PART 12. COMMISSION ON STATE EMERGENCY COMMUNICATIONS

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1 TITLE 1. ADMINISTRATION PART 12. COMMISSION ON STATE EMERGENCY COMMUNICATIONS CHAPTER SERVICE--STANDARDS 1 TAC The Commission on State Emergency Communications (CSEC) proposes new rule BACKGROUND AND PURPOSE CSEC proposes new (Title 1, Part 12, Chapter 251 of the Texas Administrative Code) relating to direct access to service from a telephone system including a multi-line telephone system (telephone system). This rule implements Kari's Law (Senate Bill 788, 84th Texas Legislature) which established Texas Health and Safety Code Chapter 771A. Kari's Law requires a business service user that owns or controls a Telephone System that provides outbound dialing capacity to "configure the telephone system or equivalent system to allow a person initiating a call on the system to directly access service by dialing the digits without an additional code, digit, prefix, postfix, or trunk-access code." If compliance is "unduly and unreasonably cost prohibitive," the law allows for 1-year waivers of the direct access requirement upon timely submission of a waiver request affidavit, including confirmation that the business service user agrees to place a corresponding instructional sticker on or immediately adjacent to each noncompliant, outbound capable telephone informing the user on how to access service. Kari's Law also requires a business service user that provides a residential or business facility, and owns or controls a telephone system, to configure the system to provide notification of a call to a central location on the site of the facility--if notification can be implemented without improving the system's hardware. Additionally, based on CSEC's interpretation of Kari's Law and its statutory rulemaking authority to implement the law, CSEC is proposing (1) an additional location for notification; and (2) to make clear that the liability protection provided by Health and Safety Code extends to a business service user that complies with Kari's Law was passed in the aftermath of a tragedy that occurred when a young girl attempted several times without success to contact to obtain help for her mother. Unbeknownst to the young girl, the telephone handset she was using was associated with a telephone system that required her to first dial "9" in order to make an outside call-including when making a call. The law avoids imposing an undue financial hardship on a business service user by providing for an annual self-certifying waiver if the business service user determines compliance is unduly and unreasonably cost prohibitive. Over the last 18 months untold numbers of businesses and governmental entities throughout the state and country have voluntarily changed their telephone systems to allow direct dialing of Based on the success of these voluntary efforts, technical or cost issues do not appear to be factors in implementing the necessary changes to existing systems. The responsibility to implement Kari's Law is on a "business service user," as opposed to the user's underlying service provider. The term is defined in the law (Health and Safety Code (2)) as well as in Consistent with related provisions in Health and Safety Code Chapter 771, the rule defines the term to include a recipient of "communications" service (e.g., Voice over Internet Protocol service), and makes clear that the law also applies to a "governmental body" as defined in Texas Government Code While the law places responsibility for compliance on a business service user, the business service user may have had little involvement in the programming of its non-compliant telephone system. A business service user, therefore, may require the assistance of its underlying system provider or operator--which may or may not be the user's underlying telecommunications or communications service provider--in order to implement Kari's Law. CSEC and the state's 52 independent Emergency Communication Districts (ECDs; defined in Health and Safety Code (3)) will assist business service users in complying with the law and Defined Terms. CSEC considered but does not define the term "cost prohibitive" because the law allows a business service user to obtain relief by providing a self-certifying waiver request. Accordingly, cost prohibitive is determined by a business service user rather than by CSEC or an ECD. CSEC does not define either the term "facility" or the phrase "the providing of a residential or business facility" which are used in the notification provision of the law. Neither the term nor the phrase can be clearly or exhaustively defined. By way of example, a business service user that leases office space from a third party is arguably excluded from the notification requirements, as is the third party owner or manager of the office facility. Conversely, an owner or manager of an office facility that makes available a telephone system to its tenants is subject to the notification requirements. Notwithstanding the foregoing, Kari's Law promotes the providing of notification of a call made from within residential or business facilities in order to enhance the efforts of emergency first responders, including by allowing for access to a facility and the providing of specific caller location. On-site Notification and Additional Location. The notification requirement is inapplicable if compliance requires an upgrade to a telephone system's hardware. On its face the statute envisions PROPOSED RULES October 30, TexReg 7503

2 that over time non-capable systems will be replaced with systems that provide notification as a feature. The notification requirement, therefore, balances the costs of replacing a system with the benefits derived from notification of a call from within a facility. The law does not, however, require someone be available to receive the notification. In order to promote meaningful notification, authorizes notification be provided to an additional location not located at the facility. Such additional location should be staffed 24 hours per day, seven days per week, by personnel that can assist emergency first responders in providing access to a facility and better determine the location of the call, e.g., campus police or security office. The additional location is in addition to the statutory on-site notification. Waivers. A waiver request that complies with (d) shall be granted by CSEC or the appropriate ECD. A compliant request is granted with or without notice being sent by CSEC or the appropriate ECD. Liability Protection. Health and Safety Code provides a limitation on liability of a service provider involved in providing service. Liability protection extends to a third party provider or other entity involved in providing service, including an officer, director, or employee of the provider or entity. A business service user in compliance with is deemed to be a third party or other entity involved in providing service and is afforded the protections in FISCAL NOTE Kelli Merriweather, CSEC's executive director, has determined that for each year of the first five fiscal years (FY) that is in effect there will be no costs to the state or to local governments as a result of enforcing or administering Ms. Merriweather's determination is based partly on costs not being a factor in the successful efforts by a number of state and local entities, and by telephone system providers and operators, and various trade associations to implement changes to allow for direct access to service from existing telephone systems. Additionally, the direct access requirement can be waived each year upon submission by a state or local government business service user of an affidavit that compliance is "unduly and unreasonably cost prohibitive." Finally, the requirement that some governmental entity business service users must provide on-site notification of a call is applicable only if providing notification does not require an upgrade in the telephone system's hardware. PUBLIC BENEFIT Ms. Merriweather has determined that for each year of the first five years the new section is in effect, the public benefits anticipated as a result of the rule adoption will be to ensure that all individuals have direct access to service, including those calling from a telephone system. If direct access is not available from a particular telephone handset, the rule requires a sticker be placed on or adjacent to the handset that instructs the user on how to reach service. CSEC will make available a form sticker that is compliant with (d)(7). REGULATORY ANALYSIS OF MAJOR ENVIRONMENTAL RULES CSEC has determined that this proposal is not a "major environmental rule" as defined by Government Code LOCAL EMPLOYMENT IMPACT STATEMENT CSEC has determined that this proposal does not affect a local economy and therefore has not drafted a local employment impact statement as would otherwise be required under Administrative Procedure Act CSEC makes the foregoing determination based on the foregoing Fiscal Note, and the waiver provision provided in the rule. SMALL AND MICRO-BUSINESS IMPACT ANALYSIS In accordance with Government Code (c), Ms. Merriweather has determined that there will be no adverse economic effect on small businesses or micro-businesses. Accordingly, CSEC has not prepared the economic impact statement or regulatory flexibility analysis that would otherwise be required. If such an impact is found for individual small and micro businesses, the rule provides a means to request a waiver of its provisions due to financial hardship. PUBLIC COMMENT Initial and Reply comments on the proposed rule may be submitted in writing to Patrick Tyler, Commission on State Emergency Communications, 333 Guadalupe Street, Suite 2-212, Austin, Texas , by to [email protected], or by fax to (512) Comments should include in the subject line "Initial (or Reply) Comments to Proposed Rule " Initial comments will be accepted for 30 days and Reply comments for 45 days following publication of the proposal in the Texas Register. All comments will be published on CSEC's website STATEMENT OF AUTHORITY The new rule is proposed pursuant to Texas Health and Safety Code 771A.001(f) and No other statute, article, or code is affected by the proposal Direct Access to Service. (a) Purpose. The purpose of this rule is to facilitate the implementation of Texas Health and Safety Code Chapter 771A ("Kari's Law") requiring telephone systems that provide outbound dialing capacity to be configured to provide direct access to service and, in instances where no hardware changes are necessary, to provide notification of a call to a central location on the site of the residential or business facility from which a call is made using a telephone system. (b) Definitions. For the purposes of this rule: (1) "9-1-1 service" means a communications service that connects users to a public safety answering point through a system. (2) "Additional location" means an optional location, other than a central location, that receives notification of a call that should be staffed 24x7 with personnel that can assist emergency first responders in accessing the residential or business facility from which a call is made and determining the location of the call, e.g., Campus Police, Security Office. (3) "Business service" means a telecommunications or communications service provided a customer where the use is primarily of a business, professional, institutional, or otherwise occupational nature. (4) "Business service user" means a user of business service that provides telecommunications or communications service, including service, to end users through a publicly or privately owned or controlled telephone switch. Business service user includes 40 TexReg 7504 October 30, 2015 Texas Register

3 a "governmental body" as defined in , Government Code, including an institution of higher education. (5) "Central location" means a designated location on the site of a residential or business facility from which a call is made that receives notification of the call. A central location is not required to have a person available at the location to receive or respond to the notification. (6) "Commission" means the Commission on State Emergency Communications. (7) "Internet Protocol enabled service" or "IP" has the meaning assigned by , Texas Utilities Code. (8) "Local exchange access line" or "Equivalent local exchange access line" has the meaning assigned in Commission Rule (Title 1, Part 12 Tex. Admin Code, 255.4). (9) "Notification" refers to a telephone system feature that can send notice to a central location and optional additional location that a call has been made. Common notifications include "screen pops" with audible alarms for security desk computers using a client application, text messages for smartphones, and for administrators. Where feasible, notification should provide the telephone number or extension and location information of the telephone system handset from which the call is made. (10) "Telephone switch" refers to the function of switching inbound and outbound calls in order to allow multiple end-users to share a defined number of local exchange access lines or equivalent local exchange access line. (11) "Telephone system" refers to a legacy system, or equivalent system using Internet Protocol enabled service, comprised of common control units, interconnected telephone or handsets, control hardware and software, and adjunct systems that allow for advanced features such as call handling and transferring, conference calling, call metering and accounting, private and shared voice message boxes, direct inward/outward dialing. A telephone system, commonly referred to as a "multi-line telephone system" or MLTS, includes network and premises based systems such as Centrex and VoIP, as well as private branch exchange (PBX), Hybrid, and Key Telephone Systems (as classified by the Federal Communications Commission under part 68 of title 47, Code of Federal Regulations) and includes systems used, owned, or leased by governmental agencies and political subdivisions, for-profit businesses, and non-profit entities. (12) Any term not expressly defined in this rule has the meaning assigned in Commission Rule 252.7, Definitions. (c) A business service user that owns or controls a telephone system that provides outbound dialing capacity or access shall configure the telephone system to allow a person initiating a call on the system to directly access service by dialing in order the digits 9, 1, and 1 without an additional code, digit, prefix, postfix, or trunk-access code. All non-compliant telephone handsets that provide outbound dialing capacity or access must have immediately adjacent to the telephone the instructional sticker required in subsection (d)(7). (d) A business service user shall be granted a one-year waiver (September 1 - August 31) of the requirements of Kari's Law and this rule upon submission of an affidavit not later than September 1 of each year that provides: (1) name (legal and any D/B/A), address, and contact information of the business service user; (2) address of all locations within Texas served by a noncomplaint telephone system; (3) a narrative of efforts demonstrating a good faith attempt to reprogram or replace non-compliant telephone systems; (4) a statement that compliance with this rule is unduly and unreasonably cost prohibitive; (5) the manufacturer and model number of each non-compliant telephone system and the estimated costs to reprogram or replace each system; (6) a projected date for compliance with Kari's Law and this rule; and (7) confirmation that the business service agrees to or has placed an instructional sticker on or immediately adjacent to each noncompliant telephone handset instructing the user how to access service. The instructional sticker must be printed in at least 16-point boldface type, in a contrasting color using a font that is easily readable, and is written in English and Spanish. (e) A business service user's waiver request affidavit may be submitted electronically to or mailed to the appropriate address provided in the website link. (f) A business service user that provides residential or business facilities and owns or controls a telephone system that provides outbound dialing capacity or access shall configure the telephone system to provide notification when a person within a residential or business facility dials if the telephone system is able to be configured to provide the notification without an improvement to the system's hardware. The notification requirement is separate from and in addition to the requirement in Texas law that "9-1-1 service" connects a caller to the public safety answering point designated for the area from which the call is made. (g) A business service user in compliance with this rule is deemed a "third party or other entity involved in the providing of service" as that term is used to limit liability in , Texas Health and Safety Code. Filed with the Office of the Secretary of State on October 15, TRD Patrick Tyler General Counsel Commission on State Emergency Communications For further information, please call: (512) PART 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION CHAPTER 354. MEDICAID HEALTH SERVICES SUBCHAPTER F. PHARMACY SERVICES The Texas Health and Human Services Commission (HHSC) proposes amendments to , Prescriber Identification PROPOSED RULES October 30, TexReg 7505

4 Numbers; , Substitution of One Drug for Another in a Prescription; , Prescription Requirements; , Pharmacy Claims; , Addition of Drugs to the Texas Drug Code Index; , Review and Evaluation; and , Retention and Deletion of Drugs. HHSC also proposes new Title 1, Part 15, Chapter 354, Subchapter F, Division 4, , Exceptions in Disasters. Background and Justification The amended rules serve two purposes. Proposed amendments allow pharmacists to fill a 30-day refill of medications in certain disaster situations, as allowed by Senate Bill (S.B.) 460, 84th Legislature, Regular Session, Proposed amendments also replace the estimated acquisition cost (EAC) with the acquisition cost, which includes the National Average Drug Acquisition Cost (NADAC), long term care pharmacy acquisition cost (LTCPAC), and specialty pharmacy acquisition cost (SPAC), for drug ingredient reimbursement. The proposed rule changes related to acquisition cost only affect claims processed through the HHSC Vendor Drug Program (VDP), which includes fee-for-service (FFS) Medicaid and the Kidney Health Care, Children with Special Health Care Needs, and Texas Women's Health programs. Claims processed through managed care are not impacted by the proposed changes to acquisition cost. Concurrently, HHSC is proposing amendments to , , , , and ; and repealing of this title (relating to Purchased Health Services). The proposed amendments and repeal appear elsewhere in this issue of the Texas Register. HHSC also proposes new , Exceptions in Disasters, to clarify that HHSC will reimburse pharmacists for drugs dispensed under the conditions described by S.B Managed care organizations in Medicaid and the Children's Health Insurance Program (CHIP) must also adhere to proposed of this title, in accordance with (i) of this title (relating to Managed Care Organization Requirements), and of this title (relating to Applicability of Medicaid Managed Care Standards for Outpatient Pharmacy Services to CHIP). Reimbursement for Certain Drugs in Disasters S.B. 460 allows a pharmacist to dispense a 30-day supply refill of a prescription drug in a Governor-declared disaster without prescriber authorization if failure to refill the prescription might result in an interruption of a therapeutic regimen or create patient suffering; the disaster prohibits the pharmacist from being able to contact the practitioner; and the Texas State Board of Pharmacy has notified pharmacists that they may dispense up to a 30-day supply of a dangerous (i.e., prescription) drug. Medicaid Fee-For-Service Drug Reimbursement The General Appropriations Act (H.B. 1, 84th Legislature, Regular Session, 2015, Article II, HHSC, Rider 50) requires HHSC to achieve cost savings through initiatives such as increasing efficiencies in VDP. In a proposed Medicaid Pharmacy Outpatient Rule published by the Centers for Medicare & Medicaid Services (CMS) (CMS P) to amend 42 CFR part 447, subpart I, published on February 2, 2012, CMS proposes that states adopt an acquisition cost, such as NADAC, that more closely reflects pharmacies' overall acquisition costs and market conditions as the basis for state Medicaid pharmacy ingredient cost reimbursement. In 2014, HHSC contracted with Myers & Stauffer to conduct studies to identify the acquisition cost being paid by Texas pharmacies to procure drug products, determine how much it costs them to dispense medications per prescription, and evaluate the impact of the potential adoption of the new federal upper limit prices. Based on Myers & Stauffer's reports, HHSC is proposing the adoption of a reimbursement methodology using NADAC for drug ingredient reimbursement. For drugs without a NADAC rate, HHSC proposes the use of wholesale acquisition cost (WAC) minus a percentage for brand and generic drugs. The proposed rule amendments replace references to estimated acquisition cost with acquisition cost, but the adoption of the NADAC methodology is not reflected in the amendments, as the current rule allows for the use of NADAC. The current rule also allows for the use of WAC, as HHSC receives WAC from First Databank. In addition to the adoption of NADAC and WAC minus a percentage for certain drugs, HHSC also proposes to establish two new acquisition costs that are based on NADAC: LTCPAC and SPAC, to reimburse drug claims submitted by long term care pharmacies and specialty drug pharmacies respectively. These changes are reflected in the rule with the addition of LTCPAC and SPAC in the definition of acquisition cost. HHSC will no longer use direct price to chain pharmacy or the maximum allowable cost for multiple source drugs as acquisition costs. Furthermore, CMS suggests that moving from an estimated pricing methodology to one that is actual acquisition cost-based will impact the balance of overall pharmacy reimbursement, thereby requiring states to concurrently reevaluate the dispensing fee. While this change is not reflected in the proposed rule amendments, VDP did reevaluate and will increase the dispensing fee amount on the effective date of the proposed rule, based on Myers & Stauffer's cost of dispensing study. These adjustments will help offset the impact of the proposed ingredient drug pricing changes. Section-by-Section Summary Proposed amended adds a reference to proposed that allows for an exception during a disaster to the requirement that pharmacies must enter the identification number of the prescriber, as listed with the appropriate medical specialty board, on each claim. Proposed amended (a) removes outdated language and clarifies that substitution of one drug for another in a prescription must follow all state and federal rules and laws. Proposed amended (b) clarifies that pharmacies may dispense interchangeable biological products, as allowed by House Bill 751, 84th Legislature, Regular Session, 2015, and clarifies that HHSC pays pharmacy claims based on the acquisition cost rather than the estimated acquisition cost of the drug when generic equivalents are dispensed. Proposed deleted (c) removes the requirement that an authorized drug substitution be completely documented on the prescription, as this requirement now falls under the general requirement in subsection (a) of this section that substitutions must meet all state and federal rules and laws. Proposed amended adds subsection (c) to clarify that prescriptions filled in a disaster, under proposed new , are not subject to the prescription requirements in subsection (b) of this section. The amendments to this rule also include nonsubstantive corrections and language changes. 40 TexReg 7506 October 30, 2015 Texas Register

5 Proposed new states that HHSC will reimburse pharmacies for refill medications dispensed during a declared disaster without having prescriber authorization if certain conditions are met, and clarifies that pharmacists must follow state law and Texas State Board of Pharmacy rules pertaining to these situations. Proposed amended (a) removes a reference to the Direct Price to Chain Pharmacy (DPCP) price, since this price will no longer be used. Proposed amended (b) updates the name of the pharmacy provider procedures manual and adds an exception to the requirement that providers must dispense the quantity prescribed or ordered by the prescriber, since proposed new limits prescriptions dispensed during a declared disaster to 30 days. Proposed amended (e) replaces estimated acquisition cost with acquisition cost; clarifies that the acquisition cost may be determined by sources other than HHSC in accordance with 1 TAC ; and replaces the term "provider's dispensing fee" with "professional dispensing fee." Proposed amended (c)(2)(A)-(D) repeals the requirement that drug manufacturers submit to HHSC drug price changes requested in the Price Certification section of the Certification of Information and adds a requirement that drug manufacturers submit these drug price changes only when requested by HHSC, within 10 calendar days of receiving the request. Proposed amended (g) removes references to DPCP and adds definitions of long term care facility, long term care pharmacy, long term care pharmacy acquisition cost, specialty pharmacy, and specialty pharmacy acquisition cost. Proposed amended (b)(4) removes a reference to WEAC, DPCP, and DEAC being determined based on Reported Manufacturer Pricing and a review of published and non-published prices since VDP is adopting NADAC and WAC as the basis of cost. Proposed amended (2)(B) deletes a reference stating that the Commission establishes the cost of a drug in the event a cost for the drug is not reported to the Commission. Fiscal Note Greta Rymal, Deputy Executive Commissioner for Financial Services, has determined that during the first 5-year period the new rule and amended rules are in effect, there could be a fiscal impact to state government to implement the rules as proposed. The rule amendments related to S.B. 460 have the potential to increase costs of state government. The potential impact is dependent on declarations of disasters and on the quantity of additional prescriptions filled under disaster conditions described in the bill. Therefore, HHSC lacks sufficient data to provide an estimate of additional costs. There is no anticipated impact to the costs and revenues of local governments. Small and Micro-business Impact Analysis HHSC has determined that there will be no adverse effect on small businesses or micro-businesses to comply with the new rule and amended rules, as there is no requirement to alter current business practices as a result of the new rule and amended rules. The changes made by S.B. 460 permit but do not require pharmacies to provide the prescriptions described during a declared disaster. Public Benefit and Costs Kay Ghahremani, Associate Commissioner for Medicaid/CHIP, has determined that for each year of the first five years the new rule and amended rules are in effect, the public will benefit from the adoption of the rules. In the event of a declared disaster, pharmacies will be able to dispense certain medications without the required prescription on file and will ensure that individuals in need of medications will receive uninterrupted services. Also, implementation of the amended rules will enhance the accuracy of reimbursements for drug ingredient costs, thereby resulting in a more responsible and effective use of taxpayer dollars. Ms. Rymal has determined there are no anticipated economic costs to persons who are required to comply with the new rule and amended rules. There is no anticipated negative impact on local employment. Regulatory Analysis HHSC has determined that this proposal is not a "major environmental rule" as defined by of the Texas Government Code. A "major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure. Takings Impact Assessment HHSC has determined that this proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under of the Government Code. Public Comment Written comments on the proposal may be submitted to Stacey Johnston, Senior Policy Analyst, Vendor Drug Program, Health and Human Services Commission, P.O. Box 85200, Mail Code 2250, Austin, Texas ; by fax to (512) ; or by to [email protected] within 30 days of publication of this proposal in the Texas Register. Public Hearing A public hearing is scheduled from 10:00 to11:00 a.m. November 23, 2015, in the Brown-Heatly Public Hearing Room located at 4900 North Lamar Boulevard, Austin, Texas Persons requiring further information, special assistance, or accommodations should contact Kristine Dahlmann at (512) DIVISION 2. ADMINISTRATION 1 TAC Statutory Authority The amendment is proposed under Texas Government Code , which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code and Texas Government Code (a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. on PROPOSED RULES October 30, TexReg 7507

