separate accounting shall be maintained for each beneficiary. (d) The purchaser of a prepaid tuition contract and the beneficiary of the contract shall have no ability to control or direct the investment of the payments made under the contract or any earnings of the fund. (e) The purchaser of a prepaid tuition contract and the beneficiary of the contract cannot use any interest in the contract as security for a loan or other obligation, and any attempt to do so shall be void. (f) The board shall make such reports as the Secretary of the Treasury shall require. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615593 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 SUBCHAPTER B.Board Meeting Guidelines and Requirements 34 TAC sec.7.11 The Comptroller of Public Accounts adopts amendments to sec.sec.7.11, 7.41, and 7.42, concerning board officers; application; and enrollment period. Section 7.41 and sec.7.42 are adopted with changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8914). Section 7.11 is adopted without changes and will not be republished. The amendments will revise the rules to provide the new room number of the physical location of the Texas Tomorrow Fund. No comments were received regarding adoption of the amendments. Proposed sec.7.41(b) and sec.7.42(a) were changed to correct an error in the post office box number and the zip code. Proposed sec.7.42(a) was changed to correct an error in the enrollment period date. The amendment is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The amendment implement the Education Code, Chapter 54, Subchapter F. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615595 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 SUBCHAPTER E.Application, Enrollment, Payment, and Fees. 34 TAC sec.7.41, sec.7.42 These amendments are adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules for the necessary for the implementation of Prepaid Higher Education Tuition Program. sec.7.41.Application. (a) These rules apply to prepaid tuition contracts for the prepayment of tuition and required fees necessary for a beneficiary to attend an institution of higher education or private or independent institution of higher education. Prepayments are expressly limited to payment of tuition and required fees as specified in this chapter, the Education Code, Chapter 54, Subchapter F, and the prepaid tuition contracts issued pursuant thereto. (b) Applications shall be made available through the Prepaid Higher Education Tuition Program, Office of the Comptroller of Public Accounts, P.O. Box 13407, Austin, Texas 78711-3407; 111 East 17th Street, Room 1114, Austin, Texas 78774- 0001, or by calling toll- free at 1-800-445-GRAD (4723), or as otherwise provided by the board. (c) The rights of purchasers and beneficiaries are subject to the provisions of this chapter, the Education Code, Chapter 54, Subchapter F, and the terms and conditions of the prepaid tuition contract. Prepaid tuition contract prices shall be evaluated by the board annually and adjusted as necessary to ensure the actuarial soundness of the fund. Revisions to the prepaid tuition contract price will be published in the Texas Register and shall apply to prepaid tuition contracts entered into subsequent to board approval of the revision. sec.7.42.Enrollment Period. (a) Each enrollment period shall begin and end on dates set annually by the board and published in the Texas Register with the initial enrollment period beginning January 2, 1996, and ending March 31, 1996. The official postmark date affixed by the United States Postal Service or date stamp evidencing actual receipt of the application at the address specified as follows, whichever is earlier, shall be considered the date of receipt of an application for purposes of the enrollment period. Applications may be mailed to the following address: Prepaid Higher Education Tuition Program, Office of the Comptroller of Public Accounts, P.O. Box 13407, Austin, Texas 78711-3407. In the alternative applications may be delivered to the following address 111 East 17th Street, Room 1114, Austin, Texas 78774-0001. (b) The board reserves the right to limit enrollment as necessary to ensure the actuarial soundness of the fund. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615594 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 SUBCHAPTER F.Tuition 34 TAC sec.7.52 The Comptroller of Public Accounts adopts an amendment to sec.7.52, concerning maximum tuition credit hours and fees paid, without changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8915). The amendment will revise subsection (a) to provide for the purchase of up to 128 tuition credit hours under the senior college plan or the private college plan. The change is made in order to more accurately reflect the typical number of tuition credit hours needed to obtain a baccalaureate degree as determined by a sample survey conducted by the Universities Division of the Texas Higher Education Coordinating Board. The amendment will revise subsection (c), pertaining to the number of credit hours covered by the junior-senior plan, to conform to the change to subsection (a). No comments were received regarding adoption of the amendment. The amendment is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The amendment implements the Education Code, Chapter 54, Subchapter F. