ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 4. AGRICULTURE PART I. Texas Department of Agriculture CHAPTER 19. Quarantines SUBCHAPTER B. Burrowing Nematode Quarantine 4 TAC sec.19.21 The Texas Department of Agriculture (the department) adopts an amendment to sec.19.21, concerning burrowing nematode quarantine, without changes to the proposed text as published in the October 25, 1996, issue of the Texas Register (21 TexReg 10481). The amendment is adopted because burrowing nematode is no longer established in the state of Louisiana thereby posing no threat to Texas agriculture. The amendment removes the state of Louisiana as a quarantined area. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Agriculture Code (the Code), sec.71.003 and sec.71.001, which provides the Texas Department of Agriculture with the authority to establish quarantines against out-of-state diseases and pests. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 26, 1996. TRD-9617229 Dolores Alvarado Hibbs Deputy General Counsel Texas Department of Agriculture Effective date: December 17, 1996 Proposal publication date: October 25, 1996 For further information, please call: (512) 463-7583 CHAPTER 28.Texas Agricultural Finance Authority: Loan Guaranty Program 4 TAC sec.28.8, sec.28.10 The Board of Directors (the board) of the Texas Agricultural Finance Authority (the Authority) of the Texas Department of Agriculture adopts amendments to sec.28.8 and sec.28.10, concerning the Authority's loan guaranty program. Section 28.8 is adopted with changes to the proposed text as published in the October 11, 1996 issue of the Texas Register (21 TexReg 9751). Section 28.10 is adopted without changes and will not be republished. The proposed new language in sec.28.8(d) has been changed by the Board to allow for applicants and lenders to appeal a staff determination that the application does not meet the minimum underwriting standards and to provide a process for notifying applicants of which standards are not met. Applicants who appeal will be required to convince the Board why standards not met should be waived. The Board believes that the addition of an appeals process is appropriate in that it still streamlines the process, yet provides some recourse to applicants and places the burden on the applicant and lender to determine whether or not to appeal a staff determination and to show why minimum standards should be waived. The reference in sec.28.8(d) to the Credit Policy and Procedures has also been changed to delete the specific reference to Subsection E of the policy. The amendments are adopted in order to make the loan guaranty program more efficient. The amendments to sec.28.8 add language to state the conditions under which a report on an application will not be presented to the board, clarify which applications must be reviewed by a majority of a quorum of the board and provide an appeal process for applicants and lenders. The amendments to sec.28.10 change the maximum percentage of the Authority's financial commitment in loans approved under the loan guaranty program and add a fee schedule adopted by the board for calculation of the loan guaranty fee payable by an applicant. No public comments were received regarding the proposal. The amendments are adopted under the Texas Agriculture Code, sec.58.022, which provides the Authority with the authority to adopt rules and procedures necessary for the administration of its programs including the setting and collection of fees in connection with the program; and, sec.58.023, which provides the Authority to adopt rules to establish criteria for eligibility of applicants and lenders under the loan guaranty program. sec.28.8. Filing Requirements and Consideration of Applications. (a)-(c) (No change.) (d) Board review. Staff will submit a report on each qualified application to the board, provided that the board has directed staff to present only those applications which meet those minimum underwriting standards established in the Credit Policy and Procedures, which shall include a recommendation for approval or denial. If staff determines that an application does not meet the minimum underwriting standards established in the Credit Policy and Procedures, the staff shall notify the applicant and the lender in writing to this effect, and shall advise them of which minimum underwriting standards are not met. The applicant and lender may appeal the determination of the staff to the Board, but shall have the burden of convincing the Board that the minimum standards not met should be waived. The board may, in its discretion, recommend the imposition of conditions and requirements in connection with approval of a qualified application. Approval of a qualified application will be by a majority of a quorum of the board, except for the approval requirements identified in sec.28.10(c) of this title (relating to General Terms and Conditions of the Authority's Financial Commitment). (e) Notification of approval. Upon conditional approval of the qualified application by the board, the Authority will notify the lender and the applicant in writing identifying the terms and conditions of the loan guaranty. The board may set certain time limits regarding the acceptance of loan commitments by the applicant and lender and time limits regarding the closing of loans by the applicant and lender; however, in no event shall the time period exceed 30 days to accept the commitment and 180 days to close the loan, provided that the board may approve one additional extension of the commitment for a period of no more than 60 days. The lender will prepare the written agreements and documents necessary to close the loan guaranty in accordance with the terms and conditions set forth in the notice of conditional approval. The Authority will send the lender and the applicant final notice of guaranty approval after review of the closing documents by the Authority's legal counsel. The lender will disburse the loan according to the terms of the note and/or loan agreement. (f)-(i) (No change.) This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617051 Dolores Alvarado Hibbs Deputy General Counsel Texas Department of Agriculture Effective date: December 13, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-7583 TITLE 16. ECONOMIC REGULATION PART I. Railroad Commission of Texas CHAPTER 9. Liquefied Petroleum Gas Division SUBCHAPTER A. General Applicability and Requirements 16 TAC sec.9.33 The Railroad Commission of Texas adopts the repeal of sec.9.33, relating to the U.S. Department of Labor (DOL) Defense Conversion Adjustment Grant Advisory Committee, without changes to the proposed text as published in the September 20, 1996, Texas Register (21 TexReg 9034). The section implemented Senate Bill 383, 73rd legislature, 1993, and created the U.S. Department of Labor (DOL) Defense Conversion Adjustment Grant Advisory Committee of the commission. It also established the committee's duration; set forth the purpose and duties of the committee; prescribed the composition of the committee, the appointment process, and the membership terms of the committee; and set forth the mechanisms by which the committee met, performed its work, and was evaluated. The repeal was proposed because the term of the grant expired on June 17, 1996, after which the purpose for the advisory committee was terminated. The commission received no comments on the proposed repeal. The repeal is adopted under Texas Natural Resources Code, sec.113.051, which authorizes the commission to adopt rules relating to any and all aspects or phases of the LP-gas industry that will protect or tend to protect the health, welfare, and safety of the general public, and Texas Revised Statutes, Article 6252-33, sec.sec.5 and 8. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 27, 1996. TRD-9617257 Mary Ross McDonald Deputy General Counsel, Office of General Counsel Railroad Commission of Texas Effective date: December 18, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-7008 SUBCHAPTER B. Basic Rules 16 TAC sec.9.167, sec.9.189 The Railroad Commission of Texas adopts amendments to sec.sec.9.167 and 9.189, relating to filling density, and grounding and electrical requirements, without changes to the proposed text as published in the September 20, 1996, Texas Register (21 TexReg 9035). Section 9.167 defines filling density and specifies the maximum filling density for different types of containers. Section 9.189 requires that containers larger than 1,200 gallons shall be grounded and that electrical installations near those containers shall comply with the National Electric Code. The amendments to both sections are nonsubstantive and include some changes in wording or punctuation to provide clearer language. The main amendment to sec.9.167 is the correction of the subchapter titles, while sec.9.189 contains new text added to replace the information formerly in chart format and clarifies that automatic dispensers are exempt from the requirements in sec.9.189, but must comply with sec.9.1565 of this title (relating to safety requirements). The commission received no comments on the proposed amendments. The amendments are adopted under the Texas Natural Resources Code, sec.113.051, which authorizes the commission to adopt rules relating to any and all aspects or phases of the LP-gas industry that will protect or tend to protect the health, welfare, and safety of the general public. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 27, 1996. TRD-9617255 Mary Ross McDonald Deputy General Counsel, Office of General Counsel Railroad Commission of Texas Effective date: December 18, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-7008 SUBCHAPTER F. Consumer LP-Gas Systems 16 TAC sec.9.463 The Railroad Commission of Texas adopts amendments to sec.9.463, relating to reinstallation of underground containers, without changes to the proposed text as published in the September 20, 1996, Texas Register (21 TexReg 9037). Section 9.463 lists requirements for underground containers which have been removed and are to be reinstalled. The adopted amendments make identification requirements consistent, allow the use of either a metal tag or a decal, and allow one tag or decal to serve for all identification required in sec.sec.9.184, 9.231, 9.462, 9.771, and 9.952, relating to uniform safety requirements, identification of approved appliances, containers manufactured for underground installation, vehicle identification labels, and piping installation identification. Amendments to these sections regarding the single tag or decal were adopted by the commission and published in the October 17, 1995, Texas Register (20 TexReg 8450). This rulemaking will add sec.9.463 to those sections that may use a single tag or decal provided all the required information is included. The commission received no comments on the proposed amendment. The amendment is adopted under the Texas Natural Resources Code, sec.113.051, which authorizes the commission to adopt rules relating to any and all aspects or phases of the LP-gas industry that will protect or tend to protect the health, welfare, and safety of the general public. Issued in Austin, Texas, on November 27, 1996. TRD-9617256 Mary Ross McDonald Deputy General Counsel, Office of General Counsel Railroad Commission of Texas Effective date: December 18, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-7008 TITLE 22. EXAMINING BOARDS PART IX. Texas State Board of Medical Examiners CHAPTER 166. Physician Registration 22 TAC sec.166.2 The Texas State Board of Medical Examiners adopts an amendment to sec.166.2, without changes to the proposed text as published in the September 6, 1996, issue of the Texas Register (21 TexReg 8561). The section as adopted will allow physicians to choose programs which will enhance their education and be of most benefit to their practice and their patients. In addition, the requirement for continuing medical education in medical ethics and/or professional responsibility is anticipated to further enhance the quality of care and service provided by physicians to the citizens of Texas. The section as adopted will function by allowing flexibility in the reporting of continuing medical education hours. One written comment was received from the Texas Medical Association (TMA) and Clifford Moy, M.D., presented oral comments on behalf of TMA. The organization commented that proposed sec.166.2(a)(2) will cause unnecessary difficulties for physicians and accredited continuing medical education sponsors. It was noted that accredited sponsors will have a difficult time justifying the development of courses to meet requirements within the context of accreditation standards and adult learning principles. It was further noted that mandated subject requirements obligate accredited sponsors to divert scarce resources into the development of continuing medical education activities which are not necessarily consistent with priority indicators of need and have less potential to demonstrate effective outcomes of improved patient care. This organization also commented that physicians will have increased difficulty in obtaining time off to attend such training and that the ethics training will not create ethical physicians. The board disagrees with the comments received because the effective date of the ethics requirement, January 1, 1999, is sufficient to allow sponsors to divert resources over a long period of time so as to minimize problems with the scarcity of such resources. Justification of ethical courses by sponsors and the need for time off for physicians can be accomplished by referring to the requirements for an annual ethics component for continued licensure. Improved awareness in all aspects of medical care, including ethical issues, will promote improved patient care, and therefore, an ethics continuing education component will be beneficial. While it is acknowledged that such training may not create ethical physicians, such training will promote ethical conduct by enhancing physician awareness of ethical issues and methods of addressing ethical problems in their day-to-day practice of medicine. The amendment is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616970 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 12, 1996 Proposal publication date: September 6, 1996 For further information, please call: (512) 305-7016 CHAPTER 174. Telemedicine 22 TAC sec.sec.174.1-174.15 The Texas State Board of Medical Examiners adopts new sec.174.1-174.15, without changes to the proposed text as published in the September 6, 1996, issue of the Texas Register (21 TexReg 8562). The sections as adopted will regulate the practice of medicine and patient care by those individuals residing outside the state of Texas who diagnose and treat Texas residents across state lines, but who do not hold a permanent license. The sections will function by creating a system to regulate the practice of medicine across state lines and to collect revenue to fund the program. Comments were received from the following groups: Texas Radiological Society, Texas Medical Association, and Texas Society of Pathologists. Texas Radiological Society commented that the proposed rules are deficient because they should provide for the requirement for full licensure so that physicians practicing across state lines fall under the jurisdiction of the Texas State Board of Medical Examiners, Texas citizens who are injured by such practitioners may pursue redress for malpractice in Texas courts, and such practitioners demonstrate a knowledge of Texas law. Texas Medical Association maintains that the board does not have authority to grant a special license and the board cannot create an exception to specific licensure requirements set forth in the Medical Practice Act. Texas Society of Pathologists has commented simply that full licensure is the most appropriate requirement for patient care in Texas. The board disagrees with the comments for the following reasons. Board jurisdiction over physicians holding the proposed special license will still be maintained through both the statute and the rule. Texas citizens may still pursue appropriate remedies for malpractice in Texas courts since any malpractice cause of action will have arisen in whole or in part in the state of Texas. A knowledge of Texas law by holders of a special license is expected due to the requirements set forth in the rules requiring compliance with Texas laws governing practice. Also as set forth in the rules, violations of Texas law will still be actionable against physicians holding a special license. The safeguards requiring specialization, licensure in another state, and an unblemished disciplinary history are sufficient to address concerns about the quality of physicians licensed through this rule. The authority of the board to create such rules is provided for in the Medical Practice Act, Article 4495b, sec.2.09 and 3.06, and is sufficiently broad under the Medical Practice Act, Article 4495b, sec.2.09(a) and 3.06(b)(12) to authorize such rules. The rules, while streamlining the licensing process, provide for more stringent qualifications for licensure than are provided for in regard to other licensure avenues. In addition, the licensure fees are consistent with the fees for full licensure. Consequently, the creation of these rules is within the rulemaking authority of the board. The new sections are adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616971 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 12, 1996 Proposal publication date: September 6, 1996 For further information, please call: (512) 305-7016 CHAPTER 177. Certification of Non-Profit Organizations 22 TAC sec.177.16 The Texas State Board of Medical Examiners adopts new sec.177.16, with changes to the proposed text as published in the October 11, 1996, issue of the Texas Register (21 TexReg 9753). A nonsubstantive change is necessary in sec.177.16(a) to correct a publication error regarding the size of the notification. The section as adopted will outline the procedure for filing a complaint against a non-profit health organization and will potentially assist patients in having concerns addressed about health care delivery by such organizations. The board will inform the public of the procedure for directing complaints to the board regarding non-profit health organizations. Two written comments were received from the following groups: House Welfare Rights Organization and University of Texas Southwestern Health Systems. House Welfare Rights Organization commented that the wording of the complaint notification should be simplified due to the limited literacy of many adults in Texas. This organization specifically noted that both the English and Spanish versions of the proposed complaint procedure notification contained surplus language and more complex sentence structure than is necessary. This organization requested that various deletions be made to the proposed complaint notification and that in some instances substitute language be inserted. This organization maintained that these changes would shorten and simplify the complaint procedure notification in both the English and Spanish versions. University of Texas Southwestern Health Systems commented that other health care entities are not required to post such complaint procedure notifications. This organization further commented that not all non-profit health organizations provide health care through employed physicians, but that such care is often provided through independent physicians or groups of independent physicians. Consequently, this organization has stated that it seems preferable to focus on the actual provider of the care, the physician, rather than on the non-profit health organization which is arranging for the care. In addition, this organization commented that this requirement will mandate multiple complaint procedure notification postings which will lead to the confusion of patients who wish to file complaints. This organization stated that the current complaint procedure notification process is sufficient and easier for patients to understand. This organization commented that the Board will still be able to effectively pursue investigations and discipline physicians or non-profit health organizations without the proposed rule. This organization further stated that the proposed sign size is smaller than the size required for other similar postings. In conclusion, this organization suggested that if a complaint procedure notification is deemed necessary, it should be incorporated into the existing notification requirements for physicians and acupuncturists to avoid the need for multiple postings. The Board disagrees with the comments for the following reasons. The comments received were few in number and consequently appear to represent isolated viewpoints. The Board finds that the proposed language changes are not significant enough to warrant revision, but simply focus on stylistic differences and minor semantics issues of limited concern. The Board further finds that due to the growth in non-profit health organizations and the potential for organizational impact on patient care, the need for the proposed complaint procedure notification outweighs the perceived problems anticipated by the commenting organizations. The Board further disagrees with the comments regarding the potential for confusion and the inability for patients to understand the procedure. Keeping in mind that the comments on this proposal were few, the Board finds that the potential for confusion of patients is minimal. As for the difference in sign size, the Board notes that this difference was the result of a publication error and that steps have been taken to correct this error. The sign size can and will be addressed through a nonsubstantive change to the published proposal. The comment encouraging a single sign system has merit, but additional time would be needed to implement such a proposal. In the meantime, the use of a separate sign may lead to the filing of legitimate complaints and ultimately to better regulation of non- profit health organizations and affiliated physicians. The new section is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. sec.177.16. Complaint Procedure Notification. (a) Method of Notification. For the purpose of directing complaints to the board regarding health-care delivery by licensees of the board practicing through non- profit health organizations certified pursuant to the Medical Practice Act, sec.5.01, the non-profit health organizations which are certified or otherwise approved pursuant to the Medical Practice Act, sec.5.01(a) and sec.5.01(b), shall provide notification to the public of the name, mailing address, and telephone number of the board by displaying in a prominent location at each site of health-care delivery and readily visible to patients or potential patients, signs in English and Spanish of no less than 8 1/2 inches by 11 inches in size with the board-approved notification statement printed alone and in its entirety in black on white background in type no smaller than standard 24-point Times Roman print with no alterations, deletions, or additions to the language of the board-approved statement. (b) Approved English Notification Statement. The following notification statement in English is approved by the board for purposes of these rules: Figure 1: 22 TAC sec.177.16(b) (c) Approved Spanish Notification Statement. The following notification statement in Spanish is approved by the board for purposes of these rules: Figure 2: 22 TAC sec.177.16(c) This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616974 Bruce A. Levy, M.D.,J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 12, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 305-7016 CHAPTER 183. Acupuncture 22 TAC sec.183.21 The Texas State Board of Medical Examiners adopts new sec.183.21, without changes to the proposed text as published in the September 6, 1996, issue of the Texas Register (21 TexReg 8564). The section as adopted will ensure that licensed acupuncturists refrain from advertising in a manner that is misleading or deceptive. The section as adopted will function by clarifying the rules for written advertising by acupuncturists. No comments were received regarding adoption of the new section. The new section is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616972 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 12, 1996 Proposal publication date: September 6, 1996 For further information, please call: (512) 305-7016 CHAPTER 185. Physician Assistants 22 TAC sec.sec.185.4, 185.9, 185.20, 185.23, 185.25, and 185.27 The Texas State Board of Medical Examiners adopts amendments to sec.sec.185.4, 185.9, 185.20, 185.23, 185.25, and 185.27, without changes to the proposed text as published in the September 6, 1996, issue of the Texas Register (21 TexReg 8565). The sections as adopted will grant the Executive Director of the board discretion regarding licensure application eligibility for physician assistants and enhance the rules relating to disciplinary guidelines and rehabilitation orders. The sections as adopted will function by clarifying the board's new address on the professional liability claims report, outlining procedures for board member participation in informal settlement conferences and show compliance proceedings, and by further defining disciplinary guidelines and self-reporting of intemperate use of drugs or alcohol or physical or mental conditions. No comments were received regarding adoption of the amendment. The amendments are adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act, and the Physician Assistant Licensing Act, Texas Civil Statutes, Article 4495b-1, sec.23 which authorizes the Texas State Board of Physician Assistant Examiners to adopt reasonable and necessary rules for the performance of its duties. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616973 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 12, 1996 Proposal publication date: September 6, 1996 For further information, please call: (512) 305-7016 PART XXII. Texas State Board of Public Accountancy CHAPTER 511.Certification as CPA Certification by Examination 22 TAC sec.511.21 The Texas State Board of Public Accountancy adopts an amendment to sec.511.21, without changes to the proposed text published in the October 11, 1996, issue of the Texas Register (21 TexReg 9753). The amendment allows for better tracking and identifying of applicants through their social security numbers. The amendment will function by requiring applicants to disclose to the Board their social security numbers to be confidentially used as part of their identifiers. No comments were received concerning adoption of the rule. The rule is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provide the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9617265 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: December 18, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 505-5566 Educational Requirements 22 TAC sec.511.57 The Texas State Board of Public Accountancy adopts an amendment to sec.511.57, without changes to the proposed text published in the October 11, 1996, issue of the Texas Register (21 TexReg 9754). The amendment allows accounting students to participate in accounting internship programs and to receive credit from the Board. The amendment will function by recognizing accounting internship programs and accepting the programs, under certain conditions, as other accounting courses in satisfying the educational requirements. No comments were received concerning adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provide the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law; and sec.12(e)(1) which allows the board to accept accounting courses as defined in board rules. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9617271 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: December 18, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 505-5566 CHAPTER 523.Continuing Professional Education Continuing Professional Education Standards 22 TAC sec.523.29 The Texas State Board of Public Accountancy adopts an amendment to sec.523.29, without changes to the proposed text published in the October 11, 1996, issue of the Texas Register (21 TexReg 9755). The amendment allows continuing professional education credit to be awarded for self-study courses. The amendment will function by allowing CPAs to satisfy their continuing professional education requirement through self-study. No comments were received concerning adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provide the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law; and sec.15A which requires licensees to complete continuing professional education courses. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9617270 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: December 18, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 505-5566 22 TAC sec.523.31 The Texas State Board of Public Accountancy adopts an amendment to sec.523.31, with changes to the proposed text published in the October 11, 1996, issue of the Texas Register (21 TexReg 9755). The changes are substituting "The AICPA's Private Companies section on Technical Issues Committee" under paragraph (8). The amendment allows CPAs who serve on either of the committees to qualify for continuing professional education credit by virtue of their participation on the committee. The amendment will function by allowing those CPAs who serve on either committee to claim CPE credit. No comments were received concerning adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provide the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law; and sec.15A which requires licensees to complete continuing professional education courses. sec.523.31. Alternative Sources of Continuing Professional Education. (a) Credit hours may be claimed from other organizations not recognized as formal continuing professional education sponsors. Credit from membership in the committees listed can be claimed using 50 minutes per contact hour at meetings to equal one credit hour: (1) Financial Accounting Standards Board (FASB); (2) Governmental Accounting Standards Board (GASB); (3) FASB's Emerging Issues Task Force (EITF); (4) AICPA's Auditing Standards Board and Accounting Standards Executive Committee; (5) Financial Executives Institute's Committee on Corporate-Reporting (FEI/CCR); (6) National Association of Accountants' Management-Accounting Practices Committee; (7) AICPA's Accounting and Review Services Committee (ARSC); and (8) The AICPA's Private Companies Section on Technical Issues Committee. (b) Credit hours earned from sources other than registered sponsors, or membership on designated committees, must receive prior approval before credit may be claimed. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9617267 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: December 18, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 505-5566 TITLE 25. HEALTH SERVICES PART I. Texas Department of Health CHAPTER 313.Athletic Trainers General Guidelines and Requirements 25 TAC sec.sec.313.1, 313.2, 313.9, 313.13-313.15, 313.17 The Advisory Board of Athletic Trainers (board) adopts amendments to sec.sec.313.1, 313.2, 313.9, 313.13-313.15, and 313.17, concerning the licensing and regulation of athletic trainers, without changes to the proposed text as published in the June 7, 1996, issue of the Texas Register (21 TexReg 5133), except as corrected in the July 5, 1996, issue of the Texas Register (21 TexReg 6265), and therefore the sections will not be republished. Sections 313.1, 313.2, 313.14, 313.15, and 313.17 were amended to correct statutory references. Section 313.9(a) was modified to delete the requirement that temporary license applicants must not have previously applied to take the licensure examination. Section 313.9(b) was amended to clarify the time frame during which a temporary license is valid. Section 313.9(c) was amended to provide for the issuance of a second temporary license based on documented hardship. Section 313.13(j) was amended to grant continuing education credit to licensees who instruct or present educational programs. The sections assure that the regulation of athletic trainers continues to identify competent practitioners. No comments were received concerning the proposed amendments. The amendments are adopted under Texas Civil Statutes, Article 4512d, sec.5(a), which provide the Advisory Board of Athletic Trainers with the authority to adopt rules consistent with the Act which are necessary for the performance of its duties; under sec.5(b), which provides the board with the authority to establish requirements for continuing education for athletic trainers; and under sec.10(c), which provides the board with the authority to establish requirements for temporary license issuance. