Part 4. TEXAS DEPARTMENT OF LICENSING AND REGULATION

Chapter 66. REGISTRATION OF PROPERTY TAX CONSULTANTS

16 TAC §66.22, §66.70

The Texas Department of Licensing and Regulation ("Department") proposes a new rule at 16 Texas Administrative Code, §66.22 and amendments to an existing rule at 16 Texas Administrative Code, §66.70, regarding the property tax consultants program.

These rule changes are necessary to implement the provisions of House Bill 2352, passed by the 80th Legislature. The new legislation takes effect September 1, 2007, and allows a registered property tax consultant to be employed by or associated with and acting for an attorney licensed in this state who has successfully completed the senior property tax consultant examination. The legislation allows an attorney who is licensed in this state to take the examination without completing any other eligibility requirements under Chapter 1152, Occupations Code for registration as a senior property tax consultant. The new rule and amendments were recommended for adoption by the Department's Property Tax Consultants Advisory Council at its meeting on July 18, 2007.

New §66.22(a) outlines the procedure for a licensed attorney to take the senior property tax consultant examination. The attorney must file an application on a form provided by the Department and pay the examination fee. Subsection (b) clarifies the eligibility requirements that the attorney is not required to complete. Subsection (c) specifies that the passing score shall be the same as for a senior property tax consultant, which is currently set at 70%.

The amendments to §66.70(e) recognize that the law will now allow property tax consultants the option of being employed by or associated with a Texas-licensed attorney. Conforming changes are made in subsections (f) and (g).

William H. Kuntz, Jr., Executive Director, has determined that for each year of the first five-year period the proposed new rule and amendments are in effect there will be no significant changes to costs or revenues of the state as a result of enforcing or administering the new rule and amendments. The Department anticipates that only a small number of individuals will apply to take the examination under the new rules. There will be no changes to costs or revenues of local government as a result of enforcing or administering the new rule and amendments.

Mr. Kuntz also has determined that for each year of the first five-year period the new rule and amendments are in effect, the public benefit will be increased employment options for registered property tax consultants.

Mr. Kuntz also has determined that for each year of the first five-year period the new rule and amendments are in effect there will be no economic cost to persons required to comply with rules as proposed. There will be no impact on small or micro-businesses.

Comments on the proposal may be submitted to Caroline Jackson, Legal Assistant, Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 78711, or facsimile (512) 475-3032, or electronically: erulecomments@license.state.tx.us. The deadline for comments is 30 days after publication in the Texas Register.

The new rule and amendments are proposed under Texas Occupations Code, Chapter 1152 and Chapter 51 which authorize the Department to adopt rules as necessary to implement those chapters and any other law establishing a program regulated by the Department. In particular, the new rule and amendments implement the provisions of House Bill 2352, passed by the 80th Legislature.

The statutory provisions affected by the proposal are those set forth in Texas Occupations Code, Chapter 1152 and Chapter 51. No other statutes, articles, or codes are affected by the proposal.

§66.22.Examination--Licensed Attorney.

(a) An attorney who is licensed to practice law in this state may take the senior property tax consultant examination, if the attorney:

(1) files an application on a form provided by the department; and

(2) pays the applicable examination fee.

(b) An attorney who takes the examination under this section is not required to complete any other eligibility requirements for registration as a senior property tax consultant, including:

(1) applying for registration as a senior property tax consultant;

(2) paying the fee for a senior property tax consultant registration; or

(3) meeting the education, experience, and other requirements of Texas Occupations Code, §1152.155 and §1152.157.

(c) The standard for passing the senior property tax consultant examination shall be the same as under §66.20.

§66.70.Responsibilities of Registrant--General.

(a) A registrant may not allow an employee or associate to perform property tax consulting services without first obtaining registration.

(b) A registrant shall list the following information on all written contracts: "Regulated by The Texas Department of Licensing and Regulation, P. O. Box 12157, Austin, Texas 78711, 1-800-803-9202, 512-463-6599; website: www.license.state.tx.us/complaints."

(c) All registrants shall report any change of address to the department within 30 days after the change.

(d) Individuals who are registered under Texas Occupations Code, §1152.158 may not perform property tax consulting services for compensation in connection with a property that is not real property.

(e) A registered property tax consultant must be either:

(1) employed by or have an association with a registered senior property tax consultant and be under the direct supervision of the senior property tax consultant , and there [ . There ] must be a legitimate employee/employer relationship or business association established ; or [ . ]

(2) employed by or associated with and acting for an attorney who is licensed to practice law in this state and who has successfully completed the senior property tax consultant registration examination under §66.22.

(f) The requirements of subsection (e) of this section do [ This requirement does ] not apply to a real estate property tax consultant.

(g) [ (f) ] A registered property tax consultant shall notify the department in writing of any change in employment or association within 30 days after the 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 July 30, 2007.

TRD-200703318

William H. Kuntz, Jr.

Executive Director

Texas Department of Licensing and Regulation

Earliest possible date of adoption: September 9, 2007

For further information, please call: (512) 463-7348

16 TAC §§74.10, 74.20, 74.25, 74.26, 74.50, 74.55, 74.60, 74.70, 74.75, 74.80, 74.85, 74.100

The Texas Department of Licensing and Regulation ("Department") proposes amendments to existing rules at 16 Texas Administrative Code, §§74.10, 74.20, 74.25, 74.50, 74.55, 74.60, 74.70, 74.75, 74.80, 74.85, and 74.100 and new rule §74.26 regarding the Elevators, Escalators, and Related Equipment program.

Senate Bill 1729, 80th Legislature amended Health and Safety Code, Chapter 754 to authorize the Commission to adopt recent versions of applicable safety codes, and it authorized the Department to grant variances to the codes for new technological improvements pending their inclusion in the applicable codes. The Department proposes amendments to accommodate those statutory changes, and it proposes changes to clarify the rules. Details are set out below.

Section 74.10 is amended at paragraph (4) and paragraph (7) to drop references to specific versions of the codes and to add a reference to §74.100 where the most recent versions of the codes are adopted. Paragraph (5) is amended to drop the reference to ASME A17.2-2001 and to add language specifying that the currently published edition is the one to use. Paragraph (11) is amended to add a reference to the ASCE Safety Code. New paragraph (14) is added to include a definition of "Inspector". Old paragraph (16) is deleted to remove the definition of unsafe elevator and the paragraph is replaced with new paragraph (1) to define a reportable condition. This change is proposed because some inspectors have been hesitant to label an elevator as unsafe. The purpose of the definition is not to label elevators but to define the types of things that must be reported to the Department. New paragraph (18) is added to define the term "New Technology Variance" as provided in Senate Bill 1729.

Section 74.20 is amended at subsection (d) to change the word "determined" to "required".

Section 74.25 is amended by deleting subsection (d) which will become new §74.26 with one addition. Section 74.25 will now provide contractor registration requirements while §74.26 will provide reporting requirements for contractors.

New §74.26(a)(3) now includes the requirement that quarterly reports only include jobs not previously reported. New subsection (b) requires contractors to report to the building owner and the Department any reportable condition they encounter.

Section 74.50(a)(2) is amended by deleting the phrase, "in a building", to eliminate unneeded language. Subsection (a)(3) is amended to replace the phrase, "have been corrected or are under contract to be corrected" with language requiring the owner to verify that violations cited in an inspection report have been addressed in compliance with §74.70(a)(3). New subsection (f) is added to require that owners notify the Department when needed corrections that were granted a delay by the Department have been made.

Section 74.55 is amended at subsection (a) to require inspectors to provide a copy of the inspection form to the Department and the building owner within ten calendar days of the inspection, and a reference to providing notice when an inspector finds equipment without a decal has been deleted, but is now included in subsection (b). Subsection (b) requires reports of equipment found without a decal to be made within 72 hours of the discovery. Old subsection (b), now subsection (c) is amended to change the reference to "unsafe" to "reportable condition" to comply with the definition change described above, and the report may now be made by e-mail, fax letter or telephone. Old subsection (c) is deleted since the requirement to provide a report to the building owner is now included in subsection (a).

Section 74.60 is amended at subsection (a) to capitalize the word "department" and to add the term "alter" to the list of functions performed under contact. The same amendment has been made to subsections (b), and (c). Subsection (c) is also amended to change the word "the" to "these" that appears before the word "rules". Subsection (d) is amended by deleting the last sentence of the subsection; it is moved to new subsection (g). Subsection (e)(1) is amended by changing the word "the" that appears before "rules" to "these". Subsection (e)(6) is amended by deleting the phrase "or complete an equipment contract" and the word "registrant" is replaced with the term "inspector registrant". Subsection (e)(7) is amended by deleting the word "the" that appears before the word "obtaining", and changing the word "of" to "for" that appears before "the building". New subsection (e)(11) is added to prohibit both the inspector and the person performing the tests observed by the inspector from being employed by the same company. New subsection (f) is added to prohibit an inspector from inspecting equipment if the inspector's employer has a contract to install, maintain, repair, alter, or replace the equipment. New subsection (g) is added to include language deleted from subsection (d).

Section 74.70(a) is amended to more clearly state the responsibilities of a building owner, and to include items deleted elsewhere in the rules. The effect is that their responsibilities are stated in one location rather than being sprinkled throughout the rules. Subsection (b) is amended to more clearly define the inspection interval and to reference the adopted codes as set out in §74.100. Subsection (c) is amended to reference the adopted codes as set out in §74.100. Subsection (d) is amended to replace the word "their" appearing before the word "representative" with the word "his", and to add a provision regarding the circumstances under which equipment suffering an accident may be returned to service. Subsection (e) is amended to reference the adopted codes as set out in §74.100 and to delete language defining who may perform tests since those requirements are set out in the codes. Subsection (f) is amended to change the references to unsafe elevators to elevators having a reportable condition, to change the notification requirement from 48 hours to 24 hours, and to add a requirement that such equipment be reinspected and recertified, and to require the owner to verify that the reportable condition has been corrected before the equipment is returned to service. Subsection (g) is amended to reference the adopted codes as set out in §74.100 and to require that new installations be free of violations of the codes unless the violation is the subject of a Delay, a Waiver, or a New Technology Variance. Subsection (h), which deals with altered equipment has been amended in the same fashion as subsection (g). Subsection (i) has been amended to require that equipment must be tested to determine compliance with adopted codes. Subsection (k)(2) has been amended to make it clear that the section applies to escalators. Subsection (m) has been amended to more clearly set the conditions under which an owner must have equipment reinspected and recertified; there are no substantive changes.

Section 74.75(a)(2) is amended to change the reference from ASME A17.2-2001 to the currently published edition of ASME A17.2. Subsection (a)(7) is deleted as its provisions are now in §74.70. Subsection (b)(4) is amended to make it clear that the official equipment inspection form is not to be used to report inspection results of elevators in single-family dwellings, federal facilities or those that are construction use only. Subsection (c)(1) is amended in its several subsections to clarify and correct the procedure for application of test tags and seals. Subsection (c)(2)(D) is amended to clarify the process for replacement of lost or destroyed decals.

Section 74.80(f) is amended by capitalizing the word "department" where it appears in the section in four places. New subsection (h) is added to provide a fee for an application for a New Technology Variance.

