PROPOSED RULES
Before an agency may permanently adopt a new or amended section or repeal an 
existing section, a proposal detailing the action must be published in the Texas 
Register at least 30 days before action is taken. The 30-day time period gives 
interested persons an opportunity to review and make oral or written comments on 
the section. Also, in the case of substantive action, a public hearing must be 
granted if requested by at least 25 persons, a governmental subdivision or 
agency, or an association having at least 25 members.
Symbology in proposed amendments. New language added to an existing section is 
indicated by the <nl> code. [Brackets] indicate deletion of existing material 
within a section.

TITLE 1. ADMINISTRATION
PART IV. Office of the Secretary of State
CHAPTER 81.Elections
SUBCHAPTER A.Voter Registration
1 TAC sec.81.7
The Office of the Secretary of State, Elections Division, proposes an amendment 
to sec.81.7, concerning the directive for high school deputy registrars. The 
amendment is proposed to adopt the most recent version of the directive. The 
amendment also shifts the responsibility for providing high school deputy 
registrars with a copy of the directive from county voter registrars to the 
Elections Division of the Secretary of State's office.
Ann McGeehan, Deputy Assistant Secretary of State for Elections, has determined 
that for the first five-year period that this rule is in effect there will be no 
fiscal implications for state or local governments as a result of enforcing or 
administering the rule. 
Ms. McGeehan has determined also that for each year of the first five years that 
the rule is in effect the public benefit anticipated as a result of enforcing 
the rule will be to provide high school deputy registrars with a clear and 
detailed statement of their duties under state and federal law, along with the 
necessary forms to carry out their duties. There will be no cost for any private 
busineses or on state and local governmental entities. 
Comments on the proposal may be submitted to Ann McGeehan, Deputy Assistant 
Secretary of State for Elections, Office of the Secretary of State, P.O. Box 
12060, Austin, Texas 78711-2060. 
The amendment is proposed under the Code, Chapter 31, Subchapter A, sec.31.003, 
which provides the Secretary of State with authority to promulgate rules to 
obtain uniformity in the interpretation and application of the Code, and under 
the Code, Chapter 13, sec.13.046(h), which authorizes the Secretary of State to 
prescribe additional procedures for high school deputy registrars.
The Code, Chapter 13, is affected by this proposed amendment. 

sec.81.7.Directive for High School Deputy Registrars.
<nl>(a)<ol> The directive for high school deputy registrars <nl> dated July 31, 
1998 <ol>is adopted [by reference]. Copies are available from the Secretary of 
State's Elections Division, P.O. Box 12887, Austin, Texas 78711. The 
<nl>Elections Division<ol> [voter registrar] shall provide a copy of this 
directive to each high school deputy registrar in the <nl>state <ol> [county]. 
(b) Summary and Purpose. In accordance with the provisions of Texas Election 
Code Annotated, sec.31.003, sec.13.046, and the National Voter Registration Act, 
this directive updates the March 15, 1995 directive and sets forth requirements 
for public and private high school principals to act as deputy voter registrars 
in registering high school students and employees of the high school. 
(c) Definitions. 
(1) High School Principal. The administrator of a public or private high school. 
(2) Designated Representative. Any person employed at a public or private high 
school as an administrative staff member or teacher who is designated by the 
principal to act in lieu of the principal as a deputy voter registrar for the 
high school. The principal shall provide a designated representative with a form 
or card that identifies the designated representative as a high school deputy 
registrar. 
(3) High School Student. Any individual enrolled full-time or part-time at a 
public or private high school as a student who is engaged in the study of 
standard curricula offered by the high school. 
(4) Employee. A person who works for wages or a salary at a public or private 
high school. 
(5) Final Month. The final month of each semester is the last 30 day period 
within the semester. 
(d) Duties of High School Deputy Voter Registrar
(1) Obtaining Voter Registration Applications and Materials from School Board 
Administrator or Secretary of State. A high school principal or designated 
representative acting as a deputy voter registrar shall procure from the school 
board administrator or Secretary of State a sufficient supply of voter 
registration applications and notice forms. It is essential that high school 
deputy voter registrars contact the Secretary of State for registration 
applications and not the county voter registrar; the voter registrar's 
applications are not coded for use by high school deputy registrars. 
(2) Distributing Voter Registration Applications and Materials to Eligible 
Students and Employees. A high school deputy registrar shall distribute voter 
registration applications during the final month of each semester to high school 
students who are or will be 18 years of age or older during that semester. 
Applications may also be distributed at any time during the school year to 
students and employees of the high school who request them. The application form 
must be accompanied by a notice which informs the high school student or 
employee that he or she may: 
(A) deliver the application form in person to the voter registrar or elections 
administrator of the county in which the applicant resides;
(B) mail the application form to the voter registrar or elections administrator 
of the county in which the applicant resides; or 
(C) deliver the application form in person to the high school deputy registrar 
or a volunteer deputy registrar for delivery to the voter registrar or elections 
administrator of the county in which the applicant resides. 
(i) The student or employee may request assistance from the high school deputy 
registrar in filling out the application. If the applicant cannot sign the 
application due to physical disability or illiteracy, another person may witness 
the applicant's mark. The witness must include an address, printed name, and 
signature on the application. If an applicant is physically unable to make a 
mark, the witness shall state this fact on the application.
(ii) On receipt of a registration application, the high school deputy registrar 
shall review it for completeness. The high school deputy registrar may review an 
application for completeness out of the applicant's presence. If the application 
does not contain all the required information and the required signature, the 
application shall be returned to the applicant for completion and resubmission. 
(3) Returning Voter Registration Applications to Voter Registrar or Elections 
Administrator. 
(A) The high school deputy registrar must deliver the completed applications to 
the voter registrar or elections administrator of the county in which the 
applicant resides as soon as possible after they are received. Completed 
applications shall be delivered to the county voter registrar or elections 
administrator by the high school deputy registrar in person, or by mail in an 
envelope or package. An application must be delivered to the county voter 
registrar or elections administrator no later than 5 p.m. of the fifth day after 
the date the application is submitted to the high school deputy registrar, 
except that an application submitted after the 34th day and before the 29th day 
before the date of an election in which any qualified voters of the county are 
eligible to vote must be delivered no later than 5 p.m. of the 29th day before 
election day. An application delivered by mail is considered to be delivered at 
the time of its receipt by the county registrar or elections administrator. 
(B) Since a voter registration application will result in an effective voter 
registration on the 30th day after it is received by a high school deputy 
registrar, it is imperative that the high school deputy registrar confer with 
the county voter registrar or elections administrator of each county in which 
the students and employees of the high school reside before instituting a voter 
registration program in the high school in order to insure that the applications 
are received by the county in a timely manner.
(4) Criminal Sanctions. Inadvertent failure to deliver applications received by 
the high school deputy registrar by the deadline stated above is a Class C 
misdemeanor. Intentional failure to deliver applications is a Class A 
misdemeanor. 
(e) Miscellaneous Provisions 
(1) High Schools Serving More than One County. A high school deputy registrar 
shall serve as a deputy voter registrar for each county in which territory 
served by the high school is located without regard to the actual physical 
location of the high school. 
(2) High School Deputy Registrar Transferring or Terminating Employment. A high 
school principal or designated representative who transfers from or terminates 
employment with a high school is immediately removed from the status of deputy 
registrar of that high school upon such transfer or termination. Upon the 
transfer or termination of a designated representative, all voter registration 
materials must be returned to the high school principal. Upon a principal's 
transfer or termination, all voter registration materials must be delivered to 
the new principal or newly designated representative. 
(3) Removal of Designated Representative. A designated representative may be 
removed at any time by the high school principal, with or without cause. If a 
designated representative fails to implement this directive or otherwise fails 
in the performance of his or her duties, the high school principal shall relieve 
the designated representative of the role of high school deputy registrar. A 
removal must be in writing, and must clearly state the grounds for removal. A 
copy of the removal must be delivered to the designated representative. All 
voter registration materials, including notices and applications, must be 
returned to the high school principal or otherwise accounted for. The high 
school principal shall resume the duties of high school deputy registrar until a 
new representative is designated. 
(4) Approval. Secretary of State approval issued this 31st day of July, 1998.  
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on July 31, 1998.
TRD-9812059
Clark Kent Ervin
Assistant Secretary of State
Office of the Secretary of State
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 463-5650

CHAPTER 97.Business Opportunity
SUBCHAPTER B.Fees and General Information
1 TAC sec.97.21
The Office of the Secretary of State proposes an amendment to sec.97.21, 
concerning the regulation of business opportunities. This amendment is necessary 
to update and clarify the fees charged for copies of public information 
contained in a business opportunity filing. 
The proposed amendment to sec.97.21 deletes paragraphs (1) - (4) of subsection 
(c). It also amends subsection (c) by adding a reference to Title 1 
(Administration), Chapter 71 (Office of the Secretary of State), Subchapter A 
(Practice and Procedure), sec.71.8 (Fees for Open Records) for the determination 
of such costs. 
Guy Joyner, Chief, Legal Support Unit, Statutory Documents Section has 
determined that for the first five year period that the proposed amendment is in 
effect there will be no fiscal implications for state or local government or 
small business as a result of enforcing the amendment. 
Mr. Joyner also has determined that for each year of the first five years that 
the amendment is in effect the public benefit anticipated as a result of 
enforcing the amendment will be to conform the rule to the correct cost charged 
for copies of public information. 
There is no anticipated additional economic cost to individuals who are required 
to comply with the amendment as proposed. 
Comments on the proposed amendment may be submitted to Guy Joyner, Chief, Legal 
Support Unit, Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711-
2887. 
The amendment is proposed under the Texas Government Code, sec.2001.004 (1), and 
Texas Business and Commerce Code, sec.41.006, which provide the Secretary of 
State with the authority to prescribe and adopt rules. 
The amendment affects Chapter 41 of the Texas Business and Commerce Code. 

sec.97.21 Fees and General Information. 
(a) (No change.)
(b) The fee for <nl>a<ol> supplemental or <nl>an<ol> amendment filing is $25 and 
is nonrefundable. 
(c) File material may be obtained in either a total or partial file format upon 
advance payment of the fees set out <nl>in sec.71.8 of this title (relating to 
Fees for Copies of Open Records)<ol> [as follows
[(1) Total file of a business opportunity registrant is $.55 for the first page 
and $.15 thereafter.] 
[(2) Partial file--$.55 for the first page and $.15 thereafter.] 
[(3) Certified copies--$1.00 per page plus $1.00 for the certificate.] 
[(4) Certificate of record or no record--$5.00.
(d)-(e) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 3, 1998.
TRD-9812259
Clark Kent Ervin
Assistant Secretary of State
Office of the Secretary of State
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 475-0775

TITLE 7. BANKING AND SECURITIES
PART VII. State Securities Board
CHAPTER 105. Rules of Practice in Contested Cases
7 TAC sec.sec.105.2, 105.5-105.8, 105.12-105.14, 105.16-105.19
The State Securities Board proposes amendments to sec.sec.105.2, 105.5-105.8, 
105.12-105.14, and 105.16-105.19, concerning rules of practice in contested 
cases. The amendments would conform the procedural rules to practice following 
recent rulemaking by the State Office of Administrative Hearings (SOAH) and make 
clarifications. Related repeals and a new sec.105.9 are being currently proposed 
to this chapter. 
David Grauer, Director, Enforcement Division, and John R. Morgan, Deputy 
Securities Commissioner, have determined that for the first five-year period the 
rules are in effect there will be no fiscal implications for state or local 
government as a result of enforcing or administering the rules. 
Mr. Grauer and Mr. Morgan also have determined that for each year of the first 
five years the rules are in effect the public benefit anticipated as a result of 
enforcing the rules will be to avoid confusion by eliminating provisions 
rendered totally ineffective by new rules of procedure in contested cases 
recently adopted by SOAH. There will be no effect on small businesses. There is 
no anticipated economic cost to persons who are required to comply with the 
rules as proposed. 
Comments on the proposal may be submitted to David Weaver, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
The amendments are proposed under Texas Civil Statutes, Article 581-28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the Texas 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
The proposed amendments affect Texas Civil Statutes, Article 581-14, 581-23, and 
581-24. 

sec.105.2. Service of Notice <nl>of Hearing<ol>. 
<nl>The<ol> [Unless otherwise specified in this chapter,] notice <nl>of 
hearing<ol> to a party in a contested case shall be by personal service or by 
registered or certified mail to the party's last known address <nl> as shown by 
records of the Agency<ol>. Service by mail shall be complete upon deposit of the 
document, enclosed in a postpaid, properly addressed wrapper, in a post office 
or official depository under the care and custody of the United States Postal 
Service. 

sec.105.5. <nl>Informal Disposition.<ol> [Presiding Officer or Body.] 
[All hearings in contested cases will be conducted by the State Office of 
Administrative Hearings pursuant to the Administrative Procedure Act.] An 
informal disposition of a contested case may be made by the Securities 
Commissioner [without a hearing] by stipulation of the parties, agreed 
settlement, consent order, or default<nl>, without further proceedings by 
SOAH<ol>. 

sec.105.6. Notice of Hearing. 
(a) <nl>The content of a<ol> [A] notice of hearing shall <nl>comport with the 
requirements of the APA; SOAH's Rules of Practice and Procedure, set forth in 1 
TAC Chapter 155 (Rules of Procedure); and Board rules.<ol> [include:] 
<nl>(1)<ol> If the notice of hearing provides for at least 30 days notice to a 
party prior to the hearing in a contested case, such a notice of hearing shall 
include the following disclosure language set forth in capital letters and 10-
point boldface type: "IF YOU DO NOT FILE A WRITTEN ANSWER OR OTHER WRITTEN 
RESPONSIVE PLEADING TO THIS NOTICE OF HEARING ON OR BEFORE THE 20TH DAY AFTER 
THE DATE ON WHICH THIS NOTICE WAS MAILED TO YOU OR PERSONALLY SERVED ON YOU, THE 
FACTUAL ALLEGATIONS IN THIS NOTICE WILL BE DEEMED ADMITTED, AND THE SECURITIES 
COMMISSIONER MAY DISPOSE OF THIS CASE WITHOUT A HEARING AND GRANT THE RELIEF 
SOUGHT IN THIS NOTICE. THE RESPONSE MUST BE FILED IN AUSTIN, TEXAS, WITH THE 
STAFF OF THE STATE SECURITIES BOARD AND THE STATE OFFICE OF ADMINISTRATIVE 
HEARINGS. IF YOU FAIL TO ATTEND THE HEARING, EVEN IF A WRITTEN ANSWER OR OTHER 
RESPONSIVE PLEADING HAS BEEN FILED, THE FACTUAL ALLEGATIONS IN THIS NOTICE WILL 
BE DEEMED ADMITTED, AND THE SECURITIES COMMISSIONER MAY DISPOSE OF THIS CASE 
WITHOUT A HEARING AND GRANT THE RELIEF SOUGHT IN THIS NOTICE." Such a notice of 
hearing shall include the mailing addresses where the response may be filed with 
the staff of the State Securities Board and SOAH. 
[(1) a statement of the time, place and nature of the hearing;] 
<nl>(2)<ol> If the notice of hearing provides for less than 30 days notice to a 
party prior to the hearing in a contested case, such a notice of hearing shall 
include the following disclosure language set forth in capital letters and 10-
point boldface type: "IF YOU FAIL TO ATTEND THE HEARING, THE FACTUAL ALLEGATIONS 
IN THIS NOTICE WILL BE DEEMED ADMITTED, AND THE SECURITIES COMMISSIONER MAY 
DISPOSE OF THIS CASE WITHOUT A HEARING AND GRANT THE RELIEF SOUGHT IN THIS 
NOTICE." 
[(2) a statement of the legal authority and jurisdiction under which the hearing 
is to be held;] 
[(3) a short, plain statement of the matters asserted;] 
[(4) a description of the relief requested; and] 
[(5) if applicable, the disclosure language set forth in sec.105.7 of this title 
(relating to Written Response to Notice of Hearing).] 
(b) (No change.) 

sec.105.7. Written Response to Notice of Hearing. 
(a) If the notice of hearing <nl>was mailed to or personally served on a 
party<ol> [provides for] at least 30 days [notice to a party] prior to the 
hearing in a contested case, the respondent shall file with both the staff of 
the State Securities Board and <nl>SOAH <ol> [the State Office of Administrative 
Hearings] a written answer or other responsive pleading to the matters asserted 
in the notice of hearing no later than the 20th day after the date <nl>the<ol> 
[of service of] notice <nl>was mailed to or personally served on<ol> [to] the 
respondent [of the hearing]. 
[(1) Such a notice of hearing shall include the following disclosure language 
set forth in capital letters and 12-point boldface type: IF YOU DO NOT FILE A 
WRITTEN ANSWER OR OTHER WRITTEN RESPONSIVE PLEADINGS TO THIS NOTICE OF HEARING 
ON OR BEFORE THE 20TH DAY AFTER THE DATE ON WHICH THIS NOTICE WAS MAILED TO YOU, 
OR IF YOU FAIL TO ATTEND THE HEARING, THE SECURITIES COMMISSIONER MAY DISPOSE OF 
THIS CASE WITHOUT A HEARING AND GRANT THE RELIEF SET FORTH IN THIS NOTICE. THE 
RESPONSE MUST BE FILED IN AUSTIN, TEXAS, WITH THE STAFF OF THE STATE SECURITIES 
BOARD AND THE STATE OFFICE OF ADMINISTRATIVE HEARINGS.] 
[(2) Such a notice of hearing shall include the mailing addresses where the 
response may be filed with the staff of the State Securities Board and the State 
Office of Administrative Hearings.] 
[(b) The failure of a respondent to timely file a written response as provided 
in this section shall entitle the staff to the remedies relating to default set 
forth in sec.105.8 of this title (relating to Default).] 
<nl>(b)<ol> [(c)] If the notice of hearing <nl> was mailed to or personally 
served on a party<ol> [provides for] less than 30 days [notice to a party] prior 
to the hearing in a contested case, then no answer need be filed<nl>,<ol> and 
all allegations will be deemed to be denied by the party <nl>if the party 
attends the hearing. At the time of such hearing the administrative law judge 
shall, on motion of the staff or on its own motion, inquire of a party which, if 
any, of the matters plead in the notice are contested by the party<ol>. 
<nl>(c)<ol> [(d)] A general denial of matters plead by the staff shall be 
sufficient to put the same in issue. When the respondent has plead a general 
denial, and the staff afterward amends its pleadings, the general denial shall 
be presumed to extend to all matters subsequently alleged by the staff. 

sec.105.8. Default.
(a) The Securities Commissioner may make an informal disposition of the 
contested case by default by issuing an order in which the relief requested in 
the notice of hearing is granted and the matters set forth in the notice are 
deemed admitted as true upon proof to the [Securities] Commissioner <nl> that 
the notice was mailed to or personally served on<ol> [of proper notice to] a 
respondent in <nl>accordance with sec.105.2 of this title (relating to Service 
of Notice of Hearing)<ol> [a contested case] and that <nl>such<ol> [the] 
respondent has failed to: 
(1)-(2) (No change.) 
[(b) The administrative law judge assigned to a contested case shall promptly 
grant a motion by the staff of the State Securities Board to seek informal 
disposition of the case by default.]
<nl>(b)<ol> [(c)] Upon the motion of a respondent, the Securities Commissioner 
may, for good cause shown, set aside a default order and reschedule a hearing 
with <nl>SOAH<ol> [the State Office of Administrative Hearings]. 
(1) A motion by a respondent to set aside a default order shall be filed with 
the Securities Commissioner not later than the 20th day after the date <nl>the 
default order was mailed to or personally served on <ol> [of service of notice 
to] the respondent <nl>or the respondent's attorney<ol> of <nl>record<ol> [the 
default order]. 
(2) A reply by the staff of the State Securities Board to the motion by a 
respondent to set aside a default order must be filed with the Securities 
Commissioner not later than the 30th day after the date <nl> the default order 
was mailed to or personally served on<ol> [of service of notice to] the 
respondent <nl>or the respondent's attorney of record <ol> [of the default 
order]. 
(3) If the Securities Commissioner does not formally grant or deny the motion 
filed by a respondent to set aside a default order not later than the 45th day 
after the date [of service of notice to] the <nl>default order was mailed to or 
personally served on the<ol> respondent <nl> or the respondent's attorney of 
record<ol> [of the default order], the motion shall be considered denied. 

sec.105.12. <nl>Burden of Proof<ol> [Presentation of Evidence].
[(a) Hearings are conducted in a trial format, and unless otherwise agreed among 
the parties, the staff of the Securities Board will present its opening 
statement first, will present its evidence first, and will have the right to 
open and close arguments. The administrative law judge may reasonably limit the 
time allotted for arguments by the parties.] 
[(b)] [The staff will present evidence to prove the facts alleged in the notice 
of hearing.] The staff will assume the burden of proving a prima facie case by a 
preponderance of the evidence based upon reasonable inferences drawn from the 
evidence presented, except that the burden of proof of an exemption shall be 
upon the party claiming the same. 
[(c) The rules of evidence as applied in nonjury civil cases in the district 
courts of this state shall be followed to the extent required by the 
Administrative Procedure Act. Irrelevant, immaterial, or unduly repetitious 
evidence shall be excluded.] 
[(d) Witnesses may be sworn by the administrative law judge and the testimony 
taken under oath.] 

sec.105.13. Subpoenas and Depositions.
(a)-(c) (No change.) 
(d) Depositions will be taken in the manner prescribed for depositions in the 
<nl>APA<ol> [Administrative Procedure Act].
(e)-(g) (No change.) 
(h) When the staff of the State Securities Board anticipates the commencement of 
a contested case and determines that it is necessary to perpetuate testimony to 
prevent a failure or delay of justice due to the risk of unavailability of the 
testimony after the action is commenced, such as with the acute illness of a 
potential witness or receipt of information that the potential witness intends 
to leave the subpoena jurisdiction of the Securities Commissioner, the staff may 
file a request with the [Securities] Commissioner for a commission to take a 
deposition as set forth in subsection (b) of this section. 
(1)-(3) (No change.) 
(4) If satisfied that the perpetuation of testimony may prevent a failure or 
delay of justice, the Securities Commissioner may issue a commission authorizing 
the taking of such deposition. At <nl>such<ol> [which] deposition the parties 
identified by the staff as adverse persons or other parties identified shall 
have the right to attend and pose questions to the deponent. 

sec.105.14. Assessment of Hearing Costs. 
The costs charged by <nl>a<ol> [the] court reporting service <nl>in transcribing 
a hearing<ol> [and the State Office of Administrative Hearings for proceedings] 
in a contested case may be assessed against a party or parties in such 
proportions as the administrative law judge may determine. 

sec.105.16. <nl>Orders<ol> [Order] Issued by Securities Commissioner. 
(a) Upon issuance of the proposal for decision [, if any,] by the administrative 
law judge assigned to the case at <nl> SOAH<ol> [the State Office of 
Administrative Hearings], the complete transcript and record <nl>of<ol> [in] the 
case shall be sent directly to the Securities Commissioner. 
(b) The Securities Commissioner may change a finding of fact or conclusion of 
law made by the administrative law judge, or may vacate or modify an order 
issued by the administrative law judge only on grounds set forth in the 
<nl>APA<ol> [Administrative Procedure Act]. The [Securities] Commissioner shall 
state in writing the reason or basis for such a change. 

sec.105.17. Motion for Rehearing. 
<nl>(a)<ol> <nl>A party's motion for rehearing must be filed with the Securities 
Commissioner not later than the 20th day after the date on which the decision on 
the administrative law judge's proposal for decision is mailed to or personally 
served on the party or the party's attorney of record.<ol> A motion for 
rehearing must set forth the particular finding(s) of fact, conclusion(s) of 
law, ruling(s), or other action(s) which the complaining party asserts were in 
error, such as violation of a constitutional or statutory provision(s), lack of 
authority, unlawful procedure(s), lack of substantive evidence, abuse of 
discretion or other error(s) of law, or other good cause specifically described 
in the motion. In the absence of specific grounds in the motion, the 
[Securities] Commissioner shall presume that the motion should be overruled. [A 
motion for rehearing must be filed with the Securities Commissioner not later 
than the 20th day after the date on which the respondent or the party's attorney 
of record is notified of a decision.
<nl>(b)<ol> A reply to a motion for rehearing must be filed not later than the 
30th day after the date on which the <nl>decision on the administrative law 
judge's proposal for decision is mailed to or personally served on a<ol> party 
or the party's attorney of record [is notified of the decision]. 
<nl>(c)<ol> <nl>Failure of the<ol> [The] Securities Commissioner <nl>to<ol> 
[shall] act on a motion for rehearing not later than the 45th day after the date 
on which <nl>the decision on the administrative law judge's proposal for 
decision is mailed or personally served on<ol> the party or the party's attorney 
of record <nl>shall cause the motion to be<ol> [is notified of the decision or 
the motion for rehearing is] overruled by operation of law. 

sec.105.18. Final Decisions and Appeals.
(a) A decision is final [and appealable]: 
(1)-(2) (No change.) 
<nl>(b)<ol> The timely filing of a motion for rehearing is a prerequisite to 
judicial review. A decision is appealable when a motion for rehearing has been 
denied in all respects by action of the Securities Commissioner, or the Board 
pursuant to sec.105.22 of this title (relating to Board Action on Motion for 
Rehearing), or by operation of law.
<nl>(c)<ol> [(b)] A person who is aggrieved by a final decision of the 
Securities Commissioner in a contested case may seek judicial review of the 
decision. Judicial review of such a decision is under the substantial evidence 
rule. 

sec.105.19. Record. 
[(a) Testimony taken at any hearing will be recorded stenographically and 
transcribed.] 
<nl>(a)<ol> [(b)] The record in a contested case includes the following: 
(1) all pleadings, motions, and intermediate rulings; 
(2) evidence received or considered; 
(3) a statement of matters officially noticed; 
(4) questions and offers of proof, objections, and rulings on them; 
(5) proposed findings and exceptions; 
(6) any decision, opinion, or report by the administrative law judge; and 
(7) all briefs, memoranda, or data submitted to or considered by the 
administrative law judge. 
<nl>(b)<ol> [(c)] In the event a final decision or order [of the Securities 
Commissioner] is appealed and the agency is required to transmit to the 
reviewing court a copy of the record of the <nl> administrative<ol> [agency] 
proceeding, or any part thereof, the appealing party shall pay all of the costs 
of the preparation of any original or certified copy of the record of the 
<nl>administrative<ol> [agency] proceeding that is required to be transmitted to 
the reviewing court. The charges imposed by this subsection will be the same as 
those charged by the agency for requests for photographic reproductions and 
certified copies of public records made pursuant to the provisions of the Public 
Information Act, Texas Government Code, Chapter 552. These charges are 
considered to be a court cost and may be assessed, all or in part, by the 
reviewing court in accordance with the Texas Rules of Civil Procedure.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 4, 1998.
TRD-9812318
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 305-8300

7 TAC sec.105.3, 105.9-105.11
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the State 
Securities Board or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The State Securities Board proposes the repeal of sec.sec.105.3, and 105.9-
105.11, concerning rules of practice in contested cases. The repeals would 
eliminate rules that have been superseded by recent rulemaking by the State 
Office of Administrative Hearings (SOAH). Related amendments and a new sec.105.9 
are being currently proposed to this chapter.
David Grauer, Director, Enforcement Division, and John R. Morgan, Deputy 
Securities Commissioner, have determined that for the first five-year period the 
repeals are in effect there will be no fiscal implications for state or local 
government as a result of enforcing or administering the repeals. 
Mr. Grauer and Mr. Morgan also have determined that for each year of the first 
five years the repeals are in effect the public benefit anticipated as a result 
of enforcing the repeals will be to avoid confusion by eliminating provisions 
rendered totally ineffective by new rules of procedure in contested cases 
recently adopted by SOAH or addressed elsewhere in other Board rules. There will 
be no effect on small businesses. There is no anticipated economic cost to 
persons who are required to comply with the repeals as proposed. 
Comments on the proposal may be submitted to David Weaver, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
The repeal is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-
1 provides the Board with the authority to adopt rules and regulations necessary 
to carry out and implement the provisions of the Texas Securities Act, including 
rules and regulations governing registration statements and applications; 
defining terms; classifying securities, persons, and matters within its 
jurisdiction; and prescribing different requirements for different classes. 
The repeals affect Texas Civil Statutes, Articles 581-14, 581-23, and 581-24.
sec.105.3. Computation of Time. 
sec.105.9. Appearance. 
sec.105.10. Continuance. 
sec.105.11. Stipulations, Agreed Settlements, and Consent Orders. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 4, 1998.
TRD-9812319
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 305-8300

7 TAC sec.105.9
The State Securities Board proposes new sec.105.9, concerning rules of practice 
in contested cases. The new rule formalizes an existing policy utilized in 
contested cases originating from the Agency. Related amendments and repeals to 
this chapter are being concurrently proposed. 
David Grauer, Director, Enforcement Division, and John R. Morgan, Deputy 
Securities Commissioner, has determined that for the first five-year period the 
rule is in effect there will be no fiscal implications for state or local 
government as a result of enforcing or administering the rule. 
Mr. Grauer and Mr. Morgan also have determined that for each year of the first 
five years the rule is in effect the public benefit anticipated as a result of 
enforcing the rule will be to inform participants, in a contested case 
originating from the Agency, of the need to provide a copy of all documents 
filed at or by SOAH to the Securities Commissioner's representative at the same 
time the document becomes part of the case file at SOAH. There will be no effect 
on small businesses. There is no anticipated economic cost to persons who are 
required to comply with the rule. 
Comments on the proposal may be submitted to David Weaver, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
The new rule is proposed under Texas Civil Statutes, Article 581-28-1. Section 
28-1 provides the Board with the authority to adopt rules and regulations 
necessary to carry out and implement the provisions of the Texas Securities Act, 
including rules and regulations governing registration statements and 
applications; defining terms; classifying securities, persons, and matters 
within its jurisdiction; and prescribing different requirements for different 
classes. 
The new rule affects Texas Civil Statutes, Article 581-14, 581-23, and 581-24. 

sec.105.9. Copies to Securities Commissioner's Representative. 
After the filing of a notice of hearing, the parties shall provide a copy to the 
Securities Commissioner's representative of all documents, other than business 
records and transcripts, filed with SOAH contemporaneously with such filing. 
SOAH shall likewise provide the Commissioner's representative with copies of all 
documents issued by the administrative law judge. The staff shall notify the 
other parties and the administrative law judge of the identity and contact 
information of the Commissioner's representative when the notice of hearing is 
filed. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 4, 1998.
TRD-9812320
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 305-8300

CHAPTER 113. Registration of Securities
7 TAC sec.sec.113.1, 113.3-113.6, 113.8, 113.9, 113.11-113.13
The State Securities Board proposes amendments to sec.sec.113.1, 113.3-113.6, 
113.8-113.9, and 113.11-113.13, concerning registration of securities. The 
amendments would eliminate portions of existing rules that address the same 
subject matter as or conflict with the securities registration guidelines 
adopted by the North American Securities Administrators Association, Inc. 
("NASAA"), which are being concurrently proposed as new sections sec.sec.113.14-
113.25 of this chapter; add the new Accredited Investor Exemption, sec.139.19, 
to the list of exemptions in sec.113.5(c)(i) permitting advertising; and make 
nonsubstantive changes to conform the rules to current formatting standards.
Micheal Northcutt, Director, Securities Registration Division has determined 
that for the first five-year period the rules are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rules. 
Mr. Northcutt also has determined that for each year of the first five years the 
rules are in effect the public benefits anticipated as a result of enforcing the 
rules will be a substantial degree of consistency with uniform guidelines for 
the registration of securities applied by other state securities regulators; 
these uniform guidelines will be applicable to all offerings, not just those 
made pursuant to the Coordinated Equity Review program; and small business 
issuers will be apprised of restrictions in their use of reviewed financial 
statements in conjunction with a registered security offering. There will be no 
effect on small businesses. There is no anticipated economic cost to persons who 
are required to comply with the rules as proposed. 
Comments on the proposal may be submitted to David Weaver, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
The amendments are proposed under Texas Civil Statutes, Article 581-28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the Texas 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
The proposed rules affects Texas Civil Statutes, Article 581-7. 

sec.113.1. Qualification of Securities. 
Regulation "A" and "B" filings with the SEC are forms of exemption and cannot be 
the basis for a filing by coordination with the State Securities Board under 
<nl>the Texas Securities Act,<ol> sec.7.C [of the Act ]. Such registrations with 
the Board should meet the requirements as outlined in <nl>the Act,<ol> sec.7.A 
[of the Act]. 

sec.113.3. Fair, Just, and Equitable Standards. 
The following factors, among others, will usually be considered in determining 
whether or not a securities issue is fair, just, and equitable.
(1) General meaning. "Fair, just, and equitable" as used in <nl> the Texas 
Securities Act,<ol> sec.7.C and [in] sec.10.A<nl> ,<ol> [of the Act] means fair, 
just, and equitable to the new investors. It does not relate to customers or 
competitors of the business as such and does not apply to other business 
relationships of the issuer, promoter, or business. The words "fair, just, and 
equitable" are accorded their generally recognized meanings and are not used in 
any narrow, technical sense. 
[(2) Price if established market or reliable earnings record. The current market 
price of securities in a proposed public offering will ordinarily be considered 
fair, just, and equitable where there is an established market for securities of 
the same class as that proposed to be offered or where the class of securities 
proposed to be offered has a value related to the securities of the issuer with 
an established market price, e.g., convertible issues or issues involving 
warrants, and the proposed offering price is reasonably related to such market 
price. Likewise, the price of securities in a proposed public offering will 
ordinarily be considered fair, just, and equitable where the issuer has a 
reliable record of earnings and the proposed price reflects a price earnings 
ratio which is reasonably related to the price earnings ratio of securities of 
similar issuers in the same industry which have established market prices.] 
[(3) Price paid for promoters' shares. In the case of securities of a going 
concern, the "consideration paid by promoters," with respect to any previously 
acquired shares, shall be deemed to be the market value of such securities at 
the time of the public offering as determined by the then bona fide, well-
established market price of such securities, if there is such a market price, 
and, if not, by other well-recognized standards of valuation applicable to the 
nature of the business concerned, such as, for example, net asset value or price 
earnings ratios of comparable businesses. This is true even though the promoters 
may hold securities theretofore acquired at a small fraction of the present 
public offering price.] 
[(4) Price if no established market or reliable earnings record. In offerings 
where there is no established market price for either the securities of the 
issuer or similar securities of other issuers or the issuer is in the 
development phase and does not have a record of earnings, primary consideration 
will be given to the proposed offering price established by the underwriters if 
there is a firm commitment by the underwriters and the proposed underwriters 
have the financial ability to perform their commitment in the light of their net 
capital positions. If, in the judgment of the Commissioner, doubt is raised as 
to the fair, just, and equitable nature of the offering based on known facts, 
the principal underwriter may be asked to present to the Commissioner an 
analysis supporting the determination of such principal underwriter to market 
the securities at the proposed offering price including the factors applied, 
such as potential earnings, the ability and experience of management, the 
contributions of promoters to the business, and the voting and preferential 
rights of the proposed issue of securities, and any other factors relied upon by 
the underwriter. The Commissioner, upon receipt of the analysis, will make a 
determination as to whether such price is fair, just, and equitable in the light 
of the factors on which such analysis was based and other factors which the 
Commissioner may deem appropriate.]
[(5) Escrow of cheap stock. In circumstances in which there is a substantial 
disparity between the consideration paid or to be paid for such securities by 
promoters and the proposed offering price, the Commissioner may require as a 
condition to the registration of securities an escrow of all or part of the 
securities issued to such promoters under an agreement providing for the 
impoundment of such securities for a reasonable period of time, subject to such 
conditions as the Commissioner may require which may include, in the discretion 
of the Commissioner, cancellation of the securities if the conditions for 
release from escrow are not attained.]
[(6) Voting rights. In offerings of nonvoting shares or shares with 
disproportionate voting rights, which offerings normally are not fair, just, and 
equitable, the Commissioner may consider whether or not the disparity in voting 
rights is a temporary condition and whether or not the deprived shareholder 
receives an offsetting benefit (e.g., dividend preference or preference in 
liquidation) to compensate for such disparity.]
[(7) Trust indenture for debt. A trust indenture which adequately protects the 
rights of the purchasers is required on all debt securities issues.] 
[(8) Conflicts of interest. A plan of business cannot be fair, just, and 
equitable in the absence of adequate safeguards against conflicts of interest 
between management and those investors with whom a fiduciary relationship is 
appropriate.] 
[(9) Promoters' investment. In order that an offering be considered fair, just, 
and equitable, the promoters will ordinarily be expected to furnish a minimum of 
10% of the total equity capital of the enterprise.] 
[(10) Excessive options and warrants. Offerings ordinarily will not be 
considered fair, just, and equitable if the issuer has options and warrants 
outstanding which, because of their number and terms of exercise, render likely 
a substantial dilution of per share equity or per share earnings or a 
corresponding reduction in market price per share. Options and warrants in 
excess of 10% of the shares outstanding at the conclusion of the offering will 
be regarded as excessive and will be prohibited unless the issuer can clearly 
demonstrate that special circumstances justify such additional options and 
warrants. Options to nonexecutive management and other employees of the issuer 
which are part of an employee incentive plan; to third parties in conjunction 
with previous arms length financing arrangements; or to the public as part of a 
public offering are excluded from the 10% restriction if such options are 
otherwise reasonable in amount and exercise price.] 
[(11) Permitted options and warrants. The following standards will be considered 
in determining whether or not the issuance of warrants or stock purchase options 
to those other than all of the purchasers of securities has been justified by 
the applicant.]
[(A) Employee stock options. Options to management in the nature of qualified 
stock options or options which meet the requirements of sec.424(b) of the 
Internal Revenue Code (as amended) other than the date of grant of the option, 
will be considered justified if reasonable in number and method of exercise.] 
[(B) Stock purchase plans. Options to employees, or their nominees, pursuant to 
stock purchase plans or profit sharing plans will be considered justified if 
reasonable in number and method of exercise.]
[(C) Options to underwriters. Options to underwriters will be considered 
justified if all of the following conditions are met:]
[(i) if issued to managing underwriters, provided they are not transferable 
except in cases where the managing underwriter is a partnership and then only 
among the partners, or if a corporation, then only among the principals 
(officers and directors or partners) of the corporation;]
[(ii) if the number of shares covered by warrants and options to the 
underwriters does not exceed 10% of the securities proposed to be sold to the 
public in the offering under consideration;] 
[(iii) if the initial exercise price of the options is at least equal to the 
public offering price, plus a step-up over said public offering price of 
either:] 
[(I) 7.0% each year they are outstanding commencing one year after issuance so 
that the exercise price throughout the second year is 107%, throughout the third 
year 114%, throughout the fourth year 121%, and throughout the fifth year 128%; 
or in the alternative;] 
[(II) 20% at any time after one year from the date of issuance, provided that an 
election as to either alternative must be made by the underwriters at the time 
the options are issued to the underwriters;]
[(iv) if the options or warrants do not exceed five years in duration and are 
exercisable no sooner than 11 months after issuance;] 
[(v) that the prospectus issued in connection with the application contains a 
full disclosure as to the terms and the reason for the issuance of such options 
and warrants; and further provided that if such reason is in connection with 
future advisory services to be performed by the underwriter without compensation 
in consideration for the issuance of such options, that a statement to that 
effect be placed in the prospectus;]
[(vi) that the market value, if any, of the options to underwriters shall be 
considered in the computation of commissions. An arbitrary value of 21% of the 
original offering price of such securities shall be used in the computation of 
commissions unless evidence indicates that a contrary valuation exists; and] 
[(vii) the same tests shall be applied to options issued by "selling 
shareholders" as provided in this chapter, unless evidence indicates that the 
selling shareholders are so separated from the issuer of the security and so 
lacking in control of the issuer of the security as to require more liberal 
treatment.] 
<nl>(2)<ol> [(12)] Limitation on liability. Issues of securities <nl>that<ol> 
[which] expose public investors to unlimited liability normally are not fair, 
just, or equitable; however, the <nl>Securities<ol> Commissioner may consider 
disclosure, sophistication of investors, potential probability of liability, 
amount of potential liability exposure, and amount of insurance against such 
exposure as possible mitigating factors. 
[(13) Loans to officers, directors, and key employees. If otherwise permitted by 
applicable law, loans to officers, directors, and key employees may be 
considered fair, just, and equitable if approved by a majority of the 
disinterested independent directors of the issuer, provided such loans are fully 
disclosed in subsequent reports to shareholders. Loans in existence prior to the 
filing of an application for securities registration must be ratified by a 
majority of the disinterested independent directors of the company and fully 
disclosed in the offering materials.]