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615596 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 SUBCHAPTER G.Beneficiaries 34 TAC sec.7.62 The Comptroller of Public Accounts adopts an amendment to sec.7.62, concerning evidence of residency, with changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8915). The amendment will revise the rule to provide for a self-certification process, wherein the purchaser would attest to the fact that the beneficiary is qualified to participate based on the residency of the purchaser or the beneficiary. The staff will have the ability to obtain proof from the purchaser in cases where eligibility is questionable. In addition, the staff proposes to conduct periodic audits of a sample of purchasers, chosen at random, to ensure compliance with the statutory residency requirements. The change is made in order to streamline the processing of applications. No comments were received regarding adoption of the amendment. The title was changed to clarify that the section includes certification. The amendment is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The amendment implements the Education Code, Chapter 54, Subchapter F. sec.7.62.Certification and Evidence of Residency. (a) The purchaser must certify on the application for enrollment in the program that the beneficiary or the parents or guardians of the beneficiary are residents of this state at the time the purchaser enters into the contract and that the beneficiary or the parents or guardians of the beneficiary satisfy any period of residency required by the board. Prior to or after accepting an application for enrollment in the program, the board may require evidence of residency in the state of Texas as of the date of the application. (b) For beneficiaries under the age of one as of the date of application, the following documents may be considered sufficient to establish residency status: (1) a birth certificate indicating that the qualified beneficiary was born in Texas; and (2) one or more of the items listed in subsection (e) of this section. (c) For beneficiaries who are at least one year of age but younger than six as of the date of application, the following documents may be considered sufficient to establish residency status: (1) progress reports or other documentation from the child's preschool or child care center or provider evidencing 12 months of continuous residency immediately prior to the date of the application; or (2) one or more of the items listed in subsection (e) of this section. (d) For beneficiaries who are at least six years of age but younger than 18 as of the date of application, the following documents may be considered sufficient to establish residency status: (1) the child's report cards or transcripts from a public or private school in Texas or documentation from a child care center or provider may be accepted as evidence of 12 months of continuous residency immediately prior to the date of the application; or (2) one or more of the items listed in subsection (e) of this section. (e) If no such records relating to the beneficiary exist or are available, or if the beneficiary is a nonresident child of a parent who is a resident of the State of Texas, the parents' or guardians' residency shall be determinative as to eligibility for the program. Residency of a parent or guardian may be established by one or more of the following documents showing 12 months of continuous residence in the state of Texas immediately prior to the date of the application: (1) voter's registration card; (2) driver's license; (3) certificate of domicile; (4) utility bills at the same residence; (5) professional or occupational license; (6) wage statements or other proof of employment in Texas; (7) Texas vehicle registration; or (8) any other similar documentation indicating such continuous residency. (f) In assessing the 12 months continuous residency requirement, brief absences or absences justified by catastrophic or extenuating circumstances may be waived. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615597 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 34 TAC sec.7.63 The Comptroller of Public Accounts adopts an amendment to sec.7.63, concerning change of beneficiary, with changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8916). The amendment will revise the rule to clarify that a purchaser other than an individual may change a beneficiary. In addition, the amendment allows a purchaser to change the original beneficiary after the original beneficiary's graduation from high school or attainment of high school equivalency certification. No comments were received regarding adoption of the amendment. The proposed amendment to sec.7.63(b) was changed to make a grammatical correction. The amendment is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The amendment implements the Education Code, Chapter 54, Subchapter F. sec.7.63.Change of Beneficiary. (a) The purchaser of a prepaid tuition contract may substitute one beneficiary for another subject to the following conditions: (1) the new beneficiary must meet the requirements of a qualified beneficiary on the date the designation is changed, including residency requirements; (2) the new beneficiary must be a sibling, step-sibling, or half-sibling of the original beneficiary; (3) documentation must be submitted evidencing the relationship of the beneficiaries; and (4) the purchaser must pay any amounts that would have been paid under the contract originally had the new beneficiary been designated at the time the original beneficiary was designated, plus any required fees specified in the board's fee schedule. (b) Amounts paid before the beneficiary is changed shall be credited against amounts due at the time of the change. If the amount due at the time of the change is less than the amount paid prior to the change, such amount shall be credited against other amounts due through the term of the contract. If the amount paid prior to change exceeds the amounts due through the term of the contract, the amount in excess of the amounts due shall be refunded to the purchaser. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615598 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 34 TAC sec.7.64 The Comptroller of Public Accounts adopts new sec.7.64, concerning purchasers, with changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8917). The new section clarifies the role of the purchaser and the right of the purchaser to designate a person with a right of survivorship in the event of the purchaser's death. In addition, this new rule allows for joint purchasers for a single prepaid tuition contract, if the joint purchasers are married on the date of application. No comments were received regarding adoption of the new section. The proposed sec.7.64 was changed to make a grammatical correction. This new section is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The new section implements the Education Code, Chapter 54, Subchapter F. sec.7.64.Purchasers. A purchaser is a person who is obligated to make payments under a prepaid tuition contract. Joint purchasers may enter into a single prepaid tuition contract if they are married on the date of application. Each person that is a purchaser under a prepaid tuition contract is jointly and severally liable for all payments and fees due under such contract. Unless otherwise provided in these rules, the purchaser shall execute all prepaid tuition contract changes, conversions, transfers, terminations and refund requests, and if there are joint purchasers for a single prepaid tuition contract, both purchasers must execute to effect such actions. Any requests to change the purchaser must be signed and notarized by the purchaser. A purchaser may designate in writing to the board a person with a right of survivorship in the event of the purchaser's death. However, until the rights under the contract pass to the designee, such designee has no right to direct decisions regarding contract changes, conversions, transfers or termination. Without limitation on the foregoing, the contract may be modified or terminated by, or refund disbursed to, the purchaser without the consent or authorization of a designee of survivorship rights pursuant to this paragraph. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615599 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 SUBCHAPTER H.Conversion 34 TAC sec.7.71 The Comptroller of Public Accounts adopts an amendment to sec.7.71, concerning conversion, with changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8918). The amendment allows the purchaser to take the value of the contract under the original plan and credit such value against the amount due for conversion to a new plan. This change is made in order to reflect the fact that the value of a contract increases each year, as tuition and fees rise. No comments were received regarding adoption of the amendment. The proposed amendment to sec.7.71(b) was changed to make clear that the value of a prepaid tuition contract at the time of conversion is based on the present lump sum actuarial value of the tuition and required fees. In addition, other grammatical clarifications were made. The amendment is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The amendment implements the Education Code, Chapter 54, Subchapter F. sec.7.71.Conversion. (a) Plans are designed to be flexible and to allow beneficiaries to attend their choice of institutions of higher education or private or independent institutions of higher education. (b) A purchaser may convert a prepaid tuition contract from one plan to another plan during the annual enrollment period specified by the board and upon payment of any additional amounts due under the plan to which the contract is converted plus any required fees specified in the board's fee schedule. The value at the time of conversion of the contract under the original plan shall be credited against amounts due upon conversion. Such value shall be the present lump sum actuarial value of the average amount of tuition and required fees for junior college plans, junior/senior college plans, and senior college plans and the estimated amount of private tuition and required fees for the private college plan. For contracts that are paid in full, the payment of additional amounts for conversion is determined by applying the value at the time of the conversion of the contract purchased under the original plan to the cost of the new plan. For contracts that are not paid in full, the payment of additional amounts for conversion is determined by applying the pro rata amount of the value at the time of conversion of the contract purchased under the original plan to the cost of the new plan, such pro rata amount determined by the number of payments paid under the contract under the original plan by the purchaser to the number of payments required to pay the contract under the original plan in full. If the amount due under the plan to which the contract is converted is less than the value at the time of conversion of the contract under the original plan, such excess amounts shall be credited against other amounts due through the term of the contract. If the amount to be credited under the preceding sentence exceeds the amount due through the term of the contract, such excess shall be refunded to the purchaser less any applicable fees. (c) A purchaser may transfer ownership of a prepaid tuition contract to another eligible purchaser, provided the transfer is accomplished without consideration and, if the beneficiary is a nonresident of Texas, the substitute purchaser meets the applicable residency requirements. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615600 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 SUBCHAPTER I.Refunds, Termination 34 TAC sec.7.81 The Comptroller of Public Accounts adopts an amendment to sec.7.81, concerning refunds, with changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8918). The amendment to subsection (d)(1) limits the amount of any refund to a beneficiary receiving a full scholarship to the tuition amount. This change is made in order to comply with Internal Revenue Code, sec.529 for the junior college plan, junior/senior college plan or the senior college plan. The amendment to subsection (d)(5) provides for refunds when a beneficiary dies before the contract is paid in full. This amendment also provides the purchaser with the ability to designate who is to receive the refund. The amendment to subsection (d)(6) ensures that amounts refunded under the private college plan consider the amounts paid into the program by the purchaser, less applicable fees. Without the amendment, the refund amount is tied to the lowest private college tuition in effect and could be considerably less than the amount paid into the program. In addition, this amendment makes a grammatical correction. The amendments to subsection (d)(7) and (8) are technical corrections, including