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617029 Michael Daniel Saly Chair Texas Department of Health Effective date: December 13, 1996 Proposal publication date: June 7 ,1996 For further information, please call: (512) 458-7236 TITLE 30. ENVIRONMENTAL QUALITY PART I. Texas Natural Resource Conservation Commission CHAPTER 7.Memoranda of Understanding 30 TAC sec.7.110 The Texas Natural Resource Conservation Commission (commission) adopts new sec.7.110, concerning entering into a Memorandum of Understanding (MOU) with the Texas Department of Public Safety (department, with changes to the proposed text as published in the September 3, 1996, issue of the Texas Register (21 TexReg 8382). EXPLANATION OF ADOPTED RULE. The addition of sec.7.110 satisfies requirements established in Executive Order GWB 96-1. This MOU divides program responsibilities between the commission and the department with regard to the Texas Motorist's Choice Program. Subsection (a) describes the need for the MOU, while subsection (b) defines which agencies are parties to the agreement. Subsections (c) and (d) delineate the responsibilities and related activities of each agency. Subsection (e) provides a mechanism for resolving any disputes between the two agencies. Subsection (f) provides conditions for review, amendment, and termination of the MOU by either agency. TAKINGS IMPACT ASSESSMENT. The commission has prepared a Takings Impact Assessment pursuant to Texas Government Code Annotated, sec.2007.043, and has determined this rule will have no affect on private real property. HEARINGS AND COMMENTERS. A public hearing was held in Austin on October 3, 1996. The comment period closed October 3, 1996. No oral comments were presented at the hearing. Only one written comment was received on the proposal. The United States Environmental Protection Agency (EPA) requested that the MOU be incorporated into the State Implementation Plan at the next major revision, or be submitted to the EPA when finalized. The commission will submit the MOU to the EPA once the MOU has been approved by the commission and the department. Administrative and clerical changes were made by the commission in order to make terminology consistent with terminology in the rules of the department, to clarify a reference, and to clarify the responsibilities of the commission. STATUTORY AUTHORITY. The new section is adopted under Texas Water Code, sec.sec.5.103, 5.105, 13.041, 26.011, 27.019, 32.009, 33.007, and 34.006 and Texas Health and Safety Code, sec.sec.341.002, 341.031, 361.011, 361.017, 361.024, 366.012, 382.017, 401.011, 401.051, and 401.412, which provide the commission with the authority to adopt the rules necessary to carry out its powers and duties. sec.7.110. Memorandum of Understanding Between the Texas Natural Resource Conservation Commission (commission) and the Texas Department of Public Safety (department). (a) Need for agreement. (1) Executive Order GWB 96-1, authorized by Senate Bill 178 (Chapter 34, Acts of the 74th Legislature, Regular Session, 1995), directs the commission to enter into an agreement with the department to provide for the establishment of an Inspection/Maintenance (I/M) program in accordance with Executive Order GWB 96- 1, the Texas Clean Air Act (TCAA), and federal regulations. (2) The commission and the department have agreed to develop this Memorandum of Understanding between these agencies. This agreement will supplement any previous Memoranda of Understanding between these two agencies or including these two agencies as participating parties. (3) The agencies entering into this Memorandum of Understanding are establishing a formal mechanism by which they will coordinate I/M program planning, implementation, oversight, evaluation, and areas of primary responsibility. This Memorandum of Understanding also provides for a system by which information developed by the commission and the department may be exchanged for the benefit of the I/M program. (b) Definitions. Unless specifically defined in the TCAA, 37 Texas Administrative Code sec.23.93 relating to Vehicle Emissions Inspection Requirements, the department "Rules and Regulations Manual for Official Vehicle Inspection Stations and Certified Inspectors", 30 Texas Administrative Code sec.114.3 relating to Vehicle Emissions Inspection Requirements, or in other rules of the commission or the department, the terms used in this Memorandum of Understanding shall have the meanings commonly ascribed to them in the fields of air pollution control and vehicle inspection unless the context clearly indicates otherwise. (c) Responsibilities. (1) The commission: (A) is the state agency responsible for conservation of natural resources; (B) is the principal state authority on matters relating to the state's air quality; and (C) shall have authority to make rules for the I/M program on matters that relate directly to: (i) emissions reduction credits awarded by the United States Environmental Protection Agency (EPA); (ii) computer modeling of the emissions reduction credits available to the Texas I/M Program; (iii) data collection efforts required by 40 CFR Part 51 or the Texas I/M State Implementation Plan (SIP); and (iv) responsibilities of the commission identified in this agreement. (2) The department: (A) is the state agency responsible for the safety of the motoring public; (B) is the principal authority on matters relating to testing motor vehicles for safety and emissions compliance; and (C) shall have authority to make rules for the implementation and operation of the I/M program. (3) Both agencies agree to comply with the provisions of the Texas I/M SIP, including the most recent proposed revision signed by the Governor and submitted to the EPA on June 21, 1996, and the provisions of Executive Order GWB 96-1. (4) It is neither the department's nor the commission's intention to direct the other agency's activities by rule or otherwise. (d) Activities. (1) In consultation with the department, the commission will: (A) develop and design an I/M program for the State of Texas that satisfies the requirements of the Federal Clean Air Act and 40 CFR Part 51, Executive Order GWB 96-1 and other relevant legislation, including any amendments made to these requirements; (B) develop, update, and amend the Texas I/M SIP and program rules as necessary to support state and federal requirements; (C) evaluate the Texas I/M Program; (D) develop criteria for emissions testing equipment required for use in emissions testing facilities; (E) serve as the state's liaison with the EPA; (F) provide the department with timely reports and data analysis as requested; and (G) set fees for the Texas I/M Program by rule. (2) In consultation with the commission, the department will: (A) implement the Texas Motorist's Choice Program, including the adoption of necessary rules and procedures; (B) actively enforce the Texas Motorist's Choice Program; (C) serve as the state's liaison with participating emissions testing facilities; (D) license emissions testing facilities; (E) provide the commission with timely reports and data analysis as requested; (F) implement Repair Effectiveness provisions of the Texas I/M SIP; and (G) collect emissions testing and other applicable fees for the Texas Motorist's Choice Program. (3) In order for both agencies to fulfill their respective program responsibilities, both agencies agree: (A) to share information necessary for maintaining program effectiveness, quality, and approvability by the EPA; (B) to allow the EPA to audit their program records; (C) to jointly determine, within 60 days of the effective date of this Memorandum of Understanding, a list of information to be shared along with a schedule and acceptable format for its provision. This list may be amended by mutual agreement of the agencies. (D) to consult on an appropriate course of action if an analysis of program data indicates that the Texas Motorist's Choice Program is not meeting commitments made in the Texas I/M SIP. Consultation requests may be made by the program director in either agency. (e) Dispute resolution. In the event that the commission and the department are not able to decide on a mutually agreeable plan of action with regard to the terms of this agreement, each agency shall inform the other of its concerns, in writing, and make a good faith effort to address the major concerns of the other party. (f) Reviews of and changes to the Memorandum of Understanding. (1) This Memorandum of Understanding shall be reviewed and updated, at a minimum, every fifth year from its effective date. Either party may suggest amendments when it feels such changes are warranted. (2) If a change in state or federal law or a change in the Texas SIP necessitates a change in this Memorandum of Understanding, then both the Director of the Mobile Source Division of the commission and the Director of the Vehicle Inspection and Emissions program of the department or their respective staffs will meet to work out a mutually agreeable amendment to the Memorandum of Understanding. If such an amendment is not possible, then either party may require dispute resolution under subsection (e) of this section. (3) This Memorandum of Understanding may be terminated by either agency upon at least 30 days written notice. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617025 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 13, 1996 Proposal publication date: September 3, 1996 For further information, please call: (512) 239-1970 CHAPTER 101.General Rules 30 TAC sec.101.25 The commission adopts the repeal to sec.101.25, concerning Fees for Registration of Nonpermitted Facilities, without changes to the proposed text as published in the September 10, 1996, issue of the Texas Register (21 TexReg 8646). EXPLANATION OF ADOPTED RULE. The adopted repeal of sec.101.25 eliminates the unnecessary requirement for the registration of facilities that were constructed before the former Texas Air Control Board implemented its permitting program. The deadline for the registration of such facilities was February 28, 1986. The Texas Clean Air Act (TCAA) requirement for this registration was repealed in 1991. There is no longer any need for the commission to require the registration of these "grandfathered" facilities. TAKINGS IMPACT ASSESSMENT. The agency has prepared a Takings Impact Assessment for this repeal in accordance with Texas Government Code, sec.2007.043. The specific purpose of this adoption is to repeal an unnecessary registration requirement. Promulgation and enforcement of this repeal will not affect private real property. HEARING AND COMMENTERS. A public hearing was held on October 8, 1996, in Austin. No public testimony was offered at the public hearing. The public comment period closed on October 10, 1996, and no written comments were received. STATUTORY AUTHORITY. The repeal is adopted under the Texas Health and Safety Code, the TCAA, sec.382.017, which provides the commission with the authority to adopt rules consistent with the policy and purposes of the TCAA. sec.101.25. Fees for Registration of Nonpermitted Facilities. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617165 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 16, 1996 Proposal publication date: September 10, 1996 For further information, please call: (512) 239-1970 CHAPTER 121.Control of Air Pollution from Municipal Solid Waste Facilities SUBCHAPTER 30 TAC sec.sec.121.1, 121.3, 121.11, 121.13, 121.15, 121.21 The commission adopts the repeals to sec.sec.121.1, 121.3, 121.11, 121.13, 121.15, and 121.21, concerning Control of Air Pollution from Municipal Solid Waste Facilities, without changes to the proposed text as published in the September 3, 1996, issue of the Texas Register (21 TexReg 8385). This adoption removes obsolete Chapter 121, which no longer applies to the review and issuance of agency permits for municipal solid waste (MSW) facilities. Current MSW permitting activities by the agency are not affected by this repeal. BRIEF EXPLANATION OF THE RULES. Chapter 121 was adopted in 1986 in response to amendments to the Solid Waste Disposal Act (SWDA), enacted by House Bill (HB) 2358 of the 69th Legislature in 1985. The HB 2358 amendments, referred to as "one-stop permitting," simplified permitting procedures for MSW facilities by specifying that a permit from the former Texas Air Control Board (TACB) was not required for facilities subject to Texas Department of Health (TDH) permit requirements. In addition, the amendments required the TACB to perform air quality reviews of permit applications submitted to the TDH, but this requirement applied only to MSW facilities that incinerated waste. The intent of one-stop permitting was to consolidate the permitting process and eliminate duplicative requirements and procedures of the individual agencies responsible for permit review. Senate Bill (SB) 2, enacted by the 72nd Legislature and effective September 1, 1993, created the Texas Natural Resource Conservation Commission by merging the TACB, TDH MSW Division, and other regulatory entities. As a result, the agency's MSW Division has taken over the TDH's responsibility for handling MSW facility permits relating to solid waste issues, while the agency's New Source Review Division reviews and issues permits relating to air quality issues. SB 2 also repealed the one-stop permitting sections contained in the SWDA, thus making the provisions of Chapter 121 obsolete. MSW permitting activities continue to be carried out by the agency's respective divisions. In order to facilitate the issuance of air quality permits for MSW facilities, the commission adopted amendments to Chapter 116, concerning Control of Air Pollution by Permits for New Construction or Modification, on March 29, 1996. The amendments created new sec.116.621, regarding Municipal Solid Waste Landfills, which specifies criteria for new or modified MSW facilities and MSW landfills to obtain a standard permit. Standard permits offer a simplified, streamlined alternative to the general new source review process by establishing standardized conditions for specific industries or types of facilities. The repeal of Chapter 121 is not directly related to the recent adoption of the standard permit rule for MSW facilities. However, the standard permit provisions help assure expedited permit review and issuance for MSW facilities in the absence of a one-stop permitting process. TAKINGS IMPACT STATEMENT. The commission has prepared a Takings Impact Assessment for these rules pursuant to Texas Government Code, sec.2007.043. The commission has determined that adoption of the repeal will not affect private real property because the change is only to eliminate obsolete procedures for permitting MSW facilities. HEARING AND COMMENTERS. A public hearing on this proposal was held September 26, 1996, at the commission's Austin offices. Two written comments were received on the proposed amendments, one in favor and one opposing the proposal. ANALYSIS OF TESTIMONY. The Galveston-Houston Association for Smog Prevention expressed opposition to the proposal, citing the air, odor, groundwater, and other environmental problems that can arise from MSW facilities. The commenter opposed standard permits or streamlined methods of permitting MSW facilities because of these factors. Repeal of Chapter 121, the subject of this rulemaking, does not concern standard permits for MSW facilities. In its review and issuance of such permits, the staff will apply appropriate technical criteria to ensure that all regulatory requirements are met. The City of Houston, Department of Solid Waste Management supported simplification of the MSW permitting process through repeal of Chapter 121. The department recommended periodic review by the agency to further streamline all regulations pertaining to MSW facilities. The commission acknowledges support for the repeal, and will continue to look for ways to facilitate MSW permitting through the regulatory review process. STATEMENT OF STATUTORY AUTHORITY. The repeals are adopted under the Texas Health and Safety Code, the Texas Clean Air Act (TCAA), sec.382.017, which provides the commission with the authority to adopt rules consistent with the policy and purposes of the TCAA. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617162 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 16, 1996 Proposal publication date: September 3, 1996 For further information, please call: (512) 239-1970 CHAPTER 330. Municipal Solid Waste SUBCHAPTER R. Management of Whole Used or Scrap Tires 30 TAC sec.330.860 The Texas Natural Resource Conservation Commission (commission) adopts new sec.330.860, concerning the Special Authorization Priority Enforcement List, is adopted without changes to the proposed text as published in the September 24, 1996, issue of the Texas Register (21 TexReg 9135). A similar rule was adopted on an emergency basis by the commission on June 26, 1996, and was published in the July 12, 1996, issue of the Texas Register (21 TexReg 6299) as necessary to prevent imminent peril to the public health, safety, or welfare. The emergency rule was originally scheduled to expire on October 24, 1996, but was extended on September 11, 1996, by the commission to expire on December 23, 1996, as published in the September 24, 1996, issue of the Texas Register (21 TexReg 9131). EXPLANATION OF ADOPTED RULE. The commission has received numerous complaints from state, city, and county health officials regarding the problems associated with whole tires piling up at generator locations primarily in the West Texas area. The concerns include fire, the creation of breeding grounds for mosquitoes, snakes, and rodents, human health problems, as well as traffic safety due to tires piling up alongside roadways. Because generator locations are usually located in large population centers, the threat of fire is of particular concern since whole tire piles are easily ignited. An uncontrolled burning tire pile releases toxic chemicals into the air and may also result in contamination to groundwater. Specifically, the new section establishes the Special Authorization Priority Enforcement List (SAPEL) which will consist of waste tires generated in specially-designated counties or regions which are not receiving adequate collection service and which, as set forth in the Texas Health & Safety Code, sec.361.476, pose a threat to public health and safety, or the environment. Additionally, the rule establishes the framework for a contracting mechanism whereby the agency may contract with collection entities designated by the executive director for the collection and transportation of SAPEL tires. COMMENTERS. The comment period closed on October 24, 1996. The commission did not receive any comments concerning the new rule. TAKINGS IMPACT ASSESSMENT. The commission has prepared a Takings Impact Assessment for this rule pursuant to Texas Government Code Annotated Section 2007.043. The following is a summary of that assessment. The specific purpose of the rule is to provide a framework that will allow the commission to prevent imminent peril to the public health, safety, and welfare by contracting with waste tire collection entities for the collection and transportation of scrap tires and tire pieces that are accumulating in certain West Texas counties and regions. The commission has received numerous complaints from state, city, and county health officials regarding the problems associated with whole tires piling up at generator locations. Tire shreds have piled up at storage sites and scrap tires are not being collected from generator locations, raising the threat of fires, creation of breeding grounds for mosquitoes, snakes, and rodents, and human health problems, as well as traffic safety due to tires piling up alongside roadways. The rule will substantially advance this specific purpose by establishing procedures for designating scrap tires and tire pieces as SAPEL in counties or regions not receiving adequate tire collection and which pose a threat to human health, safety, and welfare. Under statutory authority, the commission may contract for collection of the tires. Promulgation and enforcement of this rule will not affect, nor create a burden on, private real property because the rule pertains only to new procedures to facilitate the collection of accumulated scrap tires and tire pieces so as to eliminate the threat to public health, safety, and welfare, as well as the environment. The rule may be considered less stringent than the existing rules to the extent that the agency will be reducing the burden on the regulated community by supplementing its efforts in carrying out a currently-uneconomical task. Except for the exemptions which are specified in Senate Bill 14 and addressed above, there are no other identifiable exemptions that would apply to this rulemaking. STATUTORY AUTHORITY. The new section is adopted under the authority of the Health & Safety Code, sec.361.011, which charges the commission with the responsibility of managing solid waste, coordinating municipal solid waste activities, controlling all aspects of the management of municipal solid waste, and which grants the commission with the powers necessary or convenient to carry out those responsibilities; sec.361.024 which gives the commission the authority to adopt rules consistent with Chapter 361, Health & Safety Code; sec.5.229, Texas Water Code, which gives the executive director the authority to enter into contracts on behalf of the commission; and Health & Safety Code, sec.sec.361.475, 361.476, 361.477 and 361.484 which give the commission the authority to adopt rules necessary to implement Subchapter P, Chapter 361, Health & Safety Code, relating to the Waste Tire Recycling Program. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617024 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 13, 1996 Proposal publication date: September 24, 1996 For further information, please call: (512) 239-1970 TITLE 31. NATURAL RESOURCES AND CONSERVATION PART X. Texas Water Development Board CHAPTER 363. Financial Assistance Programs The Texas Water Development Board (the board) adopts amendments to Chapter 363, Subchapter A, sec.363.42 concerning Loan Closing and Subchapter G, sec.363.721 concerning Loan Closing, without changes to the proposed text as published in the October 11, 1996, issue of the Texas Register (21 TexReg 9767). Amendments to sec.363.42 and sec.363.721 will add the requirement and instructions for closing all loans in Book- Entry-Only form through the Depository Trust Company. The Book Entry payment method allows principal and interest payments to be tracked via data base eliminating the need for handling and depositing checks and the safekeeping of a physical bond, and providing same day receipt of payments made to the board by political subdivisions whose bonds the board holds. There were no comments received on the proposed amendments. SUBCHAPTER A. General Provisions Prerequisites to Release of Funds 31 TAC sec.363.42 The amendment is adopted under the authority of the Texas Water Code, sec.6.101 which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616966 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: December 12, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-7981 SUBCHAPTER E.Economically Distressed Areas Program 31 TAC sec.363.505 The Texas Water Development Board (the board) adopts an amendment to sec.363.505, concerning Calculation of Financial Assistance, without changes to the proposed text as published in the October 11, 1996 issue of the Texas Register (21 TexReg 9768). New subsection (d) will allow the Board to provide funds as 100% grants to political subdivisions approved for construction funding through the Economically Distressed Areas Program under the Community Self-Help Program, which provides assistance to small communities using self-help initiatives coordinated through a contract between the board, the Rensselaerville Institute and WaterWorks. No comments were received on the proposed amendment. The amendment is adopted under the authority of the Texas Water Code, sec.6.101 and sec.16.342, which provide the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State including specifically the Economically Distressed Areas Program. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616969 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: December 12, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-7981 SUBCHAPTER G. Small Community Emergency Loan Program Closing and Release of Funds 31 TAC sec.363.721 The amendment is adopted under the authority of the Texas Water Code, sec.6.101 which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616967 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: December 12, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-7981 CHAPTER 375.State Water Pollution Control Revolving Fund Prerequisites to Release of Funds 31 TAC sec.375.72 The Texas Water Development Board (the board) adopts an amendment to sec.375.72, concerning Loan Closing, without changes to the proposed text as published in the October 11, 1996 issue of the Texas Register (21 TexReg 9769). The amendment to sec.375.72 will add the requirement and instructions for closing all loans in Book-Entry-Only form through the Depository Trust Company. The Book Entry payment method allows principal and interest payments to be tracked via data base eliminating the need for handling and depositing checks and the safekeeping of a physical bond, and providing same day receipt of payments made to the board by political subdivisions whose bonds the board holds. No comments were received on the proposed amendment. The amendment is adopted under the authority of the Texas Water Code, sec.6.101 and sec.15.605, which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State including specifically the SRF program. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616968 Craig D. Pedersen Executive Administrator Texas Water Development Board Effective date: December 12, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-7981 TITLE 34. PUBLIC FINANCE PART I. Comptroller of Public Accounts CHAPTER 1.Central Administration SUBCHAPTER A.Practice and Procedure 34 TAC sec.1.1, sec.1.2 The Comptroller of Public Accounts adopts the repeal of sec.1.1 and sec.1.2, concerning intent and scope of rules, and construction of rules of practice and procedure, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9044). The sections are being repealed in order to combine this information with a new section dealing with the same subject matter. The information contained in these sections may be found in sec.1.1, concerning intent, scope, and construction of rules of practice and procedure. No comments were received regarding adoption of the repeals The repeals are adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeals implement the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617143 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.1 The Comptroller of Public Accounts adopts new sec.1.1, concerning intent, scope, and construction of rules, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9044). The Comptroller has determined that rules of similar subject matter should be combined. The consolidation of rules will benefit the taxpayers of Texas and provide a more effective means of obtaining information. This new section consolidates sec.1.1, concerning intent and scope of rules and sec.1.2, concerning construction of rules. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617144 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.3, sec.1.42 The Comptroller of Public Accounts adopts the repeal of sec.1.3, and sec.1.42, concerning definitions and contested cases, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9045). These sections are being repealed in order to combine this information with a new section dealing with the same subject matter. The information contained in these sections may be found in sec.1.42, concerning definitions. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeals implement the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617153 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.7, sec.1.8 The Comptroller of Public Accounts adopts the repeal of sec.1.7 and sec.1.8, concerning content of statement of grounds and preliminary conference, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9045). The sections are being repealed in order to combine this information with a new section dealing with the same subject matter. The information contained in these sections may be found in sec.1.7, concerning content of statement of grounds and preliminary conferences. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeals implement the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617155 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.7 The Comptroller of Public Accounts adopts new sec.1.7, concerning content of statement of grounds; preliminary conference, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9045). The comptroller has determined that rules of similar subject matter should be combined. The consolidation of rules will benefit the taxpayers of Texas and provide a more effective means of obtaining information. This new section consolidates sec.1.7, concerning content of statement of grounds and sec.1.8, concerning preliminary conference. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617156 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.10, sec.1.12 The Comptroller of Public Accounts adopts the repeal of sec.1.10 and sec.1.12, concerning acceptance or rejection of position letter, and motion to dismiss petition or set for hearing, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9046). The sections are being repealed in order to combine this information with a new section dealing with the same subject matter. The information contained in these sections may be found in sec.1.10, concerning acceptance or rejection of position letter and motion to dismiss petition or set for hearing. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeals implement the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617145 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.10 The Comptroller of Public Accounts adopts new sec.1.10, concerning acceptance or rejection of position letter; motion to dismiss petition or set for hearing, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9047). The comptroller has determined that rules of similar subject matter should be combined. The consolidation of rules will benefit the taxpayers of Texas and provide a more effective means of obtaining information. This new section consolidates sec.1.10, concerning acceptance or rejection of position letter and sec.1.12, concerning motion to dismiss petition or set for hearing. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617146 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.sec.1.17, 1.21-1.26 The Comptroller of Public Accounts adopts the repeal of sec.sec.1.17, 1.21-1.26, concerning administrative law judge to hear case; conduct of hearing; rules of evidence; oral evidence, witnesses, and penalty for false statements; documentary evidence; evidence by official notice; and transcription of oral hearing, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9047). These sections are being repealed in order to combine this information with a new section dealing with the same subject matter. The information contained in these sections may be found in new sec.1.21, concerning oral hearings. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeals implement the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617147 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.18, sec.1.19 The Comptroller of Public Accounts adopts the repeal of sec.1.18 and sec.1.19, concerning filing of documents and inspection of file, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9048). The rules are being repealed in order to combine this information with existing rules dealing with the same subject matter. The information contained in these sections may be found in sec.1.18, concerning filing of documents and inspection of file. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeals implement the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617149 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.18 The Comptroller of Public Accounts adopts new sec.1.18, concerning filing of documents and inspection of file, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9048). The comptroller has determined that rules of similar subject matter should be combined. The consolidation of rules will benefit the taxpayers of Texas and provide a more effective means of obtaining information. This new section consolidates sec.1.18, concerning filing of documents and sec.1.19, concerning inspection of file. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617150 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.21 The Comptroller of Public Accounts adopts new sec.1.21, concerning oral hearings, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9049). The comptroller has determined that rules of similar subject matter should be combined. The consolidation of rules will benefit the taxpayers of Texas and provide a more effective means of obtaining information. This new section consolidates sec.1.21, concerning conduct of hearing, sec.1.17, concerning administrative law judge to hear case, sec.1.22, concerning rules of evidence, sec.1.23, concerning oral evidence, witnesses, and penalty for false statements, sec.1.24, concerning documentary evidence, sec.1.25, concerning evidence by official notice, and sec.1.26, concerning transcription of oral hearings. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617148 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.37, sec.1.38 The Comptroller of Public Accounts adopts the repeal of sec.1.37 and sec.1.38, concerning joint hearings and severance, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9050). These sections are being repealed in order to combine this information with a new section dealing with the same subject matter. The information contained in these sections may be found in new sec.1.37, concerning joint hearings and severance. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeals implement the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617151 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.37 The Comptroller of Public Accounts adopts new sec.1.37, concerning joint hearings and severance, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9050). The comptroller has determined that rules of similar subject matter should be combined. The consolidation of rules will benefit the taxpayers of Texas and provide a more effective means of obtaining information. This new section consolidates sec.1.37, concerning joint hearings and sec.1.38, concerning severance. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617152 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 34 TAC sec.1.42 The Comptroller of Public Accounts adopts new sec.1.42, concerning definitions, without changes to the proposed text as published in the September 20, 1996, issue of the Texas Register (21 TexReg 9051). The Comptroller has determined that rules of similar subject matter should be combined. The consolidation of rules will benefit the taxpayers of Texas and provide a more effective means of obtaining information. This new section consolidates sec.1.42, concerning definitions and sec.1.3, concerning contested cases. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.111.009 and sec.111.105. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617154 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: September 20, 1996 For further information, please call: (512) 463-4062 CHAPTER 3.Tax Administration SUBCHAPTER C.Crude Oil Production Tax 34 TAC sec.3.35 The Comptroller of Public Accounts adopts an amendment to sec.3.35, concerning reporting requirements for producers and purchasers, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10276). The amendment is necessary because a repeal of 34 TAC sec.3.318, concerning oil operations, has been proposed. The text of that provision is being transferred to this rule for clarity. Information regarding an exemption from sales tax for crude oil may be found in the Tax Code, sec.151.308. No comments were received regarding adoption of the amendment. The amendment is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617142 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-4062 SUBCHAPTER O.State Sales and Use Tax 34 TAC sec.sec.3.286, 3.335, 3.353 The Comptroller of Public Accounts adopts the repeal of sec.3.286, sec.3.335, and sec.3.353, concerning seller's and purchaser's responsibilities; filing reports; and cancellation of sales tax permits with no reported business activity, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10277). The comptroller has determined that the consolidation of sections dealing with similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. These sections are being repealed in order to simplify the consolidation of related sections into a single section. The substance of the current sec.3.286, sec.3.335, and sec.3.353 will be included in the new sec.3.286, concerning seller's and purchaser's responsibilities. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeals implement Tax Code, sec.111.002. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616993 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 12, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 34 TAC sec.3.286 The Comptroller of Public Accounts adopts a new sec.3.286, concerning seller's and purchaser's responsibilities, with changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10278). The comptroller has determined that the consolidation of sections dealing with similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. Therefore, current sec.3.286 is being proposed for repeal. The new section consolidates the substance of the current sec.3.335, concerning filing reports, sec.3.353, concerning cancellation of sales tax permits with no reported business activity, part of sec.3.311, concerning auctioneers; letter of waiver, and subsection (e) of sec.3.352, with the substance of current sec.3.286 as modified below. The new section omits all definitions of "engaged in business" except those definitions requiring a "physical presence" in Texas. This was done in response to a United States Supreme Court Case, Quill v. North Dakota 112 S. Ct. 1094 (1992). Subsection (b)(2) states current policy on the length of time an out-of- state seller is obligated to collect Texas use tax after the seller ceases to have a physical presence in Texas but continues to make Texas sales from an out- of-state location. Subsection (d)(3) states current policy requiring sellers and purchasers to be specific as to the type of taxes included in lump-sum contracts. Subsection (i)(2) implements legislation allowing retailers from the United Mexican States to give a resale certificate in lieu of tax for inventory items to be sold in the regular course of business. Subsection (g)(6) implements a legislative change and imposes a $50 penalty for failure to file timely returns. The additional penalty is imposed on persons who have failed to file timely on at least two other occasions. Subsection (i)(5) implements a legislative change and lists the penalties for persons who use invalid resale or exemption certificates to avoid or evade sales or use tax. Subsection (g)(5) implements a legislative change replacing the 12% interest rate compounded monthly with 12% simple interest. A grammatical error in subsection (a)(1)(E) and (F) of the proposed section has been corrected. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.sec.111.0046, 151.008, 151.024, 151.051, 151.053, 151.054, 151.103, 151.107, 151.202, 151.203, 151.410, 151.7031, and 151.707. sec.3.286.Seller's and Purchaser's Responsibilities. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Engaged in business. A retailer is engaged in business in Texas if the retailer is: (A) maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, an office, place of distribution, sales or sample room, warehouse or storage place, or other place of business; (B) having any representative, agent, salesperson, canvasser, or solicitor operating in this state under the authority of the seller for the purpose of selling, delivering, or taking orders for any taxable items; (C) promoting a flea market, trade day, or other event involving the sales of taxable items; (D) utilizing independent salespersons in direct sales of taxable items; (E) deriving receipts from a lease of tangible personal property located in this state; (F) allowing a franchisee or licensee to operate under its trade name if the franchisee or licensee is required to collect Texas sales or use tax; or (G) conducting business in this state through employees, agents, or independent contractors. (2) Place of business of the seller - For tax permit requirement purposes means an established outlet, office, or location operated by the seller, his agent, or employee for the purpose of receiving orders for taxable items. A warehouse, storage yard, or manufacturing plant may not be considered a "place of business of the seller" for tax permit requirement purposes unless three or more orders are received by the seller in a calendar year at the warehouse, storage yard, or manufacturing plant. (3) Seller - Every retailer, wholesaler, distributor, manufacturer, or any other person who sells, leases, rents, or transfers ownership of taxable items for a consideration. A promoter of a flea market, trade day, or other event involving the sales of taxable items is a seller and is responsible for the collection and remittance of the sales tax collected by dealers, salespersons, or individuals at such events unless the participants hold active sales tax permits issued by the comptroller. A direct sales organization engaged in business as defined in paragraph (1)(D) of this subsection is a seller and is responsible for the collection and remittance of the sales tax collected by the independent salespersons selling the organization's product. Pawnbrokers, storagemen, mechanics, artisans, or others selling property to enforce a lien are also sellers. An auctioneer who does not receive payment for the item sold, does not issue a bill of sale or invoice to the purchaser of the item, and who does not issue a check or other remittance to the owner of the item sold by the auctioneer is not considered a seller responsible for the collection of the tax. In this instance, it is the owner's responsibility to collect and remit the tax. Auctioneers should refer to sec.3.311 of this title (relating to Auctioneers, Brokers, and Factors). (4) Special purpose district - A district or other local taxing jurisdiction funded by a sales tax that is governed by the County Sales and Use Tax Act, Chapter 323. (b) Permits required. (1) Every seller must apply to the comptroller for a tax permit for each place of business. (2) Every out-of-state seller engaged in business in this state must apply to the comptroller for a tax permit. An out-of-state seller that has been engaged in business in Texas continues to be responsible for collecting Texas use tax on sales made into Texas for 12 months after the seller ceases to be engaged in business in Texas. (3) Independent salespersons of direct sales organizations will not be required to hold sales tax permits. It is the responsibility of the direct sales organizations to hold Texas permits and to collect Texas tax. (c) Obtaining a permit. (1) An application will be furnished by the comptroller and must be filled out completely. After the application is filled out and returned to the comptroller, together with whatever bond or other security is required by sec.3.327 of this title (relating to Taxpayer's Bond or Other Security), a separate permit under the same account will be issued to the applicant for each place of business. The permit is issued without charge. (2) Each legal entity (corporation, partnership, sole proprietor, etc.) must apply for its own permit. The permit cannot be transferred from one owner to another. It is valid only for the person to whom it was issued and for the transaction of business only at the address shown on the permit. If a person operates two or more types of business under the same roof, only one permit is needed. (3) The permit must be conspicuously displayed at the place of business for which it is issued. However, a person who has traveling salesmen operating from one central office needs only one permit, which must be displayed at the central office. (4) All permits of the seller will have the same taxpayer number; however, each business location will have a different outlet number. The outlet numbers assigned may not necessarily correspond to the number of business locations owned by a taxpayer. (d) Collection and remittance of the tax. (1) Each seller must collect the tax on each separate retail sale in accordance with the statutory bracket system in the Tax Code, sec.151.053. Copies of the bracket system should be displayed in each place of business so both the seller and the customers may easily use them. The tax is a debt of the purchaser to the seller until collected. (2) The sales tax applies to each total sale, not to each item of each sale. For example, if two items are purchased, each costing $ .07, the seller must collect the tax on the total selling price of $ .14. Tax must be reported and remitted to the comptroller as provided by the Tax Code, sec.151.410. When tax is collected properly under the bracket system, any over-collection need not be remitted by the seller. Conversely, when the tax collected under the bracket system is less than the tax due on the total receipts, the seller is responsible for remitting tax on total receipts even though not collected from customers. (3) The amount of the sales tax must be separately stated on the bill, contract, or invoice to the customer or there must be a written statement to the customer that the stated price includes sales or use taxes. Contracts, bills, or invoices merely stating that "all taxes" are included are not specific enough to relieve either party to the transaction of its sales and use tax responsibilities. The total amount shown on such documents will be presumed to be the taxable item's sales price, without tax included. The seller or customer may overcome the presumption by using the seller's records to show that tax was included in the sales price. Out-of-state sellers must identify the tax as Texas sales or use tax. (4) It is unlawful for any seller to advertise or hold out to the public that the seller will assume, absorb, or refund any portion of the tax, or that the seller will not add the tax to the selling price of the taxable items being sold. (5) The practice of rounding off the amount of tax due on the sale of a taxable item is prohibited. Tax must be added to the sales price according to the statutory bracket system. (e) Payment of the tax. (1) Each seller or purchaser owing tax not collected by a seller must remit tax on all receipts from the sales or purchases of taxable items less any applicable deductions. On or before the 20th day of the month following each reporting period, each person subject to the tax shall file a consolidated return together with the tax payment for all businesses operating under the same taxpayer number. Reports and payments due to be submitted on due dates occurring on Saturdays, Sundays, or legal holidays may be submitted the next business day. (2) The returns must be signed by the person required to file the report or by the person's duly authorized agent, but need not be verified by oath. (3) The returns will be filed on forms prescribed by the comptroller. The fact that the seller or purchaser does not receive the form or does not receive the correct forms from the comptroller for the filing of the return does not relieve the seller or purchaser of the responsibility of filing a return and paying the required tax. (f) Reporting period. (1) Sellers, and purchasers owing tax not collected by sellers, who have less than $1,500 in state tax per quarter to report may file returns quarterly. The quarterly reporting periods end on March 31st, June 30th, September 30th, and December 31st. The returns are to be filed on or before the 20th day of the month following the period ending date. (2) Sellers, and purchasers owing tax not collected by sellers, having less than $1,000 state tax to report during a calendar year and with authorization from the comptroller's office may file yearly returns. (A) Authorization to file returns on a yearly basis will be conditioned on the correct filing of prior returns. (B) Authorization to file returns on a yearly basis will be denied if a taxpayer's liability exceeded $1,000 in the prior calendar year. (C) A taxpayer filing on a yearly basis without authorization will be liable for applicable penalty and interest on any previously unreported quarter. (D) Authority to file on a yearly basis is automatically revoked if a taxpayer's state sales and use tax liability is greater than $1,000 during a calendar year. The taxpayer must file a return for that month or quarter, depending on the amount, in which the liability is greater than $1,000. On that report, the taxpayer must report all accrued liability for the year and must file monthly or quarterly, as appropriate, as long as the yearly tax liability is greater than $1,000. (E) Once each year all accounts will be reviewed to confirm yearly filing status and to authorize permit holders who meet the filing requirements to begin filing yearly returns. (F) Yearly filers must report on a calendar year basis. The return and payment are due on or before January 20th of the next calendar year. (3) Sellers, and purchasers owing tax not collected by sellers, who have $1,500 or more in state tax per quarter to report must file monthly returns except for sellers who prepay the tax. (4) Every taxpayer required to file city, county, and Metropolitan Transit Authority/City Transit Department (MTA/CTD) sales and use tax returns must file them at the same time the state sales and use tax returns are filed. (5) State agencies. State agencies that deposit taxes directly with the comptroller's office according to Accounting Policy Statement Number 12 are not required to file a separate tax return. A fully completed deposit request voucher is deemed to be the return filed by these agencies. Subsection (f)(1)- (3) of this section do not apply to these state agencies. Taxes must be deposited with the comptroller's office within the time period otherwise specified by law for deposit of state funds. (g) Filing the return; prepaying the tax; discounts; penalties. (1) The comptroller will make forms available to all persons required to file returns. The failure of the taxpayer to obtain the forms will not relieve that taxpayer from the requirement to file and remit the tax timely. Each taxpayer may claim a discount for timely filing and payment as reimbursement for the expense of collecting the tax. The discount is equal to 0.5% of the amount of tax due. (2) The return for each reporting period must reflect the total sales, taxable sales, and taxable purchases for each outlet. The 0.5% discount for timely filing and payment may be claimed on the return for each reporting period and computed on the amount timely reported and paid with that return. (3) Prepayments may be made by taxpayers who file monthly or quarterly returns. The amount of the prepayment should be a reasonable estimate of the state and local tax liability for the entire reporting period. "Reasonable estimate" means at least 90% of the total amount due or an amount equal to the actual net tax liability due and paid for the same reporting period of the immediately preceding year. (A) A taxpayer who makes a prepayment based upon an estimate of tax liability may retain an additional discount of 1.25% of the amount due. (B) The monthly prepayment is due on or before the 15th day of the month for which the prepayment is made (C) The quarterly prepayment is due on or before the 15th day of the second month of the quarter for which the tax is due. (D) On or before the 20th day of the month following the quarter or month for which a prepayment was made, the taxpayer must file a return showing the actual liability and remit any amount due in excess of the prepayment. If there is an additional amount due, the taxpayer may retain the 0.5% reimbursement provided that both the return and the additional amount due are timely filed. If the prepayment exceeded the actual liability, the taxpayer will be mailed an overpayment notice or refund warrant. (4) Remittances which are less than a reasonable estimate as required by paragraph (3) of this subsection will not be regarded as a prepayment. The 1.25% discount will not be allowed. If the taxpayer owes more than $1,500 in a calendar quarter, the taxpayer will be regarded as a monthly filer. All monthly reports not filed because of the invalid prepayment will be subject to late filing penalty and interest. (5) If a taxpayer does not file a quarterly or monthly return together with payment on or before the due date, the taxpayer forfeits all discounts and incurs a mandatory 5.0% penalty. After the first 30 days delinquency, an additional mandatory penalty of 5.0% is assessed against the taxpayer, and after the first 60 days delinquency, interest begins to accrue at the rate of 12%. (6) Permit holders are required to file sales and use tax returns monthly, quarterly, or yearly as set out in subsection (f) of this section. The sales and use tax returns must be filed even if there is no tax to report for the reporting period. A person who has failed to file timely reports on two or more previous occasions must pay an additional penalty of $50 for each subsequent report that is not filed timely. The penalty is due regardless of whether the person subsequently files the report or whether no taxes are due for the reporting period. (h) Records required. (1) Records must be kept for four years, unless the comptroller authorizes in writing a shorter retention period. Exemption and resale certificates must be kept for four years following the completion of the last sale covered by the certificate. See sec.3.281 of this title (relating to Records Required; Information Required) and sec.3.282 of this title (relating to Auditing Taxpayer Records). (2) The comptroller or an authorized representative has the right to examine any records or equipment of any person liable for the tax in order to verify the accuracy of any return made or to determine the tax liability in the event no return is filed. (i) Resale and exemption certificates. (1) Any person selling taxable items in this state must collect a tax on the taxable items so sold unless a valid and properly completed resale, exemption, direct payment exemption certificate, or maquiladora exemption certificate is received from the purchaser. Simply having permit numbers on file without properly completed certificates does not relieve the seller from the responsibility for collecting tax. (2) A seller may accept a resale certificate only from a purchaser who is in the business of reselling the taxable items within the geographical limits of the United States of America, its territories and possessions, or in the United Mexican States. See sec.3.285 of this title (relating to Resale Certificate; Sales for Resale). To be valid, the resale certificate must show the 11-digit number from the purchaser's Texas tax permit or the out-of-state registration number of the out-of-state purchaser. (3) A seller may accept an exemption certificate in lieu of the tax on sales of items that will be used in an exempt manner or on sales to exempt entities. See sec.3.287 of this title (relating to Exemption Certificates). There is no exemption number. An exemption certificate does not require a number to be valid. (4) A purchaser claiming an exemption from the tax must issue to the seller a properly completed resale or exemption certificate. The seller must act in good faith when accepting the resale or exemption certificate. If a seller has actual knowledge that the exemption claimed is invalid, the seller must collect the tax. (5) A person who intentionally or knowingly makes, presents, uses, or alters a resale or exemption certificate for the purpose of evading sales or use tax is guilty of a criminal offense: (A) if the tax evaded by the invalid certificate is less than $20, the offense is a Class C misdemeanor; (B) if the tax evaded by the invalid certificate is $20 or more but less than $200, the offense is a Class B misdemeanor; (C) if the tax evaded by the invalid certificate is $200 or more but less than $750, the offense is a Class A misdemeanor; (D) if the tax evaded by the invalid certificate is $750 or more but less than $20,000, the offense is a felony of the third degree; (E) if the tax evaded by the invalid certificate is $20,000 or more, the offense is a felony of the second degree. (6) Direct payment permit holders are entitled to issue an exemption certificate when purchasing all taxable items, other than those purchased for resale. The direct payment exemption certificate must show the purchaser's direct payment permit number. See sec.3.288 of this title (relating to Direct Payment Procedures and Qualifications). (7) Maquiladora export permit holders are entitled to issue a maquiladora exemption certificate when purchasing tangible personal property, other than that purchased for resale. Maquiladora export permit holders should refer to sec.3.358 of this title (relating to Maquiladoras). (8) The seller should obtain a properly executed resale or exemption certificate at the time a transaction occurs. All certificates obtained on or after the date the auditor actually begins work on the audit at the seller's place of business or on the seller's records are subject to verification. All incomplete certificates will be disallowed regardless of when they were obtained. The seller has 60 days from the date written notice is received by the seller from the comptroller in which to deliver certificates to the comptroller. For the purposes of this section, written notice given by mail is presumed to have been received by the seller within three business days from the date of deposit in the custody of the United States Postal Service. The seller may overcome the presumption by submitting proof from the United States Postal Service or by other competent evidence showing a later delivery date. Any certificates delivered to the comptroller during the 60-day period will be subject to verification by the comptroller before any deductions will be allowed. Certificates delivered to the comptroller after the 60-day period will not be accepted and the deduction will not be granted. See sec.3.285 of this title (relating to Resale Certificate; Sales for Resale), sec.3.287 of this title (relating to Exemption Certificates), sec.3.288 of this title (relating to Direct Payment Procedures and Qualifications) and sec.3.282 of this title (relating to Auditing Taxpayer Records). (j) Suspension of permit. (1) If a person fails to comply with any provision of the Tax Code, Title 2, or with the rules issued by the comptroller under those statutes, the comptroller may suspend the person's permit or permits. (2) Before a seller's permit is suspended, the seller is entitled to a hearing before the comptroller to show cause why the permit or permits should not be suspended. The comptroller shall give the seller at least 20 days notice, which shall be in accordance with the requirements of sec.1.14 of this title (relating to Notice of Setting). (3) After a permit has been suspended, a new permit will not be issued to the same seller until the seller has posted sufficient security and satisfied the comptroller that the seller will comply with both the provisions of the law and the comptroller's rules and regulations. (k) Refusal to issue permit. The comptroller is required by the Tax Code, sec.111.0046, to refuse to issue any permit to a person who: (1) is not permitted or licensed as required by law for a different tax or activity administered by the comptroller; or (2) is currently delinquent in the payment of any tax or fee collected by the comptroller. (l) Cancellation of sales tax permits with no reported business activity. (1) Permit cancellation due to abandonment. Any holder of a sales tax permit who reported no business activity in the previous calendar year is hereby deemed to have abandoned the permit, and the permit is hereby canceled by the comptroller. "No Business Activity" means zero total sales, zero taxable sales, and zero taxable purchases. (2) Re-application. Nothing herein shall prohibit any applicant from receiving a new sales tax permit upon request provided the issuance is not prohibited by subsection (k)(1) or (2) of this section, or by the Tax Code, sec.111.0046. (m) Direct payment. Yearly and quarterly filing requirements, prepayment procedures and discounts for timely filing do not apply to holders of direct payment permits. See sec.3.288 of this title (relating to Direct Payment Procedures and Qualifications). Direct payment returns and remittances are due monthly on or before the 20th day of the month following the end of the calendar month for which payment is made. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616989 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 12, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 34 TAC sec.3.292 The Comptroller of Public Accounts adopts the repeal of sec.3.292, concerning repair, remodeling, maintenance, and restoration of tangible personal property, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10282). The comptroller has determined that the consolidation of sections dealing with similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. The section is being repealed in order to simplify the consolidation of related sections into a single section. The new sec.3.292 includes the substance of the current sec.3.292, and the substance of sec.3.359 relating to repairs to private aircraft. No comments were received regarding adoption of the repeal. The repeal is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeal implements the Tax Code, sec.111.002. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616991 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 12, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 34 TAC sec.3.292 The Comptroller of Public Accounts adopts new sec.3.292, concerning the repair, remodeling, maintenance, and restoration of tangible personal property, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10282). The comptroller has determined that the consolidation of sections dealing with similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. The new section consolidates the substance of the current sec.3.292 with the substance of sec.3.359, concerning repairs to private aircraft. Subsection (a)(8) of the new section refers flight school operators and students to 34 TAC sec.3.297, concerning carriers. Subsection (i)(3) of the new section also refers individuals who work on jet turbine aircraft engines to 34 TAC sec.3.300, concerning manufacturing; custom manufacturing; fabricating; processing. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.sec.151.0101, 151.058, 151.151, 151.3111, 151.328, 151.338, and 151.350. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616992 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 12, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 34 TAC sec.3.318 The Comptroller of Public Accounts adopts the repeal of sec.3.318, concerning oil operations, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10284). This section is unnecessary as the exemption from sales tax for crude oil is found in the Tax Code, sec.151.308. Information regarding taxation of crude oil may be found in 34 TAC sec.3.35, concerning Reporting Requirements for Producers and Purchasers. No comments were received regarding adoption of the repeal. The repeal is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeal implements the Tax Code, sec.111.002. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1996. TRD-9616990 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 12, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 SUBCHAPTER W.Comptroller of Public Accounts 34 TAC sec.sec.3.601, 3.606, 3.608, 3.610 The Comptroller of Public Accounts adopts the repeal of sec.sec.3.601, 3.606, 3.608, and 3.610, concerning definitions; record keeping requirements; gross receipts regulations; and changes in ownership information or other reporting information, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10285). The comptroller has determined that the consolidation of sections dealing with similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. The sections are being repealed in order to simplify the consolidation of related sections into a single section. The new sec.3.601 includes the substance of the current sec.3.601, concerning definitions, sec.3.606, concerning record keeping requirements, sec.3.608, concerning gross receipts regulations, and sec.3.610, concerning changes in ownership information or other reporting information. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002 and sec.111.0022, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Texas Civil Statutes, Articles 8801 et seq. The repeals implement the Tax Code, sec.111.002 and sec.111.0022. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 26, 1996. TRD-9617221 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 17, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 34 TAC sec.3.601 The Comptroller of Public Accounts adopts new sec.3.601, concerning definitions, changes in ownership information or other reporting information, gross receipts regulations, and record keeping requirements, with changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10285). The comptroller has determined that the consolidation of sections of similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. Therefore, current sec.3.601, concerning definitions, is being proposed for repeal. The new section consolidates the substance of the current sec.3.601 with the substance of sec.3.606, concerning record keeping requirements, sec.3.608, concerning gross receipts regulations, and sec.3.610, concerning changes in ownership information or other reporting information. The changes to the proposed text will add tax code references behind the section title and will replace the word "rule" with the word "section" in subsection (d)(1). The changes are consistent with format and language adopted in other sections. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002 and sec.111.0022, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Texas Civil Statutes, Articles 8801 et seq. The new section implements Texas Civil Statutes, Articles 8801, 8802, 8810, and 8817, sec.sec.1(a) , 2, 10, 12, and 14. sec.3.601. Definitions, Changes in Ownership, Gross Receipts Regulations, and Record Keeping Requirements. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Gross receipts - The total sum of money derived from the operation of a coin-operated machine which vends music, skill, or pleasure. (2) Issue a license - A license issued on an applicant's original application or a license issued on an application for renewal. (3) License - A general business license, import license, or repair license issued by the comptroller. (4) Machine or amusement machine - All machines which vend or dispense music, or are operated for skill or pleasure. A machine in an independent cabinet with a separate central control mechanism shall be considered a separate machine in regard to occupation tax requirements. A machine which is no longer functional, and has been permanently taken out of service, will not be considered to be a coin-operated machine operated for music, skill, or pleasure. In this context permanently taken out of service means it is no longer financially practical to operate the machine and it will be used only for parts. (5) Machines designed exclusively for children - Machines which can only be used for skill or pleasure by a child under 12 years of age. (6) Owner of a registration certificate - An owner who possesses a valid registration certificate issued by the comptroller. (7) Permit - The decal issued by the comptroller to an owner of a coin-operated machine evidencing the payment of the occupation tax. (8) Person - Any natural person, association of natural persons, trustee, receiver, partnership, corporation, organization, or the manager, agent, servant or employee of any of them. (9) Video game - An electronic mechanism played for skill or pleasure by means of images on a screen. Each cabinet which holds a game of skill or pleasure by means of images on a screen constitutes an independent operation subject to the occupation tax. (b) Changes in ownership. Changes in ownership are reported in the following manner: (1) if any partner of a partnership; trustee of a trust; receiver of a receivership; officer or director of a corporation; shareholder owning 10% or more of the outstanding shares of a corporation; individual applicant or licensee; officer, director or member of an association or other entity changes from the date the last ownership information was filed with the comptroller, written notification of the ownership change must be filed with the comptroller within 10 days of the ownership change; (2) if any information on an application changes from the date the last application was filed or any information changes from the last date the comptroller was notified of an information change, including the change of ownership of any machine owned by the registration certificate holder, written notification of the change must be filed with the comptroller within 10 days of the change; (3) if the owners of a corporation change, a written notification of the change must be filed with the comptroller within 10 days of the change. The business entity may continue to operate under its existing license or registration certificate; (4) if partners in a partnership change or a business entity dissolves, the successor in interest must request a temporary extension of a license or file an application for a new license. A successor in interest is one who assumes the ownership interest of a business entity but does not include the purchaser of the assets of the entity. To request a temporary extension of a license, the successor in interest must file with the comptroller a certification by the county judge of the county in which the business is located that the person requesting the extension is successor in interest. In the case of a sole proprietor, only when there is a successor in interest as the result of the death of the licensee can there be an extension of a license. The death of this licensee must be certified by a county judge of the county in which the business is located, or by the judge of the probate court in the county in which the estate of the deceased licensee is probated. In all other instances, the entity assuming a sole proprietor's interest must obtain a license. At the time of renewal of a license that has been extended, the successor in interest must file an original license application; and (5) if a sole proprietor owner of a registration certificate dies, the successor in interest must notify the comptroller in writing. The successor in interest may then continue to use the registration certificate until its expiration at which time the successor in interest must file an original application for a registration certificate. In all other instances, the successor in interest of the owner of a registration certificate shall file an application for a new registration certificate. (c) Gross receipts regulations. The following regulations apply to gross receipts: (1) distribution of gross receipts from amusement machines. The term "gross receipts from an amusement machine" is defined to be the total sum of money derived from the operation of a coin-operated machine which vends music, skill, or pleasure. No licensee shall enter into a contract or offer to contract with a bailee or lessee (location operator) of an amusement machine to compensate the bailee or lessee in excess of 50% of the gross receipts from an amusement machine, except that a licensee may refund a bailee or lessee of an amusement machine all money accepted by an amusement machine due to its malfunction. Before any money may be refunded under this exception, the name, address, and telephone number of the person who deposited money in the malfunctioning machine together with the sum of money deposited by him must be supplied to the licensee; (2) collection records of distribution of gross receipts from an amusement machine. Complete and separate records showing the distribution of the gross receipts for each location that an amusement machine is operated shall be made on each and every occasion the licensee or one of his employees collects money from the cash box of an amusement machine placed in operation. These records showing the distribution of the gross receipts for each location that an amusement machine is operated shall be kept by a licensee at their designated address. These records shall be kept by the licensee for a period of two years; and (3) entry to cash boxes of amusement machines. No licensee shall allow the bailee or lessee of an amusement machine to open or gain entry in any manner to the cash box except a coin-operated machine equipped with an income meter that totals or computes the sum of money deposited in the machine in dollars and cents. All keys to the cash box of a coin-operated machine other than a machine expressly exempt by this rule shall at all times remain in the possession of the licensee or his employees. (d) Record keeping requirements. The following requirements are imposed on record keeping: (1) in addition to all other record keeping requirements, each licensee shall maintain at the designated address, for inspection at all times by the comptroller, a record of each and every amusement machine purchased, received, possessed, controlled, handled, exhibited, or operated by him in this state as long as the licensee owns the machine and for two years after the date the licensee ceases to own the machine. Under this section the following information shall be shown in the licensee's records: (A) the full name and address of the owner of each and every machine, or if other than an individual, the principal officers or members thereof and their addresses; (B) the date each machine was acquired or received in Texas; (C) the make, type, and serial number of each and every machine; (D) the date each machine was first placed in operation; (E) the date of the first and most recent registration of each machine; (F) the location or locations of each machine including county, city, street, and/or rural route number; (G) every change in ownership of each machine; (H) the distribution of the gross receipts for each location that a machine is located and the receipts from each machine; (I) the date each machine was taken out of operation, the reason the machine was taken out of operation, and the location of a machine taken out of operation or the description of the final disposition of a machine; and (J) all contracts made with location owners; (2) depreciation schedules and federal income tax returns must be maintained for four years to be in compliance with the sales tax statutes; and (3) purchase invoices for the machines must be maintained for four years to be in compliance with the sales tax statutes. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 26, 1996. TRD-9617241 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 17, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 34 TAC sec.sec.3.602, 3.604, 3.607, 3.609 The Comptroller of Public Accounts adopts the repeal of sec.sec.3.602, 3.604, 3.607, and 3.609, concerning license and registration certificate renewal and occupation tax permit renewal due dates; licenses and registration certificates; tax permits; and exemptions, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10287). The comptroller has determined that the consolidation of sections dealing with similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. The sections are being repealed in order to simplify the consolidation of related sections into a single section. The new sec.3.602 includes the substance of the current sec.3.602, concerning license and registration certificate renewal and occupation tax permit renewal due dates, sec.3.604, concerning licenses and registration certificates, sec.3.607, concerning tax permits, and sec.3.609, concerning exemptions. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002 and sec.111.0022, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Texas Civil Statutes, Articles 8801 et seq. The repeals implement the Tax Code, sec.111.002 and sec.111.0022. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 26, 1996. TRD-9617222 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 17, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 34 TAC sec.3,602 The Comptroller of Public Accounts adopts a new sec.3.602, concerning licenses and certificates, renewals and due dates, occupation tax permits and exemptions, with changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10288). The comptroller has determined that the consolidation of sections dealing with similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. Therefore, current sec.3.602, concerning license and registration certificate renewal and occupation tax permit renewal due dates, is being proposed for repeal. The new section consolidates the substance of the current sec.3.602 with sec.3.604, concerning licenses and registration certificates, sec.3.607, concerning tax permits, and sec.3.609, concerning exemptions. The change to the proposed text will replace "December 1" with "December 31" in subsection (c)(1). This change is consistent with the statute. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, and sec.111.0022, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2, and other functions assigned to the comptroller by law. The new section implements the Texas Civil Statutes, Articles 8802, (1) and (3), 8806, and 8817, sec.sec.4, 8, 9, 13, and 16. sec.3.602. Licenses and Certificates, Renewals and Due Dates, Occupation Tax Permits and Exemptions. (a) Licenses and registration certificates. (1) Annual general business, import, and/or repair license fees, and registration certificate fees. Annual license and registration certificate fees are payable in advance and cannot be prorated quarterly. (2) Age requirement for issuance of a license. No natural person shall be issued a license by the comptroller for the operation of coin-operated machines unless at the time the license is issued the applicant is above the age of 18 years. (3) Information requirement for issuance of a license or registration certificate. An applicant for a license or registration certificate must complete all information asked for in the comptroller's application before a license or registration certificate will be issued or renewed. (4) Registration certificate notification requirement. A registration certificate holder must notify the comptroller in writing of any change in ownership of a machine and each time the location of a machine is changed within 10 days of the change. (5) Occasional sale exemption for registration certificate holder. A registration certificate holder may make one or two sales of coin-operated machines during any 12-month period if the certificate holder does not hold out as engaging (or does not habitually engage) in the business of selling coin- operated machines without losing the licensing exemption. Before the third sale of a coin- operated machine in a 12-month period by a certificate holder not previously in the business of selling, leasing, or renting coin-operated machines, a general business or import license must be obtained. The transfer of title or possession of more than one machine in a single transaction will constitute one sale. (b) Annual general business, import and repair license renewals, and annual occupation tax. (1) License renewal applications are due November 30. License renewal applications will not be considered complete for processing unless the tax due as well as the license fee is remitted. Complete license renewal applications filed after the due date may result in the renewal license being issued after December 31, the expiration date of the existing license. In such a case a person may not operate amusement machines after the expiration date until the renewal license is issued. A person who operates amusement machines without a license or with an expired license is guilty of a Class B misdemeanor. (2) An applicant who properly completes the application and remits all fees and taxes with it by the due date may continue to operate amusement machines after the expiration date if the applicant's license renewal has not been issued unless the applicant is notified by the comptroller prior to the license expiration date of a problem with the license renewal. (c) Annual registration certificate renewals and annual occupation tax. (1) Registration certificate renewal applications are due November 30. Registration certificate renewal applications will not be processed unless the tax due as well as the registration fee is remitted. Registration certificate renewal applications filed after the due date may result in the renewal registration certificate being issued after December 31, the expiration date of the existing registration certificate. In such a case, a person may not operate amusement machines after the expiration date until the renewal certificate is issued. A person who operates amusement machines without a registration certificate or with an expired registration certificate is guilty of a Class B misdemeanor. (2) An applicant who properly completes the application and remits all fees and taxes with it by the due date may continue to operate amusement machines after the expiration date even if the registration certificate renewal has not been issued unless the applicant is notified by the comptroller prior to the registration certificate expiration date of a problem with the registration certificate renewal. (3) License and registration certificate fees may not be prorated quarterly and the annual license or registration fee must be submitted with an application. (d) Occupation tax permits. (1) Occupation tax. Each amusement machine is subject to the occupation tax at the time a person exhibits, displays, or permits a machine to be exhibited or displayed in this state with the exception of annual renewals. The occupation tax for annual renewals for each machine exhibited or displayed or permitted to be exhibited or displayed in this state is due November 30 of each year. (2) Rate schedule. The following rate schedule will be applicable to machines first exhibited or displayed or permitted to be exhibited or displayed in this state in any quarter of the calendar year: Figure: 34 TAC 3.602(d)(2) (3) Replacement of lost, stolen, or destroyed valid Occupation Tax Permits. The comptroller shall provide a duplicate permit if a valid permit has been lost, stolen, or destroyed. The fee for each duplicate permit is $5.00. If a tax permit is lost, stolen, or destroyed, a written statement must be submitted explaining the circumstances by which the tax permit was lost, stolen, or destroyed, and including the number of the lost, stolen, or destroyed permit, before a replacement permit can be issued. A permit for which a duplicate permit has been issued is void. (4) Assignment of tax permits. Each coin-operated machine operated for music, skill, or pleasure shall be registered with the comptroller by make, model, and serial number. A tax permit issued by the comptroller shall be affixed to each registered machine. Each coin-operated machine shall have a serial number and the name and telephone number of the owner of said machine that is clearly visible on the outside surface of the machine cabinet. If a coin-operated machine is not manufactured with a serial number, a licensee or registration certificate holder shall assign a serial number to the machine and either stamp or engrave the assigned number on the machine cabinet. If all these requirements have been met, a tax permit may be assigned upon the transfer of title or possession of a machine. (5) Attachment of tax permits. Tax permits shall be securely affixed to any permanent surface on a machine in such a manner that the tax permits may be clearly seen by the public and cannot be removed without the continued application of steam and water. Tax permits shall not be attached to a machine which has not been registered with the comptroller. (6) Issuance of extra tax permits. No tax permits will be issued except for machines exhibited or displayed on location. The taxpayer shall not stockpile permits nor shall any permits be affixed to unregistered machines. (7) Exemptions. In order to establish that an organization is exempt from the license requirements pursuant to the Coin-Operated Services Law, Texas Civil Statutes, Article 8817, sec.8, it must do the following: (A) submit a written statement to the comptroller setting out in detail the nature of the activities conducted or to be conducted, a copy of the articles of incorporation if the organization is a corporation, a copy of the bylaws, a copy of any applicable trust agreement or a copy of its constitution, and a copy of any letter granting exemption from the Internal Revenue Service; and (B) furnish any additional information requested by the comptroller including, but not limited to, documentation showing all services performed by the organization and all income, assets, and liabilities of the organization. (8) Written notice. After a review of the material, the comptroller will inform the organization in writing if it qualifies for an exemption. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 26, 1996. TRD-9617223 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 17, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 SUBCHAPTER Y.Controlled Substances Tax 34 TAC sec.3.681 The Comptroller of Public Accounts adopts the repeal of sec.3.681, concerning imposition and rate of tax, without changes to the proposed text as published in the October 15, 1996, issue of the Texas Register (21 TexReg 10171). The section is being repealed because it virtually mirrors language found in Tax Code, Chapter 159, without adding any substantive meaning or interpretation. This section is therefore unneeded. No comments were received regarding adoption of the repeal. The repeal is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeal implements the Tax Code, Chapter 159. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617130 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: October 15, 1996 For further information, please call: (512) 463-3699 34 TAC sec.3.682 The Comptroller of Public Accounts adopts an amendment to sec.3.682, concerning tax payment certificates, without changes to the proposed text as published in the October 15, 1996, issue of the Texas Register (21 TexReg 10171). The comptroller has determined that the consolidation of sections dealing with similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. The sections are being repealed in order to simplify the consolidation of related sections into a single section. The substance of sec.3.684, concerning records required, confidentiality is being transferred to this section. No comments were received regarding adoption of the amendment. The amendment is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The amendment implements the Tax Code, Chapter 159. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617131 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: October 15, 1996 For further information, please call: (512) 463-3699 34 TAC sec.3.684 The Comptroller of Public Accounts adopts the repeal of sec.3.684, concerning records required, confidentiality, without changes to the proposed text as published in the October 15, 1996, issue of the Texas Register (21 TexReg 10172). The comptroller has determined that the consolidation of sections dealing with similar subject matter will benefit taxpayers by providing a more effective means of obtaining information. The section is being repealed to simplify the consolidation of related sections into a single section. The substance of this section is being transferred to sec.3.682, concerning tax payment certificates. No comments were received regarding adoption of the repeal. The repeal is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeal implements Tax Code, Chapter 159. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617132 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 16, 1996 Proposal publication date: October 15, 1996 For further information, please call: (512) 463-3699 CHAPTER 5.Funds Management (Fiscal Affairs) Funds Accounting - Deposit of State Funds 34 TAC sec.sec.5.81-5.84 The Comptroller of Public Accounts adopts the repeal of sec.sec.5.81-5.84, concerning deposit of state funds: definitions; time of deposit; where deposited; how deposited, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10289). The rules are being repealed because they are obsolete. The underlying statutes have been revised or repealed. No comments were received regarding adoption of the repeals. The repeals are adopted under Government Code, sec.403.011, which authorizes the comptroller to adopt rules concerning the expenditure of state funds. The repeals implement the Government Code, sec.403.011. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 26, 1996. TRD-9617187 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 17, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-4062 Funds Accounting - Appropriation Accounts Operation 34 TAC sec.sec.5.91-5.94 The Comptroller of Public Accounts adopts the repeal of sec.sec.5.91-5.94, concerning appropriation accounts operation: definitions; numerical identification; funding; increase, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10290). The rules are being repealed because they are obsolete. The underlying statutes and procedures have been revised. No comments were received regarding adoption of the repeals. The repeals are adopted under the Government Code, sec.403.011, which authorizes the comptroller to adopt rules concerning the expenditure of state funds. The repeals implement the Government Code, sec.403.011. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 26, 1996. TRD-9617186 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 17, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-4062 Funds Accounting - Federal Revenue Sharing Trust Fund 34 TAC sec.sec.5.101-5.104 The Comptroller of Public Accounts adopts the repeal of sec.sec.5.101-5.104, concerning federal revenue sharing trust fund: definitions; cash allocations; transfers to other cash fund accounts; spending plan, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10290). These provisions are obsolete. The federal statute relating to this procedure has been repealed, and the fund is now dormant. No comments were received regarding adoption of the repeals. The repeals are adopted under Government Code, sec.403.102, which authorizes the comptroller to adopt rules for the availability of money for use among the entities funded from the fund, and the Government Code, sec.403.011, which authorizes the comptroller to adopt rules concerning the expenditure of state funds. The repeals implement the Government Code, sec.403.011 and sec.403.102. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 26, 1996. TRD-9617185 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 17, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-4062 CHAPTER 9.Property Tax Administration SUBCHAPTER A.Practice and Procedure 34 TAC sec.9.101 The Comptroller of Public Accounts adopts new sec.9.101 concerning the conduct of the property value study, with changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10291). The new section is being adopted to make the sections easier to use and to conform to current agency practice for conducting the property value study. The new section is streamlined to eliminate duplicative references to procedures already set out in the Property Tax Division procedures manuals. The new section will also reflect statutory changes as well as the Property Tax Division's use of random sampling procedures. The new section sets forth how the Comptroller of Public Accounts conducts the study required by the Government Code, sec.403.302, and the Tax Code, sec.5.10, in the manner required by law. In the adopted section, the title of subsection (g) has been changed to more accurately describe the subsection. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002 and sec.111.0022, which provide the comptroller the authority to adopt rules for the administration and enforcement of the Tax Code and programs or functions assigned to the comptroller by law. The new section implements the Government Code, sec.403.302, and the Tax Code, sec.5.10. sec.9.101.Conduct of the Property Value Study. (a) Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. (1) Appraisal - A statement that estimates the market value or other legally required value of property. (2) Appraisal ratio - The ratio of a property's appraised value as determined by the appraisal office or appraisal review board (the County Appraisal District (CAD)) value, as applicable to: (A) the sale price of the property; or (B) an independent appraisal of the property, as applicable. (3) Appraiser - A comptroller employee or contractor who conducts appraisals for the property value study. (4) Assigned value - The value of property determined in the property value study. (5) Coefficient of dispersion - The absolute average deviation of appraisal ratios in a sample from the median appraisal ratio for the sample, expressed as a percentage of the median. (6) Comptroller - The Comptroller of Public Accounts or the Comptroller of Public Accounts designee. (7) Confirm - A sale is confirmed when the comptroller has documented that the sale price for a property is correct. (8) Documentary evidence - Writings such as letters, memoranda, appraisal records, or deeds. (9) Local property - Property other than utility, industrial, mineral, or 1-d or 1-d-1 qualified agricultural property. (10) Median appraisal ratio - The median level of appraisal is the median appraisal ratio of a sample of properties collected as part of the school district taxable value study in an appraisal district. The median appraisal ratio for a sample of properties is, in a numerically ordered list of the appraisal ratios for the properties: (A) if the sample contains an odd number of properties, the appraisal ratio above and below which there is an equal number of appraisal ratios in the list; or (B) if the sample contains an even number of properties, the average of the two consecutive appraisal ratios above and below which there is an equal number of appraisal ratios in the list. (11) Price related differential - The price related differential is the mean of a property sample divided by the weighted mean of that sample. (12) Property value study - The studies conducted by the comptroller pursuant to Government Code, sec.403.302 and Tax Code, sec.5.10. (13) Random sample - A sample in which each item of the population has an equal chance of being included. (14) Representative sample - Representative means composed of individual properties that collectively reflect the individual characteristics of the population from which they were drawn. A representative sample meets the requirements for operational representativeness set forth in the International Association of Assessing Officers' Standard on Ratio Studies. (15) Sale - A transfer of property for consideration. (16) Sale date - The date on which a deed or other document transferring title to real property by sale is executed. (17) Sample - A group of properties analyzed to determine characteristics of property in a school or appraisal district. (18) Stratification - Stratification divides the range of information for property in a district or property category into intervals and lists the number and CAD value of properties falling into each interval. (19) Stratified weighted mean appraisal ratio - A stratified weighted mean appraisal ratio is calculated by separating the properties in a category sample into subcategories by value range or other property characteristics (strata) and determining the weighted mean appraisal ratio for each of the strata. The value of property in each of the strata is calculated by dividing the total CAD value by the weighted mean appraisal ratio. These individual market value estimates are then added to produce a market value estimate for the total category sample. The total CAD value of property in the category is then divided by the total category market value estimate to produce the stratified weighted mean ratio. (20) Verify - A sale is verified when the comptroller has documented that a sale is a market value transaction as defined by the Tax Code, sec.1.04(7). (21) Weighted mean appraisal ratio - The weighted mean appraisal ratio is a number calculated by dividing the total CAD value of property in a sample by the total of corresponding sale prices or appraised values of property in that sample. (b) General statement of policy. The study constitutes a limited audit of the taxable value of property in the districts. The purpose of this section is to ensure that sufficient competent and relevant evidence affords a reasonable basis for the comptroller's judgments and conclusions regarding the taxable value of property in a school district and the appropriate measures of appraisal level and uniformity in an appraisal district. (c) General standard. Except where inconsistent with these sections, the Standard on Ratio Studies, International Association of Assessing Officers, is adopted by reference as a standard for the conduct of the property value study. (d) Changing appraisal methods. The comptroller will consult regularly with representatives of property owners, industries, appraisal firms, and other interested parties to keep abreast of changing appraisal methods. (e) Selection of property categories studied. The priority in determining categories of samples is the accuracy of the estimate of taxable property value for each school district in this state. (1) The comptroller may determine whether a category or class of property in a school district is a major category or class of property on a case-by-case basis. To maximize accuracy or efficient use of resources, the comptroller may decline to sample or estimate category values or measures. (2) If the comptroller does not sample a category or a subcategory of property in a school district, the comptroller may calculate the district's taxable value by using the district's locally reported value to represent the value of the unsampled category. (f) Taxpayer data. Owners of large unique or complex properties should be advised if these properties are included in the property value study. Taxpayers shall have the option of presenting data to the comptroller to verify the CAD value as representative of market value for inclusion in the study. The comptroller shall have the option of accepting the indicated market value for inclusion in the property value study. (g) Determining taxable value. The procedures for determining the taxable value of certain classes of property are as follows: (1) agricultural land qualified for productivity appraisal. The comptroller may determine the productivity value of land qualified for productivity appraisal in a school district through direct appraisal. The staff shall estimate an average value per acre for each land class in each school district using information provided by published sources and by individuals knowledgeable concerning local agricultural conditions. The estimated average productivity value per acre shall be developed using the same methods applicable to appraisal districts under sec.9.4001 of this title (relating to Valuation of Open-space and Agricultural Lands). The estimated value per acre shall be applied to the total number of acres in each land class reported in the school district report of property value to determine the total value of property in each class. The sum of the values of each class is the total value of agricultural property receiving productivity appraisal in the school district. (2) Timber land qualified for productivity appraisal. The comptroller may determine the productivity value of land qualified for timber appraisal in a school district through direct appraisal. The staff shall estimate an average value per acre for each soil class and type of timber in each school district using information provided by published sources and by individuals knowledgeable concerning local timber production. The estimated average productivity value per acre shall be developed using the same methods applicable to appraisal districts under sec.9.4011 of this title (relating to Appraisal of Timberlands). The estimated value per acre shall be applied to the total number of acres in each soil class for each type of timber reported in the school district report of property value to determine the total value of property in each class. The sum of the values of each class is the total value of timber property receiving productivity appraisal in the school district. (3) Utility property. Utility samples in a school district are chosen using a method that ensures sampling dominant properties and other properties as appropriate. Utilities shall be valued using recognized unitary valuation methods, that may include one or more of the cost, income, and market (sales comparison or stock and debt) approaches. Utility unit values will be allocated using generally accepted allocation methods based on the best information available. Appraisers shall consider the effects of regulation, if applicable. (4) Industrial property. If the comptroller appraises an industrial property, the property shall be valued using generally accepted appraisal methods. If staff selects an industrial property sample, the property sample shall be selected without regard to whether the appraisal district performs its own industrial property appraisals. (5) Mineral property. Mineral samples in a school district shall be chosen using a method that ensures sampling dominant leases and a sample of other leases as appropriate. Minerals shall be appraised using generally accepted appraisal methods, emphasizing the income approach to value. (6) Local property. The comptroller shall make its determination of local property values on the basis of representative samples of property selected within school districts. Except as provided in this section, the comptroller shall select samples of properties based on their judgment of the number and kind of properties required to be sampled to reasonably reflect the taxable value of property in each school district. The comptroller staff are not required to but may employ random sampling or other sampling procedures where feasible and appropriate. (A) Estimated sample sizes