6 The proposed amendment affects Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal Prescriber Identification Numbers. Unless an exception is needed during a disaster, as described in of this subchapter (relating to Exceptions in Disasters), vendors [Vendors] must enter the identification number of the prescriber, as listed with the appropriate medical specialty board, on each claim. Filed with the Office of the Secretary of State on October 19, TRD Karen Ray Chief Counsel Texas Health and Human Services Commission For further information, please call: (512) DIVISION 3. MEDICATIONS 1 TAC Statutory Authority The amendment is proposed under Texas Government Code , which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code and Texas Government Code (a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. The proposed amendment affects Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal Substitution of One Drug for Another in a Prescription. (a) Substitution of one drug for another in a prescription must follow all state and federal rules and laws. [Substitution is legal only if and when authorized by the the prescribing physician.] (b) When generic equivalents or interchangeable biological products are dispensed, the Health and Human Services Commission pays the claim based on the acquisition cost (AC), in accordance with of this title (relating to Legend and Nonlegend Medications) [the estimated acquisition cost of the drug used is claimed]. [(c) Substitution authorization must be completely documented on the prescription.] Filed with the Office of the Secretary of State on October 19, TRD Karen Ray Chief Counsel Texas Health and Human Services Commission For further information, please call: (512) DIVISION 4. LIMITATIONS 1 TAC , Statutory Authority The amendment and new rule are proposed under Texas Government Code , which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code and Texas Government Code (a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. The proposed rules affect Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal Prescription Requirements. (a) Payment for pharmaceuticals can be made only when these pharmaceuticals are prescribed by a practitioner licensed to prescribe legend drugs. (b) The pharmacist must ensure that the original prescription conforms to the Texas State Board of Pharmacy rules concerning the records to be maintained by a pharmacy. A signed prescription must be maintained in the dispenser's file and available for audit at any reasonable time. Telephone orders, where legal, must be documented in writing. The name of the prescriber and the signature of the dispensing pharmacist must be documented. If a pharmacy maintains prescription records in a data processing system, a hard copy of the prescription must be retained on file unless the daily log includes all the information required in [ ] of this title (relating to Pharmacy Claims). The provider must conform to all regulations issued by the Drug Enforcement Administration and Texas State Board of Pharmacy concerning the recording of prescriptions in a data processing system. (c) Pharmaceuticals dispensed in disasters under of this subchapter (relating to Exceptions in Disasters) are not subject to the requirements in subsection (b) of this section. (d) [(c)] Prescriptions [Effective April 1, 2008, prescriptions] for covered pharmaceuticals submitted to a pharmacy in written form are [will be] eligible for payment only if the prescription is executed on tamper-resistant prescription paper, as required by 1903(i)(23) of the Social Security Act (42 U.S.C. 1936b(i)(23)). (e) [(d)] The dispensing pharmacist must date the prescription and initial the refills Exceptions in Disasters. (a) In the case of a disaster, a pharmacy is reimbursed for dispensing a refill medication without prescriber authorization if: (1) failure to refill the prescription might result in an interruption of a therapeutic regimen or create patient suffering; (2) the natural or manmade disaster prohibits the pharmacist from being able to contact the prescribing practitioner or original filling pharmacy; (3) the Governor has declared a state of disaster under Chapter 418, Texas Government Code; and 40 TexReg 7508 October 30, 2015 Texas Register

7 (4) the Texas State Board of Pharmacy has notified pharmacies that pharmacists may dispense up to a 30-day supply of a dangerous drug, as defined in Chapter 483 of the Texas Health and Safety Code. (b) Protocols for drugs dispensed in disasters must conform to state law and Texas State Board of Pharmacy rules. Filed with the Office of the Secretary of State on October 19, TRD Karen Ray Chief Counsel Texas Health and Human Services Commission For further information, please call: (512) DIVISION 6. PHARMACY CLAIMS 1 TAC Statutory Authority The amendment is proposed under Texas Government Code , which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code and Texas Government Code (a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. The proposed amendment affects Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal Pharmacy Claims. (a) To receive payment from the Health and Human Services Commission (Commission), the provider must submit a pharmacy claim through the electronic adjudication system. A separate entry is submitted for each prescription or refill. For the original dispensing and each subsequent refill, the provider indicates on the corresponding pharmacy claim submitted to the Commission the usual and customary price, the purchasing method, and the National Drug Code (NDC). [All drug purchases through a central purchasing agreement or from a central purchasing entity must be billed to the Commission as Direct Price to Chain Pharmacy, as required by of this title (relating to Legend and Nonlegend Medications).] Claims received over 90 days after the date of service are rejected. For claims on behalf of an individual who has applied for Medicaid coverage but has not yet been assigned a recipient number on the date of service, the filing period does not commence until the date the individual has been assigned a number. The requirements in of this subchapter (relating to Prescription Requirements) are also waived for retroactive claims. The provider must ensure, however, that a prescription submitted for a prior eligibility period conformed to Texas State Board of Pharmacy and Commission regulations on the date of service, or a claim cannot be submitted. (b) Providers must dispense the quantity prescribed or ordered by the prescriber except as limited by the policies and procedures described in the Commission's pharmacy provider procedure manual, or as allowed by of this subchapter (relating to Exceptions in Disasters) [Pharmacy Provider Handbook]. Where the actual quantity dispensed deviates from the prescribed quantity, the provider must bill for the amount actually dispensed. The quantity of drugs must be entered in the metric decimal quantity field. The quantity shown as the metric decimal quantity unit must be calculated after referencing the pricing unit shown in the Texas Drug Code Index. (c) If all necessary information is not supplied, a claim will not be processed or paid. (d) The provider must submit claims as the prescription is dispensed through the on-line system. Providers who supply a large volume of medications to nursing facility recipients may submit these claims through their data transmission company after the point of sale. (e) Overcharged prescription claims are not denied. The Commission pays the appropriate drug cost. The appropriate drug cost is the [estimated] acquisition cost, as determined by the Commission or other source in accordance with of this title (relating to Legend and Nonlegend Medications), plus the professional [provider's] dispensing fee. The amount claimed and the amount paid are shown on the payment register. Filed with the Office of the Secretary of State on October 19, TRD Karen Ray Chief Counsel Texas Health and Human Services Commission For further information, please call: (512) DIVISION 7. TEXAS DRUG CODE INDEX--ADDITIONS, RETENTIONS, AND DELETIONS 1 TAC , , Statutory Authority The amendments are proposed under Texas Government Code , which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code and Texas Government Code (a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. The proposed amendments affect Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal Addition of Drugs to the Texas Drug Code Index. (a) A drug company that has a valid rebate agreement under 42 U.S.C. 1396r-8 may apply to the Health and Human Services Commission (Commission) to add a drug to the Texas Drug Code Index (TDCI). The term "drug company" includes any manufacturer, repackager, or private labeler. (b) To apply for the addition of a drug to the TDCI, a drug company must complete each section of the Certification of Informa- PROPOSED RULES October 30, TexReg 7509

8 tion for the Addition of a Drug Product to the TDCI provided by the Commission. (c) A drug company must also: (1) update the Commission with changes to formulation, product status, or availability; and (2) submit changes to the prices requested in the Price Certification section of the Certification of Information, if requested by the Commission, within 10 calendar days of receiving the request. [as follows:] [(A) send all price updates, except Average Manufacturer Price (AMP) updates, to the Commission by the 10th day of each month.] [(i) If a price change occurs on or before the 10th day of the month, send the price update by the 10th day of the next month (for example, if the price change occurs on August 8, the due date is the 10th day of September).] [(ii) If a price change occurs after the 10th day of the month, send the price update by the 10th day of the second month after the month in which the price change occurs (for example, if the price change occurs on August 11, the due date is the 10th day of October);] [(B) when submitting price updates, include current information for each price on the Certification of Information that changed during the preceding month;] [(C) update Average Manufacturer Price (AMP) prices quarterly; and] [(D) if required by the Commission, update pricing on a more frequent basis as circumstances warrant.] (d) Sources other than drug companies may request the addition of a drug not currently listed in the TDCI. If the request is not from a drug company, the Commission may request that the manufacturer submit a Certification of Information as described in subsection (b) of this section. (e) The drug company and other sources, if applicable, are entitled to receive notification of approved or denied Certifications of Information. If a Certification of Information is denied, the Commission will state the reasons for the denial. (f) Notwithstanding any other state law, pricing information reported by a drug company under this subchapter is confidential and must not be disclosed by the Commission, its agents, contractors, or any other State agency in a format that discloses the identity of a specific manufacturer or labeler, or the prices charged by a specific manufacturer or labeler for a specific drug, except as necessary to permit the Attorney General to enforce state and federal law. (g) Definitions. The following words and terms, when used in this chapter and in Chapter 355 of this title (relating to Reimbursement Rates), have the following meanings unless the context clearly indicates otherwise. (1) Average Manufacturer Price (AMP)--The average manufacturer price as defined in 42 USC 1396r-8(k)(1). (2) Average Wholesale Price (AWP)--The average wholesale price for a drug as published in a price reporting compendium such as First DataBank or Medispan. (3) Customary Prompt Pay Discount--Any discount off the purchase price of a drug routinely offered by the drug company to a wholesaler or distributor for prompt payment of purchased drugs within a specified time frame and consistent with customary business practices for payment. [(4) Direct Price to Chain Pharmacy--The amount paid by a chain pharmacy for a product when purchased directly from a drug company, whether delivered directly to a chain warehouse facility or indirectly through a wholesaler or a distributor. The price should be net of price concessions. In reporting this price point to the Commission, if the price is reported as a range, the weighted average of these prices, based on unit sales, must be included. The following prices should be excluded from this price point:] [(A) prices excluded from the determination of Medicaid Best Price at 42 C.F.R ; and] [(B) prices to entities participating in the Health Resources and Services Administration (HRSA) 340b discount program.] (4) [(5)] Direct Price to Long Term Care Pharmacy--The amount paid by a pharmacy servicing a long term care facility, including a nursing facility, assisted living facility, and skilled nursing facility. The price should be net of price concessions. In reporting this price point to the Commission, if the price is reported as a range, the weighted average of these prices, based on unit sales, must be included. The following prices should be excluded from this price point: (A) prices excluded from the determination of Medicaid Best Price at 42 C.F.R ; and (B) prices to entities participating in the Health Resources and Services Administration (HRSA) 340b discount program. (5) [(6)] Direct Price to Pharmacy--The amount paid for a product by a pharmacy when purchased directly from a drug company. This price should be net of Price Concessions. In reporting this price point to the Commission, if the price is reported as a range, the weighted average of these prices, based on unit sales, must be included. The following prices should be excluded from this price point: (A) prices excluded from the determination of Medicaid Best Price at 42 C.F.R ; (B) prices to entities participating in the Health Resources and Services Administration (HRSA) 340b discount program; and (C) [Direct Prices to a Chain Pharmacy or] Direct Prices to Long Term Care Pharmacy. (6) [(7)] Gross Amount Due--Has the meaning as defined by the National Council for Prescription Drug Programs. (7) Long term care facility--facility that provides long term care services, such as a nursing home, skilled nursing facility, assisted living facility, group home, hospice facility, or intermediate care facility for individuals with an intellectual disability or related condition (ICF/IID). (8) Long term care pharmacy--a pharmacy for which the total Medicaid claims for prescription drugs to residents of long term care facilities exceeds 50 percent of the pharmacy's total Medicaid claims per year. Long term care pharmacies are typically not open to the public for walk-in business. (9) Long term care pharmacy acquisition cost (LTCPAC)-- The acquisition cost determined by the Commission for a drug product purchased by a long term care pharmacy. (10) [(8)] "may apply to the Commission"--The act of applying to have a drug included on the TDCI. This includes completing the Certification of Information for the Addition of a New Drug Product to the Texas Drug Code Index, submitting National Drug Code (NDC) 40 TexReg 7510 October 30, 2015 Texas Register

9 changes, submitting price updates, and submitting additional package sizes for a drug that is already included on the TDCI. (11) [(9)] National Drug Code (NDC)--The 11-digit numerical code established by the U.S. Food and Drug Administration that indicates the labeler, product, and package size. (12) [(10)] Pharmacy--An entity with an approved community pharmacy license or an institutional pharmacy license. (13) [(11)] Price concession--an action by a manufacturer (other than a customary prompt-pay discount as defined in this section) that has the effect of reducing the net cost of a product to a purchaser. The term includes discounts, rebates, billbacks, chargebacks, or other adjustments to pricing or payment terms. Lagged price concessions must be accounted for in the Reported Manufacturer Pricing by operation of a 12-month average estimation methodology as described in 42 C.F.R For new, at launch products, if a manufacturer has forecasted price concessions, the initial Reported Manufacturer Pricing should reflect this internal business information. (14) [(12)] Price to Wholesaler/Distributor--The amount paid by a wholesaler or a distributor. The price should be net of price concessions. In reporting this price point to the Commission, if the price is reported as a range, the weighted average of these prices, based on unit sales, must be included. The following prices should be excluded from this price point: (A) prices excluded from the determination of Medicaid Best Price at 42 C.F.R ; and (B) prices to entities participating in the Health Resources and Services Administration (HRSA) 340b discount program. (15) [(13)] Reliable Sources--Sources including other state or federal agencies and pricing services, as well as verifiable reports by contracted providers and Vendor Drug Program formulary and field staff. (16) [(14)] Reported Manufacturer Pricing--Pricing information submitted to the Commission by a drug company on a Certification of Information, or in subsequent price updates as described in subsections (b) and (c) of this section. This includes: Average Wholesale Price, Average Manufacturer Price, Price to Wholesaler/Distributor, Direct Price to Pharmacy, [Direct Price to Chain Pharmacy,] and Direct Price to Long Term Care Pharmacy. If a drug company does not have a single price for a price point, it must report a range of prices. If a drug company reports a range of prices, it must also provide the weighted average of these prices based on unit sales. (17) Specialty pharmacy--a pharmacy that meets all of the following criteria: (A) total Medicaid claims for specialty drugs, as described in of this subchapter (relating to Specialty Drugs), exceeds 10 percent of the pharmacy's total Medicaid claims per year; (B) obtains volume-based discounts or rebates on specialty drugs from manufacturers or wholesalers; and (C) delivers at least 80 percent of dispensed prescriptions by shipment through the U.S. Postal Service or other common carrier to customers or healthcare professionals (including physicians and home health providers). (18) Specialty pharmacy acquisition cost (SPAC)--The acquisition cost determined by the Commission for a drug product purchased by a specialty pharmacy. [(15) Warehouse Purchases--Purchases through a central purchasing agreement or from a central purchasing entity. Warehouse purchases will be reimbursed at Direct Price to Chain Pharmacy.] (19) [(16)] Weighted AMP (Average Manufacturer Price)- -The Weighted AMP (Average Manufacturer Price) as contemplated in 42 U.S.C. 1396r-8(b)(3) and (e), and as reported by the Centers for Medicare & Medicaid Services. (20) [(17)] Wholesaler Cost--The net cost of a product to a wholesaler; equivalent to Price to Wholesaler/Distributor and cost to wholesaler Review and Evaluation. (a) The Health and Human Services Commission (Commission) reviews Certifications of Information to determine the need for a drug to be added to the Texas Drug Code Index and to determine the need for restrictions, when appropriate. In determining need, the Commission considers the following: (1) expansion of the prescriber's armamentarium by a new drug entity or an additional multiple source drug; (2) the predominant use of the drug in an outpatient setting; (3) the cost of the drug to pharmacies compared to: (A) relevant costs as published in price reporting compendia; (B) the drug company's prices for the drug in other packaging sizes; (C) the Average Manufacturer Price (AMP) as defined by 42 U.S.C. 1396r-8(k), as amended; and (D) other generically equivalent drug products; and (4) whether the drug is part of a category that is subject to inclusion in a preferred drug list (PDL) under of this division (relating to Preferred Drug List). If a drug is subject to inclusion in the PDL, the manufacturer or labeler's provision of supplemental rebates will be considered when determining whether the product is subject to prior authorization. (b) The Commission may return a Certification of Information for any of the following reasons: (1) discovery of false, erroneous, or incomplete information or documentation in the Certification of Information; (2) failure of the drug company to provide the Commission with documentation of the: (A) approved New Drug Application or Abbreviated New Drug Application, if applicable; or (B) Food and Drug Administration (FDA) approval for marketing; (3) failure of the drug company to provide the Commission with the National Drug Code, as defined by and filed with the FDA, for the drug product as shown on the drug product container sold to the pharmacy; or (4) failure of the drug company to provide the Commission with current prices for the pricing points on the Certification of Information. [The Wholesale Estimated Acquisition Cost, Direct Price to Chain Pharmacy, and Direct Estimated Acquisition Cost are determined based on Reported Manufacturer Pricing and a review of published and non-published prices.] (c) The Commission may deny a request if it determines that the drug is included in one or more of the following classes: PROPOSED RULES October 30, TexReg 7511

10 (1) amphetamines, when used for weight loss, and obesity control drugs; (2) appliances; (3) cosmetics; (4) DESI-ineffective products; (5) diagnostic aids; (6) durable medical equipment (rental or purchase); (7) elastic stockings; (8) experimental drugs; (9) fertility drugs; (10) first aid supplies; (11) immunizing agents; (12) irrigating sets; (13) IV sets; (14) medical devices; (15) medical supplies; (16) oxygen; (17) products unsuitable for use outside of physician offices or health care facilities; (18) shampoos, unless medicated for parasite control; (19) skin lotions and creams (nonlegend cosmetic types); (20) soaps and soap substitutes; (21) supports and suspensories; (22) syringes and needles; (23) unit-dose or convenience packaging; (24) vitamin and antianemia combinations; (25) medical foods; and/or (26) nutritional supplements Retention and Deletion of Drugs. The Health and Human Services Commission (Commission) reviews the Texas Drug Code Index to evaluate the need for retaining or deleting drugs according to the following criteria. (1) If the drug company fails to remove from pharmacies any drug recalled by the Food and Drug Administration (FDA) or fails to meet other federal requirements, the Commission has the right to request that the U.S. Department of Health and Human Services (HHS) allow deletion of the drug. If the drug company repeatedly fails to meet FDA or other federal requirements, the Commission may request permission to delete all drugs manufactured by the company. (2) The Commission may request that HHS allow deletion of a drug if: (A) the drug company or companies' actions with respect to a drug violate state or federal law; or (B) the drug company fails to provide to the Commission the information required under (c) of this division (relating to Addition of Drugs to the Texas Drug Code Index). [If the Commission retains a drug for which the cost was not reported, the Commission establishes the cost.] (3) The Commission may delete a legend drug if the same drug becomes available as an over-the-counter drug. (4) Effective upon notification, the Commission deletes discontinued or permanently recalled drugs. This provision applies to: (A) drugs permanently recalled by the manufacturer; (B) drugs permanently recalled by the FDA; and (C) drugs no longer manufactured. (5) The Commission deletes drugs for which federal matching funds are no longer available. (6) The Commission may delete a drug if: (A) there is no federal rebate for the drug; (B) the drug no longer meets the definition of a covered, outpatient drug; of drugs; or (C) the drug has been designated to an excludable class (D) the classification of the drug changes to a class listed in (c) of this division (relating to Review and Evaluation). Filed with the Office of the Secretary of State on October 19, TRD Karen Ray Chief Counsel Texas Health and Human Services Commission For further information, please call: (512) CHAPTER 355. REIMBURSEMENT RATES SUBCHAPTER J. PURCHASED HEALTH SERVICES DIVISION 28. PHARMACY SERVICES: REIMBURSEMENT The Texas Health and Human Services Commission (HHSC) proposes to amend , Legend and Nonlegend Medications; , Brand-Name Drugs; , Reimbursement for Compound Prescriptions; , 340B Covered Entities; and , Dispensing Fee, to replace the estimated acquisition cost (EAC) with the acquisition cost, which includes the National Average Drug Acquisition Cost (NADAC), long term care pharmacy acquisition cost (LTCPAC), and specialty pharmacy acquisition cost (SPAC), for drug ingredient reimbursement. HHSC also proposes to repeal , Texas Maximum Allowable Cost, to delete the Texas Maximum Allowable Cost drug pricing methodology. These proposed rule changes only affect claims processed through the HHSC Vendor Drug Program (VDP), which includes fee-for-service (FFS) Medicaid and the Kidney Health Care, Children with Special Health Care Needs, and Texas Women's Health programs. 40 TexReg 7512 October 30, 2015 Texas Register