renumbering to reflect the addition of subsection (d)(5) and a grammatical correction. No comments were received regarding adoption of the amendment. The proposed amendment to sec.7.81(d)(1) was changed to make a grammatical correction. The proposed amendment to sec.7.81(d)(5) was changed to make the language regarding the determination of the refund amount consistent within the rule. The proposed amendment to sec.7.81(d)(6) was changed to make a grammatical correction. The amendment is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The amendment implements the Education Code, Chapter 54, Subchapter F. sec.7.81.Refunds. (a) Refunds shall be made in accordance with provisions of these rules and the prepaid tuition contract, in a manner that will not adversely affect the tax status of the program under applicable provisions of the Internal Revenue Code, as amended from time to time. Refunds shall be governed by these rules as amended and as in effect on the date the request for refund is submitted to the board. In general, it is the board's intent that the amount of any refund shall be the sum of all payments made under the contract for tuition and required fees, less fees due and payable to the program under the board's fee schedule and less any amounts paid by the program pursuant to the prepaid tuition contract prior to the refund. (b) Refunds shall be made to the purchaser of the prepaid tuition contract unless otherwise designated by the purchaser in writing to the board in the event of the purchaser's death. (c) Should a beneficiary terminate his/her student status on or after the date on which the institution denies refunds to students withdrawing for a particular semester, no refund shall be paid under the prepaid tuition contract for amounts relating to such semester. (d) Examples of circumstances under these rules in which refunds may be made include, but are not limited to, the following. (1) Under any plan, if the beneficiary receives a full scholarship, the average amount of tuition and required fees under the plan selected or the estimated average private tuition and required fees, as applicable, may be refunded. Under a junior college plan, junior/senior college plan, or a senior college plan, the amount of such refund shall not exceed the tuition scholarship amount. Refund payments may be issued each academic term as long as the scholarship is effective. The purchaser of the prepaid tuition contract shall be entitled to such refund. Proof of scholarship must be submitted in a form acceptable to the board. (2) Under the junior college plan, junior/senior college plan or senior college plan, if a beneficiary receives a partial scholarship, the tuition scholarship amount may be refunded. Under the private college plan, if a beneficiary receives a partial scholarship, a refund may be made in an amount equal to the excess of the estimated average private tuition and required fee amounts, over the actual tuition and required fee amounts less the scholarship amount. Refund payments up to the amount determined in accordance with this paragraph may be issued each academic term as long as the scholarship is effective. The purchaser of the prepaid tuition contract shall be entitled to such refund. Proof of scholarship must be submitted in a form acceptable to the board. (3) If the beneficiary dies or becomes disabled while attending an institution of higher education or a private or independent institution of higher education, the amount of benefits remaining available under the prepaid tuition contract, less any applicable fees, may be refunded or the benefits under such contract may be transferred to another qualified beneficiary. If a change of beneficiary is not requested, a lump sum refund may be made within 60 days of the date the program is notified of the death or disability to the purchaser of the prepaid tuition contract, provided proof of death or disability is submitted in a form acceptable to the board. (4) If the beneficiary dies or becomes disabled after having graduated from high school but prior to attending an institution of higher education or a private or independent institution of higher education, a refund may be issued or the benefits under such contract may be transferred to another qualified beneficiary. If a change of beneficiary is not requested, a lump sum refund may be made within 60 days of the date the program is notified of the death or disability to the purchaser of the prepaid tuition contract, provided proof of death or disability is submitted in a form acceptable to the board. Under the junior college plan, junior/senior college plan, or senior college plan, the refund will equal the average amount of tuition and required fees in effect at the time the refund is requested. Under the private college plan, the refund will equal the estimated average of private tuition and required fees as determined annually by the board. (5) If the beneficiary dies or becomes disabled before the contract is paid in full, a refund may be issued or the benefits under such contract may be transferred to another qualified beneficiary. If a change of beneficiary is not requested, a lump sum refund may be made within 60 days of the date the program is notified of the death or disability to the purchaser of the prepaid tuition contract, provided proof of death or disability is submitted in a form acceptable to the board. For junior college plans, junior/senior college plans, or senior college plans, the refund amount will be equal to a pro rata amount of the average amount of tuition and required fees in effect at the time the refund is requested, such pro rata amount determined by the number of payments made under the contract by the purchaser to the number of payments required to pay the contract in full. For private college plans, the refund amount will be equal to a pro rata amount of the estimated amount of private tuition and required fees set forth in the prepaid tuition contract, such pro rata amount determined by the number of payments made under the contract by the purchaser to the number of payments required to pay