shall initially be assigned by supervisory staff. The overall goal in setting the sample size is to obtain school district taxable values that are acceptably accurate and reliable. The sample size assigned for a particular category of property in a particular school district is based on the available comptroller time, the availability of current sales, variability of ratios, and the relative value of the category. A sample may be larger or smaller than the assigned sample if the school district's resulting taxable value is determined by supervisory staff to be acceptably accurate and reliable. (B) Samples may include a combination of sales and appraisals that satisfies both size and representativeness requirements. However, a sample may consist of sales only or appraisals only. All meaningful property characteristics shall be considered in selecting non-random samples The following guidelines should be followed in non-random selection: (i) the sample should not be weighted in favor of sold properties that are appraised at a different level from unsold properties; (ii) a sample should include properties from each primary geographic area, if the geographic area contains a significant number of the kind of property being tested and the property has significant value; (iii) a sample should include improvements of varying ages; (iv) sample selection should consider other property characteristics such as construction type, size, use, and business type, as required; (v) stratification information should be used to ensure that samples are representative. If stratification data are unavailable, an appraiser should use informed judgment and knowledge of the area in a reasonable effort to ensure that samples are representative. (C) Appraisers shall categorize sample properties as they are categorized by appraisal districts (Category A, B, C, etc.). (D) Appraisers should develop a sales population to maintain a thorough knowledge of local markets and appraisal practices; and to provide a population of sales from which to select property samples. Appraisers should gather sales that occurred over as broad a time period as practicable and should gather sales from a variety of sources, such as appraisal districts, real estate professionals, title companies, financial institutions, courthouse records, and other reliable sources. (i) As a general rule, if an appraiser's sample size is less than all the sales within a relevant time period, the sales sample will be selected randomly. However, other sample selection methods may be used. (ii) The appraiser must document the source of each sale included in the property value study. The appraiser must use codes provided in the appraisal guide to identify the source of each sale entered into the comptroller sale/appraisal system. The appraiser must maintain sufficient written documentation to permit source verification upon request. (iii) The appraiser must confirm and verify at least 20% of the sales included in each category sample for each school district from sources other than the appraisal district. (iv) Sales included in a sample must be market transactions. Market transactions are consistent with the definition of market value found in the Tax Code, sec.1.04(7). For the purposes of that section, the term "price" means the most probable price. As provided in the Standard on Ratio Studies, International Association of Assessing Officers, transactions that may be non- arm's-length sales should be clearly identified and used only if it can be established that they are consistent with the definition of market value. (v) If an appraiser questions whether a transaction selected for use in the study is a market sale, the appraiser should obtain sales agreements, closing statements, statements from parties to the transaction, deed records that disclose full consideration, or other evidence sufficient to determine whether or not the transaction is a market transaction. (vi) The appraiser must exclude sales of properties that change category or significant physical characteristics after the sale but before the assessment date. (vii) The appraiser may not exclude a sale solely because it appears to be inconsistent with other sales in the sample. Such sales should be verified. The inconsistencies may indicate that a sale is not a market transaction, but they also may indicate that information regarding the sale was recorded incorrectly. If further investigation reveals that the sale was indeed a legitimate market transaction, the appraiser may include it in the sample, despite its apparent inconsistency. If the investigation, however, reveals that the sale was not a legitimate market transaction, the sale should be excluded. (viii) Generally, when financing reflects prevailing market practices and interest rates, sales prices require no adjustment. Adjustments should be considered if: (I) the seller and lender are the same party and financing is not at prevailing market rates; (II) the buyer assumes an existing mortgage at a non-market rate of interest; or (III) lenders charge the seller "points" (a percentage of the loan amount) for making money available to the purchaser/borrower. (ix) Some forms of mortgage terms also may require adjustment. If these adjustments alter the sales price significantly, the use of the sale as a good indicator of market value may be questionable. (x) The appraiser shall adjust sales samples for the effect of time if there is evidence of a significant value increase or decrease during the period from which sales are drawn. The appraiser must document the procedures used to develop time adjustments. As an alternative to time adjustment, the appraiser may randomly select samples so that the value of properties sold during a specified period before the assessment date roughly approximates the value of properties sold during a similar period after the assessment date. A sample balanced in this manner will negate the effect of changes in the level of market values if those changes occurred uniformly over the study time frame. (xi) The comptroller may use a method of adjusting for financing, time, personal property, or other matters affecting the sales price, that includes an overall adjustment affecting all or any relevant portion of the sales in the sample. (xii) If the comptroller determines that recently sold properties are appraised by the appraisal district at a different level of value than unsold properties, the comptroller may take actions to ensure that the unsold properties are fairly represented in the sample. These actions may include using appraisals in the sample, using sales that occurred after the appraisal district certified the school district tax rolls in the sample, deleting sales from the sample, or other adjustments the comptroller deems necessary to maintain the integrity of the property value study. (E) Appraisals of local property are performed if the comptroller determines they are necessary to ensure the study develops competent evidence of the value of all property in the school district. Appraisals are used to ensure a representative sample of sufficient size and to test whether sold and unsold properties are assessed at the same level. The following guidelines govern the use of appraisals: (i) appraisal samples shall be selected randomly if practicable; (ii) appraisals shall be conducted using generally accepted appraisal practices. The comptroller shall prepare an appraisal guide and other procedures as needed to conduct appraisals. Accurate and verifiable data from the market is usually preferable to information contained in the guide. Such information should be used in appraisals to the greatest extent possible. The guide and any other written instructions are open records. Supervisory staff shall selectively test appraisals to ensure the consistency and accuracy of data throughout the state; (iii) appraisers should physically inspect each property appraised. If acreage or lots cannot be physically inspected, the appraiser may use appraisal cards, aerial photographs, soil maps, and other relevant information in performing appraisals; (iv) in appraising a particular property, the appraiser may not consider the value placed on that property by the appraisal district. However, the appraiser may consult with appraisal district staff and review appraisal district records to gather information relevant to the appraisal; (v) the market value estimate for a particular property account must include the value of all property associated with that account, e.g., multiple improvements, paving, outbuildings, signs, business vehicles, additional lots, etc. The appraiser may use the appraisal district's value for any item(s) that the appraiser is unable to appraise if the item(s) in question represent an insignificant portion of the appraisal district's total appraised value for the account. (h) Local reports of taxable value. Local reports of taxable value are essential parts of the property value study. The comptroller shall issue and revise report forms as needed to incorporate necessary legal and technical changes. The comptroller shall thoroughly review and revise reports of property value as needed to ensure their reliability. The comptroller must document the date of and reasons for each revision. Between the time a report is filed and the time preliminary study findings based upon the report are issued, the reporting entity may request changes in the report. The comptroller may not make the requested changes in reported values or facts unless the reporting entity provides sufficient competent evidence supporting a change. The comptroller shall set reasonable deadlines for the return of local reports and may grant extensions of filing time of up to 30 days. (i) Protest or request for audit. A protest or request for an audit of the Property Value Study findings may be made in accordance with Property Tax Division sections. (j) Determination of school district value. School district taxable values shall be determined in a manner that maximizes the accuracy and reliability of the taxable value in each school district. (1) The taxable value of a category of property in a school district shall be determined by dividing the total locally appraised value of property in that category by the weighted mean or stratified weighted mean ratio for the sample of property selected from that category. However, the taxable value of property in a category may be determined by other methods if it is determined that sufficient competent evidence requires their use. (2) The taxable value of property in a school district shall be determined by adding together the taxable value of property in each category of property in the school district and subtracting from the total the items listed in the Government Code, sec.403.302(d). However, the taxable value of property in a school district may be determined by other methods if it is determined that sufficient competent evidence requires their use. (k) Determination of appraisal district measures. Appraisal district measures shall be determined from the sales and appraisals gathered as a part of the school district taxable value study. (1) The median level of appraisal for each category of property in the appraisal district and for the appraisal district as a whole is determined as provided by the Tax Code, sec.5.10. (2) The coefficient of dispersion for each category of property in the appraisal district and for the appraisal district as a whole is determined as provided by the Tax Code, sec.5.10. (3) The comptroller may determine and report other measures of appraisal accuracy and uniformity it deems useful and informative. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617057 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 13, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 SUBCHAPTER B.Performance Audit Administration 34 TAC sec.9.201 The Comptroller of Public Accounts adopts new sec.9.201, concerning conduct and procedures for appraisal district performance audits, without changes to the proposed text as published in the October 11, 1996, issue of the Texas Register (21 TexReg 9783). The comptroller has determined that the consolidation of sections of similar subject matter will benefit the customer by providing information in a more efficient manner. The new section consolidates the substance of the current 34 TAC sec.sec.9.5101-9.5107, concerning request for performance audit, pre-audit conference, cost estimate of performance audit, security requirements for audit costs, notice of commencement of audit, performance audit procedures and report requirements, and discontinuation of audit. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002 and sec.111.0022, which provides the comptroller the authority to adopt rules for the administration and enforcement of the Tax Code and programs or functions assigned to the comptroller by law. The new section implements the Tax Code, sec.5.12 and sec.5.13. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617053 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 13, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-3699 SUBCHAPTER H.Tax Record Requirements 34 TAC sec.sec.9.3018-9.3020 The Comptroller of Public Accounts adopts the repeal of sec.sec.9.3018-9.3020, concerning exemption applications for youth spiritual, mental, and physical development organizations; exemption applications for religious organizations; and exemption applications for privately owned schools, without changes to the proposed text as published in the October 11, 1996, issue of the Texas Register (21 TexReg 9787). The sections are being repealed because their provisions are being transferred to 34 TAC sec.9.415 without substantive change. The transfer will make it easier for the persons affected by those rules to read and interpret them. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002 and sec.111.0022, which provides the comptroller the authority to adopt rules for the administration and enforcement of the Tax Code and programs or functions assigned to the comptroller by law. The repeals implement the Tax Code, sec.11.43(f). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617058 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 13, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-3699 SUBCHAPTER I.Validation Procedures 34 TAC sec.sec.9.4012, 9.4021-9.4025 The Comptroller of Public Accounts adopts the repeal of sec.sec.9.4012, 9.4021- 9.4025, concerning the allocation of taxable value of vessels and other watercraft, of qualified property used in interstate or foreign commerce, and of aircraft property, without changes to the proposed text as published in the October 11, 1996, issue of the Texas Register (21 TexReg 9787). The rules are being repealed because their provisions are being transferred to 34 TAC sec.9.4033, concerning allocation of value, without substantive change. The transfer will make it easier for the persons affected by those rules to read and interpret them. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002 and sec.111.0022, which provides the comptroller the authority to adopt rules for the administration and enforcement of the Tax Code and programs or functions assigned to the comptroller by law. The repeals implement the Tax Code, sec.sec.21.02, 21.021, 21.03, 21.031, and 21.05. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617060 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 13, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-3699 34 TAC sec.9.4033 The Comptroller of Public Accounts adopts new sec.9.4033, concerning the allocation of taxable value of vessels and other watercraft, qualified property used in interstate or foreign commerce, and aircraft property, with changes to the proposed text as published in the October 11, 1996, issue of the Texas Register (21 TexReg 9788). The comptroller has determined that the consolidation of sections of similar subject matter will benefit the customer by providing information in a more efficient manner. The new section consolidates the substance of the current 34 TAC sec.9.4012 and 34 TAC sec.sec.9.4021-9.4025, concerning allocation of value by appraisal districts. The new section sets forth how appraisal districts allocate taxable value as required by the Tax Code, sec.sec.21.02, 21.021, 21.03, 21.031, and 21.05. The comptroller made formatting and order changes to the proposed section so that the issue of jurisdiction to tax property is addressed before the issue of allocating value. In the adopted section, subsection (e) has been reordered to (c), as have subsequent subsections to reflect the change. Comments were received from an attorney expressing concern that the text in subsection (d)(1)(A)-(D) did not clearly state that property must meet all the criteria listed before it can qualify for allocation. The attorney was also concerned that it was not clear that both criteria listed in the subsection (d)(2)(A)-(B) must be met before a commercial instrument or item of business equipment is determined present in the state for more than a temporary period. In addition, the attorney commented that subsection (c)(3)(A)-(D) did not specify that only one of the criteria listed must be met to establish tax jurisdiction. To address the attorney's concerns, changes were made to the proposed text to clarify these subsections in the adopted section. The new section is adopted under the Tax Code, sec.111.002 and sec.111.0022, which provide the comptroller the authority to adopt rules for the administration and enforcement of the Tax Code and programs or functions assigned to the comptroller by law. The new section implements the Tax Code sec.sec.21.02, 21.021, 21.03, 21.031, and 21.05. sec.9.4033.Allocation of Value. (a) The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. (1) Commercial instrument or commercial equipment - Tangible personal property used for a business purpose, which includes, but is not limited to, aircraft, rolling stock not owned or leased by a railroad, motor vehicle, shipping containers, vessels and watercraft (except for special purpose vessels and watercraft used as an instrumentality of commerce as defined in the Tax Code, sec.21.031), mobile construction or drilling equipment, and mobile equipment of any other sort. The term does not include goods, wares, ores, or merchandise held for sale or resale, stored, warehoused, or in the process of assembly, manufacture, or refinement on January 1. (2) Jurisdiction to tax - The legal power to levy a property tax on a property, regardless of whether the power to tax is exercised. (3) Situs jurisdiction - A taxing unit, state, or nation that has jurisdiction to tax a property because of the property's location or use, or because of the owner's domicile or principal place of business. (4) Used continually - Used several times on regular routes or for several tasks in close succession throughout the year. (b) A property owner may apply for the allocation of total market value of a vessel, special-purpose vessel, or other watercraft. (1) The allocation of taxable value of vessels and other watercraft used outside this state shall be determined according to the provisions of the Tax Code, sec.21.021 and sec.21.031. (2) To receive an allocation of value for vessels and other watercraft, a property owner must apply for the allocation on a form that substantially complies with the appropriate form prescribed or approved by the Comptroller of Public Accounts. A person filing an allocation application form shall include all information required by the form. The application must be filed with the chief appraiser for the district in which the property is taxable and must be filed prior to the approval of appraisal records by the appraisal board. Model Application for Interstate Allocation of Vessels or Other Watercraft (Form 50- 146-1) is adopted by reference. (3) If the chief appraiser determines that he needs information in addition to that furnished on the application, he may request additional information by written notice delivered to the property owner. A taxpayer shall furnish any additional information required within 15 days after the date the notice is mailed. (c) The guidelines for determination of jurisdiction to tax are as follows. (1) The chief appraiser shall determine whether property is within the taxing jurisdiction of another state or nation from the evidence supplied by the property owner. The burden of proof in establishing such jurisdiction is upon the property owner. (2) The State of Texas has jurisdiction to tax property if: (A) it is physically present within the State of Texas on January 1 for more than a temporary period; (B) it has been used continually in Texas during the 12 months preceding January 1, regardless of its location on January 1; or (C) its owner resides or does business in Texas and the property is outside Texas for a temporary period on January 1. (3) Property is within the jurisdiction to tax of another state or nation if: (A) it is physically present within that state or nation's boundaries on the state or nation's property tax lien date for more than a temporary period; (B) it has been used continually in the state or nation during the 12 months preceding January 1, regardless of its location on January 1; (C) its owner resides or does business in that state or nation and the property is outside that state or nation for temporary period on January 1; or (D) the state or nation has in fact assessed a property tax against the property. (4) Property is neither physically present nor used in a jurisdiction when it flies over the jurisdiction without landing. (5) Property that leaves the boundaries of this state, and returns without being exposed to the taxing jurisdiction of another state or nation, remains within this state's taxing jurisdiction for the duration of the trip. (6) Property is not within the jurisdiction to tax of this state or any other state of the United States if: (A) it is an instrumentality of commerce; (B) it is owned by a foreign domiciliary; (C) it is taxed in the nation where its owner is domiciled; (D) it is used exclusively in foreign commerce; and (E) it is not present in this state for more than a temporary period on January 1. (7) The chief appraiser may consider the following evidence in determining where a property has taxable situs: (A) published schedules, if the property carries passengers and/or cargo on regular routes at regular times; (B) records kept in the normal course of business, such as mileage, flight, or vessel logs, that indicate where the property has traveled, how long it was located at each destination, and the purpose of its location at each destination; (C) reports filed with state or national agencies that indicate where the property has traveled, how long it was located at destination, and the purpose of its location at each destination; and (D) actual tax bills or notices of appraisal or assessment from other jurisdictions. (d) The chief appraiser shall allocate the market value of that property used in interstate or foreign commerce that qualifies for allocation under this subsection. (1) Property qualifies for allocation if it: (A) constitutes a commercial instrument or commercial equipment; (B) is used for a business purpose; (C) has taxable situs in a taxing unit within the appraisal district as provided by the Tax Code, sec.21.02 or sec.21.021; and (D) is used continually outside Texas in interstate or foreign commerce, whether regularly or irregularly. (2) A commercial instrument or item of business equipment is present in the state for more than a temporary period if: (A) its owner maintains one or more places of business in this state and the property is present in this state on January 1 or at any time during the 12 months preceding January 1; and (B) the property has contact with this state of a character that would permit this state to tax it under applicable federal law. (e) A property owner who is entitled to an allocation of property must file a rendition form that provides enough information necessary to prove the entitlement to allocation and permit the chief appraiser to apply an allocation formula appropriate to the subject property. An appraisal district may use a rendition form that substantially complies with the appropriate Comptroller of Public Accounts allocation-rendition form. Each form shall require the property owner to identify the property that is the subject of the rendition and provide information measuring the use of the property within Texas and within other states or nations. The form must permit the property owner to state an opinion of the total market value of the property and the amount of value that should be allocated to each taxing unit in which the property has situs. Model Rendition of Property Qualified for Allocation of Value (Form 50-145-1) is adopted by reference. (f) If the chief appraiser determines that the property was within the taxing jurisdiction of this state and within the taxing jurisdiction of another state or nation for the same calendar year, he shall allocate to each taxing unit in which the property has situs the portion of the property's market value that fairly reflects its use in this state. If an allocation formula specified in this subsection does not fairly reflect the use of the property in this state and other situs jurisdictions, the chief appraiser may use another formula that more adequately reflects use. Such alternate formulas may include revenue-ton miles, equipment load factors, or other measures of property use. (1) For aircraft property, the chief appraiser shall use the following allocation formula: the fair market value of the aircraft multiplied by a fraction, the numerator of which is the product of 1.5 and the number of revenue departures by the aircraft from Texas during the preceding tax year and the denominator of which is the greater of: (A) the number of hours in a year (8,760); or (B) the numerator. (2) For vessels, the chief appraiser will normally use an allocation formula based on port days. The ratio of the days the vessel spends in port in Texas to total days spent in port in all situs jurisdictions is the allocation ratio. (3) For motor vehicles and rolling stock, not including vessels or aircraft, the chief appraiser will normally use an allocation formula based on mileage. The ratio of total miles traveled in Texas during the year to the total miles traveled in all situs jurisdictions during the year is the allocation ratio. (4) For other equipment, the chief appraiser will normally use an allocation formula based on time. The ratio of time spent in Texas during the year to the total time spent in all situs jurisdictions during the year is the allocation ratio. (g) If the appraisal office allocates the value of property in a given year: (1) the chief appraiser shall note on the property's appraisal record for the year: (A) that the allocation has been granted; (B) the market value of the property; (C) the allocation formula factor; and (D) the appraised value of the property after allocation. (2) the chief appraiser shall retain a record of the allocation for three years after it is granted, including: (A) the rendition form requesting allocation; (B) supporting documents filed by the property owner; and (C) the formula chosen and calculations used in making the allocations. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617059 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 13, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-3699 SUBCHAPTER C.Appraisal District Administration 34 TAC sec.sec.9.401, 9.403-9.407, 9.411 The Comptroller of Public Accounts adopts the repeal of sec.sec.9.401, 9.403- 9.407, and 9.411, concerning exemption applications for charitable organizations, miscellaneous exemptions, application for exemption of goods exported from Texas, exemption applications for residence homesteads, exemption applications for charitable organizations improving property for low-income housing, application for exemption for cotton stored in a warehouse, and exemption application for pollution control property, without changes to the proposed text as published in the October 11, 1996, issue of the Texas Register (21 TexReg 9785). The sections are being repealed because their provisions are being transferred to 34 TAC sec.9.415 without substantive change. The transfer will make it easier for the persons affected by those rules to read and interpret them. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002 and sec.111.0022, which provides the comptroller the authority to adopt rules for the administration and enforcement of the Tax Code and programs or functions assigned to the comptroller by law. The repeals implement the Tax Code, sec.11.43(f). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617056 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 13, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-3699 SUBCHAPTER I.Validation Procedures 34 TAC sec.sec.9.4101-9.4111 The Comptroller of Public Accounts adopts the repeal of sec.sec.9.4101-9.4111, concerning the policy for conduct of the property value study, without changes to the proposed text as published in the October 18, 1996, issue of the Texas Register (21 TexReg 10295). The rules are being repealed in order to combine the information in these rules into new 34 TAC sec.9.101. The new section will make it easier for the persons affected by these rules to read and interpret them. No comments were received regarding adoption of the repeals. The repeals are adopted under the Tax Code, sec.111.002 and sec.111.0022 which provides the comptroller the authority to adopt rules for the administration and enforcement of the Tax Code and programs or functions assigned to the comptroller by law. The repeals implement the Government Code, sec.403.302, and the Tax Code, sec.5.10. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617052 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 13, 1996 Proposal publication date: October 18, 1996 For further information, please call: (512) 463-3699 SUBCHAPTER C.Appraisal District Administration 34 TAC sec.9.415 The Comptroller of Public Accounts adopts new sec.9.415, concerning applications for property tax exemptions, without changes to the proposed text as published in the October 11, 1996, issue of the Texas Register (21 TexReg 9785). The comptroller has determined that the consolidation of sections of similar subject matter will benefit the customer by providing information in a more efficient manner. The new rule consolidates the substance of the current 34 TAC sec.9.401, 34 TAC sec.sec.9.403-9.407, 34 TAC sec.9.411 and 34 TAC sec.sec.9.3018-9.3020, concerning model exemption application forms. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002 and sec.111.0022, which provides the comptroller with the authority to adopt rules for the administration and enforcement of the Tax Code and programs or functions assigned to the comptroller by law. The new section implements the Tax Code, sec.sec.11.111, 11.13, 11.17, 11.18, 11.181, 11.19, 11.20, 11.21, 11.22, 11.23(a)-(k), 11.24, 11.251, 11.27, 11.271, 11.28, 11.29, 11.30, 11.31 and 11.437. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617055 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 13, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-3699 SUBCHAPTER J.Procedures 34 TAC sec.sec.9.5101-9.5107 The Comptroller of Public Accounts adopts the repeal of sec.sec.9.5101-9.5107, concerning procedures for request of appraisal district performance audit, pre- audit conference, cost estimate of performance audit, security requirements for audit costs, notice of commencement of audit, performance audit procedures and report requirements, and discontinuation of audit, without changes to the proposed text as published in the October 11, 1996, issue of the Texas Register (21 TexReg 9790). The rules are being repealed because their provisions are being transferred to 34 TAC sec.9.201, concerning performance audit procedures, without substantive change. The transfer will make it easier for the persons affected by those rules to read and interpret them. No comments were received regarding adoption of the repeals. These repeals are adopted under the Tax Code, sec.111.002 and sec.111.0022 which provides the comptroller the authority to adopt rules for the administration and enforcement of the Tax Code and programs or functions assigned to the comptroller by law. The repeals implement the Tax Code, sec.5.12 and sec.5.13. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9617054 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: December 13, 1996 Proposal publication date: October 11, 1996 For further information, please call: (512) 463-3699 PART III. Texas Youth Commission CHAPTER 81. Interaction With The Public 37 TAC sec.sec.81.1, 81.7, 81.11, 81.17, 81.31, 81.35, 81.37, 81.41, 81.45, 81.61, 81.65, and 81.75 The Texas Youth Commission (TYC) adopts new sec.sec.81.1, 81.7, 81.11, 81.17, 81.31., 81.35., 81.37., 81.41, 81.45, 81.61, 81.65, and 81.75, concerning public information request, petition for adoption of a rule, complaints from the public, private real property rights affected by governmental action, concealed handguns, involvement of victims, public and media, confidentiality, volunteers and volunteer council, notification of facility opening or relocating, site selection for juvenile facility construction, copying costs, and historically underutilized business participation, without changes to the proposed text, and sec.81.53 and sec.81.79, concerning research projects and historically underutilized business participation with changes as published in the October 25, 1996, issue of the Texas Register (21 TexReg 10515). The changes to sec.81.53 consist of deleting detailed information on internal approval procedures and responsibilities which are irrelevant to rules controlling research projects. These deletions necessitated rearranging the remaining information. The changes to sec.81.79 consist of updating a departmental title to the new title in the listing of the departments primarily responsible for increasing HUB participation. The justification for the new sections is the streamlining of general public interaction with the Texas Youth Commission as a governmental agency. The new rules will establish rules regarding TYC interaction with the general public. TYC is recodifying all existing rules. Rules address procedures which may be used to request public information, request a rule adoption and file a complaint with the Texas Youth Commission. A rule is proposed to establish procedures for determining whether private real property rights will be affected by a governmental action taken by TYC. Rules involve (in the interest of safety) the prohibition of concealed handguns on TYC facility grounds. Procedures are established whereby persons victimized by a delinquent youth now in the TYC system, may request information and provide a victim's statement. Rules are established regarding the confidentiality of information protected by law and access of the public and the media to youth and to information about youth under TYC jurisdiction. Procedures are established for persons who consider volunteering to work with TYC youth and/or participating in community volunteer councils. Information regarding research projects in TYC by non-TYC personnel is provided. Rules address the notification to community authorities when TYC initiates a facility opening or considers initiating construction. The use of historically underutilized business in purchasing by TYC is supported in rules. Information regarding cost of copying information for the public is made available. No comments were received regarding adoption of the new rules. The new rules are adopted under the Human Resources Code, sec.61.034, which provides the Texas Youth Commission with the authority to make rules appropriate to the proper accomplishment of its functions. The proposed rules implement the Human Resource Code, sec.61.034. sec.81.53. Research Projects. (a) Purpose. The purpose of this rule is to allow for research related to juvenile delinquency and to ensure confidentiality by establishing procedures which comply with state and federal guidelines and accepted professional and scientific ethics. (b) Restrictions. (1) The agency will encourage research. (2) The agency will use research results to aid decision making regarding agency operations and for youth treatment programs. (3) The agency will collaborates with other agencies whenever possible and share research information as appropriate. (4) Any patentable product, process, or idea that might result from a research project funded by the Texas Youth Commission shall be the property of the Texas Youth Commission. (c) Youth Participation. Participation by TYC youth as research subjects shall be restricted as follows: (1) TYC youth will not be used in experimental projects involving medical, pharmaceutical, or cosmetic research. (2) TYC youth may participate in nonmedical, nonpharmaceutical or noncosmetic research on a voluntary, noncoercive basis. (3) TYC youth who elect to participate in research projects will not be denied basic services available to other youth, nor participate in research activities which may accrue negative personal results. (d) Researchers. TYC staff, university faculty or students, or contracted firms or individuals may, if approved, conduct research if they: (1) show that the proposed project will provide benefits to TYC or the juvenile justice profession; (2) ensure confidentiality of TYC youth; (3) do not place undue burden on TYC staff, youth or resources; and (4) agree to comply with other agency rules of conduct for research as specified below. (e) Project Management. Procedures for research projects are managed through the research and planning department. (f) Research Proposals. Project directors other than those employed by the research and planning department must submit a research proposal to the research and planning department. The proposal should include as much of the following information as possible: (1) project title; (2) names and qualifications of all project researchers; (3) purpose (e.g., thesis, professional paper, dissertation); (4) research design and methodology; (5) number of and time required by each TYC youth if used in research; (6) provisions for confidentiality of youth names and identification numbers; (7) amount of TYC staff time needed; (8) benefit to TYC or juvenile profession; (9) research supervisor, if any (e.g., Chairman of Thesis Committee); and (10) amount and source of funding, if any. (g) Research Agreement. TYC and the research consultant shall enter into a research agreement prior to the commencement of an outside research project. The agreement shall contain the following: (1) a description of the research project; (2) an agreement to maintain the confidentiality of individual youth; (3) a clause providing that any patentable product, process, or idea that results from the performance of the research agreement, and for which TYC has expended appropriated funds, shall become the property of the Texas Youth Commission; and (4) an agreement to furnish TYC with a copy of the final report. sec.81.79. Historically Underutilized Business Participation. (a) Purpose. The purpose of this rule is to establish the responsibility and guidelines by which the Texas Youth Commission will comply with the provisions of Title 10, Subtitle D, Government Code, Chapter 2161 for the development of historically unfertilized businesses as certified by the General Services Commission. (b) Responsibility. TYC staff in the departments of business services, maintenance and construction, contract care, and juvenile corrections (purchasing and supply officer) will act as the Commission's agents to increase HUB participation in the procurement process by: (1) participating in cooperative multi-agency efforts in vendor education; (2) recruiting HUBs and assisting in gaining certification for current vendors who are minority or women owned; and (3) increasing the amount of business solicited from certified HUBs. (c) Guidelines. TYC will comply with current legislation concerning the utilization of Historically Underutilized Businesses. The Commission's goal is to increase the participation of HUBs to exceed the minimum participation level established by the General Services Commission. (d) Vendor Assistance and Education. The TYC will, when requested, provide assistance to HUBs by: (1) providing instruction on the preparation of bids, compliance with procurement policy and fulfillment of general bid requirements; and providing information on performance requirements, procurement opportunities and prerequisites for bidding on contracts. (2) disseminating relevant information using particular efforts to see that HUBs are informed of current and future procurement activities through minority and women publications and through direct contact with minority and women owned enterprises. (e) Vendor Adherence. TYC purchasing offices may ask contractors providing services, materials or supplies to the department to demonstrate that they provide employment opportunities to minorities and women equal to those provided all other groups or individuals. Such contractors may also be expected to demonstrate that they take positive steps toward the utilization of HUBs. Joint ventures will be encouraged among HUBs and other firms bidding for agency requirements. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 27, 1996. TRD-9617264 Steve Robinson Executive Director Texas Youth Commission Effective date: December 31, 1996 Proposal publication date: October 25, 1996 For further information, please call: (512) 424-6244 PART XI. Texas Juvenile Probation Commission CHAPTER 341. Texas Juvenile Probation Standards 37 TAC sec.341.4 The Texas Juvenile Probation Commission adopts an amendment to sec.341.4 concerning juvenile probation standards and juvenile boards and juvenile probation departments without changes to the proposed text as published in the October 25, 1996, issue of the Texas Register (21 TexReg 10533). This rule is being amended to clarify juvenile probation services. This rule will provide minimum standards for juvenile boards that are necessary to provide adequate and effective probation services. One comment was received re-enforcing the mandatory status of standard 341.4(f). The comment received from the Hale County Juvenile Probation Department was in support of the mandatory nature of the standard and urging strict interpretation. The amendment is adopted under the Texas Human Resource Code sec.141.042, which provides the Texas Juvenile Probation Commission with the authority to adopt reasonable rules that provide minimum standards for juvenile boards that are necessary to provide adequate and effective probation services. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 26, 1996. TRD-9617205 Vickie Wright Executive Director Texas Juvenile Probation Commission Effective date: December 17, 1996 Proposal publication date: October 25, 1996 For further information, please call: (512) 424-6682 TITLE 40. SOCIAL SERVICES AND ASSISTANCE PART I. Texas Department of Human Services CHAPTER 19. Nursing Facility Requirements for Licensure and Medicaid Certification SUBCHAPTER V. Enforcement The Texas Department of Human Services (DHS) adopts the repeal of sec.19.2128 and sec.19.2133, and adopts amendments to sec.19.2121 and sec.19.2146, without changes to the proposed text as published in the May 31, 1996, issue of the Texas Register (21 TexReg 4882). Justification for the repeals and amendments is to protect the health and safety of nursing facility residents through strong federal enforcement rules. The sections will function by adopting the federal Medicaid nursing facility regulations regarding appointment of a temporary manager and closure of a facility and provide details regarding the termination of a provider agreement on the basis of the imposition of enforcement actions three times within an accountability period. The department received a comment from Texas Health Care Association. Comment: We oppose the three-strike rule because it is no longer needed, is poor public policy, and should be repealed. If the rule is retained, its appeal provisions must provide for a contested case hearing before an administrative law judge on all elements of a proposed cancellation before taking any action. Response: The department disagrees. The rule will be retained as proposed because it is an effective remedy and was approved by the Health Care Financing Administration as an additional remedy under the federal enforcement rules. The federal rules require the state to impose all remedies, except civil money penalties, during any pending hearing. Remedies in Medicaid-Certified Facilities 40 TAC sec.19.2121, sec.19.2146 The amendments are adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes the department to administer public and medical assistance programs; and under Texas Government Code sec.531.021, which provides the Health and Human Services Commission with the authority to administer federal medical assis- tance funds. The amendments implement the Human Resources Code, sec.sec.22.001-22.030 and sec.sec.32.001-32.042. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 15, 1996. TRD-9617136 Glenn Scott General Counsel, Legal Services Texas Department of Human Services Effective date: February 1, 1997 Proposal publication date: May 31, 1996 For further information, please call: (512) 438-3765 19 TAC sec.19.2128, sec.19.2133 The repeals are adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes the department to administer public and medical assistance programs; and under Texas Government Code sec.531.021, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The repeals implement the Human Resources Code, sec.sec.22.001-22.030 and sec.sec.32.001-32.042. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 15, 1996. TRD-9617135 Glenn Scott General Counsel, Legal Services Texas Department of Human Services Effective date: February 1, 1997 Proposal publication date: May 31, 1996 For further information, please call: (512) 438-3765 40 TAC sec.19.2129 The Texas Department of Human Services (DHS) adopts new sec.19.2129, without changes to the proposed text as published in the August 20, 1996, issue of the Texas Register (21 TexReg 7792). Justification for the new section is to ensure that interest will be paid on Medicaid civil money penalties which have not been paid in a timely manner. The section will function by establishing the interest rate which accrues if Medicaid civil money penalties are not paid. The department received no comments concerning the adoption of the new section. The new section is adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes the department to administer public and medical assistance programs, and under Texas Government Code sec.531.021, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The new section implements the Human Resources Code, sec.sec.22.001-22.030 and sec.sec.32.001-32.042. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617137 Glenn Scott General Counsel, Legal Sevices Texas Department of Human Services Effective date: January 1, 1997 Proposal publication date: August 20, 1996 For further information, please call: (512) 438-3765 PART XIX. Texas Department of Protective and Regulatory Services CHAPTER 732. Contracted Services SUBCHAPTER L. Contract Administration 40 TAC sec.732.246 The Texas Department of Protective and Regulatory Services (TDPRS) adopts an amendment to sec.732.246, without changes to the proposed text as published in the October 15, 1996, issue of the Texas Register (21 TexReg 10176). The justification for the amendment is to allow TDPRS to use federal dollar limits for purposes of requiring a contractor to capitalize equipment and to define equipment. The amendment will function by ensuring that contract providers have more reasonable limits for the purpose of capitalizing equipment and defining equipment. No comments were received regarding adoption of the amendment. The amendment is adopted under the Human Resources Code (HRC), Chapter 40, which describes the services authorized to be provided by the Texas Department of Protective and Regulatory Services; and authorizes the department to enter into agreements with federal, state, or other public or private agencies or individuals to accomplish the purposes of the programs authorized by the HRC; and grants authority to contract to that Department. The amendment implements the HRC, Chapter 40, which authorizes the department to enter into agreements with federal, state, or other public or private agencies or individuals to accomplish the purposes of the programs authorized by the HRC and which authorizes the department to enter into contracts as necessary to perform any of its powers or duties. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 22, 1996. TRD-9616994 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: December 13, 1996 Proposal publication date: October 15, 1996 For further information, please call: (512) 438-3765 TITLE 43. TRANSPORTATION PART I. Texas Department of Transportation CHAPTER 1.Management SUBCHAPTER C.Complaint Resolution 43 TAC sec.sec.1.6-1.10 The Texas Department of Transportation adopts the repeal of sec.sec.1.6-1.10, concerning complaint resolution, without changes to the proposed text published in the September 13, 1996, issue of the Texas Register (21 TexReg 8822). Repeal of these sections is necessary because the subject matter of these sections more appropriately falls within Chapter 3, Public Information. The subject matter of the repealed sections will be re-enacted in an amended form and contemporaneously adopted as new sec.sec.3.20-3.25. Transportation Code, sec.201.801, requires the department to make information available to the public and appropriate state agencies describing its complaint resolution process. On October 2, 1996, the department conducted a public hearing on the proposed repealed sections. No oral or written comments were received. The repeals are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, and Transportation Code, sec.201.801 which requires the department to make information available to the public and appropriate state agencies describing its complaint resolution process. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617107 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: December 16, 1996 Proposal publication date: September 13, 1996 For further information, please call: (512) 463-8630 CHAPTER 3.Public Information SUBCHAPTER C.Complaint Resolution 43 TAC sec.sec.3.20-3.25 The Texas Department of Transportation adopts new sec.sec.3.20-3.25, concerning complaint resolution, without changes to the proposed text published in the September 13, 1996, issue of the Texas Register (21 TexReg 8823). Adoption of the new sections is necessary to replace, in an amended form, the provisions of sec.sec.1.6-1.10, concerning the department's complaint resolution program. Sections 1.6-1.10 are being contemporaneously adopted for repeal because the subject matter of the repealed sections more appropriately falls within Chapter 3, Public Information. Transportation Code, sec.201.801, requires the department to make information available to the public and appropriate state agencies describing its complaint resolution process. These new sections delete existing ineffective procedures and add new procedures which will improve the awareness and effectiveness of the policies and procedures concerning filing, resolving, and recording complaints against the department. These sections also improve the department's notification process of these policies and procedures to consumers and service recipients of the complaint process, including industries newly regulated by the department with the enactment of Texas Civil Statutes, Articles 6687-1a and 6687-9a, which were added by the 74th Legislature, 1995. Section 3.20 establishes the purpose of the department's complaint resolution policy. Section 3.21 identifies exceptions in which the complaint policies and procedures of this subchapter do not apply. Such exceptions include contested cases, vendor protests, employee complaints or routine communications. Section 3.22 defines words and terms used in the subchapter. Section 3.23 designates the Public Information Office as the department's office of primary responsibility for complaint resolution and to designate a separate 1-800 telephone number to receive complaints. Section 3.24 specifies how the department will provide notice to consumers and service recipients of where to direct complaints. In order to increase the awareness of the department's complaint resolution program, the scope of notification includes public information literature; the official state travel map; the department's homepage of the Internet; at each business office; and on applications for vehicle storage facility operator's license; and applications for motor vehicle salvage dealer licenses, outdoor advertising license and renewals, and rural road sign permits. In addition, information pieces concerning the control of outdoor advertising signs, motor carrier regulation, and screening of junkyards and motor vehicle registration renewals will be developed which will include information on the complaint resolution program. On October 2, 1996, the department conducted a public hearing on the proposed new sections. No oral or written comments were received. The new sections are proposed under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, and Transportation Code, sec.201.801 which requires the department to make information available to the public and appropriate state agencies describing its complaint resolution process. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617108 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: December 16, 1996 Proposal publication date: September 13, 1996 For further information, please call: (512) 463-8630 CHAPTER 4.Employment Practices SUBCHAPTER F.Employee Training and Education 43 TAC sec.sec.4.60-4.64 The Texas Department of Transportation adopts new sec.sec.4.60-4.64, concerning the department's employee training and education program. Sections 4.63-4.64 are adopted with changes to the text as published in the September 13, 1996, issue of the Texas Register (21 TexReg 8825). Sections 4.60-4.62 are adopted without changes and will not be republished. Government Code, sec.656.048 requires state agencies to adopt rules relating to the eligibility of the department's administrators and employees for training and education supported by the state agencies and the obligations assumed by the administrators and employees on receiving the training and education. Section 4.60 states the department's policy to encourage employee professional growth through training and education. Section 4.61 includes words and terms as defined in this subchapter. Section 4.62 provides that the department will provide training that will enhance an employee's ability to perform his or her current job duties, or enable the employee to perform prospective job duties. This section also provides that the training taken will benefit both the department and the employee by increasing employee skills, providing greater employee career planning choices, or introducing new, more effective technologies to the department. Section 4.63 establishes eligibility criteria for a degree program, including standing and length of service with the department, completion of an education assistance agreement; acceptance from the academic institution, enrollment in a field of study related to assigned work, professional development, or department needs, and approval of a management team member for all degrees except doctoral degrees which must have the approval of the executive director. This section also provides for a department sponsored master's program in which the selected employee receives funding for education financial assistance and salary compensation while pursuing a master's degree on a full-time basis and completing an assigned research project related to the department's functions. This section establishes eligibility criteria for this master's program including standing and length of service with the department, completion of an education assistance agreement, acceptance from the academic institution; nomination from a management team member, and selection by the Program Selection Committee. This section requires the student to be enrolled each semester and maintain a passing grade point average to continue participation, and provides that for a degree program, other than the department sponsored master's program, the employee participation will be reconsidered each semester and the employee may be denied further participation if it is determined that participation adversely affects job performance. This section provides that an employee may take courses without pursuing a degree and that an employee may pursue a general equivalency diploma; specifies the type of institution an employee may attend and the expenses eligible for financial assistance; and allows the student to use specific types of state property for course assignments, but prohibits the student from using duty hours. Section 4.64 describes the length of time the student will agree to work for the department depending on the type of degree sought; requires that the employee must adhere to the terms and conditions of the education assistance agreement and requirements for continued eligibility, and the employee must pass each course; and provides that the department will deduct any grant, scholarship or other financial aid toward tuition, required fees, and books before reimbursement. This section requires the department to declare cancellation and require repayment of funds if the student withdraws from the institution, is removed or prohibited from attending the institution, fails to comply with the assistance agreement, or is terminated; describes that if an employee is placed on disciplinary probation, the department may suspend the employee's participation in the education assistance program; requires that if an employee's participation is canceled or a non-degree student fails to complete or pass a courses, he or she must repay the department; and requires the department to establish a repayment schedule. This section provides that the executive director may temporarily reduce or defer payments and/or extend the repayment period if the student demonstrates hardship, and a student whose agreement has been canceled will no longer be eligible for assistance unless the student demonstrates that the cancellation was due to hardship or it has been at least three years since the department canceled the student's education assistance agreement. On October 1, 1996, a public hearing was held to receive comments, views, or testimony regarding new sec.sec.4.60-4.64, concerning the department's employee training and education program. No oral comments were submitted. Written comments were received from three employees. Comment: One employee commented that the proposed sections do not allow the executive director the discretion to establish doctoral education programs, eligibility requirements, reimbursement levels, and selection criteria. Response: The majority of the public college or university systems are able to offer most employees comparable quality education programs that meet the business needs of the department as well as professional growth of the employee. The department has determined that the calculation of a cost equivalent and monitoring of adjustments to this equivalent would not be an effective and efficient use of department resources. Comment: Another employee commented that an individual who pursues a master's degree at night and an individual who pursues the department sponsored master's program should not have the same time pay back requirements. The employee suggested that those in the department sponsored program should pay back a ratio of 1.5 years to those in other masters courses. The employee also suggested those in other masters courses should pay back less than three years. Response: In determining the length of time for pay back, the department considered a number of variables including the total cost of education, length of time the individual has pursued the education goals, and the reasonable expectation of the department to recoup its investment. Participants in the department sponsored program provide some return on investment during their education through completion of an assigned research project related to the department's functions. Comment: The commenter also suggested that an employee seeking a bachelor's degree should pay back four times the length of a master's a program because a bachelor's degree usually needs about 120 hours for completion and a master's usually only takes about 30 hours. An adjustment for difference in cost per credit hour could be made. Response: It is the department's position that the resources spent in calculating and monitoring such a program would outweigh the benefit of a longer payout period. In addition, two years for an associate or bachelors degree and three years for a graduate degree was determined to be a reasonable time period for an employee to promise to remain with the department. Comment: Another employee suggested the elimination of sec.4.63(c) concerning the circumstances under which an employee may attend a private institution. The employee suggests the department allow the employee to choose the institution and if the employee chooses a private institution, then the department would only pay the cost equivalent of the public institution. Response: The majority of the public college or university systems are able to offer most employees comparable quality education programs that meet the business needs of the department as well as professional growth of the employee. The department has determined that the calculation of a cost equivalent and monitoring of adjustments to this equivalent would not be an effective and efficient use of department resources. Comment: An employee who does not comply with the requirements of the agreement to work for the department should reimburse the department for the remaining time based upon funds spent on the employee per year of education. Collection action against an employee failing to make reimbursement should be referred to the Office of General Counsel for appropriate legal action. Response: The terms of the education assistance agreement stipulates a set period of time depending on the type of degree sought for employment pay back. Employees who sign the agreement do so with full understanding of said terms. They are also asked to declare their intention to honor the terms and willingness to pay back the department for their assistance. The monitoring of partial pay backs would not be cost effective to the program. The department collects debts pursuant to Title 43, Texas Administrative Code, sec.5.10. Section 5.10 provides that unpaid debts are ultimately referred to the Office of the Attorney General for collection. Section 4.63(b) has been revised to state that only full-time employees are eligible to participate in the education assistance program; except that upon approval of an employee's management team member, an employee may change his or her status from full-rime to part-time in order to accommodate class scheduling. The investment of department funds towards employee academic attainment or continuing education is viewed as a long-term staffing goal. Generally speaking, part-time employees are more transitory and have less commitment to an organization. Also, the return on investment of employee professional growth, contribution of new technology, and educational methods introduced into the work place is lower. The department must invest resources on staffing that will generate the highest knowledge and skills development supporting its current and future strategic goals. Section 4.63(e) has been revised to clarify that a student may utilize flex-time hours to accommodate classes with prior written approval from his or her supervisor. Section 4.64(c) has been amended to clarify that students in the department sponsored master's program will not be obligated to repay salary compensation received during their participation in the program. The new sections are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation and Government Code, sec.656.048 which requires state agencies to adopt rules relating to the eligibility of the department's administrators and employees for training and education and the obligations assumed by the administrators and employees on receiving the training and education. sec.4.63.Education Assistance Program. (a) Purpose. The department provides professional development opportunities through an education assistance program. The program enables the department to assist employees who wish to pursue an academic degree or continuing education if they meet minimum requirements and this pursuit benefits the department. This section establishes eligibility criteria for participation in the program. (b) Eligibility. (1) Degree program. To be eligible for participation in an associate's, baccalaureate, master's, or doctorate degree program under the educational assistance program an employee must: (A) be a full-time employee; (B) be in good standing with the department; (C) have at least 12 months of service time with the department, or 24 months if the employee is seeking a graduate degree; (D) complete and file with the department, on forms prescribed by the department, an education assistance agreement that will set forth the terms and conditions of the assistance, including, but not limited to, the amount of the assistance and the requirements of continued eligibility pursuant to this subsection, and a declaration of intent to abide by terms set forth in the agreement; (E) have written acceptance from an accredited institution of higher learning and a degree plan signed by the institution's department dean or the dean's designee; (F) seek enrollment and participation in a field of study that: (i) relates to assigned work; (ii) satisfies a professional development requirement; or (iii) meets minimum requirements for a profession in which the department anticipates staffing needs, provided that the employee receives the appropriate senior management team member's approval based upon the employee's aptitude demonstrated through job performance; and (G) have a management team member's approval for associate, baccalaureate, and master degree programs and the executive director's approval if the employee is seeking a doctoral degree. (2) Department sponsored master's program. An employee may apply for an in-house competitive program in which the employee who is selected receives funds for tuition, fees, books, and supplies plus salary compensation while pursuing a master's degree on a full-time basis and completing an assigned research project related to the department's functions. To be eligible for the program an employee must: (A) be a full-time employee; (B) be in good standing with the department; (C) have at least four years of service time with the department; (D) complete and file with the department, on forms prescribed by the department, an education assistance agreement that will set forth the terms and conditions of the assistance, including, but not limited to, the amount of the assistance and the requirements of continued eligibility pursuant to this subsection, and a declaration of intent to abide by terms set forth in the agreement; (E) have met the acceptance criteria of the appropriate graduate program at the participating university; (F) be nominated by the employee's management team member; and (G) be selected by the Program Selection Committee based on qualifications and field or work experience. (3) Continued eligibility. (A) In order to maintain eligibility, a student must: (i) be enrolled each semester in an institution in a course of instruction leading toward a degree in an eligible profession; and (ii) maintain an overall institutional passing grade point