11 Concurrently, HHSC is proposing amendments to , , , , and of this title (relating to Pharmacy Services). The proposed amendments appear elsewhere in this issue of the Texas Register. Background and Justification The General Appropriations Act (House Bill 1, 84th Legislature, Regular Session, 2015, Article II, HHSC, Rider 50) requires HHSC to achieve cost savings through initiatives such as increasing efficiencies in VDP. In a proposed Medicaid Pharmacy Outpatient Rule published by the Centers for Medicare & Medicaid Services (CMS) (CMS P) to amend 42 CFR part 447, subpart I, published on February 2, 2012, CMS proposes to replace estimated acquisition cost with actual acquisition cost as the basis for state Medicaid pharmacy ingredient cost reimbursement. In 2014, HHSC contracted with Myers & Stauffer to conduct studies to identify the acquisition cost being paid by Texas pharmacies to procure drug products, determine how much it costs them to dispense medications per prescription, and evaluate the impact of the potential adoption of the new federal upper limit prices. Myers & Stauffer recommended the adoption of a reimbursement methodology using the National Average Drug Acquisition Cost (NADAC) for drug ingredient reimbursement. For drugs without a NADAC rate, the use of wholesale acquisition cost (WAC) minus a percentage for brand and generic drugs was recommended. Based on Myers & Stauffer's reports, HHSC also proposes to establish two new acquisition costs that are based on NADAC, long term care pharmacy acquisition cost and specialty pharmacy acquisition cost, to reimburse drug claims submitted by long term care pharmacies and specialty drug pharmacies. In addition, CMS suggests that moving from an estimated pricing methodology to one that is actual acquisition cost-based will impact the balance of overall pharmacy reimbursement, thereby requiring states to concurrently reevaluate the dispensing fee. VDP did reevaluate and will increase the dispensing fee amount on the effective date of the proposed rule, based on Myers & Stauffer's cost of dispensing study. These adjustments will help offset the impact of the proposed ingredient drug pricing changes and are included in the proposed rule's fiscal impact. The proposed rule amendments incorporate these recommendations, in addition to making updates to outdated language and repealing language that is no longer applicable to the program. Section-by-Section Summary Proposed amended (a) adds nonlegend drugs because reimbursement for nonlegend drugs will be identical to reimbursement for legend drugs. Proposed amended (a)(1), (b), (b)(1), and (b)(2) replaces HHSC's best estimate of acquisition cost (EAC) with acquisition cost (AC). Proposed amended (a)(1) also reflects the proposed change to , which renames "dispensing fee" to "professional dispensing fee." Proposed deleted (b)(1)(C) removes direct price to chain pharmacy (DPCP) from the definition of AC, as the DPCP methodology will no longer be used. Proposed deleted (b)(1)(D) removes maximum allowable cost (MAC) for multiple source drugs from the definition of AC, as the MAC methodology for multiple source drugs will no longer be used. Proposed new (b)(1)(C) adds long term care pharmacy acquisition cost (LTCPAC) to the definition of AC. Proposed new (b)(1)(D) adds specialty pharmacy acquisition cost (SPAC) to the definition of AC. Proposed deleted (b)(3) removes the requirement that all drug purchases through a central purchasing agreement or from a central purchasing entity must be billed to HHSC as DPCP. The rule is renumbered. Proposed amended (b)(3) adds LTCPAC and SPAC to the list of acquisition costs and clarifies that WEAC, LTCPAC, and SPAC may be established by entities other than HHSC. Proposed deleted (b)(5) removes the requirement that WEAC may not exceed the Wholesaler Cost plus an amount representing wholesaler operating costs and profits, as NADAC includes wholesaler operating costs and profits. The rule is renumbered. Proposed deleted (b)(7) removes the reference to DPCP because this methodology will no longer be used. Proposed deleted (c) removes a subsection related to nonlegend drugs, because (a) and (b) now apply to nonlegend drugs. The rule is re-lettered. Proposed repealed is deleted because Texas Maximum Allowable Cost (MAC) will no longer be used. Proposed amended (a) removes the reference to maximum allowable cost, as this will no longer be used; clarifies that physicians who want to dispense a brand name for a prescription for a multisource drug must write the phrase "brand necessary" on the prescription; and clarifies that a pharmacy provider must enter "1" in the field rather than "6" for "Dispense as Written." Proposed new (c) includes existing language that is in proposed repealed and clarifies that a pharmacy provider that dispenses a brand name drug that is subject to a NADAC generic reimbursement limit and bills HHSC for the service must accept Medicaid reimbursement as payment in full. Proposed amended replaces the estimate of acquisition cost with acquisition cost, makes a non-substantive change to replace "the department" with HHSC, and renames "dispensing fee" to "professional dispensing fee." Proposed amended (c) is amended to remove a reference to Texas MAC and adds the term "professional" to dispensing fee to align the term with the proposed amendments in Proposed amended adds "professional" to the rule title and corresponding sections within the rule and removes the reference to MAC. The rule is renumbered to reflect these amendments. Proposed amended (a) adds a definition for "acquisition cost," deletes a definition for "estimated acquisition cost," adds a reference to 42 C.F.R in the definition for "professional dispensing fee," and clarifies that the definition of "professional dispensing fee" includes the pharmacist's professional services. Proposed amended (b) eliminates unnecessary verbiage from the rule and adds the term "professional" to dispensing fee. PROPOSED RULES October 30, TexReg 7513

12 Proposed deleted (c) removes the language that allows HHSC to make inflation adjustments, as this practice was not required by law and has not been undertaken. The rule is re-lettered. Proposed amended (e) adds the term "professional" to dispensing fee to align the term with the proposed amendments in Fiscal Note Greta Rymal, Deputy Executive Commissioner for Financial Services, has determined that during the first 5-year period the amended and repealed rules are in effect, there will be a net reduction of costs to state government. The anticipated cost reduction results from decreased costs for drug acquisition, net of a small increase to dispensing fees implemented concurrently, as discussed in the Background and Justification section of the preamble. The expected savings are ($676,327) General Revenue (GR) (($1,577,623) All Funds (AF)) for state fiscal year (SFY) 2016, ($263,261) GR (($608,133) AF) for SFY 2017, ($234,269) GR (($540,663) AF) for SFY 2018, ($266,497) GR (($615,040) AF) for SFY 2019, and ($304,914) GR (($703,701) AF) for SFY The costs and revenues of local governments will not be affected. Small Business and Micro-business Impact Analysis Ms. Rymal has also determined that there may be an effect on small businesses or micro businesses to comply with the amended rules. There are an estimated 1,231 pharmacies operating that qualify as small businesses or micro-businesses. HHSC expects the individual impact to these small businesses and micro-businesses to be small; totaling around $41.39 per year. There are no alternative methods of achieving the purpose of the proposed rule that are consistent with the health, safety, environmental, and economic welfare of the state. Public Benefit and Costs Kay Ghahremani, Associate Commissioner for Medicaid/CHIP, has determined that for each year of the first five years the amended rules are in effect, the public will benefit from the adoption of the rules. HHSC anticipates that enforcement of the amended rules as proposed will enhance the accuracy of reimbursements for drug ingredient costs thereby resulting in a more responsible and effective use of taxpayer dollars. Ms. Rymal has determined there are no anticipated economic costs to persons who are required to comply with the amended rules. There is no anticipated negative impact on local employment. Regulatory Analysis HHSC has determined that this proposal is not a "major environmental rule" as defined by of the Texas Government Code. A "major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure. Takings Impact Assessment HHSC has determined that this proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under of the Government Code. Public Comment Written comments on the proposal may be submitted to Stacey Johnston, Senior Policy Analyst, Vendor Drug Program, Health and Human Services Commission, P.O. Box 85200, Mail Code 2250, Austin, Texas ; by fax to (512) ; or by to [email protected] within 30 days of publication of this proposal in the Texas Register. Public Hearing A public hearing is scheduled from 8:45 to 9:45 a.m. on November 23, 2015, in the Brown-Heatly Public Hearing Room located at 4900 North Lamar Boulevard, Austin, TX Persons requiring further information, special assistance, or accommodations should contact Kristine Dahlmann at (512) TAC , , Statutory Authority The amendments are proposed under Texas Government Code , which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code (and Texas Government Code (a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas). The proposed amendments affect Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal Legend and Nonlegend Medications. (a) Legend and nonlegend drug reimbursement. A pharmaceutical provider is reimbursed for legend and nonlegend drugs based on the lesser of the: (1) acquisition cost (AC) plus the Health and Human Services Commission's (HHSC's) [best estimate of acquisition cost (EAC) plus HHSC's] currently established professional dispensing fee per prescription; (2) usual and customary price charged the general public; or (3) Gross Amount Due, if provided. (b) Acquisition cost (AC). The AC is an [Estimated acquisition cost (EAC). The EAC is HHSC's best] estimate of prices generally and currently paid in the market. (1) The AC [EAC] is defined as the: (A) wholesale estimated acquisition cost (WEAC); (B) direct estimated acquisition cost (DEAC), according to the pharmacist's usual purchasing source and the pharmacist's usual purchasing quantity; (C) long term care pharmacy acquisition cost (LTC- PAC); or (D) specialty pharmacy acquisition cost (SPAC). [(C) direct price to chain pharmacy (DPCP); or] [(D) maximum allowable cost (MAC) for multiple source drugs.] 40 TexReg 7514 October 30, 2015 Texas Register

13 (2) The AC [EAC] is verifiable by invoice audit conducted by HHSC to include necessary supporting documentation that will verify the final cost to the provider. [(3) All drug purchases through a central purchasing agreement or from a central purchasing entity must be billed to HHSC as DPCP.] (3) [(4)] The WEAC, LTCPAC, and SPAC are [is] established [by HHSC] using market or government sources, which include, but are not limited to: (A) Reported Manufacturer Pricing; (B) First Databank; (C) Redbook; (D) Weighted AMP, as published by the Centers for Medicare & Medicaid Services (CMS); (E) National Average Drug Acquisition Cost (NADAC), as published by the CMS; or (F) Gold Standard. [(5) The WEAC may not exceed the Wholesaler Cost, as supplied by a drug company, plus an amount representing wholesaler operating costs and profits. Wholesaler operating conditions may be determined from information supplied to HHSC by drug companies, wholesalers, or other reliable sources. Exceptions to general pricing determinations may be made on certain drugs and/or drug categories based on information from these same sources.] (4) [(6)] The DEAC is established by HHSC using direct price information supplied by a drug company. Providers are reimbursed only at the DEAC on all drug products that are available from select manufacturers/distributors who actively seek and encourage direct purchasing. [(7) The DPCP is established by HHSC using price information supplied by a drug company.] [(c) Nonlegend drugs.] [(1) Reimbursement for nonlegend drugs is based on the lesser of the:] public;] [(A) usual and customary price charged to the general [(B) EAC, plus 50 percent of the EAC; or] [(C) Gross Amount Due, if provided.] [(2) No dispensing fee is added to the price of nonlegend drugs paid under this subsection, except as described in paragraph (3) of this subsection.] [(3) If 50 percent of the EAC exceeds the standard dispensing fee calculation, the nonlegend drug is reimbursed under subsection (a) of this section.] (c) [(d)] Public hearing. Notice of a public hearing to receive comments on proposed changes to general pricing determinations derived under this section will be published in the Texas Register. (d) [(e)] Definitions. The terms used in this section have the meanings as defined for the same terms in (g) of this title (relating to Addition of Drugs to the Texas Drug Code Index) Brand-Name Drugs. (a) Physicians[,] who want [to dispense] a brand name drug dispensed on a prescription for a multisource drug must [with a maximum allowable cost,] handwrite the phrase "Brand necessary" on the face of the prescription. This procedure enables payment for the drug at the more expensive brand name [estimated] acquisition cost. To indicate this certification (override) on the pharmacy claim form, the pharmacy provider must enter "1" ["6"] in the field for "Dispense as Written." For telephone orders involving physician overrides, a written prescription must be obtained from the prescribing physician within 30 days from the time the order was placed. (b) A physician override for a prescription is valid only for the life of the prescription. The life of the prescription is defined as the original dispensing and any authorized refills, not to exceed eleven refills or a twelve-month supply. The physician override cannot be forwarded or transferred to any other prescription for the same drug. (c) A pharmacy provider that dispenses a brand drug that is subject to a generic reimbursement and bills HHSC for the service must accept Medicaid reimbursement as payment in full. No additional dispensing fee or product cost amounts may be billed to the Medicaid recipient Reimbursement for Compound Prescriptions. Reimbursement for compounded prescriptions is based on [estimated] acquisition cost of the ingredients used, verifiable by invoice audit, plus HHSC's [the department's] currently established professional dispensing fee per prescription or the usual and customary price charged to the general public, whichever is lower. Only drugs listed in the latest revision of the Texas Drug Code Index are considered for reimbursement. There is no provision for a compounding fee over and above the professional dispensing fee B Covered Entities. (a) Scope. This section applies to each manufacturer of outpatient drugs that has executed an agreement with the Secretary of the United States Department of Health and Human Services under Section 340B of the Public Health Service Act (42 U.S.C. 256b). (b) Definitions. For purposes of this section, the following terms are defined as follows: (1) 340B covered entity--a health-care organization enrolled in the 340B Program. (2) 340B covered outpatient drug--a drug eligible for purchase through the 340B Program, as defined in 42 C.F.R and (3) 340B price--the maximum price that the United States Health Resources and Services Administration will allow a drug manufacturer to charge a 340B covered entity for a 340B covered outpatient drug purchased through the 340B program. The 340B price is also known as the "ceiling price." (4) 340B program--a drug-pricing program established under Section 340B of the Public Health Service Act (42 U.S.C. 256b) under which a manufacturer of covered outpatient drugs agrees that it will not charge a 340B covered entity more than the 340B price for a 340B covered outpatient drug. (5) HHSC--The Texas Health and Human Services Commission or its designee. (c) Reimbursement methodology. HHSC reimburses a 340B covered entity for a 340B covered outpatient drug purchased through the 340B program and dispensed to a patient of a 340B covered entity based on [the lower of] HHSC's estimate of the 340B price [or the maximum allowable cost in accordance with of this division (relating to Texas Maximum Allowable Cost)] plus a professional dispensing fee assigned by HHSC in accordance with of this division (relating to Dispensing Fee). HHSC establishes the estimate PROPOSED RULES October 30, TexReg 7515

14 of the 340B price using market or government sources, which include, but are not limited to: (1) Reported manufacturer pricing; (2) Weekly data from national drug pricing publishers; and (3) Quarterly data from the Centers for Medicare and Medicaid Services Professional Dispensing Fee. (a) The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise. (1) Acquisition Cost--As defined in of this division (relating to Legend and Nonlegend Medications). (2) [(1)] Delivery Incentive--An incentive for offering no-charge prescription delivery to all Medicaid recipients, in accordance with subsection (d) of this section. (3) [(2)] Professional Dispensing Fee--The portion of the reimbursement paid to a pharmacy under of this division [(relating to Legend and Nonlegend Medications)], in accordance with 42 C.F.R and 42 C.F.R , to provide a reasonable payment for the cost of dispensing a prescription drug, including the pharmacist's professional services, and which may include incentive amounts for providers that qualify under this section. [(3) Estimated Acquisition Cost--As defined in of this division and of this division (relating to Texas Maximum Allowable Cost).] (4) Fixed Component--A component that provides the base reimbursement to a pharmacy for the cost of dispensing a prescription; it includes reimbursement for professional services costs and overhead costs. (5) Preferred Generic Incentive--An incentive to fill a Medicaid prescription with a premium preferred generic drug for which a drug manufacturer has agreed to pay a supplemental rebate. (6) Variable Component--A component that is expressed as a percentage of the [estimated] acquisition cost, and provides an incentive to a pharmacy to stock and dispense higher-cost drugs by covering additional expenses incurred when providing those drugs. (b) The Texas Health and Human Services Commission (HHSC) reimburses contracted Medicaid pharmacy providers according to the following dispensing fee formula: Professional Dispensing Fee = ((([Estimated] Acquisition Cost + Fixed Component) divided by (1 - the percentage used to calculate the Variable Component)) - [Estimated] Acquisition Cost) + Delivery Incentive + Preferred Generic Incentive. [(c) An inflation adjustment may be made, subject to the availability of appropriated funds, on the first day of the biennium. The projected rate of inflation is based upon a forecast of the Personal Consumption Expenditures (PCE) chain-type price index as the general cost inflation index. HHSC uses the lowest feasible PCE forecast consistent with the forecasts of nationally recognized sources available to HHSC at the time proposed reimbursement is prepared for public dissemination and comment.] (c) [(d)] A delivery incentive is paid to approved providers who certify in a form prescribed by HHSC that the delivery services meet minimum conditions for payment of the incentive. These conditions include: making deliveries to individuals rather than just to institutions, such as nursing homes; offering no-charge prescription delivery to all Medicaid recipients requesting delivery in the same manner as to the general public; and publicly displaying the availability of prescription delivery services at no charge. The delivery incentive is to be paid on all Medicaid prescriptions filled for legend drugs. This delivery incentive is not to be paid for over-the-counter drugs that are prescribed as a benefit of this program. (d) [(e)] Preferred generic drugs are subject to the Preferred Drug List requirements. (e) [(f)] The total professional dispensing fee will not exceed $200 per prescription. (f) [(g)] Notwithstanding other provisions of this section, HHSC may adjust the dispensing fee to address budgetary constraints in accordance with the provisions of of this division (relating to Establishment and Adjustment of Reimbursement Rates by the Health and Human Services Commission). Filed with the Office of the Secretary of State on October 19, TRD Karen Ray Chief Counsel Texas Health and Human Services Commission For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Health and Human Services Commission or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) Statutory Authority The repeal is proposed under Texas Government Code , which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code (and Texas Government Code (a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas). The proposed repeal affect Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal Texas Maximum Allowable Cost. Filed with the Office of the Secretary of State on October 19, TRD Karen Ray Chief Counsel Texas Health and Human Services Commission For further information, please call: (512) TexReg 7516 October 30, 2015 Texas Register

15 TITLE 7. BANKING AND SECURITIES PART 1. TEXAS FINANCE COMMISSION OF CHAPTER 4. CREDIT CARD SURCHARGE APPEAL PROCEDURES SUBCHAPTER A. CONTESTED CASE PROCEDURE FOR VIOLATIONS ON OR BEFORE AUGUST 31, TAC The Finance Commission of Texas (commission) proposes amendments to Title 7 of the Texas Administrative Code, 4.105, concerning the rules applicable to a contested case hearing on a credit card surcharge violation occurring on or before August 31, In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC 9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC 155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to 9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in 9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 1 (relating to the Finance Commission of Texas), contains one reference to the Chapter 9 rules of procedure concerning credit card surcharge violations regulated by the OCCC under Chapter 4. Section 4.105(b) identifies the rules of procedure applicable to a contested case hearing regarding a credit card surcharge violation occurring on or before August 31, The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to 9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas or by to [email protected]. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 14, 339, and Title Contested Case on Credit Card Surcharge. (a) (No change.) (b) A contested case under this chapter is subject to Texas Government Code, Chapter 2001, and the rules of procedure applicable under 9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)]. To the extent of any conflict between this chapter and Chapter 9, this chapter prevails. (c) (No change.) Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Consumer Credit Commissioner Finance Commission of Texas For further information, please call: (512) PROPOSED RULES October 30, TexReg 7517

16 CHAPTER 9. RULES OF PROCEDURE FOR CONTESTED CASE HEARINGS, APPEALS, AND RULEMAKINGS The Finance Commission of Texas (commission) proposes amendments to 7 TAC Chapter 9, concerning Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings. Specifically, the amendments are proposed in 9.1, concerning Definitions and Interpretation; Severability; and in 9.12, concerning Default in a contested case subject to the rules under Chapter 9, Subchapter B. In general, the purpose of the proposed amendments is to update and clarify certain contested case procedural rules applicable to the finance agencies (Texas Department of Banking, Texas Department of Savings and Mortgage Lending, and Office of Consumer Credit Commissioner). Regarding 9.1, the purpose of the proposed amendments is to clarify the rules applicable to different forums in which contested cases may be heard for individuals and entities regulated by the finance agencies. Regarding 9.12, the purpose of the proposed amendments is to clarify that the finance agencies may informally dispose of contested cases by default, as authorized by Section of the Texas Government Code. The finance agencies circulated drafts of the proposed amendments to interested stakeholders and held a stakeholders meeting where the background of the amendments was provided. The following background information relates to the proposed amendments in 9.1, regarding contested case forums. Some of the finance agencies have contracted with a licensed attorney to serve as an administrative law judge and conduct contested case hearings. This administrative law judge used by the Texas Department of Savings and Mortgage Lending (SML) and by the Office of Consumer Credit Commissioner (OCCC) elected to not renew the contract for the 2016 fiscal year. In order to provide an appropriate, timely, and transparent forum to persons subject to SML and OCCC regulation, these two finance agencies entered into contracts with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. In contrast, the Texas Department of Banking has contracted with another administrative law judge for this fiscal year. At present, contested cases for the Texas Department of Banking will continue to be governed by the rules contained in 7 TAC Chapter 9. With regard to the SML and the OCCC, the law requires that SOAH's rules of procedure control a contested case conducted by SOAH. In order to clarify the application of procedural rules in various forums, the proposed amendments have been prepared for persons regulated by the SML and the OCCC whose cases may be heard by SOAH. Additionally, should any of the finance agencies have the need to utilize a different contested case forum in the future, the proposed amendments will provide the flexibility for contested cases to be heard by either a contracted administrative law judge or by SOAH. The proposed amendments to 9.1 add new subsection (a), which states that the rules provided in Chapter 9 govern contested case hearings conducted by an administrative law judge employed or contracted by one of the finance agencies. The amendments to 9.1 further explain that contested case hearings conducted by SOAH are governed by SOAH's procedural rules. The proposed amendments also revise the title of the rule to provide a more appropriate description of the amended content of the rule. The new title of "Application, Construction, and Definitions" is proposed to replace the current title of 9.1, "Definitions and Interpretation; Severability." In addition, the existing subsections have been relettered accordingly. The following background information relates to the proposed amendments in 9.12, concerning default in a contested case subject to the rules under Chapter 9, Subchapter B. A contested case is a formal proceeding to determine the legal rights, duties, or privileges of licensees and applicants after an opportunity for an adjudicative hearing. The proceeding is governed by formal rules of procedure, which allow an agency to dispose of a case by default. The finance agencies expend considerable resources preparing for and conducting contested case hearings where the respondent fails to appear at the hearing, or withdraws its request shortly before the hearing date. These costs are ultimately passed on to licensees and applicants in the form of higher license and renewal fees. During the last session, the Texas Legislature expressed further support for disposing of cases by default according to the individual agency's rules. Therefore, the proposed amendments to 9.12 further the Legislature's directive to conserve state resources where a party does not intend to proceed with a hearing. The proposed amendments to 9.12 clarify the finance agencies' authority to informally dispose of a contested case by default. The amendments add a single sentence to the end of the existing rule. The additional sentence states that a finance agency may, as an alternative to conducting a hearing when a party fails to appear, informally dispose of the matter as permitted by Section of the Texas Government Code, without the necessity of a hearing. This amendment is consistent with Section (4) of the Texas Government Code, as well as the Finance Commission's existing default procedures found within the current language of 9.12 (deeming the defaulting party to have waived the right to contest the evidence, cross-examine the witnesses, and present an affirmative case or defense), and the default procedures of the State Office of Administrative Hearings found at 1 Texas Administrative Code Charles Cooper, Banking Commissioner, as Executive Director of the Finance Commission, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years the amendments are in effect, Commissioner Cooper has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. 40 TexReg 7518 October 30, 2015 Texas Register