sec.113.4. Application for Registration. 
(a)-(b) (No change.) 
<nl>(c)<ol> Consents to service of process.
<nl>(1)<ol> Except as provided in paragraphs (2) and (3) of this subsection, all 
applications to register securities issued by an issuer which is organized under 
the laws of any other state, territory, or government, or domiciled in any state 
other than Texas, must include with the application a written consent to service 
of process duly executed by an authorized agent of the issuer, under proper 
resolution or authority of the appropriate governing body, appointing the 
Securities Commissioner irrevocably its true and lawful attorney upon whom 
process in any action or proceeding against such issuer arising out of any 
transaction subject to the Texas Securities Act may be served with the same 
effect as if such issuer were organized or created under the laws of Texas and 
had been lawfully served with process herein. 
<nl>(2)<ol> The consent to service of process required under paragraph (1) of 
this subsection is not required when the application for registration is filed 
by a registered dealer acting as a principal in a firm commitment underwriting. 
<nl>(3)<ol> The consent to service of process required for applications to 
register securities filed through the Securities Registration Depository System 
will satisfy, in all respects, the requirements governing consents to service of 
process set out in this subsection and in the Texas Securities Act, sec.8. 
[(c) Variable prices. The Commissioner cannot properly permit variable price 
approvals on primary sales. However, if good cause is shown, the Commissioner 
may permit variable pricing on firmly underwritten offerings or similar 
continuous offerings such as employee benefit plans.] 
(d) (No change.) 
(e) Sales in excess of amount registered. An offeror who sells securities in 
this state in excess of the amount of securities registered may do the 
following. 
(1) If the registration is still in effect an offeror may:
(A) apply to register the excess securities by paying three times the difference 
between the initial fee paid and the fee required under the <nl>Texas<ol> 
Securities Act (Act), sec.35, for the securities sold to persons in this state; 
and 
(B) (No change.) 
(2)-(4) (No change.) 
[(f) Marketing expenses.] 
[(1) The total expenses for marketing securities paid by the issuer shall in no 
event in the aggregate exceed 20% of the gross proceeds of the offering.] 
[(2) The expenses of marketing securities paid by the issuers (or program if it 
is a limited partnership or other syndication type of offering) shall not exceed 
20% of the gross proceeds of the offering for offerings of $3 million or less 
and shall not ordinarily exceed 19% if the gross proceeds of the offering are 
$3,000,001 through $6 million, 16% of the gross proceeds of offerings $6,000,001 
through $9 million; and 15% of the gross proceeds of offerings of $9,000,001 and 
greater.] 
[(3) For purposes of determining the amount of underwriting compensation 
received or to be received by an underwriter or a related person, the following 
items received or to be received by an underwriter or related person from the 
issuer or an affiliate of the issuer in connection with or related to an 
offering shall be included:] 
[(A) underwriters discount, commission, or concession;]
[(B) nonaccountable expense allowances;] 
[(C) expenses incurred by an underwriter or related person payable by the issuer 
or from the proceeds of the offering, to or on behalf of an underwriter or 
related person;] 
[(D) fees and expenses of underwriter's counsel;]
[(E) finder's fees known to be payable at the commencement of the offering;] 
[(F) wholesaler's fees;] 
[(G) financial consulting and advisory fees, whether in the form of cash, 
securities, or any other item of value which are connected with or related to 
the offering unless an ongoing financial consulting or advisory relationship 
between the proposed issuer or affiliate and the proposed underwriter or related 
person has been established at least 12 months prior to the filing of the 
registration statement;] 
[(H) stock, options, warrants, and other securities,]
[(I) special sales incentive items;] 
[(J) a right provided to an underwriter or related person to require the issuer 
upon demand to register securities on behalf of the underwriter or person in the 
future at the expense of the issuer, which shall be valued at 1.0% of the gross 
proceeds of the offering, unless the demand is for only one such registration, 
in which event the demand registration shall be valued at 0.5% of the gross 
proceeds of the offering. A right to "piggyback" on a nondemand registration 
shall be valued at 0.25% of the gross proceeds of the offering unless the 
underwriter agrees to pay its pro rata share of offering expenses incurred as a 
result of such securities being included in the offering; and] 
[(K) commissions, expense reimbursements, or other compensation to be received 
by an underwriter or related person as a result of the exercise of the 
conversion within 12 months following the effective date of the offering of 
warrants, options, convertible securities, or similar securities distributed as 
part of the offering.] 
[(4) All underwriter compensation set forth in paragraph (3) of this subsection, 
when added to all other marketing expenses, such as printing costs, registration 
fees, filing fees, issuer's attorneys and accounting fees, and miscellaneous 
marketing expenses shall not exceed the limits imposed in paragraph (2) of this 
subsection.] 
[(5) To assure compliance with the provisions of this subsection, an escrow of 
the proceeds of the offering may be required.]
[(6) In a public offering of a direct participation program such as a limited 
partnership or other syndication-type offering, no escrow of the proceeds of the 
offering will be required if the Commissioner is satisfied that there is a 
guarantee without recourse against the issuer that an entity other than the 
issuer will pay marketing expenses in excess of the percentages of gross 
proceeds specified in paragraph (2) of this subsection.]
[(g) Consents to service of process.]
[(1) Except as provided in paragraphs (2) and (3) of this subsection, all 
applications to register securities issued by an issuer which is organized under 
the laws of any other state, territory, or government, or domiciled in any state 
other than Texas, must include with the application a written consent to service 
of process duly executed by an authorized agent of the issuer, under proper 
resolution or authority of the appropriate governing body, appointing the 
Securities Commissioner irrevocably its true and lawful attorney upon whom 
process in any action or proceeding against such issuer arising out of any 
transaction subject to the Securities Act may be served with the same effect as 
if such issuer were organized or created under the laws of Texas and had been 
lawfully served with process herein.] 
[(2) The consent to service of process required under paragraph (1) of this 
subsection is not required when the application for registration is filed by a 
registered dealer acting as a principal in a firm commitment underwriting.] 
[(3) The consent to service of process required for applications to register 
securities filed through the Securities Registration Depository System will 
satisfy, in all respects, the requirements governing consents to service of 
process set out in this subsection and in the Securities Act, sec.8.] 

sec.113.5. Financial Statements. 
(a) Audited financial statements. Except as provided in subsection
(b) of this section, all financial statements submitted to the Securities 
Commissioner pursuant to the <nl>Texas<ol> Securities Act, sec.7.A(1)(f), 
(including all financial statements of the issuer and any entity that is being 
taken over by an issuer which has not been operating) must be audited, and an 
opinion must be expressed by an independent certified public accountant or an 
independent public accountant. Such opinion shall be one acceptable to the 
[Securities] Commissioner. 
(b) (No change.) 
(c) Small business issuer. For purposes of subsection (b) of this section, the 
term "small business issuer" shall mean any corporation:
(1) that has not previously sold securities by means of an offering involving 
public solicitation or advertising unless such offering was made in compliance 
with sec.139.16 of this title (relating to Sales to Individual Accredited 
Investors), <nl>sec.139.19 of this title (relating to Accredited Investor 
Exemption),<ol> sec.109.3(c) of this title (relating to Sales to Financial 
Institutions and Certain Institutional Investors under the <nl>Texas<ol> 
Securities Act, sec.5.H), or the <nl>Texas<ol> Securities Act, sec.5.H; 
(2)-(4) (No change.) 
(5) that is not subject to the reporting requirements of [sec.13 or sec.15(d) 
of] the Securities Exchange Act of 1934<nl>, sec.13 or sec.15(d)<ol>; 
(6)-(7) (No change.) 
(d)-(e) (No change.) 

sec.113.6. Renewal Update. 
It is the responsibility of the applicant for renewal to see that all exhibits 
and information required to be filed with the Securities Commissioner for an 
original registration pursuant to [sec.7 of] the <nl> Texas<ol> Securities 
Act<nl>, sec.7,<ol> are maintained current with the Commissioner for the issuer 
whose registration is renewed under [sec.10.B of] the Act, <nl>sec.10.B,<ol> so 
long as the permit is outstanding. Whenever there are material changes, the 
prospectus must be amended and filed with the Commissioner. 

sec.113.8. Notification of Status in Other States.
Any issuer with an application pending under [sec.7.C of] the <nl>Texas<ol> 
Securities Act, <nl>sec.7.C,<ol> in addition to filing with the 
<nl>Securities<ol> Commissioner the original list of other states where filing 
has been made or is expected to be made as required by <nl> the Act, sec.<ol> 
[subsection] 7.C(1)<nl>(<ol>c<nl>)<ol>, must make a timely report of the names 
of any states where such an application is subsequently made, withdrawn, or 
denied (together with the reasons for any withdrawal or denial). 

sec.113.9. Securities Underlying Transferable Warrants and Employee Stock 
Options. 
When equity securities underlying transferable warrants or employee stock 
options are registered under <nl>the Texas Securities Act,<ol> sec.7, those 
equity securities shall thereafter be deemed to be properly registered in Texas 
regardless of the time at which the warrants are exercised by warrant or option 
holders. Continuous registration (or annual renewal of registration) of the 
underlying equity securities during the life of the warrants or options shall 
not be required solely because of the existence of outstanding warrants or 
options. Once the distribution process is completed pursuant to the 
registration, the issuer or dealer who sold such registered securities is not 
required to remain continuously registered pursuant to <nl>the Texas Securities 
Act, <ol> sec.12 solely because of the existence of outstanding warrants or 
options. However, if the issuer or dealer solicits the holders to exercise their 
warrants or options, the issuer or dealer must be registered as a securities 
dealer if the transaction does not fall within an exemption other than this 
section. This section is adopted pursuant to the authority granted by the <nl> 
Texas<ol> Securities Act, sec.5.T. 

sec.113.11. Shelf Registration of Securities. 
(a) Applicability. 
(1)-(2) (No change.) 
(3) Where appropriate, the provisions of Chapters 117, 119, 121, 129, 141, and 
143 of this title (relating to Administrative Guidelines for Registration of 
Real Estate Programs; Publicly Offered Cattle Feeding Programs; Administrative 
Guidelines for Registration of Oil and Gas Programs; Administrative Guidelines 
for Registration of Asset-Backed Securities; Administrative Guidelines for 
Registration of Equipment Programs; and Administrative Guidelines for 
Registration of Real Estate Investment Trusts)<nl>, sec.135.5 of this title 
(relating to Registration of Bonds),<ol> and other provisions of this chapter 
also will be applied. 
(b) (No change.) 

sec.113.12. Applicability of Guidelines <nl>to Exempt Offerings<ol>. 
<nl>This chapter and the<ol> [The] guidelines listed in this section do not 
apply to offerings made pursuant to an exemption under either the Texas 
Securities Act, sec.5 or sec.6, or an exemption by Board rule pursuant to the 
Texas Securities Act, sec.5.T, or to an offering of federal covered securities, 
as that term is defined in sec.107.2 of this title (relating to Definitions). In 
other words, the requirements contained in one of the following guidelines would 
apply only to an offering for which an application for registration is filed 
with the Securities Commissioner:
(1)-(7) (No change.) 

sec.113.13. Multijurisdictional Disclosure System - MDS Offerings. 
(a) (No change.) 
(b) For purposes of the <nl>Texas<ol> Securities Act (the Act), sec.7.C, a 
waiting period of seven days prior to effectiveness will apply to each MDS 
offering as long as the application for registration is filed contemporaneously 
with the SEC registration application in accordance with sec.113.2 of this title 
(relating to Registration by Coordination).
(c) Financial statements. 
(1) A financial statement prepared in a manner that meets the registration 
requirements of the SEC for an MDS offering is deemed to meet the financial 
statement requirements contained in the <nl>Texas Securities <ol> Act, sec.7.C, 
if the registration statement has been designated as Form F-7, F-8, F-9, or F-10 
by the SEC and: 
(A)-(D) (No change.) 
(2) (No change.) 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 4, 1998.
TRD-9812321
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 305-8300

7 TAC sec.113.14-113.25
The State Securities Board proposes new sections sec.sec.113.14-113.25, 
concerning registration of securities. The new provisions reflect various 
guidelines, applicable to securities offerings, that have been adopted by the 
North American Securities Administrators Association, Inc. ("NASAA"). One change 
to the NASAA uniform guidelines is being made. That change, occurring in 
proposed sec.113.22(d) and sec.113.22(f)(8), adds a phrase referencing filing 
with the Securities Commissioner for applications not seeking registration with 
the Securities and Exchange Commission. The proposal would make these guidelines 
applicable to all registered offerings of securities. 
Micheal Northcutt, Director, Securities Registration Division has determined 
that for the first five-year period the rules are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rules. 
Mr. Northcutt also has determined that for each year of the first five years the 
rules are in effect the public benefits anticipated as a result of enforcing the 
rules will be a substantial degree of consistency with uniform guidelines for 
the registration of securities applied by other state securities regulators and 
these uniform guidelines will be applicable to all offerings, not just those 
made pursuant to the Coordinated Equity Review program. There will be no effect 
on small businesses. There is no anticipated economic cost to persons who are 
required to comply with the rules as proposed. 
Comments on the proposal may be submitted to David Weaver, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
The new rules are proposed under Texas Civil Statutes, Article 581-28-1. Section 
28-1 provides the Board with the authority to adopt rules and regulations 
necessary to carry out and implement the provisions of the Texas Securities Act, 
including rules and regulations governing registration statements and 
applications; defining terms; classifying securities, persons, and matters 
within its jurisdiction; and prescribing different requirements for different 
classes. 
The proposed rules affects Texas Civil Statutes, Article 581-7. 

sec.113.14. Corporate Securities Definitions. 
(a) Introduction. The State Securities Board has determined that this section is 
consistent with public investor protection and is in the public interest. 
Nothing shall prevent the Securities Commissioner from applying different 
standards than those contained in this section. This section applies to 
definitions of terms used in the following sections: 
(1) sec.113.15 of this title (relating to Impoundment of Proceeds); 
(2) sec.113.16 of this title (relating to Loans and Other Material Affiliated 
Transactions); 
(3) sec.113.17 of this title (relating to Options and Warrants); 
(4) sec.113.18 of this title (relating to Preferred Stock); 
(5) sec.113.19 of this title (relating to Promoters' Equity Investment); 
(6) sec.113.20 of this title (relating to Promotional Shares); 
(7) sec.113.21 of this title (relating to Specificity in Use of Proceeds); 
(8) sec.113.22 of this title (relating to Underwriting Expenses, Underwriter's 
Warrants, Selling Expenses, and Selling Security Holders);
(9) sec.113.23 of this title (relating to Unsound Financial Condition); and 
(10) sec.113.24 of this title (relating to Unequal Voting Rights). 
(b) Definitions. The following words and terms, when used in the sections named 
in subsection (a) of this section, shall have the following meanings, unless the 
context clearly indicates otherwise. 
(1) Adjusted net earnings - The issuer's net earnings and after charges for 
interest and dividends, adjusted on a pro forma basis to reflect: 
(A) the elimination of any required charges for debt, debt securities, or 
preferred stock that are to be redeemed or retired from the proceeds derived 
from the public offering of preferred stock; 
(B) the effect of any acquisitions or capital expenditures that were made by the 
issuer after its last fiscal year, or which are proposed or required to be made 
during the current fiscal year, which materially affect the issuer's net 
earnings; 
(C) the effect of charges or dividends on debt, debt securities, or preferred 
stock issued after the issuer's last fiscal year; 
(D) the effect of any charges or dividends on debt, debt securities, or 
preferred stock that were issued during the issuer's last fiscal year, but which 
were outstanding for only a portion of such fiscal year, as if charges or 
dividends, such debt, debt securities, or preferred stock had been outstanding 
for the entire fiscal year; and 
(E) the effect of any other material changes to an issuer's future net earnings. 
(2) Affiliate - A person who, directly or indirectly, controls, is controlled 
by, or is under common control with the person specified herein. 
(3) Aggregate revenues - The aggregate amount of revenues a promotional or 
development stage company has received within the last three consecutive fiscal 
years immediately preceding the public offering plus revenues received during 
the period covered by any interim period financial information included in the 
prospectus. Revenues from interest and extraordinary items are to be excluded. 
(4) Associate - When used to indicate a relationship with a person, includes: 
(A) corporations or legal entities, other than the issuer or majority owned 
subsidiaries of the issuer, of which a person is an officer, director, partner, 
or a direct or indirect, legal or beneficial owner of 5.0% or more of any class 
of equity securities; 
(B) trusts or other estates in which a person has a substantial beneficial 
interest or for which a person serves as a trustee or in a similar capacity; and
(C) a persons's spouse and relatives, by blood or by marriage, if the person is 
a promoter of the issuer, its subsidiaries, its affiliates, or its parent. 
(5) Average promotional price - The average per share price paid for promotional 
shares and other shares issued prior to the public offering which are of the 
same class of shares being offered in the public offering as determined by 
reference to the audited financial statements of the issuer included in the 
prospectus. 
(6) Cash analysis - The issuer's "net cash provided by operating activities" as 
reflected on the statement of cash flows and presented in conformity with 
generally accepted accounting principles. If debt securities are to be redeemed 
or retired from the proceeds from the public offering, a pro forma adjustment 
for the elimination of the related interest charges, net of applicable income 
taxes, must be made. 
(7) Control - The power to direct or influence the direction of the management 
or policies of a person, directly or indirectly, through the ownership of voting 
securities, by contract, or otherwise. 
(8) Equity securities - Includes shares of common stock or similar securities 
and convertible securities, warrants, options, or rights that may be converted 
into or exercised to purchase, shares of common stock or similar securities. 
(9) Escrow agent - A financial institution whose principal place of business and 
domicile is in the United States. It may not be affiliated with the issuer, its 
promoters, or associates. A financial institution may not be disallowed to act 
as an escrow agent merely because the issuer, its promoters, or associates are 
customers thereof. An escrow agent may also include an attorney or certified 
public accountant, provided that the attorney or certified public accountant is 
not affiliated with the issuer, its promoters, or associates, is licensed to do 
business in the state in which they practice, and can demonstrate that they are 
adequately insured or can provide a fidelity bond. 
(10) Impoundment agent - A financial institution that is domiciled and whose 
principal place of business is located in the United States and whose deposits 
are insured by the FDIC. 
(11) Independent director - A member of issuer's board of directors who: 
(A) is not an officer or employee of the issuer, its subsidiaries, or their 
affiliates or associates and has not been an officer, or employee of the issuer, 
its subsidiaries, or their affiliates or associates within the last two years; 
(B) is not a promoter as defined in paragraph (15)(A), (B), (D)(ii), or (E) of 
this subsection; and 
(C) does not have a material business or professional relationship with the 
issuer or any of its affiliates or associates. For purposes of determining 
whether or not a business or professional relationship is material, the gross 
revenue derived by the independent director from the issuer, its affiliates and 
associates shall be deemed material per se if it exceeds 5.0% of the independent 
director's: 
(i) annual gross revenue, derived from all sources, during either of the last 
two years; or 
(ii) net worth, on a fair market value basis. 
(12) Lock in agreement - An agreement between an issuer and persons who hold 
promotional shares wherein those persons agree, as a condition of registration, 
not to sell, pledge, hypothecate, assign, grant any option for the sale of, or 
otherwise transfer or dispose of, whether or not for consideration, directly or 
indirectly, promotional shares and all certificates representing stock 
dividends, stock splits, recapitalizations, and the like, that are granted to or 
received by the security holder for the period specified in the lock in 
agreement. 
(13) Net earnings - The issuer's after tax earnings that are derived from its 
normal operations, exclusive of extraordinary and nonrecurring items, determined 
according to generally accepted accounting principles, consistently applied. 
(14) Person - An individual, a corporation, a limited liability company, a 
partnership, an association, a joint stock company, a trust, an unincorporated 
organization, a government or a political subdivision of a government, or any 
other legal entity. 
(15) Promoter - Includes: 
(A) a person who, alone or in conjunction with one or more persons, directly or 
indirectly, took the initiative in founding or organizing the issuer or controls 
the issuer; 
(B) a person who, directly or indirectly, receives, as consideration for 
services and/or property rendered, 5.0% or more of any class of the issuer's 
equity securities or 5.0% or more of the proceeds from the sale of any class of 
the issuer's equity securities; 
(C) a person who receives securities or proceeds solely as underwriting 
compensation, is excluded from the definition of promoter if that person falls 
outside the definition of subparagraph (A), (D), or (E) of this paragraph; 
(D) a person who: 
(i) is an officer or director for the issuer; or 
(ii) anyone who legally or beneficially owns, directly or indirectly, 5.0% or 
more of any class of the issuer's equity securities; or
(E) a person who is an affiliate or an associate of a person specified in 
subparagraph (A), (B), or (D) of this paragraph. 
(16) Promoters' equity investment - The total of cash and tangible assets that 
has been contributed by the promoters to the issuer, provided that the value of 
the tangible assets is accepted by the Securities Commissioner. Promoters 
contributions of intangible assets may be considered as promoters' equity 
investment, provided that the value thereof has been accepted by the 
Commissioner. Promoters' equity investment may be adjusted by the issuer's 
earned surplus immediately prior to the public offering.
(17) Promotional or development stage company - May include an issuer who is not 
listed on the New York Stock Exchange, the American Stock Exchange, or the 
NASDAQ National Market System, or whose annual net earnings for each of the last 
two consecutive fiscal years or whose average, annual net earnings for the last 
five fiscal years prior to the public offering have been less than 5.0% of the 
aggregate public offering. 
(18) Promotional shares - Equity securities that are to be issued or were 
issued: 
(A) by an issuer, which is a promotional or development stage company, to 
promoters for cash or other consideration, including services rendered, patents, 
copyrights, and other intangibles (provided that the value thereof has been 
accepted by the Securities Commissioner), that will be or was less than 85% of 
the proposed public offering price; or 
(B) within three years prior to the filing of the registration statement by an 
issuer, which is not a promotional or development stage company, to promoters 
for cash or other consideration, including services rendered, patents, 
copyrights, and other intangibles (provided that the value thereof has been 
accepted by the Securities Commissioner), that will be or was less than 85% of 
the proposed public offering price. 
(19) Public offering price - The per share price at which a promotional or 
development stage company proposes to offer equity securities to the public. 
(20) Unaffiliated institutional investor: 
(A) an unaffiliated bank or unaffiliated savings and loan company; 
(B) an unaffiliated investment company registered under the Investment Company 
Act of 1940; 
(C) an unaffiliated business development company as defined in the Investment 
Company Act of 1940, sec.2(a)(48); 
(D) an unaffiliated small business investment company licensed by the U.S. Small 
Business Administration under the Small Business Investment Act of 1958, 
sec.301; 
(E) an unaffiliated employee benefit plan, within the meaning of the Employee 
Retirement Income Security Act of 1974, Title I, and state and local government 
employees retirement and pension plans; 
(F) an unaffiliated insurance company; 
(G) an unaffiliated trust company; 
(H) an unaffiliated private business development company, as defined in the 
Investment Advisors Act of 1940, sec.202(a)(22), or a comparable business 
entity, that is engaged as a substantial part of its business in the purchase 
and sale of securities, and which will own less than 20% of the issuer's 
securities upon completion of the public offering; or 
(I) an unaffiliated "qualified purchaser" to be defined under the National 
Securities Markets Improvement Act of 1996. 
(21) Underwriter - Any person who has agreed with the issuer or other person on 
whose behalf a distribution is to be made: 
(A) to purchase securities for distribution; 
(B) to distribute securities for or on behalf of the issuer or other person; or 
(C) to manage or supervise a distribution of securities for or on behalf of the 
issuer or other person. 

sec.113.15. Impoundment of Proceeds. 
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) When an impoundment agreement (agreement) is necessary, the proceeds from 
the sale of the securities must be deposited in an interest bearing escrow or 
trust account with an impoundment agent. The impoundment agent may not be 
affiliated with the issuer, its affiliates, its officers or directors, the 
underwriter, or any promoter. 
(c) The agreement shall meet the following conditions: 
(1) a signed copy of the agreement must be filed with the Securities 
Commissioner and shall become part of the registration statement;
(2) the agreement must be signed by an officer of the issuer, an officer of the 
underwriter (if applicable), and an officer of the impoundment agent. The 
aforesaid individuals must have the authority to sign such documents; 
(3) the agreement shall provide that the impounded proceeds (proceeds) are not 
subject to claims by creditors of the issuer, affiliates, associates, or 
underwriters until the proceeds have been released to the issuer pursuant to the 
terms of the agreement; 
(4) a summary of the principal terms shall be included in the registration 
statement; and 
(5) the agreement shall provide that the Commissioner has the right to inspect 
and make copies of the records of the impoundment agent at any reasonable time 
wherever the records are located. 
(d) The impoundment agent shall notify the Securities Commissioner in writing 
upon the release of the proceeds. If the proceeds are insufficient to meet the 
minimum requirements within the time prescribed by the agreement:
(1) the impoundment agent must release and return the proceeds directly to the 
investors; and 
(2) the proceeds shall be released and returned to the investors without 
deduction for expenses, including impoundment agent fees. All interest earned 
shall be submitted pro rata to the investors, along with the proceeds. 
(e) If a person, who is an underwriter or an officer, director, promoter, 
affiliate, or an associate of the issuer, purchases securities, that are a part 
of the public offering being sold pursuant to the registration statement, and if 
the proceeds from that purchase are used for the purpose of completing the 
impoundment requirements imposed under this section, the following conditions 
shall be met: 
(1) the persons are purchasing the securities on the same terms as unaffiliated 
public investors; 
(2) the prospectus contains a disclosure that such persons may purchase 
securities of the issuer for purposes of completing the impoundment requirements 
imposed by this section; and 
(3) all securities so purchased will neither be defined as "promotional shares," 
nor be a part of the calculation of the promotional shares subject to escrow 
under sec.113.20 of this title (relating to Promotional Shares). However, all 
such securities shall be immediately subject to the escrow/lock-up provisions of 
sec.113.20 of this title (relating to Promotional Shares). 

sec.113.16. Loans and Other Material Affiliated Transactions. 
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) The terms used in this section are defined pursuant to sec.113.14 of this 
title (relating to Corporate Securities Definitions).
(c) Where there have been or will be loans and other material affiliated 
transactions as described in this section, the offer or sale of securities may 
be disallowed by the Securities Commissioner unless the issuer has, and 
represents in the prospectus or offering document that it will maintain, at 
least two independent directors on its board of directors. 
(d) The offer or sale of securities may be disallowed by the Securities 
Commissioner if the issuer or its affiliates will have loans outstanding after 
the offering, or intends to make loans to or loan guarantees on behalf of its 
promoters, other than: 
(1) advances to officers, directors, and employees for travel, business expense, 
and similar ordinary operating expenditures; 
(2) loans or loan guarantees made for the purchase of an issuer's securities by 
its officers, directors, and employees, and loans for relocation of officers, 
directors, and employees, provided the loans or loan guarantees that are ongoing 
were approved by a majority of the independent directors of the issuer's board 
of directors who did not have an interest in the transactions and who had 
access, at the issuer's expense, to issuer's or independent legal counsel; or 
(3) loans made by an issuer or its affiliates whose primary business is that of 
making loans, provided that: 
(A) the loans will be evidenced by promissory notes naming the lender as payee; 
(B) the loans will bear interest at rates which are comparable to those normally 
charged by other commercial lenders for similar loans made in the lender's 
locale; 
(C) the loans will be repaid pursuant to appropriate amortization schedules and 
contain default provisions comparable to those normally used by other commercial 
lenders for similar loans made in the lender's locale;
(D) the loans will be made only if credit reports and financial statements show 
the loans to be collectible and the borrowers are satisfactory credit risks, in 
light of the nature and terms of the loans and other circumstances;
(E) the loans meet the loan policies normally used by other commercial lenders 
for similar loans made in the lender's locale; 
(F) the purposes of the loans and the disbursements of proceeds will be reviewed 
and monitored in a manner comparable to that normally used by other commercial 
lenders for similar loans made in the lender's locale; and 
(G) the loans will not violate the requirements of any banking or other 
financial institutions regulatory authority. 
(e) Except for loans described in subsection (d) of this section, all loans 
existing at the time of the application for registration shall be repaid in full 
prior to the offering. The Securities Commissioner may waive this requirement 
if: 
(1) repayment of the loans will be made pursuant to appropriate amortization 
schedules; or 
(2) any portion of the offering is made on behalf of a promoter and the promoter 
undertakes to immediately repay the loans from the proceeds of the offering. 
(f) The offer or sale of securities may be disallowed by the Securities 
Commissioner if the issuer or its affiliates have engaged in other material 
transactions with promoters, unless the prospectus discloses the terms of 
transactions and indicates whether such terms were as favorable to the issuer or 
its affiliates as those generally available from unaffiliated third parties; and 
(1) the transaction is ratified by a majority of the issuer's independent 
directors who did not have an interest in the transactions and who had access, 
at the issuer's expense, to issuer's or independent legal counsel; or 
(2) for transactions which were entered into when there were less than two such 
disinterested independent directors, the prospectus discloses that the issuer 
lacked sufficient disinterested independent directors to ratify the transactions 
at the time the transactions were initiated. 
(g) The issuer shall disclose in the prospectus or offering document whether or 
not it or its affiliates have made or will make loans to, have made or will make 
loan guarantees on behalf of, or have engaged or will engage in material 
transactions with promoters and the terms and details relating thereto. If 
material affiliated transactions or loans have been made, or may be made, the 
Securities Commissioner may require the following representations to appear in 
the prospectus or offering document: 
(1) all future material affiliated transactions and loans will be made or 
entered into on terms that are no less favorable to the issuer than those that 
can be obtained from unaffiliated third parties; and 
(2) all future material affiliated transactions and loans, and any forgiveness 
of loans, must be approved by a majority of the issuer's independent directors 
who do not have an interest in the transactions and who had access, at the 
issuer's expense, to issuer's or independent legal counsel. 
(h) The issuer and its officers and directors should consider their due 
diligence and other obligations to affirmatively demonstrate a reasonable basis 
for the representations in subsections (f) and (g) of this section. In 
particular, they should consider whether the representations in subsection 
(g)(2) of this section should be embodied in the issuer's charter or bylaws.
(i) In order to satisfy the ratification provisions of subsections (d)(2), 
(f)(1), and (g) of this section the issuer must have at least two independent 
directors on its board of directors. In the event the issuer has only two 
independent directors on its board of directors, both independent directors must 
be disinterested in and approve loans and other material transactions covered by 
subsections (d)(2), (f)(1), and (g)(2) of this section. 

sec.113.17. Options and Warrants.
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) The terms used in this section are defined pursuant to sec.113.14 of this 
title (relating to Corporate Securities Definitions).
(c) Options or warrants may be issued to underwriters as compensation in 
connection with a public offering provided those options or warrants comply with 
the requirements of sec.113.22 of this title (relating to Underwriting Expenses, 
Underwriter's Warrants, Selling Expenses, and Selling Security Holders).
(d) Options or warrants may be granted to unaffiliated institutional investors 
in connection with loans if: 
(1) the options or warrants are issued contemporaneously with the issuance of 
the loan; 
(2) the options or warrants are granted as the result of bona fide negotiations 
between the issuer and unaffiliated institutional investor; 
(3) the exercise price of the options or warrants is not less than the fair 
market value of the issuer's shares of common stock underlying the options or 
warrants on the date that the loan was approved; and 
(4) the number of shares issuable upon exercise of the options or warrants 
multiplied by the exercise price thereof does not exceed the face amount of the 
loan. 
(e) Options or warrants may be granted in connection with acquisitions, 
reorganizations, consolidations, or mergers if: 
(1) they are granted to persons who are unaffiliated with the issuer; and 
(2) the earnings of the issuer at the time of grant and after giving effect to 
the acquisition, reorganization, consolidation, or merger would not be 
materially diluted by the exercise of the options or warrants.
(f) Options and warrants may not be granted at an exercise price of less than 
85% of fair market value of the issuer's underlying shares of common stock on 
the date of grant. The issuer, and its officers and directors, should consider 
the advisability of obtaining a concurrent appraisal, by a qualified independent 
appraiser, of the value of the shares of common stock at the time of the grant 
as evidence of the fair market value. 
(g) The total number of options and warrants issued or reserved for issuance at 
the date of the public offering may not, for one year following the effective 
date of the offering, exceed 15% of the issuer's shares of common stock 
outstanding at the date of the public offering plus the number of shares of 
common stock being offered that are firmly underwritten, or in the case of 
offerings not firmly underwritten, the number of shares of common stock required 
to be sold in order to meet the minimum offering amount. In calculating the 
number of options and warrants, the following are excluded: 
(1) options and warrants that were issued, or reserved for issuance, pursuant to 
subsections (c), (d) and (e) of this section; 
(2) options and warrants that were issued, or reserved for issuance, to 
employees or consultants who were not promoters, in connection with an incentive 
stock option plan qualified under the Internal Revenue Code, sec.422; and 
(3) options and warrants that are exercisable at or above the public offering 
price. 
(h) No options or warrants issued and outstanding at the date of the public 
offering, excluding those options and warrants issued pursuant to an incentive 
stock option plan qualified under the Internal Revenue Code, sec.422, may be 
exercisable more than five years from the date of the public offering. 
(i) If the number of options and warrants that are issued and outstanding and/or 
reserved for issuance is material, the final offering circular shall disclose 
the potential dilutive effects of such options and warrants. 

sec.113.18. Preferred Stock. 
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) The terms used in this section are defined pursuant to sec.113.14 of this 
title (relating to Corporate Securities Definitions).
(c) A public offering of preferred stock may be disallowed by the Securities 
Commissioner if the issuer's adjusted net earnings for the last fiscal year or 
its average adjusted net earnings for the last three fiscal years prior to the 
public offering were insufficient to pay its fixed charges and preferred stock 
dividends, whether or not accrued, and to meet the redemption requirements, if 
applicable, of the preferred stock being offered. 
(d) As an alternative to subsection (c) of this section, the Securities 
Commissioner may choose to apply a cash analysis. The Commissioner may consider 
the statement of cash flows if the statement demonstrates that the issuer has 
had positive "net cash provided by operating activities" for its last fiscal 
year. The Commissioner may request that the issuer submit a financial statement 
demonstrating an average positive "net cash provided by operating activities" 
for the last three fiscal years prior to the public offering. In either instance 
there must be sufficient cash to cover the preferred stock dividend whether or 
not declared. 
(e) Subsections (c) and (d) of this section shall not apply to public offerings 
of convertible preferred stock that are superior in right to payment of 
dividends, interest, and liquidation proceeds to any convertible debt and 
preferred stock that are or may be legally or beneficially, directly or 
indirectly, owned by promoters. The risks of failure to declare or pay dividends 
and the equity characteristics of the convertible preferred stock must be 
disclosed in the offering prospectus. An offering of such securities may be 
reviewed using guidelines for equity offerings. 
(f) If the issuer's net earnings are subject to cyclical fluctuations or if the 
Securities Commissioner deems it necessary for investor protection, the 
Commissioner may require that the issuer establish redemption requirements.
(g) A public offering of equity securities may be disallowed by the Securities 
Commissioner if the issuer's articles of incorporation authorize its board of 
directors to issue preferred stock in the future without a vote of the common 
shareholders unless: 
(1) the issuer represents in its prospectus or offering document that it will 
not offer preferred stock to promoters except on the same terms as it is offered 
to all other existing shareholders or to new shareholders; or 
(2) the issuance of preferred stock is approved by a majority of the issuer's 
independent directors who do not have an interest in the transaction and who 
have access, at the issuer's expense, to issuer's or independent legal counsel. 

sec.113.19. Promoter's Equity Investment. 
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) The terms used in this section are defined pursuant to sec.113.14 of this 
title (relating to Corporate Securities Definitions).
(c) A public securities offering by a promotional or development stage company 
may be disallowed by the Securities Commissioner if the promoters' equity 
investment, which may include items submitted by the promoter to meet this 
requirement whose value has been accepted by the Commissioner, is less than: 
(1) 10% of the first $1 million of the aggregate public offering;
(2) 7.0% of the next $500,000 of the aggregate public offering; 
(3) 5.0% of the next $500,000 of the aggregate public offering; and 
(4) 2.5% of the balance over $2 million. 

sec.113.20. Promotional Shares.
(a) Introduction. The State Securities Board has determined that this section is 
consistent with public investor protection and is in the public interest. 
Nothing shall prevent the Securities Commissioner from applying different 
standards than those contained in this section. In addition, nothing in this 
section restricts the ability of the Commissioner to deny an offering which 
contains excessive promoters' profits or is not fair, just, or equitable under 
the circumstances. Terms used in this section are defined pursuant to sec.113.14 
of this title (relating to Corporate Securities Definitions). 
(b) Escrow of promotional shares. The Securities Commissioner may require that 
some or all of the promoters deposit some or all of their promotional shares 
into an escrow account ("escrow") with an escrow agent, according to the terms 
of an escrow agreement ("agreement"), as a condition to registering a public 
offering of equity securities. The promoters, who are required to deposit some 
or all of their promotional shares into escrow, are hereinafter collectively 
referred to as depositors. The Commissioner may, in his or her discretion, 
require a lock in agreement on substantially the same terms and conditions as an 
agreement. 
(1) Except where a promoter must comply with paragraph (2) of this subsection, 
this formula may be used to determine the number of promotional shares to be 
deposited in escrow: 
Figure: 7 TAC sec.113.20(b)(1) 
(2) If the issuer's latest audited financial statements contain an auditor's 
report or footnote that contains an opinion or statement regarding the ability 
of the issuer to continue as a going concern, then all promotional shares shall 
be deposited in escrow. 
(3) The number of promotional shares to be deposited into escrow shall be 
determined on a pro rata basis among the promoters. 
(c) Release of promotional shares. The escrow agent shall release the 
promotional shares in accordance with this subsection and as illustrated in this 
table: 
Figure: 7 TAC sec.113.20(c) 
(1) if the issuer's aggregate revenues are: 
(A) $500,000 or more; provided that neither the auditor's report nor any 
footnote to the issuer's latest audited financial statements contain an opinion 
or statement regarding the ability of the issuer to continue as a going concern: 
(i) beginning one year from the date of completion of the offering, 2.5% of 
promotional shares held in escrow may be released each quarter pro rata among 
the depositors; 
(ii) all remaining promotional shares shall be released from escrow on the 
second anniversary from the date of completion of the offering; or 
(B) less than $500,000: 
(i) beginning two years from the date of completion of the offering, 2.5% of 
promotional shares held in escrow may be released each quarter pro rata among 
the depositors; 
(ii) all remaining promotional shares shall be released from escrow on the 
fourth anniversary from the date of completion of the offering;
(2) the public offering has been terminated, and no securities were sold 
pursuant thereto; 
(3) the public offering has been terminated, and all of the gross proceeds that 
were derived therefrom have been returned to the public investors; 
(4) in the event of a dissolution, liquidation, merger, consolidation, 
reorganization, sale or exchange of the issuer's assets or securities (including 
by way of tender offer), or any other transaction or proceeding with a person 
who is not a promoter which results in the distribution of the issuer's assets 
or securities ("distribution"), while this agreement remains in effect, the 
depositors agree that: 
(A) all holders of the issuer's equity securities will initially share on a pro 
rata, per share basis in the distribution, in proportion to the amount of cash 
or other consideration that they paid per share of equity securities (provided 
that the Securities Commissioner has accepted the value of the other 
consideration), until the public shareholders have received, or had irrevocably 
set aside for them, an amount that is equal to 100% of the public offering's 
price per share times the number of shares of equity securities that they 
purchased pursuant to the public offering and which they still hold at the time 
of the distribution, adjusted for stock splits, stock dividends, 
recapitalizations, and the like; 
(B) all holders of the issuer's equity securities shall thereafter participate 
on an equal, per share basis times the number of shares of equity securities 
they hold at the time of the distribution, adjusted for stock splits, stock 
dividends, recapitalizations, and the like; and 
(C) a distribution may proceed on lesser terms and conditions than the terms and 
conditions stated in paragraphs (4)(A) and (B) of this subsection, if a majority 
of the equity securities, that are not held by promoters, or their associates or 
affiliates, vote, or consent by consent procedure, to approve the lesser terms 
and conditions at a special meeting called for that specific purpose; 
(5) in the event of a dissolution, liquidation, merger, consolidation, 
reorganization, sale or exchange of the issuer's assets or securities (including 
by way of tender offer), or any other transaction or proceeding with a person 
who is a promoter, which results in a distribution while this agreement remains 
in effect, the depositors' promotional shares shall remain in escrow subject to 
the terms of the agreement; and 
(6) in the event securities in the escrow become "covered securities," as 
defined in the Securities Act of 1933, sec.18(b)(1), all securities in the 
escrow shall be released. 
(d) Documentation regarding the termination of the escrow agreement and/or the 
release of promotional shares. 
(1) A request for the release of any of the promotional shares from escrow shall 
be in writing and be forwarded to the escrow agent. 
(2) The issuer shall provide the documentation, showing that the requirements of 
subsection (c) of this section have been met, to the escrow agent. 
(3) The escrow agent shall terminate the agreement and/or release some or all of 
the promotional shares from escrow if all the applicable provisions of the 
agreement have been satisfied. The escrow agent shall maintain all records 
relating to the agreement for a period of three years following the termination 
of the agreement. Copies of all records retained by the escrow agent shall be 
forwarded to the Securities Commissioner promptly upon written request. 
(e) Restrictions on the transfer, sale, or disposal of promotional shares. 
(1) Promotional shares may be transferred by will, the laws of descent and 
distribution, the operation of law, or by any court of competent jurisdiction 
and proper venue. 
(A) The promotional shares of a deceased depositor may be hypothecated to pay 
the expenses of the deceased depositor's estate; provided that the hypothecated 
promotional shares shall remain subject to the terms of the agreement. 
(B) No promotional shares may be transferred, sold, or disposed of 
("transferred") until the escrow agent has received a written statement signed 
by the proposed transferee ("transferee") which states that the transferee has 
full knowledge of the terms of the agreement, the transferee accepts the 
promotional shares subject to the terms of the agreement, and the transferee 
realizes that the promotional shares shall remain in escrow until they are 
released pursuant to subsection (c) of this section. 
(2) With the exception of paragraph (1)(A) of this subsection, promotional 
shares may not be pledged to secure a debt. 
(3) Promotional shares may be transferred by gift to the depositor's family 
members, provided that the promotional shares shall remain subject to the terms 
of the agreement. 
(4) With the exception of paragraph (1) of this subsection, no promotional 
shares, any interest therein or any right or title thereto, may be transferred. 
(5) Notwithstanding the provisions of subsection (b)(1) of this section, 
promoters shall be prohibited from selling any of their promotional shares that 
are not subject to escrow during the time that the issuer is offering its 
securities to the public in the case of a self-underwritten offering.
(f) Terms of the escrow. 
(1) Except as noted in subsection (c)(4)(C) of this section, depositors shall 
have the same voting rights as shareholders who purchased equity securities 
pursuant to the public offering ("public shareholders").
(2) All certificates representing stock dividends and shares resulting from 
stock splits of escrowed shares, recapitalizations, and the like, that are 
granted to or received by depositors while their promotional shares are held in 
escrow shall be deposited with and held by the escrow agent subject to the terms 
of the agreement. Any cash dividends that are granted to or received by 
depositors while their promotional shares are held in escrow, shall be deposited 
with and be held by the escrow agent subject to the terms of the agreement 
unless such cash dividends are approved by a majority of the independent 
directors of the issuer. The escrow agent shall invest such cash dividends as 
directed by the depositors. The cash dividends and any interest earned thereon 
will be disbursed in proportion to the number of shares released from the 
escrow. 
(3) Equity securities that are received by depositors as the result of the 
conversion or exercise of convertible securities, warrants, options, or rights 
to purchase common stock or similar securities, while their promotional shares 
are in escrow, shall be deposited with and held by the escrow agent subject to 
the terms of the escrow. 
(4) A summary of the agreement shall be included in the prospectus and 
subsequent amendments thereto, annual reports to shareholders, proxy statements, 
and other disclosure materials that are used to make investment decisions until 
the public offering has been terminated. 
(5) The escrow agent shall be entitled to reasonable compensation from the 
issuer for its services as set forth in the agreement. If the escrow agent is 
required to render additional services that are not expressly provided for 
therein, or if it is made a party to or intervenes in any action, suit, or 
proceedings pertaining to the agreement, it shall be entitled to receive 
reasonable compensation from the issuer and the depositors. If additional 
services are provided, the escrow agent, after giving written notice to the 
depositors and issuer, may deduct reasonable compensation from any cash 
dividends, interest, and proceeds that are being held by it for distribution 
pursuant to the agreement. 
(6) The issuer and the depositors shall hold the escrow agent harmless from, and 
indemnify it for, any cost or liability regarding administrative proceeding, 
investigation, litigation, interpretation, implementation, or interpleading 
relating to the agreement, including the release of promotional shares and the 
disbursement of dividends, interest, or proceeds, unless the cost or the 
liability arises from the escrow agent's failure to abide by the terms of the 
agreement. 
(7) The agreement shall be binding upon the depositors, their heirs and 
assignees, and upon the issuer and escrow agent and their successors. 
(8) Except for the escrow agent's compensation and indemnification provisions, 
which shall survive until they are satisfied, the agreement will be terminated 
when all of the promotional shares have been released or the issuer's equity 
securities and/or the assets have been distributed pursuant to the agreement. 