average. (B) Upon approval of an employee's management team member, an employee may change his or her status from full-time to part-time in order to accommodate class scheduling. (C) The employee's management team member will reconsider the employee's participation in the program each semester. The department may deny further participation if the employee does not meet the requirements of subparagraph (A) of this paragraph or sec.4.64(a) of this title (relating to Employee Obligations), or if the management team member determines that the employee's participation in a degree program adversely affects the employee's job performance. The requirement concerning employee job performance does not apply to the department sponsored master's program. (4) Non-degree program. Eligibility and continued eligibility requirements do not apply when a full-time employee is not pursuing a degree, but is taking one or more classes as a requirement of the employee's position or is pursuing a general equivalency diploma, except that a management team member must approve the request. (c) Type of institution. An employee who participates in the education assistance program must attend a public institution in the State of Texas, unless: (1) there is no accredited public institution which offers program courses that can reasonably be attended by an employee within a normal combination work/school day; (2) the public institution does not offer the approved courses or degree program; (3) the admission requirements of the public institution are so restrictive as to preclude the employee's qualification into the program; (4) the completion of the degree or course at a private institution costs less than a public institution; or (5) the employee attends the private institution under an agreement that the department will pay only the equivalent of what the education would have cost at a public institution. (d) Eligible expenses. The following expenses are eligible for financial assistance: (1) tuition, including correspondence courses that fulfill degree, trade, or technical school plan requirements or are taken while pursuing a general equivalency diploma; (2) College Level Equivalency Program (CLEP) exams, or similar exams if the student scores high enough to receive college credit or a waiver of the course requirements if part of the employee's degree plan; (3) life experience assessments for which the student obtains a credit if part of the employee's degree plan; and (4) required fees and books. (e) Use of state time and property. (1) Unless the student is participating in a department sponsored master's program as provided in subsection (b)(2) of this section, department duty hours may not be used for attending classes, studying, or other activities associated with the program. A student may use annual leave, flextime, or compensatory time with prior written approval from his or her supervisor. (2) A student in the program may use the department's self-service copy machines, typewriters, calculators, and microcomputers to complete course assignments. sec.4.64.Employee Obligations. (a) Obligation. (1) Educational assistance is conditional upon the employee: (A) agreeing to work for the department for a minimum of two years for an associate's or bachelor's degree and three years for a graduate degree, commencing 30 days following the date of the employee's receipt of the degree providing the employee meets all conditions of employment and eligibility at that time; (B) adhering to the terms and conditions of the education assistance agreement and requirements for continued eligibility; and (C) completing and passing each individual course. (2) Each semester, a student must provide grade reports for verification that full credit was received for courses taken. (b) Offset. Employees shall provide fee receipts for courses to be taken and shall promptly report any outside funds such as grants, scholarships, or other financial aid received before reimbursement of expenses. The department will deduct any amounts students receive through grants, scholarships, or other financial aid toward tuition, required fees, and books. (c) Cancellation and suspension. (1) Cancellation. The department will cancel the student's education assistance agreement and require the student to repay all funds, not to include salary, received from the department under sec.4.63 of this title (relating to Education Assistance Program) if the student: (A) withdraws from the institution; (B) is removed or prohibited from attending the institution; (C) fails to comply with one or more terms of the education assistance agreement; or (D) is terminated for poor performance or behavior during the duration of the student's education assistance agreement, including the employment period required by subsection (a)(1)(A) of this section. (2) Suspension. If an employee is placed on disciplinary probation, the department may suspend the employee's participation in the education assistance program. (d) Repayment. (1) A student who is liable for repayment under subsection (c) of this section shall repay the department in accordance with this subsection. (2) The department will establish a degree program repayment schedule of: (A) up to 60 equal monthly installments beginning 90 days after the effective date of cancellation; and (B) minimum installments based on the student's ability to repay and amount of funds owed, with a minimum installment requirement of $20 per month. (3) Non-degree program students taking academic classes who fail to complete or pass a course must repay funds provided by the department for that course. (A) The department will establish a repayment schedule of up to 12 equal monthly installments beginning 60 days after verification of failure or noncompletion. (B) The department will not pay expenses incurred to retake the same course or take a substitute for that course. (4) The executive director may approve the reduction, deferral, and extension of the prescribed repayment period if the student demonstrates an inability to pay due to a hardship. (5) Any reduction, deferral, or extension does not relieve the employee of his or her responsibility to repay the funds owed. (6) If the department cancels a student's education assistance agreement, the student will no longer be eligible for assistance under sec.4.63 of this title, unless the student has repaid the department in accordance with this subsection and: (A) the student demonstrates that the cancellation was due to hardship; or (B) it has been at least three years since the department canceled the student's education assistance agreement. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617109 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: December 16, 1996 Proposal publication date: September 13, 1996 For further information, please call: (512) 463-8630 CHAPTER 9.Contract Management SUBCHAPTER E.Maintenance Project Contracts 43 TAC sec.sec.9.70-9.73 The Texas Department of Transportation adopts new sec.sec.9.70-9.73, concerning maintenance project contracts, without changes to the proposed text as published in the September 13, 1996, issue of the Texas Register (21 TexReg 8829). Transportation Code, sec.223.042 provides that of the amount spent in a fiscal year by the department for maintenance projects, the department shall spend not less than 50% through contracts awarded by competitive bid. The department is also required to consider all of its direct and indirect costs in determining the cost of providing the services and the commission is required to adopt rules to administer the section. Section 9.70 states that the department is required to contract a minimum percentage of maintenance project contracts to the private sector and identifies the process by which the department determines the cost effectiveness of this contracting and the activities to contract to the private sector. Section 9.71 establishes definitions applicable to this subchapter. Section 9.72 establishes the amount to be spent by the department for maintenance projects, through contracts awarded by the competitive bidding process; states that the bidding requirements does not apply unless the department determines that a function of comparable quality and quantity can be purchased or performed at a savings by using private sector contracts; provides that materials purchased by the department for maintenance projects performed by department personnel do not apply toward the calculation of the percentage to be contracted; and establishes the types of payments that will be included in the contract amount. Section 9.73 provides that the department will perform evaluations of the quality and cost of maintenance projects to determine whether to use the private sector. This section also provides the type of projects that will be evaluated and what will be considered in the evaluations. On September 30, 1996, the department conducted a public hearing on the new sections. No oral or written comments were received. The new sections are adopted under Transportation Code, sec.201.101 which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, Transportation Code, sec.201.103 which requires the commission to plan and make policies for the maintenance of a comprehensive system of state highways and public roads, and Transportation Code, sec.223.042 which provides for the privatization of not less than 50% of maintenance projects. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617110 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: December 16, 1996 Proposal publication date: September 13, 1996 For further information, please call: (512) 463-8630 CHAPTER 15.Transportation Planning and Programming SUBCHAPTER H.Transportation Corporations 43 TAC sec.sec.15.80-15.93 The Texas Department of Transportation adopts new sec.sec.15.80-15.93, concerning transportation corporations. Sections 15.81-15.85, sec.15.87, sec.15.89, sec.15.90, and sec.15.93 are adopted with changes to the proposed text as published in the September 13, 1996, issue of the Texas Register (21 TexReg 8831). Section 15.80, sec.15.86, sec.15.88, sec.15.91, and sec.15.92 are adopted without changes and will not be republished. The Texas Transportation Corporation Act, Transportation Code, Chapter 431, provides for the creation of transportation corporations for the purpose of the promotion and development of public transportation facilities and systems. Section 15.80 describes the commission's authority to establish the policies and procedures governing the creation and operation of transportation corporations in Texas. Section 15.81 defines words and terms used in the new subchapter. Section 15.82 prescribes the application procedures for the creation of a corporation and sets out the qualification requirements for applicants. Section 15.83 identifies the information that must be contained in a notice that will be published in a newspaper in the corporation's geographic area prior to the commission considering the application. The section also states that, before the commission may approve the creation of a corporation, the executive director must submit the application and department's recommendations to the commission. Section 15.84 describes the conditions by which the commission will approve the creation of a corporation, and the content of the approval order. Section 15.85 identifies the information that must be submitted by an applicant to become a member of a corporation's board. The section also identifies those circumstances where an individual would be ineligible to serve on a corporation's board. The section explains how vacancies on the board will be addressed and how replacement and additional directors will be appointed to the board, whether by board nomination or commission nomination. Finally, the section states that the commission may remove a director with or without cause. Section 15.86 identifies prohibited actions for directors and certain employees of a transportation corporation. The actions that are prohibited reflect the same provisions that govern department employees, officers, and members of the Texas Transportation Commission. Section 15.87 explains the powers and limitations granted to the board by the commission. Section 15.88 specifies that donated cash, goods, services and property may be used only for the purpose of furthering the corporation's authorized purposes. Section 15.89 sets out terms and conditions that must be adhered to by a transportation corporation when it enters into a contract. The section also requires the prior review of: all contracts in excess of $100,000; construction contracts; and contracts relating to the provision of professional or scientific services. Section 15.90 explains that quarterly financial and semi-annual project status reports are required from each corporation and discusses the minimum requirements for each type of report. This section also addresses the necessity of an annual audit. Section 15.91 explains the procedure for dissolution of a corporation by either the board or the commission. Section 15.92 states that the corporations are subject to the requirements of the Open Meetings Act, the Public Information Act, and the Texas Non-Profit Corporation Act. Section 15.93 declares that the commission and the department shall not assume liability for any action of the corporation, any debt incurred by the corporation, or any judgment against the corporation, its officers, employees, or agents. Further, the section states that the formation of a corporation does not imply commission commitment for future construction, operation or maintenance, nor shall such action be considered as authorization for right of way acquisition, construction funding or development of a transportation project. On October 4, 1996, a public hearing was held to receive comments, views, or testimony concerning the proposed adoption of the new sections. No commenters were present to offer oral comments, views, or testimony, however, the department received written comments from Jane Hughson, a director of the San Marcos Parkway Association and from the Grand Parkway Association. Regarding sec.15.85(b)(1), ineligibility of elected public officials to serve as directors, Ms. Hughson stated that she was disappointed that elected officials are ineligible to serve as directors. She stated that the project the San Marcos Parkway Association is involved in is a county project and she cannot see that serving on the City Council would be detrimental to the project. In response, a city council and a transportation corporation both have jurisdiction over public projects. A public road in a county, though not geographically in a city, could have an effect on a city. To ensure that there is no conflict between a director's duty of loyalty to the corporation and an elected official's duty of loyalty to his or her electorate, this section has not been revised. Also regarding sec.15.85(b), the Grand Parkway Association (GPA) stated that it generally agrees with the requirements related to an individual's qualifications to serve as a director. However, the GPA is concerned about the possible unintended consequences resulting from stating that a director is ineligible to serve. GPA stated that this ineligibility would seem to result in an automatic resignation that could produce serious unintended consequences. The GPA suggests the department restate the language to require that the named individuals "cannot be appointed" rather than "are ineligible." The GPA specifically requests that the language of sec.15.85(b)(4) be changed to "once appointed, directors must comply with sec.15.86(b) of this title (relating to Conflict of Interest)." In response, corporation directors are carrying out duties of commission members, and therefore the department believes that directors should have the same ethical standards. The restrictions on eligibility in sec.15.86 track the statutory language in Transportation Code, sec.201.051, concerning eligibility for appointment as a member of the commission. Therefore, the section has not been revised. Regarding sec.15.85(d)(1), Ms. Hughson stated she had no argument with limiting the period in which a director may serve on a Board to six years. She does have a concern with how sec.15.85(g), Retroactivity, affects this limitation. She specifically requests that, if this means that any director currently serving, who has served for six or more years, must be replaced, that they be allowed a one year transition period. In response, the department notes that the term limit of six years is a statutory requirement under Transportation Code, sec.431.028(c). To ensure efficient transitions of corporation boards, Section 15.84(b) has been revised to provide for the staggering of terms, and Section 15.85(d) has been revised to clarify that directors are eligible for re-appointment. Regarding sec.15.86(a), prohibited conduct for directors and employees, the GPA states that the standards related to such prohibited conduct are not consistent and, therefore, unclear. They suggest that the prohibition in sec.15.86(a)(1) concerning accepting or soliciting any gift, favor, or service that might reasonably tend to influence a director or employee in the discharge of official duties or that the director or employee knows or should know is being offered with the intent to influence the director's or employee's official conduct be changed to be consistent with the language in sec.15.86(a)(2)-(4), i.e., "prohibit conduct that the employee would reasonably expect." They suggest that the language in sec.15.86(a)(1) be revised to read: "accept or solicit any gift, favor, or service that the director or employee would reasonably expect to be offered with the intent to influence the director's or employee's official conduct." In response, since a corporation acts on behalf of the commission, the department desires to apply to directors and corporation employees the same ethical requirements applicable to state officers and employees. The language in the subsection tracks the language in Government Code, sec.572.051 concerning standards of conduct for state officers and employees. Thus, the section has not been revised. Regarding sec.15.86(b), eligibility of directors and chief administrative officers, the GPA commented that the proposed standard prohibits a person serving as a director if that person is a lobbyist " . . . on behalf of a profession related to the operation of the department." The GPA stated that the proposed standard is so broad that virtually any significant company doing business in Texas is "related" to the operation of the department. They suggest that "the department is interested in a much stronger connection; consequently, the standard should be whether the lobbyist represents an entity that is regulated or receives funds from the department." In response, since a corporation acts on behalf of the commission, the department desires to apply to corporate directors and chief administrative officers the same conflict of interest standards applicable to commission members. The language cited tracks the language in Transportation Code, sec.sec.201.051 and 201.401, relating to the qualifications of a member of the commission and employees of the department. The language has not been changed. Regarding sec.15.89, Contracts for Goods and Services, the GPA expressed concerns that the proposed language in the section changes the basic structure under which the GPA has entered into contracts for goods and services during its 12 years of operation. They request that this section be revised to conform with existing commission policy governing GPA's contracts. Specific comments regarding this section include comments regarding subsection (a), Adequate funds. This subsection, as proposed, states that "a corporation shall not enter into a contract for goods or services that creates a legally binding obligation against the corporation unless there are available to it, at the time of execution of the contract, adequate funds and projected receipts sufficient to pay the obligation created by such contract as well as all other known obligations of the corporation." The GPA states that it receives professional services on a contingent fee arrangement, which is necessary for the GPA to continue operation in an uninterrupted fashion, since the funding from local counties and other potential users is sporadic. They assert that current policy is adequate to ensure that transportation corporations do not create obligations that they cannot fund. Current policy states that if adequate funds are not available at the time of its execution, the contract must state that the transportation corporation is not legally obligated for such goods and services beyond funds on hand. Regarding sec.15.89(b)(1), Department review, the GPA states that the required approval by the commission of all contracts in excess of $200,000 defeats one of the primary purposes for the creation of transportation corporations, since the required review would slow down the pace of operations and work of the corporation. They state that current policy requires an independent annual audit and quarterly financial and project reports, which allow the commission to review the activities of transportation corporations. The GPA asserts they are unaware of any problems that have arisen under existing procedures that require such drastic changes that will slow down the entire process. They suggest that the language be revised so that these contracts be reviewed at the district engineer level. Regarding sec.15.89(b)(2), which requires all contracts, regardless of contract amount, to be submitted to the deputy executive director no more than 30 days subsequent to contract execution, the GPA asserts that the required department review has the potential to create a very slow and unwieldy system. They suggest that small contracts be excluded and that the district engineer have the review authority. The GPA suggests a contract amount of $10,000 and that the contract be submitted to the district engineer. The department agrees with many of the concerns of GPA and has revised sec.15.89 in a way to prevent financial management problems, while allowing for the efficient operation of the corporation by deleting the requirement for commission approval of contracts over $200,000. Also as requested by GPA, small contracts unrelated to the primary purposes of the corporation will not be reviewed by department staff. The section has been revised to require the prior review of: all contracts in excess of $100,000; construction contracts; and contracts relating to the provision of professional or scientific services. The department considers this requirement to be less onerous to the corporations while allowing the commission and the department to properly monitor significant corporate activities. With the removal of department approval of large contracts, the department has revised the section to reinstate previous commission policy, as requested by GPA, to require each contract to specify whether there are adequate funds and projected receipts available, and if not available, to state that the corporation is not legally obligated for the goods and services beyond funds on hand. This requirement is intended to ensure proper fiscal management. The department disagrees with the suggestion that contracts be submitted to the district engineer. Contractual review is proper at the headquarters level where the necessary expertise resides. The GPA also recommends that wording be included that a contract requiring approval be approved or disapproved 30 days after the contract is submitted. The department disagrees with this recommendation. As previously described, the section was amended to remove the requirement for department approval. The section does, however, require prior review. The department considers placing deadlines on the department to be inconsistent with the source of a corporation's power and authority. Regarding sec.15.81, the department has deleted the definition of deputy executive director and revised the definition of executive director to include the executive director's designee. Wherever the term "deputy executive director" appears in the rules, it has been changed to "executive director." The purpose of this revision is to allow the department the flexibility to appoint the appropriate department liaison to a corporation as circumstances dictate. Regarding sec.15.82(a), the department has changed paragraph (3)to read from "a diagram of the proposed transportation project or projects" to "a project location map indicating" such limits to more accurately define the information needed in an application for creation of a transportation corporation. Regarding sec.15.84, the department has reviewed the proposed section and has deleted subsection (c) concerning the bond requirement since the requirements in sec.15.91 (relating to dissolution of a corporation) are sufficient to protect the interests of the department. Regarding sec.15.87(c), the department has amended this subsection to specifically reflect the fact that the commission authorizes a transportation corporation to complete various stages of project development. Regarding sec.15.90, the department has amended subsection (a)(2), Project status report, to more accurately reflect the commission's interest in the scope of any work or project it authorizes. Also regarding sec.15.90, the department has added a new subsection (b) to provide for periodic appearances before the commission whereby corporations will have the opportunity to report on their status. This revision is necessary to ensure proper communication between the commission and corporations. Proposed subsections (b) and (c) have been renumbered to reflect this addition. Regarding sec.15.93, subsection (a) has been revised to clarify that the commission and the department are not liable for any debt of, action by, or judgment against a corporation, its officers, employees, or agents. The new sections are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of work of the Texas Department of Transportation, and more specifically, the Texas Transportation Corporation Act, Transportation Code, Chapter 431, which provides for the creation of transportation corporations for the purpose of the promotion and development of public transportation facilities and systems. sec.15.81.Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. Act - The Transportation Corporation Act, Transportation Code, Chapter 431. Board - The Board of Directors of a corporation. Commission - The Texas Transportation Commission. Corporation - A transportation corporation created under this subchapter. Department - The Texas Department of Transportation. Director - A director of a corporation's Board. Executive director - The executive director of the Texas Department of Transportation or the executive director's designee. Transportation project - The planning, construction, or reconstruction of a transportation facility which the department has the legal authority to plan, construct, or reconstruct, including but not limited to, a public road or highway, bridge, ferry, transit facility, or high occupancy vehicle lane. sec.15.82.Application for Creation of Corporation. (a) Three or more qualified individuals may file with the executive director an application for the creation of a corporation. The application shall be in a form prescribed by the department and shall, at a minimum, include: (1) the name, address, and telephone number of a person who may be contacted for additional information; (2) a description of the proposed transportation project or projects; (3) a project location map indicating the limits of the proposed transportation project or projects; (4) copies of project feasibility studies, if available; (5) proposed articles of incorporation; (6) proposed bylaws; and (7) applications for appointment as a director, submitted in accordance with sec.15.85(a) of this title (relating to Board of Directors). (b) For purposes of this section, an applicant is qualified if he or she is a: (1) qualified voter in this state; and (2) resident of a county within the geographic area of the corporation's operations or resident of a county adjacent to such county or counties. sec.15.83.Department Action. (a) Notice of Publication. (1) After the department has determined that the application is complete and ready for consideration by the commission, the applicants shall publish a notice in a newspaper with general circulation in each county located in the corporation's geographic area. The notice must be published at least once a week for two consecutive weeks, with the first publication being at least 20 days before commission action on the application. The form and content of the notice must at a minimum include: (A) the proposed purpose of the corporation; (B) the names of the proposed initial directors; (C) a statement that the commission is considering an application for the creation of a corporation and the applications of the proposed directors; (D) a statement that inquiries may be made to the executive director; (E) date, time, and location of the commission meeting; and (F) who to contact, within the department, if special accommodation is required. (2) The applicants must furnish the executive director with a publisher's affidavit at least seven days prior to commission action on the application. (b) Department recommendation. Prior to approval of the creation of a corporation under sec.15.84 of this title (relating to Approval of the Creation of a Corporation), the executive director will submit to the commission the application together with the department's recommendations. sec.15.84.Approval of the Creation of a Corporation. (a) Creation. The commission will by order approve the creation of a corporation if it finds that such creation is advisable and will: (1) serve the public interest; (2) address a statewide or regional transportation need; and (3) develop or promote a transportation project that is or will be consistent with the statewide transportation plan and an existing regional transportation plan developed by a metropolitan planning organization, if any. (b) Approval order. (1) An order of the commission approving the creation of a corporation shall: (A) include a finding that the commission determines that the creation of the corporation is advisable; (B) approve the articles of incorporation and bylaws to be used in organizing the corporation; (C) designate the geographic area of the state in which the corporation may operate; and (D) appoint three or more directors to the Board, in accordance with sec.15.85 of this title (concerning Board of Directors), for individual terms not to exceed six years. (2) The commission will stagger the terms of the directors to the extent practicable. sec.15.85.Board of Directors. (a) Application for initial appointment. Each applicant for appointment as an initial director shall submit the following information to the executive director: (1) an application for appointment, in a form prescribed by the department; (2) a financial statement in conformance with Government Code, sec.572.023; (3) three letters of reference; and (4) an executed bond, payable to the state in a sum of $5,000, and conditioned on the faithful performance of the director's duties. (b) Ineligible to serve. The following individuals are ineligible to serve as directors: (1) elected public officials; (2) persons who are not residents of a county within the geographic area of the corporation's operations, or resident of a county adjacent to such county or counties; (3) persons owning an interest in real property which will be acquired by the Corporation or the department for the Corporation's project; and (4) persons ineligible under sec.15.86(b) of this title (relating to Conflict of Interest). (c) Vacancies. The Board must notify the executive director within 30 days of a vacancy on the Board. If the Board fails to nominate a replacement director within 60 days of a vacancy, the commission will appoint a replacement director in accordance with subsection (d)(2) of this section. (d) Appointment of replacement and additional directors. (1) Board nomination. If nominated by the Board, the commission may appoint replacement or additional directors for a term not to exceed six years. The Board will submit to the commission the information on behalf of the prospective director required under subsection (a) of this section. (2) Commission nomination. The commission may, on its own motion, appoint replacement or additional directors for a term that does not exceed six years. The prospective director will submit, directly to the executive director, the information required under subsection (a) of this section. (3) Re-appointment. Directors completing their terms are eligible for re- appoinment under this subsection. (4) Publication. After the completed application is received, the executive director have published, or if nominated by the Board, authorize the Board to publish, a notice in a newspaper with general circulation in each county within the corporation's geographic area, at least 20 days before the commission action. The form and content of the notice should include, at a minimum: (A) the names of the proposed replacement or additional directors; (B) a statement that the commission will consider the application for such proposed directors at a future meeting, in accordance with this section; and (C) a statement that inquiries may be made to the executive director. (5) Publisher's affidavit. If nominated by the Board, the Board shall furnish the executive director with an affidavit of publication. (e) Removal. The commission may remove a director for cause or without cause. (f) Compensation. A director serves without compensation but is entitled to reimbursement from the corporation for expenses incurred in the performance of the director's duties. (g) Retroactivity. Not including the requirements of subsection (b)(2) of this section, all requirements concerning qualifications and eligibility for directors including those of this section and of sec.15.86 of this