Section 74.85(a) is amended to correct language and to more clearly state the Department's responsibilities. Subsection (a)(2)(A) and (C) are amended to state the Department's duty to review reports and applications that are received rather than having that duty for submitted by a building owner. Subsection (c), which established continuing education requirements for QEI certified inspector, has been deleted since QEI inspectors must have continuing education administered by the QEI certifying entity in order to maintain QEI inspector status. New subsection (c) is added to set out the procedure for Department review of New Technology Variance requests. New subsection (e) is added to provide that the Department may require inspectors to attend training seminars on law and rules. New subsection (f) is added to provide that such seminars where attendance by inspectors is not mandatory may be conducted.

Section 74.100(a) is amended to add "repair, replacement and testing" to the list of operations covered by the adopted codes and to delete the> 1, 2003", and to change the reference to ASME A17.1-2000 to ASME A17.1-2007/CSA B44-07. Old subsection (b) is deleted and a new subsection (b) is added with a list of sections in ASMS A17.1-2007/CSA B44-07 that are not adopted by the Commission. Subsection (c) is added to establish the dates that the adopted codes will become effective in Texas.

These rules are necessary to implement the provisions of Senate Bill 1729 and to generally simplify and clarify the rules.

William H. Kuntz, Jr., Executive Director, has determined that for the first five-year period the proposed amendments and new rule are in effect there will be no cost to state or local government as a result of enforcing or administering the proposed amendments and new rule.

Mr. Kuntz also has determined that for each year of the first five-year period the proposed amendments and new rule are in effect, the public benefit will be that the rules reflect the provisions of Senate Bill 1729, and that they more clearly communicate requirements to affected and interested persons.

There will be no effect on small or micro-businesses as a result of the proposed amendments and new rule. Other than the filing fee for persons applying for a New Technology Variance, there are no anticipated economic costs to persons who are required to comply with the rules as proposed.

Comments on the proposal may be submitted to Caroline Jackson, Legal Assistant, General Counsel's Office, Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 78711, or facsimile (512) 475-3032, or electronically: erule.comments@license.state.tx.us. The deadline for comments is 30 days after publication in the Texas Register.

The amendments and the new rule are proposed under Texas Health and Safety Code, Chapter 754 and Texas Occupations Code, Chapter 51, which authorizes the Department to adopt rules as necessary to implement this chapter and any other law establishing a program regulated by the Department.

The statutory provisions affected by the proposal are those set forth in Texas Health and Safety Code, Chapter 754 and Texas Occupations Code, Chapter 51. No other statutes, articles, or codes are affected by the proposal.

§74.10.Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) The Act--Texas Health and Safety Code, Chapter 754, Elevators, Escalators, and Related Equipment.

(2) Altered Equipment--Any changed equipment, including its parts, components, and/or subsystems, other than maintenance, repair, or replacement. However, the term does include any repairs and replacements performed as part of any alteration(s).

(3) ASME--American Society of Mechanical Engineers, a nationally recognized professional engineering society.

(4) ASME A17.1--The ASME A17.1 [ A17.1-2000 ] "Safety Code for Elevators and Escalators" as adopted in §74.100 [ and A17.1a-2002 and A17.1b-2003 Addenda ].

(5) ASME A17.2--The currently published edition of " [ A17.2-2001-- ] The Guide for Inspection of Elevators, Escalators, and Moving Walks " .

(6) ASME A17.3--The ASME A17.3-2002, "Safety Code for Existing Elevators and Escalators."

(7) ASME A18.1--The ASME 18.1 [ 18.1-1999 ], "Safety Standards for Platforms Lifts and Stairway Chairlifts" as adopted in §74.100 [ and the A18.1-2001 addenda ].

(8) Automated People Mover (APM)--a guided transit mode with fully automated operation, featuring vehicles that operate on guideways with exclusive right of way.

(9) Building Owner--The person or persons, company, corporation, authority, commission, board, governmental entity, institution, or any other entity that holds title to the subject building or facility. For purposes under these rules and the Act, an owner may designate an agent.

(10) Contractor--A person, partnership, company, corporation, or other entity engaging in the installation, alteration, repair, or maintenance of equipment. The term does not include an employee of a contractor.

(11) Delay--Postponement of compliance with a requirement of the applicable ASME/ASCE [ ASME ] Safety Codes, for a specific period of time.

(12) Existing Equipment--equipment installed or altered before September 1, 1993.

(13) Inspection report--A Department approved form used by the inspector to report the inspection results of one unit of equipment.

(14) Inspector--A person engaged in the inspection of equipment for the purpose of determining compliance with these rules and adopted standards.

(15) [ (14) ] New Equipment--equipment installed or altered on or after September 1, 1993.

(16) [ (15) ] Publicly visible area of building--a location that is visible to the public in an elevator car or a common area lobby or hallway and accessible to the public at all times when any elevator is in operation, without the need for the viewer to obtain assistance or permission from building personnel.

(17) Reportable Condition--a condition which exists where a defect requires the equipment to be removed from operation to present a risk of serious injury to passengers, operators, or the general public.

(18) Variance, New Technology--Deferral of compliance with a requirement of the applicable ASME/ASCE Safety Codes to allow the installation of new technology if the new component, system, sub-system, function or device is found to be equivalent or superior to the standards adopted in §74.100, pending adoption of standards that approve the new technology.

[(16) Unsafe elevator or escalator--A condition which exists due to a defect which presents a risk of serious bodily injury.]

(19) [ (17) ] Waiver--Deferral of compliance with a requirement of the applicable ASME Safety Codes for an indefinite period of time.

§74.20.Inspector Registration Requirements.

(a) - (c) (No change.)

(d) Inspectors shall attend a law and rules update seminar conducted by the Department as part of their requirements to renew their registration, when required [ determined ] by the Executive Director.

(e) (No change.)

§74.25.Contractor Registration Requirements.

(a) A person registering with the Department as a contractor shall submit a completed application for registration on the forms provided by the Department. A complete application shall include the original application fee referenced in §74.80.

(b) Registration renewal applications must be filed by the expiration date. Contractors shall submit a completed registration renewal application on forms provided by the Department. A completed contractor registration renewal application shall include the renewal application fee referenced in §74.80.

(c) The contractor shall notify the Department in writing within 30 days of any changes to information submitted on the application or renewal forms.

[(d) Contractors must submit to the Department reports regarding installation, repair, alteration or maintenance jobs on a format approved by the Department.]

[(1) An initial report is due no later than 60 days of the application date and must include all jobs performed by the contractor during the two years prior to the application date.]

[(2) Quarterly reports are due each calendar year in accordance with the following schedule.]

[(A) 1st quarter--April 30]

[(B) 2nd quarter--July 31]

[(C) 3rd quarter--October 31]

[(D) 4th quarter--January 31 of the next year.]

[(3) Quarterly reports must include all jobs performed in the quarter which have not been previously reported to the Department.]

[(4) The initial quarterly report must include all jobs performed from the application date until the end of the quarter containing the application date, which have not been previously reported to the Department.]

§74.26.Reporting Requirements--Contractor.

(a) Contractors must submit to the Department reports regarding installation, repair, alteration, or maintenance jobs on a format approved by the Department.

(1) An initial report is due no later than 60 days of the application date and must include all jobs performed by the contractor during the two years prior to the application date.

(2) Quarterly reports are due each calendar year in accordance with the following schedule.

(A) 1st quarter--April 30

(B) 2nd quarter--July 31

(C) 3rd quarter--October 31

(D) 4th quarter--January 31 of the next year.

(3) Quarterly reports must only include all jobs performed in the quarter which have not been previously reported to the Department.

(b) Contractors shall, by e-mail, fax, letter or telephone, report to the Building Owner and Department, within 24 hours of discovery, all equipment they encounter that has a reportable condition.

§74.50.Reporting Requirements--Building Owner.

(a) To obtain a Certificate of Compliance, the building owner must submit to the Department within 60 days of the equipment inspection date, the following items:

(1) the application for Certificate of Compliance;

(2) a copy of the inspection reports for each unit of equipment [ in a building ];

(3) written documentation to verify that all violations of the applicable ASME code, cited on the inspection report, are in compliance with §74.70(a)(3) [ have been corrected or are under contract to be corrected ];

(4) any application(s) for Delay or Waiver if applicable; and,

(5) all applicable fees.

(b) All Delay [ delay ] applications, received after September 1, 2003 to install door restrictor and fire service by September 1, 2010, must include the following on the delay application form or attach a statement to the delay application form:

(1) verification that the building owner has notified all tenants or occupants in the building that the elevators do not comply with the door restrictor or fire service requirements in the ASME A17.3-2002 Code and has made available to tenants or occupants upon request the building owner plan of compliance before 2010;

(2) the building owner plan of compliance before 2010; and

(3) compliance completion date.

(c) The owner shall notify the Department, in writing and within 30 days, of equipment that has been placed out of service. The equipment must be placed out of service in accordance with the definition in A17.1, "installation placed out of service."

(d) The owner shall notify the Department, in writing and within 30 days, of an elevator that has had alterations converting the equipment to a material lift. The conversion shall comply with the applicable sections of A17.1 [ Part 7 ].

(e) The owner shall notify the Department, in writing and within 30 days, of a material lift that has had alterations converting the equipment to an elevator. The elevator must be inspected and brought into compliance with A17.1 as a new installation.

(f) When a Delay has been approved, the owner shall notify the Department, in writing within 30 days of the date of correction.

§74.55.Reporting Requirements--Inspector

(a) For new installations or alterations [ and for equipment inspected and found without a decal, ] the inspector shall provide a copy of the Elevator Equipment Inspection Form to the Department and the building owner not later than the 10th [ within ten ] calendar day [ days ] after completing the inspection.

(b) Inspectors, by e-mail, fax, letter or telephone, shall report to the Department, within 72 hours of discovery, all equipment they encounter that does not have a decal number.

(c) [ (b) ] The inspector shall clearly note on the inspection report any equipment found with a reportable condition [ to be unsafe ], and shall report it immediately by submitting a copy of the report to the building owner and by e-mail, fax, letter or telephone to the Department within 24 hours .

[(c) Inspectors shall submit a copy of the inspection report to the building owner not later than the 10th calendar day after the date of inspection.]

§74.60.Standards of Conduct for Inspector or Contractor Registrants.

(a) Competency. The registrant shall be knowledgeable of and adhere to the Act, these [ the ] rules, the ASME and ASCE Code, and all procedures established by the Department [ department ] for equipment inspections or performance of a contract to install, alter, repair, or maintain equipment. It is the obligation of the registrant to exercise reasonable judgment and skill in the performance of equipment inspections or performance of a contract to install, repair, or maintain equipment.

(b) Integrity. A registrant shall be honest and trustworthy in the performance of equipment inspections or performance of a contract to install, alter, repair, or maintain equipment, and shall avoid misrepresentation and deceit in any fashion, whether by acts of commission or omission. Acts or practices that constitute threats, coercion, or extortion are prohibited. The registrant shall accurately and truthfully represent to any prospective client his/her capabilities and qualifications to perform the services to be rendered.

(c) Interest. The primary interest of the registrant is to ensure compliance with the Act, these [ the ] rules, and the ASME or ASCE Code and all procedures established by the Department . The registrant's position, in this respect, should be clear to all parties concerned while conducting equipment inspections or completing the performance of a contract to install, alter, repair, or maintain equipment.