17 To be considered, comments on the proposed amendments must be submitted no later than 5:00 p.m. on November 29, Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas Comments may also be submitted by to SUBCHAPTER A. GENERAL 7 TAC 9.1 The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are also proposed under specific rulemaking authority in the substantive statutes administered by the agencies. Texas Finance Code, and (a)(5) authorize the finance commission to adopt rules necessary or reasonable to facilitate the fair hearing and adjudication of matters before the banking commissioner and the finance commission. Texas Finance Code, (a)(1) authorizes the finance commission to adopt rules necessary to implement and clarify Chapter 151. Texas Finance Code, (b) authorizes the department of banking to adopt rules concerning matters incidental to the enforcement and orderly administration of Chapter 154. Texas Finance Code, authorizes the finance commission to adopt rules applicable to state savings associations or to savings banks. Texas Finance Code, (a)(2) authorize the savings and mortgage lending commissioner and the finance commission to adopt procedural rules for deciding applications filed with the savings and mortgage lending commissioner or the department of savings and mortgage lending. Texas Finance Code, authorizes the finance commission to adopt rules necessary for supervising the consumer credit commissioner and for ensuring compliance with Texas Finance Code, Chapter 14 and Title 4. Texas Finance Code, authorizes the consumer credit commissioner to adopt rules necessary for the enforcement of Texas Finance Code, Chapter 371. Texas Finance Code, authorizes the commission to adopt residential mortgage loan origination rules as provided by Chapter 156. Texas Finance Code, authorizes the commission to adopt rules to enforce Chapter 180. Texas Finance Code, authorizes the commission to adopt rules to enforce Chapter 393. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 154, 156, 157, 180, 339, 393, 394, and Title 4, and Texas Occupations Code, Chapter Application, Construction, and Definitions [Definitions and Interpretation; Severability]. (a) This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code. (b) [(a)] The same rules of construction that apply to interpretation of Texas statutes and codes, the definitions in Government Code, , and the definitions in subsection (c) [(b)] of this section govern the interpretation of this chapter. If any section of this chapter is found to conflict with an applicable and controlling provision of other state or federal law, the section involved shall be void to the extent of the conflict without affecting the validity of the rest of this chapter. (c) [(b)] The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: (1) Administrative law judge--the hearings officer employed by or contracted by an agency to conduct administrative hearings for the finance commission, the department of banking, the department of savings and mortgage lending, and the office of consumer credit commissioner. (2) Agency--The finance commission, the department of banking, the department of savings and mortgage lending, or the office of consumer credit commissioner. (3) Agency head(s)--finance commission members, the banking commissioner, the savings and mortgage lending commissioner, or the consumer credit commissioner, or a designee if authorized by law. (4) Applicant--A party seeking a license, registration, charter, or permit, or to amend its authority under an existing license, registration, charter or permit, or other action from an agency. (5) Protestant--A party opposing an application for a license, registration, charter, permit, or other action filed with an agency who has paid any filing fees required by an applicable law. (6) Respondent--A permittee, licensee, registrant, charter holder, or other party against whom a disciplinary proceeding is directed by an agency. Filed with the Office of the Secretary of State on October 16, TRD Charles Cooper Executive Director Finance Commission of Texas For further information, please call: (512) SUBCHAPTER B. CONTESTED CASE HEARINGS 7 TAC 9.12 The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are also proposed under specific rulemaking authority in the substantive statutes administered by the agencies. Texas Finance Code, and (a)(5) authorize the finance commission to adopt rules necessary or reasonable to facilitate the fair hearing and adjudication of matters before the banking commissioner and the finance commission. Texas Finance Code, (a)(1) authorizes the finance commission to adopt rules necessary to implement and clarify Chapter 151. Texas Finance Code, (b) authorizes the department of banking to adopt rules concerning matters incidental to the enforcement and orderly administration of Chapter 154. PROPOSED RULES October 30, TexReg 7519

18 Texas Finance Code, authorizes the finance commission to adopt rules applicable to state savings associations or to savings banks. Texas Finance Code, (a)(2) authorize the savings and mortgage lending commissioner and the finance commission to adopt procedural rules for deciding applications filed with the savings and mortgage lending commissioner or the department of savings and mortgage lending. Texas Finance Code, authorizes the finance commission to adopt rules necessary for supervising the consumer credit commissioner and for ensuring compliance with Texas Finance Code, Chapter 14 and Title 4. Texas Finance Code, authorizes the consumer credit commissioner to adopt rules necessary for the enforcement of Texas Finance Code, Chapter 371. Texas Finance Code, authorizes the commission to adopt residential mortgage loan origination rules as provided by Chapter 156. Texas Finance Code, authorizes the commission to adopt rules to enforce Chapter 180. Texas Finance Code, authorizes the commission to adopt rules to enforce Chapter 393. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 154, 156, 157, 180, 339, 393, 394, and Title 4, and Texas Occupations Code, Chapter Default. If, after served with notice in compliance with 9.11 of this title (relating to Notice and Initiation of Proceedings), a party fails to attend a hearing, the administrative law judge may proceed in that party's absence and, where appropriate, may issue a proposal for decision against that party. The proposal for decision shall be served upon the defaulting party and the party will be afforded the opportunity to contest the law as stated in the proposal for decision, but shall be deemed to have waived the right to contest the evidence, cross-examine the witnesses, and present an affirmative case or defense. In the alternative, an agency may informally dispose of the matter as permitted by of the Texas Government Code, without the necessity of a hearing. Filed with the Office of the Secretary of State on October 16, TRD Charles Cooper Executive Director Finance Commission of Texas For further information, please call: (512) PART 2. TEXAS DEPARTMENT OF BANKING CHAPTER 17. TRUST COMPANY REGULATION SUBCHAPTER B. EXAMINATION AND CALL REPORTS 7 TAC The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes amendments to 17.23, regarding trust company call reports. Finance Code (c) and (a) were amended effective September 1, 2015 by Sections 3 and 7 of S.B. 875 (Acts 2015, 84th Leg., R.S., Ch. 250, 3 and 7), which make confidential the statement of condition and income (call report) of an exempt trust company, and require the trust company's annual certification that it is maintaining the conditions and limitations of its exemption to be submitted with the company's call report. The statutory amendments further make clear that these provisions apply to all exempt trust companies, whether exempt under Finance Code or Proposed amendments to 17.23(b)(2) will revise the due date for an exempt trust company to file its call report from January 31 to April 30 of each year, and to simultaneously file its annual certification of exempt status required by Finance Code (a). Section 17.23(f) is proposed to be amended to incorporate the changes in law regarding confidentiality of call reports. Finally, conforming changes are proposed in 17.23(g)(2). Robert L. Bacon, Deputy Commissioner, Texas Department of Banking, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule. Mr. Bacon also has determined that, for each year of the first five-year period the section as proposed will be in effect, the public benefit anticipated as a result of enforcing this section is the enhanced ability of an exempt trust company to consult with accounting professionals before filing its annual reports and certifications. For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed, no adverse economic effect on small businesses or micro-businesses, and no difference in the cost of compliance for small businesses as compared to large businesses. To be considered, comments on the proposed amended section must be submitted no later than 5:00 p.m. on November 30, Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas Comments may also be submitted by to [email protected]. The amendments are proposed pursuant to Finance Code , which authorizes the commission to adopt rules to implement and clarify applicable law, and pursuant to Finance Code (b)(1), which empowers the commission to adopt rules requiring trust companies to file their statements of condition and income with the banking commissioner at specified intervals. Finance Code and are affected by the proposed amendments Call Reports. (a) (No change.) (b) Reporting requirements of trust companies. (1) (No change.) (2) Exempt [Family] trust companies. Each trust company that is exempt pursuant to Finance Code, or [and 40 TexReg 7520 October 30, 2015 Texas Register

19 , and of this title (relating to Exemptions for Trust Companies Administering Family Trusts),] shall file an annual call report with the banking commissioner no later than April 30 [January 31] of each year relating to the preceding calendar year, accompanied by its annual certification, required by Finance Code, (a), that the trust company is maintaining the conditions and limitations of its exemption. (3) (No change.) (c) - (e) (No change.) (f) Confidentiality. Call reports filed under subsection (b)(2) of this section are confidential as provided by [Pursuant to] Finance Code, (c)(2). Call [ (b) and (c) and , call] reports filed under subsection (b)(1) [(b) of this section] are public information except for those portions designated as confidential by the banking commissioner [to the extent that such reports are considered public records], and may be published or otherwise disclosed to the public. Special call reports filed pursuant to subsection (c) of this section and non-public portions of call reports filed pursuant to subsection (b) of this section are confidential, subject only to such disclosure as may be permitted by Finance Code, , et seq. or by of this title (relating to Confidential Information). (g) Reports containing significant errors and penalties for failure to file or for filing a report with false or misleading information. (1) (No change.) (2) Exempt [Family] trust companies. Failure of a trust company that is exempt pursuant to Finance Code, or [and , and of this title] to make, file, or submit a timely call report or a special call report as required by this section is grounds for revocation of its exempt status. (3) (No change.) Filed with the Office of the Secretary of State on October 16, TRD Catherine Reyer General Counsel Texas Department of Banking For further information, please call: (512) CHAPTER 21. TRUST COMPANY CORPORATE ACTIVITIES SUBCHAPTER B. TRUST COMPANY CHARTERING AND POWERS 7 TAC The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes amendments to 21.24, regarding exemptions for family trust companies. Finance Code and were amended effective September 1, 2015, by Sections 5 and 6 of S.B. 875 (Acts 2015, 84th Leg., R.S., Ch. 250, 5-6), to materially revise the requirements for exemption as a family trust company. In general, prior to September 1, 2015, a trust company could obtain an exemption from certain otherwise applicable requirements if it restricted its client services to individuals related within the fourth degree of affinity or consanguinity to an individual who controls the trust company, and to certain of their related interests. Effective September 1, 2015, the exemption is available to a trust company that serves only individuals related within the seventh degree to a shared common ancestor and their related interests, provided the trust company is wholly owned by family members, see Finance Code (a). Section specifies the information that must be contained in an application for exemption as a family trust company, and further specifies the specific provisions of the Trust Company Act (Finance Code, Title 3, Subtitle F), from which a trust company may request an exemption, subject to conditions or limitations imposed by the banking commissioner. Proposed amendments to Subsection (a) will clarify the definition of "family member" by eliminating ambiguities in Finance Code, (a - 1)(2), and define the term "key employee" as required by Finance Code, (a - 1)(1)(C). As proposed, 21.24(c) would be amended to delete existing paragraph (1) and renumber the subsequent paragraphs accordingly. An exempt family trust company is no longer required to request confidential treatment of its call report because Finance Code, (c), was amended effective September 1, 2015, to make such call reports confidential by law. Proposed new 21.24(f) would establish one year as a reasonable transition period for terminating services to a former key employee or to a formerly revocable trust that is no longer an eligible family client. The banking commissioner is proposed to be empowered to grant an extension of up to one year based on a finding that additional time is needed for the trust company to appropriately discharge its fiduciary duty to affected beneficiaries, notwithstanding its demonstrated good faith efforts to terminate the ineligible relationship. Proposed new 21.24(g) would extend the revised statutory exemption scheme to a family trust company that was granted exempt status prior to September 1, However, the control person named in its certificate of formation would be deemed to be the shared common ancestor for purposes of determining family client eligibility under Finance Code, , unless the trust company amends its certificate of formation to name a new shared common ancestor. Finally, the proposed amendments to that are not discussed in this preamble are nonsubstantive and proposed solely to conform the text to new law and the proposed, substantive amendments to Robert L. Bacon, Deputy Commissioner, Texas Department of Banking, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule. Mr. Bacon also has determined that, for each year of the first five-year period the section as proposed will be in effect, the public benefit anticipated as a result of enforcing this section is the clarification of highly complex and recently amended statutory standards to aid the industry in compliance. PROPOSED RULES October 30, TexReg 7521

20 For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed, no adverse economic effect on small businesses or micro-businesses, and no difference in the cost of compliance for small businesses as compared to large businesses. To be considered, comments on the proposed new section must be submitted no later than 5:00 p.m. on November 30, Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas Comments may also be submitted by to The amendments are proposed pursuant to Finance Code , which grants the commission authority to adopt rules to implement and clarify applicable law, and Finance Code (e)(2) - (4), which grants the commission authority to adopt rules (1) specifying the provisions of Finance Code, Title 3, Subtitle F that are subject to an exemption request, (2) establishing procedures and requirements for obtaining, maintaining, or revoking an exemption, and (3) defining or further defining terms used in Finance Code Finance Code and are affected by the proposed amendments Exemptions for Family Trust Companies [Administering Family Trusts]. (a) Definitions. Definitions in Finance Code, (a - 1), are incorporated herein by reference except for the term "family member." As used in this section and in Finance Code, Title 3, Subtitle F (the Trust Company Act), the following words and terms shall have the following meanings, unless the context clearly indicates otherwise: [Compliance required. Pursuant to Finance Code, and , a trust company, which does not transact business with the public, may request in writing that it be exempted from specified provisions of the Trust Company Act. The banking commissioner may grant the request in whole or in part if the trust company does not transact business with the public. A trust company does not transact business with the public if it acts as a corporate fiduciary for accounts in which all beneficiaries are related within the fourth degree of affinity or consanguinity to the person who controls the trust company. A trust company administering family trusts which request exemption from specified provisions of the Trust Company Act, must comply with this section.] (1) "Family" means individuals who are related within the seventh degree of affinity or consanguinity to a shared common ancestor. (2) "Family member" means each individual included in the definition of "family," provided that a foster child is considered the child of the foster parent and a person for whom a guardian was appointed before the person's 18th birthday is considered the child of the guardian. The term "family member" also includes the shared common ancestor. (3) "Key employee" means the president of the trust company, any of its officers in charge of a principal business unit, division or function (such as administration or finance), an officer who performs a policymaking function for the trust company, or another person who performs similar policymaking functions for the trust company. (b) Application for exemption. (1) Pursuant to Finance Code, and , a trust company may request in writing that it be exempted from specified provisions of the Trust Company Act, if it has only family clients, transacts business solely on behalf of family clients and their related interests, is wholly owned, directly or indirectly, legally or beneficially, by one or more family members, and does not hold itself out to the general public as a corporate fiduciary for hire. [A trust company administering family trusts which seeks exemption from specified provisions of the Trust Company Act, shall file an application, together with the appropriate filing fee required by 21.2 of this title (relating to Filing and Investigation Fees), with the banking commissioner. ] (2) The application must: (A) be accompanied by the appropriate filing fee required by 21.2 of this title (relating to Filing and Investigation Fees); (B) specify the specific exemptions requested and the reasons or justification for requesting the exemptions; and[. The application must also] (C) include a copy of the trust company's certificate of formation containing, or a proposed amendment to the certificate of formation that would cause it to [which must] contain, the following statement in its purposes clause: "The sole purpose for which the trust company is organized is to act as a corporate fiduciary for accounts in which all beneficiaries are related within the seventh [fourth] degree of affinity or consanguinity to (name of common ancestor), and their related interests to the extent permitted by the Texas Finance Code or applicable rules and regulations [person who controls the trust company)]." [(2) A person who has beneficial ownership of sufficient outstanding shares of a class of voting securities to constitute control of a state trust company may be designated as the control person for purposes of Finance Code, (a) and this section. Such identification of a beneficial shareholder as the controlling person is permissive and does not affect determinations of control made pursuant to Finance Code, ] (c) Exemption. Subject to conditions or limitations being imposed by the banking commissioner, a family trust company [administering family trusts] may request exemption from the following provisions of the Trust Company Act: [(1) the requirement of Finance Code, (c), providing that the report of assets portion of a statement of condition and income is a public record.] (1) [(2)] the requirement of Finance Code, (a), that five is the minimum number of directors, managers, or managing participants that can be specified in the certificate of formation, provided that the certificate of formation must specify the number of directors, managers, or managing participants, consistent with paragraph (2) [(3)] of this subsection; (2) [(3)] the requirement of Finance Code, (a), that the number of directors, managers, or managing participants of a trust company cannot be less than five or more than 25, the majority of whom must be residents of this state, provided that the board of a trust company seeking exemption under this section must consist of not fewer than three or more than 25 directors, managers, or managing participants, at least one of whom must be a resident of this state; (3) [(4)] the restrictions of Finance Code, (a) - (c), regarding transactions with management and affiliates; (4) [(5)] the limitations of Finance Code, , on investment in trust company facilities; (5) [(6)] the limitations of Finance Code, , on securities investments, provided that the exemption request must address each limitation and the reasons for exemption separately; 40 TexReg 7522 October 30, 2015 Texas Register

21 (6) [(7)] the restrictions of Finance Code, , regarding transactions in state trust company shares or participation shares; (7) [(8)] the limitations of Finance Code, , on other real estate investments; and (8) [(9)] the limitations of Finance Code, , regarding lending limit and lease financing transaction restrictions, provided that no loans may be made from a trust company's minimum restricted capital amount. (d) Notice to applicant. The banking commissioner shall issue a written notice as required by 21.4 of this title (relating to Required Information and Abandoned Filings) informing the applicant either that all filing fees have been paid and the application is complete and accepted for filing, or that the application is deficient and specific additional information is required. (e) Notice to clients [beneficiary]. A family trust company [administering family trusts] which has been granted an exemption under subsection (c) of this section must provide each family client [beneficiary of the family trust] with a copy of the exemption granted by the banking commissioner. The trust company must maintain an acknowledged receipt of such notice in its files. (f) Transition period for certain former family clients. Pursuant to Finance Code, (a - 1)(1)(C) and (I), a family trust company may continue providing services to a former key employee or a formerly revocable trust that is no longer an eligible family client for a period of one year after the date of the disqualifying event. The banking commissioner may grant an extension of up to one year in response to a written request if the commissioner determines that: (1) the trust company has acted diligently and in good faith in its efforts to terminate the disqualified relationship in a manner consistent with its fiduciary duties; and (2) additional time is needed to avoid harm to the affected beneficiaries and appropriately discharge the trust company's fiduciary duties with respect to the disqualified relationship. (g) Effect on existing family trust company. A family trust company with exemptions granted prior to September 1, 2015, under Finance Code, and , is not required to take any action to preserve its exemption as a result of changes in law made by Acts 2015, 84th Leg., R.S., Ch. 250, 5. However, unless and until any such family trust company amends its certificate of formation to name a new shared common ancestor, the control person named in its certificate of formation is considered to be the shared common ancestor for purposes of determining eligibility of family members under Finance Code, , and this section. Filed with the Office of the Secretary of State on October 16, TRD Catherine Reyer General Counsel Texas Department of Banking For further information, please call: (512) PART 5. OFFICE OF CONSUMER CREDIT COMMISSIONER CHAPTER 83. REGULATED LENDERS AND CREDIT ACCESS BUSINESSES The Finance Commission of Texas (commission) proposes amendments to the following sections of Title 7 of the Texas Administrative Code: , concerning the rules applicable to a regulated lender license application denial hearing; and , concerning the rules applicable to a credit access business license application denial hearing. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC 9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC 155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to 9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in 9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 83 contains two of these eight references. The proposed amendments replace these references with references to the rules of procedure made applicable by the amendment to 9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section (d) identifies the rules of procedure applicable to a regulated lender license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to 9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Section (d) identifies the rules of procedure applicable to a credit access business license application denial hearing. The PROPOSED RULES October 30, TexReg 7523

22 proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to 9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to and are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas or by to [email protected]. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. SUBCHAPTER A. RULES FOR REGULATED LENDERS DIVISION 3. APPLICATION PROCEDURES 7 TAC The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; Texas Finance Code, , which authorizes the commission to adopt residential mortgage loan origination rules as provided by Chapter 156; Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 180; and Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 393. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 156, 180, 393, and Title Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the affected applicant has 30 calendar days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under 9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner For further information, please call: (512) SUBCHAPTER B. RULES FOR CREDIT ACCESS BUSINESSES DIVISION 3. APPLICATION PROCEDURES 7 TAC The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; Texas Finance Code, , which authorizes the commission to adopt residential mortgage loan origination rules as provided by Chapter 156; Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 180; and Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 393. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 156, 180, 393, and Title Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the affected applicant has 30 calendar days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under 9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) 40 TexReg 7524 October 30, 2015 Texas Register

23 Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner For further information, please call: (512) SUBCHAPTER B. RULES FOR CREDIT ACCESS BUSINESSES The Finance Commission of Texas (commission) proposes amendments to , , , , , and and proposes new (repeal and replace), , , and in 7 TAC Chapter 83, Subchapter B, concerning Rules for Credit Access Businesses. In addition, the commission proposes the repeal of , (repeal and replace), and In general, the purpose of the proposal regarding these rules for credit access businesses is to implement changes resulting from the commission's review of Chapter 83, Subchapter B under Texas Government Code, The proposed amendments include clarifying changes regarding definitions, license applications, and fees. Proposed new sections outline examination authority and recordkeeping requirements, including a list of documents that credit access businesses are required to maintain, and relate to separation between credit access businesses and third-party lenders. Section is being proposed for repeal and being replaced with a reorganized rule regarding the review of criminal history. The content of current has been incorporated into proposed new Section concerning provisional licenses is being proposed for repeal, as this rule is no longer necessary. This is the first of two anticipated rule actions for credit access businesses. The agency anticipates that the second action, to be published in a later issue of the Texas Register, will include rule amendments on the following issues: (1) consumer disclosures, (2) reporting requirements, and (3) license transfers. The notice of intention to review 7 TAC Chapter 83, Subchapter B was published in the September 11, 2015, issue of the Texas Register (40 TexReg 6165). The commission received no comments in response to that notice. The agency circulated an early draft of proposed changes to interested stakeholders and received some informal precomments. Certain concepts recommended by the precommenters have been incorporated into this proposal, and the agency appreciates the thoughtful input provided by stakeholders. The individual purposes of the proposed amendments, new rules, and repeals are outlined in the paragraphs to follow. Section provides general definitions to be used throughout the chapter. The proposed amendments to this section contain definitions for the terms "multiple payment auto title loan," "multiple payment payday loan," "single payment auto title loan," and "single payment payday loan." The agency intends to apply these definitions for purposes of the requirements for recordkeeping (proposed ), data reporting (current ), and disclosures (current through ). Two precommenters expressed concern about these definitions. One precommenter recommended "deferred presentment transaction" instead of "payday loan," due to the limited uses of the phrase "payday loan" in Texas Finance Code, Chapter 393. However, the agency believes that the term "payday loan" is appropriate, because it is widely used by the industry, and Texas Finance Code, (2) specifies that the term "[d]eferred presentment transaction... is also referred to as a payday loan." The other precommenter recommended the terms "installment pay day loans" and "installment auto title loan" instead of terms beginning with "multiple payment," because the precommenter believed that this more closely corresponds to how the products are marketed. However, the agency has consistently used the phrases "multiple payment" and "multi-payment" in the rule for consumer disclosures at and the accompanying figures. A proposed amendment to (2)(A) amends the definition of "principal party" for sole proprietorships. The amendment removes the statement that proprietors include spouses with a community property interest. In addition, an amendment to (1)(A)(iv)(I) removes the requirement to disclose community property interests and documentation regarding separate property status, and replaces it with a requirement to disclose the names of the spouses of principal parties if requested. The agency currently spends considerable time requesting information from license applicants to determine the status of spouses' property interests, and explaining these concepts to applicants. These amendments will help streamline the licensing process. Proposed amendments to clarify the circumstances in which a licensee must notify the OCCC of changes to information in the original license application. The amendments specify that the requirement to provide updated information within 10 days applies before a license application is approved. Proposed new (b) provides that a licensee must notify the OCCC within 30 days if the information relates to the names of principal parties or third-party lenders, criminal history, regulatory actions, or court judgments. Proposed new (c) specifies that each applicant or licensee is responsible for ensuring that all contact information on file with the OCCC is current and correct, and that it is a best practice for licensees to regularly review contact information. A proposed amendment to (c) provides that a license applicant must pay a fee to a party designated by the Texas Department of Public Safety (DPS) for processing fingerprints, replacing a statement that the fee will be paid to the OCCC. This amendment conforms the rule to the method by which applicants currently provide fingerprint information through DPS's Fingerprint Applicant Services of Texas (FAST) program. A proposed amendment to (g)(1)(B) contains a technical correction for the method of calculating the volume-based portion of the annual assessment fee. Currently, the rule provides that the volume-based fee will not exceed "$0.03 per each $1,000 advanced... in accordance with the most recent quarterly report filing required by Texas Finance Code, " However, the total dollar amount of extensions of consumer credit is not part of the information the OCCC currently requests on the quarterly report. Rather, this information is requested on the annual report. For this reason, the proposed amendment specifies that the fee will be based on the most recent annual PROPOSED RULES October 30, TexReg 7525