sec.113.21. Specificity in Use of Proceeds. 
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) A registration statement not complying with the requirements of this section 
may be denied registration by the Securities Commissioner.
(c) The issuer's prospectus shall disclose, in a tabular form, for both the 
minimum and maximum amounts proposed, if applicable, the percentages and dollar 
amounts of the following: 
(1) the estimated cash proceeds to be received by the issuer from the offering; 
(2) the purposes for which the proceeds are to be used by the issuer; 
(3) the amount to be used for each purpose; and 
(4) the order or priority in which the proceeds will be used for the purposes 
stated. 
(d) Additionally, the issuer's prospectus shall disclose:
(1) the amounts of any funds to be raised from other sources to achieve the 
purposes stated, whether the sources are firm or contingent, and any 
contingencies; 
(2) the sources of any such funds, whether the sources are firm or contingent, 
and any contingencies; 
(3) if any part of the proceeds is to be used to acquire any property (including 
goodwill) otherwise than in the ordinary course of business, the names and 
addresses of the vendors, the purchase price, the names of any persons who have 
received commissions in connection with the acquisition, and the amounts of any 
such commissions and any other expense in connection with the acquisition 
(including the cost of borrowing money to finance the acquisition); and 
(4) the amount and basis for any proceeds used to pay indebtedness, including 
unpaid salaries, to promoters (as defined in sec.113.16 of this title (relating 
to Loans and Other Material Affiliated Transactions)).
(e) The issuer normally may not reserve more than 15% of the proceeds for 
working capital or general corporate purposes (or for any other unspecified 
use). In the event the issuer's business plans require greater flexibility in 
the use of unspecified proceeds, the issuer must: 
(1) disclose all potential uses of such proceeds with qualifying language that 
such uses may be subject to change; and 
(2) indicate the specific circumstances leading to reallocation and the 
potential areas of reallocation. 
(f) The issuer must demonstrate that the offering proceeds, together with all 
other sources of financing currently available to the issuer, are sufficient to 
sustain the issuer's proposed activities. If such proceeds are insufficient to 
sustain the issuer's activities for at least 12 months following the offering, 
the issuer must provide the appropriate risk disclosure in the prospectus. 
(g) In the event the offering is not firmly underwritten, the issuer must set a 
minimum amount of proceeds to be raised consistent with the business plan set 
forth in the prospectus. These proceeds must be impounded until such minimum 
amount is reached. In the event monies are impounded in a non-interest bearing 
account, the prospectus must disclose this fact to investors. Additionally, the 
prospectus must disclose if officers, directors, or other promoters have the 
right to purchase shares for the purpose of meeting the impound requirements. 

sec.113.22. Underwriting Expenses, Underwriter's Warrants, Selling Expenses, and 
Selling Security Holders.
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) An offer or sale of securities may be disallowed by the Securities 
Commissioner if the underwriting expenses to be incurred exceed 17% of the gross 
proceeds from the public offering. 
(c) Underwriting expenses may include but are not limited to: 
(1) commissions to underwriters or broker dealers; 
(2) non accountable fees or expenses to be paid to the underwriter or broker 
dealer; 
(3) underwriter's warrants, which shall be valued using this formula (see also 
paragraph (4) of this subsection): 
Figure: 7 TAC sec.113.22(c)(3) 
(4) the value arrived at in paragraph (3) of this subsection may be reduced by 
20% if the exercise period of the warrants is extended from one year after the 
public offering to two years after the public offering and by 40% if the 
exercise period of the warrants is extended from one year after the public 
offering to three years after the public offering. Warrants granted to 
underwriters are subject to the following restrictions: 
(A) the underwriter is a managing underwriter; 
(B) the public offering is either a firmly underwritten offering or a "minimum 
maximum" offering. Options or warrants may be issued in a "minimum maximum" 
public offering only if: 
(i) the options or warrants are issued on a pro rata basis; and 
(ii) the "minimum" amount of securities has been sold; 
(C) the exercise price of the warrants must be at least equal to the public 
offering price; 
(D) the number of shares covered by underwriter's options or warrants does not 
exceed 10% of the shares of common stock actually sold in the public offering; 
(E) the life of the options or warrants does not exceed a period of five years 
from the completion date of the public offering; 
(F) the options or warrants are not exercisable for the first year after the 
completion date of the public offering; 
(G) options or warrants may not be transferred, except: 
(i) to partners of the underwriter, if the underwriter is a partnership; 
(ii) to officers and employees of the underwriter, who are also shareholders of 
the underwriter, if the underwriter is a corporation; or 
(iii) by will, pursuant to the laws of descent and distribution, or by the 
operation of law; and 
(H) the warrant agreement may not allow for a reduction in the exercise price of 
the options or warrants resulting from the subsequent issuance of shares by the 
issuer except where such issuances are pursuant to a: 
(i) stock dividend or stock split; or 
(ii) merger, consolidation, reclassification, reorganization, recapitalization, 
or sale of assets; 
(5) right of first refusal, which shall be valued at 1.0% of the public offering 
or the amount payable to the underwriter if the issuer terminates the right of 
first refusal; 
(6) solicitation fees payable to the underwriter, which shall be valued at the 
lesser of actual cost or 1.0% of the public offering if the fees are payable 
within one year of the offering; 
(7) financial consulting or financial advisory agreements with an underwriter or 
any other similar type of agreement or fees, however designated, which shall be 
valued at actual cost; 
(8) underwriter's due diligence expenses; 
(9) payments made either six months prior to or required to be made six months 
following the public offering to investor relations firms designated by the 
underwriter; and 
(10) other underwriting expenses incurred in connection with the public offering 
of securities as determined by the Securities Commissioner.
(d) Underwriting expenses shall not include financial consulting or financial 
advisory agreements with the underwriter payable at the time the services are 
rendered provided that such agreement was entered into at least 12 months before 
the registration is filed with the Securities and Exchange Commission or with 
the Securities Commissioner for applications not seeking registration with the 
Securities and Exchange Commission. 
(e) An offer or sale of securities may be disallowed by the Securities 
Commissioner if the direct and indirect selling expenses of the offering exceed 
20% of the gross proceeds from the public offering. 
(f) Selling expenses may include but are not limited to: 
(1) commissions to underwriters or broker dealers; 
(2) non accountable fees or expenses to be paid to the underwriters or broker 
dealers; 
(3) auditors' and accountants' fees; 
(4) legal fees; 
(5) the cost of printing prospectuses, circulars, and other documents required 
to comply with securities laws and regulations; 
(6) charges of transfer agents, registrars, indenture trustees, escrow holders, 
depositories, engineers, appraisers, and other experts;
(7) the cost of authorizing and preparing the securities, including issue taxes 
and stamps; 
(8) financial consulting or financial advisory agreements with an underwriter or 
any similar type agreement or fees, however designated, which shall be valued at 
actual cost excluding financial and consulting agreements, which is entered into 
at least 12 months before the registration is filed with the Securities and 
Exchange Commission or with the Securities Commissioner for applications not 
seeking registration with the Securities and Exchange Commission; 
(9) payments made either six months prior to or required to be made six months 
following the public offering to investor relations firms designated by the 
underwriter; and 
(10) other cash expenses incurred in connection with the public offering of 
securities as determined by the Securities Commissioner.
(g) A public offering or sale of securities, that includes selling security 
holders offering more than 10% of the securities to be sold in the public 
offering, may be disallowed by the Securities Commissioner unless:
(1) selling security holders offering or selling more than 10% but less than 50% 
of the securities to be sold in the public offering pay a pro rata share of all 
selling expenses of the public offering, excluding the legal and accounting 
expenses of the public offering; or 
(2) selling security holders offering more than 50% of the securities to be sold 
in the offering pay a pro rata share of all selling expenses of the public 
offering; and 
(3) the prospectus or offering document discloses the amount of selling expenses 
which the selling security holders will pay. 
(h) With the exception of underwriter's or broker-dealer's compensation, the 
provisions of subsection (g)(1), (2), and (3), shall not apply if the selling 
security holders have a written agreement with the issuer, that was entered into 
in an arm's-length transaction, whereby the issuer has agreed to pay all of the 
selling security holders' selling expenses. 

sec.113.23. Unsound Financial Condition. 
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) An issuer shall be deemed to be in unsound financial condition if the 
financial statements contain: 
(1) a footnote to the financial statements or an explanatory paragraph in the 
independent auditor's report regarding the issuer's ability to continue as a 
going concern; and 
(2) including, but not limited to, one of the following:
(A) an accumulated deficit; 
(B) negative shareholder equity; 
(C) an inability to satisfy current obligations as they come due; or 
(D) negative cash flow (or revenues not being generated by operations). 
(c) If the application for registration contains audited financial statements 
which were issued more than 90 days from the date of application, the 
accompanying interim unaudited financial statements are subject to the scrutiny 
of this section. 
(d) An application for registration by an issuer in unsound financial condition 
may be denied by the Securities Commissioner. 
(e) An application for registration by an issuer in unsound financial condition 
may be registered by the Securities Commissioner if the chief financial officer 
of the issuer provides pro forma financial data acceptable to the Commissioner 
that: 
(1) demonstrate that the issuer's financial condition will improve either as a 
direct result of the offering proceeds, or as a proximate result of the offering 
proceeds (as part of a long term business plan); 
(2) demonstrate when profitability is expected to occur; and 
(3) are supported with documentation of and the bases for any assumptions. 
(f) In addition to satisfying the requirements of subsection (e) of this 
section, the issuer must: 
(1) include prominent disclosure that the issuer is considered to be in unsound 
financial condition, and that persons should not invest unless they can afford 
to lose their entire investment; and 
(2) disclose the following risk factors, as applicable:
(A) the presence of an explanatory paragraph in the independent auditor's 
report; 
(B) if the issuer has not been generating revenues from operations, the means by 
which the issuer has been financing its operations; 
(C) the amount of any accumulated deficit; 
(D) the presence and amount of any negative shareholder's equity; and 
(E) the need for future financing. 
(g) Nothing in this section shall prevent the Securities Commissioner from 
imposing net worth standards or limiting the sales of securities to accredited 
investors in lieu of, or in addition to, the requirements of subsections (e) and 
(f) of this section. The imposition of these minimal net worth standards does 
not relieve a dealer from the responsibility of making an independent 
determination of suitability required under industry standards. Unless the 
Commissioner determines that the risks associated with the offering would 
require lower standards, public investors shall have the following: 
(1) a minimum annual gross income of $65,000 and a minimum net worth of $65,000, 
exclusive of automobile, home, and home furnishings; or 
(2) a minimum net worth of $150,000, exclusive of automobile, home, and home 
furnishings. 

sec.113.24. Unequal Voting Rights.
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) The offer and sale of securities that have less than equal voting rights may 
be deemed to be inconsistent with public investor protection and against public 
policy by the Securities Commissioner unless: 
(1) the securities are given preferential treatment as to dividends and 
liquidation or the less than equal voting rights are justified to the 
satisfaction of the Commissioner; and 
(2) the terms of the voting rights are prominently disclosed on the cover page 
of the issuer's offering circular or prospectus. 

sec.113.25. Debt Securities. 
(a) The State Securities Board has determined that this section is consistent 
with public investor protection and is in the public interest. Nothing shall 
prevent the Securities Commissioner from applying different standards than those 
contained in this section. 
(b) The following words and terms, when used in this section, shall have the 
following meanings, unless the context clearly indicates otherwise.
(1) Adjusted cash flow - The issuer's cash flow adjusted on a pro forma basis to 
reflect: 
(A) the elimination of interest and fees on debt or debt securities and of cash 
dividends on preferred stock that are to be retired with the proceeds derived 
from the offering; 
(B) the effect of any acquisitions or capital expenditures that were made by the 
issuer after its last fiscal year, or which are proposed or required for the 
current fiscal year, which materially affect the issuer's cash flow; 
(C) the effect of interest and fees on debt or debt securities or cash dividends 
paid after the issuer's last fiscal year; 
(D) the effect of any interest and fees on debt securities and of cash dividends 
on preferred stock or common stock that were issued during the issuer's last 
fiscal year, but which were outstanding for only a portion of such fiscal year, 
as if such debt, debt securities, preferred stock, or common stock had been 
outstanding for the entire fiscal year;
(E) the effect of imputed or deferred charges of zero coupon debt or debt 
securities for the issuer's last fiscal year and any additional charges on such 
debt or debt securities issued after the issuer's last fiscal year; 
(F) the effect of accrued dividends on preferred stock for the issuer's last 
fiscal year and any additional dividends on such preferred stock issued after 
the issuer's last fiscal year; and 
(G) the effect of any other material changes to the issuer's future cash flow. 
(2) Affiliate - A person who, directly or indirectly, controls, is controlled 
by, or is under common control with the person specified herein. 
(3) Associate - When used to indicate a relationship with a person, includes: 
(A) corporations or legal entities, other than the issuer or majority owned 
subsidiaries of the issuer, of which a person is an officer, director, partner, 
or a direct or indirect, legal or beneficial owner of 5.0% or more of any class 
of equity securities; 
(B) trusts or other estates in which a person has a substantial beneficial 
interest or for which a person serves as a trustee or in a similar capacity; and 
(C) a person's spouse and relatives, by blood or by marriage, if the person is a 
promoter of the issuer, its subsidiaries, its affiliates, or its parent. 
(4) Cash flow - The issuer's after tax earnings that are derived from its normal 
operations, exclusive of extraordinary and nonrecurring items, less interest and 
dividends, plus certain noncash charges against earnings such as depreciation, 
depletion, and amortization, determined according to generally accepted 
accounting principles, consistently applied.
(5) Control - The power to direct or influence the direction of the management 
or policies of a person, directly or indirectly, through the ownership of voting 
securities, by contract, or otherwise. 
(6) Equity securities - Includes shares of common stock or similar securities 
and convertible securities, warrants, options, or rights that may be converted 
into, or exercised to purchase, shares of common stock or similar securities. 
(7) Person - An individual, a corporation, a limited liability company, a 
partnership, an association, a joint stock company, a trust, an unincorporated 
organization, a government or a political subdivision of a government, or any 
other legal entity. 
(8) Promoter - May include: 
(A) a person who, alone or in conjunction with one or more persons, directly or 
indirectly, took the initiative in founding or organizing the issuer or controls 
the issuer; 
(B) a person who, directly or indirectly, receives, as consideration for 
services and/or property rendered, 5.0% or more of any class of the issuer's 
equity securities or 5.0% or more of the proceeds from the sale of any class of 
the issuer's equity securities. A person, who receives securities or proceeds 
solely as underwriting compensation, is excluded from the definition of promoter 
if that person falls outside of the definitions of subparagraph (A), (C), (D), 
or (E) of this paragraph; 
(C) a person who is an officer or director of the issuer;
(D) a person who legally or beneficially, directly or indirectly, owns 5.0% or 
more of any class of the issuer's equity securities ("5.0% shareholder") if that 
person was in control of the issuer at the time of acquiring 5.0% or more of any 
class of the issuer's equity securities or if that person is in control of the 
issuer at the time of the public offering of the issuer's equity securities; or 
(E) a person who is an affiliate or an associate of a person specified in 
subparagraph (A), (B), (C), or (D) of this paragraph. 
(c) A public offering of debt securities may be disallowed by the Securities 
Commissioner if the issuer's adjusted cash flow for the last fiscal year or its 
average adjusted cash flow for the last three fiscal years prior to the public 
offering was insufficient to cover its fixed charges, meet its debt obligations 
as they became due, and service the debt securities being offered. 
(d) Notwithstanding subsection (b)(1)(F) of this section, accrued dividends of 
cumulative preferred stock having a stated interest rate may be excluded from 
adjusted cash flow at the discretion of the Securities Commissioner. 
(e) The Securities Commissioner, in his or her discretion, may choose to not 
apply subsection (c) of this section to public offerings of convertible 
securities that are superior in right of payment of interest and liquidation 
proceeds to any convertible debt that is or may be legally or beneficially, 
directly or indirectly, owned by promoters. The risks of failure to meet debt 
service obligations and the equity characteristics of such securities must be 
disclosed in the prospectus. An offering of such securities may be reviewed 
using guidelines for equity offerings. 
(f) Unless the Securities Commissioner permits otherwise, public offerings of 
debt securities shall be offered and sold pursuant to a trust indenture 
("indenture") which adequately protects the rights of the purchasers. Some of 
these protections are: 
(1) the indenture shall comply with the provisions of the Trust Indenture Act of 
1939. This shall be disclosed in the offering document;
(2) the events of default of the indenture shall be disclosed in the offering 
document; 
(3) the trustee shall be provided with adequate reports, including any 
compliance reports from independent auditors, to allow the trustee to ensure 
compliance with the indenture; 
(4) neither the trustee nor its promoters may be major creditors of the issuer 
or its affiliates; 
(5) the indenture shall provide that upon any consolidation, merger, 
recapitalization, reorganization, pledge foreclosure, equity or share exchange, 
conveyance or transfer of the properties and assets of the issuer substantially 
as an entirety, or any other transaction having a substantially equivalent 
effect, the successor person shall expressly assume the payment obligations on 
the debt securities and the performance of the covenants of the indenture; and 
(6) the indenture shall provide that interest will accrue and be paid to the 
date(s) of redemption or conversion of the debt securities.
(g) If the issuer's cash flow is subject to cyclical fluctuations or if the 
Securities Commissioner deems it necessary for investor protection, the 
Commissioner may require that the issuer establish a sinking fund or redemption 
requirements. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 4, 1998.
TRD-9812322
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 305-8300

CHAPTER 139. Exemptions by Rule of Order
7 TAC sec.139.19
The State Securities Board proposes an amendment to sec.139.19, concerning the 
accredited investor exemption, to identify the uniform form required to be 
filed. 
Micheal Northcutt, Director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
Mr. Northcutt also has determined that for each year of the first five years the 
rule is in effect the public benefit anticipated as a result of enforcing the 
rule will be identify the uniform form required so that persons utilizing the 
exemption can easily ascertain the filing required in order to claim the 
exemption. There will be no effect on small businesses. There is no anticipated 
economic cost to persons who are required to comply with the rule as proposed. 
Comments on the proposal may be submitted to David Weaver, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
The amendment is proposed under Texas Civil Statutes, Articles 581-28-1 and 5.T. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the Texas 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. Section 5.T provides that the Board may prescribe new 
exemptions by rule. 
The proposed amendment affects Texas Civil Statutes, Article 581-7. 

sec.139.19. Accredited Investor Exemption. 
Any offer or sale of a security by an issuer in a transaction that meets the 
requirements of this section is exempted from the securities registration 
requirements of the Texas Securities Act and exempted from the filing 
requirements contained in the Texas Securities Act, sec.22.A, and Chapter 139 of 
this title (relating to Guidelines for Regulation of Offers). 
(1)-(8) (No change.) 
(9) Filing. The issuer shall file with the Securities Commissioner a notice of 
transaction <nl>on the Model Accredited Investor Exemption Uniform Notice of 
Transaction form<ol>, a consent to service of process, and a copy of the general 
announcement within 15 days after the first sale in this state. 
(10) (No change.) 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 4, 1998.
TRD-9812323
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 305-8300

TITLE 16. ECONOMIC REGULATION
PART VIII. Texas Racing Commission
CHAPTER 319.Veterinary Practices and Drug Testing
The Texas Racing Commission proposes amendments to sec.319.1- sec.319.5, 
sec.319.8, sec.319.10, sec.319.11, sec.319.13, sec.319.14, sec.319.101, 
sec.319.105-sec.319.111, sec.319.201, sec.319.204, sec.319.302, sec.319.303, 
sec.319.331, sec.319.332, sec.319.334-sec.319.336, sec.319.361-sec.319.363 and 
sec.319.391, new sec.319.304 and the repeal of sec.319.103, sec.319.304,- 
sec.319.309 and sec.319.365 relating to veterinary practices and drug testing in 
conjunction with its review of this chapter pursuant to the requirements of the 
Appropriations Act of 1997, House Bill 1, Article IX, Section 167. In accordance 
with Section 167, the Commission has reviewed this chapter and has determined 
that it should be readopted, in part, with changes to the above-referenced 
sections. The Commission finds that the reasons for this chapter with the 
proposed changes, continue to exist. The Commission has determined that 
sec.319.103, sec.319.304-sec.319.309 and sec.319.365 should be repealed because 
the reasons for the sections no longer exist. 
The proposed amendments conform and clarify the rules as to current requirements 
and procedures. Amendments have been proposed where the rule does not conform to 
current law or current agency or industry practice. Rules are amended or deleted 
where there is redundancy with other rules or statutes. Responsibilities are 
clarified and made consistent throughout the chapter. Definitions are added to 
sec.319.1 for clarity and consistency. Amendments are made to clarify when a 
section applies to both greyhound and horse racetracks as in sec.319.4.
The repeal of sec.319.103 is based on the fact that all the provisions in that 
section can be found in other rules. Sections 319.304 through 319.309 are being 
repealed and consolidated into a new sec.319.304. Section 319.365 is being 
repealed because it is redundant with other rules and statutes. 
In addition, a memorandum which outlines each change to this chapter can be 
obtained from Roselyn Marcus, General Counsel for the Texas Racing Commission, 
P.O. Box 12080, Austin, Texas 78711-2080, or telephone number (512) 833-6699. 
Roselyn Marcus, General Counsel for the Texas Racing Commission, has determined 
that for the first five-year period the rules as amended are in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing the proposal. 
Ms. Marcus has also determined that for each of the first five years the rules 
as amended are in effect the public benefit anticipated as a result of enforcing 
the proposal will be that requirements and standards will be clear to the public 
and licensees. The public and licensees will know who is responsible for 
different aspects of the chapter. There will be consistency between the law, 
agency and industry practice and the rules. The changes will ensure that the 
highest integrity in pari-mutuel racing is maintained and racing will be fair to 
all participants. The proposal has no effect on the state's agricultural, horse 
breeding, horse training, greyhound breeding, or greyhound training industries. 
Comments on the proposal may be submitted on or before September 20, 1998, to 
Roselyn Marcus, General Counsel for the Texas Racing Commission, P.O. Box 12080, 
Austin, Texas 78711-2080. 

SUBCHAPTER A.General Provisions
16 TAC sec.sec.319.1-319.5, 319.8, 319.10, 319.11, 319.13, 319.14
The amendments are proposed under the Texas Civil Statutes, Article 179e, 
sec.3.02, which authorize the Commission to adopt rules for conducting racing 
with wagering and for administering the Texas Racing Act; sec.3.07, which 
authorizes the Commission to medication and drug testing on race animals; 
sec.3.16, which authorizes the Commission to adopt rules prohibiting the illegal 
influencing of the outcome of a pari-mutuel horse or greyhound race, including 
use of prohibited substances; sec.6.06, which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks; sec.14.07, which 
makes it a criminal act for a person to hinder another who is exercising its 
power of entry under the Act or Commission rule; sec.14.10, which makes it a 
criminal offense for a person to possess a prohibited device or substance on a 
racetrack facility; and sec.14.18 which grants the Commission the power of 
search and seizure subject to the limitations provided in Commission adopted 
rules. 
The proposal implements Texas Civil Statutes, Article 179e. 

sec.319.1.Purpose <nl>and Definitions<ol>.
<nl>(a)<ol> The purpose of this chapter is to protect the integrity of horse and 
greyhound racing, to ensure the health of race animals, and to safeguard the 
interests of the public and the participants in racing through the prohibition 
and control of all prohibited drugs, chemicals, and other substances. 
<nl>(b)<ol> <nl>For purposes of this chapter, "prohibited drugs, chemicals, or 
other substances" means: <ol>
<nl>(1)<ol> <nl>any stimulants, depressants, tranquilizers, local anesthetics, 
drugs, other drug metabolites which could affect the health or performance of a 
race animal, however minimal, except as expressly permitted by this chapter; 
<ol>
<nl>(2)<ol> <nl>a drug permitted by this chapter in excess of the maximum or 
other restrictions in this chapter; and<ol>
<nl>(3)<ol> <nl> drug or substance, regardless of how harmless or innocuous it 
might be, which interferes with the detection of stimulants, depressants, 
tranquilizers, local anesthetics, drugs, or drug metabolites which could affect 
the health or performance of a race animal, however minimal, or quantitation of 
drugs permitted by this chapter. <ol>

sec.319.2.Treatment Restricted.
(a) (No change.) 
(b) This section does not apply to the administration of: 
(1) (No change.)
(2) a noninjectable substance on the direction or by prescription of a 
<nl>licensed<ol> veterinarian. 

sec.319.3.Medication Restricted.
<nl>(a)<ol> <nl>Except as otherwise provided by this section, a horse or 
greyhound participating in a race may not carry in its body a prohibited drug, 
chemical, or other substance.<ol> 
[(a) For purposes of this chapter, "prohibited drugs, chemicals, or other 
substances" means:] 
[(1) any stimulants, depressants, tranquilizers, local anesthetics, drugs, or 
drug metabolites which could affect the performance of a race animal, except as 
expressly permitted by this chapter;] 
[(2) a drug permitted by this chapter in excess of the maximum or other 
restrictions in this chapter; and] 
[(3) except as otherwise provided by this section, a drug or substance, 
regardless of how harmless or innocuous it might be, which interferes with the 
detection of stimulants, depressants, tranquilizers, local anesthetics, drugs, 
or drug metabolites which could affect the performance of a race animal or 
quantitation of drugs permitted by this chapter.] 
(b) (No change.) 
[(c) Regarding trace levels of drugs of possible dietary origin, the maximum 
permissible urine concentration in horses is as follows:] 
[(1) of theobromine, 2.0 micrograms per milliliter;
[(2) for arsenic, 0.2 micrograms per milliliter; and] 
[(3) for salicylic acid, 750 micrograms per milliliter.] 
<nl>(c)<ol> [(d)] Furosemide (Lasix) at or below the <nl>approved<ol> 
[commission-established] tolerance level in a horse that has been admitted to 
the furosemide (Lasix) program is permissible. The <nl>approved<ol> [commission- 
established] tolerance level shall be published on the list of therapeutic drugs 
<nl>posted under subsection (d) of this section<ol>. 
<nl>(d)<ol> Trace levels of drugs which are therapeutic and necessary for 
treatment of illness or injury in race animals are permissible, provided: 
(1) the therapeutic drug is on a written list approved by the <nl>executive 
secretary<ol> [commission], maintained by the commission veterinarian, and 
posted in the commission veterinarians' office; and 
(2) the maximum permissible urine or blood concentration of the drug does not 
exceed the published limit, if any, on the written list of therapeutic drugs. 
[(e) Except as otherwise provided by this section, a horse or greyhound 
participating in a race may not carry in its body a prohibited drug, chemical, 
or other substance.] 
<nl>(e)<ol> [(f)] Except as otherwise provided by this chapter, a person may not 
administer or cause to be administered to a horse or greyhound a prohibited 
drug, chemical, or other substance, [including any restricted medication 
pursuant to subsection (d) of this section,] by injection, by oral or topical 
administration, by rectal infusion or suppository, by nasogastric intubation, or 
by inhalation, <nl>and any other means<ol> during the 24-hour period before the 
post time for the race in which the animal is entered. 
<nl>(f)<ol> [(g)] A positive finding by a chemist of a prohibited drug, [a] 
chemical, or other substance in a test specimen of a horse or greyhound 
collected before or after the running of a race, subject to the rules of the 
commission relating to split specimens, is prima facie evidence that the 
prohibited drug, chemical, or other substance was administered to the animal and 
was carried in the body of the animal while participating in a race. 

sec.319.4.Veterinarians.
(a) (No change.) 
(b) The commission shall <nl>employ<ol> [appoint] at least one veterinarian at 
each greyhound racetrack and at least two veterinarians at each horse racetrack. 
(c)-(d) (No change.) 
[(e) The commission and association veterinarians must be licensed by the Texas 
State Board of Veterinary Medical Examiners.
<nl>(e)<ol> [(f)] The commission veterinarians shall advise the stewards <nl>or 
racing judges<ol> on all veterinary matters and shall: 
(1) maintain the veterinarian's list as required by these rules; 
(2) conduct <nl>pre-race<ol> [racing soundness] examinations as required by 
these rules; 
[(3) inspect race animals in the pre-race holding area or at weighing-in time 
and in the paddock as required by these rules;] 
<nl>(3)<ol> [(4)] attend to the race animals <nl> in the paddock, on the 
track,<ol> at the starting gate, and during the running of the race at a horse 
racetrack; 
<nl>(4)<ol> [(5)] supervise the operation of the test barn or test area and the 
collection of specimens for testing; 
<nl>(5)<ol> [(6)] maintain <nl>the<ol> [a] list[, approved by the commission,] 
of permissible trace levels of drugs which are therapeutic and necessary for the 
treatment of illness or injury in race animals; 
<nl>(6)<ol> [(7)] conduct <nl>stable area and<ol> kennel inspections to ensure 
that <nl>race animals<ol> [greyhounds] are housed in a safe, humane, and 
sanitary environment;
<nl>(7)<ol> [(8)] maintain a database of all racing-related injuries incurred at 
the track; and 
<nl>(8)<ol> [(9)] perform any other duties imposed on the commission 
veterinarian by these rules, or the commission<nl>, or the executive 
secretary<ol>. 
<nl>(f)<ol> [(g)] An association veterinarian shall: 
(1) be present at each official schooling and each official race performance; 
(2) provide emergency care to greyhounds acutely injured or stressed while at 
the racetrack; <nl>and<ol> 
[(3) maintain vaccination records required by these rules;] 
[(4) perform entrance examinations on greyhounds as required by these rules; 
and] 
<nl>(3)<ol> [(5)] perform any other duties imposed on the association 
veterinarian by these rules, [or] the commission<nl>, or the executive 
secretary<ol>. 
[(h) During the term of a commission veterinarian's appointment, the 
veterinarian may not perform veterinary services on a race animal owned or 
trained by a licensee of the commission, except on an emergency basis.] 
<nl>(g)<ol> [(i)] During the term of an association veterinarian's employment, 
it is not a conflict of interest for the veterinarian to: 
(1) dispense or administer medications or biologicals sold only by veterinary 
suppliers to licensed veterinarians; 
(2) provide emergency medical treatment to injured greyhounds at no cost; or 
(3) charge a fee for veterinary services performed, other than emergency 
services. 

sec.319.5.Report <nl>of Treatment<ol> by Veterinarians.
(a) <nl>Veterinarians who treat race animals shall maintain reports of the 
treatment in strict compliance with the requirements of the Texas State Board of 
Veterinary Medical Examiners. Veterinarians shall make the report available to a 
steward or judge within 24 hours of a request.<ol> [Except as otherwise provided 
by this section, not later than 24 hours after a veterinarian treats a race 
animal that is on association grounds, the veterinarian shall report the 
treatment to the commission veterinarian.
[(b) A report under subsection (a) of this section must be made on a form 
prescribed by the commission. The report must contain:] 
[(1) the name of the race animal;] 
[(2) the name of the trainer or kennel owner;] 
[(3) the date and time of treatment;
[(4) the veterinarian's diagnosis;] 
[(5) a description of the treatment, including the name and amounts of any 
medication, drug, chemical, or other substance administered to or prescribed or 
dispensed for the animal; and] 
[(6) the signature of the veterinarian.
<nl>(b)<ol> [(c)] A report <nl>of treatment provided to the stewards or racing 
judges pursuant to<ol> [made under] subsection (a) of this section is 
confidential and its contents may not be disclosed except in a proceeding before 
the stewards or racing judges <nl> or the commission<ol>. 
[(d) A veterinarian who administers furosemide (Lasix) to a horse that has been 
admitted to the furosemide (Lasix) program shall report the administration on a 
form prescribed by the commission. A report made under this subsection must be 
filed with the commission veterinarian not later than one hour before post time 
for the first race of that day.]

sec.319.8.Submission Required.
On request by the <nl>executive secretary<ol> [commission or a designee of the 
commission], the owner or trainer of a race animal shall: 
(1)-(2) (No change.)

sec.319.10.Devices and Substances Prohibited.
(a) Except as otherwise provided by this section, a person in a restricted area 
on association grounds during a live race meeting may not possess: 
(1) an injectable container of a prohibited drug, chemical, or other substance[, 
as that term is defined by sec.319.3 of this title (relating to Medication 
Restricted)]; or 
(2) (No change.)
(b) (No change.) 
(c) This section does not apply to a veterinarian licensed by the commission or 
a veterinary technician <nl>licensed by the commission <ol> acting under the 
direct supervision of a veterinarian licensed by the commission. 
(d) (No change.) 

sec.319.11.Powers of Inspection, Examination, and Search and Seizure.
(a) A <nl>peace officer, including a peace officer commissioned by<ol> [member 
or employee of] the commission, <nl>or<ol> [a steward or racing judge, an 
officer of an association,] a commissioned officer of the Department of Public 
Safety who is assigned to work on racing investigations[, or another person 
authorized or designated by any such person] may enter an office, a racetrack, 
any area on association grounds, or any similar area or other place of business 
of an association at any time to inspect, examine, or search an individual's 
person and possessions in that area and to seize any contraband or other item 
that is found, which may be evidence of a rule violation or a criminal offense. 
<nl>A search of dormitory rooms where participants of racing actually reside 
will be conducted pursuant to a validly obtained warrant to search, or without a 
warrant if consent is obtained or exigent circumstances exist.<ol> 
(b) <nl>A person conducting a search authorized by this section may obtain the 
assistance of a commission employee or an employee of another local, state, or 
federal governmental entity.<ol> [Any peace office may assist a person acting 
under the authority of this section.] 
(c) By applying for, accepting, or holding a license under the Act, an 
individual licensee consents to an inspection, examination, or search conducted 
under this section of the licensee's person and possessions while on premises 
covered by this section and to the seizure of any contraband or other item that 
is found which may be evidence of a rule violation or a criminal offense. 
Consent described in this subsection [is not]:
(1) <nl>is not<ol> effective for a search outside the premises covered by this 
section; 
(2) <nl>is not<ol> effective for a search conducted at a time when no valid 
license was in effect, unless at the time of the search the licensee who was 
searched claimed the existence of a valid license as authority to enter or 
remain in an area covered by this section; 
(3) <nl>is not<ol> limited in effect to a pre-race or post-race search or a 
search on a race [or meeting] day; <nl> and<ol> [or] 
(4) <nl>is not<ol> limited in effect to a search based on reasonable cause, 
reasonable suspicion, reasonable grounds, probable cause, or any similar legal 
standard. 
(d) By applying for, accepting, or holding a temporary pass to enter or remain 
on any restricted area of association grounds, an individual who is not a 
licensee consents to a search conducted under this section of the individual's 
person or possessions in that area and to the seizure of any contraband or other 
item that is found which may be evidence of a rule violation or a criminal 
offense. Consent described in this subsection [is not]: 
(1) <nl>is not<ol> effective for a search outside the restricted area covered by 
this subsection; 
(2) <nl>is not<ol> effective for a search conducted at a time when no temporary 
pass was in effect, unless at the time of the search the individual who was 
searched claimed the existence of a valid pass as authority to enter or remain 
in the restricted area covered by this subsection; 
(3) <nl>is not<ol> limited in effect to a pre-race or post-race search or a 
search on a race [or meeting] day; <nl> and<ol> [or] 
(4) <nl>is not<ol> limited in effect to a search based on reasonable cause, 
reasonable suspicion, reasonable grounds, probable cause, or any similar legal 
standard. 
(e) A licensee, an officer, employee, or agent of an association, or holder of a 
temporary pass may not refuse or deny a request by a person acting under the 
authority of this section to enter, inspect, examine, or search any property 
that is <nl>covered by this section<ol> [within an area on association grounds] 
and to seize any contraband or other item that is found which may be evidence of 
a rule violation or a criminal offense. 
(f) An association shall post a sign at each entrance to, but outside of, any 
restricted area of association grounds that gives conspicuous notice of at least 
the following: 
(1)-(2) (No change.)
(3) the [felony] criminal consequences for refusing or denying a request by a 
person acting under the authority of this section to inspect, examine, or search 
any property that is within a restricted area and to seize any contraband or 
other item that is found which may be evidence of a rule violation or a criminal 
offense; and 
(4) (No change.)

sec.319.13.Disposable Syringes.
All practicing veterinarians shall use single-use disposable <nl> needles 
and<ol> syringes while on association grounds and shall dispose of the <nl>used 
needles and<ol> syringes off the association grounds. The association 
veterinarian shall dispose of <nl>used needles and<ol> syringes in a manner 
approved by the commission veterinarian.

sec.319.14.Possession of Controlled Substances.
(a) A veterinarian may not possess on association grounds a controlled 
substance, as defined by the Texas Controlled Substances Act, Health and Safety 
Code, Chapter 481, <nl>unless the controlled substance is on an approved list 
developed by the executive secretary. The approved list of controlled substances 
shall be posted in the commission veterinarian's office and in a prominent place 
that will ensure access by veterinarians and other interested persons. A 
veterinarian must obtain approval from the commission veterinarian to possess on 
association grounds a controlled substance which is not on the approved 
list.<ol> [without the written approval of the chief veterinarian for the 
commission on a form prescribed by the commission.
(b) The <nl>executive secretary<ol> [commission veterinarian] may not approve 
the possession of a controlled substance <nl>which is not on the approved 
list<ol> unless the person requesting approval submits documentation in 
recognized veterinary journals or by recognized veterinary experts that the 
substance has a beneficial, therapeutic application for a horse or greyhound in 
race training. 
(c) (No change.) 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812586
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

SUBCHAPTER B.Treatment of Horses
16 TAC sec.sec.319.101, 319.105-319.111
The amendments are proposed under the Texas Civil Statutes, Article 179e, 
sec.3.02, which authorize the Commission to adopt rules for conducting racing 
with wagering and for administering the Texas Racing Act; sec.3.07, which 
authorizes the Commission to medication and drug testing on race animals; 
sec.3.16, which authorizes the Commission to adopt rules prohibiting the illegal 
influencing of the outcome of a pari-mutuel horse or greyhound race, including 
use of prohibited substances; sec.6.06, which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks; sec.14.07, which 
makes it a criminal act for a person to hinder another who is exercising its 
power of entry under the Act or Commission rule; and sec.14.10, which makes it a 
criminal offense for a person to possess a prohibited device or substance on a 
racetrack facility. 
The proposal implements Texas Civil Statutes, Article 179e.

sec.319.101.<nl>Pre-Race<ol> [Racing Soundness] Examination.
(a) (No change.) 
(b) The examination may include <nl>any practice or procedure which the 
commission veterinarian considers necessary to determine the health and 
soundness of the horse for racing. The examination may be conducted at any time 
before the actual start of the race.<ol>[:] 
[(1) an inspection of the horse's eyes and legs;] 
[(2) a recording of the horse's temperature; and] 
[(3) an observation of the horse at rest and in motion.] 
[(c) The veterinarian conducting the examination shall make a written report of 
the results of the examination and file the report with the commission 
veterinarian. The report must be made on a form prescribed by the commission 
veterinarian.]

sec.319.105.Bandages.
On leaving the pre-race holding area to enter the paddock, a horse may not have 
any leg coverings other than <nl>leg coverings approved by the stewards.<ol> 
[bandages approved by the commission veterinarian.]

sec.319.106.Nerved Horses.
(a)-(c) (No change.) 
(d) A veterinarian who performs a palmar digital neurectomy on a horse located 
on association grounds shall report that fact to the commission veterinarian 
<nl>and to the racing secretary.<ol> [in accordance with sec.319.5 (relating to 
Report by Veterinarians).] 