the contract in full. (6) If a prepaid tuition contract is terminated under sec.7.82(c) of this title (relating to Termination of Prepaid Tuition Contract), such contract may be refunded in an amount equal to the lesser of: (A) the lowest amount of tuition and required fees among all institutions under the plan selected, but if a private college plan, such tuition and required fee amount shall not be less than the amount of payments made under the plan for tuition and required fees, less a cancellation fee and any other applicable fee; or (B) the amount of payments made under the plan for tuition and required fees; plus the average annual earnings rate on the fund, less 3.0%, but not to exceed 5.0% times the accumulated payments made under the contract as of December 31, of each year; less a cancellation fee and any other applicable fee. Any such refund may be made in semi-annual installments to the purchaser of the prepaid tuition contract. (7) If the purchaser who selected the junior college plan, junior/senior college plan, or senior college plan dies or becomes disabled and payments cease before the contract is paid in full, and unless otherwise directed by the purchaser in writing, a refund may be made. The refund amount will be equal to a percentage of the average amount of tuition and required fees in effect at the time the refund is requested, determined by reference to the percentage of payments made under the contract by the purchaser. If the purchaser who selected the private college plan dies or becomes disabled and payments cease before the contract is paid in full, a refund may be made. The refund amount will be equal to a percentage of the estimated amount of private tuition and required fees set forth in the prepaid tuition contract, determined by reference to the percentage of payments made under the contract by the purchaser. A lump-sum refund may be made within 60 days to the purchaser of the prepaid tuition contract unless otherwise specified in writing by the purchaser as described in this paragraph. In the alternative, contract benefits may be converted to a plan with reduced benefits. Proof of death or disability shall be in a form acceptable to the board. Notwithstanding any other provision of this paragraph, the purchaser, in a writing to the board, and providing such other information as the board may request, may designate a person who shall have a right of survivorship with respect to the purchaser's rights and obligations pursuant to a prepaid tuition contract; provided that such designation shall in no way affect the purchaser's ability to modify or terminate the contract and receive a refund without the consent or authorization of the designee. (8) Refunds may be made for other reasons as approved by the board. By way of example, such refunds may be made in an amount equal to the lowest amount of tuition and required fees of all institutions under the plan selected, less a cancellation fee. Refund payments may be made in semi-annual installments to the purchaser of the prepaid tuition contract. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615601 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 34 TAC sec.7.82 The Comptroller of Public Accounts adopts an amendment to sec.7.82, concerning termination of prepaid tuition contract, without changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8920). The amendment reinstates the purchaser's right to terminate a prepaid tuition contract if the beneficiary has reached the age of 18. The rule was amended on June 24, 1996, to address potential income tax issues for the contract purchaser. However, recent federal legislation has resolved these issues. No comments were received regarding adoption of the amendment. The amendment is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The amendment implements the Education Code, Chapter 54, Subchapter F. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615602 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062 34 TAC sec.7.84 The Comptroller of Public Accounts adopts new sec.7.84, concerning transfers of benefits if a beneficiary should attend a college or university out-of-state, with changes to the proposed text as published in the September 17, 1996, issue of the Texas Register (21 TexReg 8920). This new section is transferred from 34 TAC sec.7.81(d)(8) in order to more appropriately place it in a section different from sec.7.81 which addresses refunds. No comments were received regarding adoption of the new section. The proposed new sec.7.84 was changed to clarify that an out of state college must meet the "eligible educational institution" requirement of the Internal Revenue Code. In addition, the proposed amendment was changed to add hyphens in the word "out-of-state." The new section is adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules as necessary for the implementation of Prepaid Higher Education Tuition Program. The new section implements the Education Code, Chapter 54, Subchapter F. sec.7.84.Transfer of Benefits. The purchaser may transfer benefits to an out-of-state college or university accredited by a regional accrediting association which is an "eligible educational institution" within the meaning of the Internal Revenue Code, sec.135(c)(3). The amount of the transfer shall not exceed the average amount of tuition and required fees under the plan selected, or the estimated average private tuition and required fees, as applicable, less a cancellation fee and any other applicable fees. Payments may be transferred each academic term to the out-of-state college or university as necessary to pay for tuition and required fees up to the credit hours limit identified in the prepaid tuition contract. A statement from the out-of-state college or university shall be submitted to the board during each academic term, in a form acceptable to the board. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 25, 1996. TRD-9615603 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: November 15, 1996 Proposal publication date: September 17, 1996 For further information, please call: (512) 463-4062