24 report under This amendment is intended to provide technical clarification. Section is proposed for repeal because it is no longer necessary. The agency issued provisional licenses during 2012 (the first year in which credit access businesses were licensed), but no longer issues provisional licenses. Proposed amendments to clarify the agency's procedure for providing delinquency notices to licensees that have failed to pay an annual assessment fee. The amendments specify that notice of delinquency is considered to be given when the OCCC sends the notice by mail to the address on file with the OCCC as a master file address, or by to the address on file with the OCCC (if the licensee has provided an address). The amendments replace current language stating that notice is given upon mailing in a properly addressed envelope. Proposed new specifies the criminal history information collected by the OCCC, outlines factors the OCCC will consider when reviewing criminal history information, and describes grounds for denial, suspension, and revocation of a credit access business license. This section replaces the current and , which are proposed for repeal. Subsection (a) describes the OCCC's collection of criminal history record information from law enforcement agencies. Subsection (b) identifies the criminal history information that the applicant must disclose. Subsection (c) describes the OCCC's denial, suspension, and revocation based on crimes that are directly related to the licensed occupation of a credit access business. Subsection (c)(1) lists the types of crimes that the OCCC considers to directly relate to the duties and responsibilities of being a credit access business, including the reasons the crimes relate to the occupation, as provided by Texas Occupations Code, (a). Subsection (c)(2) contains the factors the OCCC will consider in determining whether a criminal offense directly relates to the duties and responsibilities of a licensee, as provided by Texas Occupations Code, Subsection (c)(3) provides the mitigating factors the OCCC will consider to determine whether a conviction renders an applicant or licensee unfit, as provided by Texas Occupations Code, Subsection (d) describes the OCCC's authority to deny a license application if it does not find that the financial responsibility, experience, character, and general fitness of the applicant are sufficient to command the confidence of the public and warrant the belief that the business will be operated lawfully and fairly, as provided by Texas Finance Code, (a). Subsection (e) explains that the OCCC will revoke a license on the licensee's imprisonment following a felony conviction, felony community supervision revocation, revocation of parole, or revocation of mandatory supervision, as provided by Texas Occupations Code, (b). Subsection (f) identifies other grounds for denial, suspension, or revocation, including convictions for specific offenses described by statutory provisions cited in the rule. Proposed new describes the OCCC's examination authority for credit access businesses. This section implements Texas Finance Code, (a)(3), which allows the commission to "adopt rules with respect to periodic examination" of credit access businesses by the agency, as well as Texas Finance Code, (b), which authorizes the commission to "adopt rules... to allow the commissioner to review, as part of a periodic examination, any relevant contracts between the credit access business and the third-party lender organizations with which the credit access business contracts to provide services." Subsection (a) provides that the OCCC may periodically examine each place of business of a licensee. Subsection (b) requires licensees to allow the OCCC to access their offices and make copies of records. Subsection (c) provides that the OCCC's examination authority includes the authority to examine third-party lender agreements. Subsections (d) and (e) allow the OCCC to take witness and records statements during an examination, and specifies the requirements of these statements. Unlike the other chapters of the Texas Finance Code that provide examination authority to the OCCC, Chapter 393 does not include express authority to take oaths. For this reason, under subsections (d) and (e), the OCCC may obtain unsworn witness and records, rather than sworn affidavits. Both statements would require an acknowledgment that the statements could be used in an enforcement action in which the licensee is a party. Proposed new describes the recordkeeping requirements for credit access businesses. Paragraph (1) requires a transaction register showing the name of each consumer, the transaction number, and the type of transaction. Paragraph (2) outlines the information that must be included in the record of an individual consumer's account. Paragraph (2)(A) identifies the records that must be kept for every transaction, including required disclosures and any agreements with the consumer. Paragraph (2)(B) identifies additional records for transactions that the licensee services or collects, including account histories, documentation of repossessed collateral, litigation records, and records of criminal charges. Paragraph (2)(C) specifies the time period for maintaining the information in the individual consumer's file, which generally must be kept for four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. This provision is intended to ensure that the licensee keeps transaction records at least until the time specified in applicable statutes of limitations, including the four-year limitations period in Texas Finance Code, Paragraph (4) requires a licensee to maintain the required in-store fee schedule and notices. Paragraph (5) requires a licensee to maintain online disclosures and copies of web pages used to access online disclosures. Paragraph (6) requires a licensee to maintain advertisements. Paragraph (7) requires a licensee to maintain credit applications and adverse action records for the time period specified in Regulation B, 12 C.F.R (b). Paragraph (8) requires a licensee to maintain an index of transfers, assignments, and sales. Paragraph (9) requires a licensee to maintain an index of litigation, criminal charges, and repossessions. Paragraph (10) requires a licensee to maintain records of its registration and surety bond as a credit services organization. Paragraph (11) requires a licensee to maintain an official correspondence file for communications with the OCCC. Paragraph (12) requires a licensee to maintain general business records showing its compliance with applicable laws. One precommenter requested a delayed implementation period for the recordkeeping requirements in As of the effective date of the rules, a licensee will be required to maintain any records described by that are in the licensee's possession. However, the agency is willing to consider a delayed implementation date for generating new records (such as the transaction register or the index of litigation, criminal charges, and repossessions) in order to comply with the rule. The agency invites comments about the amount of time that would be required in order to generate any new records not currently maintained. Proposed new describes the requirements for separation between credit access businesses and third-party lenders. 40 TexReg 7526 October 30, 2015 Texas Register

25 Subsection (a) describes the general separation requirement for credit access businesses and third-party lenders. Subsection (b) explains that the relationship must be consistent with special agency. Subsection (c) prohibits the credit access business from sharing its fee with the third-party lender. This rule helps ensure that credit access businesses comply with Texas Finance Code, (3), which provides that a credit services organization's services include obtaining for a consumer or assisting a consumer in obtaining an extension of consumer credit "by others." Because a credit access business is a type of credit services organization, this means that a credit access business must be a separate entity from any third-party lender that provides an extension of credit to a consumer. The credit access business and third-party lender must operate independently. The agency is aware of two published court decisions analyzing the separation between credit services organizations and lenders under Texas law. First, in Lovick v. Ritemoney Ltd., 378 F.3d 433 (5th Cir. 2004), the Fifth Circuit analyzed whether the relationship between a credit services organization and a lender was consistent with special agency for purposes of Chapter 393 and Texas usury laws. The court determined that the relationship was consistent with special agency, based primarily on four facts: (1) the credit services organization was not the same entity as the lender, (2) the credit services organization did not select underwriting criteria for making loans (instead, the credit services organization applied criteria selected by the lender), (3) the credit services organization's fee was not passed on to the lender, and (4) the credit services organization's fee did not directly benefit the lender. Lovick, 378 F.3d at According to the court, the fact that the credit services organization and lender shared an exclusive relationship was not sufficient to create a general-agency or joint-participant relationship that would lead to a violation of Texas usury law. Id. at Second, in In re Grayson, 488 B.R. 579, 589 (S.D. Tex. Bankr. 2012), a Texas bankruptcy court rejected a debtor's allegation that a credit services organization and lender were not truly independent and operated as a combined entity. Although the lender developed the software to prepare agreements between the credit services organization and lender, the court found that the facts did not support the debtor's allegation. Two precommenters discussed the requirements for separation between credit access businesses and third-party lenders. One precommenter noted that some credit access businesses perform an initial credit evaluation to determine whether they will provide services for the consumer, before applying the lender's separate underwriting criteria to determine whether the loan will be made. In response to this precomment, proposed subsection (b) specifies that a licensee "may not select the underwriting criteria used in determining whether the lender will make a loan to the consumer." Another precommenter suggested that the requirement that the credit access business be a "separate legal entity" from the third-party lender was insufficient, stating that this would provide credit access businesses with a loophole to get around the separation requirement. In response to this precomment, subsection (a) specifies that a credit access business "must operate independently from any third-party lender." The agency believes that with this language, the rule includes the necessary requirements to ensure that a credit access business assists in obtaining extensions of credit "by others," consistent with the case law discussed above. Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the rule changes are in effect there will be no fiscal implications for state or local government as a result of administering the rules. Commissioner Pettijohn also has determined that for each year of the first five years the rule changes are in effect, the public benefit anticipated as a result of the changes will be increased protection of consumers, clear and consistent regulations for credit access businesses, and enhanced compliance with the law. Additional economic costs may be incurred by a person required to comply with this proposal. The agency anticipates that any costs resulting from the proposal would involve fulfilling certain requirements in the proposed recordkeeping rule, The three main types of potential costs the agency anticipates licensees may encounter in complying with the proposal are: 1) labor costs, 2) costs involved to maintain records for longer periods than they are currently maintained, 3) costs involved to generate new records not currently kept, and 4) programming costs for licensees that utilize electronic recordkeeping systems. For licensees that utilize manual or electronic recordkeeping systems, the anticipated costs may include expenses related to employee training to review and implement the new recordkeeping requirements. These costs would vary widely among licensees depending on the number of employees who must be trained, as well as the labor costs associated with supervisors or other personnel assigned to create or maintain a licensee's records. For licensees that utilize manual or electronic recordkeeping systems, the anticipated costs would include expenses required to generate new records not currently kept. In particular, the proposed provisions that may result in the generation of new records are: 1) (1) (transaction register), 2) (2)(B)(i)(IX) and (X) (individual payment entries and refunds for each consumer's transaction file), 3) (8) (index of transfers, assignments, and sales), 4) (9) (index of litigation, criminal charges, and repossessions). The amount of potential costs would vary considerably and be impossible to predict, as much will depend on how licensees currently maintain certain records, and the ability of licensees to produce certain records not retained with their current recordkeeping systems. However, based on the agency's experience with other licensees that maintain similar registers and indexes, such records should be easily produced from existing records (e.g., software program query or report). Some licensees who use or lease specialized computer software programs for their business may experience some additional costs. These costs are impossible to predict, as much will depend on the particular licensee's current software system and the amount of programming changes required to comply with the proposal. Some training may be necessary to teach employees how to use existing or updated software to produce the records contemplated by the rule. The amount of software training necessary for each licensee is impossible to predict due to several variable factors, such as number of employees, amount of previous training conducted, and current knowledge of employees. In relation to software programming, it is the agency's experience that today's credit access business transactions involve highly automated software systems. The agency expects that many licensees will select computer programs that will result in any marginal costs increases being relatively low. First, licensees should already be maintaining a majority of the required records outlined in proposed new in order to comply with mandated quarterly and annual reporting require- PROPOSED RULES October 30, TexReg 7527

26 ments. In order to provide accurate reports, licensees must maintain detailed transaction records, including the type of transaction and all charges imposed in connection with the transaction. Second, most of these records should be maintained in order to demonstrate compliance with the law during examinations and investigations. Third, retention of the records outlined in proposed is a prudent business practice, and complying with these requirements helps ensure that licensees can properly address inquiries from the OCCC, federal regulators, and consumers. The agency has attempted to lessen any potential costs by providing flexibility in the recordkeeping rules, which allow paper, electronic, or optically imaged systems. As noted earlier, this proposal incorporates the ability to access several items, or produce the information in the form of a report or list, which if generated from an electronic system, does not have to be maintained as a separate file or record. The agency has also allowed for certain records to be maintained at a centralized location, thus reducing the costs of keeping records at multiple locations, and providing examination access to these records at a particular location upon request. Additionally, the agency is considering a delaying implementation date for the generation of new records, which will help minimize potential costs. Overall, the agency anticipates that any costs involved to comply with the proposal will be minimal for most licensees. However, due to several factors resulting in varying, uncertain, and unpredictable costs, the agency would like to invite comment from licensees on any costs involved to comply with the proposal, as well as any alternatives to lessen those costs while achieving the purpose of the proposal. Aside from the previously outlined costs, there will be no other effects on individuals required to comply with the rule changes as proposed. The agency is not aware of any adverse economic effect on small or micro-businesses resulting from this proposal. But in order to obtain more complete information concerning the economic effect of these rule changes, the agency invites comments from interested stakeholders and the public on any economic impacts on small businesses, as well as any alternative methods of achieving the purpose of the proposal while minimizing adverse impacts on small businesses. Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas or by to [email protected]. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. DIVISION 1. GENERAL PROVISIONS 7 TAC These rule changes are proposed under Texas Finance Code, (a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. In addition, proposed new and are proposed under Texas Finance Code, (a)(3), which authorizes the commission to adopt rules regarding periodic examinations of credit access businesses by the OCCC, and under Texas Finance Code, (b), which authorizes the commission to adopt rules regarding the review of third-party lender agreements. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter Definitions. Words and terms used in this chapter that are defined in Texas Finance Code, Chapter 393 have the same meanings as defined in Chapter 393. The following words and terms, when used in this chapter, will have the following meanings, unless the context clearly indicates otherwise. (1) - (3) (No change.) (4) Multiple payment auto title loan--an auto title loan that is not a single payment auto title loan. (5) Multiple payment payday loan--a payday loan that is not a single payment payday loan. (6) [(4)] OCCC--The Office of Consumer Credit Commissioner of the State of Texas. (7) Single payment auto title loan--an auto title loan for which the entire principal balance, interest, and all fees required under the terms of the transaction, including fees required to be paid to a credit access business, are due in a single payment. (8) Single payment payday loan--a payday loan for which the entire principal balance, interest, and all fees required under the terms of the transaction, including fees required to be paid to a credit access business, are due in a single payment. Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner For further information, please call: (512) DIVISION 3. APPLICATION PROCEDURES 7 TAC , , , These rule changes are proposed under Texas Finance Code, (a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. In addition, proposed new and are proposed under Texas Finance Code, (a)(3), which authorizes the commission to adopt rules regarding periodic examinations of credit access businesses by the OCCC, and under Texas Finance Code, (b), which authorizes the commission to adopt rules regarding the review of third-party lender agreements. 40 TexReg 7528 October 30, 2015 Texas Register

27 The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter Definitions. Words and terms used in this chapter that are defined in Texas Finance Code, Chapter 393, have the same meanings as defined in Chapter 393. The following words and terms, when used in this chapter, will have the following meanings, unless the context clearly indicates otherwise. (1) (No change.) (2) Principal party--an adult individual with a substantial relationship to the applicant by ownership of more than 10% of the applicant, or having control of the proposed credit access business of the applicant. The following individuals are principal parties: (A) a proprietor holding a 100% ownership interest [proprietors, including spouses with community property interest]; (B) - (H) (No change.) Filing of New Application. An application for issuance of a new credit access business license must be submitted in a format prescribed by the commissioner at the date of filing and in accordance with the commissioner's instructions. The commissioner may accept the use of prescribed alternative formats to facilitate multistate uniformity of applications or in order to accept approved electronic submissions. Appropriate fees must be filed with the application and the application must include the following: (1) Required application information. All questions must be answered. (A) Application for license. (i) - (iii) (No change.) (iv) Owners and principal parties. (I) Proprietorships. The applicant must disclose the name of the individual holding a 100% ownership interest in the business and the name of any individual [who owns and who is] responsible for operating the business. If requested, the applicant must also disclose the names of the spouses of these individuals. [All community property interests must also be disclosed. If the business interest is owned by a married individual as separate property, documentation establishing or confirming separate property status must be provided.] (II) - (VI) (No change.) (B) - (E) (No change.) (2) - (3) (No change.) Updating Application and Contact Information [Reportable Actions After Application]. (a) Applicant's updates to license application information. Before a license application is approved, an applicant must report to the OCCC any [Any action, fact, or] information that would require a materially different answer than that given in the original license application and that relates to the qualifications for license[, must be reported] within 10 calendar days after the person has knowledge of the [action, fact, or] information. (b) Licensee's updates to license application information. A licensee must report to the OCCC any information that would require a different answer than that given in the original license application within 30 calendar days after the licensee has knowledge of the information, if the information relates to any of the following: (1) the names of principal parties; (2) the names of third-party lender organizations; (3) criminal history; (4) actions by regulatory agencies; or (5) court judgments. (c) Contact information. Each applicant or licensee is responsible for ensuring that all contact information on file with the OCCC is current and correct, including all mailing addresses, all phone numbers, and all addresses. It is a best practice for licensees to regularly review contact information on file with the OCCC to ensure that it is current and correct Fees. (a) - (b) (No change.) (c) Fingerprint processing. An applicant must pay a fee to a party designated by the Texas Department of Public Safety for processing fingerprints. The Texas Department of Public Safety and the designated party determine the amount of the fee and whether it is refundable. [A nonrefundable fee as prescribed by the commissioner will be charged to recover the costs of investigating each principal party's fingerprint record.] (d) - (f) (No change.) (g) Annual renewal and assessment fees. (1) An annual assessment fee is required for each license consisting of: (A) (No change.) (B) a volume fee based upon the volume of business that consists of an amount not to exceed $0.03 per each $1,000 advanced for license holders whose operations occur within Texas Finance Code, Chapter 393 in accordance with the most recent annual report required by of this title (relating to Data Reporting Requirements) [quarterly report filing required by Texas Finance Code, ]. (2) - (4) (No change.) Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Office of Consumer Credit Commissioner or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) This repeal is proposed under Texas Finance Code, (a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. PROPOSED RULES October 30, TexReg 7529

28 The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter Provisional License. Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner For further information, please call: (512) DIVISION 4. LICENSE 7 TAC , These rule changes are proposed under Texas Finance Code, (a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. In addition, proposed new and are proposed under Texas Finance Code, (a)(3), which authorizes the commission to adopt rules regarding periodic examinations of credit access businesses by the OCCC, and under Texas Finance Code, (b), which authorizes the commission to adopt rules regarding the review of third-party lender agreements. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter Notice of Delinquency in Payment of Annual Assessment Fee. For purposes of Texas Finance Code, , notice of delinquency in the payment of an annual assessment fee is given when the OCCC sends the delinquency notice: [upon the mailing of the delinquency notice, enclosed in a postpaid, properly addressed envelope, in a post office or official depository under the care and custody of the United States Postal Service.] (1) by mail to the address on file with the OCCC as a master file address; or (2) by to the address on file with the OCCC, if the licensee has provided an address Denial, Suspension, or Revocation Based on Criminal History. (a) Criminal history record information. After an applicant submits a complete license application, including all required fingerprints, and pays the fees required by of this title (relating to Fees), the OCCC will investigate the applicant and its principal parties. The OCCC will obtain criminal history record information from the Texas Department of Public Safety and the Federal Bureau of Investigation based on the applicant's fingerprint submission. The OCCC will continue to receive information on new criminal activity reported after the fingerprints have been initially processed. (b) Disclosure of criminal history. The applicant must disclose all criminal history information required to file a complete application with the OCCC. Failure to provide any information required as part of the application or requested by the OCCC reflects negatively on the belief that the business will be operated lawfully and fairly. The OCCC may request additional criminal history information from the applicant, including the following: (1) information about arrests, charges, indictments, and convictions of the applicant and its principal parties; (2) reliable documents or testimony necessary to make a determination under subsection (c), including letters of recommendation from prosecution, law enforcement, and correctional authorities; (3) proof that the applicant has maintained a record of steady employment, has supported the applicant's dependents, and has otherwise maintained a record of good conduct; and (4) proof that all outstanding court costs, supervision fees, fines, and restitution as may have been ordered have been paid. (c) Crimes directly related to licensed occupation. The OCCC may deny a license application, or suspend or revoke a license, if the applicant or licensee has been convicted of an offense that directly relates to the duties and responsibilities of a credit access business, as provided by Texas Occupations Code, (a)(1). (1) Providing credit access business services involves or may involve making representations to consumers regarding the terms of the contract, receiving money from consumers, remitting money to third parties, maintaining accounts, repossessing property without a breach of the peace, maintaining goods that have been repossessed, and collecting due amounts in a legal manner. Consequently, crimes involving the misrepresentation of costs or benefits of a product or service, the improper handling of money or property entrusted to the person, failure to file a governmental report or filing a false report, or the use or threat of force against another person are directly related to the duties and responsibilities of a licensee and may be grounds for denial, suspension, or revocation. (2) In determining whether a criminal offense directly relates to the duties and responsibilities of holding a license, the OCCC will consider the following factors, as specified in Texas Occupations Code, : (A) the nature and seriousness of the crime; (B) the relationship of the crime to the purposes for requiring a license to engage in the occupation; (C) the extent to which a license might offer an opportunity to engage in further criminal activity of the same type as that in which the person previously had been involved; and (D) the relationship of the crime to the ability, capacity, or fitness required to perform the duties and discharge the responsibilities of a licensee. (3) In determining whether a conviction for a crime renders an applicant or a licensee unfit to be a licensee, the OCCC will consider the following factors, as specified in Texas Occupations Code, : (A) the extent and nature of the person's past criminal activity; (B) the age of the person when the crime was committed; (C) the amount of time that has elapsed since the person's last criminal activity; (D) the conduct and work activity of the person before and after the criminal activity; 40 TexReg 7530 October 30, 2015 Texas Register