(d) Conflict of Interest. A registrant is obliged to avoid conflicts of interest and the appearance of conflicts of interest. A conflict of interest exists when an inspector performs or agrees to perform equipment inspections for a building in which he has a financial interest, whether direct or indirect. A conflict of interest also exists when a registrant's professional judgment and independence are affected by his/her family, business, property, or other personal interests or relationships. [ A registered inspector shall withdraw from employment when it becomes apparent that it is not possible to faithfully discharge the duty and performance of services owed the client, but then only upon reasonable notice to the client. ]

(e) Specific Rules of Conduct. A registrant shall not:

(1) participate, whether individually or in concert with others, in any plan, scheme, or arrangement attempting or having as its purpose the evasion of any provision of the Act, these [ the ] rules, or the Standards adopted by the Commission;

(2) knowingly furnish inaccurate, deceitful, or misleading information to the department, a building owner, or other person involved in equipment inspections or equipment contracts;

(3) state or imply to a building owner that the department will grant a delay or waiver;

(4) engage in any activity that constitutes dishonesty, misrepresentation, or fraud while performing equipment inspections or completing an equipment contract;

(5) perform equipment inspections or complete an equipment contract in a negligent or incompetent manner;

(6) perform equipment inspections [ or complete an equipment contract ] in a building or facility in which the inspector registrant is an owner, either in whole or in part;

(7) perform equipment inspections in a building or facility wherein the registrant, for compensation, participated in [ the ] obtaining an equipment contract for [ of ] the building;

(8) indulge in advertising that is false, misleading, or deceptive;

(9) misrepresent the amount or extent or prior education or experience to any client; [ or ]

(10) hold out as being engaged in partnership or association with any person unless a partnership or association exists in fact ; or [ . ]

(11) perform inspections on any equipment in which both the inspector registrant and the person performing the test or installing the equipment are employed by the same company.

(f) An inspector registrant may not perform inspections upon equipment for which the inspectors' employer also has a contract to perform installations, maintenance, repairs, tests, replacements or alterations on that equipment.

(g) An inspector registrant shall withdraw from employment when it becomes apparent that it is not possible to faithfully discharge the duty and performance of services owed the client, but then only upon reasonable notice to the client.

§74.70.Responsibilities of the Building Owner.

(a) The building owner shall :

(1) obtain the services of an inspector registered with the Department [ department ] to perform inspections in accordance with §74.75 and §74.100 ; [ . ]

(2) keep the equipment free from reportable conditions;

(3) have all violations cited on an inspection report;

(A) corrected within 60 calendar days of the date of inspection;

(B) have them under contract to be corrected and all work completed not later than the next inspection due date; or

(C) have an approved waiver or delay.

(b) The owner of the building in which equipment is located shall have such equipment inspected at an interval not to exceed every twelve (12) months to determine compliance with the applicable standards adopted in §74.100 .

(c) The owner of the building in which the equipment is located must have available all maintenance and inspection records and maintenance control programs for the equipment during the life of the equipment as required by the applicable standards adopted in §74.100 [ A17.1 Section 8.6 ]. These records and programs shall be available in the building.

(d) The building owner or his [ their ] representative must report all accidents, as defined in Texas Health and Safety Code, §754.011, involving equipment to the Department, using a Department approved form, within 72 hours of the accident. If the accident results in serious bodily injury or a fatality, the equipment shall be removed from service and shall not be moved (except as necessary to extricate an injured party or effect a life-saving rescue) or returned to service until a representative of the Department completes an investigation and issues an approval to return the unit to service.

(e) The building owner shall ensure that all of the tests required by the applicable standards adopted in §74.100 [ ASME A17.1, Part 8, ] are performed [ made by a person qualified to perform such services and registered with the department. Such tests must be performed in the presence of the inspector. The person performing the test must be familiar with the operation of the equipment and available to accompany and assist during an inspection ].

(f) If any equipment is determined to have a reportable condition [ be unsafe, ] by inspection or other means, the building owner shall notify the Department in writing within 24 [ 48 ] hours, and shall place the unsafe equipment out of operation until repairs to correct the reportable [ unsafe ] condition(s) are completed. After repairs have been completed, the building owner shall have the equipment re-inspected and re-certified and submit written verification to the Department that the reportable [ unsafe ] condition has been corrected before returning the equipment to service .

(g) New equipment installations must be inspected and tested to determine their safety and compliance with the requirements as adopted in §74.100 [ of ASME A17.1, ] before being placed in service. The equipment shall be free of any violations, unless a Waiver, Delay or New Technology Variance has been granted by the Department in writing, before being placed in service.

(h) Altered equipment must be inspected and tested to determine its safety and compliance with the requirements as adopted in §74.100 [ of ASME A17.1, and ASME A17.3 ] before being placed back in service. The equipment shall be free of any violations, unless a Waiver, Delay or New Technology Variance has been granted by the Department in writing, before being placed back into service.

(i) Equipment [ Existing equipment ] must be [ inspected and ] tested [ annually ] to determine its safety and compliance with the requirements as adopted in §74.100 [ of ASME A17.3 ].

(j) The owner of the building in which equipment is located must obtain a yearly certificate of compliance from the Department evidencing that each unit of equipment in the building is in compliance with the Act and all applicable rules and standards. The owner of the building must have a current Certificate of Compliance in order to operate equipment located in the building.

(k) The building owner must display the current Certificate of Compliance:

(1) if the certificate relates to an elevator,

(A) inside the elevator car not more than 7'0" or less than 3'0" above the finished car floor;

(B) outside the elevator car in the main elevator lobby within 10 feet of the elevator call button; or

(C) in a common area lobby or hallway location that is:

(i) accessible to the public without assistance or permission during all hours in which any elevator is in operation and

(ii) identified by a plaque mounted in the elevator car or within 10 feet of the elevator call button in the main elevator lobby. The font size for letters on the plaque shall be at least 18 and the plaque must state that the elevator is regulated by the Texas Department of Licensing and Regulation and include the department's telephone number 1-800-803-9202 and the building management's telephone number.

(2) if the certificate relates to an escalator, in a common area lobby or hallway location that is:

(A) accessible to the public without assistance or permission during all hours in which any escalator is in operation and

(B) identified by a plaque mounted within 10 feet of entry and exit of escalator in the main escalator lobby. The font size for letters on the plaque shall be at least 18 and the plaque must state that the escalator is regulated by the Texas Department of Licensing and Regulation and include the department's telephone number 1-800-803-9202 and the building management's telephone number.

(3) on the box containing the control circuitry if the certificate relates to a chairlift, platform lift, automated people mover operated by cables, moving sidewalk, or related equipment.

(l) The building owner must display an inspection report at the location defined in subsection (k), selected by the owner, until a current certificate of compliance is issued by the Executive Director.

(m) The building owner must have equipment re-inspected and re-certified if the equipment :

(1) [ if the equipment ] has been altered [ and determined to be unsafe ];

(2) has been determined to have a reportable condition [ be unsafe ];

(3) has had any [ cosmetic ] alteration made to the interior of elevator car enclosures or flooring [ that diminishes the level of safety or poses a risk of serious injury ]; or

(4) [ if an ] inspection report shows an existing violation has continued longer than permitted in a delay granted by the executive director.

(n) The building owner shall have copies of all current department issued Waivers, Delays, and Variances [ waivers and delays, ] posted in the machine room/machinery space in a readily accessible and visible location available to elevator personnel.

§74.75.Responsibilities of the Inspector.

(a) Inspection procedures.

(1) The inspector must inspect all equipment for compliance with the applicable standards as adopted in §74.100.

(2) Inspectors must use the currently published edition of ASME A17.2 [ A17.2-2001 ], "Inspectors' Manuals" to conduct inspections and witness tests for compliance with the standards adopted by the Department.

(3) The inspector shall report to the building owner [ or agent ] before beginning any inspections.

(4) The inspector[ , ] and the building owner must sign and date the inspection report.

(5) The inspector shall not perform any of the safety tests.

(6) On new or altered equipment installations, the inspector may perform an inspection prior to the installation being completed. However, on these installations the Department will only accept inspection reports for final inspections performed by the inspector after the installation is completed.

[(7) New or altered equipment installations shall not be permitted to be used by the public until the equipment is completely installed and all work is completed.]

(b) Department forms.

(1) The inspector must use current Department approved forms for reporting inspections.

(2) The Department forms shall be filled out completely, and shall be used to report the [ all ] inspections of existing equipment and final inspections of new or altered equipment.

(3) The inspector must list all ASME Code violations by code rule number and code edition for each unit inspected, and include a written description of the violation on the Department Form. If the ASME Code refers to another code, the inspector must list both code rule numbers and include a written description of the violation.

(4) The inspector may not use the official elevator equipment inspection form [ must provide his/her own inspection report form ] to report the results of an inspection to the owner of equipment located in a single-family dwelling , construction-use only elevator, or Federal Facility .

(c) Inspector's Equipment.

(1) Test Tags

(A) The inspector must purchase test tags from the Department and shall be the person who attaches these tags to the inspected [ inspection ] equipment.

(B) The inspector shall inscribe all required information on each Department test tag. Department test tags shall not be replaced until after all date and signature spaces on the tag are filled.

(C) Upon completion of the initial Acceptance test, Department test tags shall be attached to each individual piece of [ the ] equipment on or adjacent to the equipment controller or main line disconnect so that it is in a conspicuous location [ with wire rope and lead seal ].

(D) All devices and adjustments required to be sealed by the adopted standard shall be sealed with wire rope and lead seal by the inspector witnessing the tests(s). Once a device or adjustment has been so sealed, there shall be no need to replace the seal unless it is broken for whatever reason, whereupon an inspector shall witness the test and provide a seal as prescribed herein prior to the unit being returned to service. The lead seal shall be crimped onto the wire rope using a crimping tool bearing the Department's seal and the crimping tool number assigned to the inspector. An inspector may use the required crimping tool to seal lead seals provided by the manufacturer at the factory as long as the assigned number is legible.

(E) Inspector's equipment may be purchased from the Department for:

(i) $200 per 100 test tags (sold in multiples of 100); and

(ii) $10 per 100 wire ropes and lead seals (sold in multiples of 100).

(F) The inspector shall verify that contractor's test tags are placed on the equipment in conformance with the adopted standards in §74.100. [ Test tags shall be attached to equipment as described below: ]

[(i) Electric Elevators, Acceptance Tests, Category 1 (annual tests) and Category 5 (Five Year Tests). Tags shall be placed in the machine room/machinery space. Tags shall not be replaced until after all date and signature spaces on the tag are filled.]

[(ii) Hydraulic Elevators, Acceptance Tests, Category 1 (annual test), Category 3 (three year tests), and Category 5 (Five Year Tests). Tags shall be placed in the machine room/machinery space. Tags shall not be replaced until after all date and signature spaces on the tag are filled.]

[(iii) Escalators, Acceptance Tests. Attach tags to the overspeed governor and/or emergency brake. Tags shall not be replaced until after all date and signature spaces on the tag are filled.]

(2) Decals

(A) Each unit of equipment shall be identified with a unique identification number decal issued by the Department, which the inspector must affix to the upper right hand corner of the control panel. The decal shall remain on the control panel for the life of the equipment.

(B) An additional Department decal shall not be affixed to equipment that has a current Department decal displayed.

(C) All correspondence and inspection reports shall reference the decal number and Department building ID number, as reflected on the Certificate of Compliance.

(D) If an inspector places a new decal on a unit of equipment to replace a lost or destroyed decal, the inspector must report the equipment's location , old decal number, and new decal number to the Department within ten calendar days of placing the new decal number upon the equipment .

§74.80.Fees.

(a) Inspector registration fees.