sec.319.107.Altering Sex of Horse.
(a) A <nl>veterinarian<ol> [person] who alters the sex of a horse as recorded on 
the certificate of foal registration or eligibility certificate and that is 
scheduled to race in an association's race meeting shall report the alteration 
to [the racing secretary and] the horse identifier. 
(b) (No change.) 
[(c) A report made under this section must contain:] 
[(1) the name of the veterinarian who performed the alteration; and] 
[(2) the date of the alteration.] 
<nl>(c) <ol> [(d)] The horse identifier shall record the alteration on the 
official registration certificate and the horse identification record of the 
horse. 

sec.319.108.Postmortem Examination.
(a) The commission veterinarian <nl>may<ol> [shall] order a postmortem 
examination on <nl>any<ol> [each] horse that, while on an association's grounds, 
dies or suffers <nl>an injury <ol> [a breakdown] in training or in competition 
and is subsequently <nl> euthanized<ol> [destroyed]. The examination shall be 
conducted at a time and place acceptable to the commission veterinarian and to 
the extent reasonably necessary to determine the injury or sickness that 
resulted in the death or <nl> euthanization<ol> [breakdown] of the horse. 
(b) An examination required by this section must be conducted by a veterinarian 
licensed by the commission on the authority of the commission veterinarian 
<nl>or at a qualified laboratory approved by the commission veterinarian.<ol> 
The commission veterinarian shall either witness the examination or designate 
another <nl>person<ol> [veterinarian] to witness the examination. 
(c) Specimens may be obtained from <nl>a horse for which a postmortem 
examination has been ordered<ol> [the carcass on which a postmortem examination 
is conducted] and may be delivered for testing to an approved laboratory in 
accordance with Subchapter D of this chapter (Relating to Drug Testing). When 
practical, specimens should be procured before euthanasia. 
<nl>(d)<ol> <nl>Specimens may be obtained from a horse that was euthanized but 
for which no postmortem examination was ordered and may be delivered for testing 
to an approved laboratory in accordance with Subchapter D of this chapter.<ol> 
<nl>(e)<ol> [(d)] The owner of a deceased horse shall pay any charges due the 
veterinarian or laboratory <nl>which<ol> [who] conducts the postmortem 
examination or subsequent laboratory tests. 
<nl>(f)<ol> [(e)] Not later than 72 hours after a postmortem examination, the 
<nl>person<ol> [veterinarian] who conducted the examination shall file a report 
of the examination with the commission veterinarian on a form prescribed by the 
commission. 
<nl>(g)<ol> [(f)] An owner or trainer who fails to comply with this section is 
subject to disciplinary action by the commission.

sec.319.109.Destruction of Horses.
(a) If a horse becomes disabled on the racetrack, the rider shall dismount and 
unsaddle the horse <nl>as soon as possible.<ol> [without passing the stands.] 
(b) (No change.) 
(c) The commission veterinarian may order a horse to be <nl> euthanized<ol> 
[destroyed] if the veterinarian determines the horse is seriously injured to the 
extent that <nl>euthanasia<ol> [its destruction] is in the best <nl>and 
humane<ol> interests of the horse [and racing]. By accepting a license from the 
commission, an owner or trainer consents to the authority of the commission 
veterinarian under this subsection. 

sec.319.110.Health <nl>Certificate<ol> [Requirements].
To be admitted on to an association's grounds, a horse must have:
(1) a <nl>current<ol> negative test for equine infectious anemia conducted in 
accordance with rules of the Texas Animal Health Commission [in the twelve- 
month period preceding the horse's arrival]; and 
(2) (No change.) 

sec.319.111.Bleeders and Furosemide (Lasix) Program.
(a) (No change.) 
(b) Admission to Furosemide (Lasix) Program. 
(1) A horse that has been certified as a bleeder in this state may be admitted 
to the furosemide (Lasix) program. To be admitted to the furosemide (Lasix) 
program, the trainer of the horse must file a request for the horse's admission 
to the program before the horse <nl>starts<ol> [is entered] in its next race. 
(2) The trainer of a horse that was certified as a bleeder in another pari-
mutuel racing jurisdiction and who competed with furosemide (Lasix) in its most 
recent start out-of-state is required to request the horse's admission to the 
furosemide (Lasix) program. The trainer must provide documentation satisfactory 
to the commission veterinarian that the horse was certified as a bleeder in 
another jurisdiction. The request that the horse be admitted to the furosemide 
(Lasix) program must be filed before the horse <nl>starts <ol> [is entered] in 
its next race. 
(c) Administration of Furosemide (Lasix). Furosemide (Lasix) shall be 
administered to a horse in the furosemide (Lasix) program not later than four 
hours before the published post time for the race the horse is entered to run. 
The furosemide (Lasix) must be administered intravenously by a veterinarian 
licensed by the commission. The <nl>executive secretary<ol> [chief veterinarian] 
shall periodically publish the permissible blood levels of furosemide (Lasix) in 
post-race specimens and shall post the levels at each licensed racetrack. 
(d) (No change.) 
(e) Withdrawal from Furosemide (Lasix) Program. 
[(1) The chief veterinarian of the commission shall establish criteria for 
withdrawing a horse from the furosemide (Lasix) program and shall make those 
criteria available in the commission veterianian's office at each racetrack.] 
<nl>(1)<ol> [(2)] To withdraw a horse from the furosemide (Lasix) program, the 
trainer must apply to the commission veterinarian. The commission veterinarian 
<nl>may<ol> [shall] require a signed medical statement from the trainer's 
regular practicing veterinarian that it is in the horse's best interest to be 
withdrawn from the furosemide (Lasix) program. The commission veterinarian may 
also request <nl>any other additional information the commission veterinarian 
needs to justify removal of the horse from the furosemide (Lazix) program<ol> [a 
record of past performances, a workout without furosemide (Lasix), a blood test 
at the time of the workout to confirm the absence of furosemide (Lasix), or a 
post-workout endoscopic examination.] A withdrawal request and all accompanying 
information must be reviewed and <nl>a decision rendered<ol> [approved] by 
<nl>the<ol> [two] commission <nl>veterinarian<ol> [veterinarians] <nl>as soon as 
practicable<ol>. [The commission veterinarians must act on a withdrawal request 
no later than one week after the request is filed.] 
<nl>(2)<ol> [(3)] A horse in the furosemide (Lasix) program may not compete 
without furosemide (Lasix) until its withdrawal from the program has been 
approved by the commission veterinarians. Withdrawal from the furosemide (Lasix) 
program does not prohibit a horse from subsequent readmission to the program in 
accordance with this section. 
(f) Bleeders List. 
(1)-(2) (No change.) 
(3) Notwithstanding the foregoing, if after reviewing a report of a diagnosed 
EIPH event the commission veterinarian determines additional days on the 
veterinarian's list are essential to the health and safety of the horse, the 
commission veterinarian may extend the number of days the horse is on the 
veterinarian's list. The commission veterinarian shall record the medical 
reasons for the additional days. [for review by the chief veterinarian.] 
<nl>(g)<ol> <nl>Report by Veterinarian. A veterinarian who administers 
furosemide (Lasix) to a horse that has been admitted to the furosemide (Lasix) 
program shall report the administration on a form prescribed by the commission. 
A report made under this subsection must be filed with the commission 
veterinarian not later than one hour before post time for the first race of that 
day. <ol>
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812587
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

16 TAC sec.319.103
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas Racing 
Commission or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal of this section is proposed under the Texas Civil Statutes, Article 
179e, sec.3.02, which authorize the Commission to adopt rules for conducting 
racing with wagering and for administering the Texas Racing Act; sec.3.07, which 
authorizes the Commission to medication and drug testing on race animals; 
sec.3.16, which authorizes the Commission to adopt rules prohibiting the illegal 
influencing of the outcome of a pari-mutuel horse or greyhound race, including 
use of prohibited substances; sec.6.06, which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks; sec.14.07, which 
makes it a criminal act for a person to hinder another who is exercising its 
power of entry under the Act or Commission rule; and sec.14.10, which makes it a 
criminal offense for a person to possess a prohibited device or substance on a 
racetrack facility.
The proposal implements Texas Civil Statutes, Article 179e.
sec.319.103.Examination in Pre-race Holding Area.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812594
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

SUBCHAPTER C.Treatment of Greyhounds
16 TAC sec.319.201, sec.319.204
The amendments are proposed under the Texas Civil Statutes, Article 179e, 
sec.3.02, which authorize the Commission to adopt rules for conducting racing 
with wagering and for administering the Texas Racing Act; sec.3.07, which 
authorizes the Commission to medication and drug testing on race animals; 
sec.3.16, which authorizes the Commission to adopt rules prohibiting the illegal 
influencing of the outcome of a pari-mutuel horse or greyhound race, including 
use of prohibited substances; sec.6.06, which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks; sec.14.07, which 
makes it a criminal act for a person to hinder another who is exercising its 
power of entry under the Act or Commission rule; and sec.14.10, which makes it a 
criminal offense for a person to possess a prohibited device or substance on a 
racetrack facility. 
The proposal implements Texas Civil Statutes, Article 179e.

sec.319.201.<nl>Pre-Race<ol> [Racing Soundness] Examination.
(a) The commission veterinarian shall <nl>examine each greyhound entered in a 
race on the day it is to race<ol> [observe each greyhound as it enters the 
lockout kennel and examine the greyhound when it enters the paddock before the 
race] to determine the greyhound's health and soundness for racing. 
(b) The examination may include <nl>any practice or procedure which the 
commission veterinarian considers necessary to be able to determine the health 
and soundness of the greyhound for racing. The examination may be conducted at 
any time before the actual start time of the race.<ol>[
[(1) an inspection of the greyhound's eyes and legs;] 
[(2) a recording of the greyhound's temperature; and] 
[(3) an observation of the greyhound at rest and in motion.] 

sec.319.204.Vaccination Requirements.
(a)-(b) (No change.) 
(c) The association may not permit a greyhound to enter its grounds unless the 
trainer or kennel owner of the greyhound provides <nl> to the association<ol> 
proof of the necessary vaccinations <nl>and has a health certificate, entry 
permit or veterinarian inspection pursuant to the rules of the Texas Animal 
Health Commission.<ol> [to the association.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812588
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

SUBCHAPTER D.Drug Testing
Division 1. General Provisions
16 TAC sec.319.302, sec.319.303
The amendments are proposed under the Texas Civil Statutes, Article 179e, 
sec.3.02, which authorize the Commission to adopt rules for conducting racing 
with wagering and for administering the Texas Racing Act; sec.3.07, which 
authorizes the Commission to medication and drug testing on race animals; 
sec.3.16, which authorizes the Commission to adopt rules prohibiting the illegal 
influencing of the outcome of a pari-mutuel horse or greyhound race, including 
use of prohibited substances; sec.6.06, which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks; sec.14.07, which 
makes it a criminal act for a person to hinder another who is exercising its 
power of entry under the Act or Commission rule; and sec.14.10, which makes it a 
criminal offense for a person to possess a prohibited device or substance on a 
racetrack facility. 
The proposal implements Texas Civil Statutes, Article 179e.

sec.319.302.Reasonable Diligence Required.
The owner, trainer, groom, or other person who has care and custody of a race 
animal shall guard each animal in his or her custody before the animal races in 
the manner and for the time necessary to prevent the administration of a 
<nl>prohibited<ol> drug, chemical, or other substance [prohibited by these 
rules]. 

sec.319.303.Tampering with Specimen.
(a) Except as otherwise provided by this section, a person may not tamper with 
or adulterate or attempt to tamper with or adulterate a specimen taken for 
testing under this <nl>chapter<ol> [subchapter
(b) (No change.) 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812589
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

16 TAC sec.sec.319.304-319.309
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas Racing 
Commission or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal of these sections are proposed under the Texas Civil Statutes, 
Article 179e, sec.3.02, which authorize the Commission to adopt rules for 
conducting racing with wagering and for administering the Texas Racing Act; 
sec.3.07, which authorizes the Commission to medication and drug testing on race 
animals; sec.3.16, which authorizes the Commission to adopt rules prohibiting 
the illegal influencing of the outcome of a pari-mutuel horse or greyhound race, 
including use of prohibited substances; sec.6.06, which authorize the Commission 
to adopt rules on all matters relating to the operation of racetracks; 
sec.14.07, which makes it a criminal act for a person to hinder another who is 
exercising its power of entry under the Act or Commission rule; and sec.14.10, 
which makes it a criminal offense for a person to possess a prohibited device or 
substance on a racetrack facility. 
The proposal implements Texas Civil Statutes, Article 179e. 
sec.319.304.Disqualification on Positive Test.
sec.319.305.Penalties.
sec.319.306.Effects of Rulings on Purse.
sec.319.307.Suspension.
sec.319.308.Exclusion.
sec.319.309.Commission Review.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812595
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

16 TAC sec.319.304
The new rule is proposed under the Texas Civil Statutes, Article 179e, sec.3.02, 
which authorize the Commission to adopt rules for conducting racing with 
wagering and for administering the Texas Racing Act; sec.3.07, which authorizes 
the Commission to medication and drug testing on race animals; sec.3.16, which 
authorizes the Commission to adopt rules prohibiting the illegal influencing of 
the outcome of a pari-mutuel horse or greyhound race, including use of 
prohibited substances, and sec.6.06 which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks.
The proposal implements Texas Civil Statutes, Article 179e.

sec.319.304.Penalties on Positive Test.
(a) On a finding by the stewards or racing judges that a test specimen from a 
race animal that participated in a race contains a prohibited drug, chemical, or 
other substance, the stewards or racing judges may: 
(1) disqualify the animal and order the purse redistributed; 
(2) declare the race animal ineligible to race for a period of time; and 
(3) impose penalties authorized by Chapter 307 of this title (relating to 
Practice and Procedure) on: 
(A) the animal's trainer or kennel owner; 
(B) any other person responsible for the care and custody of the animal; and 
(C) all individuals determined to have administered or to have attempted, 
caused, or conspired to administer the prohibited drug, chemical, or other 
substance; and. 
(b) The commission staff may promulgate a fine schedule with recommended 
disciplinary action for use by stewards, racing judges, and the commission in 
assessing penalties for various violations under this chapter.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812593
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

Division 2. Testing Procedures
16 TAC sec.sec.319.331, 319.332, 319.334-319.336
The amendments are proposed under the Texas Civil Statutes, Article 179e, 
sec.3.02, which authorize the Commission to adopt rules for conducting racing 
with wagering and for administering the Texas Racing Act; sec.3.07, which 
authorizes the Commission to medication and drug testing on race animals; 
sec.3.16, which authorizes the Commission to adopt rules prohibiting the illegal 
influencing of the outcome of a pari-mutuel horse or greyhound race, including 
use of prohibited substances; sec.6.06, which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks; sec.14.07, which 
makes it a criminal act for a person to hinder another who is exercising its 
power of entry under the Act or Commission rule; and sec.14.10, which makes it a 
criminal offense for a person to possess a prohibited device or substance on a 
racetrack facility. 
The proposal implements Texas Civil Statutes, Article 179e. 

sec.319.331.Equipment for Testing.
An association shall provide the equipment and supplies for collecting specimens 
and operating and maintaining the test barn or test area of the types and in the 
quantities prescribed by the <nl>executive secretary<ol> [commission or the 
commission veterinarian.]

sec.319.332.Procedure for Obtaining Specimens.
(a) The commission veterinarian shall directly supervise the persons and 
procedures for obtaining specimens for conducting tests under this chapter. The 
individuals hired by the association to be test barn technicians and the 
compensation to be paid to the technicians are subject to the approval of the 
<nl>commission<ol> [chief] veterinarian. 
(b)-(c) (No change.) 

sec.319.334.Delivery and Retention of Specimens.
The commission veterinarian shall ensure that a specimen that is to be sent to a 
testing laboratory is delivered to the laboratory in a timely manner and by a 
method that ensures the integrity of the specimen. The courier service to be 
used by an association and the contract with that courier service is subject to 
the approval of the <nl>executive secretary.<ol> [commission or a designee of 
the commission.] 

sec.319.335.Auditing and Approval of Testing Costs.
(a) All charges for conducting tests under this subchapter must be audited and 
approved by the <nl>executive secretary<ol> [commission] before payment. The 
<nl>executive secretary<ol> [commission] shall audit the charges as to the 
reasonableness of the charges in accordance with industry standards for 
comparable testing procedures. 
(b) (No change.) 
(c) On approval of the charges [by the commission], the <nl>executive 
secretary<ol> [commission] shall forward a copy of the charges to the 
association for which the tests were conducted.

sec.319.336.Payment of Testing Costs.
(a)-(b) (No change.) 
(c) Accounting and Payment of Remainder. 
(1) (No change.)
(2) The <nl>executive secretary<ol> [commission] will review the accounting 
submitted by the association. If the <nl> executive secretary<ol> [commission] 
determines the <nl>accounting <ol> [account] is in error, the <nl>executive 
secretary<ol> [commission] may adjust the amount of outstanding tickets and 
either demand payment of the additional amounts owed or reimburse the 
association for the excess amount paid to the commission. 
(d) (No change.) 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812590
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

Division 3. Provisions for Horses
16 TAC sec.sec.319.361-319.363
The amendments are proposed under the Texas Civil Statutes, Article 179e, 
sec.3.02, which authorize the Commission to adopt rules for conducting racing 
with wagering and for administering the Texas Racing Act; sec.3.07, which 
authorizes the Commission to medication and drug testing on race animals; 
sec.3.16, which authorizes the Commission to adopt rules prohibiting the illegal 
influencing of the outcome of a pari-mutuel horse or greyhound race, including 
use of prohibited substances; sec.6.06, which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks; sec.14.07, which 
makes it a criminal act for a person to hinder another who is exercising its 
power of entry under the Act or Commission rule; and sec.14.10, which makes it a 
criminal offense for a person to possess a prohibited device or substance on a 
racetrack facility. 
The proposal implements Texas Civil Statutes, Article 179e.

sec.319.361.Testing of Horses.
(a)-(b) (No change.) 
(c) In addition to the horse designated under subsection (b) of this section, a 
specimen may be collected from the following horses: 
(1)-(2) (No change.)
(3) for a race with a gross purse of <nl>$50,000<ol> [$20,000] or more, the 
horse that finishes third; 
(4)-(5) (No change.)

sec.319.362.Split Specimen.
(a) Before sending a specimen from a horse to a testing laboratory, the 
commission veterinarian <nl>or commission veterinarian's designee<ol> shall 
divide the specimen into two parts. The veterinarian <nl>or designee <ol> shall 
ensure that the part of the specimen that is to be sent to the laboratory is of 
a quantity sufficient for testing and subsequent storage by the laboratory. 
(b) The commission veterinarian <nl>or commission veterinarian's designee<ol> 
shall retain the part of the specimen that is not sent to the laboratory. The 
veterinarian <nl>or designee<ol> shall store the retained part in a manner that 
ensures the integrity of the specimen. 
(c)-(h) (No change.) 

sec.319.363.Storage of Splits.
(a) (No change.) 
(b) If the result of the initial test on a specimen is negative, the commission 
veterinarian may discard the retained part of the specimen on receipt of the 
negative result. If the result of the initial test on a specimen is positive, 
the commission veterinarian may discard the retained part of the specimen after 
<nl>all appeals are exhausted and the disposition of the matter is final.<ol> 
[the expiration of the period during which an owner or trainer may request the 
retained part be sent for testing.] 
(c) (No change.) 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812591
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

16 TAC sec.319.365
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas Racing 
Commission or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The repeal of this section is proposed under the Texas Civil Statutes, Article 
179e, sec.3.02, which authorize the Commission to adopt rules for conducting 
racing with wagering and for administering the Texas Racing Act; sec.3.07, which 
authorizes the Commission to medication and drug testing on race animals; 
sec.3.16, which authorizes the Commission to adopt rules prohibiting the illegal 
influencing of the outcome of a pari-mutuel horse or greyhound race, including 
use of prohibited substances; sec.6.06, which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks; sec.14.07, which 
makes it a criminal act for a person to hinder another who is exercising its 
power of entry under the Act or Commission rule; and sec.14.10, which makes it a 
criminal offense for a person to possess a prohibited device or substance on a 
racetrack facility.
The proposal implements Texas Civil Statutes, Article 179e. 
sec.319.365.Laboratory for Testing Splits.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812596
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

Division 4. Provisions for Greyhounds
16 TAC sec.319.391
The amendment is proposed under the Texas Civil Statutes, Article 179e, 
sec.3.02, which authorize the Commission to adopt rules for conducting racing 
with wagering and for administering the Texas Racing Act; sec.3.07, which 
authorizes the Commission to medication and drug testing on race animals; 
sec.3.16, which authorizes the Commission to adopt rules prohibiting the illegal 
influencing of the outcome of a pari-mutuel horse or greyhound race, including 
use of prohibited substances; sec.6.06, which authorize the Commission to adopt 
rules on all matters relating to the operation of racetracks; sec.14.07, which 
makes it a criminal act for a person to hinder another who is exercising its 
power of entry under the Act or Commission rule; and sec.14.10, which makes it a 
criminal offense for a person to possess a prohibited device or substance on a 
racetrack facility. 
The proposal implements Texas Civil Statutes, Article 179e. 

sec.319.391.Testing of Greyhounds.
(a) (No change.) 
(b) A racing judge or the commission veterinarian may order a greyhound in a 
race to submit to a test of body fluid specimens to determine the presence of a 
<nl>prohibited drug, chemical, or other<ol> [foreign] substance. 
(c)-(d) (No change.) 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812592
Roselyn Marcus
General Counsel
Texas Racing Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 833-6699

TITLE 22. EXAMINING BOARDS
PART XXI. Texas State Board of Examiners of Psychologists
CHAPTER 461.General Rulings
22 TAC sec.461.7
The Texas State Board of Examiners of Psychologists proposes an amendment to 
sec.461.7, concerning License Statuses. The amendment is being proposed in order 
to reflect that the Board may sanction a license that is on delinquent status 
and that a licensee must comply with the continuing education requirements 
before being allowed to retire a license and to clarify that "nonpayment" status 
is synonymous with "void" status. 
Sherry L. Lee, Executive Director, has determined that for the first five-year 
period the rule is in effect there will be no fiscal implications for state or 
local government as a result of enforcing or administering the rule. 
Ms. Lee also has determined that for each year of the first five years the rule 
is in effect the public benefit anticipated as a result of enforcing the rule 
will ensure that all licensees obtain mandatory continuing education credits 
each year that they hold a license and to reconcile the differences between 
classifications of license status in the Board's rules and the Board's computer 
system. There will be no effect on small businesses. There is no anticipated 
economic cost to persons who are required to comply with the rule as proposed. 
Comments on the proposal may be submitted to Janice C. Alvarez, Texas State 
Board of Examiners of Psychologists, 333 Guadalupe, Suite 2-450, Austin, Texas 
78701, (512) 305-7700. 
The amendment is proposed under Texas Civil Statutes, Article 4512c, which 
provide the Texas State Board of Examiners of Psychologists with the authority 
to make all rules, not inconsistent with the Constitution and Laws of this 
State, which are reasonably necessary for the proper performance of its duties 
and regulations of proceedings before it. 
The proposed amendment does not affect other statutes, articles, or codes. 

sec.461.7 License Statuses.
(a)-(b) (No change) 
(c) Delinquent Status. A person who fails to renew his/her license for any 
reason when required is considered to be on delinquent status. Any license 
delinquent for more than one consecutive year shall be void <nl> (non-
payment)<ol>. A person may not engage in the practice of psychology under a 
delinquent license. <nl>The Board may sanction a delinquent licensee for 
violations of Board rules.<ol> 
(d) (No change) 
(e) Retirement Status. A person who is on active or inactive status with the 
Board may retire by notifying the Board in writing prior to or up until the 
renewal date for the license. A person seeking to retire after his or her 
renewal date must submit <nl>proof of compliance with the Board's continuing 
education requirement<ol> [a written request to the Board stating the reasons 
that notice was not given prior to the expiration date]. A person with a pending 
complaint, a restricted license, [a delinquent license,] or who is otherwise not 
in compliance with all applicable Board rules may not retire his or her license 
[without written permission from the Board]. Permission to retire will not be 
granted for the purpose of allowing a licensee to avoid compliance with 
sec.461.11 of this title (relating to Continuing Education). A person who 
retires shall be reported to have retired in good standing. 
(f) (No change) 
(g) Void <nl>(Non-Payment)<ol> Status. The Board may void any license that is no 
longer in active or inactive standing. An individual may not engage in the 
practice of psychology under a void license. A license that has been voided may 
not be reinstated for any reason. A licensee whose license has been voided must 
submit a new application if he or she wishes to obtain a new license with the 
Board. 
(h) (No change)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 7, 1998.
TRD-9812545
Sherry L. Lee
Executive Director
Texas State Board of Examiners of Psychologists
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 305-7700

PART XXIII. Texas Real Estate Commission
CHAPTER 535. Provisions of the Real Estate License Act
SUBCHAPTER R. Licensed Real Estate Inspectors
22 TAC sec.535.223
The Texas Real Estate Commission (TREC) proposes an amendment to sec.535.223, 
concerning standard inspection report forms. The amendment would require 
licensed inspectors to use a single inspection report form, form REI 7A-0, when 
performing inspections of residential property for a prospective buyer or 
prospective seller. 
TREC has a statutory duty to adopt standard inspection report forms and to adopt 
rules requiring licensed inspectors to use the report forms under Senate Bill 
1100, 75th Legislature (1997). Effective January 1, 1998, TREC adopted a 
standard report form, REI 7-0 and eight optional systems report forms, REI 8-0 
to REI 15-0. After receiving comments that the forms were too long and detailed 
and that inspectors had difficulty completing the forms on computers, TREC 
amended sec.535.223 to adopt an alternative report form, REI 7A-0, which could 
be used in lieu of the original report forms. Inspectors have become familiar 
with the new form and would have an opportunity to exhaust supplies of the 
original forms prior to the adoption of the proposed amendment. The amendment 
would delete all references to the original forms in sec.535.223 as well as 
provisions relating to their use and reproduction. The amendment also would 
clarify that the report must be provided to the person for whom the inspection 
is performed within a reasonable period of time. 
Mark A. Moseley, general counsel, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section. There 
is no anticipated impact on local or state employment as a result of 
implementing the section. 
Mr. Moseley also has determined that for each year of the first five years the 
section as proposed is in effect the public benefit anticipated as a result of 
enforcing the section will be standardization of report forms used in Texas and 
clarification of the commission's rules concerning the writing of inspection 
reports for consumers. Because the proposed section permits the inspector to 
modify the length and appearance of the report form and to use either preprinted 
or computer-generated reports, there is no anticipated adverse effect on small 
businesses. Use of form REI 7A-0 may reduce the number of pages of copies of 
reports made by the inspector. There is no anticipated economic cost to persons 
who are required to comply with the proposed section, other than the cost of 
copies of REI 7A-0, which are available from TREC at no cost on the TREC web 
site at http://www.trec.state.us. 
Comments on the proposal may be submitted to Mark A. Moseley, General Counsel, 
Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188.
The amendment is proposed under Texas Civil Statutes, Article 6573a, sec.5(h), 
which authorize the Texas Real Estate Commission to make and enforce all rules 
and regulations necessary for the performance of its duties. 
The statute which is affected by this proposal is Texas Civil Statutes, Article 
6573a.

sec.535.223. Standard Inspection Reports. 
(a) The Texas Real Estate Commission adopts by reference <nl> Property 
Inspection Report, REI 7A-0,<ol> [the following forms] approved by the Texas 
Real Estate Commission in [1997 and ]1998 and published and available from the 
Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188. 
[(1) Property Inspection Report, REI 7-0;] 
[(2) Property Inspection Report (Short Form), REI No. 7A-0;] 
[(3) Optional Systems Property Inspection Report (Gas Lines), REI No. 8-0;] 
[(4) Optional Systems Property Inspection Report (Outbuildings), REI No. 9-0;] 
[(5) Optional Systems Property Inspection Report (Outdoor Cooking Equipment), 
REI No. 10-0;] 
[(6) Optional Systems Property Inspection Report (Lawn and Garden Sprinkler 
System), REI No. 11-0;] 
[(7) Optional Systems Property Inspection Report (Private Water Wells), REI No. 
12-0;] 
[(8) Optional Systems Property Inspection Report (Individual Private Sewage 
Systems), REI No. 13-0;] 
[(9) Optional Systems Property Inspection Report (Built-in Security and Fire 
Protection Equipment), REI No. 14-0; and] 
[(10) Optional Systems Property Inspection Report (Swimming Pools and 
Equipment), REI No. 15-0.] 
(b) Except as provided by this section, inspections performed for a prospective 
buyer or prospective seller of one-to-four family residential property must be 
reported on <nl>Form REI 7A-0 ("the form")<ol> [forms adopted by the 
commission]. Licensed inspectors shall complete the applicable portions of 
<nl>the form<ol> [inspection report forms adopted by the commission] and provide 
the <nl>report within a reasonable period of time<ol> [reports] to the persons 
for whom the inspection has been performed. [Except as provided in this section, 
each inspector shall use either Property Inspection Report REI No. 7-0 or 
Property Inspection Report REI No. 7A-0 when reporting an inspection. If the 
inspector uses Property Inspection Report REI No. 7-0 and an inspection of an 
optional system is also to be performed, the inspector shall also complete the 
appropriate optional system property inspection report, REI Nos. 8-0 through 15-
0, for each optional system inspected. When the inspection is limited to one or 
more of the optional systems, the inspector shall use [either the appropriate 
optional system report form adopted by the commission or ] Property Inspection 
Report REI No. 7A-0.] If necessary to report the inspection of a part, component 
or system not contained in <nl>the<ol> [a] form, or space provided on 
<nl>the<ol> [a] form is inadequate for a complete reporting of the inspection, 
such as when the inspector provides a higher level of inspection performance 
than that required by sec.535.222 of this title (relating to Standards of 
Practice), the inspector may attach additional pages to the form. When providing 
comments or additional pages to report on items listed on a form, the inspector 
shall arrange the comments or additional pages to follow the sequence of the 
items listed in the form adopted by the commission. If a part, component or 
system contained in <nl>the<ol> [a] form is present in the property and has not 
been inspected under the departure provisions of sec.535.222 of this title, the 
inspector shall make an appropriate notation on the form, clearly indicating the 
reason the part, component, or system has not been inspected. 
(c) Inspectors may reproduce the <nl>form<ol> [forms] adopted by the commission 
from printed copies obtained from the commission and [may reproduce the forms] 
by computer. With the exception of the changes to the <nl>form<ol> [forms] which 
are permitted by this section, the inspector shall reproduce the [forms] text of 
the <nl>form<ol> [forms] verbatim and the spacing, length of blanks, borders, 
fonts and placement of text on the page must appear to be identical to that used 
by the commission in the printed version of the form [forms]. Inspectors may 
insert information in the spaces provided for that purpose.
[(d) When using form REI 7-0 or any of the optional systems reports, forms REI 
8-0 through 15-0, the inspector may make the following changes.] 
[(1) The inspector may delete duplicate headings or sub-parts of the report form 
relating to an item which is not being inspected.] 
[(2) The inspector may delete duplicate provisions in the optional systems 
reports such as the identification of the property, date, and scope of the 
inspection.] 
[(3) The inspector may renumber the pages of the forms to correspond with any 
changes made necessary due to deletions of text.] 
<nl>(d)<ol> [(e)] When using form REI 7A-0, the inspector may make the following 
changes. 
(1) The inspector may select the type and size of the fonts, provided the fonts 
are no smaller than those used in the printed version of the form adopted by the 
commission. 
(2) The inspector may use legal sized (8 &frac12;" by 14") paper. 
(3) The inspector may select the information to be inserted below the caption 
"Property Inspection Report" and above the text of the form relating to TREC 
rules ; however, the inspector must include the name of the inspector's client, 
the address or other identification of the inspected property, the date the 
inspection was performed, and the name and license number of any inspector 
participating in the inspection. If the person performing the inspection is 
licensed as an apprentice inspector or real estate inspector, the license number 
and name of the inspector's sponsor also must be included, and the inspector 
supervising an apprentice must sign the report. 
(4) The inspector may select other information to be inserted in the space on 
the first page of the report reserved for that purpose; provided the caption 
"Additional Information Provided By Inspector " is not deleted. 
(5) The inspector may delete inapplicable provisions relating to the optional 
systems and re-letter the remaining provisions. 
(6) The inspector may add footers to each page of the report except the first 
page and may add headers to each page of the report. 
(7) Whether the form is reproduced by computer or is preprinted by the 
inspector, the inspector may allocate such space for comments as the inspector 
deems necessary or may attach additional pages of comments to the report. 
(8) The inspector may renumber the pages of the form to correspond with any 
changes made necessary due to adjusting the space for comments or deleting text. 
(9) The inspector may list other built-in appliances and add additional 
captions, letters and check boxes for those items. 
(10) The inspector may add numbers or letters in parentheses to the right of the 
caption for each item and may place the property identification and page number 
either at the top or bottom of the page. 
<nl>(e)<ol> [(f)] This section does not apply to the following: 
(1) inspections performed for a lender or for a person other than the 
prospective buyer or prospective seller; 
(2) quality control construction inspections of new homes, including phased 
construction inspections, inspections performed solely to determine compliance 
with building codes, warranty or underwriting requirements, or inspections 
required by a municipality; 
(3) inspections of remodeling or re-inspections; 
(4) inspections for which federal or state law requires use of a different 
report; or 
(5) inspections for which a relocation company or a seller's employer requires 
use of a different report, and the first page of the report contains a notice 
either in bold or underlined print reading substantially similar to the 
following: "This report was prepared for a relocation company or seller's 
employer in accordance with the company's requirements. The report is not 
intended as a substitute for an inspection of the property by an inspector of 
the buyer's choice. Standard inspection reports required by the Texas Real 
Estate Commission may contain additional information a buyer should consider in 
making a decision to purchase." If the report form required by the relocation 
company or seller's employer does not contain the notice, the inspector may 
attach the notice to the first page of the report at the time the report is 
prepared by the inspector. If the inspector attaches the notice, the inspector 
is not required to use a form adopted by the commission to report the 
inspection. 
<nl>(f)<ol> [(g)] Failure to comply with this section is grounds for the 
suspension or revocation of an inspector's license or the imposition of an 
administrative penalty by the commission. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on July 28, 1998.
TRD-9811955
Mark A. Moseley
General Counsel
Texas Real Estate Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 465-3900

TITLE 25. HEALTH SERVICES
PART I. Texas Department of Health
CHAPTER 29.Purchased Health Services
SUBCHAPTER DD.Tuberculosis
25 TAC sec.29.2901
Subject to the approval of the State Medicaid Director, the Texas Department of 
Health (department) submits a proposed amendment to sec.29.2901, concerning 
Tuberculosis clinic services. Specifically, the section covers benefits and 
limitations of Tuberculosis clinic services available to Medicaid recipients and 
provider requirements for the delivery of these services. 
The department has determined the need to amend the rule to ensure consistency 
with federal regulations. The amendment specifies that clinic services must be 
delivered in an outpatient setting; clarifies physician supervision requirements 
for the delivery of clinic services; and emphasizes that services must not be 
provided within a skilled nursing facility (SNF), intermediate care facility 
(ICF), or intermediate care facility for the mentally retarded (ICF-MR).
Joe Moritz, Health Care Financing Budget Director, has determined that for the 
first five-year period the section is in effect, there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section as proposed. 
Mr. Moritz also has determined that for each year of the five years the section 
is in effect, the public benefit anticipated as a result of enforcing the 
section will be the clarification of department policies concerning the delivery 
of Tuberculosis clinic services. There will be no effect on small businesses and 
there are no anticipated economic costs to persons who are required to comply 
with the section as proposed. There is no impact on local employment. 
Comments on the proposal may be submitted to Rodger Love, Program Specialist IV, 
Health Care Financing, Texas Department of Health, 1100 West 49th Street, 
Austin, Texas 78756-3168, (512) 794-6892. Comments will be accepted for 30 days 
following publication of this proposal in the Texas Register. 
The amendment is proposed under the Human Resources Code, sec.32.021 and 
Government Code sec.531.021, which provide the Health and Human Services 
Commission with the authority to adopt rules to administer the state's medical 
assistance program and is submitted by the Texas Department of Health under its 
agreement with the Health and Human Services Commission to operate the purchased 
health services program and as authorized under Chapter 15, sec.1.07, Acts of 
the 72nd Legislature, First Called Session (1991). 
The amendment affects Chapter 32 of the Human Resources Code. 

sec.29.2901. Benefits and Limitations.
(a) (No change.) 
(b) TB clinics shall: 
(1) be a facility that is not an administrative, organizational, or financial 
part of a hospital<nl>, but is organized and operated to provide medical care to 
outpatients<ol>; 
(2)-(3) (No change.) 
(4) employ or have a contract or formal arrangement with a licensed physician 
(Medical Doctor or Doctor of Osteopathy) who is responsible for providing 
medical direction and supervision over all services provided to the clinic's 
patients[;]<nl>. To meet this requirement, a physician must see the patient at 
least once, prescribe the type of care provided, and, if the services are not 
limited by the prescription, periodically review the need for continued 
care;<ol> 
(5)-(6) (No change.) 
(7) be qualified, approved and enrolled in the Texas Medical Assistance Program 
(Medicaid) and sign a written Medicaid Provider Agreement with the department or 
its designee; [and] 
(8) agree to comply with all other provisions and requirements contained in the 
current Texas Medicaid Provider Procedures Manual and as updated on a bimonthly 
basis by the Medicaid Bulletin; [and] 
(9) submit claims for services using the claims filing procedures established by 
the department <nl>or<ol>[of] its designee. All claims are subject to review for 
medical necessity[.]<nl>; and<ol> 
<nl>(10)<ol> <nl> not provide services within a skilled nursing facility (SNF), 
intermediate care facility (ICF), or intermediate care facility for the mentally 
retarded (ICF-MR). <ol>
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 4, 1998.
TRD-9812344
Susan K. Steeg
General Counsel
Texas Department of Health
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 458-7236

PART II. Texas Department of Mental Health and Mental Retardation
CHAPTER 417.Agency and Facility Responsibilities
SUBCHAPTER K.Abuse, Neglect, and Exploitation in TDMHMR Facilities
25 TAC sec.sec.417.503, 417.508, 417.509, 417.510, 417.516, 417.518
The Texas Department of Mental Health and Mental Retardation (TDMHMR) proposes 
amendments to sec.sec.417.503, 417.508, 417.509, 417.510, 417.516, and 417.518, 
of Chapter 417, Subchapter K, concerning abuse, neglect, and exploitation in 
TDMHMR facilities. 
The sections describe the procedures for reporting allegations; ensuring the 
safety and protection of persons served involved in allegations; facilitating 
proper investigations/peer reviews; notifying appropriate licensing authorities 
and other individuals of issues relating to an allegation; and contesting the 
finding of an investigation. 
Because the Pharmacy Practice Act allows for pharmacist peer review, allegations 
of abuse, neglect, or exploitation that are determined to be clinical practice 
of a pharmacist would be referred for peer review. A new exhibit titled 
"Therapeutic Psychological Follow-up for Persons Served Involved in Allegations" 
would be referenced in sec.sec.417.508, 417.510, and 417.516. The exhibit 
contains guidelines for providing psychological attention to an alleged victim 
during an investigation and identifying and addressing issues of trust so that a 
therapeutic environment can be re-established. The proposal would include 
references to two existing memorandum of understandings that may relate to 
reporting abuse, neglect, and exploitation. To ensure final findings are 
routinely determined expeditiously, the time frame for requesting a review of 
finding would be changed from 30 calendar days to 14 calendar days. A request 
for review would be permitted after 14 calendar days if additional information 
crucial to the investigation becomes available. 
Donald C. Green, Chief Financial Officer, has determined that for each year of 
the first five years the new sections as proposed are in effect there will be no 
fiscal implications for state or local government or small businesses as a 
result of enforcing or administering these rules because there are no 
significant operational costs associated with the proposed amendments. 
Karen Hale, interim commissioner, has determined that for each year of the first 
five years the amended sections as proposed are in effect the public benefit 
anticipated is the provision of clear and concise procedures for addressing and 
facilitating investigations of abuse, neglect, and exploitation in department 
facilities since the safety and protection of persons with mental illness and 
mental retardation residing in department facilities are fundamental in the 
delivery of quality care. There is no additional economic cost to persons who 
are required to comply with the proposed sections because existing resources are 
adequate to accomplish the implementation of the sections' provisions.
Written comments on the proposal may be sent to Linda Logan, director, Policy 
Development, Texas Department of Mental Health and Mental Retardation, P.O. Box 
12668, Austin, Texas 78711-2668, within 30 days of publication. 
The amendments are proposed under the Texas Health and Safety Code, Title 7, 
sec.532.015, which provides the Texas Mental Health and Mental Retardation Board 
with rulemaking powers; sec.161.132, which requires the board to adopt rules 
that prescribe procedures for the investigation and referral of reports of abuse 
and neglect or illegal, unprofessional, or unethical conduct toward a person 
served in a health care facility; sec.533.006, which requires the department to 
report to the Texas State Board of Medical Examiners any allegation received by 
the department that a physician employed by or under contract with the 
department has committed an action that constitutes a ground for the denial or 
revocation of the physician's license; Texas Human Resources Code, Chapter 48, 
which requires the reporting and investigations of abuse, neglect, and 
exploitation of elderly and disabled persons; Texas Family Code, Chapter 261, 
which requires the reporting and investigations of abuse or neglect of a child; 
and Civil Practice and Remedies Code, sec.81.006, which requires the reporting 
of alleged sexual exploitation by a mental health services provider to the 
county prosecuting attorney. 
These amendments would affect sec.161.132 and sec.532.015 of the Texas Health 
and Safety Code; Texas Human Resources Code, Chapter 48; and Texas Family Code, 
Chapter 261.