29 (E) evidence of the person's rehabilitation or rehabilitative effort while incarcerated or after release, or following the criminal activity if no time was served; and (F) evidence of the person's current circumstances relating to fitness to hold a license, which may include letters of recommendation from one or more of the following: (i) prosecution, law enforcement, and correctional officers who prosecuted, arrested, or had custodial responsibility for the person; (ii) the sheriff or chief of police in the community where the person resides; and (iii) other persons in contact with the convicted person. (d) Crimes related to character and fitness. The OCCC may deny a license application if the OCCC does not find that the financial responsibility, experience, character, and general fitness of the applicant are sufficient to command the confidence of the public and warrant the belief that the business will be operated lawfully and fairly, as provided by Texas Finance Code, (a). In conducting its review of character and fitness, the OCCC will consider the criminal history of the applicant and its principal parties. If the applicant or a principal party has been convicted of an offense described by subsections (c)(1) or (f)(2) of this section, this reflects negatively on an applicant's char- and fitness. The OCCC may deny a license application based on acter other criminal history of the applicant or its principal parties if, when the application is considered as a whole, the agency does not find that the financial responsibility, experience, character, and general fitness of the applicant are sufficient to command the confidence of the public and warrant the belief that the business will be operated lawfully and fairly. The OCCC will, however, consider the factors identified in subsection (c)(2) - (3) of this section in its review of character and fitness. (e) Revocation on imprisonment. A license will be revoked on the licensee's imprisonment following a felony conviction, felony community supervision revocation, revocation of parole, or revocation of mandatory supervision, as provided by Texas Occupations Code, (b). (f) Other grounds for denial, suspension, or revocation. The OCCC may deny a license application, or suspend or revoke a license, based on any other ground authorized by statute, including the following: (1) a conviction for an offense that does not directly relate to the duties and responsibilities of the occupation and that was committed less than five years before the date of application, as provided by Texas Occupations Code, (a)(2); (2) a conviction for an offense listed in Texas Code of Criminal Procedure, art , 3g, or art (6), as provided by Texas Occupations Code, (a)(3) - (4); (3) errors or incomplete information in the license application; (4) a fact or condition that would have been grounds for denying the license application, and that either did not exist at the time of the application or the OCCC was unaware of at the time of application, as provided by Texas Finance Code, (a)(3); and (5) any other information warranting the belief that the business will not be operated lawfully and fairly, as provided by Texas Finance Code, (a) and (a). Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner For further information, please call: (512) TAC , (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Office of Consumer Credit Commissioner or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The repeals are proposed under Texas Finance Code, (a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter Effect of Criminal History Information on Applicants and Licensees Crimes Directly Related to Fitness for License; Mitigating Factors. Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner For further information, please call: (512) DIVISION 5. OPERATIONAL REQUIRE- MENTS 7 TAC These rule changes are proposed under Texas Finance Code, (a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. In addition, proposed new and are proposed under Texas Finance Code, (a)(3), which authorizes the commission to adopt rules regarding periodic examinations of credit access businesses by the OCCC, and under PROPOSED RULES October 30, TexReg 7531

30 Texas Finance Code, (b), which authorizes the commission to adopt rules regarding the review of third-party lender agreements. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter Examinations. (a) Examination authority. The OCCC may periodically examine each place of business of a licensee and investigate the licensee's transactions and records, including books, accounts, papers, and correspondence, to the extent the transactions and records pertain to business regulated under Texas Finance Code, Chapter 393. (b) Access to records. A licensee must allow the OCCC to examine the licensee's place of business and make a copy of an item that may be investigated under subsection (a) of this section. (c) Third-party lender agreements. The OCCC's examination authority includes the authority to review all agreements between a licensee and any third-party lender with which the licensee contracts to provide services under Texas Finance Code, Chapter 393. (d) Witness statements. In connection with an examination, the OCCC may obtain witness statements that pertain to business regulated under Texas Finance Code, Chapter 393. A witness statement must be signed and dated, and must include an acknowledgment that the statement may be introduced in an enforcement action in which the licensee is a party. (e) Records statements. In connection with an examination, the OCCC may obtain statements regarding records maintained by the licensee that pertain to business regulated under Texas Finance Code, Chapter 393. A records statement must be signed and dated by a witness, and must include acknowledgments of the following: (1) a statement of the witness's position and duties at the licensee; (2) a statement that the witness is familiar with the manner in which records are created and maintained by virtue of duties and responsibilities; (3) the number of pages of attached records; (4) a statement that the records are original records or exact duplicates of the original records; (5) a statement that the records were made at or near the time of each act, event, condition, opinion, or diagnosis set forth; (6) a statement the records were made by, or from information transmitted by, persons with knowledge of the matters set forth; (7) a statement that the records were kept in the course of regularly conducted business activity; (8) a statement that it is the regular practice of the business activity to make the records; and (9) an acknowledgment that the statement and the accompanying records may be introduced in an enforcement action in which the licensee is a party Files and Records Required. A licensee must maintain records for each transaction under Texas Finance Code, Chapter 393, and make those records available to the OCCC for examination. The records required by this section may be maintained by using a paper or manual recordkeeping system, electronic recordkeeping system, optically imaged recordkeeping system, or a combination of these types of systems, unless otherwise specified. All records must be prepared and maintained in accordance with generally accepted accounting principles. If federal law requirements for record retention are different from the provisions contained in this section, the federal law requirements prevail only to the extent of the conflict with the provisions of this section. (1) Transaction register. A licensee must maintain a transaction register, or be able to produce this information within a reasonable amount of time. Each record in the register must contain the transaction number, the date of the transaction, the last name of the consumer, the total fees payable to the licensee, the total of payments, and the type of transaction (single payment payday loan, single payment auto title loan, multiple payment payday loan, or multiple payment auto title loan). Each record in the transaction register must be retained for four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. (2) Consumer's transaction file. A licensee must maintain a paper or electronic transaction file for each individual transaction under Texas Finance Code, Chapter 393, or be able to produce this information within a reasonable amount of time. The transaction file must contain documents that show the licensee's compliance with applicable state and federal law, including Texas Finance Code, Chapter 393. If a substantially equivalent electronic record for any of the following documents exists, a paper copy of the record does not have to be included in the transaction file if the electronic record can be accessed upon request. (A) The transaction file must include the following documentation for each transaction under Texas Finance Code, Chapter 393: (i) any agreement between the consumer and the licensee, including the contract described by Texas Finance Code, , with all provisions required by that section, as well as the notice of cancellation described by Texas Finance Code, ; (ii) any agreement between the consumer and the lender, including the promissory note; (iii) documentation referencing which agreements between the licensee and a third-party lender apply to the transaction, including any guarantee or letter of credit issued by the licensee; (iv) all legally required disclosures provided in connection with the transaction, including: (I) the consumer disclosure required by Texas Finance Code, , and of this title (relating to Consumer Disclosures); (II) the credit services organization disclosure required by Texas Finance Code, ; (III) any disclosures provided under the Truth in Lending Act, 15 U.S.C f, and Regulation Z, 12 C.F.R. Part 1026; (IV) any privacy notice provided under the Gramm-Leach-Bliley Act, 15 U.S.C , and Regulation P, 12 C.F.R. Part 1016; (V) any notice to cosigner provided under the Federal Trade Commission's Credit Practices Rule, 16 C.F.R ; (v) the consumer's credit application and any other written or recorded information used in evaluating the application; (vi) any document signed by a co-borrower, co-signor, or other guarantor in connection with the transaction; 40 TexReg 7532 October 30, 2015 Texas Register

31 (vii) any documentation of whether the consumer is a covered borrower under the Department of Defense's Military Lending Act Rule, 32 C.F.R. Part 232, including the identification of covered borrower described by 32 C.F.R ; (viii) complete documentation of any ancillary products (including insurance or an automobile club) offered to the consumer or purchased by the consumer in connection with the transaction; (ix) complete documentation of all payments made by or to the licensee during the transaction and all payments made by or to the third-party lender at the inception of the transaction (including the amount of each payment, the source of each payment, and the recipient of each payment); (x) any other documentation created or obtained by the licensee in connection with the transaction. (B) The transaction file must include the following documentation if the licensee services or collects a loan in connection with a transaction under Texas Finance Code, Chapter 393, or if the licensee otherwise obtains this documentation in the course of business: (i) Consumer's account record. The licensee must maintain an account record containing at least the following information: (I) loan number or another unique number identifying the transaction; (II) loan schedule and terms itemized to show the number of installments and the due date and amount of each installment, including installments payable to the licensee; consumer; any; (III) name, address, and telephone number of (IV) (V) (VI) (VII) names and addresses of co-borrowers, if principal balance; total interest charges; all fees paid to the licensee; (VIII) amount of official fees for recording, amending, or continuing a notice of security interest that are collected at the time the loan is made; (IX) individual payment entries for all payments described by subparagraph (A)(ix) of this paragraph, and any other payments made by the consumer during the transaction, itemized to show the date payment was received (dual postings are acceptable if date of posting is other than date of receipt), actual amounts received for application to due amounts, and actual amounts paid for default, deferment, or other authorized charges; (X) any refunds of unearned charges that are required in the event a loan is prepaid in full, including records of final entries, and entries to substantiate that refunds due were paid to consumers, with refund amounts itemized to show interest charges refunded; (XI) collection contact history, including a written or electronic record of each contact made by a licensee with the consumer or any other person and each contact made by the consumer with the licensee, in connection with amounts due, with each record including the date, method of contact, contacted party, person initiating the contact, and a summary of the contact; (XII) corrective entries to the consumer's account record, if justified, including the reason and supporting documentation for each corrective entry. (ii) Payday loan records. For a payday loan, the transaction file must include documentation relating to the personal check or authorization to debit a deposit account accepted in connection with the loan. (iii) Auto title loan records. For an auto title loan, the transaction file must include all documentation relating to the attachment and perfection of a security interest in the motor vehicle, including any of the following documentation obtained by the licensee: (I) the security agreement; (II) if obtained by the licensee or the third-party lender, the original certificate of title to the vehicle, a certified copy of the negotiable certificate of title, or a copy of the front and back of either the original or certified copy of the title; (III) if executed by the licensee or the third-party lender, an application for certificate of title (Texas Department of Motor Vehicles Form 130-U for Texas vehicles); (IV) if obtained by the licensee or the third-party lender, a title application receipt (Texas Department of Motor Vehicles Form VTR-500-RTS for Texas vehicles), or a similar document evidencing the filing of the application for certificate of title and payment of required fees and taxes. (iv) Repossession records. The transaction file must include complete documentation of any repossession initiated by the licensee, including: (I) any condition report indicating the condition of the collateral, if prepared by the licensee, the licensee's agent, or any independent contractor hired to perform the repossession; (II) any invoices or receipts for any reasonable and authorized out-of-pocket expenses that are assessed to the consumer and incurred in connection with the repossession or sequestration of the vehicle including cost of storing, reconditioning, and reselling the vehicle; (III) for a vehicle disposed of in a public or private sale as permitted by the Texas Business and Commerce Code, 9.610, the following documents: (-a-) one of the following notices: (-1-) a copy of the notification of disposition as sent to the consumer and other obligors as required by Texas Business and Commerce Code, 9.614; or (-2-) a copy of the waiver of the notice of intended disposition prescribed by subitem (-1-) of this item, as applicable, signed by the consumer and other obligors after default; (-b-) copies of evidence of the type or manner of private sale that was conducted. These records must show that the manner of the disposition was commercially reasonable, such as circumstances surrounding a dealer-only auction, internet sale, or other type of private disposition; (-c-) copies of evidence of the type or manner of public sale that was conducted. These records must show that the manner of the disposition was commercially reasonable, such as documentation of the date, place, manner of sale of the vehicle, and amounts received for disposition of the vehicle; (-d-) the bill of sale showing the name and address of the purchaser of the repossessed collateral and the purchase price of the vehicle; PROPOSED RULES October 30, TexReg 7533

32 (-e-) for a disposition or sale of collateral creating a surplus balance, a copy of the check representing the payment of the surplus balance paid to the consumer or other person entitled to the surplus; (-f-) for a disposition or sale of collateral resulting in a surplus or deficiency, a copy of the explanation of calculation of surplus or deficiency as required by Texas Business and Commerce Code, 9.616, if requested by the consumer; (-g-) a copy of the waiver of the deficiency letter if the licensee elects to waive the deficiency balance in lieu of sending the explanation of calculation of surplus or deficiency form, if applicable; (IV) for a vehicle disposed of using the strict foreclosure method permitted by the Texas Business and Commerce Code, and 9.621, the following documents: (-a-) one of the two following notices: (-1-) a copy of the proposal to accept collateral in full satisfaction of the obligation; or (-2-) for a transaction where 60% or more of the principal balance has been paid, a copy of the debtor or obligor's waiver of compulsory disposition of collateral signed by the consumer and other obligors after default; (-b-) for a transaction where the consumer rejects the offer under item (-a-)(-1-) or (-2-) of this subclause, a copy of the consumer's signed objection to retention of the collateral; (-c-) copies of the records reflecting the total satisfaction of the obligation. (v) Litigation records. The transaction file must include complete documentation of any litigation filed by a licensee against a consumer, or by a consumer against the licensee, including all pleadings, the terms of settlement (if a settlement was entered), documentation of any mediation or arbitration, the final judgment (if the court entered a final judgment), and records of all payments received after judgment, properly identified and applied. If the licensee maintains the complete documentation of litigation at a centralized location other than the licensed location or branch office, then the licensee's transaction file may include a written summary of the status of the litigation, rather than complete documentation of the litigation. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. (vi) Criminal charge records. The transaction file must include complete documentation of any criminal charge or complaint filed by a licensee against a consumer, showing the licensee's compliance with Texas Finance Code, (c)(3). This must include any written evidence of criminal conduct, a written summary of any oral statement submitted to law enforcement, any police report, and any court records obtained by the licensee. (vii) Claim records for insurance or ancillary products. The transaction file must include complete documentation of any claims or disbursement of money related to insurance or another ancillary product provided in connection with the transaction. (viii) Transfer records. The transaction file must include transfer, assignment, or sale records for any loan transferred, assigned, or sold to or from another person. (C) The transaction file and its contents must be retained for four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. However, this retention period does not apply to the credit services organization disclosure required by Texas Finance Code, , which must be kept for two years from the date on which it is provided to the consumer, as provided by Texas Finance Code, (3) Agreements between licensee and third-party lender. A licensee must maintain all documentation of its current agreements with third-party lenders, including copies of the agreement, any guarantees or letters of credit, and underwriting guidelines issued by the lender. The documentation must show the licensee's compliance with of this title (relating to Separation Between Credit Access Business and Third-Party Lender). The licensee may maintain this documentation at a centralized location other than the licensed location or branch office if the agreements apply to multiple locations. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. If an agreement terminates, documentation of the agreement must be maintained until the latest of: (A) four years from the date of the last consumer transaction subject to the agreement; (B) two years from the date of the final entry made on the consumer's account in the last consumer transaction subject to the agreement; (C) one year from the date of termination of the agreement; or (D) the OCCC's next examination of the licensee (if the documentation is maintained at a centralized location, this refers to the next examination of the centralized location). (4) In-store fee schedule and notices. The in-store fee schedule and notices required by Texas Finance Code, (a), and (a) of this title must be available for inspection by the OCCC in a conspicuous location visible to the general public. If a licensee amends the in-store fee schedule or notices, it must maintain documentation of the previous versions of the schedule or notices for one year from the date of amendment or until the next examination by OCCC staff, whichever is later. The licensee may maintain the documentation of previous in-store fee schedules and notices at a centralized location other than the licensed location or branch office. In this case, the documentation must be maintained for one year from the date of amendment or until the OCCC's next examination of the centralized location, whichever is later. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. (5) Website and online disclosures. If a licensee maintains a website, it must make the website available to the OCCC for inspection. The website must include a fee schedule to show the licensee's compliance with (b) of this title, and applicable consumer disclosures to show the licensee's compliance with (f) of this title. If a licensee amends the website's fee schedule, consumer disclosures, or method of accessing the fee schedule or consumer disclosures, the licensee must maintain documentation of the previous version of the website to show compliance with (b) of this title and (f) of this title. This must include the home page, any pages used in accessing the fee schedule and disclosures, and copies of the previously used fee schedule and disclosures. The licensee must maintain this documentation for one year from the date of amendment or until the next examination by OCCC staff, whichever is later. This paragraph does not require a licensee to maintain previously used pages of the website that were not the home page or pages used in accessing the fee schedule and consumer disclosures. The licensee may maintain the documentation of previous versions of the website at a centralized location other than the licensed location or branch office. In this case, 40 TexReg 7534 October 30, 2015 Texas Register

33 the documentation must be maintained for one year from the date of amendment or until the OCCC's next examination of the centralized location, whichever is later. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. (6) Advertisements. A licensee must maintain advertising and solicitation records, including examples of all written and electronic communications soliciting transactions (including advertisements at the place of business, scripts of radio and television broadcasts, and reproductions of billboards and signs not at the licensed place of business) for one year from the date of use or until the next examination by OCCC staff, whichever is later. If any language other than English is used in any advertising material, a true and correct translation must be maintained along with the advertising material. The licensee may maintain the documentation of advertising at a centralized location other than the licensed location or branch office. In this case, the documentation must be maintained for one year from the date of amendment or until the OCCC's next examination of the centralized location, whichever is later. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. (7) Adverse action records. Each licensee must maintain adverse action records for all applications relating to Texas Finance Code, Chapter 393 transactions. Adverse action records must be maintained according to the record retention requirements in Regulation B, 12 C.F.R (b). The current retention period is 25 months for consumer credit. These records include the loan application, any written or recorded information used in evaluating the application, the adverse action notice (if required), the notice of incompleteness (if applicable), and counteroffer notice (if applicable). (8) Index of transfers, assignments, and sales. The licensee must maintain (or be able to produce within a reasonable period of time) an index of all loans transferred, assigned, or sold to or from another person, including a third-party lender, or to a different location of the licensee. Each record in the index must be retained for four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. (For transfers from the licensee, the date of transfer is the date of the final entry.) (9) Index of litigation, criminal charges, and repossessions. A licensee must maintain (or be able to produce within a reasonable period of time) an index of each litigation action and criminal charge filed by or against the licensee, as well as each repossession initiated by the licensee. The index must show the consumer's name, account number, and date of action. Each record in the index must be retained for a period of four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. (10) Registration and surety bond records. A licensee must maintain documentation of its registration as a credit services organization with the Texas Secretary of State, including its registration statement and registration certificate, to show its compliance with Texas Finance Code, A licensee must maintain complete documentation of any surety bond obtained by the licensee under Texas Finance Code, , and any surety bond required by the OCCC under Texas Finance Code, If a registration or surety bond terminates, the licensee must maintain the documentation for one year after the date of termination or until the next examination by OCCC staff, whichever is later. (11) Official correspondence file. A licensee must maintain an official correspondence file, including all communications from the OCCC, copies of correspondence and reports addressed to the OCCC (including quarterly and annual reports), examination reports issued by the OCCC, and notices of relocation described by of this title (relating to Relocation of Licensed Office). (12) General business records. A licensee must maintain any other business records showing its compliance with applicable law, including accounting records showing that the licensee maintains net assets required by Texas Finance Code, , records used to compile quarterly and annual reports, records of disbursement of funds between the licensee and third-party lenders, receipts, bank statements, and any master insurance policies Separation Between Credit Access Business and Third- Party Lender. (a) Generally. A licensee assists consumers in obtaining extensions of credit by others, as provided by Texas Finance Code, (3). A licensee must operate independently from any third-party lender that makes a loan in connection with a transaction under Texas Finance Code, Chapter 393. A licensee must be a separate legal entity from any third-party lender. (b) Special agency. The relationship between the licensee and a third-party lender must be limited to special agency. A licensee may not engage in a general agency or joint-venture relationship with a third-party lender. A licensee may not select the underwriting criteria used in determining whether the lender will make a loan to the consumer, but a licensee may apply underwriting criteria selected by the third-party lender. (c) Fee sharing. No portion of a fee charged by the licensee may be passed on to the third-party lender. A fee charged by a licensee may not directly benefit a third-party lender. Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner For further information, please call: (512) CHAPTER 84. MOTOR VEHICLE INSTALLMENT SALES SUBCHAPTER F. LICENSING 7 TAC The Finance Commission of Texas (commission) proposes amendments to Title 7 of the Texas Administrative Code, , concerning the rules applicable to a motor vehicle installment sales license application denial hearing. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meet- PROPOSED RULES October 30, TexReg 7535

34 ing where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC 9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC 155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to 9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in 9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 84 contains one of these references. The proposed amendments replace this reference with a reference to the rules of procedure made applicable by the amendment to 9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section (d) identifies the rules of procedure applicable to a motor vehicle installment sales license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to 9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas or by to [email protected]. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; Texas Finance Code; and Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 348. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 348, and Title Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the affected applicant has 30 calendar days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under 9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner For further information, please call: (512) CHAPTER 85. PAWNSHOPS AND CRAFTED PRECIOUS METAL DEALERS SUBCHAPTER A RULES OF OPERATION FOR PAWNSHOPS The Finance Commission of Texas (commission) proposes amendments to the following sections of Title 7 of the Texas Administrative Code: , concerning the rules applicable to a pawnshop employee license application denial hearing; , concerning the rules applicable to a pawnshop license application denial hearing; and , concerning the rules 40 TexReg 7536 October 30, 2015 Texas Register

35 applicable to a pawnshop license revocation, suspension, and surrender hearing. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC 9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC 155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to 9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in 9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 85 contains three of these references. The proposed amendments replace these references with references to the rules of procedure made applicable by the amendment to 9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section (g) identifies the rules of procedure applicable to a pawnshop employee license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to 9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Section (e) identifies the rules of procedure applicable to a pawnshop license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to 9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Section identifies the rules of procedure applicable to a pawnshop license revocation, suspension, and surrender hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to 9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to , , and are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas or by to [email protected]. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. DIVISION 2. PAWNSHOP LICENSE 7 TAC The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; and Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 371. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 371, and Title Processing of Application. (a) - (f) (No change.) (g) Hearing. When an application is denied, the applicant has 30 days from the date of the denial to request a hearing in writing to contest the denial. Also, upon a proper and timely protest pursuant to subsection (e) of this section, a hearing will be set. This hearing will be conducted within 60 days of the date of the appeal or protest unless the parties agree to an extension of time or the administrative law judge grants an extension of time pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001 and the rules of procedure applicable under 9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision either approving or denying the license. (h) (No change.) PROPOSED RULES October 30, TexReg 7537