(1) original--$100

(2) renewal application--$100

(3) Revised/Duplicate registration card--$25

(b) Certificate of Compliance filing fees:

(1) submitted by building owner with a copy of inspection report within 60 days of the equipment inspection date--$30 per unit of equipment;

(2) $10 late filing fee per each unit for every thirty (30) day period if the inspection report, filing fees, and verification about correcting deficiencies in the inspection report are filed after the 90th day from the equipment inspection date, and

(3) $25 per Revised/Duplicate Certificate.

(c) Waiver/Delay [ Waiver/delay ] application fee: $50 for each ASME Code violation[ , ] per unit of equipment[ , ] requested to be waived or delayed.

(d) Fees shall be charged and collected by the Department for a waiver or delay application for an institution of higher education.

(e) Contractor Registration fees

(1) original--$300

(2) renewal application--$300

(3) Revised/Duplicate registration card--$25

(f) The fee for Department [ department ] personnel to disconnect power or lockout equipment in a building shall be $200 per hour. Travel and per diem costs shall be reimbursed by the building owner in accordance with the current rate as established in the current Appropriations Act. The Department [ department ] shall present a billing statement to the building owner or representative after disconnecting the power or lockout that is payable upon receipt unless the Department receives in writing verification that the expenses would be paid no later that the 10th day after the date power is reconnected or equipment is unlocked. The fee for Department [ department ] personnel to reconnect power or unlock equipment is the same to disconnect or lockout equipment.

(g) Late renewal fees for Inspector and Contractor registrations issued under this Chapter are provided under §60.83 of this title (relating to Late Renewal Fees).

(h) New Technology Variance application fee of $2,500 for each individual deviation from the standards adopted in §74.100.

§74.85.Responsibilities of the Department.

(a) When issuing [ Issue ] Certificates of Compliance the Department shall: [ . ]

(1) Assure that each [ Each ] certificate includes [ must include ] the decal number, inspection date, building name and physical address, owner name and mailing address, inspector name and QEI #, current inspection date, the date of the last inspection, the due date of the next inspection, contact information at the department to report a violation, indicate status of correcting code violations and the Executive Director's signature and date.

(2) Use [ The Department shall use ] the following procedures to issue a Certificate of Compliance:

(A) review inspection report and fees received by the Department [ submitted by building owner ]

(B) review verification submitted by building owner indicating which code violations have been remedied and which code violations are under contract to be corrected;

(C) review Waiver/Delay [ delay/waiver ] application and fees received by the Department [ submitted by building owner ];

(D) notify building owner with a Notice of Incomplete Submittal asking for any missing inspection documents and fees; and

(E) notify building owner of any denied waiver or delay requests and ask for verification that violations have been remedied or under contract to be corrected.

(F) After a determination is made that the building owner submitted an inspection report with the correct amount of filing fees and all deficiencies in the inspection report have been corrected, or under contract to be corrected, or delay or waiver granted, then a certificate of compliance is issued for each unit of equipment.

(b) The Department shall provide notification to building owners, architects, and other building industry professionals regarding the necessity of annually inspecting equipment through the Department's website, press releases, and group presentations.

(c) Prior to the installation of any device, equipment or technology not permitted by the currently adopted standards, a request for New Technology Variance must be granted by the Department.

(1) Requests for New Technology Variances shall contain the following, if applicable:

(A) an enumeration and description of all the requirements of the adopted standard for which a new technology variance is being requested;

(B) documentary evidence to support a claim of equivalence or superiority to the requirements of the adopted standard;

(C) documentary evidence that the new technology is being or may be considered by the ASME code committee(s) for inclusion in a future standard;

(D) an estimated time frame for the approval of the new technology by the ASME code committee(s);

(E) any additional supporting evidence deemed by the applicant to be necessary to assist in making a determination; and

(F) the new technology variance application fees outlined in §74.80(h).

(2) The applicant shall be advised of the status of the application, in writing, not less often than quarterly.

(3) The applicant for a New Technology Variance shall be notified of the Department's decision in writing. If approved, the notification will itemize the specific code requirement deviations for which the variance(s) are approved.

[(c) The Department shall approve continuing education programs for registered QEI-1 certified Inspectors.]

[(1) Applicant must submit application form, copy of the course outline, resume of instructor who will teach, payment of all applicable fees, and any other information or data that is necessary to adequately describe or explain the course.]

[(2) The Department will issue a letter of approval or disapproval for the continuing education program.]

[(3) The Department will compile a list of approved continuing education programs for inspectors.]

(d) The Department may periodically review inspection reports to determine compliance with the applicable statutes and administrative rules.

(e) The Department may require inspector attendance at periodic rules and/or law update seminars conducted by the Department when the Executive Director determines such seminars to be necessary.

(f) The Department may conduct code, rule and law or other inspector training seminars where attendance by inspectors is not mandatory.

§74.100.Technical Requirements.

(a) The Department adopts the standards for the installation, maintenance, repair, replacement, alteration, testing, operation, and inspection of [ new ] equipment [ installed or altered on or after September 1, 2003, ] that are contained in the following codes: ASME A17.1-2007/CSA B44-07 as amended below [ A17.1-2000 ], ASME A17.3-2002, ASME A18.1-2005 [ A18.1 ] and ASCE Codes 21.

(b) The following amendments shall be made to ASME A17.1-2007/CSA B44-07:

(1) Delete requirement 1.2.1(c) and all references to A17.7 within the adopted standard, preface and appendices.

(2) Delete requirement 8.10.2.2.1(q) emergency or standby power operation.

(3) Delete requirement 8.10.2.3.2(l) emergency or standby power alterations.

(4) Delete requirement 8.10.3.3.2(l) emergency or standby power alterations.

(5) Delete 8.11.2.2.7 standby or emergency power operation.

(6) Delete requirement 8.11.2.3.5 emergency and standby power operation.

(7) Delete requirement 8.11.3.2.3(f) standby power operation.

(8) Delete the reference to ASME A17.3 contained within Section 9.1.

(9) Delete Appendix E in its entirety.

(c) The effective dates of:

(1) ASME A17.1-2007/CSA B44-07 and the amendments in §74.100(b) shall be effective on April 1, 2008.

(2) ASME A18.1-2005 shall be effective April 1, 2008.

(3) ASME A17.3-2002 continues to be in effect.

[(b) The Department adopts the standards for the installation, maintenance, alteration, operation, and inspection of existing equipment installed or altered before September 1, 2003, that are contained in the following codes: ASME A17.1, ASME 18.1 and ASCE Codes 21 in effect on the date of installation or alteration and ASME A17.3-2002.]

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 30, 2007.

TRD-200703319

William H. Kuntz, Jr.

Executive Director

Texas Department of Licensing and Regulation

Earliest possible date of adoption: September 9, 2007

For further information, please call: (512) 463-7348

16 TAC §§83.10, 83.20, 83.22, 83.23, 83.25, 83.26, 83.29, 83.31, 83.40, 83.50 - 83.54, 83.71, 83.80, 83.106, 83.110, 83.114, 83.120

The Texas Department of Licensing and Regulation ("Department") proposes amendments to existing rules at 16 Texas Administrative Code, §§83.10, 83.20, 83.22, 83.23, 83.25, 83.26, 83.29, 83.31, 83.40, 83.50, 83.51, 83.52, 83.53, 83.54, 83.71, 83.80, 83.106, 83.110, 83.114, and 83.120, regarding the regulation of cosmetologists.

These proposed rule changes are necessary to implement changes in law enacted by House Bill 2106, 80th Legislature, and to make certain clean-up changes in the rules for cosmetologists. The provisions of House Bill 2106 became effective on June 15, 2007 and require the Commission of Licensing and Regulation to adopt rules necessary to implement the new legislation by January 1, 2008. These proposed rule changes, with the exception of a clean-up change in §83.114, were recommended by the Advisory Board on Cosmetology at its meeting on July 9, 2007.

In §83.10 the definition of "hair weaver" is amended to recognize that shampooing clients' hair is a customary part of hair weaving services and, in fact, is a significant part of the curriculum for hair weaver training.

Section 83.20 is reorganized to implement a change in law made by House Bill 2106, that applicants for a specialty certificate are no longer required to have a high school diploma or equivalent.

Section 83.22 is amended to implement a change in law made by House Bill 2106, that new beauty shops and specialty shops are no longer required to be inspected by the Department before opening for business.

Section 83.23 is amended to implement a change in law made by House Bill 2106, that applicants for a beauty culture school license are no longer required to submit a floor plan. A corresponding change is made to the requirements for public school cosmetology programs.

In §83.25 a clean-up change is made to Subsection (c) to recognize that a hair braiding specialty certificate is distinct from a hair weaving specialty certificate. Subsection (f) is amended to remove the reference to a time frame that will no longer apply once the proposed rules are adopted and take effect. Subsection (k) is added to implement a provision of House Bill 2106 that restricts the number of continuing education hours required of cosmetologists who are at least 65 years of age and have held a license for at least 15 years. The law now limits the number of hours that the Department may require of these licensees to not more than four hours in health and safety courses. Upon the recommendation of the Advisory Board on Cosmetology, the proposed rule requires these licensees to complete two hours in a Sanitation course.

In §83.26 a technical correction is made to recognize that a hair braiding specialty certificate is distinct from a hair weaving specialty certificate.

Section 83.29(b) is amended to implement a change in law made by House Bill 2106 by specifying that relocated beauty shops and specialty shops are no longer required to be inspected by the Department before opening for business. Relocated beauty culture schools must still be inspected prior to opening. Similarly, Subsection (c) is amended to clarify that beauty shops and specialty shops are not required to be inspected on a change of ownership; only beauty culture schools require such inspection. Additionally, in Subsection (c) a clean-up change is made to clarify that the list of events that constitute a change of ownership is not an exhaustive list.

In §83.31 a clean-up change is made to list the hair braiding specialty certificate separately from the hair weaving specialty certificate.

In the General Appropriations Act, the 80th Legislature appropriated money to the Department from Private Beauty Culture School Tuition Protection Account for the 2008-09 biennium. In response, the Department proposes to update the rules related to claims against the account. Section 83.40(a) is amended to recognize that under Chapter 1602, Occupations Code there are two purposes of the account: to refund tuition and fees to students who are owed a refund by a closed school and to pay expenses incurred by a private beauty culture school in providing training directly related to educating a student from a closed school. In Subsection (f) the substitution of the word "may" for "will" acknowledges that a claim may be paid only if all conditions of the rules are met, including that the account contains sufficient funds. A limit of $100,000 is placed on the total of claims that may be paid against one school. This limit is intended to avoid having the entire account being exhausted by claims against one closed school. Subsection (g) is added to list the requisites for payment of a refund to a student. Subsection (h) lists the requisites for payment of expenses to a private beauty culture school related to educating a student from a closed school. Subsection (i) specifies that claims will be paid on a pro rata basis if all claims cannot be satisfied. Subsection (j) requires that the Department provide notice of a claim to the affected school and gives the school 20 days from the date of the notice to dispute the claim. Subsection (k) identifies the consequences of a payment from the account, including that the closed school must repay the account and that the school is subject to administrative sanctions and penalties.

Sections 83.50 and 83.51 are amended to recognize that initial inspections are now required only of beauty culture schools and not shops.

Section 83.52(a) is amended to implement a change in law made by House Bill 2106 to increase the frequency of periodic inspections of beauty culture schools to twice per year. A clean-up change is made to Subsection (d) to remove a reference to "certain" violations because the rules do not specify certain violations that may result in administrative penalties or sanctions. The Department's Penalty Matrix, which is part of the Enforcement Plan, identifies the range of sanctions and penalties for various violations.