sec.417.503. Definitions. 
The following words and terms, when used in this subchapter, have the following 
meanings, unless the context clearly indicates otherwise: 
(1)-(4) (No change.)
(5) Clinical practice - Relates to issues of potentially or allegedly unsafe 
nursing, dental, <nl>pharmacy,<ol> or medical practice or violations of the 
Nursing Practice Act, Vocational Nurse Act, Dental Practice Act, <nl>Pharmacy 
Practice Act,<ol> or Medical Practice Act. These include acts or omissions of 
the physician, dentist<nl>, pharmacist,<ol> or nurse which result from a lack of 
competence in his/her profession, impaired status, or failure to provide 
adequate medical, nursing, <nl>pharmacy,<ol> or dental care to a person served. 
(6)-(16) (No change.)
(17) Peer review - A review of clinical and/or medical practice(s) by peer 
physicians; a review of clinical and/or dental practice(s) by peer dentists; 
<nl>a review of clinical and/or pharmacy practice(s) by peer pharmacists;<ol> or 
a review of clinical and/or nursing practice(s) by peer nurses. 
(18)-(32) (No change.)

sec.417.508. Responsibilities of the Head of the Facility. 
(a) (No change.)
(b) Immediately upon notification of an allegation the head of the facility 
takes measures to ensure the safety of the alleged victim(s), including the 
following actions: 
(1)-(2) (No change.)
(3) As necessary, the head of the facility ensures psychological attention is 
provided to the alleged victim and any other person served who may have 
witnessed or been affected by the incident <nl>in accordance with "Therapeutic 
Psychological Follow-up for Persons Served Involved in Allegations," referenced 
as Exhibit J in sec.417.516 of this title (relating to Exhibits) <ol>. The 
psychological attention shall be provided in a timely manner while preserving 
the integrity of the investigation. 
(4)-(5) (No change.)
(c)-(d) (No change.)
<nl>(e)<ol> <nl> The head of the facility at state schools, state centers, and 
state-operated community services with intermediate care facilities for the 
mentally retarded (ICF/MR) must report those allegations that are considered 
reportable incidents to the Texas Department of Human Services (TDHS), ICF/MR/RC 
Department in accordance with the memorandum of understanding, referenced as 
Exhibit K in sec.417.516 of this title (relating to Exhibits), between the 
department, TDHS, and Texas Department of Protective and Regulatory Services. 
<ol> 

sec.417.509. Peer Review.
(a) If the allegation involves the actions of a physician, dentist, 
<nl>pharmacist,<ol> registered nurse, or licensed vocational nurse, then a 
determination of whether the allegation involves the clinical practice, as 
defined in sec.417.503 of this title (relating to Definitions), of the 
physician, dentist, <nl>pharmacist,<ol> registered nurse, or licensed vocational 
nurse is made by the head of the facility, the APS investigator, and the 
facility medical\dental\nursing<nl>\pharmacy<ol> director, as appropriate to the 
discipline involved. 
(1) (No change.)
(2) If the allegation does involve clinical practice the APS investigator refers 
the allegation to the head of the facility, who immediately refers the 
allegation to the facility medical\dental\nursing director, as appropriate to 
the discipline involved, for review for possible peer review as follows: 
(A) for allegations involving physicians<nl>, pharmacists, <ol> and dentists, 
Investigative Medical Peer Review Operating Instruction 408-2; and 
(B) (No change.)
(3) (No change.)
(4) If a determination of whether the allegation involves clinical practice 
cannot be made, then: 
(A) (No change.)
(B) the regional APS program administrator and the head of the facility jointly 
agree to use a previously mutually agreed-upon 
physician/dental/nursing<nl>/pharmacy<ol> consultant, as appropriate to the 
discipline involved, to make the final determination within 24 hours. The 
facility is responsible for the costs of the consultant's services. 
(b) If the allegation involves the facility 
medical\dental\nursing<nl>\pharmacy<ol> director, the head of the facility 
refers the allegation to the TDMHMR medical\dental\nursing<nl>\pharmacy<ol> 
director, as appropriate to the discipline involved, for review for possible 
peer review in accordance with subsection (a)(2)(A) or (B) of this section. 
<nl>If the allegation involves the TDMHMR pharmacy director, then the head of 
the facility refers the allegation to the TDMHMR medical director for review for 
possible peer review in accordance with subsection (a)(2)(A) of this 
section.<ol> 
(c) All allegations involving physicians, <nl>pharmacists, <ol> nurses (RN or 
LVN), and dentists, regardless of type or clinical/non-clinical practice, are 
reported by the head of the facility to the TDMHMR 
medical\nursing\dental<nl>\pharmacy<ol> director, as appropriate to the 
discipline, within five working days of the allegation. The report may be brief, 
but will include; 
(1)-(4) (No change.)
(d) The TDMHMR medical\dental\nursing<nl>\pharmacy<ol> director, as appropriate 
to the discipline involved, ensures that reports of allegations of abuse and 
neglect are made, if required by law, to the licensing authority for the 
discipline under review, i.e., the <nl>Texas<ol> Board of Medical Examiners for 
physicians, the <nl>State<ol> Board of Dental Examiners for dentists, <nl>the 
Texas State Board of Pharmacy,<ol> the Board of Nurse Examiners <nl>for the 
State of Texas<ol> for registered nurses, or the Board of <nl>Vocational Nurse 
Examiners<ol> [Licensed Vocational Nurses] for licensed vocational nurses. 
(e) <nl>Upon receipt of an allegation involving physician misconduct or 
malpractice, the TDMHMR medical director reports the allegation to the Texas 
Board of Medical Examiners in accordance with sec.533.006 of the Texas Health 
and Safety Code and the memorandum of understanding, referenced as Exhibit L in 
sec.417.516 of this title (relating to Exhibits), between the department, TDPRS, 
and the Texas Board of Medical Examiners.<ol> 
<nl>(f)<ol> When an allegation is determined to involve the clinical practice of 
a physician, nurse (RN or LVN), <nl>pharmacist, <ol> or dentist, then the head 
of the facility ensures that the alleged victim and/or guardian or parent (if 
the alleged victim is a child) are informed that the allegation has been 
referred for peer review. 

sec.417.510. Completion of the Investigation.
(a)-(e) (No change.)
(f) If the head of the facility believes that the methodology used in conducting 
the investigation was flawed (e.g., failure to collect or consider evidence, 
such as witnesses' statement, progress notes, test results), the head of the 
facility may request a review by submitting a completed Request by Head of 
Facility/SOCS/Center for Review of Finding form to the regional APS program 
administrator. (The Request by Head of Facility/SOCS/Center for Review of 
Finding form is referenced as Exhibit F in sec.417.516 of this title (relating 
to Exhibits).) The request for review must be filed within <nl> 14<ol> [30] 
calendar days after receiving the investigative report. 
(1)-(5) (No change.)
(g) If the head the facility disagrees with: 
(1) the APS investigator's finding, the head of the facility may contest the 
finding by submitting a copy of the written investigative report and a completed 
Request by Head of Facility/SOCS/Center for Review of Finding form to the APS 
Director, TDPRS, P.O. Box 149030, E-561, Austin, Texas 78714-9030. (The Request 
by Head of Facility/SOCS/Center for Review of Finding form is referenced as 
Exhibit F in sec.417.516 of this title (relating to Exhibits).) When filing the 
request for review, the head of the facility will include a copy of the report 
by the review authority, if applicable and relevant. The request for review must 
be filed within <nl>14<ol> [30] calendar days after receiving the investigative 
report. <nl>A request for review may be filed after 14 calendar days if 
additional information crucial to the investigation becomes available.<ol> 
(A)-(B) (No change.)
(2) (No change.)
(h)-(m) (No change.)
(n) <nl>If the (alleged) perpetrator and (alleged) victim will again be in close 
proximity following an investigation, the head of the facility is responsible 
for ensuring appropriate reconciliation actions are taken in accordance with 
"Therapeutic Psychological Follow-up for Persons Served Involved in 
Allegations," referenced as Exhibit J in sec.417.516 of this title (relating to 
Exhibits).<ol> 
<nl>(o)<ol> The head of the facility shall establish a mechanism for evaluating 
any recommendations concerning problematic patterns or trends identified during 
the investigation by the APS investigator and the review authority, if 
applicable. 

sec.417.516. Exhibits. 
The following exhibits referenced in this subchapter are available from the 
Texas Department of Mental Health and Mental Retardation, Office of Policy 
Development, P.O. Box 12668, Austin, Texas 78711-2668. 
(1)-(7) (No change.)
(8) Exhibit H - "Procedures in Facility Abuse, Neglect, and Exploitation 
Investigations and Thurston Rebuttal Proceedings"; [and] 
(9) Exhibit I - Texas Civil Practice and Remedies Code, sec.81.001 and 
sec.81.006<nl>;<ol> [.] 
<nl>(10)<ol> <nl> Exhibit J - "Therapeutic Psychological Follow-up for Persons 
Served Involved in Allegations"; <ol>
<nl>(11)<ol> <nl> Exhibit K - Memorandum of Understanding between TDMHMR, TDHS, 
and TDPRS concerning Reportable Incidents in State Schools, State Centers, State 
Operated Community-based MHMR Services, and Community MHMR Centers with 
Intermediate Care Facilities for the Mentally Retarded (ICF/MR); and <ol>
<nl>(12)<ol> <nl> Exhibit L - Memorandum of Understanding between TDPRS, Texas 
Board of Medical Examiners, and TDMHMR concerning Mandatory Reporting of 
Physician Misconduct or Malpractice.<ol>

sec.417.518. Distribution.
(a) This subchapter will be distributed to:
(1)-(6) (No change.)
(7) the <nl>State<ol> [Texas] Board of Dental Examiners; 
(8) the [Texas] Board of Nurse Examiners <nl> for the State of Texas<ol>; [and] 
(9) the [Texas] Board of [Licensed] Vocational Nurse Examiners<nl>; and<ol>[.] 
<nl>(10)<ol> <nl> the Texas State Board of Pharmacy.<ol>
(b)-(c) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 7, 1998.
TRD-9812564
Charles Cooper
Chairman, Texas MHMR Board
Texas Department of Mental Health and Mental Retardation
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 206-4516

TITLE 28. INSURANCE
PART I. Texas Department of Insurance
CHAPTER 5.Property and Casualty
SUBCHAPTER R.Temporary Rate Reduction for Certain Lines of Insurance
28 TAC sec.5.14004, sec.5.14005
The Texas Department of Insurance proposes amendments to sec.sec.5.14004 and 
5.14005, concerning temporary rate reductions for certain lines of insurance. 
The amendments are necessary to update Subchapter R (Temporary Rate Reduction 
for Certain Lines of Insurance) to apply to 1999 rates. Subchapter R was enacted 
to implement Article 5.131 of the Texas Insurance Code which requires the 
commissioner of insurance to hold a hearing on or before September 1 of each 
year to determine the percentage of equitable across-the-board reductions in 
insurance rates required of insurers writing lines and sublines of insurance 
addressed in Article 5.131. 
Subchapter R, Sections 5.14000 - 5.14011 concern the mandatory temporary rate 
reductions for certain lines of insurance which are required by Article 5.131. 
The sections set forth the calculation and application of the amount of the rate 
reduction for certain lines of insurance for insurers to pass through to 
policyholders, on a prospective basis, the reduction in loss and allocated loss 
adjustment expense anticipated from tort reform legislation enacted by the 73rd 
and 74th Texas Legislatures. Department staff proposes that sec.sec.5.14000 - 
5.14011 continue in effect with changes only to the amount of loss and allocated 
loss adjustment expenses (ALAE) reduction percentages applicable to specified 
lines of insurance (sec.5.14004) and instructions for the calculation and 
application of rate reduction factors and for filing forms with the Department 
regarding the rate reduction factors as applied to policies effective in 1999 
(sec.5.14005). 
As required by Article 5.131, the commissioner will make a final determination 
whether sec.sec.5.14000 - 5.14011, and particularly the rate reduction factors 
set forth in sec.5.14004, should be amended based on evidence adduced at a 
public hearing to be held for this purpose on August 25, 1998, and on public 
comment to this proposal. Oral testimony and written comments and evidence 
submitted at the August 25 hearing will be considered as part of the record 
pertaining to these proposed amendments to sec.sec. 5.14004 and 5.14005. There 
is no need to resubmit comments and data submitted for the August 25 hearing; 
however, all parties are invited to submit additional comments during the formal 
comment period. 
The reduction percentages included in proposed sec.5.14004(c) are preliminary 
percentages recommended by TDI staff to the commissioner. Staff's final 
recommendations may vary. The percentages adopted by the commissioner may vary 
from staff's recommendations based on evidence adduced at the hearing and/or 
comments received regarding this proposal. Although a single percentage of 
reduction is included in proposed sec.5.14004(c), for each line of insurance 
addressed in that subsection, staff has prepared a recommended range of 
percentages. Information regarding the scope of these ranges can be obtained 
from the Office of the Chief Clerk, Texas Department of Insurance, or from TDI's 
web page at www.tdi.state.tx.us.
Article 5.131, section 3(d), Texas Insurance Code, provides that the effective 
date of a rule adopted under that article is the 90th day after the date the 
rule is adopted. The effective date stated in the proposed amendments is January 
1, 1999. However, that date may change depending on the date on which any 
amendments are adopted. 
C. H. Mah, associate commissioner for the Technical Analysis Division, has 
calculated the fiscal impact for the two years that the amended rule will be in 
effect. Mr. Mah has determined that any impact will have occurred in the first 
three years the rule has been in effect. Mr. Mah has also determined that for 
each year of the remaining two years the proposed rate reductions will be in 
effect, there will be no fiscal implications to local government as a result of 
enforcing or administering the sections. There will be no detrimental effect on 
local employment or the local economy as a result of the proposal.
Mr. Mah has also calculated the public benefit and cost anticipated for the 
first five years that the amended rule is in effect. Any such effect will be 
felt only for two years after the proposed rule is in effect because Article 
5.131 provides that the rate reduction percentages established by the 
commissioner remain effective only until January 1, 2001. The full impact of the 
rule was addressed when the sections were originally proposed in 1995. Mr. Mah 
has determined that the public benefit as a result of the sections will be the 
reduction in rates charged by insurers for certain lines of insurance affected 
by tort reform legislation. Consumers will experience savings in insurance 
premiums as a result of implementation of the proposal. The amount of premium 
savings to the consumer will vary depending on the type of coverage the person 
has, the amount of the deductible, the type of company the person is insured by 
and similar factors. 
The largest cost of compliance will have occurred in 1995 and 1996 when insurers 
reprogrammed their computer systems to account for the rate reduction factors. 
The estimated cost of compliance with the proposed sections to insurers that 
write the lines of insurance affected by these sections will vary depending upon 
various factors including the following: the size of the company; the type of 
company; whether the company is a rate regulated or non-rate regulated insurer; 
the type of risk written by the insurer; the number of affected lines of 
insurance written by the company; the volume of premium dollars the insurer 
writes for the lines of insurance affected; the type and extent of computer 
resources used by the company; and the type of data collection the insurer 
maintains. The proposed amendments are not expected to result in substantial 
additional costs. The primary costs to insurers from this proposal will be the 
costs involved in filing the forms required by these sections and in modifying 
computer programs to reflect the reduction percentages adopted by the 
commissioner.
Because of the variables involved, the costs to each insurer of complying with 
the rule may vary considerably. A non-rate regulated company writing only one 
affected line or subline of insurance may incur a cost as little as $100, which 
is the cost of filing a single form. On the other hand, a rate-regulated company 
writing lines or sublines of insurance which require more complex calculations 
to implement the tort reform adjusted rates, such as commercial umbrella, may 
incur a cost of up to $5,000, per line or subline. The total cost to a company 
will depend on whether it is rate regulated or non-rate regulated, the number of 
affected lines it writes, and the nature of the coverages for those lines. The 
assumptions on which these costs are based may change substantially as the 
department receives data during the comment period.
Mr. Mah has further determined that the rule will not have an adverse economic 
effect on small businesses because those insurance companies that would qualify 
as "small" businesses within the meaning of Government Code sec.2006.002 do not 
issue liability policies that would be subject to the proposed sections. The 
companies affected by this rule either have a national premium income of $1 
million or more, or are not "independently owned and operated." Therefore, these 
companies do not qualify as small businesses within the meaning of Government 
Code sec.2006.002. This conclusion was based on a search of information 
maintained by TDI. This search revealed that there are 86 insurance companies 
with national premium revenue below $1 million. Of these companies, 69 are 
either a subsidiary of another company, a reinsurer, not writing new business, 
or not writing affected lines. Of the remaining 17 companies, all but two are 
farm mutuals. Farm mutuals are governed by Insurance Code, Chapter 16 and can 
only write property insurance and are therefore not affected by the proposed 
sections. Of the two remaining companies, one has no written premium in Texas 
and one writes homeowner's insurance, but would not be affected by the proposed 
sections since the proposed rate reduction percentage for homeowner's is 0%. 
Therefore, there is no adverse or differential impact on small businesses as a 
result of the proposed amendments. 
Comments on the proposal must be submitted within 30 days after publication of 
the proposed section in the Texas Register, to Lynda H. Nesenholtz, General 
Counsel and Chief Clerk, Texas Department of Insurance, P. O. Box 149104, Mail 
Code 113-2A, Austin, Texas 78714-9104. An additional copy of the comment must be 
submitted to Ann Bright, Legal and Compliance Division, Texas Department of 
Insurance, P. O. Box 149104, MC 110-1A, Austin, Texas 78714-9104. The text of 
current sec.sec.5.14000, 5.14001, 5.14002, 5.14003, and 5.14006 - 5.14011 will 
not be republished in the Texas Register as part of this proposed rule because 
the department proposes no changes to those sections. Interested parties may 
view the current Subchapter R via the Internet at 
http://www.sos.state.tx.us/tac/28/I/5/R/index.html, or obtain a copy from the 
Office of the Chief Clerk, Texas Department of Insurance.
These amendments are proposed under the Insurance Code, Articles 5.131 and 1.03A 
and Government Code, Article 2001.004. Article 5.131, enacted by the 74th Texas 
Legislature, requires the commissioner to issue rules mandating appropriate rate 
reductions for certain lines of insurance to pass through, on a prospective 
basis, the savings that accrue from tort reform legislation enacted in the 
regular sessions of the 73rd and 74th legislatures, and to hold a hearing on 
such rules on or before September 1 of each of the years that the rates are to 
remain in effect. Article 5.131 also provides for the granting of administrative 
relief and the collection of data to monitor compliance with the statute. 
Article 1.03A authorizes the commissioner of insurance to promulgate and adopt 
rules and regulations for the conduct and execution of the duties and functions 
of the department. Government Code sec.sec.2001.004 et seq. authorizes and 
requires each state agency to adopt rules of practice setting forth the nature 
and requirement of available procedures and prescribes the procedures for 
adoption of rules by a state administrative agency.
The following article is affected by this proposal Insurance Code, Article 5.131 

sec.5.14004.Loss and ALAE Reduction Percentages by Line.
(a)-(b) (No change.)
(c) The first loss and ALAE reduction percentages shown for each line is 
applicable to policies effective on or after January 1, 1996 but before January 
20, 1998; the second reduction percentage is applicable to policies effective on 
or after January 20, 1998<nl>, but before January 1, 1999; the third reduction 
percentage is applicable to policies effective on or after January 1, 1999:<ol> 
(1) private passenger automobile liability insurance for bodily injury___ 7.5% / 
11.4%<nl> / 11.5%<ol> 
(2) commercial automobile liability insurance for bodily injury___ 12.0% / 
13.5%<nl> / 19.0%<ol> 
(3) the liability portion 
(A) of homeowner's insurance___ 0% / 0%<nl> / 0%<ol> 
(B) of farm and ranch owner's insurance (for policies effective prior to January 
1, 1998)___10.0% / 10.0%<nl> / N/A<ol> 
(C) of renter's insurance___0% / 0%<nl> / 0%<ol> 
(4) professional liability insurance as defined in the Insurance Code, article 
5.15-1 for: 
(A) physician, other health care provider - 
(i) claims made policy percentage 1___11.5% / 15.0%<nl> / 20.0%<ol> 
(ii) claims made policy percentage 2___3.5% / NA<nl> / NA <ol> 
(iii) claims made policy percentage 3___8.5% / 12.8%<nl> / 18.7%<ol> 
(iv) occurrence policy___11.5% / 15.0%<nl> / 20.0%<ol> 
(B) hospital 
(i) claims made policy percentage 1___15.0% / 17.0%<nl> / 26.0%<ol> 
(ii) claims made policy percentage 2___3.5% / NA<nl> / NA <ol> 
(iii) claims made policy percentage 3___8.5% / 10.5%<nl> / 16.2%<ol> 
(iv) occurrence policy___15.0% / 17.0%<nl> / 26.0%<ol> 
(5) commercial liability insurance for damages arising out of the manufacture, 
design, importation, distribution, packaging, labeling, lease, or sale of a 
product or for completed operations coverage (products/completed 
operations)___12.5% / 18.0%<nl> / 20.5%<ol> 
(6) personal umbrella and excess liability insurance__7.5% / 12.5%<nl> / 
12.5%<ol> 
(7) the liability portion of commercial multi-peril insurance 
(A) with a divisible premium, refer to sec.5.14005(d) of this title (relating to 
Calculation and Application of Rate Reduction Factor)
(B) with an indivisible premium, including business owner's policies___12.5% / 
17.0%<nl> / 17.0%<ol> 
(8) the employer's liability portion of workers' compensation insurance___0% / 
0%<nl> / 0%<ol> 
(9) commercial general liability, which includes premises medical, fire, legal 
liability, personal advertising injury, contractual liability, and liability for 
all premises___12.5% / 17.0%<nl> / 17.0% <ol>
(10) commercial umbrella___18.0% / 30%<nl> / 30.0%<ol> 
(11) commercial excess liability 
(A) general liability/commercial multiple peril___18.0% / 32%<nl> / 32.0%<ol> 
(B) commercial automobile___18.0% / 25.3%<nl> / 29.0%<ol> 
(C) products liability___18.0% / 20%<nl> / 22.5%<ol> 
(D) medical professional - physicians, other health care provider 
(i) claims made policy percentage 1___15.0% / 17.5%<nl> / 20.5%<ol> 
(ii) claims made policy percentage 2___4.5% / NA<nl> / NA <ol> 
(iii) claims made policy percentage 3___11.5% / 15.9%<nl> / 19.5%<ol> 
(iv) occurrence policy___15.0% / 17.5%<nl> / 20.5%<ol> 
(E) medical professional - hospitals - 
(i) claims made policy percentage 1___20.0% / 27.5%<nl> / 30.5%<ol> 
(ii) claims made policy percentage 2____4.5% / NA<nl> / NA <ol> 
(iii) claims made policy percentage 3____11.5% / 12.5%<nl> / 18.9%<ol> 
(iv) occurrence policy___20.0% / 27.5%<nl> / 30.5%<ol> 
(F) other professional 
(i) claims made policy percentage 1___17.5% / 25.0%<nl> / 25.0%<ol> 
(ii) claims made policy percentage 2___0.5% / NA<nl> / NA <ol> 
(iii) claims made policy percentage 3___17.0% / 9.0%<nl> / 11.3%<ol> 
(iv) occurrence policy___17.5% / 25.0%<nl> / 25.0%<ol> 
(12) professional liability other than insurance described by paragraph (4) of 
this section 
(A) claims made policy percentage 1___12.0% / 20%<nl> / 20.0% <ol> 
(B) claims made policy percentage 2___1.0% / NA<nl> / NA <ol> 
(C) claims made policy percentage 3___11.0% / 15.4%<nl> / 16.3%<ol> 
(D) occurrence policy___12.0% / 20.0%<nl> / 20.0%<ol> 
(13) other commercial liability insurance, if not already covered as a part of 
coverage in paragraph (9) of this section, when written as a monoline coverage 
or added to another policy, including the following lines and sublines: 
(A) fire legal liability___12.5% / 17.0%<nl> / 17.0%<ol> 
(B) contractual liability___12.5% / 17.0%<nl> / 17.0%<ol> 
(C) pollution liability 
(i) claims made policy percentage 1___6.0% / 12.5%<nl> / 26.5%<ol> 
(ii) claims made policy percentage 2___1.0% / NA<nl> / NA <ol> 
(iii) claims made policy percentage 3___5.5% / 7.2%<nl> / 17.6%<ol> 
(iv) occurrence policy___6.0% / 12.5%<nl> / 26.5%<ol> 
(D) owners and contractors protective liability___12.5% / 17.0%<nl> / 17.0%<ol> 
(E) railroad protective liability___12.5% / 17.0%<nl> / 17.0% <ol> 
(F) liquor liability 
(i) claims made policy percentage 1___12.5% / 17.0%<nl> / 17.0%<ol> 
(ii) claims made policy percentage 2___2.0% / NA<nl> / NA <ol> 
(iii) claims made policy percentage 3___8.0% / 11.0%<nl> / 12.1%<ol> 
(iv) occurrence policy__12.5% / 17.0%<nl> / 17.0%<ol> 
(G) farm liability___12.5% / 17.0%<nl> / 17.0%<ol> 
(H) garage liability____6.0% / 17.0%<nl> / 17.0%<ol> 
(I) all other commercial liability lines and sublines___12.5% / 17.0%<nl> / 
17.0%.<ol> 
(14) the liability portion of farm and ranch owner's insurance (for policies 
effective after January 1, 1998)___10% / 10%<nl> / 10.0%<ol>

sec.5.14005.Calculation and Application of Rate Reduction Factor.
(a) For those lines or sublines of insurance that have a benchmark rate 
<nl>established under Insurance Code, article 5.101<ol>, a rate reduction factor 
will be calculated by the department using the loss and ALAE reduction 
percentages set forth in sec.5.14004(c) of this title (relating to Loss and ALAE 
Reduction Percentages by Line) and relevant industry average expenses for the 
applicable line or subline. This rate reduction factor shall be applied to the 
applicable benchmark rate to arrive at an adjusted benchmark rate for purposes 
of this section. 
(1)-(2) (No change.)
(b) (No change.)
(c) For those lines and sublines other than those subject to the Insurance Code, 
article 5.101, the claims made policy loss and ALAE reduction percentages shall 
be used by each insurer to calculate the rate reduction factor to be applied to 
claims made policy rates in effect on January 1, 1996 for the lines or sublines 
identified in sec.5.14004(c) of this title (relating to Loss and ALAE Reduction 
Percentages by Line) according to the following method: 
(1)-(6) (No change.)
(7) The department adopts and incorporates herein by reference, Form TR-3A-R 
Calculation of Tort Reform Impact, Claims Made Policies, and Form TR-3B-R, 
Calculation of Rating Values, Claims Made Policies. The department publishes a 
version of Forms TR-3A-R and TR-3B-R for policies effective in each of the years 
1996, 1997, [and] 1998<nl>, and 1999<ol>. These forms may be obtained from the 
Technical Analysis Division, Mail Code 105-5G, Texas Department of Insurance, 
333 Guadalupe, P. O. Box 149104, Austin, Texas 78714-9104. 
(d) (No change.)
(e) For insurers writing any commercial liability or professional liability 
lines or large risk, the rate reduction factor for the specific line identified 
in sec.5.14004 of this subchapter (relating to Loss and ALAE Reduction 
Percentages by Line) may be reduced by the individual tort reform component 
specified in Form TR95, [or] TR97, <nl>or TR98 <ol> Pricing Components by Tort 
Reform, if coverage for the specific tort reform identified in Form TR95, [or] 
TR97<nl>, or TR98<ol> is specifically excluded from the policies. Insurers shall 
be required to file a certification form, developed by the department, that 
indicates the rate reduction factor used, the specific individual tort reform 
components used to reduce the factor, the premium volume affected, and such 
other information determined by the department. The department adopts and 
incorporates herein by reference Forms TR95, [and] TR97, <nl>and TR98,<ol> 
Pricing Components by Tort Reform. These forms are published by the Texas 
Department of Insurance and may be obtained from the Technical Analysis 
Division, Mail Code 105-5G, Texas Department of Insurance, 333 Guadalupe, P. O. 
Box 149104, Austin, Texas 78714-9104. 
(f)-(g) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 7, 1998.
TRD-9812574
Lynda H. Nesenholtz
General Counsel and Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 463-6327

CHAPTER 9.Title Insurance
SUBCHAPTER A.Basic Manual of Rules, Rates and Forms for the Writing of Title 
Insurance in the State of Texas
28 TAC sec.9.20
The Texas Department of Insurance proposes new 28 TAC sec.9.20 which concerns 
amendments to and adoption of procedural rules in the Basic Manual of Rules, 
Rates and Forms for the Writing of Title Insurance in the State of Texas (the 
Basic Manual). The new section is necessary to reflect amendments to the Basic 
Manual, which the section adopts by reference and to specify its purpose of 
amending and adding procedural rules for policies of title insurance. The 
proposed amendments to and adoption of procedural rules in the Basic Manual 
address the payment of rebates in the title insurance industry through the use 
of licensed controlled business organizations. The changes consist of amendments 
to P-12, concerning abstract plants, amendments to P-22, concerning payment of a 
fee for examination or closing, and adoption of P-48, concerning payment for 
services rendered by a title company, title insurance agent, or direct operation 
to another title insurance company, title agent, or direct operation. 
Article 9.30 of the Insurance Code prohibits the giving of a rebate, discount, 
commission, or other thing of value directly or indirectly for solicitation or 
referral of title insurance business. Based on data taken from the Texas Title 
Insurance Agents Statistical Report Calendar Year Ending 1996 (Stat Report); 
Texas Department of Insurance title insurance agent records; staff interviews of 
title industry representatives; title industry self-identification; complaints; 
field examinations; legislative committee testimony; and analysis of current 
business practices in the title industry, a limited review by the department has 
identified approximately twenty licensed controlled business organizations that 
have the potential to rebate a portion of the title insurance premium to a 
person or entity who refers title insurance business. The number appears to be 
increasing. Case by case enforcement is not effective in eliminating these 
rebating arrangements given the costs involved, the limited staff resources, and 
the proliferation of these arrangements during increased real estate market 
activity; hence, the department's proposal intends to address the issue by 
changes to the procedural rules. 
Not all licensed controlled business organizations in Texas have been set up for 
the purpose of rebating. A controlled business organization (hereinafter 
referred to as CBO) is a title agent owned or partially owned by a person or 
entity within the real estate industry, such as a developer, real estate broker, 
mortgage lender, or homebuilder (hereinafter referred to as a producer), who is 
in a position to direct all or a portion of the title insurance business to that 
title agent (Title Professionals Association, "An Analysis of Rebating in the 
Title Insurance Industry Through the Use of Licensed Controlled Business 
Organizations" 1997, p. 2). Several fully functioning CBOs provide title 
services for their owners and the general public. They are not dependent upon 
any other title agent or title underwriter to perform all aspects of abstract, 
examination, closing, and escrow functions in the county in which they are 
licensed nor do they qualify for licensing with a non-operational abstract plant 
(Id. at p. 2). These CBOs should not be affected by the proposed amendments 
because they are fully functional, and they pay a split of the title premium for 
services that are actually needed and rendered. 
Among CBOs in Texas, there also exist those that have been organized as conduits 
to rebate portions of the title insurance premium for the referral of title 
insurance business (Senate Economic Development Committee Hearing, April 1, 
1997) and are identified as follows: The conduit CBO owns only a non-operational 
abstract plant which it has purchased at a cost below what is paid for a fully 
functioning abstract plant and which is the basis on which the conduit CBO 
becomes a licensed title insurance agent (Title Professionals Association, "An 
Analysis of Rebating in the Title Insurance Industry Through the Use of Licensed 
Controlled Business Organizations" 1997, pp. 6-7). While there exist numerous 
organizational variations, a common example of the ownership structure of the 
conduit CBO comprises a licensed title underwriter or title agent (hereinafter 
referred to as participating title company) that actually performs all of the 
title company functions and a producer from whom the conduit CBO obtains almost 
100% of its title business (Id. at p. 8). The rebate comes in the form of the 
examination service, which is traditionally 10-20% of the title insurance 
premium, but for which the conduit CBO is paid as much as 40-50% of the premium 
(Id. at pp.18-19, and Field Audits conducted by the Texas Department of 
Insurance). The value paid to the conduit CBO for the examination service is 
excessive and duplicative in those cases where the participating title company 
could perform the examination for less than 40-50% of the premium, and it may, 
through the use of computer programs, incorporate the examination work into the 
abstract product which is furnished to the conduit CBO (Id. at p. 19). In such 
cases, the conduit CBO contends that it is outsourcing services to its 
participating title company; however, in actuality, the participating title 
company operates both organizations. The conduit CBO is not outsourcing, as an 
independent title agent to another title agent for services, but rather the 
participating title company is performing the work functions of the conduit CBO, 
as well as its own. A service is nominally created in the conduit CBO for money 
to be paid (or retained) by the conduit CBO for its referral of business. Both 
the conduit CBO and the participating title company duplicate costs. These 
duplicative or excessive costs do not come within the exception allowed by 
Article 9.30, Section B(2) that permits a division of premium for the 
performance of core title services. Rather, these are unnecessary costs that are 
added into the rate base and ultimately increase title insurance rates for the 
consumer. 
The proposed amended and new procedural rules will enable the department to 
require that title agents must either own or lease and operate a fully 
functioning abstract plant or face non-renewal or revocation of their license. 
The amendments to Procedural Rule P-12 define a fully functioning abstract 
plant, clarify that lessees must maintain and operate the leased abstract plant 
in accordance with new paragraph d, and emphasize that lease agreements shall 
not be used to give or receive rebates in violation of Article 9.30. The 
proposal adds the requirement that if abstract plants are combined with other 
abstract plants to form a joint abstract plant operation, all of the abstract 
plants must be licensed to be eligible to enter into a joint abstract plant 
arrangement. The amendment also clarifies that the operation of an abstract 
plant includes more than merely possessing a microfilm geographic index of 
property in a particular county and receiving monthly updates. The operation of 
an abstract plant means that a title agent will use its own abstract plant to 
provide abstract and examination services for all title insurance orders for the 
county in which it is licensed. A title agent may not subcontract the abstract 
and examination services for title insurance orders for the county in which the 
title agent is licensed to other title agents, direct operations, or 
underwriters. The only exception to this prohibition against subcontracting of 
"in county" abstract and examination services is that the title examination 
service may be performed by an attorney. 
The proposed amendments to Procedural Rule P-22 are necessary to specify 
requirements for the payment of premiums for service, to change the formatting 
of P-22 to clarify the operation of this rule, to correct grammar, and to add 
definitions. The proposed adoption of Procedural Rule P-48 sets forth the range 
of payments for the three distinct core services performed by a title company in 
metropolitan areas in order to prohibit rebate-type arrangements. The proposed 
procedural rule specifies the applicable county population, clarifies additional 
reasonable charges, and excludes licensed attorneys from the requirements of P-
48. 
The effective date stated in the proposed amendments is November 1, 1998. 
However, that date may change depending on the date on which any amendments are 
adopted. 
Robert R. Carter, Jr., deputy commissioner for the title insurance division, has 
determined that for each year of the first five years that the proposal will be 
in effect, there will be no fiscal implications for state or local government as 
a result of enforcing or administering the section. There will be no adverse 
effects on local employment or the local economy. 
Mr. Carter has also determined that for each year of the first five years these 
proposed amendments and new procedural rule are in effect there are several 
public benefits anticipated as a result of adopting these amendments and new 
procedural rule. The first benefit is compliance with the law. The adoption of 
these amendments and new procedural rule will require a conduit CBO either to 
expend money to convert its non-operational abstract plant into a viable, 
working abstract plant that can be used in performing the examination service or 
to cease doing business, thus eliminating duplicative operating expenses and 
arrangements that are set up for the purpose of paying rebates prohibited by 
Article 9.30 of the Insurance Code. The second benefit is increased competition 
in the title insurance industry. Several large blocks of title insurance 
business that were being directed to specific CBOs in exchange for the payment 
of rebates will no longer be directed in this manner, thus placing these 
formerly controlled blocks of business on the open market. This will allow all 
title insurance agents in the county in which the property is located to compete 
for this new business. Moreover, if the conduit CBO decides to incur the costs 
of becoming a fully operational CBO, it will be because the CBO expects the 
revenues generated by its captive business and any other business it seeks to 
cover its cost of operation. In either case, consumers will benefit from this 
increased competition because title insurance agents will have to provide faster 
and more professional service than their competitors to capture a share of these 
new blocks of business. A third benefit from the adoption of these amendments 
and new procedural rule will be to promote greater stability in the title 
insurance industry. A review of Texas Department of Insurance title insurance 
agent license records maintained by the department indicates a destabilizing 
phenomenon with respect to CBOs. When there is a downturn in the real estate 
market and a corresponding decline in title insurance sales, there are a 
disproportionate number of CBOs that cease business. This cessation of business 
by CBOs has a destabilizing effect on consumers who have closed transactions 
with these CBOs. They often have difficulty in obtaining their real estate 
closing records even though Article 9.34 of the Insurance Code requires that 
such records be maintained for a period of not less than fifteen years. A 
reduction in the number of CBOs ceasing to do business in a real estate downturn 
would greatly increase the stability of services that the title insurance 
industry provides, help consumers retrieve their closing records and eliminate 
the post-transaction costs (lost work time or other search costs) that consumers 
may incur in retrieving their records. 
In analyzing the economic impact of these proposed amendments and new procedural 
rule, the department considered the previously referenced Texas Title Insurance 
Agents Statistical Report Calendar Year Ending 1996 (Stat Report); Texas 
Department of Insurance title insurance agent records; staff interviews of title 
industry representatives; title industry self-identification; complaints; field 
examinations; legislative committee testimony; and analysis of current business 
practices in the title industry. The department analyzed total title income and 
total title expenses for all title insurance agents reporting in the Stat Report 
and total title income and total title expenses for the identified conduit CBO 
group. The analysis focused on title revenue and did not include revenue from 
sources other than title premiums. The department then matched comparable 
numbers of total title income and total title expenses for the identified CBO 
group and for fully functioning title companies and calculated an expense to 
income ratio for each group. The department excluded from the selected groups 
those agents that reported negative figures for title income, the assumption 
being that a business reporting an operating loss is not representative of the 
industry or of this particular segment of the industry. A company reporting a 
loss will necessitate substantial restructuring to operate at a profit, or will 
ultimately cease business operations, or a revised Stat Report would reveal 
numerical differences from those reported. From the selected title agents, the 
department found that the expense to income ratio for title revenue ranged from 
42.59% to 92.02% for the identified CBO group with an average of 61.75% and 
ranged from 56.04% to 99.84% for comparably reporting fully functioning title 
companies with an average of 83.44%. Multiplying this 83.44% expense to income 
ratio for fully functioning title companies by the average total title income 
for the CBO group and subtracting an average of the actual reported expenses of 
the CBO group indicates an average increase in annual operating expenses for 
each individual title agent in the CBO group of $171,592. This average increase 
in operating expenses to each CBO having to comply with the proposed amendments 
and new procedural rule may, depending on factors such as the volume and value 
of title policies and closings, differ substantially in individual cases. 
The department also separated the CBOs based on title income of above and below 
$1,000,000 as taken from the 1996 Stat Report figures in order to produce 
estimates for different sized revenues. For CBOs with total title income of less 
than $1,000,000, the annual total title expense of compliance is up to a maximum 
of $58,447. For larger CBOs (total title income of $1,000,000 or more), the 
annual total title expense of compliance may be up to a maximum of $382,840. 
This representative cost was determined by subtracting the expense of the CBO 
reporting the least amount of expense from the fully functional title agent from 
the same income group. The department does not anticipate the expenditure of 
significant capital costs for a CBO to come into compliance with the amendments 
and new procedural rule because presumably the CBOs are purchasing updates for 
their abstract plants. If the CBOs choose to begin fully utilizing these 
abstract plants, then the capital costs would be for obtaining microfilm 
equipment and other similar items that do not create substantial capital 
investment. Whatever the case may be concerning the expenditure of operating and 
capital costs, some CBOs will choose to comply with the amendments and new 
procedural rule and become fully operational and will over a period of years 
recoup their costs just as the title insurance industry's costs of operation are 
covered for fully functioning title companies. For those companies already in a 
negative profit position that decide to go out of business, the cost of doing so 
will be the loss of potential profits. For those companies in a profit position 
that decide to go out of business, the cost of doing so will be the loss of 
future profits. The assumptions on which these costs are based may change 
substantially based on information received during the comment period. For 
companies already in compliance, there will be no fiscal impact. 
In comparing the cost of compliance for small businesses with the cost of 
compliance for the largest businesses affected by the proposed amendments and 
new procedural rule, the department analyzed the cost for each $100 of sales 
defined as retained title premium. Retained title premium is distinguished from 
total title income. The department first reviewed fully functioning title 
companies, identifying their title revenue and then matching them with CBOs with 
comparable title revenue. The department then calculated the expense (title 
expense/income) ratio for each of the identified title companies. The department 
did the same calculation for the matched CBOs. Each expense ratio for the title 
company and CBO was multiplied by the retained premium of the CBO. That produced 
an estimate of the cost that will be required for each CBO to come into 
compliance with the rule. The results of this methodology show a cost of up to 
$37.28 for each $100 of sales revenue for companies reporting less than 
$1,000,000 in sales revenue and a cost of up to $28.61 for each $100 of sales 
revenue for companies reporting over $1,000,000 in sales revenue. The proposed 
amendments and new procedural rule will impact smaller CBOs to a greater extent 
than larger CBOs. Everything else being equal, some smaller CBOs could be in a 
negative profit position if they decide to incur the costs of implementation. 
The decision to remain in the industry will depend on the size of their loss 
after implementation, potential efficiencies that they can gain elsewhere in 
their operation, the title and non-title revenue growth that they can expect, 
and the opportunity cost of continuing to employ their capital in the title 
industry. While setting forth this analysis, it is important to note that the 
department has determined that it is not legal and feasible to exempt small 
businesses or waive compliance considering the purpose of the statute under 
which the rule is to be adopted, that being the prohibition of the paying of 
rebates. To do otherwise would be contrary to the statute.
Comments on the proposal to be considered by the department must be submitted 
within 30 days after publication of the proposed Section in the Texas Register 
to Lynda H. Nesenholtz, General Counsel and Chief Clerk, Texas Department of 
Insurance, Mail Code 113-2A, P. O. Box 149104, Austin, Texas 78714-9104. An 
additional copy of the comment should be submitted to Robert R. Carter, Jr., 
Deputy Commissioner for the Title Insurance Division, Mail Code 106-2T, Texas 
Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. Request for 
a public hearing should be submitted separately to the Chief Clerk's office. 
The new section is proposed pursuant to the Insurance Code, Articles 9.30, 9.01, 
9.21 and 1.03A. Article 9.30 prohibits the giving or receipt of a rebate, 
discount, commission, or any thing of value directly or indirectly for 
solicitation or referral of title insurance business. Article 9.01 provides that 
the business of title insurance shall in all respects be totally regulated by 
the State of Texas so as to provide for the protection of every consumer and 
purchaser of a title insurance policy and to provide for adequate and reasonable 
rates of return for title insurance companies and title insurance agents. 
Article 9.21 authorizes the commissioner to promulgate and enforce all such 
rules and regulations which in his discretion are deemed necessary to accomplish 
the purposes of Chapter 9. Article 1.03A authorizes the commissioner to adopt 
rules and regulations for the conduct and execution of the duties and functions 
of the department as authorized by statute. 
The following statutes are affected by this proposal: Insurance Code, Articles 
9.01, 9.21 and 9.30 

sec.9.20.Amendments and\or Adoption of Procedural Rules for the business of 
Title Insurance.
In addition to material adopted by reference under sec.9.1 of this title 
(relating to Basic Manual of Rules, Rates and Forms for the Writing of Title 
Insurance in the State of Texas (the manual)), the Texas Department of Insurance 
adopts by reference, as part of the manual, procedural rules for the business of 
title insurance as amended and effective (November 1, 1998). This document is 
available from and on file at the Texas Department of Insurance, Title Insurance 
Section, Mail Code 106-2T, 333 Guadalupe Street, Austin, Texas 78701-1998. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 7, 1998.
TRD-9812576
Lynda H. Nesenholtz
General Counsel and Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 463-6327