36 Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner For further information, please call: (512) DIVISION 3. PAWNSHOP EMPLOYEE LICENSE 7 TAC The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; and Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 371 regarding pawnshops. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 371, and Title Processing of Application. (a) - (d) (No change.) (e) Hearing. When an application is denied, the applicant has 30 days from the date of the denial to request a hearing in writing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001 and the rules of procedure applicable under 9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title]. When a hearing is requested following an initial license application denial, the hearing will be held within 60 days after a request for a hearing is made unless the parties agree to an extension of time. The commissioner will make a final decision approving or denying the license application after receipt of the proposal for decision from the administrative law judge. (f) (No change.) Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner For further information, please call: (512) DIVISION 6. LICENSE REVOCATION, SUSPENSION, AND SURRENDER 7 TAC The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; and Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 371 regarding pawnshops. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 371, and Title Hearings. Hearings held under this subchapter will be held in accordance with the rules of procedure applicable under 9.1(a) of this title (relating to Application, Construction, and Definitions) [Administrative Hearing Process and Rules of Procedure in the Finance Commission Agencies, Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings (Chapter 9 of this title)], the Administrative Procedure Act, the Texas Rules of Civil Procedure, and the Texas Rules of Evidence. Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner For further information, please call: (512) CHAPTER 88. CONSUMER DEBT MANAGEMENT SERVICES SUBCHAPTER A. REGISTRATION PROCEDURES 7 TAC The Finance Commission of Texas (commission) proposes amendments to Title 7 of the Texas Administrative Code, , concerning the rules applicable to a consumer debt management services registration application denial hearing. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC 9.1. The Office of Consumer Credit Commissioner 40 TexReg 7538 October 30, 2015 Texas Register

37 (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC 155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to 9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in 9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 88 contains one of these references. The proposed amendments replace this reference with a reference to the rules of procedure made applicable by the amendment to 9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section (d) identifies the rules of procedure applicable to a consumer debt management services registration application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to 9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas or by to [email protected]. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 14 and Title Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the applicant has 30 days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under 9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner For further information, please call: (512) CHAPTER 89. PROPERTY TAX LENDERS SUBCHAPTER C. APPLICATION PROCEDURES 7 TAC The Finance Commission of Texas (commission) proposes amendments to Title 7 of the Texas Administrative Code, , concerning the rules applicable to a property tax lender license application denial hearing. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. PROPOSED RULES October 30, TexReg 7539

38 See, 7 TAC 9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC 155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to 9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in 9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 89 contains one of these references. The proposed amendments replace this reference with a reference to the rules of procedure made applicable by the amendment to 9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section (d) identifies the rules of procedure applicable to a property tax lender license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to 9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas or by to [email protected]. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. The amendments are proposed under Texas Government Code, (1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, , which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; and Texas Finance Code, , which authorizes the commission to adopt rules to ensure compliance with Chapter 351. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 351, and Title Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the affected applicant has 30 calendar days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under 9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) Filed with the Office of the Secretary of State on October 16, TRD Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner For further information, please call: (512) PART 6. CREDIT UNION DEPARTMENT CHAPTER 91. CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS SUBCHAPTER A. GENERAL RULES 7 TAC The Credit Union Commission (the Commission) proposes amendments to concerning Definitions and Interpretations. The amendments revise and update certain characteristics used to determine if a unifying factor among a group of persons satisfies the requirements and qualifies for inclusion in a credit union's field of membership. The absence of a characteristic is determinative. The modification will help ensure credit union compliance with membership requirements. Additionally, the proposal clarifies that only a credit union owned, deposit-taking ATM is included in the definition of "office." 40 TexReg 7540 October 30, 2015 Texas Register

39 The amendments proposed will result in more objective applications of the standards, less difficulty for credit unions, and more efficient use of agency recourses. The amendments are proposed as a result of the Department's general rule review. Shari Shivers, General Counsel, has determined that for the first five-year period the proposed amendments are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the amended rule. Ms. Shivers has also determined that for each year of the first five years the proposed amendments are in effect, the public benefits anticipated as a result of enforcing the rule will be greater clarity and ease of use of the rule. There will be no effect on small or micro businesses as a result of adopting the amended rule. There is no economic cost anticipated to the credit union system or to individuals for complying with the amended rule if adopted. Written comments on the proposal must be submitted within 30 days after its publication in the Texas Register to Shari Shivers, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin, Texas The amendments are proposed under Texas Finance Code, , which authorizes the Commission to adopt reasonable rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the Texas Finance Code. The specific section affected by the proposed amended rule is Texas Finance Code, Definitions and Interpretations. (a) Words and terms used in this chapter that are defined in Finance Code , have the same meanings as defined in the Finance Code. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. (1) Act--the Texas Credit Union Act (Texas Finance Code, Subtitle D). (2) Allowance for loan and lease losses (ALLL)--a general valuation allowance that has been established through charges against earnings to absorb losses on loans and lease financing receivables. An ALLL excludes the regular reserve and special reserves. (3) Applicant--an individual or credit union that has submitted an application to the commissioner. (4) Application--a written request filed by an applicant with the department seeking approval to engage in various credit union activities, transactions, and operations or to obtain other relief for which the commission is authorized by the act to issue a final decision or order subject to judicial review. (5) Appraisal--a written statement independently and impartially prepared by a qualified appraiser setting forth an opinion as to the market value of a specifically described asset as of a specific date, supported by the presentation and analysis of relevant market information. (6) Automated teller machine (ATM)--an automated, unstaffed credit union facility owned by or operated exclusively for the credit union at which deposits are received, cash dispensed, or money lent. (7) Catastrophic act--any natural or man-made disaster such as a flood, tornado, earthquake, major fire or other disaster resulting in physical destruction or damage. (8) Community of interest--a unifying factor among persons that by virtue of its existence, facilitates the successful organization of a new credit union or promotes economic viability of an existing credit union. The types of community of interest currently recognized are: (A) Associational--based on commonality of interest related to membership in a recognized organization or a portion of such a group. The organization must satisfy each of the following criteria: (i) The organization's primary purpose must be other than providing eligibility for credit union services. For purposes of this subparagraph, the practice of a credit union enrolling an individual in an association without that person's knowledge or consent is presumed to be the equivalent of providing eligibility for credit union services; (ii) The organization's membership must be primarily composed of natural persons; (iii) The organization's organizational documents clearly define membership eligibility and it may not be based primarily on a client or customer relationship; and (iv) The organization observes the formalities of corporate separateness from the credit union. (v) With respect to an associational group within a credit union's field of membership, a credit union may admit to membership: (I) Employees of the enterprise; (II) Directors, employees, volunteers, and retirees of the enterprise or its subsidiaries or affiliates; (III) Natural persons under contract to work for the enterprise, or its subsidiaries or affiliates; (IV) Family members (as determined by the credit union) of any of the above-described natural persons; The enterprise and its subsidiaries and affiliates; and Other persons approved by the commissioner. (V) (VI) (B) Occupational--based on an commonality of interest related to employment by, work for, an enterprise, or employment within a specific trade, industry or profession (TIP) with a close nexus and narrow attributes. A geographic limitation is not a requirement for an occupational community of interest; however, for purposes of describing the field of membership, the geographic areas being served may be included. With respect to an occupational group within a credit union's field of membership, a credit union may admit to membership: (i) Employees of the enterprise; (ii) Directors, employees, volunteers, and retirees of the enterprise or its subsidiaries or affiliates; (iii) Natural persons under contract to work for the enterprise, or its subsidiaries or affiliates; (iv) Family members (as determined by the credit union) of any of the above-described natural persons; and (v) The enterprise and its subsidiaries and affiliates; PROPOSED RULES October 30, TexReg 7541

40 (vi) Other persons approved by the commissioner. [(A) Occupational--based on an employment relationship that may be established by:] [(i) employment (or a long term contractual relationship equivalent to employment) by a single employer, affiliated employers or employers under common ownership with at least a 10% ownership interest;] [(ii) employment or attendance at a school; or] [(iii) employment in the same trade, industry or profession (TIP) with a close nexus and narrow commonality of interest, which is geographically limited.] [(B) Associational--based on groups consisting primarily of natural persons whose members participate in activities developing common loyalties, mutual benefits, or mutual interests. In determining whether a group has an associational community of interest, the commissioner shall consider the totality of the circumstances, which include:] [(i) whether the members pay dues,] [(ii) whether the members participate in furtherance of the goals of the association,] [(iii) whether the members have voting rights,] [(iv) whether there is a membership list,] [(v) whether the association sponsors activities,] [(vi) what the association's membership eligibility requirements are, and] [(vii) the frequency of meetings. Associations formed primarily to qualify for credit union membership and associations based on client or customer relationships, do not have a sufficient associational community of interest.] (C) Geographic--based on a clearly defined and specific geographic boundary. Geographic boundaries may include a city, county (single, multiple, or portions of a county) or their political equivalent, school districts, or a clearly identifiable neighborhood. The Department recognizes four types of affinity on which a geographic community of interest can be based--persons who live in, worship in, attend school in, or work in the geographic area. Businesses and other legal entities with the geographic boundaries may also qualify for membership. The geographic community of interest requirement is met if the area to be served is in a recognized single political jurisdiction, e.g., a city, county, or their political equivalent, or any contiguous portion thereof. Some examples of insufficiently defined or unacceptable geographic communities of interest are: [area where persons have common interests and/or interact. More than one credit union may share the same geographic community of interest area where persons have common interests and/or interact. More than one credit union may share the same geographic community of interest. There are currently four types of affinity on which a geographic community of interest can be based: persons, who] (i) Persons who live or work within, and business located within, a ten-mile radius of a credit union office; area; or (ii) Persons who live or work in the greater Houston (iii) Persons who live or work in the State of Texas; [(i) live in,] [(ii) worship in,] [(iii) attend school in, or] [(iv) work in that community. The geographic community of interest requirements are met if the area to be served is in a recognized single political jurisdiction, e.g., a city or a county, or a portion thereof.] (D) Other--The commissioner may authorize other types of community of interest, if the commissioner determines that either a credit union or foreign credit union has sufficiently demonstrated that a proposed factor creates an identifiable affinity among the persons within the proposed group. Such a factor shall be well-defined, have a geographic definition, and may not circumvent any limitation or restriction imposed on one of the other enumerated types. (9) Construction or development loan--a financing arrangement for acquiring property or rights to property, including land or structures, with the intent of converting the property into income-producing property such as residential housing for rental or sale; commercial use; industrial use; or similar use. Construction or development loan includes a financing arrangement for the major renovation or development of property already owned by the borrower that will convert the property to income-producing property or convert the use of income-producing property to a different or expanded use from its former use. Construction or development loan does not include loans to finance maintenance, repairs, or improvements to an existing income-producing property that do not change its use. (10) Day--whenever periods of time are specified in this title in days, calendar days are intended. When the day, or the last day fixed by statute or under this title for taking any action falls on Saturday, Sunday, or a state holiday, the action may be taken on the next succeeding day which is not a Saturday, Sunday, or a state holiday. (11) Department newsletter--the monthly publication that serves as an official notice of all applications, and by which procedures to protest applications are described. (12) Field of membership (FOM)--refers to the totality of persons a credit union may accept as members. The FOM may consist of one group, several groups with a related community of interest, or several unrelated groups with each having its own community of interest. (13) Finance Code or Texas Finance Code--the codification of the Texas statutes governing financial institutions, financial businesses, and related financial services, including the regulations and supervision of credit unions. (14) Imminent danger of insolvency--a circumstance or condition in which a credit union is unable or lacks the means to meet its current obligations as they come due in the regular and ordinary course of business, even if the value of its assets exceeds its liabilities; or the credit union has a positive net worth ratio equal to two percent or less of its assets. (15) Improved residential property--real property consisting of a residential dwelling having one to four dwelling units, at least one of which is occupied by the owner of the property. This term shall also include a one to four unit dwelling occupied in whole or in part by the owner on a seasonal basis. (16) Indirect financing--a program in which a credit union makes the credit decision in a transaction where the credit is extended by the vendor and assigned to the credit union or a loan transaction that generally involves substantial participation in and origination of the transaction by a vendor. (17) Loan-to-value ratio--the aggregate amount of all sums borrowed including outstanding balances plus any unfunded commit- 40 TexReg 7542 October 30, 2015 Texas Register

41 ment or line of credit from all sources on an item of collateral divided by the market value of the collateral used to secure the loan. (18) Loan and extension of credit--a direct or indirect advance of funds to a member, or on that member's behalf, that is conditioned upon the repayment of the funds by the member or the application of collateral. The terminology also includes the purchase of a member's loan or other obligation, a lease financing transaction, a credit sale, a line of credit or loan commitment under which the credit union is contractually obligated to advance funds to or on behalf of a member, an advance of funds to honor a check or share draft drawn on the credit union by a member, or any other indebtedness not classified as an investment security. (19) Manufactured home--a HUD-code manufactured home as defined by the Texas Manufactured Housing Standards Act. The terminology may also include a mobile home, house trailer, or similar recreational vehicle if the unit will be used as the member's residence and the loan is secured by a first lien on the unit, and the unit meets the requirements for the home mortgage interest deduction under the Internal Revenue Code (26 U.S.C. Section 163(a), (h)(2)(d)). (20) Market Value--the most probable price which an asset should bring in a competitive and open market under an arm's-length sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of ownership from seller to buyer where: (A) Buyer and seller are typically motivated; (B) Both parties are well informed or well advised, and acting in their own best interests; (C) A reasonable time is allowed for exposure in the open market; (D) Payment is made in cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (E) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (21) Metropolitan Statistical Area (MSA)--a geographic area as defined by the director of the U. S. Office of Management and Budget. (22) Mobile office--a branch office that does not have a single, permanent site, including a vehicle that travels to various public locations to enable members to conduct their credit union business. (23) Office--includes any service facility or place of business established by a credit union at which deposits are received, checks or share drafts paid, or money lent. This definition includes a credit union owned branch, a mobile branch, an office operated on a regularly scheduled weekly basis, a credit union owned deposit-taking ATM, or a credit union owned electronic facility that meets, at a minimum, these requirements; however, it does not include the credit union's Internet website. This definition also includes a shared branch or a shared branch network if either: (A) the credit union has an ownership interest in the service facility either directly or through a CUSO or similar organization; or (B) the service facility is local to the credit union and the credit union is an authorized participant in the service center. (24) Overlap--the situation which exists when a group of persons is eligible for membership in two or more state, foreign, or federal credit unions doing business in this state. Notwithstanding this provision, no overlap exists if eligibility for credit union membership results solely from a family relationship. (25) Pecuniary interest--the opportunity, directly or indirectly, to make money on or share in any profit or benefit derived from a transaction. (26) Person--an individual, partnership, corporation, association, government, governmental subdivision or agency, business trust, estate, trust, or any other public or private entity. (27) Principal office--the home office of a credit union. (28) Protestant--a credit union that opposes or objects to the relief requested by an applicant. (29) Real estate or real property-an identified parcel or tract of land. The term includes improvements, easements, rights of way, undivided or future interest and similar rights in a tract of land, but does not include mineral rights, timber rights, growing crops, water rights and similar interests severable from the land when the transaction does not involve the associated parcel or tract of land. (30) Remote service facility--an automated, unstaffed credit union facility owned or operated by, or operated for, the credit union, such as an automated teller machine, cash dispensing machine, point-of-sale terminal, or other remote electronic facility, at which deposits are received, cash dispensed, or money lent. (31) Reserves--allocations of retained earnings including regular and special reserves, except for any allowances for loan, lease or investment losses. (32) Resident of this state--a person physically located in, living in or employed in the state of Texas. (33) Respondent--a credit union or other person against whom a disciplinary proceeding is directed by the department. (34) Shared service center--a facility which is connected electronically with two or more credit unions so as to permit the facility, through personnel at the facility and the electronic connection, to provide a credit union member at the facility the same credit union services that the credit union member could lawfully obtain at the principal office of the member's credit union. (35) Secured credit--a loan made or extension of credit given upon an assignment of an interest in collateral pursuant to applicable state laws so as to make the enforcement or promise more certain than the mere personal obligation of the debtor or promisor. Any assignment may include an interest in personal property or real property or a combination thereof. (36) TAC--an acronym for the Texas Administrative Code, a compilation of all state agency rules in Texas. (37) Title or 7 TAC--Title 7, Part VI of the Texas Administrative Code [(TAC)], Banking and Securities, which contains all of the department's rules. (38) Underserved area--a geographic area, which could be described as one or more contiguous metropolitan statistical areas (MSA) or one or more contiguous political subdivisions, including counties, cities, and towns, that satisfy any one of the following criteria: (A) A majority of the residents earn less than 80 percent of the average for all wage earners as established by the U. S. Bureau of Labor Statistics; PROPOSED RULES October 30, TexReg 7543

42 (B) The annual household income for a majority of the residents falls at or below 80 percent of the median household income for the State of Texas, or the nation, whichever is higher; or (C) The commission makes a determination that the lack of available or adequate financial services has adversely effected economic development within the specified area. (39) Uninsured membership share--funds paid into a credit union by a member that constitute uninsured capital under conditions established by the credit union and agreed to by the member including possible reduction under of the act, risk of loss through operations, or other forfeiture. Such funds shall be considered an interest in the capital of the credit union upon liquidation, merger, or conversion. (40) Unsecured credit--a loan or extension of credit based solely upon the general credit financial standing of the borrower. The term shall include loans or other extensions of credit supported by the signature of a co-maker, guarantor, or endorser. (b) The same rules of construction that apply to interpretation of Texas statutes and codes, the definitions in the Act and in Government Code , and the definitions in subsection (a) of this section govern the interpretation of this title. If any section of this title is found to conflict with an applicable and controlling provision of other state or federal law, the section involved shall be void to the extent of the conflict without affecting the validity of the rest of this title. Filed with the Office of the Secretary of State on October 19, TRD Harold E. Feeney Commissioner Credit Union Department For further information, please call: (512) SUBCHAPTER C. MEMBERS 7 TAC The Credit Union Commission (the Commission) proposes amendments to , concerning Field of Membership. The proposed amendments to make changes to reflect that a credit union's field of membership may include a mosaic of communities of interest. More specifically, the amendments expand the local service area requirement to a newly delineated market area with certain limitations. The amendments eliminate many existing restrictions imposed\ by the Commissioner. The amendments also add a direct marketing restriction. Additionally, the amendments delete the restrictions for underserved communities by granting the Department a more permissive waiver provision and makes amendments necessary to include the provisions of Subchapter K, related to Credit Union Development Districts. The amendments change and streamline the notice requirements. Finally, the rule places certain affirmative obligations on a credit union who presents an application to expand their field of membership. The amendments are proposed as a result of the Department's general rule review. The amendments proposed allow more flexibility to credit unions for determining a community of interest and will result in reduced regulatory burden for credit unions. Shari Shivers, General Counsel, has determined that for the first five-year period the proposed amendments are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the amended rule. Ms. Shivers has also determined that for each year of the first five years the proposed amendments are in effect, the public benefits anticipated as a result of enforcing the rule will be greater clarity and ease of use of the rule. There will be no effect on small or micro businesses as a result of adopting the amended rule. There is no economic cost anticipated to the credit union system or to individuals for complying with the amended rule if adopted. Written comments on the proposal must be submitted within 30 days after its publication in the Texas Register to Shari Shivers, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin, Texas The amendments are proposed under Texas Finance Code, , which authorizes the Commission to adopt reasonable rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the Texas Finance Code and under Texas Finance Code , concerning membership. The specific section affected by the proposed amended rule is Texas Finance Code, Field of Membership. (a) General. Membership in a credit union shall be limited to one or more groups, each of which (the Group) has its own community of interest and is within the credit union's market [local service] area. [In this section, local service area shall mean an area that is within reasonable proximity of a credit union's office, and allows members to be realistically served from that office.] For purposes of field of membership, the Group as a whole will be considered to be within the credit union's market [local service] area when: (1) A majority of the persons in the Group live, work, or gather regularly within the market [local service] area; (2) The Group's corporate headquarters is located within the market [local service] area; or (3) The persons in the Group are "paid from" or "supervised from" an office or facility located within the market [local service] area. The commissioner may impose a geographical limitation on any Group if the commissioner reasonably determines that the applicant credit union does not have the facilities and staffing to serve a larger group or there are other operational or management concerns. (b) Delineation of market area. A credit union shall delineate its market area in the bylaws. A credit union whose field of membership does not include any geographic communities of interest, may delineate its membership bylaw provisions as its market area. (1) Market area. The market area for a credit union shall consist generally of one or more MSA's or metropolitan divisions or one or more contiguous political subdivisions, such as counties, cities, or towns in which the credit union has its principal place of business, offices, and deposit-taking ATMs. (2) Limitations on market area. Each credit union's market area(s): (A) Must consist only of whole metropolitan areas or political subdivisions; 40 TexReg 7544 October 30, 2015 Texas Register