The effect of the wording changes in §83.53 is to remove beauty culture schools from Tiers 1 and 2 of the risk-based inspection schedule. This is necessary in light of the increased frequency of periodic inspections for schools. Additional relevant factors are added that would place a beauty culture school in Tier 3. Conforming changes are made to Subsections (f) and (g). As in §83.52(d) the word "certain" is removed in Subsection (e) in reference to administrative penalties and sanctions for violations.

Section 83.54(a) is amended to add a deadline by which an establishment owner shall complete all corrective modifications and provide written verification of the corrective modifications to the department. The deadline is 10 days after receiving the Department's list of required corrective modifications. As in previous sections, the word "certain" is removed with respect to violations that may lead to administrative penalties and sanctions. Subsection (b) is amended to add that failure to complete corrective modifications timely or to provide written verification to the department timely may result in administrative penalties or sanctions.

Section 83.71(f) is amended to make a clean-up change to separate the requirements for hair weaving specialty shops and hair braiding specialty shops. Hair braiding specialty shops are not required to provide shampoo bowls or dryers because hair braiding practice does not include shampooing.

Section 83.80 is amended to make clean-up changes to separate the fees for hair weaving specialty shops and hair braiding specialty shops.

Section 83.106 is amended to implement a change in law enacted by House Bill 2106. Under Texas Occupations Code, Section 1603.352, as amended by House Bill 2106, the requirement to sterilize of instruments used in nail services applies to metal instruments.

A clean-up change is made to §83.110 to clarify that hair braiders, in addition to the other license types mentioned, must wash their hands before performing services on a client.

Section 83.114(f) is amended to make a clean-up change to clarify that preparation of food or beverages on licensed premises for sale is prohibited, but preparation of food or beverages not for sale is permitted. For example, a cosmetology establishment may offer a cup of coffee to a customer without charge. The language of the current rule, strictly interpreted, could be read to prohibit a cosmetology establishment from preparing a cup of coffee for a customer. This is not the intent of the rule and was never the Department's interpretation. The intent of the rule is to prohibit, due to health concerns, the operation of a food or drink establishment on the same premises as a cosmetology establishment. The Department's enforcement of the rule has been consistent with that interpretation. However, the Department proposes this change to avoid any confusion as to what is permitted.

Section 83.120(d) is amended to require that the beauty culture school, rather than the student, is responsible for keeping a record of the practical applications completed by each student. Because the school reports this information to the Department, the Department believes that it is more appropriate for the school to be responsible for tracking the information.

William H. Kuntz, Jr., Executive Director, has determined that for the first five-year period the proposed amendments are in effect there will be no significant changes to costs or revenues of the state and no changes to costs or revenues of local government as a result of enforcing or administering the amendments. Although the underlying changes in law, such as eliminating initial inspections of cosmetology shops or increasing inspection frequency of beauty culture schools, may have some fiscal implications, the changes made by these proposed rules do not in themselves have any significant fiscal implications.

Mr. Kuntz also has determined that for each year of the first five-year period the amendments are in effect, the public benefit will be as follows: more clear and detailed procedures for payment of tuition refund claims to cosmetology students when a school closes; a fixed time frame for establishment owners to make corrective modifications following an inspection; a more specific requirement that hair braiders must wash their hands before working on a client; and clarification that establishments may offer food and beverages, such as coffee, without charge to customers. Licensees who are at least 65 years of age and have at least 15 years of licensure will benefit by needing only two hours of Sanitation continuing education to renew the license.

Mr. Kuntz also has determined that there may be some increased costs to closed beauty culture schools by requiring that the schools must repay claims that are paid from the Private Beauty Culture School Tuition Protection Account. Schools affected may include small or micro-businesses. The maximum amount of each claim is $35,000, and the maximum amount of all claims for one school is $100,000. Repayments to the account include interest of 8% per year. Additionally, establishments, including small or micro-businesses, generally will have a ten-day deadline to make corrective modifications following a Department inspection. The cost of making these modifications within the specified time frame will vary depending on the nature of the violation. There are no other anticipated costs to persons required to comply with the rules. There are no other anticipated costs to small or micro-businesses.

Comments on the proposal may be submitted to Caroline Jackson, Legal Assistant, Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 78711, or facsimile (512) 475-3032, or electronically: erule.comments@license.state.tx.us. The deadline for comments is 30 days after publication in the Texas Register.

The amendments are proposed under Texas Occupations Code, Chapters 51, 1602, and 1603, which authorize the Department to adopt rules as necessary to implement those chapters and any other law establishing a program regulated by the Department. In particular, many of these rule changes are proposed to implement the provisions of House Bill 2106, 80th Legislature.

The statutory provisions affected by the proposal are those set forth in Texas Occupations Code, Chapters 51, 1602, and 1603. No other statutes, articles, or codes are affected by the proposal.

§83.10.Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) - (9) (No change.)

(10) Hair weaver--person authorized by the department to perform the services of a hair braider as defined in this section and, additionally, may attach hair by any weaving method. Such practice may [ shall not ] include shampooing, conditioning, and drying performed in connection with a hair weaving service. Such practice may not include [ , ] styling, cutting, or trimming hair except to the extent such activity is incidental to a hair weaving service. Such practice shall not include the application of color chemicals, relaxers, perm solutions, or other preparations to alter the color or to straighten, curl, or alter the structure of hair.

(11) - (23) (No change.)

§83.20.License Requirements--Individuals.

(a) To be eligible for an operator license, facialist specialty license, or manicurist specialty license, [ hair weaving specialty certificate, hair braiding specialty certificate, wig specialty certificate, or shampoo/conditioning specialty certificate, ] an applicant must:

(1) submit a completed application on a department-approved form;

(2) pay the fee required under §83.80;

(3) be at least 17 years of age;

(4) have obtained a high school diploma, or the equivalent of a high school diploma, or have passed a valid examination administered by a certified testing agency that measures the person's ability to benefit from training; [ and ]

(5) have completed the following hours of cosmetology curriculum in a beauty culture school:

(A) for an operator license, one of the following:

(i) 1500 hours of instruction in a beauty culture school; or

(ii) 1000 hours of instruction in beauty culture courses and 500 hours of related high school courses prescribed by the department in a vocational cosmetology program in a public school.

(B) for a facialist specialty license, 750 hours of instruction.

(C) for a manicurist specialty license, 600 hours of instruction ; and [ . ]

[ (D) for a hair weaving specialty certificate, 300 hours of instruction completed in not less than eight weeks from date of enrollment.]

[ (E) for a hair braiding specialty certificate, 35 hours of instruction.]

[ (F) for a wig specialty certificate, 300 hours of instruction completed in not less than eight weeks from date of enrollment.]

[ (G) for a shampoo/conditioning specialty certificate, 150 hours of instruction completed in not less than four weeks from date of enrollment; and]

(6) [ for an operator license, facialist specialty license, manicurist specialty license, hair weaving specialty certificate, wig specialty certificate, or shampoo/conditioning specialty certificate, ] pass a written and practical examination required under §83.21. [ No examination is required for a hair braiding specialty certificate. ]

(b) To be eligible for hair weaving specialty certificate, hair braiding specialty certificate, wig specialty certificate, or shampoo/conditioning specialty certificate, an applicant must:

(1) submit a completed application on a department-approved form;

(2) pay the fee required under §83.80;

(3) be at least 17 years of age;

(4) have completed the following hours of cosmetology curriculum in a beauty culture school:

(A) for a hair weaving specialty certificate, 300 hours of instruction completed in not less than eight weeks from date of enrollment;

(B) for a hair braiding specialty certificate, 35 hours of instruction;

(C) for a wig specialty certificate, 300 hours of instruction completed in not less than eight weeks from date of enrollment; or

(D) for a shampoo/conditioning specialty certificate, 150 hours of instruction completed in not less than four weeks from date of enrollment; and

(5) for a hair weaving specialty certificate, wig specialty certificate, or shampoo/conditioning specialty certificate, pass a written and practical examination required under §83.21. No examination is required for a hair braiding specialty certificate.

(c) [ (b) ] To be eligible for an instructor license, facial instructor specialty license or manicure instructor specialty license, an applicant must:

(1) pass a written examination and practical demonstration of teaching skills required under §83.21;

(2) be at least 18 years of age;

(3) have completed the 12th grade or its equivalent;

(4) pay the fee required under §83.80; and

(5) meet the following requirements:

(A) for an instructor license, hold an active operator license and have completed one of the following:

(i) 750 hours in methods of teaching the student; or

(ii) 250 hours in methods of teaching the student, if the applicant can verify two years of working experience in a licensed beauty salon.

(B) for a facial instructor specialty license, hold an active operator or facialist specialty license and have completed one of the following:

(i) 750 hours in methods of teaching the student; or

(ii) 250 hours in methods of teaching the student, if the applicant can verify two years of facial experience in a licensed beauty salon or facial specialty salon.

(C) for a manicure instructor specialty license, hold an active operator or manicurist specialty license and have completed one of the following:

(i) 750 hours of instruction in cosmetology courses and methods of teaching in a department-approved school or program, or

(ii) 250 hours in methods of teaching the student, if the applicant can verify two years of manicure experience in a licensed beauty salon or manicure specialty salon.

(d) [ (c) ] To be eligible for a shampoo apprentice permit, an applicant must:

(1) be at least 16 years of age; and

(2) submit a completed application on a department-approved form.

(e) [ (d) ] To be eligible for a student permit, an applicant must:

(1) submit a completed application on a department-approved form; and

(2) pay the fee required under §83.80.

(f) [ (e) ] To be eligible for a registered examination proctor registration, an applicant must:

(1) have held an active instructor license for at least two of the five years preceding the application;

(2) hold an active instructor license;

(3) obtain a certificate of completion from a department-approved training course;

(4) submit a completed application on a department-approved form; and

(5) pay the applicable fee under §83.80.

(g) [ (f) ] A license application is valid for one year from the date it is filed with the department.

§83.22.License Requirements--Beauty Salons, Specialty Salons, and Booth Rentals (Independent Contractors).

[ (a) ] To be eligible for a beauty salon, specialty salon, or booth rental license, an applicant must:

(1) obtain the current law and rules book;

(2) comply with the requirements of the Act and this chapter;

(3) submit a completed application on a department-approved form;

(4) pay the fee required under §83.80; and

(5) for a booth rental license, hold an active department-issued cosmetology license.

[ (b) A beauty salon or specialty salon applicants must be inspected and approved by the department prior to the operation of the beauty or specialty salon. To ensure timely inspection, an applicant should submit a completed application at least 45 days in advance of the anticipated opening date.]

§83.23.License Requirements--Beauty Culture Schools.

(a) - (b) (No change.)

(c) Private beauty culture schools must have and maintain the following:

(1) a building of permanent construction [ floor plan ] of not less than 3,500 square feet that includes two separate areas, one area for instruction in theory and one area for clinic work, and separate restrooms for male and female;

(2) equipment established by the department sufficient to instruct a minimum of 50 students;

(3) proof of ownership of building or proof of a lease for the first 12 months of operation;

(4) current inspection report(s) of the fire marshal and building official approving or confirming compliance with applicable laws and ordinances; and

(5) a copy of the curriculum approved by the department for each course offered.

(d) Public beauty culture schools must have and maintain the following:

(1) [ a detailed floor plan showing ] not less than 2,200 square feet that includes office, dispensary, locker room, classroom space, and at least 1,200 square feet of laboratory space;

(2) - (5) (No change.)

§83.25.License Requirements--Continuing Education.

(a) - (b) (No change.)