CHAPTER 11.Health Maintenance Organizations
SUBCHAPTER X.Provider Sponsored Organizations
28 TAC sec.sec.11.2301-11.2315
The Texas Department of Insurance proposes new Subchapter X, sec.sec.11.2301-
11.2315, concerning the licensing and regulation of provider sponsored 
organizations (PSOs) to provide health care services to Medicare enrollees. A 
PSO is an integrated health care delivery system controlled by health care 
providers. In 1997, Congress amended the Social Security Act, Title XVIII, 
Health Insurance for the Aged and Disabled, to create a new program named 
"Medicare+Choice." One purpose of Medicare+Choice is to reduce Medicare's health 
care costs by having more Medicare enrollees obtain their health care in a 
managed care environment. The Medicare+Choice Program recognizes PSOs for the 
purpose of contracting with the Health Care Financing Administration, a federal 
agency, to provide managed health care to Medicare enrollees under the 
Medicare+Choice program. Under Texas law, a PSO would essentially function as an 
HMO and would be licensed as an HMO; however, federal law provides that a PSO 
may obtain a waiver of state licensing requirements if a state's solvency 
requirements are more stringent than the solvency requirements established in 
the Medicare+Choice Program and in other circumstances. To assure state 
regulation of PSOs, the proposed subchapter will adopt the solvency requirements 
of the federal Medicare+Choice Program and otherwise provide for the licensing 
of a PSO solely for the purpose of providing health care services to Medicare 
enrollees. To the extent possible, the solvency related language is identical 
with that in federal regulations. The other sections will require a PSO to file 
the application required for an HMO to receive a certificate of authority and 
otherwise make it clear that a PSO is subject to regulation as a licensed HMO. 
Jose Montemayor, Associate Commissioner for the Financial Program, has 
determined that for each year of the first five years the proposed subchapter is 
in effect, there will be fiscal implications for state government as a result of 
enforcing and administering the subchapter. A new federal program called 
"Medicare+Choice" authorizes PSOs to provide health care to Medicare enrollees. 
Under state law, a PSO would be an HMO and subject to licensing and regulation 
under Insurance Code, Chapter 20A; however, the Medicare+Choice Program allows a 
PSO to seek a waiver of state licensing from the Health Care Financing 
Administration if the state's solvency standards for licensing are more 
stringent than those established in the federal law and in certain other 
instances. The solvency standards for an HMO licensed under Insurance Code, 
Chapter 20A, are higher than those provided for in federal law; therefore, a PSO 
could ask for a waiver of state licensing. Since Insurance Code, Article 20A.03 
requires any person who arranges for or provides health care services to obtain 
a license under Insurance Code, Chapter 20A and Insurance Code, Article 
20A.22(c) authorizes the commissioner to adopt rules as are necessary and proper 
to meet the requirements of federal law and regulations, the subchapter is 
necessary to carry out Insurance Code, Article 20A.03 by providing state 
licensing and regulation of PSOs. The subchapter will limit a PSO to providing 
health care to Medicare enrollees. Since PSOs were created after the 
department's appropriation had been approved in 1997, no funds have been 
appropriated for this purpose. However, a PSO essentially performs the same 
function as an HMO; therefore, the department will treat an application for a 
PSO license as an application for an HMO license for fiscal purposes and will 
use existing staff and appropriations to process these applications. There will 
not be fiscal implications for local government. There is no anticipated effect 
on local employment or the local economy. 
Mr. Montemayor also has determined that for the each year of the first five 
years the new subchapter is in effect, the public benefit anticipated as a 
result of the new subchapter will be the licensing and regulation of PSOs 
providing health care services in this state for Medicare enrollees. The new 
subchapter is necessary as a result of the enactment of the federal 
Medicare+Choice Program. While a PSO would otherwise be regulated as an HMO 
under Insurance Code, Chapter 20A, the Medicare+Choice Program provides for the 
waiver of state regulation when a state's solvency requirements are more 
stringent than those established in the Medicare+Choice Program. The solvency 
requirements in Insurance Code, Chapter 20A for HMO's are more stringent than 
the solvency requirements in the Medicare+Choice Program for PSOs. The new 
subchapter will provide the same solvency requirements for PSOs as those in the 
Medicare+Choice Program, thereby making it possible for the department to 
license and regulate PSOs. Since a PSO would otherwise be an HMO under Texas 
law, the described costs are not new or additional costs relating to the 
regulation of a PSO. In the absence of the federal statute, a PSO would be 
subject to the existing licensing and regulation costs of an HMO. According to 
persons who provide this service, the cost of compliance in the first year will 
be approximately $150,000 for the legal, actuarial and consultant fees to 
organize and license a PSO under the Insurance Code. After a certificate of 
authority is issued by the department to a PSO, the cost to a PSO of continued 
regulation will include periodic examinations to evaluate the quality of care 
provided by a PSO and the financial condition of a PSO. Financial condition 
examinations are generally performed once each year during the first three years 
of an entity's operation. Quality of care examinations are generally performed 
once every three years of an entity's operation. The cost of an examination of a 
PSO will be based on the examiner hours required to perform an examination and 
the travel expense incident to an examination. Examiner salaries and travel 
expenses are governed by the General Appropriations Act. The number of hours 
required to conduct an examination depends on the size of the PSO, the manner in 
which its records are kept and several other variables that cause the total cost 
of an examination to vary widely from one entity to another. The cost of the 
examination must be paid for by the examined PSO. Additionally, a PSO will have 
to furnish periodic financial statements and other reports to the department. 
These reports should be prepared by a person experienced in the preparation of 
these reports. Such persons can be employees of the PSO or a consultant hired by 
the PSO for this purpose. Such persons are generally compensated at $30 per hour 
based on the department's experience. The total cost of providing these reports 
will depend on the size of the PSO and the manner in which the records are 
maintained. On the basis of cost per hour of labor, there is no expected 
difference in the cost of compliance between small PSOs and large PSOs. 
Comments on the proposal must be submitted in writing within 30 days after 
publication of the proposed subchapter in the Texas Register to Lynda H. 
Nesenholtz, General Counsel and Chief Clerk, Mail Code #113-2A, Texas Department 
of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of 
the comments should be submitted to Jose Montemayor, Associate Commissioner for 
the Financial Program, Mail Code #305-2A, Texas Department of Insurance, P.O. 
Box 149104, Austin, Texas 78714-9104. 
The new subchapter is proposed under Insurance Code, Articles 20A.22(c) and 
1.03A. Article 20A.22(c) authorizes the commissioner to promulgate reasonable 
regulations necessary to meet the requirements of federal law and regulations. 
The federal Medicare+Choice program provides for a waiver of state licensing of 
a PSO when the solvency requirements of state law are more stringent than those 
in federal law. The current solvency requirements in the Insurance Code for a 
PSO would be more stringent, so this regulation adopts the federal solvency 
requirements for PSOs in order to provide state licensing and regulation of PSOs 
that provide health care to Medicare enrollees and to protect the public 
interest. Article 1.03A authorizes the commissioner to adopt rules and 
regulations for the conduct and execution of the duties and functions of the 
department as authorized by statute. 
The following Texas statutes are affected by this rule: Insurance Code, Chapter 
20A. 

sec.11.2301.Purpose and Scope.
The Social Security Act was amended by Congress in 1997 to create 
Medicare+Choice. Medicare+Choice recognizes and authorizes provider sponsored 
organizations to contract with the Health Care Financing Administration to 
deliver health care services to Medicare recipients in a managed cared 
environment. The purpose of this subchapter is to provide for the licensing and 
regulation of these provider sponsored organizations by the department. Under 
state law a PSO would otherwise be an HMO. However, the Medicare+Choice program 
authorizes a PSO to seek a waiver of state licensing from the Health Care 
Financing Administration if the state's solvency standards for an HMO license 
are more stringent than those required of a PSO under the Medicare+Choice 
program. This subchapter requires the same solvency standards for a PSO as the 
Medicare+Choice program and otherwise provides for the licensing of a PSO in the 
same manner as an HMO. Provider sponsored organizations licensed under this 
subchapter are only authorized to engage in the delivery of health care services 
pursuant to a contract with the Health Care Financing Administration related to 
the Medicare+Choice program. 

sec.11.2302.Definitions.
The following words and terms, when used in this subchapter shall have the 
following meanings, unless the context clearly indicates otherwise. 
(1) Affiliate-One health care provider, directly or indirectly, controls, is 
controlled by, or is under common control with the other. 
(2) Capitated basis-A payment method under which a fixed per member, per month 
amount is paid for contracted services without regard to the type, cost or 
frequency of services provided. 
(3) Cash equivalent-Those assets excluding accounts receivables, which can be 
exchanged on an equivalent basis as cash, or converted into cash within 90 days 
from their presentation for exchange. 
(4) Control-An individual, group of individuals, or entity has the power, 
directly or indirectly, to direct or influence significantly the actions or 
policies of an organization or institution. 
(5) Current ratio-Total current assets divided by total current liabilities. 
(6) Deferred acquisition costs-Those costs incurred in starting or purchasing a 
business. These costs are capitalized as intangible assets and carried on the 
balance sheet as deferred charges since they benefit the business for periods 
after the period in which the costs were incurred. 
(7) Department-Texas Department of Insurance. 
(8) Engaged in the delivery of health care services- 
(A) For an individual, that the individual directly furnishes health care 
services, or 
(B) For an entity, that the entity is organized and operated primarily for the 
purpose of furnishing health care services directly or through its provider 
members or entities. 
(9) Generally accepted accounting principles-Broad rules adopted by the 
accounting profession as guides in measuring, recording, and reporting the 
financial affairs and activities of a business to its owners, creditors and 
other interested parties. 
(10) Guarantor-An entity that 
(A) has been approved by the department under sec.11.2310 as meeting the 
requirements to be a guarantor; and 
(B) obligates its resources to a PSO to enable the PSO to meet the solvency 
requirements required to contract with the Health Care Financing Administration 
as an Medicare+Choice organization. 
(11) Health care delivery assets-Any tangible assets that are part of a PSO's 
operation, including hospitals and other medical facilities and their ancillary 
equipment, and such property as may be reasonably required for the PSO's 
principal office or for such other purposes as the PSO may need for transacting 
its business. 
(12) Health care provider- 
(A) Any individual who is engaged in the delivery of health care services in 
this state and is licensed or certified by the state to engage in that activity 
in this state; and 
(B) Any entity that is engaged in the delivery of health care services in this 
state and is licensed or certified to deliver those services if such licensing 
or certification is required by state law or regulation. 
(13) Insolvency - A condition where the liabilities of the debtor exceed the 
fair valuation of its assets. 
(14) Medicare+Choice-A Medicare program that expands the health care options 
available to Medicare beneficiaries. 
(15) Net worth-The excess of total assets over total liabilities, excluding 
fully subordinated debt or subordinated liabilities. 
(16) PSO-Provider Sponsored Organization. A PSO is a public or private entity 
that is established or organized, and controlled and operated, by a health care 
provider, or a group of affiliated health care providers to provide health care 
solely to Medicare enrollees pursuant to a contract with the Health Care 
Financing Administration and which provider(s) share substantial financial risk 
and have at least a majority financial interest in the entity. 
(17) Qualified actuary-A member in good standing of the American Academy of 
Actuaries or a person recognized by the Academy as qualified for membership, or 
a person who has otherwise demonstrated competency in the field of actuarial 
determination and is satisfactory to the department. 
(18) Statutory accounting practices-Those accounting principles or practices 
prescribed or permitted by the domiciliary state insurance department in the 
state that the PSO operates. 
(19) Subordinated debt-An obligation that is owed by an organization, that the 
creditor of the obligation, by law, agreement, or otherwise, has a lower 
repayment rank in the hierarchy of creditors than another creditor. The creditor 
would be entitled to repayment only after all higher ranking creditors' claims 
have been satisfied. A debt is fully subordinated if it has a lower repayment 
rank than all other classes of creditors. 
(20) Subordinated liability-Claims liabilities otherwise due to providers that 
are retained by the PSO to meet net worth requirements and are fully 
subordinated to all other creditors. 
(21) Uncovered expenditures-Those expenditures for health care services that are 
the obligation of an organization, for which an enrollee may also be liable in 
the event of the organization's insolvency and for which no alternative 
arrangements have been made that are acceptable to the department. They include 
expenditures for health care services for which the organization is at risk, 
such as out-of-area services, referral services and hospital services. However, 
they do not include expenditures for services when a provider has agreed not to 
bill the enrollee. 

sec.11.2303.Application for Certificate of Authority.
(a) Any health care provider may apply to the commissioner for and obtain a 
certificate of authority to establish and operate a PSO for the purpose of 
providing health care to Medicare enrollees in accordance with this subchapter. 
(b) Prior to obtaining a certificate of authority under the Insurance Code, 
Chapter 20A, an applicant PSO must comply with each requirement for the issuance 
of a certificate of authority imposed on an HMO under the Insurance Code, 
Chapter 20A and 28 Texas Administrative Code Chapter 11 and other applicable 
insurance laws and regulations of this state except where preempted by federal 
law. 
(c) An applicant for a certificate of authority for a PSO shall complete and 
file with the department the application form for a health maintenance 
organization adopted by reference under sec.11.1001 of this chapter (relating to 
Forms Adopted by Reference) and the Financial Plan required by sec.11.2304 of 
this title (relating to Financial Plan Requirement). 

sec.11.2304.Financial Plan Requirement.
(a) General rule. At the time of application under sec.11.2303 of this title 
(relating to Application for certificate of authority), an applicant must submit 
a financial plan acceptable to the department. 
(b) Content of plan. A financial plan must include: 
(1) A detailed marketing plan; 
(2) Statements of revenue and expense on an accrual basis; 
(3) Statements of sources and uses of funds; 
(4) Balance sheets; 
(5) Detailed justifications and assumptions in support of the financial plan 
including, where appropriate, certification of reserves and actuarial 
liabilities by a qualified health maintenance organization actuary; and 
(6) If applicable, statements of the availability of financial resources to meet 
projected losses. 
(c) Period covered by the plan. A financial plan must: 
(1) Cover the first 12 months after the estimated effective date of a PSO's 
Medicare+Choice contract; or 
(2) If the PSO is projecting losses, cover 12 months beyond the end of the 
period for which losses are projected. 
(d) Funding for projected losses. Except for the use of guarantees, letters of 
credit, and other means as provided in sec.11.2310 of this title (relating to 
Guarantees), an organization must have the resources for meeting projected 
losses on its balance sheet in cash or a form that is convertible to cash in a 
timely manner, in accordance with the PSO's financial plan. 
(e) Guarantees and projected losses. Guarantees will be an acceptable resource 
to fund projected losses, provided that a PSO: 
(1) meets the department's requirements for guarantors and guarantee documents 
as specified in sec.11.2310 of this title and 
(2) obtains from the guarantor cash or cash equivalents to fund the projected 
losses timely, as follows: 
(A) prior to the effective date of a PSO's Medicare+Choice contract, the amount 
of the projected losses for the first two quarters; 
(B) during the first quarter and prior to the beginning of the second quarter of 
a PSO's Medicare+Choice contract, the amount of projected losses through the end 
of the third quarter; and 
(C) during the second quarter and prior to the beginning of the third quarter of 
a PSO's Medicare+Choice contract, the amount of projected losses through the end 
of the fourth quarter. 
(3) If the guarantor complies with the requirements in paragraph (2) of this 
section, the PSO, in the third quarter, may notify the department of its intent 
to reduce the period of advance funding of projected losses. The department will 
notify the PSO within 60 days of receiving the PSO's request if the requested 
reduction in the period of advance funding will not be accepted. 
(4) If the guarantee requirements in paragraph (2) of this section are not met, 
the department may take appropriate action, such as requiring funding of 
projected losses through means other than a guarantee. The department retains 
discretion to require other methods or timing of funding, considering factors 
such as the financial condition of the guarantor and the accuracy of the 
financial plan. 
(f) Letters of credit. Letters of credit are an acceptable resource to fund 
projected losses, provided they are irrevocable, unconditional, and satisfactory 
to the department. They must be capable of being promptly paid upon presentation 
of a sight draft under the letters of credit without further reference to any 
other agreement, document, or entity. 
(g) Other means. If satisfactory to the department, and for periods beginning 
one year after the effective date of a PSO's Medicare+Choice contract, a PSO may 
use the following to fund projected losses: 
(1) lines of credit from regulated financial institutions; 
(2) legally binding agreements for capital contributions; or 
(3) legally binding agreements of a similar quality and reliability as permitted 
in paragraphs (1) and (2) of this subsection. 
(h) Application of guarantees, letters of credit or other means of funding 
projected losses. Notwithstanding any other provision of this section, a PSO may 
use guarantees, letters of credit and, beginning one year after the effective 
date of a PSO's Medicare+Choice contract, other means of funding projected 
losses, but only in a combination or sequence that the department considers 
appropriate.

sec.11.2305.Issuance of Certificate of Authority.
The commissioner of insurance may issue a certificate of authority for the 
purpose of providing health care to Medicare enrollees only to a PSO that meets 
each requirement for the issuance of a certificate of authority as a health 
maintenance organization imposed by the Insurance Code, Chapter 20A, except for 
Article 20A.13, Insurance Code. 

sec.11.2306.Solvency Standards.
A PSO or the legal entity of which the PSO is a component must have a fiscally 
sound operation that meets the requirements of sec.sec.11.2307 - 11.2310 of this 
title relating to (Provider Sponsored Organizations). 

sec.11.2307.Minimum Net Worth Amount.
(a) Prior to the issuance of a certificate of authority, a PSO must have a 
minimum net worth amount, as determined under subsection (d) of this section, 
of: 
(1) at least $1,500,000, except as provided in paragraph (2) of this subsection. 
(2) no less than $1 million based on evidence from the organization's financial 
plan under sec.11.2304 of this title (relating to Financial Plan Requirement) 
demonstrating to the department's satisfaction that the organization has 
available to it an administrative infrastructure that the department considers 
appropriate to reduce, control or eliminate start-up administrative costs. 
(b) After the effective date of a PSO's certificate of authority, a PSO must 
maintain a minimum net worth amount equal to the greater of: 
(1) one million dollars; 
(2) two percent of annual premium revenues as reported on the most recent annual 
financial statement filed with the department for up to and including the first 
$150 million of annual premiums and 1% of annual premium revenues on premiums in 
excess of $150 million; 
(3) an amount equal to the sum of three months of uncovered health care 
expenditures as reported on the most recent financial statement filed with the 
department; or 
(4) using the most recent annual financial statement filed with the department, 
an amount equal to the sum of: 
(A) eight percent of annual health care expenditures paid on a non-capitated 
basis to non-affiliated providers; and 
(B) four percent of annual health care expenditures paid on a capitated basis to 
non-affiliated providers plus annual health care expenditures paid on a non-
capitated basis to affiliated providers. 
(c) Annual health care expenditures that are paid on a capitated basis to 
affiliated providers are not included in the calculation of the net worth 
requirement under subsections (a) and (b)(4) of this section. 
(d) The minimum net worth amount shall be calculated as follows: 
(1) Cash requirement. A PSO must maintain the following in cash or cash 
equivalents: 
(A) At the time of application for a certificate of authority, the PSO must 
maintain at least $750,000 of the minimum net worth amount in cash or cash 
equivalents. 
(B) After the effective date of a PSO's certificate of authority, a PSO must 
maintain the greater of $750,000 or 40% of the minimum net worth amount in cash 
or cash equivalents. 
(2) Intangible Assets. A PSO may include intangible assets, the value of which 
is based on Generally Accepted Accounting Principles, in the minimum net worth 
amount calculation subject to the following limitations:
(A) At the time of application: 
(i) Up to 20 % of the minimum net worth amount, provided at least $1million of 
the minimum net worth amount is met through cash or cash equivalents; or 
(ii) Up to 10 % of the minimum net worth amount, if less than $1million of the 
minimum net worth amount is met through cash or cash equivalents, or if the 
department has used its discretion under subsection (a)(2) of this section. 
(B) From the effective date of the PSO's certificate of authority. 
(i) Up to 20 % of the minimum net worth amount if the greater of $1 million or 
67% of the minimum net worth amount is met by cash or cash equivalents; or 
(ii) Up to 10% of the minimum net worth amount if the greater of $1 million or 
67 % of the minimum net worth amount is not met by cash or cash equivalents. 
(3) Health care delivery assets. Subject to this section, a PSO may apply 100% 
of the Generally Accepted Accounting Principles depreciated value of health care 
delivery assets to satisfy the minimum net worth amount. 
(4) Other assets. A PSO may apply other assets not used in the delivery of 
health care provided that those assets are valued according to Statutory 
Accounting Practices as defined by the department. 
(5) Subordinated debts and subordinated liabilities. Fully subordinated debt and 
subordinated liabilities are excluded from the minimum net worth amount 
calculation. 
(6) Deferred acquisition costs. Deferred acquisition costs are excluded from the 
calculation of the minimum net worth amount. 

sec.11.2308.Liquidity.
(a) A PSO must have sufficient cash flow to meet its financial obligations as 
they become due and payable. 
(b) To determine whether the PSO meets the requirement in subsection (a) of this 
section, the department will examine the following: 
(1) The PSO's timeliness in meeting current obligations; 
(2) The extent to which the PSO's current ratio of assets to liabilities is 
maintained at 1:1 including whether there is a declining trend in the current 
ratio over time; and 
(3) The availability of outside financial resources to the PSO. 
(c) If the department determines that a PSO fails to meet the requirement in 
subsection (b)(1) of this section, the department will require the PSO to 
initiate corrective action and pay all overdue obligations. 
(d) If the department determines that a PSO fails to meet the requirement of 
subsection (b)(2) of this section, the department will require the PSO to 
initiate corrective action to: 
(1) change the distribution of its assets; 
(2) reduce its liabilities; or 
(3) make alternative arrangements to secure additional funding to restore the 
PSO's current ratio to 1:1. 
(e) If the department determines that a PSO fails to meet the requirement of 
subsection (b)(3) of this section, the department will require the PSO to obtain 
funding from alternative financial resources. 

sec.11.2309.Deposits.
(a) Insolvency deposit. 
(1) At the time of application, an organization must deposit $100,000 in cash or 
securities (or any combination thereof) into an account in a manner that is 
acceptable to the department. 
(2) The deposit must be restricted to use in the event of insolvency to help 
assure continuation of services or pay costs associated with receivership or 
liquidation. 
(3) At the time of the PSO's application for a certificate of authority, and, 
thereafter, upon the department's request, a PSO must provide the department 
with proof of the insolvency deposit, such proof to be in a form that the 
department considers appropriate. 
(b) Uncovered expenditures deposit. 
(1) If at any time uncovered expenditures exceed 10% of a PSO's total health 
care expenditures, then the PSO must place an uncovered expenditures deposit 
into an account with any organization or trustee that is acceptable to the 
department. 
(2) The deposit must at all times have a fair market value of an amount that is 
120% of the PSO's outstanding liability for uncovered expenditures for 
enrollees, including incurred, but not reported, claims. 
(3) The deposit must be calculated as of the first day of each month required 
and maintained for the remainder of each month required.
(4) If a PSO is not otherwise required to file a quarterly report, it must file 
a report within 45 days of the end of the calendar quarter with information 
sufficient to demonstrate compliance with this section. 
(5) The deposit required under this section is restricted and in trust for the 
department's use to protect the interests of the PSO's Medicare enrollees and to 
pay the costs associated with administering the insolvency. It may be used only 
as provided under this section. 
(c) Deposit as asset. A PSO may use the deposits required under subsections (a) 
and (b) of this section to satisfy the PSO's minimum net worth amount required 
under sec.11.2307(a) and (b) of this title (Relating to Minimum Net Worth 
Amount). 
(d) Income. All income from the deposits or trust accounts required under 
subsections (a) and (b) of this section are considered assets of the PSO. Upon 
the department's approval, the income from the deposits may be withdrawn. 
(e) Withdrawal. On prior written approval from the department, a PSO that has 
made a deposit under subsection (a) or (b) of this section may withdraw that 
deposit or any part thereof if: 
(1) a substitute deposit of cash or securities of equal amount and value is 
made; 
(2) the fair market value exceeds the amount of the required deposit; or 
(3) the required deposit under subsections (a) or (b) of this section is reduced 
or eliminated. 

sec.11.2310.Guarantees.
(a) General policy. A PSO, or the legal entity of which the PSO is a component, 
may apply to the department to use the financial resources of a guarantor for 
the purpose of meeting the requirements in sec.11.2304 of this title (relating 
to Financial Plan Requirements). The department has the discretion to approve or 
deny approval of the use of a guarantor. 
(b) Request to use a guarantor. To apply to use the financial resources of a 
guarantor, a PSO must submit to the department the material described in 
paragraphs (1)-(2) of this subsection: 
(1) Documentation that the guarantor meets the requirements for a guarantor 
under subsection (c) of this section; and 
(2) The guarantor's independently audited financial statements for the current 
year-to-date and for the two most recent fiscal years. The financial statements 
must include the guarantor's balance sheets, profit and loss statements, and 
cash flow statements. 
(c) Requirements for guarantor. To serve as a guarantor, an organization must 
meet the following requirements: 
(1) Be a legal entity authorized to conduct business within a state of the 
United States. 
(2) Not be under federal or state bankruptcy or rehabilitation proceedings. 
(3) Have a net worth (not including other guarantees, intangibles and restricted 
reserves) equal to three times the amount of the PSO guarantee. 
(4) If the guarantor is regulated by a state insurance commissioner, or other 
state official with authority for risk-bearing entities, it must meet the net 
worth requirement in paragraph (3) of this subsection with all guarantees and 
all investments in and loans to organizations covered by guarantees excluded 
from its assets. 
(5) If the guarantor is not regulated by a state insurance commissioner or other 
similar state official, it must meet the net worth requirement in paragraph (3) 
of this subsection with all guarantees and all investments in and loans to 
organizations covered by a guarantee and to related parties (subsidiaries and 
affiliates) excluded from its assets. 
(d) Guarantee document. If the guarantee request is approved, a PSO must submit 
to the department a written guarantee document signed by an appropriate 
authority of the guarantor. The guarantee document must contain the following 
provisions: 
(1) State the financial obligation covered by the guarantee; 
(2) Agree to unconditionally fulfill the financial obligation covered by the 
guarantee; 
(3) Agree not to subordinate the guarantee to any other claim on the resources 
of the guarantor; 
(4) Declare that the guarantor must act on a timely basis, in any case not more 
than five business days, to satisfy the financial obligation covered by the 
guarantee; and 
(5) Meet other conditions as the department may establish from time to time. 
(e) Reporting requirement. A PSO must submit to the department the current 
internal financial statements and annual audited financial statements of the 
guarantor according to the schedule, manner, and form that the department 
requests. 
(f) Modification, substitution, and termination of a guarantee. A PSO cannot 
modify, substitute or terminate a guarantee unless the PSO: 
(1) requests the department's approval at least 90 days before the proposed 
effective date of the modification, substitution, or termination; 
(2) demonstrates to the department's satisfaction that the modification, 
substitution, or termination will not result in insolvency of the PSO; and 
(3) demonstrates how the PSO will meet the requirements of this section. 
(g) Nullification. If at any time the guarantor or the guarantee ceases to meet 
the requirements of this section, the department will notify the PSO that it 
ceases to recognize the guarantee document. In the event of this nullification, 
a PSO must: 
(1) meet the applicable requirements of this section within 15 business days; 
and 
(2) if required by the department, meet a portion of the applicable requirements 
in less than the time period granted in paragraph (1) of this subsection. 

sec.11.2311.Dissolution; Liquidation; Rehabilitation.
Any dissolution, liquidation, rehabilitation, supervision or conservation of an 
entity licensed under this subchapter shall be handled as provided in Insurance 
Code, Article 21.28, 21.28-A and 20A.31. 

sec.11.2312.Reports.
Each PSO shall annually, on or before the 1st day of March, file an annual 
statement, in the form adopted by the Commissioner, with the department. Each 
PSO shall file other reports with the department as required from time to time. 

sec.11.2313.Examinations.
The commissioner may make an examination concerning the quality of health care 
services and of the affairs of an PSO as often as the commissioner deems 
necessary, but not less frequently than once every three years. 

sec.11.2314.Suspension or Revocation of Certificate of Authority.
The commissioner, after notice and hearing, may suspend or revoke any 
certificate of authority issued to a PSO, if the commissioner finds that the PSO 
is insolvent or that any of the conditions described in Insurance Code, Article 
20A.20 exist.

sec.11.2315.Application of Other Insurance Laws.
The holder of a certificate of authority issued under this subchapter has all 
the powers granted to and duties imposed on a health maintenance organization 
under the Texas Health Maintenance Organization Act (Insurance Code, Chapter 
20A) and the insurance laws of this state, and is subject to regulation and 
regulatory enforcement under these laws in the same manner as a health 
maintenance organization, except for the solvency standards in this subchapter.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 7, 1998.
TRD-9812575
Lynda H. Nesenholtz
General Counsel and Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 463-6327

PART II. Texas Workers' Compensation Commission
CHAPTER 164.Extra-Hazardous Employer Program
28 TAC sec.sec.164.1-164.8, 164.10-164.12, 164.14-164.18 
The Texas Workers' Compensation Commission proposes amendments to sec.sec.164.1-
164.8, 164.10-164.12, 164.14, 164.15, and new sec.sec.164.16-164.18 concerning 
the Extra-Hazardous Employer Program. 
On July 31, 1996, the Third Court of Appeals in Austin ruled that the 
Occupational Safety and Health Act (OSH Act), 29 U.S.C. sec.651 (1982) preempts 
the extra-hazardous employer program as it was previously administered by the 
Workers' Health and Safety Division of the Texas Workers' Compensation 
Commission. The court found that the federal law preempted the state duplication 
or regulation of Occupational Safety and Health Administration (OSHA) Section 6 
OSH Act standards and noted the administration of the Extra-Hazardous Employer 
Program required that an accident prevention plan had to be consistent with 
federal standards and included provisions relating to the abatement of 
specifically identified hazardous conditions or practices. The Court's ruling 
was that the Extra-Hazardous Employer Program as it was administered under the 
facts of the case was preempted by the federal OSH Act. The Court did not 
address other methods of administering the Extra-Hazardous Employer Program and 
did not specify the boundaries of the federal preemption. It is the Commission's 
intention to comply with the Court's ruling by avoiding actions that are 
preempted by federal law while complying, to the extent possible, with the 
directive of the Texas Labor Code to develop a program to identify extra-
hazardous employers. Historically, employers participating in the Extra-
Hazardous Employer Program have seen reduction in injuries averaging 55%, as 
measured 12 months after completing the program and compared to the 12 months 
used for identification purposes. The program has been very successful in 
promoting workplace safety in Texas. These proposed amendments and new rule have 
been drafted to retain as much of this positive impact as possible without 
treading upon areas the Court has ruled to be within the exclusive jurisdiction 
of the federal OSH Act.
The proposed amendments and new rules recognize the difference between public 
and private employers and define each. Because the OSH Act does not apply to 
public employers but does apply to private employers, the amendments and new 
rules establish a different Extra-Hazardous Employer Program for the two groups 
of employers (public and private). For public employers, the previous Extra-
Hazardous Employer Program remains essentially the same. For private employers, 
the amendments clarify which sections of the rules apply to them. The proposed 
new rules eliminate reference to or actions upon OSH Act Section 6 safety 
hazards, required recommendations based upon such standards, and plan provisions 
for reducing injuries based upon such standards. The amendments delete the 
requirement that the private employers develop accident prevention plans. 
Section 18(a) of the OSH Act states, "Nothing in this Act shall prevent any 
state agency or court from asserting jurisdiction under state law over any 
occupational safety and health issue with respect to which no standard is in 
effect under section 6." Because no section 6 standard can be found which 
addresses identifying employers whose injury frequency rate substantially 
exceeds that of their business or industry, identifying such employers is not 
preempted by OSHA. 
It is recognized that the OSHA has a targeting system that involves collecting 
injury data for worksites and intends to encourage employers with high injury 
rates to voluntarily formulate and implement safety programs through a 
Cooperative Compliance Program (CCP). However, in discussing the directive to 
implement that program, the Secretary of Labor and OSHA made it clear the 
program is not intended to preempt state laws (See Chamber of Commerce of the 
United States, et al. v. United States Department of Labor, et al., No 98-1036 
U.S. Court of Appeals for the District of Columbia). In their brief OSHA states, 
"The directive is not remotely comparable to a 'standard.' A standard sets forth 
mandatory requirements employers must follow; the Directive does not mandate any 
action by employers but, to the contrary, leaves employers completely free to 
decide whether to participate in the CCP. An employer may be cited and penalized 
for violating a 'standard,' because the CCP is voluntary, the Directive contains 
nothing an employer can violate. A standard represents an exercise of delegated 
lawmaking authority and has the force and effect of law; the CCP is a voluntary 
program aimed at encouraging self-inspection and thereby avoiding the need for 
government intervention. A standard preempts state laws in states without OSHA-
approved state plans; OSHA certainly did not intend that a program designed to 
foster voluntary efforts by employers would preempt state laws." 
There is no OSHA standard for identifying employers whose injury frequencies 
substantially exceed those of their business or industry. In a letter to Baruch 
A. Fellner of Gibson, Dun & Cratcher LPP, answering a request to stay 
implementation of the High Injury/Illness Rate Targeting System and Cooperative 
Compliance Program, Mr. Charles N. Jeffress, Assistant Secretary for 
Occupational Safety and Health, stated, "The Targeting System is not remotely 
comparable to an OSHA safety or health standard." Thus, mere identification of 
employers as extra-hazardous is not preempted by OSHA. 
Proposed sec.164.1. 
The proposed amendment to sec.164.1(b)(1) adds to the definition of "employer" a 
distinction between public and private employers. Subsection (b)(3) acknowledges 
that a replacement coding system, North American Industry Classification System 
(NAICS), has been developed and will be implemented when appropriate coding 
assignments and data collection instruments incorporate the changes. The 
proposed amendment to subsection (b)(5) clarifies which injuries are to be 
included in the determination of extra-hazardous employer status. Proposed 
subsection (f) expands the provisions for employers with fewer than 20 employees 
to elect the state's OSHCON Program, in lieu of the Extra-Hazardous Employers 
Program. Previous rules limited such an option to employers with fewer than 20 
employees who would have been identified for the program based upon a fatality 
only. Proposed subsection (f)(3) has been added to clarify that public employers 
will be provided OSHCON services with state resources. 
Proposed sec.164.2. 
The proposed amendment to sec.164.2 deletes the reference to Chapter 145 
(relating to Dispute Resolution Hearings Under the Administrative Procedure Act) 
because Chapter 145 applies to hearings to adjudicate disputes under the Texas 
Workers' Compensation Act where the first day of hearing occurred prior to 
January 1, 1996. Hearings which fall within the time period described by Chapter 
145 have already been completed, therefore Chapter 145 is no longer applicable 
to any hearings related to the Extra-Hazardous Program. The words "if any" in 
proposed subsection (b)(2) have been added because no action is required for 
private employers. The words "if any" are added to subsection (b)(3) to reflect 
private employer actions that are not required. The words "as applicable" in 
subsection (b)(5) have been deleted. In proposed subsection (b)(6) the word 
"the" has been replaced by "any" to clarify that not all employees identified as 
extra-hazardous will be assessed penalties. 
Proposed sec.164.3. 
The proposed amendment to sec.164.3 changes the rule title and subsections (a) 
and (b) to indicate its application to only public employers. Proposed sec.164.3 
does not apply to private employers. Under the proposed rules, the consultant's 
initial visit includes a review of the existing safety programs, a walk through 
of the employer's worksite for the purpose of conducting a hazard exposure 
survey, and preparation of a program review report. In proposed subsection (d) 
the term "hazard survey" has been deleted and replaced with the term "hazard 
exposure survey" to emphasize the importance of an exposure which may or may not 
include a physical hazard. The hazard exposure survey will be included in the 
program review report. The requirement that the program review report be in 
writing has been deleted and instead the report will comply with a format 
prescribed by the Commission. The words "in writing" and "and shall include a 
description of any hazardous conditions or practices identified, along with the 
recommendations for controlling the identified hazardous conditions or 
practices" in subsection (d) have been eliminated because the format required by 
the Commission will provide the requirements for the report. While the report 
would still require a description of any hazardous conditions or practices 
identified, it will no longer reference federal standards. Under proposed 
sec.164.3, the report would reference which parts of the Accident Prevention 
Plan would most likely abate the hazard identified. The survey would be 
submitted to the Commission as part of the new program review report. The 
consultation in proposed sec.164.3 concentrates on the existence or need for 
administrative accident prevention plan components that have historically proven 
effective in preventing or mitigating injuries. In proposed subsection (e) the 
term "hazard survey" has been replaced with "program review" and "any 
attachments" has been replaced with "all subparts". This more clearly focuses 
the survey on the administrative accident plan components. The words "the 
employer" in proposed subsection (g) have been changed to "an employer" because 
the consultant may only charge an employer that is provided consultation 
services. 
Proposed sec.164.4. 
As in proposed sec.164.3, the proposed amendment to sec.164.4 changes the rule 
title to indicate that this rule applies only to public employers. The proposed 
amendment would remove the requirement that an accident prevention plan be 
consistent with federal codes, because public employers are exempt from OSHA 
federal safety and health standards. Also, the requirement that only hazards 
likely to cause death or serious harm be identified in the report is deleted in 
the proposal. This change results from the proposed new report format which 
requires identification of all hazards the consultant found during the 
consultation. The proposed amendment also changes the wording of the analysis 
component, placing emphasis on having the analysis evaluate the effectiveness of 
the safety program and the detection of trends. For the review and revision 
component, the proposed wording highlights the need to perform a program review 
when there is a change in operations, equipment, or processes. Under proposed 
sec.164.4, the review and revision component no longer requires a determination 
of the effectiveness of abatement measures. The proposed amendment also corrects 
references to the titles of other rules. 
To accomplish the changes discussed previously, the rule title to sec.164.4 and 
subsection (a), (a)(2), (a)(7), and (b) are proposed to be amended. The words 
"for Public Employers" are added at the end of the title of the proposed rule. 
Proposed subsection (a) is amended by inserting the word "Public" at the 
beginning of the paragraph. In proposed subsection (a), the requirement that an 
accident prevention plan be consistent with federal codes is deleted and 
references to identified hazards that were likely to cause death or serious harm 
are deleted. The proposed amendments to subsection (a)(2) regarding the analysis 
component emphasize conducting the analysis to evaluate the effectiveness of the 
entire safety program and the detection of trends. Proposed subsection (a)(7), 
adds program review to the accident prevention plan when there is a change in 
operations, equipment, and/or processes. The reference to other rules in 
proposed subsection (b) are amended to reflect rule title changes.
Proposed sec.164.5. 
The proposed amendment to sec.164.5 adds the words "for Public Employers" to the 
rule title to indicate that this rule only applies to public employers. This 
title change would eliminate the requirement for private employers to receive an 
inspection to certify implementation of the accident prevention plan. In 
addition, in each subsection of proposed sec.164.6 the word "public" is inserted 
before "employer" to clarify that each subsection applies only to public 
employers. 
Proposed sec.164.6. 
The proposed amendment to sec.164.6 adds the words "Public Employers" to the 
rule title to indicate that this rule only applies to public employers. In 
addition, as in sec.164.5, in each subsection of proposed sec.164.6 the word 
"public" is inserted before "employer" to clarify that each subsection applies 
only to public employers. 
Proposed sec.164.7. 
The proposed amendment to sec.164.7 adds the words "Public Employers" to the 
rule title to indicate that this rule only applies to public employers. In 
proposed subsections (a) and (b) the word "public" is added prior to the first 
time the word "employer" appears in the paragraphs to clarify that the 
subsection applies only to public employers. In subsection (c)(3) the proposed 
amendment deletes the reference to "additional accident prevention plans" and 
replaces it with "additional safety plans". This change is needed because 
additional plans may not necessarily be part of the accident prevention plan. 
Also, the proposed amendment to subsection (c)(3) broadens the purpose of an 
additional safety plan. In proposed subsection (d) references to other rules are 
changed to reflect title changes to rules. 
Proposed sec.164.8. 
The proposed amendment to sec.164.8 adds the words "Public Employers" to the 
rule title to indicate that this rule only applies to public employers. The 
elimination of private employers from this rule deletes the requirement for 
private employers to be continued on the extra-hazardous employers program 
because they failed to implement an accident prevention plan. To further 
indicate that this proposed rule applies only to public employers, the word 
"public" is inserted in subsection (a) next to the word "employer." The 
reference to sec.164.5 is changed to reflect the proposed rule title change. 
Proposed sec.164.10. 
The proposed amendment to sec.164.10 removes the reference in subsection (a)(1) 
to a "hazard analysis" and replaces it with a "program review report." This 
change reflects the names of the new forms and reports which would be 
implemented by the proposed rules. Proposed subsection (a)(1) deletes the 
requirement that the report or plan be signed by the consultant and replaces 
"mandatory, and/or federal" with "program review report, or established industry 
practices." This change is needed because compliance with OSHA federal standards 
is not part of the proposed Extra-Hazardous Employer Program. In place of 
federal standards, established industry practices are used. Producing a report 
or plan with federal standards is eliminated from subsection (a)(1) as a reason 
for removal of an approved professional source from the Commission's list and 
the reference to subsection (a)(1) is removed from subsection (d) and added to 
subsection (e). These changes allow reinstatement of an approved professional 
source on the list after a period of one year for violation of subsection 
(a)(1). The word "public" is added to subsection (a)(5) to clarify that the 
subsection pertains only to public employers and the reference to sec.164.4 is 
changed to reflect the proposed rule title change. The proposed amendment 
deletes references in subsections (b) and (c) to Chapter 145 (relating to 
Dispute Resolution Hearings Under the Administrative Procedure Act) because 
Chapter 145 is no longer applicable to hearings regarding the Extra-Hazardous 
Program. 
Proposed sec.164.11. 
The proposed amendment to sec.164.11 deletes subsection (c). The division will 
use all available resources to fill requests for safety consultations. 
Proposed sec.164.12. 
The proposed amendment to sec.164.12 delineates when an employer is required to 
reimburse the Commission for services provided in connection with the Extra-
Hazardous Employer Program. Proposed changes reflect when a public employer and 
a private employer must pay for Commission services. In proposed subsection 
(a)(2), (3), (4), and (5) the word "public" is inserted prior to the first word 
"employer." In subsection (a)(3) the reference to sec.164.5 is changed to 
reflect the rule's proposed title change. Proposed subsection (a)(6) is added to 
reflect that private employers will not be visited by Commission staff unless 
the private employer requested the visit and that no other actions or conduct by 
the private employer are required. 
Proposed sec.164.14. 
The proposed amendment to sec.164.14 adds a description of the audit period to 
be used after October 31, 1998 and deletes the reference to the old audit 
period. The initial audit period would be July 1, 1997 through June 30, 1998. 
The proposed amendment to subsection (c) clarifies when the annual review of the 
Extra-Hazardous Program would begin under revised Chapter 164. The word 
"excluded" in proposed subsection (e)(4) is deleted and replaced with "converted 
to an injury for use in the computation." Proposed subsection (e)(5) is added to 
convert fatalities investigated by Federal OSHA to injuries for purposes of the 
computations involved in the identifications of extra-hazardous employers. This 
change clarifies how fatalities resulting from circumstances beyond the control 
or jurisdiction of the employer are counted in the identification process. 
Proposed sec.164.15. 
The proposed amendment to sec.164.15 deletes the reference to sec.145.3 because 
Chapter 145 is no longer applicable. 
Proposed New sec.164.16. 
Proposed new sec.164.16 is applicable only to private employers and provides 
that unless an employer identified as Extra-Hazardous is removed from that 
status by an administrative review or a hearing, the identification will remain 
in effect for a period of twelve months from the date of identification. In 
addition, a private employer could only be identified as extra-hazardous once 
every twelve months. During that twelve-month period, an employer can choose to 
utilize the services of the Workers' Health and Safety Division of the 
Commission or other health and safety sources. 
Proposed New sec.164.17. 
Proposed new sec.164.17 points out that private employers with a total of 250 
employees or less in all SIC codes are eligible to obtain an Occupational Safety 
and Health Consultation (OSHCON) from the division at no cost to the employer. 
The availability of this resource is an important part of the Extra-Hazardous 
Employer Program since it identifies free services available from a 
federal/state partnership. This service has proven beneficial to employers who 
have requested the service. 
Proposed New sec.164.18. 
Proposed new sec.164.18 states the general principal that a court can find a 
portion of a rule or statute invalid, allowing the remaining portion to continue 
in effect. 
Janet Chamness, Associate Director of Finance, has determined that for the first 
five-year period the proposed amendments and new rules are in effect there will 
be no fiscal implications for state or local governments as a result of 
enforcing or administering the rules as amended or newly adopted. The state and 
local governments as entities subject to these rules will continue to be 
involved in the program with the same cost factors encountered before the rules 
were amended. The fiscal impact is attributable to requirements already imposed 
by the statute and existing rules, rather than the proposed amendments and new 
rules. 
Ms. Chamness has also determined that for each year of the first five years the 
amended and new rules as proposed are in effect the public benefit anticipated 
as a result of enforcing the rules will be a safer and healthier workplace for 
employees because of employers' participating in the program. Historically, 
employers participating in the program as previously administered have seen 
reduction in injuries of up to 55%, as measured 12 months after completing the 
program and compared to the 12 months used for identification purposes. A 
reduced number of injuries result in a corresponding reduction in costs to the 
workers' compensation system. A reduced number of injuries should also result in 
reduced experience modifiers for employers and be reflected in lower future 
premiums. 
Some public employers will continue to be involved in the program with the same 
cost factors encountered before the rules were amended. Program costs are 
expected to be offset by a reduction in injuries and their associated costs. The 
fiscal impact is attributable to requirements already imposed by the statute and 
existing rules, rather than the proposed amendments and new rules. 
The proposed amendments and new rules will have no adverse economic effect on 
small businesses. An analysis and comparison of the costs of compliance for 
small business with the costs of compliance for large businesses does not 
demonstrate any increase for either entity. Small public and private businesses 
with less than 20 employees may have lower costs than larger businesses as a 
result of the proposed rules by being excluded from identification under the 
program. Small and large private businesses identified as extra-hazardous under 
the proposed new and amended rules will have lower costs by not receiving and 
paying for a safety consultation, or for an inspection from the division.
Comments on the proposal must be received by 5 p.m. on September 21, 1998, and 
submitted to Sue Cutler, Office of the General Counsel, Mailstop #4-D, Texas 
Workers' Compensation Commission, Southfield Building, 4000 South IH-35, Austin, 
Texas 78704-7491. A public hearing on this proposed new rule is tentatively 
scheduled for September 16, 1998, at 10am. Those persons interested in attending 
the public hearing should contact the Commission's Office of Executive 
Communication at (512) 440-5690 to confirm the date, time, and location of the 
public hearing.
The amendments and new sections are proposed under the Texas Labor Code, 
sec.402.061, which authorizes the Commission to adopt rules necessary to 
administer the Act; the Texas Labor Code, sec.sec.411.041-411.048, which require 
the Commission to identify extra-hazardous employers and develop, implement, and 
enforce accident prevention programs; and the Texas Labor Code, sec.411.049, 
which provides that an employer may request a hearing to contest the 
identification as an extra-hazardous employer. 
The amendments and new sections affect the following statutes: the Texas Labor 
Code, sec.sec.411.011-411.018, 411.031-411.035, 411.041-411.048 and 411.101-
411.110, which require the Commission to identify extra-hazardous employers and 
develop, implement and enforce accident prevention programs; the Texas Labor 
Code, sec.411.049, which provides that an employer may request a hearing to 
contest the identification as an extra-hazardous employer; and the Texas Labor 
Code, sec.411.050, which provides when identification as an extra-hazardous 
employer may be used in a judicial proceeding. 