title (relating to Conflict of Interest), shall apply to all directors serving prior to the effective date of this subchapter. sec.15.87.Powers of Corporation. (a) A corporation has the powers, duties, and responsibilities granted it under the Act and this subchapter. (b) A corporation shall coordinate proposals and actions involving the promotion and development of transportation projects through the executive director. (c) All powers and authorizations granted to a corporation concerning the promotion and development of a transportation project are subject to the direction of the commission. The corporation's powers and authorizations shall not be exercised until the commission, by order or resolution, explicitly authorizes the applicable specific stage of project development. (d) Development of projects shall be performed according to applicable state and federal laws, rules, and regulations and in accordance with state policies and guidelines. (e) If directed by the commission as a part of the transportation project, the corporation shall prepare an environmental assessment and/or environmental impact statement in accordance with Chapter 2, Subchapter C of this title (relating to Environmental Review and Public Involvement for Transportation Projects). The form and content of an environmental assessment and environmental impact statement prepared by a corporation and any decision by a corporation that an environmental impact statement is not necessary must be approved by the department. sec.15.89.Contracts for Goods or Services. (a) Adequate funds. (1) A corporation shall not enter into a contract for goods or services that creates a legally binding obligation against the corporation unless there are available to it, at the time of execution of the contract, adequate funds and projected receipts sufficient to pay the obligation created by such contract as well as all other known obligations of the corporation. (2) Each contract shall specify on its face whether or not there are adequate funds and projected receipts available at the time of its execution. If adequate funds and projected receipts are not available at the time of its execution, the contract must state that the corporation is not legally obligated for such goods and services beyond funds on hand and actual payment for such goods and services shall be within the sole discretion of the Board at such time as funds may be available to the corporation. Each contract where there is inadequate funding shall also include a statement to the effect that: (A) the contract does not create a present or future legally binding obligation of the corporation beyond monies on hand as of the effective date of the contract; (B) the contractor waives his or her right to sue for non-payment if no monies are available; and (C) the contract is subject to termination upon 30 days written notice by either party. (b) Department review. (1) The following contracts must be submitted to the executive director prior to contract execution for review as to form and consistency with the provisions of this subchapter: (A) construction contracts; (B) contracts relating to the provision of professional services; (C) contracts relating to the provision of scientific services; and (D) all contracts in excess of $100,000. (2) A corporation may not divide contracts into smaller quantities, reduce time periods, or otherwise limit the maximum amount payable to a contractor to avoid or appear to avoid the requirements of this subsection. (c) The department will not be a third party to a contract. sec.15.90.Reports and audits. (a) Written reports. (1) Financial report. Except as provided in paragraph (4) of this subsection, a corporation shall submit a quarterly financial report after the end of each of the state's fiscal quarters. The quarterly financial report must include a balance sheet as of the end of the quarter and a fiscal year-to-date statement of revenues, expenditures, and changes in fund balance prepared in accordance with generally accepted accounting practices. (2) Project status report. Except as provided in paragraph (4) of this subsection, for each transportation project, the corporation shall submit a semi-annual project status report after the end of the mid-point of the state's fiscal year and after the end of the state's fiscal year, that must include, at a minimum: (A) the scope of work authorized by the commission; (B) the work that has been accomplished in that quarter; (C) the anticipated completion date of the project, as well as anticipated completion dates for various segments of the project, if applicable; (D) the status of coordinating activities with other governmental entities and with railroads, utilities and others; (E) project fiscal data, including funds received, expended, available, and projected completion costs; and (F) comments on significant accomplishments, problems, and concerns of the corporation. (3) Certification. Reports submitted under this subsection must be approved by official action of the board and certified as correct by the president of the Corporation. (4) Inactivity. If no financial activity has taken place or the project status has not changed in the preceding period, the corporation may submit, in lieu of the quarterly financial report and semi-annual project status report, a certification stating that no activity has taken place. (5) Submission dates. Reports or the certification required by this subsection must be submitted to the executive director within 60 days after the end of each of the state's fiscal quarter. (b) Annual commission report. Every 12 months, the corporation shall appear before the commission to report on its current condition, status of projects, and activities undertaken the preceding 12 months. (c) Annual audits. The Corporation shall submit reports of an annual financial audit in accordance with this subsection. (1) Submission date. The annual audit shall be submitted to the executive director within 90 days after the end of the state's fiscal year (August 31). (2) Certification. The audit must be conducted by an independent certified public accountant in accordance with generally accepted auditing standards. The accompanying financial report shall be prepared according to pronouncements by the Government Accounting Standards Board. (3) Content. The audit shall include, at a minimum: (A) an evaluation of the corporation's internal accounting system and controls; (B) a statement regarding the corporation's compliance with the guidelines established by the commission for its operation, including both the positive and negative compliance (summary of all instances of noncompliance, if any, must be included); (C) a complete recapitulation of the corporation's income and expenditures as well as assets and liabilities; and (D) an unqualified certification by the certified public accountant. (4) Paperwork retention period. All work papers and reports shall be retained for a minimum of four years from the date of the audit report, unless the certified public accountant is notified by the department in writing, to extend the retention period. (5) Availability of audit work papers. If requested by the department, audit work papers shall be made available to the executive director at the completion of the audit. (d) Other reports. The corporation will provide other reports and information regarding the corporation promptly when requested by the executive director. sec.15.93.Commission and Department Responsibility. (a) Debt. The commission and the department shall not assume liability for any action of the corporation, any debt incurred by the corporation, or any judgment against the corporation, its officers, employees, or agents. (b) Commitment. Creation of a corporation by the commission shall not be construed to be a commitment for future roadway construction, operation, or maintenance, nor shall such action be considered as authorization for right of way acquisition, construction funding, or development of a transportation project. (c) Authority. (1) It is and shall remain the policy of the commission that corporations are to be viewed as acting on behalf of the commission. A corporation only has the powers and may perform only the functions specifically delegated to it by order of the commission. All decisions with respect to location, design, construction and related matters shall be made by the commission and the department. (2) The board shall comply with such directions as the commission may from time to time communicate concerning staffing, contracting, and corporation organizational matters. (d) Curative actions. In the event that a corporation is determined to be insolvent, found to be in noncompliance with the requirements of this subchapter, or fails to respond to a request of the commission or the department, the corporation is subject to curative actions by the commission up to and including dissolution. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617111 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: January 1, 1997 Proposal publication date: September 13, 1996 For further information, please call: (512) 463-8630 CHAPTER 25.Traffic Operations SUBCHAPTER H.City Pride Sign Program 43 TAC sec.sec.25.420-25.425 The Texas Department of Transportation adopts new sec.sec.25.420-25.425, concerning the city pride sign program. Sections 25.421- 25.425, are adopted with changes to the proposed text as published in the June 28, 1996, issue of the Texas Register (21 TexReg 5965). Section 25.420 is adopted without changes and will not be republished. These new sections prescribe the policies and procedures for the program which will allow municipalities to erect and display signs concerning points of interest or geographical, recreational, cultural, or civic information at the city limits on state highway right of way. Section 25.420 outlines the purpose of the program. Section 25.421 provides definitions of the words and terms included in the proposed sections. Section 25.422 provides a procedure for a municipality to apply for participation in the city pride sign program, establishes conditions under which the department will approve the application, and provides for the form and content of the written agreement between the municipality and the department. This section requires a municipality to cooperate with contractors working on state right of way, provides installation requirements for the signs, requires that the municipality maintain the sign, and allows the department to require that a sign be removed or relocated. This section also restricts municipalities from charging fees for local participation in the program. Section 25.423 defines the eligibility requirements for local civic organizations to participate in the sign program. Section 25.424 establishes the design, content, and placement requirements of a city pride sign and its attachment signs. This section also restricts municipalities from removing existing regulatory, warning, destination, guide, recreational, and cultural interest signs on state highway right of way. The section provides that existing signs may be relocated at municipal expense with prior written approval from the department. This section provides that a municipality shall remove or relocate existing, non-complying civic organization or attachment signs. Beginning on September 1, 1998, the department will remove a sign that is not in compliance with this section. Section 25.425 provides that a civic organization must apply to the municipality, that the municipality is responsible for selection, and prescribes a procedure for removal of civic organization attachment signs. On July 18, 1996, a public hearing was held to receive comments, views, or testimony regarding new sec.sec.25.420-25.425, concerning the city pride sign program. Oral and written comments were submitted on behalf of the Texas Natural Resource Conservation Commission (TNRCC) and Keep Texas Beautiful (KTB) opposing the new sections. The following governmental groups, civic organizations, businesses, and individuals submitted written comments opposing the new sections: City of Caldwell, Moody Beautification Committee, Eldorado Pride Committee, City of Eldorado, The Colony, Cuero Chamber of Commerce and Agriculture, City of Richland Hills, City of Richland Hills Clean City Commission, City of San Marcos, Farmers Insurance Group of Companies (Keep Round Rock Beautiful Organizer), Keep Dublin Beautiful, Canton Chamber of Commerce, City of Rankin, Keep Texas Beautiful Proud Community of Rankin, Farmersville Clean and Proud, City of Wichita Falls, City of Beaumont, Keep DeKalb Beautiful, Keep Columbus Beautiful, Escents (Keep Texas Beautiful), Keep Point Comfort Beautiful Committee, City of Lockhart, Kountze Middle School, Rockport-Fulton Area Chamber of Commerce, City of West Tawankoni, Nacogdoches Proud Inc., City of Lake Jackson, City of Chandler, City of Cedar Park, and one individual. Keep Victoria Beautiful submitted written comments supporting the new sections. Wichita Falls Clean Country submitted written comments asking for clarification of the rules. Comment: TNRCC objected to the placement of the Superior Public Drinking Water Supply and Clean Cities 2000 on the city pride sign and asked the department to allow the signs from these programs to be posted individually. KTB supported TNRCC's comments and also requested that its signs remain. Numerous commenters submitted comments similar to TNRCC and KTB. Most comments opposed moving the KTB signs. Keep Victoria Beautiful supported the decision to condense signage into one area. Response: The new sections apply only to highways under the department's jurisdiction. They do not apply to county or city roadways. The department's primary concern is safety. The department proposed these new sections not only to allow a municipality to erect and display signs that will inform the traveling public along the state highway system, but to comply with the new breakaway safety standards. The Federal Highway Administration adopted these national standards after the publication of the National Cooperative Highway Research Report No. 350 "Recommended Procedures for the Safety Performance Evaluation of Highway Features." The breakaway safety standards must be implemented by September 1, 1998. Most of the Superior Public Drinking Water Supply, Clean Cities 2000, and KTB signs are currently posted on the city limit sign. Continued placement of these signs on the city limit sign will not meet the new safety standards. To comply with the new breakaway safety standards these signs must be removed from the city limit signs. In some cases, an individually posted sign is the only sign placed near the city limits. In that case, the city may approve that sign as the city pride sign and the sign will not have to be moved until the city chooses to change the sign. TNRCC's Superior Public Drinking Water Supply and Clean Cities 2000 signs are posted pursuant to Natural Resources Code, Chapter 26 concerning water quality control. In order to promote the maintenance of the quality of the state's water consistent with public and environmental health enjoyment, these signs may be placed on a TNRCC sign separate from the city pride sign. A definition of "TNRCC sign" has been added to sec.25.421 and changes have been made to sec.25.422 and sec.25.424 to reflect the addition of the TNRCC sign to this subchapter. Comment: Several commenters opposed the new sections because they thought that the program would limit a city to one sign. Response: The new sections do not limit a city to only one sign per city. A city may have more than one sign since a city pride sign and a TNRCC sign may be erected at each non-controlled access highway entrance. Section 25.422(a)(1) has been changed to clarify this. Comment: Several commenters were concerned that the standard size of 80 square feet would be too large. Response: Smaller size signs are allowed as long as the total sign area does not exceed 80 square feet. Individual signs may be placed on a sign post or posts if the total sign area at any location does not exceed 80 square feet and the sign meets breakaway standards or is mounted in accordance with department specifications. The maximum total sign area is 80 square feet. Comment: TNRCC noted that there would be a negative financial impact to TNRCC if TNRCC were to move the signs. Several commenters noted that small cities may not have the budget available to build a city pride sign and thus, may be deterred from seeking recognition in these programs. KTB commented that moving the signs would be an unfunded mandate. Several commenters suggested that the department should pay for the cost involved and the City of Caldwell also suggested that the department should reimburse the city for its existing signs. Response: The cost for the city pride sign or TNRCC sign will depend upon the size of the sign. The cost estimate may range from $200 to $2,000 depending upon the size of the sign. For many cities, the cost would be minimal, because the cities already have the employees and expertise to replace city signs. In these situations, the cost would be for the support structure and attachment hardware. Comment: The commenters stated that having so many attachment signs on one sign would create a safety hazard when a motorist tries to read the sign. Response: Safety is the department's primary consideration. The city pride signs should reduce the problem of trying to read too many signs, not exacerbate it. The introduction of the new 70 mile per hour rural speed limit has resulted in the placement of reduced speed limit signs at most entrances to cities. Typically a speed limit sign is posted directly adjacent to the city limit sign. This has created situations where the city limit sign, the speed limit sign, and the civic organizations and other signs present so much information that the driver is overloaded and may not see the speed limit sign. Comment: A few commenters suggested that if the current KTB sign is removed, then people might think that the litter problem has been solved. Keep Victoria Beautiful expressed the opinion that moving the sign would not create the impression that the litter problem has been solved and "residents would be thrilled with the reduction of so many signs on so many posts, spaced so far apart, going so far into city limits." Response: The department agrees with Keep Victoria Beautiful and does not think that moving the sign will cause people to think the litter problem has been solved. Comment: Several commenters thought that their sign would lose exposure if placed with other signs on a city pride sign. Keep Victoria Beautiful suggested that if KTB thinks the signs will be overlooked that it could establish a standard placement for the KTB sign, in the bottom right hand corner, for example. Response: The department does not think that an organization will lose exposure if it is moved to a city pride sign. Instead, with standard signage, travelers will know exactly where to look to find the organization's sign. Comment: The City of Lake Jackson supported limitations or prohibitions on signs for individual civic organization signs, such as the Lions and Rotary Clubs, but not for community-wide signs, such as "All-America City" and "Superior Water Supply System." A city ordinance currently prohibits civic organization signs. The city wants to keep the community-wide signs, but its city ordinance also prohibits the placement of billboards. Response: Under this program, the city may limit the signs placed on the city pride sign to community-wide signs. The department will consider a design other than a billboard design if it meets department specifications. Comment: An individual commented that to have one program throughout the State of Texas would interfere with freedom of choice. Response: The city pride signs are located on the department's right of way. The department has the responsibility to maintain the right of way in a safe manner. It is the department's opinion that safety will be served with the implementation of these signs. The city is free to decide which signs should be placed on the city pride sign. Comment: Wichita Falls Clean Country inquired whether the new sections would apply to signs for its sister city sign. Response: The new sections will apply to a sign for a sister city. Comment: Wichita Falls Clean Country asked if space on the sign would have to be purchased. Response: Space will not have to be purchased, because the municipality will own the sign. The municipality will be responsible for selecting the civic organizations and placing the attachment signs. Comment: Wichita Falls Clean Country asked for clarification as to whether the signage would be part of the logo sign program. Response: This is a separate program from the logo sign program. The definition of attachment sign in sec.25.421 has been changed to clarify that an award for participation in a program is considered civic information. The definition has also been changed to clarify that the rules apply to a governmental entity. The definition of city pride sign has been changed to require the sign to be located near the city limits instead of at the city limits. This change conforms to the placement requirements of sec.25.424(a)(3)(1). Section 25.422(g)(2) has been changed to require submittal of the city pride sign application to the district, instead of allowing submittal to the Traffic Operations Division or the district. Section 25.422 and sec.25.425 have been changed to eliminate the requirements that a missing sign be removed. Section 25.423(b)(2) has been revised to clarify that an organization may have more than one attachment sign if the city agrees to the placement of additional signs. Section 24.424(a)(1)has been revised to delete the requirement for reflective sheeting, because the reflective sheeting requirement is contained in the department specifications. The removal date for non-conforming signs in sec.25.424(a)(5)(B) has been extended from September 1, 1997, to September 1, 1998. The extension allows the department more time to inform the municipalities of the new sections and seek voluntary removal of non-conforming signs. This date coincides with the implementation date of the new breakaway standards. Section 24.424(a)(3)(F) has been revised to change the phrase "without blocking motorists' visibility" to "without blocking motorists' view" to clarify that a sign may not block motorists' view of traffic control and guide signs. These new sections are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, and more specifically under Transportation Code, sec.203.002, which authorizes the commission to lay out, construct, maintain, and operate a modern state highway system. sec.25.421.Definitions. The following words and terms, when used in the sections under this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. Attachment sign - A sign, provided by a civic organization or a governmental entity, that displays points of interest or geographical, recreational, cultural, or civic information, including awards for participation in programs. City pride sign - A sign placed near a city's jurisdictional limits that displays attachment signs. Civic organization - A non-profit organization. Department - The Texas Department of Transportation. District - One of the 25 geographical areas managed by a district engineer, in which the department conducts its primary work activities. Eligible highway - A non-controlled access highway on the state highway system. Municipality - A city, town, or a self-governing unincorporated community. Non-controlled access highway - In accordance with applicable state law, a state highway on which owners, or occupants of abutting lands, and other persons have access to or from the highway other than at such points determined by the department. Non-profit organization - A non-profit unincorporated association or society or a corporation that is incorporated or holds a certificate of authority under the Texas Non-Profit Corporation Act (Texas Civil Statutes, Article 1396-1.01 et seq.). Texas MUTCD- Texas Manual on Uniform Traffic Control Devices for Streets and Highways, latest edition, issued by the Texas Department of Transportation. TNRCC sign - A sign that promotes the maintenance of the state's water quality and contains attachment signs for the Texas Natural Resources Conservation Commission's Superior Public Drinking Water or Clean Texas 2000 programs. sec.25.422.City Pride Sign Program. (a) Municipality application. (1) A municipality may obtain an application for participation in the city pride sign program from the Texas Department of Transportation, Traffic Operations Division, 125 East 11th Street, Austin, Texas 78701-2483, or a district office. The application may contain a request for more than one sign. One city pride sign and one TNRCC sign may be placed at each eligible highway entrance. (2) An application must be submitted to a district office. (b) Department approval. (1) The district engineer or his or her designee will approve the design and locations of the city pride and TNRCC signs if the plans meet department specifications in accordance with sec.25.424 of this title (relating to Specifications for Signs). (2) The department will notify a municipality in writing whether its specifications have met the department's criteria. Deficiencies will be noted in the returned application. (3) A municipality may resubmit its application when the noted deficiencies have been corrected. (c) Written agreement. If the district engineer or his or her designee approves the sign, the municipality must enter into a written agreement with the department. The participation agreement shall be in a form prescribed by the department and shall, at a minimum, contain the requirements of this subchapter. (d) Cooperation with contractors. While installing or maintaining the sign, the municipality is required to cooperate with any department contractor working on the state highway system at that location. (e) Installation. (1) The municipality or its contractor may install the city pride or TNRCC sign. The department will inspect installation to ensure that the sign meets department and Texas MUTCD standards. (2) The municipality shall submit as-built plans to the department within 45 calendar days upon completion of the installation of a city pride and/or TNRCC sign. (f) Maintenance. The municipality shall maintain the city pride and TNRCC signs in a safe manner and condition in accordance with department standards. (g) Sign relocation or removal. (1) If the department determines that additional regulatory, warning, or guide signing is needed, it may require the municipality to remove or relocate an existing or planned city pride or TNRCC sign at the expense of the municipality. If the department determines that construction or maintenance activities within the state highway right of way will create conditions where an existing city pride or TNRCC sign will not be in compliance with the provisions of this subchapter, the municipality shall remove the city pride or TNRCC sign at its expense. (2) The municipality shall remove a city pride or TNRCC sign if it has not provided a replacement sign within 60 calendar days of written notification from the department that the sign is damaged, broken, faded, or has become a hazard due to failure to build to specifications, inclement weather, inadequate maintenance, accidental damage, or other cause. (3) A sign not removed in compliance with paragraph (2) of this subsection is subject to removal by the department and the municipality is liable for removal and disposal costs as provided by sec.25.10 of this title (relating to Signs on State Highway Right of Way). (h) Fees. The department and the municipality shall not require fees for participation in the city pride sign program. (i) Termination. The department may terminate the agreement upon default of the municipality. sec.25.423.Civic Organization Eligibility. (a) General requirements for eligibility. A civic organization's application must be approved by the municipality. To be eligible to have an attachment sign placed on a city pride sign in accordance with sec.25.422 of this title (relating to City Pride Sign Program), a civic organization must: (1) be located within or have a member who resides in the municipality; and (2) comply with all applicable laws concerning the provisions of public accommodations without regard to race, religion, color, sex, or national origin. (b) Placement. (1) The attachment sign shall be placed within the available sign space. (2) An organization may have only one attachment sign per city pride sign unless the city and organization agree to installation of additional signs. sec.25.424.Specifications for Signs. (a) City pride and TNRCC signs. (1) Design. (A) A city pride sign: (i) shall be fabricated in conformance with department standard plan sheet CPS (CITY PRIDE SIGN); (ii) may contain a message no greater than eight inches in height identifying the municipality; (iii) shall meet the applicable provisions of the Texas MUTCD; (iv) shall have background material which conforms with department specifications; (v) be fabricated, erected, and maintained in conformance with department specifications and fabrication details; and (vi) have attachment signs spaced for a balanced appearance. (B) A TNRCC sign: (i) shall meet the applicable provisions of the Texas MUTCD; (ii) shall have background material which conforms with department specifications;and (iii) be fabricated, erected, and maintained in conformance with department specifications and fabrication details. (2) Content. A city pride sign shall not contain: (A) advertising or words that may be construed as advertising, including, but not limited to, the offering of products and services; (B) notification of municipal ordinances or regulations; (C) attachments to the city pride sign that extend beyond the sign borders; or (D) attachments to the supports of the city pride or TNRCC signs, including banners and flags. (3) Placement. Subject to approval of the department, a city pride or TNRCC sign shall be installed or placed: (A) between 300 feet and 800 feet from the city limits; (B) to take advantage of natural terrain; (C) to have the least impact on the scenic environment; (D) to avoid visual conflict with other signs within the state highway right of way; (E) with a lateral offset greater than existing guide signs; (F) without blocking motorists' view of existing traffic control and guide signs; and (G) in locations other than hanging above the road. (4) Lighting. A sign approved for placement under paragraph (3) of this subsection may not display lighting. (5) Existing signs. (A) A municipality may not remove existing regulatory, warning, destination, guide, recreation, and cultural interest signs; provided, however, existing signs may be relocated with written permission of the department at the expense and responsibility of the municipality to the extent necessary to accommodate city pride and TNRCC signs. (B) A municipality shall remove existing civic organization or attachment signs from department right of way and relocate these signs to a city pride or TNRCC sign approved in accordance with sec.25.422 of this title (relating to City Pride Sign Program). Beginning on September 1, 1998, the department will remove a sign that is not in compliance with this subchapter in accordance with sec.25.10 of this title (relating to Signs on State Highway Right of Way). (b) Attachment signs. (1) Design. (A) An attachment sign shall not exceed 48 inches in width or 36 inches in height. (B) An attachment sign may be any color or combination of colors. (2) Content. (A) An attachment sign may not: (i) consist of text, symbols, trademarks or a legend message identifying the name or abbreviation of a commercial establishment, service, or product; or (ii) contain supplemental address or directional information, such as meeting dates or locations. (B) An attachment sign may contain a message, symbol, or trademark only if the message, symbol, or trademark does not resemble an official traffic control device. sec.25.425. Program Operation. (a) Civic organization application. A civic organization shall apply to the municipality. (b) Civic organization selection. The municipality will be responsible for selecting the civic organizations and placing the attachment signs. (c) Removal of civic organization attachment sign. (1) The municipality shall contact the civic organization in writing if the civic organization does not meet the requirements of sec.25.423 of this title (relating to Civic Organization Eligibility), or if the attachment sign is missing, damaged, broken, or faded. (2) The civic organization has 30 calendar days after written notification to meet the requirements of sec.25.423 of this title (relating to Civic Organization Eligibility). The civic organization has 60 calendar days after written notification to replace a missing, damaged, broken, or faded attachment sign. (3) The municipality shall remove an attachment sign of a participating civic organization if the civic organization: (A) ceases to exist; (B) does not meet the requirements of this subchapter, and all corrections are not made within the time limits set in the written notification; or (C) has not provided a replacement attachment sign within 60 calendar days of written notification that the attachment sign is damaged, broken, or faded or has become a hazard due to failure to build to specifications, inclement weather, inadequate maintenance, accidental damage, or other cause. (4) A sign not removed in compliance with paragraph (3) of this subsection is subject to removal by the department and the applicant is liable for removal and disposal costs as provided by sec.25.10 of this title (relating to Signs on State Highway Right of Way). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 25, 1996. TRD-9617112 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: December 16, 1996 Proposal publication date: June 28, 1996 For further information, please call: (512) 463-8630