(c) To renew a manicure instructor specialty license, manicurist specialty license, facial instructor specialty license, facialist specialty license, hair weaving [ weaving/braiding ] specialty certificate, hair braiding specialty certificate, wig specialty certificate, and shampoo/conditioning specialty certificate on or after September 1, 2006, a licensee must complete a total of 8 hours of continuing education through department-approved courses, of which 4 hours must be in Sanitation required under the Act and 16 Texas Administrative Code, Chapter 83.

(d) - (e) (No change.)

(f) A licensee may receive continuing education hours in accordance with the following:

(1) A licensee may not receive continuing education hours for attending the same course more than once.

[ (2) A licensee may receive continuing education hours for a course if the course provider was approved by the former Texas Cosmetology Commission and the licensee completed the course on or after September 1, 2004 and on or before October 15, 2005.]

(2) [ (3) ] Except as provided within this subsection, a licensee will receive continuing education hours for only those courses that are registered with the department, under procedures prescribed by the department.

(g) - (j) (No change.)

(k) Notwithstanding Subsections (b), (c), and (d), a licensee may satisfy the continuing education requirement for renewal by completing two hours of Sanitation in department-approved courses, if the licensee:

(1) is at least 65 years of age; and

(2) has held a cosmetology license for at least 15 years.

§83.26.License Requirements--Renewals.

(a) To renew an instructor license, manicure instructor specialty license, facial instructor specialty license, operator license, manicurist specialty license, facialist specialty license, hair weaving [ weaving/braiding ] specialty certificate, hair braiding specialty certificate, wig specialty certificate, and shampoo/conditioning specialty certificate, an applicant must:

(1) complete the continuing education requirements under §83.25;

(2) submit a completed application on a department-approved form; and

(3) pay the applicable fee required under §83.80.

(b) - (e) (No change.)

§83.29.Establishment Relocation, Change of Ownership, Owner Death or Incompetency.

(a) Under the Act, a license is not transferable.

(b) If an establishment relocates, the licensee must apply for a new establishment license and verify that the new establishment meets the requirements of the Act and this chapter. Additionally, a relocated beauty culture school must be inspected prior to operation under the Act.

(c) If an establishment changes ownership, the new owner must apply for a new establishment license within 30 days after the change of ownership . Additionally, a beauty culture school must be inspected but [ and be inspected; however, an establishment ] may continue to operate pending the department's inspection. A change of ownership includes the following [ is defined as ]:

(1) For a sole proprietorship, the licensee no longer owns and/or operates the establishment.

(2) For a partnership, the partnership is dissolved.

(3) For a corporation, the corporation is sold to another person or entity. A change of ownership does not include corporate officer or stockholder restructuring.

(4) Legal incompetence or death.

§83.31.Licenses--License Terms.

(a) The following licenses have a term of two (2) years:

(1) operator license;

(2) manicurist specialty license;

(3) facialist specialty license;

(4) hair weaving [ weaving/braiding ] specialty certificate;

(5) hair braiding specialty certificate;

(6) [ (5) ] wig specialty certificate;

(7) [ (6) ] shampoo/conditioning specialty certificate;

(8) [ (7) ] instructor license;

(9) [ (8) ] facial instructor specialty license;

(10) [ (9) ] manicure instructor specialty license;

(11) [ (10) ] booth rental (independent contractor) license;

(12) [ (11) ] beauty and specialty salon license; and

(13) [ (12) ] student permit.

(b) - (c) (No change.)

§83.40.Private Beauty Culture School Tuition Protection Account.

(a) Pursuant to §1602.463 of the Act, [ in the event that a student from a closed school is placed in another beauty culture school, ] the Private Beauty Culture School Tuition Protection Account is created to :

(1) refund tuition and fees to a student if a private beauty culture school closes and the school fails to pay the refund as required by the Act; and

(2) pay the tuition costs and expenses incurred by a private beauty culture school in providing training directly related to educating a [ the ] student from a [ the ] closed school.

(b) (No change.)

(c) The necessity for assessing the fee will be determined by the department when it conducts its [ it's ] annual account balance review prior to December 31st. The fee that is assessed by the department shall be in effect for a period of 12 months.

(d) - (e) (No change.)

(f) In the event a student from a closed school cannot be placed or does not accept a place in another school, a refund, calculated under the closed school's refund policy, may [ will ] be paid from the Private Beauty Culture School Tuition Protection Account and the total payment of a claim may not exceed $35,000. The total amount of claims paid against a single closed school may not exceed $100,000.

(g) The executive director may authorize payment to a student from the Private Beauty Culture School Tuition Protection Account if:

(1) the student makes a claim for payment on a form approved by the executive director;

(2) a closed private beauty culture school has failed to pay a refund to the student within 30 days after the date the student became eligible for the refund, and the student has not been placed or accepted a place in another school with appropriate credit given to the student for tuition and fees paid to the closed school;

(3) the executive director determines after investigation that the student is owed the refund; and

(4) the student assigns to the department all rights of the student against the closed school to the extent of the amount paid to the student from the account.

(h) The executive director may authorize payment to a private beauty culture school from the Private Beauty Culture School Tuition Protection Account if:

(1) the school makes a claim for payment on a form approved by the executive director;

(2) the school has incurred expenses in providing training directly related to educating a student from a closed private beauty culture school, including the applicable tuition for the period for which the student paid tuition;

(3) the executive director determines after investigation that the school is entitled to payment from the account; and

(4) the school assigns to the department all rights of the school against the closed school to the extent of the amount paid from the account.

(i) The department shall pay claims on a pro rata basis from appropriated money available in the account if:

(1) the account contains insufficient assets to pay all claims;

(2) insufficient money has been appropriated to the department from the account to pay all claims; or

(3) the total amount of claims against a single closed school exceeds the amount specified in Subsection (f).

(j) The department shall notify a closed private beauty culture school of any claim made against the closed school under this section. Before the executive director may authorize any payment from the account, the school shall have 20 days from the date of notice of the claim to dispute the claim and present evidence to the executive director in opposition to the claim.

(k) If payment is made from the Private Beauty Culture School Tuition Protection Account on a claim against a closed private beauty culture school:

(1) the school shall reimburse the account immediately or agree in writing to reimburse the account, on a schedule to be determined by the executive director;

(2) the school shall immediately pay the student any additional amount due to the student under the Act or agree in writing to pay the student on a schedule to be determined by the executive director;

(3) payments made by a school to the account under this subsection include interest accruing at the rate of eight percent a year beginning on the date the executive director pays the claim;

(4) the department shall be subrogated to all rights of the claimant against the school to the extent of the amount paid to the claimant; and

(5) the department may assess administrative penalties or sanctions against the school and may deny an application for a license, certificate, or permit or an application for renewal of a license, certificate, or permit filed by the holder of the private beauty culture school license.

§83.50.Inspections General.

(a) (No change.)

(b) Inspections shall be performed during the normal operating hours of the cosmetology establishments. Except for initial inspections of beauty culture schools, the department may conduct inspections under the Act and this chapter without advance notice.

(c) - (d) (No change.)

§83.51.Initial Inspections--Inspection of Beauty Culture Schools [ Cosmetology Establishments ] Before Operation.

(a) Any new or relocated beauty culture school [ cosmetology establishment ] must be inspected and approved by the department before it may operate. Additionally, a beauty culture school [ cosmetology establishment ] that has changed ownership must be inspected and approved by the department but may continue to operate prior to inspection.

(b) The beauty culture school [ cosmetology establishment ] owner shall request an initial inspection from the department and pay the fee required by §83.80. In order for the department to schedule the initial inspection in a timely manner, the initial inspection request and fee should be submitted to the department no later than forty-five (45) calendar days prior to the opening date of the school [ establishment ].

(c) Upon receipt of the owner's request and the fee, the department shall schedule the initial inspection date and notify the owner.

(d) Upon completion of the initial inspection, the owner shall be advised in writing of the results. The inspection report will indicate whether the beauty culture school [ cosmetology establishment ] meets or does not meet the minimum requirements of the Act and this chapter.

(e) For beauty culture schools [ cosmetology establishments ] that do not meet the minimum requirements, the report will reflect those minimum requirements that remain to be addressed by the owner.

(f) A beauty culture school [ cosmetology establishment ] that does not meet the minimum requirements on initial inspection must be reinspected. The beauty culture school [ cosmetology establishment ] owner must submit the request for reinspection along with the fee required by §83.80, before the department will perform the reinspection.

§83.52.Periodic Inspections.

(a) Each beauty salon or specialty salon shall be inspected at least once every two years. Each beauty culture school shall be inspected at least twice per year.

(b) - (c) (No change.)

(d) For inspections that are not approved, the inspection report will identify violations that must be corrected by the owner. The report will also indicate the corrective modifications required to address the violations, in accordance with §83.54. Additionally, the department may assess administrative penalties and/or administrative sanctions for [ certain ] violations, in accordance with §83.90.

(e) (No change.)

§83.53.Risk-based Inspections.

(a) (No change.)

(b) Cosmetology establishments subject to risk-based inspections will be scheduled for inspection based on the following risk criteria and inspection frequency:

Figure: 16 TAC §83.53(b)

(c) - (d) (No change.)

(e) For inspections that are not approved, the inspection report will identify violations that must be corrected by the owner of the cosmetology establishment. The report will also indicate the corrective modifications required to address the violations, in accordance with §83.54. Additionally, the department may assess administrative penalties and/or administrative sanctions for [ certain ] violations, in accordance with §83.90.

(f) Cosmetology establishments [ Beauty salons and specialty salons ] on a risk-based inspection schedule that have no significant violations [ of sanitation or licensing requirements ] in four consecutive inspections, may be moved to a less frequent risk-based inspection schedule or returned to a periodic schedule of inspections. The department will notify the owner of the establishment [ salon ], in writing, if there is a change in the establishment's [ salon's ] risk-based schedule or if the establishment [ salon ] is returned to a periodic inspection schedule.

[ (g) Beauty culture schools, public or private, subject to the Tier 2 or Tier 3 schedule, that have no violations of sanitation or licensing requirements in four consecutive inspections, may be moved to a less frequent risk-based inspection schedule. The department will notify the owner or authorized representative of the school, in writing, if there is a change in the school's risk-based schedule.]

§83.54.Corrective Modification Following Inspection.

(a) When corrective modifications to achieve compliance are required[ , the department ]:

(1) the department shall provide the owner a list of required corrective modification(s) ; [ and a deadline for completing modifications; and ]

(2) within 10 days after receiving the list of required corrective modifications, the owner shall complete all corrective modifications and provide written verification of the corrective modifications to the department; and

(3) [ (2) ] the department may grant an extension, consistent with established procedures, if satisfactory evidence is presented showing that the time period specified is inadequate to perform the necessary corrections.

(b) When corrective modifications to achieve compliance involve violations of [ certain ] sanitation rules or violations relating to unlicensed practice, those violations may be referred to the department's enforcement division for further action. The cosmetology establishment will be contacted by the department to arrange final resolution of these violations. Additionally, the department may assess administrative penalties and/or administrative sanctions for [ certain ] violations or for failure to complete corrective modifications timely or provide written verification to the department timely, in accordance with §83.90.

§83.71.Responsibilities of Beauty Salons, Specialty Salons, Booth Rentals.

(a) - (e) (No change.)

(f) In addition to the requirements of subsection (e):

(1) - (5) (No change.)