sec.164.1.Criteria for Identifying Extra-Hazardous Employers.
(a) (No change.) 
(b) The following words and terms, when used in this chapter, shall have the 
following meanings, unless the context clearly indicates otherwise.
(1) Employer - A public or private entity defined by the employer's Federal 
Employer Identification Number (FEIN) and four-digit Standard Industrial 
Classification (SIC) code. <nl>Public employers are employers who are political 
subdivisions of the state. Private employers shall include all employers who are 
not Federal, State, other governmental agencies, or political subdivisions of 
the state.<ol> 
(2) (No change.) 
(3) Standard Industrial Classification (SIC) Code - The SIC Code derived from 
the Standard Industrial Classification Manual, current edition, published by the 
Office of Management and Budget, and assigned to the employer by the <nl>Texas 
Workforce Commission (TWC)<ol> [Texas Employment Commission]. <nl>When the Texas 
Workforce Commission assigns appropriate codes, and the Bureau of Labor 
Statistics completes the transition to the North American Industry 
Classification System (NAICS) in their publications, the NAICS will replace the 
Standard Industrial Classification Manual to classify employers by their 
business or industry, and to obtain the Expected Injury Rate at the level 
equivalent to that used under the SIC. Employers will be notified by the 
Commission prior to the change in coding systems through a notice published in 
the Texas Register.<ol> 
(4) Employment (E) - Highest employment recorded during the audit period by the 
employer in any pay period, for the applicable SIC code, as reported to 
<nl>TWC<ol>[TEC] or substantiated by employer payroll documents. 
(5) Injuries (I) - The employer's total number of injuries, <nl> in the 
following categories:<ol> [ including] lost time injuries, occupational 
diseases, and fatalities. The category of no lost time injuries will be included 
when provided by rule. 
(6)-(13) (No change.) 
(c)-(e) (No change.) 
(f) An employer whose [identification is based solely on one fatality and whose] 
total employment in all SIC codes is less than 20 may be excluded from 
identification for the program. 
(1)-(2) (No change.) 
<nl>(3)<ol> <nl>Public employers who request an OSHCON consultation will be 
provided an OSHCON equivalent consultation utilizing state resources. <ol>
<nl>(4)<ol> [(3)] If the employer does not request and receive a full OSHCON 
consultation, the employer will be identified for the Extra-Hazardous Employer 
Program. 
<nl>(5)<ol> [(4)] An employer tentatively identified for the program may request 
an administrative review of the facts used in the tentative identification as 
addressed in sec.164.2 of this title (relating to Notice to Extra-Hazardous 
Employers). 

sec.164.2.Notice to Extra-Hazardous Employers.
(a) (No change.) 
(b) The notice shall be in writing and shall inform the employer of the 
following requirements: 
(1)-(2) (No change.) 
(3) an outline of the actions<nl>, if any,<ol> the employer is required to take 
as an identified extra-hazardous employer; 
(4) (No change.) 
(5) the information that the employer has the right to contest "extra-hazardous 
employer" status by requesting a hearing within 20 days of notification of 
identification or failure to resolve the matter administratively, [as provided 
by Chapter 145 of this title (relating to Dispute Resolution Hearings Under the 
Administrative Procedure Act) or] as provided by Chapter 148 of this title 
(relating to Hearings Conducted by the State Office of Administrative Hearings) 
[as applicable]. The Workers' Health and Safety Division will offer the employer 
the opportunity to refer to a hearing request for an administrative review that 
is not resolved through the administrative process. A request for a hearing will 
suspend identification as an "extra-hazardous employer" pending the outcome of 
the hearing; 
(6) <nl>any<ol> [the] penalties for failure to take the actions required under 
the Extra-Hazardous Employer Program; and 
(7) (No change.)

sec.164.3.Safety Consultation <nl>for Public Employers<ol>.
(a) <nl>Public employers<ol> [Employers] who have not had an accident prevention 
plan developed and implemented in the last six months prior to notification 
shall, not later than 30 days following receipt of notice of identification as 
an extra-hazardous employer, complete a safety consultation from a consultant 
who has been approved by the division as an approved professional source. The 
consultation may be provided by:
(1)-(3) (No change.)
(b) <nl>Public employers<ol> [Employers] who have had an accident prevention 
plan developed within the six months prior to notification as an extra-hazardous 
employer must obtain division review of the plan for adequacy, to include an on-
site visit. 
(c) (No change.)
(d) The safety consultant<nl>, described in subsection (a) of this section,<ol> 
shall <nl>visit the public employer's work place, review existing safety 
programs,<ol> conduct a <nl>walk through<ol> [hazard survey] at each appropriate 
job site <nl>to include a hazard exposure survey,<ol> and prepare a <nl>program 
review<ol> [hazard survey] report. The report shall be [in writing] in the 
format prescribed by the commission [and shall include a description of any 
hazardous conditions or practices identified, along with recommendations for 
controlling the identified hazardous conditions or practices]. 
(e) The <nl>program review<ol> [hazard survey] report(s) and <nl>all 
subparts<ol> [any attachments] shall be filed by the consultant with the 
division within 24 hours of the date of the <nl> public<ol> employer's signature 
on the <nl>Program Review<ol> [Hazard Survey] Report. 
(f) If the initial consultation and report cannot be completed in the time 
allowed under this section, the <nl>public<ol> employer may apply to the 
commission for a waiver of the time requirements. In no case shall the initial 
consultation exceed 60 days following the receipt of notification of 
identification as an extra hazardous employer. 
(g) The consultants identified in subsection (a) of this section may charge 
<nl>an<ol> [the] employer for consultations provided under the extra-hazardous 
employer program. 

sec.164.4.Formulation of Accident Prevention Plan <nl> for Public Employers<ol>.
(a) <nl>Public employers<ol> [Employers] who have not had an accident prevention 
plan developed in the last six months prior to notification will, within 30 days 
of the date of the consultant's initial report, develop [with the assistance of 
a consultant] an accident prevention plan. This plan will be consistent with 
established [federal and] state <nl>safety and health<ol> codes and [standards, 
or in the absence of such standards,] with accepted industry practices. [If the 
initial report indicated recognized hazards that are causing or are likely to 
cause death or serious physical harm to employees, it will address each hazard 
and/or unsafe practice identified in the report.] The accident prevention plan 
shall be developed with the assistance of an approved professional source as 
defined in sec.164.9 of this title (relating to Approval of Professional Sources 
for Safety Consultations), and shall be in the format prescribed by the 
Commission. The <nl>public<ol> employer shall submit the completed accident 
prevention plan, developed and signed by the <nl>public<ol> employer and the 
approved professional source, to the division. The approved professional 
source's signature on the accident prevention plan cover sheet certifies that 
the accident prevention plan meets the format prescribed by the commission. The 
format shall include the following components and specify the individual 
responsible for each, by position or title: 
(1) (No change.) 
(2) an analysis component which includes <nl>a review of safety program 
documentation, existing operations, and injury trends. The analysis will be used 
to evaluate the effectiveness of the existing programs and to detect existing or 
potential<ol> [identified operational and safety hazards and injury] trends. The 
analysis component will contain a statement as to the interval between the 
accomplishment of the analyses;
(3)-(6) (No change.)
(7) a component to ensure [a periodic] review and revision of the safety program 
<nl>when changes in operations, equipment, or public employee activities are 
determined or anticipated, to ensure continued effectiveness of the program 
requirements. This component also includes the periodic review and revisions of 
the safety program including<ol> [and operational procedures to determine 
effectiveness of abatement measures with] a statement as to the interval 
(minimum of annually) between reviews. 
(b) <nl>Public employers<ol> [Employers] who have had an accident prevention 
plan developed and implemented within the six months prior to notification as an 
extra-hazardous employer and verified and approved by the division pursuant to 
sec.164.3(b) of this title (relating to Safety Consultation <nl>for Public 
Employers<ol>) will continue implementation of the plan and obtain an inspection 
by the division as provided in sec.164.5 of this title (relating to Follow-up 
Inspection <nl>for Public Employers <ol> by the Division). 
(c)-(d) (No change.) 
(e) If the <nl>public<ol> employer disagrees with any or all of the plan, the 
<nl>public<ol> employer shall sign the accident prevention cover sheet and 
attach a statement containing the specific reasons for disagreement to the plan 
and what alternative measures the <nl>public<ol> employer proposes to meet the 
objectives of the program. The division will review the areas of disagreement 
and notify the <nl>public<ol> employer and the consultant of the decision on 
each area of the disagreement. 
(f) The <nl>public<ol> employer's signature is understood to exclude those areas 
of the plan for which a disagreement has been attached to the plan, pending 
review by the division or a formal appeal. 
(g) If the division finds it is practical to do so, the division may direct the 
<nl>public<ol> employer to begin implementation of any or all parts of the plan 
that are not subject to the <nl>public<ol> employer's disagreement. The time 
lines specified in the plan shall remain in effect for those parts of the plan 
the <nl>public<ol> employer is directed to implement. 
(h) The <nl>public<ol> employer shall be responsible for filing the accident 
prevention plan that has been reviewed by the approved professional source and 
signed as meeting the criteria in subsection (a) of this section with the 
division no later than 30 days after completion of the safety consultation and 
no later than 90 days after the employer received notification of identification 
as an extra-hazardous employer. Delays requested for good cause may be granted 
by the division. 

sec.164.5.Follow-up Inspection <nl>for Public Employers <ol> by the Division. 
(a) Not earlier than six months or later than nine months after the formulation 
of the <nl>public<ol> employer's accident prevention plan, the division shall 
conduct a follow-up inspection to ensure compliance with, and effectiveness of, 
the accident prevention plan at the <nl>public <ol> employer's premises. 
(b) (No change.)
(c) The <nl>public<ol> employer shall allow the division access to the 
<nl>public<ol> employer's premises, including remote job sites, and employees 
during normal work hours to conduct the follow-up inspection. <nl> A public<ol> 
[An] employer who without good cause refuses to allow the division access to the 
<nl>public<ol> employer's premises may be served with an order of the commission 
demanding such access. Failure to comply with the commission order will subject 
the <nl>public<ol> employer to penalties and sanctions as provided in the Texas 
Labor Code, sec.415.021(b)(3).
(d) At the time of the inspection, the division may consider as evidence of 
compliance information which includes, but is not limited to, visual 
verification, written policies and procedures, attendance rosters for training 
programs, <nl>public<ol> employee interviews, and purchase orders or receipts 
for equipment or services necessary to support the accident prevention plan. 

sec.164.6.Report of Follow-up Inspection<nl>, Public Employers<ol>.
(a) As soon as practical, but not later than 30 days from the date of inspection 
the <nl>public<ol> employer, the safety consultant, and the employer's workers' 
compensation insurance carrier, if any, shall be provided copies of the report 
of the follow-up inspection by the division. 
(b) The report shall be in writing and shall specify whether the <nl>public<ol> 
employer has, or has not, implemented the accident prevention plan or other 
acceptable corrective measures approved by the division. 
(c) If the <nl>public<ol> employer is found not to have implemented the accident 
prevention plan, the report shall also contain: 
(1) a notification that the <nl>public<ol> employer's extra-hazardous employer 
status is being continued; 
(2) (No change.) 
(3) a list of the specific actions required of the <nl> public<ol> employer to 
correct the identified deficiencies; and 
(4) (No change.) 

sec.164.7.Removal <nl>of Public Employers<ol> From Extra-Hazardous Employer 
Status [and Placement in Monitor Status
(a) <nl>A public<ol> [An] employer shall be removed from extra-hazardous 
employer status if, on inspection, the division determines that the employer has 
complied with the terms of the accident prevention plan or implemented other 
acceptable corrective measures approved by the division. 
(b) If the <nl>public<ol> employer has complied with the accident prevention 
plan but continues to exceed the injury frequency that may reasonably be 
expected in that <nl>public<ol> employer's business or industry, the 
<nl>public<ol> employer will be removed from extra-hazardous employer status and 
placed in a monitoring status. For purposes of placing <nl> a public<ol> [an] 
employer in monitor status, the phrase "reasonably expected" is defined as: the 
Expected Injury Rate as defined in sec.164.1(b)(7) of this title (relating to 
Criteria For Identifying Extra-Hazardous Employers). Injury data from the most 
recent 12-month period for which data is available will be used to determine 
placement on monitor status. 
(c) During the monitoring period, the division: 
(1)-(2) (No change.) 
(3) may formulate additional <nl>safety<ol> [accident prevention] plans 
reasonably <nl>designed<ol> [calculated] to <nl>increase the effectiveness of 
the existing plan<ol> [abate hazards]. 
(d) At the end of the six month monitoring period the <nl> public<ol> employer 
will be removed from the program. Such release from the program will not prevent 
the division from evaluating the employer in future audit periods. If identified 
in a future audit period, the employer will be required to fulfill all 
requirements of sec.sec.164.1-164.4 of this title (relating to Criteria For 
Identifying Extra-Hazardous Employers; Notice To Extra-Hazardous Employers; 
Safety Consultation <nl>for Public Employers <ol>; and Formulation of Accident 
Prevention Plan <nl>for Public Employers<ol>). 
(e) <nl>A public<ol> [An] employer who fails or refuses to implement accident 
prevention plans formulated by the division under subsection (c) of this section 
commits an administrative violation with a penalty not to exceed $5,000 a day. 

sec.164.8.Continuation of Extra-Hazardous Employer Status<nl>, Public 
Employers<ol>.
(a) <nl>A public<ol> [An] employer shall remain on extra-hazardous employer 
status if the employer is found under sec.164.5 of this title (relating to 
Follow-up Inspection <nl>for Public Employers <ol> by the Division) to have 
failed or refused to implement an accident prevention plan or other suitable 
hazard abatement measures as approved by the division. 
(b) If <nl>a public<ol> [an] employer is not certified for removal from extra-
hazardous employer status after the follow-up inspection, the employer shall 
take the actions specified in the follow-up inspection report, or other suitable 
hazard abatement measures as approved by the division, as a condition of future 
removal from extra-hazardous employer status. 
(c) <nl>A public<ol> [An] employer shall file a progress report with the 
division every 60 days until the employer has been removed from extra-hazardous 
employer status. The report shall include: 
(1)-(3) (No change.)
(d) After the required corrective actions have been taken, the <nl>public<ol> 
employer shall notify the division and request a reinspection. 
(e) The division shall reinspect the <nl>public<ol> employer six months after 
the date of the follow-up inspection or within 30 days after receiving a request 
to reinspect, whichever is earlier. 

sec.164.10.Removal From the List of Approved Professional Sources.
(a) A safety consultant shall remain on the list of approved professional 
sources until removed by the commissioners because: 
(1) the <nl>program review report or<ol> [hazard analysis and] accident 
prevention plan [signed by the consultant] is in conflict with [mandatory] state 
[and/or federal] safety and health standards <nl>or established industry 
practices<ol> applicable to the workplace; 
(2)-(4) (No change.) 
(5) the consultant approves an accident prevention plan submitted by <nl>a 
public<ol> [an] employer that does not meet the criteria prescribed in 
sec.164.4(a) of this title (relating to Formulation of Accident Prevention Plan 
<nl>for Public Employers<ol>). The consultant's signature on the Accident 
Prevention Plan Cover Sheet is understood to certify that the accident 
prevention plan has been personally reviewed by the consultant and the plan 
contains the prescribed components in sec.164.4 (a) of this title. 
(b) The division shall notify a consultant by certified mail, return receipt 
requested, of the division's intent to recommend to the commissioners that the 
consultant be removed from the list. Within 20 days after receiving the notice, 
a consultant may request a hearing as provided by [sec.145.3 of this title 
(relating to Requesting a Hearing) or as provided by] sec.148.3 of this title 
(relating to Requesting a Hearing) [as applicable ]. If a request for hearing is 
received, the commission shall hold a hearing as provided in [Chapter 145 of 
this title (relating to Dispute Resolution -- Hearings Under the Administrative 
Procedure Act) or as provided in] Chapter 148 of this title (relating to 
Hearings conducted by the State Office of Administrative Hearings) [as 
applicable]. If no request for hearing is filed within the time allowed, the 
division's recommendation will be reviewed by the commissioners at a public 
meeting and a decision made to either delete or maintain the consultant on the 
list. 
(c) As described in the Texas Labor Code, sec.402.072, [sec.145.24 of this title 
(relating to Special Provisions for Imposing Sanctions Pursuant to the Act, 
sec.2.09(f)),] and sec.148.23 of this title (relating to Proposal for Decision 
by the Hearing Officer), only the commissioners may delete a consultant from the 
list. The commission shall notify the consultant by issuing an order of 
deletion. This order will be delivered to the consultant by certified mail, 
return receipt requested, with a copy maintained in the consultant's file until 
the consultant meets reinstatement criteria as outlined in subsections 
(d),(e),(f), or (g) of this section. 
(d) A safety consultant removed from the list of approved professional sources 
under subsection (a)[(1) or] (2) of this section shall not be reinstated on the 
list. 
(e) A safety consultant removed from the list of approved professional sources 
under subsection (a)<nl>(1) or<ol> (3) of this section may apply for 
reinstatement on the list after a period of one year. 
(f)-(i) (No change.) 

sec.164.11.Request for Safety Consultation From the Division.
(a) -(b) (No change.) 
[(c) The division shall accept only the number of requests that it can serve in 
the time frames established by the applicable rules. and the Texas Labor Code, 
sec.411.041. Priority shall be based on the order in which the requests are 
received, available consultant expertise in the requesting employer's industry, 
or extra-hazardous employer status involving multiple fatalities.] 
<nl>(c)<ol> [(d)] The division shall notify each employer who requests services 
whether the division has accepted or rejected the request. The notice shall be 
in writing and shall be made within three working days of the date the 
commission received the request. 

sec.164.12.Reimbursement of Division for Services Provided to Extra-Hazardous 
Employer.
(a) An employer shall be required to reimburse the division for the services it 
renders when: 
(1) (No change.)
(2) the division investigates accidents at the <nl> public<ol> employer's 
worksite(s) while the employer is designated an extra-hazardous employer or is 
in monitor status; 
(3) the division conducts a follow-up inspection of the <nl> public<ol> 
employer's premises under sec.164.5 of this title (relating to Follow-up 
Inspection <nl>for Public Employers<ol> by the Division) or other inspection 
under sec.164.8 of this title (relating to Continuation of Extra-Hazardous 
Employer Status<nl>, Public Employers<ol>); 
(4) the division formulates an accident prevention plan under sec.164.8 of this 
title for <nl>a public<ol> [an] employer who was not removed from extra-
hazardous employer status after the follow-up inspection or was placed in 
monitor status; [or] 
(5) the division conducts visits to the <nl>public<ol> employer after the 
<nl>public<ol> employer was not removed from extra-hazardous employer 
status<nl>; or<ol>[.] 
<nl>(6)<ol> <nl>a private employer requests the division to perform a 
consultation or other services. <ol>
(b)-(c) (No change.) 

sec.164.14.Values [and Criteria] Assigned for Computation of Extra-Hazardous 
Employer Identification.
(a)-(b) (No change.) 
(c) <nl>After October 31, 1998, the division will use a 12-month audit period 
made up of four calendar year quarters to be used for counting employment and 
injuries.<ol> The initial 12-month audit period <nl>is July 1, 1997 through June 
30, 1998 <ol> [to be used for counting employment and injuries is September 1, 
1993 through August 31, 1994]. Subsequent 12-month audit periods will advance by 
three months [for each audit period]. The Extra-Hazardous Employer Program will 
be reviewed at least once each year at the January public meeting, beginning 
January <nl>2000<ol> [1996], for authorization by the commissioners to continue 
the notification cycles for <nl>another<ol> [the next] year.
(d) (No change.) 
(e) Fatal injuries that meet the following screening criteria will be converted 
to injuries by the division and used in the computation. 
(1)-(3) (No change.) 
(4) Circumstances beyond the control or jurisdiction of the employer. A fatality 
resulting from circumstances beyond the control or jurisdiction of the employer 
will be included in the computation as an injury rather than a fatality. Where 
the employee, employer, or employment environment was involved in the fatality 
and verifiable information was provided indicating preventive programs were in 
place and enforced, the fatality will be <nl>converted to an injury for use in 
the computation<ol> [excluded <nl>(5)<ol> <nl>Fatalities which were investigated 
by Federal OSHA.<ol>

sec.164.15.Administrative Reviews and Hearings Regarding Identification as an 
Extra-Hazardous Employer.
(a)-(f) (No change.) 
(g) Requests for hearings under this rule must be made in compliance with 
[sec.145.3 of this title (relating to Requesting a Hearing) or] sec.148.3 of 
this title (relating to Requesting a Hearing) [as applicable]. 

sec.164.16.Removal of Private Employers from Extra-Hazardous Employer Status.
Unless the identification of a private sector employer as extra-hazardous in 
accordance with this chapter is removed by an administrative review or a 
hearing, the identification remains in effect for twelve months from the 
effective date of identification, regardless of any action the employer may have 
taken under these rules. 

sec.164.17.Availability of OSHCON Services.
Private employers who have 250 employees or less, in all SIC codes, are 
encouraged to obtain a full Occupational Safety and Health Consultation (OSHCON) 
from the division. OSHCON consultations are available at no cost to the 
employers. 

sec.164.18.Severability.
Where any terms or sections of this chapter are determined by a court of 
competent jurisdiction to be inconsistent with any applicable law, the 
applicable law will apply and the remaining terms and provisions of this chapter 
shall continue in effect. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 10, 1998.
TRD-9812603
Susan M. Cory
General Counsel
Texas Workers' Compensation Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 440-3972

TITLE 30. ENVIRONMENTAL QUALITY
PART I. Texas Natural Resource Conservation Commission
CHAPTER 7. Memoranda of Understanding
30 TAC sec.7.118
The Texas Natural Resource Conservation Commission (commission) proposes new 
sec.7.118, concerning Memorandum of Understanding between the Texas Department 
of Health and the Texas Natural Resource Conservation Commission Regarding 
Radiation Control Functions. 
EXPLANATION OF PROPOSED RULES The primary purpose of new rule sec.7.118 is to 
reflect the transfer of the source material licensing and by-product disposal 
jurisdiction from the commission to the Texas Department of Health (TDH) by 
Senate Bill (SB) 1857, 75th Legislature, 1997, in an amended Memorandum of 
Understanding (MOU). 
New sec.7.118 is proposed to adopt by reference TDH rule 25 Texas Administrative 
Code (TAC) sec.289.101, Memorandum of Understanding between the Texas Department 
of Health and the Texas Natural Resource Conservation Commission Regarding 
Radiation Control Functions, which is amended to reflect the transfer of the 
source material and by-product disposal jurisdiction to the TDH. The full text 
of the amended MOU is proposed for adoption in Texas Department of Health rule 
25 TAC sec.289.101 (July 31, 1998, issue of the Texas Register (24 TexReg 
7707)). Also, an amended sec.336.11 and new sec.331.16 are proposed that will 
reference the updated MOU and state where to obtain a copy. 
FISCAL NOTE Stephen Minick, Strategic Planning and Appropriations Division, has 
determined that for the first five-year period the new rule section as proposed 
is in effect, there will be no significant fiscal implications for state 
government. There are also no fiscal implications for units of local government. 
PUBLIC BENEFIT Mr. Minick has also determined that for the first five years the 
new rule section as proposed is in effect the public benefit anticipated will be 
a clearer understanding between the state agencies on their jurisdictions and on 
areas of cooperation. The proposed new section will result in no increase in 
costs to affected parties. Significant cost savings are not anticipated to any 
person or business, large or small. 
ECONOMIC ANALYSIS FOR SMALL BUSINESS The commission has reviewed the proposed 
rulemaking in light of Texas Government Code, sec.2006.002, requirements and has 
determined that there will be no economic effect on small businesses because the 
proposed rulemaking adds no regulatory burden, but only reflects the transfer of 
the existing source material licensing and by-product disposal jurisdiction from 
the commission to the TDH by SB 1857, 75th Legislature, 1997. 
DRAFT REGULATORY IMPACT ANALYSIS The commission has reviewed the proposed 
rulemaking in light of the regulatory analysis requirements of Texas Government 
Code, sec.2001.0225, and has determined that the rulemaking is not subject to 
sec.2001.0225 because it does not meet the definition of a "major environmental 
rule" as defined in the act, and it does not meet any of the four applicability 
requirements listed in sec.2001.0225(a). 
Although this rule is to protect the environment and reduce the risk to human 
health from environmental exposure, this is not a major environmental rule 
because it does not adversely affect in a material way the economy, a sector of 
the economy, productivity, competition, jobs, the environment, or the public 
health and safety of the state or a sector of the state. 
In addition, this rule does not exceed a standard set by federal law, exceed an 
express requirement of state law, exceed a requirement of a delegation 
agreement, or adopt a rule solely under the general powers of the agency. The 
rule MOU assists the state in the implementation of federal rules. 
TAKINGS IMPACT ASSESSMENT The commission has prepared a Takings Impact 
Assessment for this rulemaking pursuant to Texas Government Code, sec.2007.043. 
The following is a summary of that assessment. The specific purpose of the 
rulemaking is to reflect the transfer of the source material licensing and by-
product disposal jurisdiction from the commission to the TDH by SB 1857, 75th 
Legislature, 1997, in an amended understanding between the state agencies and in 
related actions. The rules will substantially advance this specific purpose by 
amending an MOU, by transferring the complete text of the amended MOU to TDH 
rule 25 Texas Administrative Code (TAC) sec.289.101, by adopting the MOU by 
reference, by cross referencing the MOU in uranium and injection well program 
rules, and by removing obsolete MOUs, concerning municipal sewage sludge and 
concerning non-hazardous wastewater that contains radioactive constituents, 
adopted by reference in 30 TAC sec.305.521(1) and (2), respectively. 
Promulgation and enforcement of these rules will not burden private real 
property which is the subject of the rules because they merely pertain to an 
understanding between state agencies on their joint jurisdiction and on areas of 
cooperation. The amended understanding places no requirements on the regulated 
community. 
COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW The commission has reviewed the 
proposed rulemaking and found that the rule is neither identified in Coastal 
Coordination Act Implementation Rules, 31 TAC sec.505.11, nor will it affect any 
action/authorization identified in Coastal Coordination Act Implementation 
Rules, 31 TAC sec.505.11. Therefore, the proposal is not subject to the Coastal 
Management Program. 
SUBMITTAL OF COMMENTS Written comments may be mailed to Bettie Bell, Texas 
Natural Resource Conservation Commission, Office of Policy and Regulatory 
Development, MC 205, P.O. Box 13087, Austin, Texas 78711-3087, or faxed to (512) 
239-4808. All comments must be received by September 21, 1998 and should 
reference Rule Log Number 97172-007-WS. Comments received by 5:00 p.m. on that 
date will be considered by the commission prior to any final action on the 
proposal. For further information, please contact Kathy Vail at (512) 239-6637. 
The agencies that are parties to the understanding plan to review and respond to 
comments jointly. 
STATUTORY AUTHORITY This new section is proposed under Texas Water Code, 
sec.5.104, and Texas Health and Safety Code, sec.361.016 and sec.401.069, which 
require the commission to adopt by rule any MOU or a revision to an MOU. The 
rulemaking is also proposed under the Texas Radiation Control Act, Texas Health 
and Safety Code sec.sec.401.011, 401.051, and 401.412, and Texas Water Code, 
sec.5.103 and sec.27.019, which give the commission the authority to adopt rules 
necessary to carry out its responsibilities to regulate and license the disposal 
of radioactive substances and to regulate injection wells. 
The new section implements Texas Health and Safety Code, Chapter 401 (relating 
to Radioactive Materials and Other Sources of Radiation) and Texas Water Code, 
Chapter 27 (relating to Injection Wells). 

sec.7.118. Memorandum of Understanding between the Texas Department of Health 
and the Texas Natural Resource Conservation Commission Regarding Radiation 
Control Functions.
The Memorandum of Understanding between the Texas Department of Health and the 
Texas Natural Resource Conservation Commission regarding radiation control 
functions and mutual cooperation is adopted by reference as in complete text in 
Texas Department of Health rule 25 TAC sec.289.101 (Memorandum of Understanding 
between the Texas Department of Health and the Texas Natural Resource 
Conservation Commission Regarding Radiation Control Functions). If a copy of 
this document cannot be obtained from the Internet, a copy can be requested from 
the Texas Natural Resource Conservation Commission, Chief Clerk's Office, P.O. 
Box 13087, Austin, Texas 78711-3087, (512) 239-3300. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 10, 1998.
TRD-9812607
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commissioncs
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 239-6087

CHAPTER 305.Consolidated Permits
SUBCHAPTER N. Adoption of <nl>Memorandum<ol> [Memoranda] of Understanding by 
Reference
30 TAC sec.305.521
The Texas Natural Resource Conservation Commission (commission) an proposes 
amendment to sec.305.521, concerning Adoption of Memoranda of Understanding by 
Reference. 
EXPLANATION OF PROPOSED RULES The primary purpose of the amendments is to delete 
obsolete memoranda of understanding (MOUs). One concerns municipal sewage 
sludge, and the other concerns non-hazardous wastewater that contains 
radioactive constituents; these MOUs are adopted by reference in 30 Texas 
Administrative Code (TAC) sec.305.521(1) and (2), respectively. The MOU 
concerning municipal sewage sludge is obsolete. The MOU concerning non-hazardous 
wastewater that contains radioactive constituents has been superseded by the 
Memorandum of Understanding between the Texas Department of Health and the Texas 
Natural Resource Conservation Commission Regarding Radiation Control Functions. 
(An update of this MOU was proposed in the July 31, 1998, issue of the Texas 
Register (24 TexReg 7707). The remaining MOU in sec.305.521 between the Texas 
Department of Transportation and the Texas Water Commission (a predecessor to 
the Texas Natural Resource Conservation Commission) concerns primarily the 
assessment of water quality impacts resulting from certain transportation 
projects and is still applicable. Another purpose of these amendments to 
sec.305.521 is to change the name of the commission office that will provide a 
copy of the remaining MOU from the Legal Division to the Office of the Chief 
Clerk. 
FISCAL NOTE Stephen Minick, Strategic Planning and Appropriations Division, has 
determined that for the first five-year period these amendments as proposed are 
in effect, there will be no fiscal implications for state government. There are 
also no fiscal implications for units of local government. 
PUBLIC BENEFIT Mr. Minick has also determined that for the first five years 
these amendments as proposed are in effect the public benefit anticipated will 
be the removal of obsolete understandings among the state agencies on their 
jurisdictions from commission rules. The proposed amendments will result in no 
increase in costs to affected parties. Also, cost savings are not anticipated to 
any person or business, large or small. 
ECONOMIC ANALYSIS FOR SMALL BUSINESS The commission has reviewed the proposed 
rulemaking in light of Texas Government Code, sec.2006.002, requirements and has 
determined that there will be no economic effect on small businesses because the 
proposed rulemaking adds no regulatory burden, but only deletes two obsolete 
jurisdiction and cooperation agreements between state agencies. DRAFT REGULATORY 
IMPACT ANALYSIS The commission has reviewed the proposed rulemaking in light of 
the regulatory analysis requirements of Texas Government Code, sec.2001.0225, 
and has determined that the rulemaking is not subject to sec.2001.0225 because 
it does not meet the definition of a "major environmental rule" as defined in 
the act, and it does not meet any of the four applicability requirements listed 
in sec.2001.0225(a). 
Although this rule is to protect the environment and reduce the risk to human 
health from environmental exposure, this is not a major environmental rule 
because it does not adversely affect in a material way the economy, a sector of 
the economy, productivity, competition, jobs, the environment, or the public 
health and safety of the state or a sector of the state. 
In addition, this rule does not exceed a standard set by federal law, exceed an 
express requirement of state law, exceed a requirement of a delegation 
agreement, or adopt a rule solely under the general powers of the agency. The 
rule MOU assists the state in the implementation of federal rules. 
TAKINGS IMPACT ASSESSMENT The commission has prepared a Takings Impact 
Assessment for this rulemaking pursuant to Texas Government Code, sec.2007.043. 
The following is a summary of that Assessment. The specific purpose of the 
rulemaking is to reflect the transfer of the source material licensing and by-
product disposal jurisdiction from the commission to the TDH by SB 1857, 75th 
Legislature, 1997, in an amended understanding between the state agencies and in 
related actions. The rules will substantially advance this specific purpose by 
amending an MOU, by transferring the complete text of the amended MOU to TDH 
rule 25 Texas Administrative Code (TAC) sec.289.101, by adopting the MOU by 
reference, by cross referencing the MOU in uranium and injection well program 
rules, and by removing obsolete MOUs, concerning municipal sewage sludge and 
concerning non-hazardous wastewater that contains radioactive constituents, 
adopted by reference in 30 TAC sec.305.521(1) and (2), respectively. 
Promulgation and enforcement of these rules will not burden private real 
property which is the subject of the rules because they merely pertain to an 
understanding between state agencies on their joint jurisdiction and on areas of 
cooperation. The amended understanding places no requirements on the regulated 
community.
COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW The commission has reviewed the 
proposed rulemaking and found that the rule is neither identified in Coastal 
Coordination Act Implementation Rules, 31 TAC sec.505.11, nor will it affect any 
action/authorization identified in Coastal Coordination Act Implementation 
Rules, 31 TAC sec.505.11. Therefore, the proposal is not subject to the Coastal 
Management Program. 
SUBMITTAL OF COMMENTS Written comments may be mailed to Bettie Bell, Texas 
Natural Resource Conservation Commission, Office of Policy and Regulatory 
Development, MC 205, P.O. Box 13087, Austin, Texas 78711-3087, or faxed to (512) 
239-4808. All comments must be received by September 21, 1998 and should 
reference Rule Log Number 97172-305-WS. Comments received by 5:00 p.m. on that 
date will be considered by the commission prior to any final action on the 
proposal. For further information, please contact Kathy Vail at (512) 239-6637. 
STATUTORY AUTHORITY The amendment is proposed under the Texas Water Code, 
sec.5.104, which requires the commission to adopt by rule any MOU related to the 
regulation of water. 
The amendment implements Texas Water Code, Chapter 5 (relating to the Texas 
Natural Resource Conservation Commission). Subchapter N: Memorandum of 
Understanding sec.305.521 

sec.305.521. Adoption of <nl>Memorandum<ol> [Memoranda] of Understanding by 
Reference.
The <nl>February, 1992 Memorandum of Understanding between the Texas Department 
of Transportation and the Texas Water Commission (a predecessor to the Texas 
Natural Resource Conservation Commission, which concerns primarily the 
assessment of water quality impacts resulting from certain transportation 
projects<ol> [following memoranda of understanding between the commission and 
other state agencies, required to be adopted by rule as set forth in the Texas 
Water Code, sec.5.104], <nl>is<ol> [are] adopted by reference. <nl>A copy of the 
document is<ol> [Copies of these documents are] available upon request from the 
Texas Natural Resource Conservation Commission, <nl>Office of the Chief 
Clerk<ol> [Legal Division], P. O. Box 13087, Austin, Texas 78711-3087, (512) 
<nl>239-3300<ol> [239-0600]. 
[(1) the memorandum of understanding (effective April 1, 1989) between the Texas 
Department of Health, the Texas Air Control Board, and the Texas Water 
Commission, which concerns the regulation and management of municipal sewage 
sludge;] 
[(2) the memorandum of understanding between the Texas Department of Health and 
the Texas Water Commission, which concerns the regulation and management of non-
hazardous wastewater that contains radioactive constituents; and] 
[(3) the memorandum of understanding (effective February, 1992) between the 
Texas Department of Transportation and the Texas Water Commission, which 
concerns primarily the assessment of water quality impacts resulting from 
certain transportation projects.] 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 10, 1998.
TRD-9812608
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 239-6087