(6) hair weaving [ weaving/braiding ] salons shall provide the following equipment for each licensee present and providing services:

(A) one work station;

(B) one styling chair;

(C) a sufficient amount of shampoo bowls for licensees providing hair weaving services; and

(D) one chair dryer/handheld dryer for each three licensees providing hair weaving services.

(7) hair braiding salons shall provide the following equipment for each licensee present and providing services:

(A) one work station; and

(B) one styling chair.

(g) - (k) (No change.)

§83.80.Fees.

(a) Application fees.

(1) - (3) (No change.)

(4) Hair Weaving [ weaving/braiding ] Specialty Certificate--$53

(5) Hair Braiding Specialty Certificate--$53

(6) [ (5) ] Wig Specialty Certificate--$53

(7) [ (6) ] Shampoo-Conditioning Specialty Certificate--$53

(8) [ (7) ] Student Permit--$25 (includes law and rules book fee)

(9) [ (8) ] Instructor License--$70

(10) [ (9) ] Facial Instructor Specialty License--$70

(11) [ (10) ] Manicure Instructor Specialty License--$70

(12) [ (11) ] Examination Proctor Registration--$25

(13) [ (12) ] Beauty and specialty salons--$106

(14) [ (13) ] Booth Rental (Independent Contractor) License--$67

(15) [ (14) ] Private Beauty Culture School--$500

(b) Renewal fees.

(1) - (3) (No change.)

(4) Hair Weaving [ weaving/braiding ] Specialty Certificate--$53

(5) Hair Braiding Specialty Certificate--$53

(6) [ (5) ] Wig Specialty Certificate--$53

(7) [ (6) ] Shampoo-Conditioning Specialty Certificate--$53

(8) [ (7) ] Student Permit--No charge.

(9) [ (8) ] Instructor License--$70

(10) [ (9) ] Facial Instructor Specialty License--$70

(11) [ (10) ] Manicure Instructor Specialty License--$70

(12) [ (11) ] Examination Proctor Registration--$25

(13) [ (12) ] Beauty and specialty salons--$69

(14) [ (13) ] Booth Rental (Independent Contractor) License--$67

(15) [ (14) ] Private Beauty Culture School--$200

(c) - (k) (No change.)

§83.106.Health and Safety Standards--Manicure and Pedicure Services.

(a) - (c) (No change.)

(c) All metal [ non-porous ] manicure and pedicure tools shall be properly cleaned, disinfected and sterilized prior to each service, in accordance with this chapter, regardless of the tool's multiuse for only a single client or for multiple clients.

(d) - (g) (No change.)

§83.110.Health and Safety Standards--Hair Weaving and Hair Braiding Services.

(a) Cosmetologists, wig specialists , [ and ] hair weavers , and hair braiders shall wash their hands with soap and water, or use a liquid hand sanitizer, prior to performing any services on a client.

(b) - (d) (No change.)

§83.114.Health and Safety Standards--Establishments.

(a) - (e) (No change.)

(f) Food or beverages shall not be prepared on licensed premises for sale [ or client consumption ]. Pre-packaged food or beverages may be sold to or consumed by clients.

(g) - (i) (No change.)

§83.120.Technical Requirements--Curriculum.

(a) - (c) (No change).

(d) Practical Applications of the Curriculum

Figure: 16 TAC §83.120(d)

(e) - (f) (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 July 30, 2007.

TRD-200703320

William H. Kuntz, Jr.

Executive Director

Texas Department of Licensing and Regulation

Earliest possible date of adoption: September 9, 2007

For further information, please call: (512) 463-7348

Chapter 402. CHARITABLE BINGO ADMINISTRATIVE RULES

Subchapter E. BOOKS AND RECORDS

16 TAC §402.500

(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 Lottery Commission or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Texas Lottery Commission (Commission) proposes the repeal of Title 16, Part 9, Chapter 402, Subchapter E, §402.500 (relating to General Audit Rule). By separate action, the Commission will publish proposed new Title 16, Part 9, Chapter 402, Subchapter G, §402.715 (relating to Compliance Audit). The Commission is proposing the repeal of the current rule and the adoption of the new rule, rather than an amendment of the current rule, because the format and substantive provisions of the new rule will be changed significantly. The proposed new rule is written in a question and answer format. The new rule is also being assigned a new rule number within Chapter 402.

Kathy Pyka, Controller, has determined that for each year of the first five years the proposed repeal will be in effect, there will be no significant fiscal impact for state or local government as a result of this proposed repeal. There will be no adverse effect on small businesses, micro businesses, or local or state employment. There will be no adverse effect on individuals as a result of the repeal.

Philip D. Sanderson, Director of the Charitable Bingo Operations Division, has determined that for each year of the first five years the proposed repeal of the existing rule and subsequent proposed new rule will be in effect, the public benefit anticipated is a more understandable rule that will provide interested parties with information about the audit process and related requirements.

The Commission requests comments on the proposed repeal from any interested person. Comments on the proposed repeal may be submitted to Sandra Joseph, Assistant General Counsel, by mail at P.O. Box 16630, Austin, Texas 78711; by facsimile at (512) 344-5189; or by email at www.txlottery.org. The Commission will hold a public hearing on this proposal at 11:00 a.m. on August 21, 2007, at 611 E. 6th Street, Austin, Texas 78701. Comments must be received within 30 days after publication of this proposed repeal in order to be considered.

The repeal is proposed under the Texas Occupations Code §2001.054 which authorizes the Commission to adopt rules to enforce and administer the Bingo Enabling Act.

The repeal implements the Texas Occupations Code, Chapter 2001.

§402.500.General Audit Rule.

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 27, 2007.

TRD-200703269

Andy Marker

Chief, General Counsel Section

Texas Lottery Commission

Earliest possible date of adoption: September 9, 2007

For further information, please call: (512) 344-5012

16 TAC §402.708

The Texas Lottery Commission (Commission) proposes new Title 16, Part 9, Chapter 402, Subchapter G, §402.708 (relating to Dispute Resolution). The purpose of the proposed new rule is to provide an informal process to resolve disputed issues and enforcement actions related to bingo operations as an alternative to the formal process described in the Bingo Enabling Act, Occupations Code Chapter 2001 and the Administrative Procedures Act, Government Code Chapter 2001. The proposed new rule is not intended to supersede the formal process. Instead, it is an alternative way to resolve disputed issues and enforcement actions relating to the identification of violations of the Bingo Enabling Act and/or administrative rules. The proposed new rule is written in a question and answer format. Specifically, the rule sets out definitions for terms used in the rule, identifies who can request a dispute resolution conference, how to request a conference, the circumstances in which a request for a conference will be denied, the time and place of the conference, what will happen in the event of not attending a previously scheduled conference or not rescheduling a conference, who must attend the conference as well who can attend on behalf of the licensee or unit, who will attend the conference on behalf of the Charitable Bingo Operations Division, what happens at the conference, what information must be provided in advance of the conference, what happens if an agreement is reached at the conference, and what happens if an agreement is not reached at the conference.

Kathy Pyka, Controller, has determined that for each year of the first five years the proposed new rule will be in effect, there will be no significant fiscal impact for state or local governments as a result of this new rule. There will be no adverse effect on small businesses, micro businesses, or local or state employment. There will be no additional economic cost to persons required to comply with the new rule as proposed.

Philip D. Sanderson, Director of the Charitable Bingo Operations Division, has determined that for each year of the first five years the proposed new rule will be in effect, the public benefit anticipated is the ability to resolve disputed issues and enforcement actions through a dispute resolution process that is an alternative to a formal enforcement hearings process. Use of an alternative dispute resolution to resolve disputed issues allows the parties to settle the dispute in a more efficient and less costly manner than through a formal enforcement hearings process.

The Commission requests comments on the proposed new rule from any interested person. Comments on the proposed rule may be submitted to Sandra Joseph, Assistant General Counsel, by mail at Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630; by facsimile at (512) 344-5189; or by email at www.txlottery.org. The Commission will hold a public hearing on this proposal at 11:00 a.m. on August 21, 2007, at 611 E. 6th Street, Austin, Texas 78701. Comments must be received within 30 days after publication of this proposed new rule in order to be considered.

The new rule is proposed under Occupations Code §2001.054, which authorizes the Commission to adopt rules to enforce and administer the Bingo Enabling Act and under Government Code §467.102, which authorizes the Commission to adopt rules for the enforcement and administration of this chapter and the laws under the Commission's jurisdiction.

The proposed new rule implements Occupations Code, Chapter 2001.

§402.708.Dispute Resolution.

(a) What are the definitions for the terms used in this rule?

(1) Determination letter--a notice issued by the director stating the basis for the conclusion that a violation occurred, recommending that an administrative penalty be imposed on the person alleged to have committed the violation, and recommending the amount of the proposed penalty. The notice must include a brief summary of the alleged violation; include the amount of the administrative penalty recommended; and inform the person of the person's right to a hearing on the occurrence of the violation, the amount of the penalty, or both.

(2) Dispute resolution--an informal process available to licensed authorized organizations to resolve regulatory disputes in a fair, competent, and consistent manner.

(3) Dispute resolution conference--an informal meeting to resolve a disputed issue(s) related to an audit finding(s) contained within a final audit report or a disputed issue(s) contained within a notice of opportunity to show compliance letter.

(4) Dispute resolution officer--the Director or his designee who will facilitate or manage the dispute resolution conference and guide and assist the participants.

(b) Who may request a dispute resolution conference? A licensed authorized organization that does not agree with the findings in its final audit report or the information in a notice of opportunity to show compliance letter may request a dispute resolution conference.

(c) How do I request a dispute resolution conference?

(1) You may request a dispute resolution conference by completing and submitting a Request for Informal Dispute Resolution Form to the Director.

(2) Disputed issues must be identified on the form.

(3) The form must be signed by:

Figure: 16 TAC §402.708(c)(3)

(4) You must submit the completed Request for Informal Dispute Resolution Form no later than 20 calendar days from the date you receive a determination letter, the final audit report, or notice of opportunity to show compliance letter.

(5) You may provide supporting documentation related to your position with your request.

(d) Under what circumstances will the Director deny a request for a dispute resolution conference? The Director will not grant a request for a dispute resolution conference if:

(1) You are not a licensed authorized organization that disputes the findings in the final audit report or the information in a notice of opportunity to show compliance letter;

(2) You fail to timely submit the completed Request for Informal Dispute Resolution Form; or

(3) A dispute resolution conference has been held previously on the disputed issue(s).

(e) When and where will the Dispute Resolution Conference be held?

(1) Charitable Bingo Operations Division staff will contact you within 15 calendar days from the date we receive a Request for Informal Dispute Resolution Form, in order to schedule a mutually agreeable date, time, and location for the dispute resolution conference.

(2) The dispute resolution conference may be held in person, by videoconference, or by telephone conference call. The date, time, and location of the conference must be agreeable to all parties.

(3) A dispute resolution conference may be rescheduled due to unforeseen events upon agreement of the parties. You must contact the Commission within 24 hours prior to the scheduled conference time to reschedule a dispute resolution conference.

(f) What happens if I don't attend or reschedule a Dispute Resolution Conference? The dispute resolution process will end. The administrative process will continue and a formal hearing will proceed. We will notify you of the date of the administrative hearing.

(g) Who attends the Dispute Resolution Conference? Depending on your regulatory classification, certain individuals from your organization must attend the dispute resolution conference. You must notify the Director at least 24 hours before the scheduled dispute resolution conference of who is attending.

Figure: 16 TAC §402.708(g)

(h) Who will represent the Charitable Bingo Operations Division at a Dispute Resolution Conference?

(1) Appropriate Commission staff from the Charitable Bingo Operations Division, Legal Services Division, and/or Enforcement Division will attend and participate in the dispute resolution conference to provide relevant information and documentation regarding the disputed issues and to attempt to reach a resolution of the dispute.

(2) The dispute resolution officer and dispute resolution support staff will facilitate the dispute resolution process but will not advocate on behalf of any party.

(i) What happens at the Dispute Resolution Conference?

(1) Each party states their position related to the disputed issues and presents appropriate documentation to substantiate their position on all disputed issues.

(2) The dispute resolution officer works with the parties to reach a settlement.

(3) Any resolution reached as a result of the dispute resolution conference will be through voluntary agreement of the parties.

(j) Do I need to provide any information prior to the Dispute Resolution Conference? If the Dispute Resolution Conference is conducted via telephone or videoconferencing, you must provide to the Director a copy of any documentation you plan to present at least 48 hours prior to the conference. If the basis of the dispute involves an audit finding, the Director will provide the dispute resolution officer with the information submitted by the organization, the final audit report, and the determination letter. If the basis of the dispute is other than an audit finding, the Director will provide the dispute resolution officer the notice of opportunity to show compliance letter and the underlying report that is the basis for the notice of opportunity to show compliance letter. The dispute resolution officer may contact both parties and request additional information be submitted to him prior to dispute resolution conference.

(k) What happens if an agreement is reached at the dispute resolution conference?

(1) If the parties agree to a resolution of disputed issues, the dispute resolution officer will prepare a Dispute Resolution Settlement Agreement for review, approval, and signature by both parties at the Dispute Resolution Conference.

(2) The Agreement will include:

(A) the violation(s),

(B) the resolution of the disputed issues(s), and

(C) corrective action you must take.

(3) The Agreement must be signed by an officer/director or bingo chairperson and the primary operator.

(l) What happens if an agreement is not reached at the dispute resolution conference? The matter will proceed to a formal administrative hearing.

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 27, 2007.

TRD-200703270

Andy Marker

Chief, General Counsel Section

Texas Lottery Commission

Earliest possible date of adoption: September 9, 2007

For further information, please call: (512) 344-5012

16 TAC §402.715

The Texas Lottery Commission (Commission) proposes new Title 16, Part 9, Chapter 402, Subchapter G, §402.715 (relating to Compliance Audit). The purpose of the proposed new rule is to provide clarification and guidance to licensees concerning the audit process authorized by Occupations Code §2001.560. The proposed new rule is written in plain language in a question and answer format. The new rule sets out definitions for terms used in the rule, describes what a compliance audit is, identifies the objectives of a compliance audit, describes how a licensee is selected for a compliance audit, describes how a licensee is notified that it has been selected for a compliance audit, sets out the time period the compliance audit will typically cover, identifies the information that will need to be provided and when it will need to be provided, sets out the effect of not providing the requested records, describes what an entrance conference is, what will occur during the entrance conference, when and where the entrance conference will occur, who must attend the entrance conference as well who can attend the conference, where the audit will be conducted, how long the audit will take, when the audit findings will be available, what is an exit conference, who must attend the exit conference, what happens if the licensee does not agree with the draft audit report or the audit findings, whether the licensee will be able to respond to the draft audit report, what information must be included in the response, what will happen after the response, what will happen if the licensee does not respond, who will receive the final audit report, what will happen after the issuance of the final audit report, and what the licensee can do if the licensee disagrees with the determination letter.

Kathy Pyka, Controller, has determined that for each year of the first five years the new rule will be in effect, there will be no foreseeable implications relating to cost or revenues of the state or local governments as a result of enforcing or administering the rule. There will be no adverse effect on small businesses, micro businesses, or local or state employment. There will be no additional economic cost to persons required to comply with the rule.

Philip D. Sanderson, Director of the Charitable Bingo Operations Division, has determined that for each year of the first five years the proposed new rule will be in effect, the public benefit anticipated is providing to licensees specific information about the audit process and what a licensee may expect during an audit to ensure compliance with the Bingo Enabling Act and Charitable Bingo Administrative Rules.

The Commission requests comments on the proposed new rule from any interested person. Comments on the proposed rule may be submitted to Sandra Joseph, Assistant General Counsel, by mail at Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630; by facsimile at (512) 344-5189; or by email at www.txlottery.org. The Commission will hold a public hearing on this proposal at 11:00 a.m. on August 21, 2007, at 611 E. 6th Street, Austin, Texas 78701. Comments must be received within 30 days after publication of this proposed new rule in order to be considered.

The new rule is proposed under Occupations Code §2001.054, which authorizes the Commission to adopt rules to enforce and administer the Bingo Enabling Act and under Government Code §467.102, which authorizes the Commission to adopt rules for the enforcement and administration of Chapter 467 and the laws under the Commission's jurisdiction.

The proposed new rule implements Occupations Code, Chapter 2001.

§402.715.Compliance Audit.

(a) What are definitions for the terms used in this rule?

(1) Audit Finding--an instance of non-compliance with Occupations Code Chapter 2001, Bingo Enabling Act (Act) or Charitable Bingo Administrative Rules (Rules) identified in a compliance audit.

(2) Licensee--a licensed authorized organization that holds a license to conduct bingo under the Act or a group of licensed authorized organizations operating under a unit agreement.

(b) What is a compliance audit?

(1) An official examination of the licensee's bingo operations to:

(A) determine compliance with the Act and Rules;

(B) provide objective information to the licensee's management and those persons responsible for the governance and oversight of the licensee: and,

(C) contribute to public accountability.

(2) A compliance audit may include physically inspecting bingo equipment and premises, observing the conduct of the bingo game, inquiry of management and staff, reviewing the licensee's financial accounts and records, or any other activity necessary to meet the compliance audit objectives.

(3) Compliance audits are conducted in accordance with the Generally Accepted Government Auditing Standards promulgated by the Government Accountability Office and Commission policies and procedures.

(c) What are the objectives of a compliance audit? The activities of an audit are designed to accomplish the following objectives:

(1) determine whether the licensee is in compliance with the Act and Rules;

(2) determine whether the information reported to the Commission is accurate; and,

(3) determine whether proceeds from the conduct of bingo are used for authorized purposes.

(d) How is a licensee selected for a compliance audit? A licensee may be selected for an audit based on any of the following:

(1) a statewide risk assessment;

(2) a request by Charitable Bingo Operations Division management;

(3) a request by another division of the Commission;

(4) in conjunction with or as a result of a complaint; or

(5) a request by the licensee's management or its oversight authorities.

(e) How is the licensee notified that it has been selected to be audited? The licensee will receive written notification of an audit in order to allow time to gather any requested information.

(f) What time period will the audit cover? Typically the audit will cover the most recently completed calendar year; however, the audit period may be extended.

(g) What information does the licensee need to provide for the audit? The licensee must provide:

(1) the records identified on the records request form that is attached to the notification letter;

(2) the completed internal control questionnaire that is provided with the notification letter; and,

(3) any additional records or information requested by the auditor.

(h) When does the licensee need to provide the records and the completed internal control questionnaire? The requested records and the internal control questionnaire must be provided to the auditor before or at the entrance conference.

(i) Does the licensee need to provide original records? No. The licensee may provide the auditor with copies of records. If original records are supplied, the auditor will provide a receipt to the licensee.

(j) What if the licensee does not provide the requested records?

(1) The Commission will send the licensee a demand letter requesting the records.

(2) If the licensee does not respond to the demand letter or provides insufficient records, the audit will be conducted using any information that the auditor is able to get from other sources.

(3) The audit report will discuss efforts to collect records necessary to conduct the audit.

(4) Administrative enforcement action may result when requested records are not provided.

(k) What is an entrance conference? An entrance conference is a meeting at which the audit team leader will collect the required records and discuss:

(1) the audit process;

(2) what the audit will cover;

(3) how the results of the audit will be shared;

(4) a planned date for finishing fieldwork; and

(5) the completed internal control questionnaire.

(l) When and where will the entrance conference be held?

(1) The audit team leader will contact the licensee to schedule a mutually agreeable time and place for the entrance conference.

(2) The entrance conference is held at a convenient location, for example, the bingo hall, the bookkeeper's office, the licensee's primary business office, or the regional audit office.

(m) Who attends the entrance conference?

(1) The following individuals from the organization are required to attend the entrance conference:

(A) bingo chairperson;

(B) primary operator; and

(C) unit manager or designated agent, if applicable.

(2) The organization may designate any other individual(s) to attend the conference also, including any other officer, an accountant, a bookkeeper, or an attorney.

(n) Where will the audit be conducted? The audit is typically conducted at the Commission's regional office or at a location the licensee provides. The location should include office furniture and equipment that allows the audit staff to efficiently perform audit activities.

(o) How long will the audit take? An audit may take a few weeks to several months to complete depending upon several factors such as the time period the audit covers, scope of the audit, completeness of the records, licensee's cooperation, availability and condition of the licensee's records, and availability of agency records.

(p) When will the audit results be given? Audit results will be given to the licensee at the exit conference. However, the audit team will discuss any issues found throughout the audit, and the licensee may ask about this information at any time during the audit.

(q) What is an exit conference? An exit conference is a meeting at which the audit team leader will discuss the results of the audit included in the draft audit report. The exit conference is an additional opportunity for the licensee to provide records that may resolve audit findings.

(r) Who attends the exit conference?

(1) The following individuals from the licensee are required to attend the exit conference:

(A) bingo chairperson;

(B) primary operator; and

(C) unit manager or designated agent, if applicable.

(2) Any other individual(s) may attend the conference also, including any other officer, an accountant, a bookkeeper, or an attorney.

(s) What if the licensee disagrees with the draft audit report or findings? Within 10 calendar days from the date of the exit conference, the licensee may request in writing a meeting with the audit manager to discuss any concerns about the audit report or findings. The results of the meeting with the audit manager will be considered in the preparation of the final audit report.

(t) Is there an opportunity to respond to the draft audit report? Yes. Although no response is required, if the licensee wants to respond, the response must be in writing and be sent to the auditor no later than 20 calendar days from the date of the exit conference. It would be beneficial to include any documentation to support the response.

(u) What information must be included in a response to the draft audit report? If the licensee chooses to respond, the response must include:

Figure: 16 TAC §402.715(u)

(v) What happens after the licensee responds to the draft audit report? The responses will be reviewed and, if appropriate, changes will be made to the draft audit report. The responses will be included in the final audit report. The final audit report will be mailed to the licensee.

(w) What happens if the licensee does not respond to the draft audit report? The final audit report will be issued. The final audit report will include a statement that the licensee did not provide a written response to the audit findings and recommendations.

(x) Who receives the final audit report? The final audit report is sent to the following individuals:

(1) two officers, including the bingo chairperson;

(2) primary operator; and

(3) unit manager or designated agent, if applicable.

(y) What happens after the licensee receives the final audit report?

(1) If there are no audit findings, no further action is required.

(2) If there are audit findings, a Determination Letter outlining the next steps will be sent to the licensee no later than 14 calendar days after the date of the final audit report.

(z) What if the licensee disagrees with the Determination Letter? The licensee may request a dispute resolution conference or request a hearing no later than 20 calendar days after the licensee receives the Determination Letter. For more information, see 16 TAC §402.708 pertaining to dispute resolution.

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 27, 2007.

TRD-200703295

Andy Marker

Chief, General Counsel Section

Texas Lottery Commission

Earliest possible date of adoption: September 9, 2007

For further information, please call: (512) 344-5012