CHAPTER 331. Underground Injection Control
SUBCHAPTER A. General Provisions
30 TAC sec.331.16
The Texas Natural Resource Conservation Commission (commission) proposes new 
sec.331.16, concerning Memorandum of Understanding Between the Texas Department 
of Health and the Texas Natural Resource Conservation Commission Regarding 
Radiation Control Functions. 
EXPLANATION OF PROPOSED RULES The primary purpose of the amendments is to 
reflect the transfer of the source material licensing and by-product disposal 
jurisdiction from the commission to the Texas Department of Health (TDH) by 
Senate Bill (SB) 1857, 75th Legislature, 1997, in an amended Memorandum of 
Understanding (MOU) and in related actions. 
The jurisdiction transfer required amendment of the MOU to incorporate 
provisions regarding "in situ" uranium mining that had been previously removed 
from Chapter 331 (relating to Underground Injection Control). The "in situ" 
uranium mining provisions are contained in the proposed amended Memorandum of 
Understanding Between the Texas Department of Health and the Texas Natural 
Resource Conservation Commission Regarding Radiation Control Functions (see July 
31, 1998, issue of the Texas Regiser (24 Texreg 7707)). 
New sec.331.16 is being proposed to reference the proposed amended MOU as it 
will appear in complete text in TDH rule 25 Texas Administrative Code (TAC) 
sec.289.101 and be adopted by reference in the commission's new sec.7.118 
proposed in this issue of the Texas Register.
FISCAL NOTE Stephen Minick, Strategic Planning and Appropriations Division, has 
determined that for the first five-year period the new section as proposed is in 
effect, there will be no significant fiscal implications for state government. 
There are also no fiscal implications for units of local government.
ECONOMIC ANALYSIS FOR SMALL BUSINESS The commission has reviewed the proposed 
rulemaking in light of Texas Government Code, sec.2006.002, requirements and has 
determined that there will be no economic effect on small businesses because the 
proposed rulemaking adds no regulatory burden, but only reflects the transfer of 
the existing source material licensing and by-product disposal jurisdiction from 
the commission to the TDH by SB 1857, 75th Legislature, 1997. 
PUBLIC BENEFIT Mr. Minick has also determined that for the first five years the 
new section as proposed is in effect the public benefit anticipated will be a 
clearer understanding among the state agencies on their jurisdictions and on 
areas of cooperation. The proposed new section will result in no increase in 
cost to affected parties. Significant cost savings are not anticipated to any 
person or business, large or small. 
DRAFT REGULATORY IMPACT ANALYSIS The commission has reviewed the proposed 
rulemaking in light of the regulatory analysis requirements of Texas Government 
Code, sec.2001.0225, and has determined that the rulemaking is not subject to 
sec.2001.0225 because it does not meet the definition of a "major environmental 
rule" as defined in the act, and it does not meet any of the four applicability 
requirements listed in sec.2001.0225(a). 
Although this rule is to protect the environment and reduce the risk to human 
health from environmental exposure, this is not a major environmental rule 
because it does not adversely affect in a material way the economy, a sector of 
the economy, productivity, competition, jobs, the environment, or the public 
health and safety of the state or a sector of the state. 
In addition, this rule does not exceed a standard set by federal law, exceed an 
express requirement of state law, exceed a requirement of a delegation 
agreement, or adopt a rule solely under the general powers of the agency. The 
rule MOU assists the state in the implementation of federal rules. 
TAKINGS IMPACT ASSESSMENT The commission has prepared a Takings Impact 
Assessment for this rulemaking pursuant to Texas Government Code, sec.2007.043. 
The following is a summary of that assessment. The specific purpose of the 
rulemaking is to reflect the transfer of the source material licensing and by-
product disposal jurisdiction from the commission to the TDH by SB 1857, 75th 
Legislature, 1997, in an amended understanding between the state agencies and in 
related actions. The rules will substantially advance this specific purpose by 
amending an MOU, by transferring the complete text of the amended MOU to TDH 
rule 25 Texas Administrative Code (TAC) sec.289.101, by adopting the MOU by 
reference, by cross-referencing the MOU in uranium and injection well program 
rules, and by removing obsolete MOUs, concerning municipal sewage sludge and 
concerning non-hazardous wastewater that contains radioactive constituents, 
adopted by reference in 30 TAC sec.305.521(1) and (2), respectively. 
Promulgation and enforcement of these rules will not burden private real 
property which is the subject of the rules because they merely pertain to an 
understanding between state agencies on their joint jurisdiction and on areas of 
cooperation. The amended understanding places no requirements on the regulated 
community.
COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW The commission has reviewed the 
proposed rulemaking and found that the rule is neither identified in Coastal 
Coordination Act Implementation Rules, 31 TAC sec.505.11, nor will it affect any 
action/authorization identified in Coastal Coordination Act Implementation 
Rules, 31 TAC sec.505.11. Therefore, the proposal is not subject to the Coastal 
Management Program. 
SUBMITTAL OF COMMENTS Written comments may be mailed to Bettie Bell, Texas 
Natural Resource Conservation Commission, Office of Policy and Regulatory 
Development, MC 205, P.O. Box 13087, Austin, Texas 78711-3087, or faxed to (512) 
239-4808. All comments must be received by September 21, 1998 and should 
reference Rule Log Number 97172-331-WS. Comments received by 5:00 p.m. on that 
date will be considered by the commission prior to any final action on the 
proposal. For further information, please contact Kathy Vail at (512) 239-6637. 
The agencies that are parties to the MOU plan to review and respond to comments 
jointly. 
STATUTORY AUTHORITY This new section is proposed under Texas Water Code, 
sec.5.104, and Texas Health and Safety Code, sec.361.016 and sec.401.069, which 
require the commission to adopt by rule any MOU or a revision to an MOU. The 
rulemaking is also proposed under the Texas Radiation Control Act, Texas Health 
and Safety Code sec.sec.401.011, 401.051, and 401.412, and Texas Water Code, 
sec.5.103 and sec.27.019, which give the commission the authority to adopt rules 
necessary to carry out its responsibilities to regulate and license the disposal 
of radioactive substances and to regulate injection wells. 
The new section implements Texas Health and Safety Code, Chapter 401 (relating 
to Radioactive Materials and Other Sources of Radiation) and Texas Water Code, 
Chapter 27 (relating to Injection Wells). 

sec.331.16. Memorandum of Understanding Between the Texas Department of Health 
and the Texas Natural Resource Conservation Commission Regarding Radiation 
Control Functions.
The Memorandum of Understanding between the Texas Department of Health and the 
Texas Natural Resource Conservation Commission Regarding Radiation Control 
Functions is adopted by reference in sec.7.118 of this title (relating to 
Memorandum of Understanding between the Texas Department of Health and the Texas 
Natural Resource Conservation Commission Regarding Radiation Control Functions). 
However, the full text of the memorandum of understanding can be found only in 
Texas Department of Health rule 25 TAC sec.289.101 (Memorandum of Understanding 
between the Texas Department of Health and the Texas Natural Resource 
Conservation Commission Regarding Radiation Control Functions). If a copy of 
this document is required and cannot be obtained from the Internet, a copy can 
be requested from the Texas Natural Resource Conservation Commission, Chief 
Clerk's Office, P.O. Box 13087, Austin, Texas 78711-3087, (512) 239-3300.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 10, 1998.
TRD-9812606
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 239-6087

CHAPTER 336. Radioactive Substance Rules
SUBCHAPTER A. General Provisions
30 TAC sec.336.11
The Texas Natural Resource Conservation Commission (commission) proposes an 
amendment to sec.336.11, concerning Appendix A. Memorandum of Understanding 
Between the Texas Department of Health and the Texas Natural Resource 
Conservation Commission Regarding Radiation Control Functions.
EXPLANATION OF PROPOSED RULES The purpose of the amendments is to reflect the 
transfer of the source material licensing and by-product disposal jurisdiction 
from the commission to the Texas Department of Health (TDH) by Senate Bill (SB) 
1857, 75th Legislature, 1997, in an amended Memorandum of Understanding (MOU) 
and in related actions. 
Section 336.11 (relating to Appendix A. Memorandum of Understanding Between the 
Texas Department of Health and the Texas Natural Resource Conservation 
Commission Regarding Radiation Control Functions) is proposed to be amended to 
delete "Appendix A" from the title, to cite the proposed new sec.7.118 adopting 
the updated MOU by reference to TDH rule (see July 31, 1998, issue of the Texas 
Register(24 TexReg7707)), to state where to obtain a copy of the MOU, and to 
delete the old MOU text (that was updated and transferred to TDH rule 25 Texas 
Administrative Code (TAC) sec.289.101). 
FISCAL NOTE Stephen Minick, Strategic Planning and Appropriations Division, has 
determined that for the first five-year period the amended section as proposed 
is in effect, there will be no significant fiscal implications for state 
government. There are also no fiscal implications for units of local government. 
PUBLIC BENEFIT Mr. Minick has also determined that for the first five years the 
amended section as proposed is in effect the public benefit anticipated will be 
a clearer understanding between the state agencies on their jurisdictions and on 
areas of cooperation. The proposed amendments will result in no significant 
increase in costs to affected parties. Significant cost savings are not 
anticipated to any person or business, large or small. 
ECONOMIC ANALYSIS FOR SMALL BUSINESS The commission has reviewed the proposed 
rulemaking in light of Texas Government Code, sec.2006.002, requirements and has 
determined that there will be no economic effect on small businesses because the 
proposed rulemaking adds no regulatory burden, but only reflects the transfer of 
the existing source material licensing and by-product disposal jurisdiction from 
the commission to the TDH by SB 1857, 75th Legislature, 1997. 
DRAFT REGULATORY IMPACT ANALYSIS The commission has reviewed the proposed 
rulemaking in light of the regulatory analysis requirements of Texas Government 
Code, sec.2001.0225, and has determined that the rulemaking is not subject to 
sec.2001.0225 because it does not meet the definition of a "major environmental 
rule" as defined in the act, and it does not meet any of the four applicability 
requirements listed in sec.2001.0225(a). 
Although this rule is to protect the environment and reduce the risk to human 
health from environmental exposure, this is not a major environmental rule 
because it does not adversely affect in a material way the economy, a sector of 
the economy, productivity, competition, jobs, the environment, or the public 
health and safety of the state or a sector of the state. 
In addition, this rule does not exceed a standard set by federal law, exceed an 
express requirement of state law, exceed a requirement of a delegation 
agreement, or adopt a rule solely under the general powers of the agency. The 
rule MOU assists the state in the implementation of federal rules. 
TAKINGS IMPACT ASSESSMENT The commission has prepared a Takings Impact 
Assessment for this rulemaking pursuant to Texas Government Code, sec.2007.043. 
The following is a summary of that Assessment. The specific purpose of the 
rulemaking is to reflect the transfer of the source material licensing and by-
product disposal jurisdiction from the commission to the TDH by SB 1857, 75th 
Legislature, 1997 in an amended understanding between the state agencies and in 
related actions. The rules will substantially advance this specific purpose by 
amending an MOU, by transferring the complete text of the amended MOU to TDH 
rule 25 Texas Administrative Code (TAC) sec.289.101, by adopting the MOU by 
reference, by cross referencing the MOU in uranium and injection well program 
rules, and by removing obsolete MOUs, concerning municipal sewage sludge and 
concerning non-hazardous wastewater that contains radioactive constituents, 
adopted by reference in 30 TAC sec.305.521(1) and (2), respectively. 
Promulgation and enforcement of these rules will not burden private real 
property which is the subject of the rules because they merely pertain to an 
understanding between state agencies on their joint jurisdiction and on areas of 
cooperation. The amended understanding places no requirements on the regulated 
community.
COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW The commission has reviewed the 
proposed rulemaking and found that the rule is neither identified in Coastal 
Coordination Act Implementation Rules, 31 TAC sec.505.11, nor will it affect any 
action/authorization identified in Coastal Coordination Act Implementation 
Rules, 31 TAC sec.505.11. Therefore, the proposal is not subject to the Coastal 
Management Program. 
SUBMITTAL OF COMMENTS Written comments may be mailed to Bettie Bell, Texas 
Natural Resource Conservation Commission, Office of Policy and Regulatory 
Development, MC 205, P.O. Box 13087, Austin, Texas 78711-3087, or faxed to (512) 
239-4808. All comments must be received by September 21, 1998 and should 
reference Rule Log Number 97172-336-WS. Comments received by 5:00 p.m. on that 
date will be considered by the commission prior to any final action on the 
proposal. For further information, please contact Kathy Vail at (512) 239-6637. 
The agencies that are parties to the understanding plan to review and respond to 
comments jointly. 
STATUTORY AUTHORITY This amended section is proposed under Texas Water Code, 
sec.5.104, and Texas Health and Safety Code, sec.361.016 and sec.401.069, which 
require the commission to adopt by rule any MOU or a revision to an MOU. The 
rulemaking is also proposed under the Texas Radiation Control Act, Texas Health 
and Safety Code, sec.sec.401.011, 401.051, and 401.412, and Texas Water Code, 
sec.5.103 and sec.27.019, which give the commission the authority to adopt rules 
necessary to carry out its responsibilities to regulate and license the disposal 
of radioactive substances and to regulate injection wells. 
The amended section implements Texas Health and Safety Code, Chapter 401 
(relating to Radioactive Materials and Other Sources of Radiation) and Texas 
Water Code, Chapter 27 (relating to Injection Wells).

sec.336.11. [Appendix A.] Memorandum of Understanding Between the Texas 
Department of Health and the Texas Natural Resource Conservation Commission 
Regarding Radiation Control Functions.
<nl>The Memorandum of Understanding between the Texas Department of Health and 
the Texas Natural Resource Conservation Commission Regarding Radiation Control 
Functions is adopted by reference in sec.7.118 of this title (relating to 
Memorandum of Understanding between the Texas Department of Health and the Texas 
Natural Resource Conservation Commission Regarding Radiation Control Functions). 
However, the full text of the memorandum of understanding can be found only in 
Texas Department of Health rule 25 TAC sec.289.101 (Memorandum of Understanding 
between the Texas Department of Health and the Texas Natural Resource 
Conservation Commission Regarding Radiation Control Functions). If a copy of 
this document is required and cannot be obtained from the Internet, a copy can 
be requested from the Texas Natural Resource Conservation Commission, Chief 
Clerk's Office, P.O. Box 13087, Austin, Texas 78711-3087, (512) 239-3300.<ol> 
[(a) Purpose. The purpose of this Memorandum of Understanding (MOU) is to 
implement and coordinate the responsibilities and define the respective duties 
of the agencies in the regulation of sources of radiation in accordance with 
Texas Health and Safety Code (code), sec.401.414 and sec.402.1512, to provide a 
consistent approach to avoid duplication, and to delineate areas of separate 
jurisdiction.] 
[(b) Jurisdiction.] 
[(1) In accordance with the code, sec.401.412, the Texas Natural Resource 
Conservation Commission (TNRCC) has primary jurisdiction to regulate and issue 
licenses for the disposal of radioactive substances, except for naturally 
occurring radioactive material (NORM) originating from oil and gas production 
and exploration activities, defined as "oil and gas NORM waste" in the code, 
sec.401.003(27). For purposes of this MOU, disposal means isolation or removal 
of radioactive substances from mankind's environment without intent to retrieve 
those radioactive substances later. The term does not include emissions and 
discharges in accordance with 25 TAC sec.289.202 (relating to Standards for 
Protection Against Radiation) of the Texas Department of Health (TDH). 
"Radioactive substance" includes byproduct material, radioactive material, 
radioactive waste, source material, sources of radiation, and special nuclear 
material as are defined by the code, sec.401.003. In accordance with the code, 
sec.401.412, the TNRCC also has primary jurisdiction to regulate and issue 
licenses for source material recovery and processing, including the disposal of 
byproduct material, as defined in the code, sec.401.003(3)(B).]
[(2) The TDH has jurisdiction to regulate and license the possession, receipt, 
use, handling, transfer, transport, and storage of all radioactive material, 
excluding the recovery and processing of source material, processing of 
byproduct material as defined in the code, sec.401.003(3)(B), and the disposal 
of radioactive substances. The TDH has sole jurisdiction to regulate and 
register or license the use or service of electronic products as defined in the 
code, sec.401.003(9). The code, sec.401.106, gives the TDH the authority, 
through rulemaking by the Texas Board of Health, to exempt a source of radiation 
or a kind of use or user from licensing or registration requirements.] 
[(3) The receipt, storage, and/or processing of radioactive substances received 
by a TNRCC licensee at a radioactive substance disposal facility for the 
explicit purpose of disposal at that facility shall be regulated by the TNRCC. 
All other uses of radioactive material (e.g., well logging, industrial 
radiography, gauging devices, etc.) at a TNRCC-licensed radioactive substance 
disposal facility shall be regulated by the TDH.] 
[(4) Processing of radioactive substances at a TNRCC-licensed radioactive 
substance disposal facility by persons other than the TNRCC licensee shall be 
authorized only by the TDH under a license or under reciprocal recognition of an 
out-of-state license and shall be in accordance with the jurisdiction of the 
TDH.] 
[(5) The receipt, storage, and processing of radioactive material at TDH-
licensed facilities whose primary activity is not disposal of radioactive 
substances but which are also licensed by the TNRCC for disposal of radioactive 
substances shall be regulated by the TDH.]
[(c) Relationship with the United States Nuclear Regulatory Commission (NRC) and 
the Texas Radiation Advisory Board (TRAB) regarding rulemaking. The TNRCC and 
the TDH agree to work together to ensure that complete regulation is maintained 
for sources, uses, and users of radiation. As appropriate, the TDH and the TNRCC 
agree to coordinate rulemaking activities between the two agencies and the TRAB 
to ensure consistency of regulation. Each agency agrees to coordinate rulemaking 
activities which pertain to the requirements of the Agreement between the State 
of Texas and the NRC, as amended, and to ensure the compatibility of rules and 
guidelines with federal regulatory programs. Each agency agrees to coordinate on 
providing information on any proposed legislation relating to the regulation of 
radioactive substances.]
[(d) Emergency preparedness.]
[(1) The State of Texas is required by federal laws and regulations to have 
trained personnel always available for emergency response training, drills, 
exercises, and actual emergency response at fixed nuclear facilities. The code, 
sec.401.066, requires the TDH to implement these activities.] 
[(2) The TDH and the TNRCC will coordinate personnel availability for emergency 
planning and response activities. Each agency is authorized to collect an annual 
fee from the operators of fixed nuclear facilities in the state for expenses 
arising from emergency response activities, including training.] 
[(3) The TDH will inform the TNRCC in a timely manner of all required exercises, 
drills and training. The TNRCC will ensure that all technical personnel who work 
in the radiation program attend the emergency response training coordinated by 
the TDH. The TNRCC shall notify the TDH of changes in the employment status of 
all the appropriate radiation personnel. In the event of an emergency, the 
appropriate TDH and TNRCC radiation staff will be available for emergency 
response under the direction of the TDH staff and in accordance with Annex D of 
the State of Texas Emergency Management Plan.] 
[(e) Management of radioactive wastewaters.] 
[(1) The TNRCC is the state agency having the jurisdiction in accordance with 
the Texas Water Code, Chapter 26, for the discharge of any waste or wastewaters, 
including radioactive wastewaters, into or adjacent to waters in the state, 
except for those wastes regulated by the Railroad Commission of Texas. No 
discharge is allowed unless authorized by the TNRCC or by another state agency 
having jurisdiction over the activity. The TNRCC has responsibility for issuance 
of permits and for enforcement of the terms and conditions of permits, rules, 
and/or orders which concern the treatment and discharge of radioactive 
wastewaters.] 
[(2) The TNRCC shall consult with the TDH with regard to regulation and 
management of radioactive wastewaters and may not adopt any rules or engage in 
any management activities that are in conflict with state or federal laws and 
rules relating to regulation of radioactive wastewaters. The TNRCC shall notify 
the TDH, Bureau of Radiation Control, when an application is received for a 
treatment and/or disposal permit for radioactive wastewaters. The TNRCC shall 
provide the TDH with a copy of the wastewater treatment and/or disposal permit 
application during the technical review. The TDH shall provide the TNRCC with 
the appropriate permit limits for the radioactive component of wastewater 
discharges and cumulative limits for disposal sites, if land application is 
contemplated by the application. No separate license from the TDH shall be 
required to authorize that discharge. The TDH may provide the TNRCC with other 
suggestions related to management of radioactive wastewaters.] 
[(3) TDH licenses regarding facilities requiring a wastewater permit shall 
contain a provision that licensees must comply with the TNRCC permit 
requirements. TNRCC permits governing facilities requiring a radioactive 
materials license from the TDH shall contain a provision that permittees must 
comply with TDH license requirements.] 
[(f) Financial security instruments. The TNRCC will review and evaluate the 
financial security instruments for radioactive substance disposal sites and 
uranium recovery facilities in accordance with its jurisdiction. The TDH will 
review and evaluate the financial security instruments for licenses in 
accordance with its jurisdiction. The radiation and perpetual care fund will be 
available for use by both agencies for receipt of financial security as 
appropriate.] 
[(g) Low-level waste health surveillance survey. In accordance with code, 
sec.402.058, the TDH and the TNRCC agree to coordinate efforts, in conjunction 
with the Texas Low-Level Radioactive Waste Disposal Authority and the local 
public health officials, in the development of a health surveillance survey for 
the population in the vicinity of a radioactive waste disposal site.] 
[(h) Dosimetry program and meter calibration. The TDH may provide personnel 
monitoring services, thermoluminescent dosimeters for environmental monitoring, 
and radiation survey instrument calibration for TNRCC personnel in the radiation 
program in accordance with an approved contract for those services. The TDH and 
the TNRCC may renegotiate this contract each biennium.] 
[(i) Mutual assistance. Each agency may request from the other agency short-term 
assistance of personnel or resources when there is need for such assistance, 
such as for performing close-out surveys, training, environmental monitoring, 
technical reviews, and technical support at contested hearings. Each agency will 
provide the requested assistance to the extent possible without disrupting its 
own required activities.] 
[(j) Maintenance of files on known disposal sites and contaminated facilities. 
The TDH agrees to assist the TNRCC in maintaining files on known locations in 
the State at which radioactive material has been disposed of and at which soil 
and facilities are contaminated and in maintaining information on inspection 
reports related to these locations. Each agency agrees to maintain files of 
sites and facilities regulated in accordance with its respective jurisdictions.]
[(k) Relationship with other memoranda of understanding. This MOU supersedes 
those found at 25 TAC sec.289.123 (relating to Licensing of Uranium Recovery 
Facilities), 25 TAC sec.289.125 (relating to Licensing Requirements for Near-
Surface Land Disposal of Radioactive Waste), and sec.305.521(2) of this title 
(relating to Adoption of Memoranda of Understanding by Reference).] 
[(l) Radioactive substances exempted or released for unrestricted use. Once a 
source of radiation is exempted from regulation by the Texas Board of Health in 
accordance with code sec.401.106 or meets release criteria for unrestricted use 
in accordance with the provisions of the Texas Regulations for Control of 
Radiation, its disposal is not subject to further regulation as a radioactive 
substance by the TNRCC.] 
[(m) Miscellaneous.] 
[(1) The TNRCC and the TDH agree to revise their respective rules and procedures 
as needed to implement this MOU.] 
[(2) Agency representatives shall meet as needed to discuss possible changes in 
this MOU and to encourage increased communication between the agencies.] 
[(3) Nothing in this MOU shall be construed to reduce the statutory jurisdiction 
of either agency.] 
[(4) If any provision of this MOU is held to be invalid, the remaining 
provisions shall not be affected thereby.] 
[(n) Effective date. This amended MOU will take effect when signed by both 
agencies and remain in effect until rescinded by formal action of either 
agency.]
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 10, 1998.
TRD-9812605
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 239-6087

TITLE 37. PUBLIC SAFETY AND CORRECTIONS
PART XIII. Texas Commission on Fire Protection
CHAPTER 433.Forms
37 TAC sec.sec.433.1, 433.3, 433.5, 433.7
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas Commission 
on Fire Protection or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The Texas Commission on Fire Protection proposes the repeal of sec.sec.433.1, 
433.3, 433.5, and 433.7, concerning forms. The repeal of this chapter removes 
obsolete language. 
Anthony C. Calagna, Fire Fighter Advisory Committee Chairman, has determined 
that for the first five year period the repeal is in effect there will be no 
fiscal implications for state or local governments. 
Mr. Calagna also has determined that for each of the first five years the repeal 
is in effect the public benefit anticipated as a result of enforcing the repeal 
will be the elimination of obsolete and unnecessary text. 
There are no additional costs of compliance for small or large businesses or 
individuals required to comply with the amendment. The commission has determined 
that the proposed repeal relating to forms will have no impact on private real 
property interests and no takings impact assessment is required pursuant to the 
Government Code, sec.2007.043(b) and sec.2.18 of the Attorney General's Private 
Real Property Rights Preservation Act Guidelines. 
There is no local employment impact resulting from the change. 
Comments on the proposal may be submitted to: Gary L. Warren Sr., Executive 
Director, Texas Commission on Fire Protection, P.O. Box 2286, Austin, Texas 
78768-2286 or e-mail to tcfp@mail.capnet.state.tx.us. 
The repeal is proposed under Texas Government Code, sec.419.008, which provides 
the Texas Commission on Fire Protection with authority to adopt rules for the 
administration of its powers and duties.
Texas Government Code, sec.419.008 is affected by the proposed repeal. 
sec.433.1. Forms - Required. 
sec.433.3. Form - Examples. 
sec.433.5. Form - Completion Instructions. 
sec.433.7. Form - Availability 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 7, 1998.
TRD-9812515
T. R. Thompson
General Counsel
Texas Commission on Fire Protection
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 918-7189

CHAPTER 491.Voluntary Regulation of State Agencies and State
Agency Employees
37 TAC sec.491.1
The Texas Commission on Fire Protection proposes an amendment to sec.491.1, 
concerning election of components for voluntary regulation of state agencies and 
state agency employees. The amendment clarifies the provisions for election of 
components and promotes consistency with terminology used in other chapters 
pertaining to fire protection personnel. 
Anthony C. Calagna, Fire Fighter Advisory Committee Chairman, has determined 
that for the first five year period the amendment is in effect there will be no 
fiscal implications for state or local governments. 
Mr. Calagna also has determined that for each of the first five years the 
amendment is in effect the public benefit anticipated as a result of enforcing 
the amendment will be the elimination of obsolete language and substitution of 
language consistent with rule changes to other chapters. 
There are no additional costs of compliance for small or large businesses or 
individuals required to comply with the amendment. The commission has determined 
that the proposed new sections relating to voluntary regulation of state 
agencies and state agency employees will have no impact on private real property 
interests and no takings impact assessment is required pursuant to the 
Government Code, sec.2007.043(b) and sec.2.18 of the Attorney General's Private 
Real Property Rights Preservation Act Guidelines.
There is no local employment impact resulting from the change. 
Comments on the proposal may be submitted to: Gary L. Warren Sr., Executive 
Director, Texas Commission on Fire Protection, P.O. Box 2286, Austin, Texas 
78768-2286 or e-mail to tcfp@mail.capnet.state.tx.us. 
The amendment is proposed under Texas Government Code, sec.419.008, which 
provides the Texas Commission on Fire Protection with authority to adopt rules 
for the administration of its powers and duties; and Texas Government Code, 
sec.419.083, which provides for voluntary regulation of certain state agencies 
and state agency employees. 
Texas Government Code, sec.419.083 is affected by the proposed amendment. 

sec.491.1. Election of Components for Voluntary Regulation. 
A state agency or state employee eligible for regulation under the Texas 
Government Code, sec.419.083, may apply to the commission for regulation. The 
agency or individual must submit an application that elects regulation under one 
or more of the following components: 
(1) standards for certification and continuing education; 
(2) standards for structure fire protection personnel certification; 
(3) standards for <nl>certified<ol> [structure recruit] training facilities; 
(4) standards for aircraft <nl>rescue fire fighting <ol> [crash and rescue fire 
protection] personnel certification;
(5) [standards for aircraft crash and rescue fire protection personnel training 
facilities;] 
[(6)] standards for marine fire protection personnel certification; 
<nl>(6)<ol> [(7)] standards for fire [protection] instructor certification; 
<nl>(7)<ol> [(8)] standards for fire inspector certification; 
<nl>(8)<ol> [(9)] standards for fire <nl> investigation<ol> [and arson 
investigator] certification; and 
<nl>(9)<ol> [(10)] standards for protective clothing. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 7, 1998.
TRD-9812517
T. R. Thompson
General Counsel
Texas Commission on Fire Protection
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 918-7189

CHAPTER 493.Voluntary Regulation of Federal Agencies and
Federal Agency Employees
37 TAC sec.493.1
The Texas Commission on Fire Protection proposes an amendment to sec.493.1, 
concerning election of components for voluntary regulation of federal agencies 
and federal agency employees. The amendment clarifies the provisions for 
election of components and promotes consistency with terminology used in other 
chapters pertaining to fire protection personnel. 
Anthony C. Calagna, Fire Fighter Advisory Committee Chairman, has determined 
that for the first five year period the amendment is in effect there will be no 
fiscal implications for state or local governments. 
Mr. Calagna also has determined that for each of the first five years the 
amendment is in effect the public benefit anticipated as a result of enforcing 
the amendment will be to eliminate obsolete language and substitute language 
consistent with rule changes to other chapters.
There are no additional costs of compliance for small or large businesses or 
individuals required to comply with the amendment. The commission has determined 
that the proposed new sections relating to voluntary regulation of federal 
agencies and federal agency employees will have no impact on private real 
property interests and no takings impact assessment is required pursuant to the 
Government Code, sec.2007.043(b) and sec.2.18 of the Attorney General's Private 
Real Property Rights Preservation Act Guidelines.
There is no local employment impact resulting from the change. 
Comments on the proposal may be submitted to: Gary L. Warren Sr., Executive 
Director, Texas Commission on Fire Protection, P.O. Box 2286, Austin, Texas 
78768-2286 or e-mail to tcfp@mail.capnet.state.tx.us. 
The amendment is proposed under Texas Government Code, sec.419.008, which 
provides the Texas Commission on Fire Protection with authority to adopt rules 
for the administration of its powers and duties; and Texas Government Code, 
sec.419.084, which provides for voluntary regulation of certain federal agencies 
and federal agency employees. 
Texas Government Code, sec.419.084 is affected by the proposed amendment.

sec.493.1. Election of Components for Voluntary Regulation.
A federal agency or federal fire fighter eligible for regulation under the Texas 
Government Code, sec.419.084, may apply to the commission for regulation. The 
agency or individual must submit an application that elects regulation under one 
or more of the following components:
(1) standards for certification and continuing education; 
(2) standards for structure fire protection personnel certification; 
(3) standards for <nl>certified<ol> [structure recruit] training facilities; 
(4) standards for aircraft <nl>rescue fire fighting <ol> [crash and rescue fire 
protection] personnel certification;
(5) [standards for aircraft crash and rescue fire protection personnel training 
facilities;] 
[(6)] standards for marine fire protection personnel certification; 
<nl>(6)<ol> [(7)] standards for fire [protection] instructor certification;
<nl>(7)<ol> [(8)] standards for fire inspector certification; 
<nl>(8)<ol> [(9)] standards for fire <nl> investigation<ol> [and arson 
investigator] certification; 
<nl>(9)<ol> [(10)] standards for protective clothing; and 
<nl>(10)<ol> [(11)] standards for self-contained breathing apparatus. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 7, 1998.
TRD-9812518
T. R. Thompson
General Counsel
Texas Commission on Fire Protection
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 918-7189

TITLE 40. SOCIAL SERVICES AND ASSISTANCE
PART I. Texas Department of Human Services
CHAPTER 27.Intermediate Care Facilities for the Mentally Retarded (ICFs-MR)
SUBCHAPTER H.Dental Program
40 TAC sec.sec.27.801, 27.803, 27.805, 27.807, 27.809, 27.811, 27.813, 27.815, 
27.817, 27.819, 27.821, 27.823, 27.825, 27.827, 27.829, 27.831, 27.833, 27.835, 
27.837, 27.839, 27.841, 27.843, 27.845, 27.847, 27.849, 27.851, 27.853, 27.855, 
27.857, 27.859, 27.861, 27.863
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas 
Department of Human Services or in the Texas Register office, Room 245, James 
Earl Rudder Building, 1019 Brazos Street, Austin.)
The Texas Department of Human Services (DHS) proposes the repeal of Chapter 27, 
Subchapter H, sec.sec.27.801, 27.803, 27.805, 27.807, 27.809, 27.811, 27.813, 
27.815, 27.817, 27.819, 27.821, 27.823, 27.825, 27.827, 27.829, 27.831, 27.833, 
27.835, 27.837, 27.839, 27.841, 27.843, 27.845, 27.847, 27.849, 27.851, 27.853, 
27.855, 27.857, 27.859, 27.861, and 27.863, concerning the dental program, in 
its Intermediate Care Facilities for the Mentally Retarded chapter. The purpose 
of the repeal is to delete Subchapter H, Dental Program. The Intermediate Care 
Facilities for Persons with Mental Retardation and Related Conditions (ICFMR/RC) 
Medicaid Program transferred to the Texas Department of Mental Health and Mental 
Retardation (TxMHMR). The Standards of Participation, Chapter 27, were deleted 
by the Texas Department of Human Services (DHS), except for Subchapter H, Dental 
Program. The Dental Program is now being managed by Medicaid Administration, 
TxMHMR. Chapter 27 will be deleted from the rule base. 
Eric M. Bost, commissioner, has determined that for the first five- year period 
the repeal is in effect there will be no fiscal implications for state or local 
government as a result of enforcing or administering the repeal. 
Mr. Bost also has determined that for each year of the first five years the 
repeal is in effect the public benefit anticipated as a result of enforcing the 
repeal will be that the rule base will be accurate and up-to-date. This rule has 
no economic impact on small or large businesses. TxMHMR has a rule in effect 
that both large and small providers are mandated to follow. There is no 
anticipated economic cost to persons who are required to comply with the 
proposed repeal. 
Questions about the content of this proposal may be directed to Maxcine 
Tomlinson at (512) 438-3169 in DHS's Long-Term Care section. Written comments on 
the proposal may be submitted to Supervisor, Rules and Handbooks Unit-332, Texas 
Department of Human Services E-205, P.O. Box 149030, Austin, Texas 78714-9030, 
within 30 days of publication in the Texas Register The repeal is proposed under 
the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes the 
department to administer public and medical assistance programs and under Texas 
Government Code sec.531.021, which provides the Health and Human Services 
Commission with the authority to administer federal medical assistance funds.
The repeal implements the Human Resources Code, sec.sec.22.001-22.030 and 
sec.sec.32.001-32.042.
sec.27.801. Program Basis. 
sec.27.803. Eligibility. 
sec.27.805. Confidentiality of Records. 
sec.27.807. Freedom of Choice. 
sec.27.809. Allowable Services and Limitations. 
sec.27.811. Dental Examination and Treatment. 
sec.27.813. Emergency Services. 
sec.27.815. Preventive Services. 
sec.27.817. Therapeutic Services. 
sec.27.819. Orthodontic Services. 
sec.27.821. Eligibility for Orthodontic Services. 
sec.27.823. Application for Participation. 
sec.27.825. Requirements for Participation. 
sec.27.827. Orthodontic Provider Participation. 
sec.27.829. Post-payment Review. 
sec.27.831. Termination of a Provider Agreement. 
sec.27.833. Maximum Payment. 
sec.27.835. Charges to ICFs-MR. 
sec.27.837. Payment of Claims. 
sec.27.839. Change to Another Provider. 
sec.27.841. Time Limits, Return, and Denial of Claims. 
sec.27.843. Dental Problems Discovered by the Utilization-review Dentist.
sec.27.845. Utilization of Peer Review or Grievance Committees. 
sec.27.847. Utilization of State Board of Dental Examiners. 
sec.27.849. Types of Reviews. 
sec.27.851. Notification to Provider about Utilization Review. 
sec.27.853. Provider Cooperation. 
sec.27.855. Report of Findings. 
sec.27.857. Classification of Review Findings. 
sec.27.859. Restitution of Overpayments. 
sec.27.861. Administrative Actions. 
sec.27.863. Fraud and Abuse. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on August 4, 1998.
TRD-9812326
Glen Scott
General Counsel, Legal Services
Texas Department of Human Services
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 438-3765

PART VI. Texas Commission for the Deaf and Hard of Hearing
CHAPTER 183. Board for Evaluation of Interpreters and Interpreter Certification
SUBCHAPTER E. Fees
40 TAC sec.183.573
The Texas Commission for the Deaf and Hard of Hearing is proposing an amendment 
of sec.183.573 concerning fees. The amendment proposes to provide an opportunity 
to recoup the costs related to the operation and administration of the licensure 
program by providing a means for the program to collect additional fees to 
assist in funding the development of testing materials and allow for the 
licensure program to undergo extensive test validation studies on current and 
new testing materials. 
David W. Myers, Executive Director, has determined that for each year of the 
first five years the section is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
section. 
Mr. Myers has also determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of this 
amendment will be that interpreters licensed by the commission will possess more 
accurately assessed skills. There will be no effect on small businesses. There 
is no anticipated economic hardship to persons required to comply with the 
section as proposed. 
Comments on this proposed amendment may be submitted to Angela Bryant, Board for 
Evaluation of Interpreters, Texas Commission for the Deaf and Hard of Hearing, 
P.O. Box 12904, Austin, Texas 78711-2904. 
The amendment is proposed under the Human Resources Code, 81.006(b) (3), which 
provides the Texas Commission for the Deaf and Hard of Hearing the authority to 
adopt rules for administration of programs. 
No other statute, code or article is affected by this proposed new section.

sec.183.573. Fees. 
The commission shall charge the following fees: Certification Fee Schedule Level 
I Level II Level III Level IV Level V: 
(1) Application (written) $20 N/A $20 N/A $20; 
(2) Written Evaluation $15 N/A $20 N/A $20; 
(3) Application (performance) $20 N/A $20 N/A $20; 
(4) Performance Evaluation $60 N/A $80 N/A $90; 
(5) Intermediary N/A N/A $30 N/A $30; 
(6) Annual Maintenance $50 $50 $50 $50 $50; 
(7) Late Maintenance $50 $50 $50 $50 N/A; 
(8) Reciprocity $50 $50 $50 $50 N/A; 
(9) Renewal of License $50 $50 $50 $50 $50; 
(10) Re-issuance $20 $20 $20 $20 $20; 
(11) Inactive Status $15 $15 $20 $25 $25; 
(12) Analysis $50 $65 $65 $75 $75; and
(13) Score Sheets $20 $20 $20 $20 $20.
[(1) Application--$20 n/a $20 $20 $20;] 
[(2) Evaluation--$75 n/a $100 $100 $100;] 
[(3) Intermediary Evaluation--n/a n/a $30 $30 $30;] 
[(4) Annual Renewal/Maintenance--$25 $25 $25 $25 $25;] 
[(5) Late Maintenance--$50 $50 $50 $50 $50;] 
[(6) Reciprocity Application--$50 $50 $50 $50 n/a;] 
[(7) Recertification Application--$50 $50 $50 $50 $50;] 
[(8) Re-issuance--$20 $20 $20 $20 $20;] 
[(9) Inactive--$15 $15 $20 $25 $25;] 
[(10) Analysis--$50 $65 $65 $75 $75.]
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 3, 1998.
TRD-9812185
David Myers
Executive Director
Texas Commission for the Deaf and Hard of Hearing
Earliest possible date of adoption: September 20, 1998
For further information, please call: (512) 407-3250