43 (B) Must be of reasonable geographic size, taking into account the credit union's size, financial condition, and location of its offices and deposit-taking ATMs; and (C) May not reflect illegal discrimination. [(b) Other persons eligible for membership. A number of persons by virtue of their close relationship to a Group may be included in the field of membership at the option of the applicant credit union. These include:] [(1) members of the family or household of a member of the Group;] Group;] [(2) volunteers performing services for or on behalf of the [(3) organizations owned or controlled by a member or members of the Group, and any employees and members of those organizations;] [(4) spouses of persons who died while in the Group;] [(5) employees of the credit union;] [(6) subsidiaries of the credit union and their employees; and businesses and other organizations whose employees or members are within the Group.] (c) Multiple-groups. (1) The commissioner may approve a credit union's original articles of incorporation and bylaws or a request for approval of an amendment to a credit union's bylaws to serve one or more communities of interest or a combination of types of communities of interest. (2) In addition to general requirements, special requirements pertaining to multiple-group applications may be required before the commissioner will grant such a certificate or approve such an amendment. (A) Each Group to be included in the proposed field of membership of the credit union must have its own community of interest. (B) Each associational or occupational Group must individually request inclusion in the proposed credit union's field of membership. (d) Direct marketing restriction. A credit union with a geographic community of interest may not direct marketing targeted primarily at the persons in an occupational or associational Group unless: (1) the Group was included in the bylaws of the credit union prior to October 31, An occupational or associational Group is "included" in the bylaws of a credit union if the underlying enterprise or organization, as applicable, is specifically named in the credit unions bylaws. (2) a management official of the underlying enterprise or organization has provided the credit union with a written statement, signed by the official, that the Group desires service by the credit union. [(d) Overlap protection.] [(1) The commissioner will only consider the financial effect of an overlap proposed by an application to expand a credit union's field of membership or when a charter application proposes an overlap for a Group of 3,000 members or more.] [(2) The commissioner will weigh the information in support of the application and any information provided by a protesting or affected credit union. If the applicant has the financial capacity to serve the financial needs of the proposed members, demonstrates economic feasibility, complies with the requirements of this rule, and no protestant reasonably establishes a basis for denying the request, it shall be approved.] [(3) If a finding is made that overlap protection is warranted, the commissioner shall reject the application or require the applicant to limit or eliminate the overlap by adding exclusionary language to the text of the amendment, e.g., "excluding persons eligible for primary membership in any occupation or association based credit union that has an office within a specified proximity of the applicant credit union at the time membership is sought." Exclusionary clauses are rarely appropriate for inclusion on a geographic community of interest.] [(4) Generally, if the overlapped credit union does not submit a notice of protest form, and the department determines that there is no safety and soundness problem, an overlap will be permitted. If, however, a notice of protest is filed, the commissioner will consider the following in performing an overlap analysis:] [(A) whether the overlap is incidental in nature, ie., the group(s) in question is so small as to have no material effect on the overlapped credit union;] [(B) whether there is limited participation by members of the group(s) in the overlapped credit union after the expiration of a reasonable period of time;] [(C) whether the overlapped credit union provides requested service;] [(D) the financial effect on the overlapped credit union;] [(E) the desires of the group(s); and] [(F) the best interests of the affected group(s) and the credit union members involved.] [(5) Where a sponsor organization expands its operations internally, by acquisition or otherwise, the credit union may serve these new entrants to its field of membership if they are part of the community of interest described in the credit union's bylaws. Where acquisitions are made which add a new subsidiary or affiliate, the group cannot be served until the entity is included in the field of membership through the application process.] [(6) Credit unions affected by the organizational restructuring or merger of a group within its field of membership must apply for a modification of their fields of membership to reflect the group to be served.] (e) Underserved communities. (1) The Department may waive any provision of this section as the commissioner deems appropriate to facilitate credit union service to low and moderate income persons. (2) A credit union may extend membership to persons and organizations in an underserved community where such area has been designated a credit union development district in accordance with Subchapter K (related to Credit Union Development Districts). [(1) All credit unions may include underserved areas in their fields of membership, without regard to location. More than one credit union can serve the same underserved area.] [(2) Once an underserved area has been added to a credit union's field of membership, the credit union must establish and maintain an office or facility in the community. For the purposes of this subsection, service facility is defined as a place where shares are accepted for members' accounts, loan applications are accepted and loan proceeds are disbursed. This definition includes a credit union owned PROPOSED RULES October 30, TexReg 7545

44 branch, a shared branch, a mobile branch, and an office operated on a regularly scheduled weekly basis, or a credit union owned electronic facility that meets, at a minimum, these requirements. This definition does not include an ATM or a credit union's Internet website.] [(3) A credit union desiring to add an underserved area must document that the community meets the definition. In addition, the credit union must develop a business plan specifying how it will serve the community. The business plan, at a minimum, must identify the credit and depository needs of the community and detail how the credit union plans to serve those needs. The credit union will be expected to regularly review the business plan to determine if the community is being adequately served. The commissioner may require periodic service status reports from a credit union pertaining to the underserved area to ensure that of the area are being met, as well as requiring such reports before allowing a credit union to add an additional underserved area.] (f) Parity with Federal Credit Unions. Credit unions will be allowed to have, at a minimum, at least as much flexibility as federal credit unions have in field of membership regulation. If a credit union proposes a type of Group that the National Credit Union Administration has previously determined meets the Federal requirements, the commissioner shall approve the application unless the commissioner finds that the credit union has not demonstrated sufficient managerial and financial capacity to safely and soundly serve such expanded membership. (g) Application to expand field of membership. (1) In order to request the approval of the commissioner to add a Group to its field of membership [bylaws], a credit union must submit a written application to the Department. The applicant credit union shall have the burden to show to the Department such facts and data that support the requirements and considerations in this rule. In reviewing such application, the commissioner shall consider: (A) [(1)] Whether the Group has adequate unifying characteristics or a mutual interest such that the safety and soundness of the credit union is maintained; (B) [(2)] The ability of credit unions to maintain parity and to compete fairly with their counterparts; (C) [(3)] Service by the credit union that is responsive to the convenience and needs of prospective members; (D) [(4)] Protection for the interest of current and future members of the credit union; and (E) [(5)] The encouragement of economic progress in this State by allowing opportunity to expand services and facilities. (2) Notice published in accordance with Section (relating to Public Notice and Comment on Certain Applications) is deemed sufficient notification to all credit unions that the applicant credit union has submitted a request to expand its field of membership and comments on the proposed expansion are being accepted. (h) Plan to Serve Geographic Community of Interest. (1) A credit union must develop a business plan specifying how it will serve a proposed geographic community of interest. The business plan, at a minimum, must identify the credit and depository needs of the geographic area and detail how the credit union plans to serve those needs. The board of directors should periodically evaluate the credit union's record of helping to meet the credit needs of a geographic area(s) included in its field of membership. The commissioner may require a service status report from a credit union before allowing the credit union to expand its field of membership to include another geographic community of interests or change its market area. (2) A credit union has a continuing and affirmative obligation to help meet the financial needs of a geographic community of interest. This obligation, however, does not require a credit union to make loans or to provide services that are inconsistent with safe and sound operations. (i) Applicability of this section. (1) This section also applies to the conversion of a foreign or federal credit union to a credit union chartered and operating under Texas Finance Code, Title 3, Subtitle D. (2) This section does not apply to mergers where the continuing credit union is organized and operating under Texas Finance Code, Title 3, Subtitle D. The continuing credit union may amend its bylaws to add the field of membership of the merging credit union. (3) This section does not restrict Groups added to a credit union's bylaws prior to October 31, Filed with the Office of the Secretary of State on October 19, TRD Harold E. Feeney Commissioner Credit Union Department For further information, please call: (512) TITLE 10. COMMUNITY DEVELOPMENT PART 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS CHAPTER 5. COMMUNITY AFFAIRS PROGRAMS SUBCHAPTER A. GENERAL PROVISIONS 10 TAC 5.7 The Texas Department of Housing and Community Affairs (the "Department") proposes amendments to 10 TAC Chapter 5, 5.7, Fidelity Bond Requirements. The purpose of the amendments to 10 TAC 5.7 is to remove reference to Office of Management and Budget ("OMB") Circular A-110 "Administrative Requirements for Grants to Non-Profits," which has been replaced by requirements now included in 2 Code of Federal Regulations ("CFR") Part 200 and addressed elsewhere in this Subchapter, and to update Subrecipient requirements for fidelity bond documentation. The proposed amendments make changes to harmonize the section with 10 TAC 5.2 and 10 TAC Chapter 2, Subchapter B, and reduce the reporting burden for Subrecipients. FISCAL NOTE. Timothy K. Irvine, Executive Director, has determined that, for each year of the first five years the amendments are in effect, enforcing or administering the amendments does 40 TexReg 7546 October 30, 2015 Texas Register

45 not have any foreseeable implications related to costs or revenues of the state or local governments. PUBLIC BENEFIT/COST NOTE. Mr. Irvine also has determined that, for each year of the first five years the amendments are in effect, the public benefit anticipated as a result of the amendments will be clarity of program requirements and programmatic adherence to federal guidelines. There will not be any economic cost to any individuals required to comply with the amendments. ADVERSE IMPACT ON SMALL OR MICRO-BUSINESSES. The Department has determined that there will be no economic effect on small or micro-businesses. REQUEST FOR PUBLIC COMMENT. The public comment period will be held October 23, 2015, to November 23, 2015, to receive input on the amendments. Written comments may be submitted to the Texas Department of Housing and Community Affairs, Attention: Annette Cornier, Rule Comments, P.O. Box 13941, Austin, Texas , by to the following address: [email protected], or by fax to (512) ALL COMMENTS MUST BE RECEIVED BY 5:00 P.M. NOVEMBER 23, STATUTORY AUTHORITY. The amendments are proposed pursuant to Texas Government Code , which authorizes the Department to adopt rules, and Chapter 2306, Subchapter E, which authorizes the Department to administer its Community Affairs programs. The proposed amendments affect no other code, article, or statute Fidelity Bond Requirements. The Department is required to assure that fiscal control and accounting procedures for federally funded entities will be established to assure the proper disbursal and accounting for the federal funds paid to the state [(A-110 "Administrative Requirements for Grants to Non-Profits")]. In compliance with that assurance the Department requires program Subrecipients to maintain adequate fidelity bond coverage. A fidelity bond is a bond indemnifying the Subrecipient against losses resulting from the fraud or lack of integrity, honesty or fidelity of one or more of its employees, officers, or other persons holding a position of trust. (1) In administering Contracts, Subrecipients shall observe their regular requirements and practices with respect to bonding and insurance. In addition, the Department may impose bonding and insurance requirements by contract. (2) If a Subrecipient is a non-governmental organization, the Department requires an adequate fidelity bond. If the amount of the fidelity bond is not prescribed in the contract, the fidelity bond must be for a minimum of $10,000 or an amount equal to the contract if less than $10,000. The bond must be obtained from a company holding a certificate of authority to issue such bonds in the State of Texas. (3) The fidelity bond coverage must include all persons authorized to sign or counter-sign checks or to disburse sizable amounts of cash. Persons who handle only petty cash (amounts of less than $250) need not be bonded, nor is it necessary to bond officials who are authorized to sign payment vouchers, but are not authorized to sign or counter-sign checks or to disburse cash. (4) [The Department must receive written assurance from the Subrecipient that the required fidelity bond has been established.] The Subrecipient must receive an assurance letter [must be received] from the bonding company or agency stating the type of bond, the amount and period of coverage, the positions covered, and the annual cost of the bond. Compliance must be continuously maintained thereafter. A copy of the actual policy shall remain on file with the Subrecipient and shall be subject to monitoring by the Department. (5) Subrecipients are responsible for filing claims against the fidelity bond when a covered loss is discovered. The Department may take any one or more of the actions described in Chapter 2, Subchapter B of this Part, titled "Enforcement Regarding Community Affairs Contract Subrecipients." [subparagraphs (A) - (D) of this paragraph for noncompliance.] [(A) Deny Subrecipient's requests for advances and place the Subrecipient on a Modified Cost Reimbursement plan until written assurance of compliance is received by the Department.] [(B) Withhold Subrecipient payments (either reimbursement or advance) until written assurance of compliance is received by the Department.] [(C) Suspend performance of the contract until written assurance of compliance is received by the Department.] [(D) Contract termination.] Filed with the Office of the Secretary of State on October 19, TRD Timothy K. Irvine Executive Director Texas Department of Housing and Community Affairs For further information, please call: (512) CHAPTER 12. MULTIFAMILY HOUSING REVENUE BOND RULES 10 TAC (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Department of Housing and Community Affairs or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Department of Housing and Community Affairs (the "Department") proposes the repeal of 10 TAC Chapter 12, , concerning the 2015 Multifamily Housing Revenue Bond Rules. The purpose of the repeal is to allow for the proposal and adoption of new sections. The proposed new Chapter 12, concerning the 2016 Multifamily Housing Revenue Bond Rules, is published concurrently with this proposed repeal in this issue of the Texas Register. FISCAL NOTE. Timothy K. Irvine, Executive Director, has determined that, for each year of the first five years the repeal will be in effect, enforcing or administering the repeal does not have any foreseeable implications related to costs or revenues of the state or local governments. PUBLIC BENEFIT/COST NOTE. Mr. Irvine also has determined that, for each year of the first five years the repeal is in effect, the public benefit anticipated as a result of the repeal will be the adoption of new rules for multifamily housing revenue bonds; PROPOSED RULES October 30, TexReg 7547

46 providing updates and greater clarity, and enhancing the state's ability to provide decent, safe and sanitary housing administered by the Department. There will not be any economic cost to any individuals required to comply with the repeal. ADVERSE IMPACT ON SMALL OR MICRO-BUSINESSES. The Department has determined that there will be no economic effect on small or micro-businesses. REQUEST FOR PUBLIC COMMENT. The public comment period will be held October 30, 2015, to November 30, 2015, to receive input on the repeal. Written comments may be submitted to the Texas Department of Housing and Community Affairs, Shannon Roth, Rule Comments, P.O. Box 13941, Austin, Texas or by fax to (512) ALL COMMENTS MUST BE RECEIVED BY 5:00 P.M. November 30, STATUTORY AUTHORITY. The repeal is proposed pursuant to Texas Government Code, , which authorizes the Department to adopt rules. The proposed repeal affects no other code, article, or statute General Definitions Bond Rating and Investment Letter Pre-Application Process and Evaluation Pre-Application Threshold Requirements Pre-Application Scoring Criteria Full Application Process Refunding Application Process Regulatory and Land Use Restrictions Fees. Filed with the Office of the Secretary of State on October 19, TRD Tom Gouris Deputy Executive Director Texas Department of Housing and Community Affairs For further information, please call: (512) TAC The Texas Department of Housing and Community Affairs (the "Department") proposes new 10 TAC Chapter 12, , concerning the 2016 Multifamily Housing Revenue Bond Rules. The purpose of the proposed new rules is to implement changes that will improve the 2016 Private Activity Bond Program. The Multifamily Housing Revenue Bond Rules outline the threshold and scoring related requirements associated with private activity bond funding from the Department. The proposed repeal of existing Chapter 12 is published concurrently with this rulemaking. FISCAL NOTE. Timothy K. Irvine, Executive Director, has determined that, for each year of the first five years the new sections will be in effect, enforcing or administering the new sections does not have any foreseeable implications related to costs or revenues of the state or local governments. PUBLIC BENEFIT/COST NOTE. Mr. Irvine also has determined that, for each year of the first five years the new sections will be in effect, the public benefit anticipated as a result of the new sections will be the adoption of new rules for multifamily housing revenue bonds; providing updates and greater clarity and thereby enhancing the state's ability to provide decent, safe and sanitary housing administered by the Department. The average cost of filing an application is between $40,000 and $50,000, which may vary depending on the specific type of application, location of the development site, and other non-state of Texas funding sources utilized. The proposed rules do not, on average, result in an increased cost of filing an application as compared to the existing program rules. ADVERSE IMPACT ON SMALL OR MICRO-BUSINESSES. The Department has determined that there will be no new or additional economic effect on small or micro-businesses. The average cost of filing an application is between $40,000 and $50,000, which may vary depending on the specific type of application, location of the development site, and other non-state of Texas funding sources utilized. The proposed rules do not, on average, result in an increased cost of filing an application as compared to the existing program rules. REQUEST FOR PUBLIC COMMENT. The public comment period will be held October 30, 2015, to November 30, 2015, to receive input on the new sections. Written comments may be submitted to the Texas Department of Housing and Community Affairs, Shannon Roth, Rule Comments, P.O. Box 13941, Austin, Texas or by fax to (512) ALL COMMENTS MUST BE RECEIVED BY 5:00 P.M. November 30, STATUTORY AUTHORITY. The new sections are proposed pursuant to Texas Government Code, , which authorizes the Department to adopt rules. The proposed new sections affect no other code, article, or statute General. (a) Authority. The rules in this chapter apply to the issuance of multifamily housing revenue bonds ("Bonds") by the Texas Department of Housing and Community Affairs ("Department"). The Department is authorized to issue Bonds pursuant to Texas Government Code, Chapter Notwithstanding anything in this chapter to the contrary, Bonds which are issued to finance the Development of multifamily rental housing are subject to the requirements of the laws of the State of Texas, including but not limited to Texas Government Code, Chapters 1372 and 2306, and federal law pursuant to the requirements of Internal Revenue Code ("Code"), 142. (b) General. The purpose of this chapter is to state the Department's requirements for issuing Bonds, the procedures for applying for Bonds and the regulatory and land use restrictions imposed upon Bond financed Developments. The provisions contained in this chapter are separate from the rules relating to the Department's administration of the Housing Tax Credit program. Applicants seeking a Housing Tax Credit Allocation should consult Chapter 11 of this title (relating to the Housing Tax Credit Program Qualified Allocation Plan) and Chapter 10 of this title (relating to Uniform Multifamily Rules) for the current program year. In general, the Applicant will be required to satisfy the requirements of the Qualified Allocation Plan ("QAP") and Uniform Multifamily Rules in effect at the time the Certificate of Reservation is 40 TexReg 7548 October 30, 2015 Texas Register

47 issued by the Texas Bond Review Board. If the applicable QAP or Uniform Multifamily Rules contradict rules set forth in this chapter, the applicable QAP or Uniform Multifamily Rules will take precedence over the rules in this chapter. The Department encourages participation in the Bond program by working directly with Applicants, lenders, Bond Trustees, legal counsels, local and state officials and the general public to conduct business in an open, transparent and straightforward manner. (c) Costs of Issuance. The Applicant shall be responsible for payment of all costs related to the preparation and submission of the pre-application and Application, including but not limited to, costs associated with the publication and posting of required public notices and all costs and expenses associated with the issuance of the Bonds, regardless of whether the Application is ultimately approved or whether Bonds are ultimately issued. At any stage during the process, the Applicant is solely responsible for determining whether to proceed with the Application and the Department disclaims any and all responsibility and liability in this regard. (d) Taxable Bonds. The Department may issue taxable Bonds and the requirements associated with such Bonds, including occupancy requirements, shall be determined by the Department on a case by case basis. (e) Waivers. Requests for waivers of program rules must be made in accordance with of this title (relating to Waiver of Rules for Applications) Definitions. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. Any capitalized terms not specifically mentioned in this section shall have the meaning as defined in Texas Government Code, Chapter 2306, 141, 142, and 145 of the Internal Revenue Code, and Chapter 10 of this title (relating to Uniform Multifamily Rules). (1) Institutional Buyer--Shall have the meaning prescribed under 17 CFR (a), but excluding any natural person or any director or executive officer of the Department (17 CFR (a)(4) - (6)), or as defined by 17 CFR (A), promulgated under the Securities Act of 1935, as amended. (2) Persons with Special Needs--Shall have the meaning prescribed under Texas Government Code, (3) Bond Trustee--A financial institution, usually a trust company or the trust department in a commercial bank, that holds collateral for the benefit of the holders of municipal securities. The Bond Trustee's obligations and responsibilities are set forth in the Indenture Bond Rating and Investment Letter. (a) Bond Ratings. All publicly offered Bonds issued by the Department to finance Developments shall have a debt rating the equivalent of at least an "A" rating assigned to long-term obligations by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or Moody's Investors Service, Inc. If such rating is based upon credit enhancement provided by an institution other than the Applicant or Development Owner, the form and substance of such credit enhancement shall be subject to approval by the Board, evidenced by a resolution authorizing the issuance of the credit enhanced Bonds. (b) Investment Letters. Bonds rated less than "A," or Bonds which are unrated must be placed with one or more Institutional Buyers and must be accompanied by an investor letter acceptable to the Department. Subsequent purchasers of such Bonds shall also be qualified as Institutional Buyers and shall execute and deliver to the Department an investor letter in a form satisfactory to the Department. Bonds rated less than "A" and Bonds which are unrated shall be issued in physical form, in minimum denominations of one hundred thousand dollars ($100,000), and shall carry a legend requiring any purchasers of the Bonds to sign and deliver to the Department an investor letter in a form acceptable to the Department Pre-Application Process and Evaluation. (a) Pre-Inducement Questionnaire. Prior to the filing of a preapplication, the Applicant shall submit the Pre-Inducement Questionnaire, in the form prescribed by the Department, so the Department can get a preliminary understanding of the proposed Development plan before a pre-application and corresponding fees are submitted. Information requested by the Department in the questionnaire includes, but is not limited to, the financing structure, borrower and key principals, previous housing tax credit or private activity bond experience, related party or identity of interest relationships and contemplated scope of work (if proposing Rehabilitation). After reviewing the pre-inducement questionnaire, Department staff will follow-up with the Applicant to discuss the next steps in the process and may schedule a pre-inducement conference call or meeting. Prior to the submission of a pre-application, it is important that the Department and Applicant communicate regarding the Department's objectives and policies in the development of affordable housing throughout the State using Bond financing. The acceptance of the questionnaire by the Department does not constitute a pre-application or Application and does not bind the Department to any formal action regarding an inducement resolution. (b) Undesirable Neighborhood Characteristics. If the Development Site has any of the characteristics described in (a)(4)(B) of this title (relating to Site and Development Requirements and Restrictions), the Applicant must disclose the presence of such characteristics to the Department. Disclosure may be done at time of pre-application and handled in connection with the inducement or it can be addressed at the time of Application submission. The Application may be subject to termination should staff conclude that the Development Site has any characteristics found in (a)(4)(B) of this title (relating to Site and Development Requirments and Restrictions) and the Applicant failed to disclose. (c) Pre-Application Process. An Applicant who intends to pursue Bond financing from the Department shall submit a pre-application by the corresponding pre-application submission deadline, as set forth by the Department. The required pre-application fee as described in of this chapter (relating to Fees) must be submitted with the pre-application in order for the pre-application to be accepted by the Department. Department review at the time of the pre-application is limited and not all issues of eligibility and documentation submission requirements pursuant to Chapter 10 of this title (relating to Uniform Multifamily Rules) are reviewed. The Department is not responsible for notifying an Applicant of potential areas of ineligibility or other deficiencies at the time of pre-application. If the Development meets the criteria as described in 12.5 of this chapter (relating to Pre-Application Threshold Requirements), the pre-application will be scored and ranked according to the selection criteria as described in 12.6 of this chapter (relating to Pre-Application Scoring Criteria). (d) Scoring and Ranking. The Department will rank the preapplication according to score within each priority defined by Texas Government Code, All Priority 1 pre-applications will be ranked above all Priority 2 pre-applications which will be ranked above all Priority 3 pre-applications. This priority ranking will be used throughout the calendar year. The selection criteria, as further described in 12.6 of this chapter, reflect a structure which gives priority consideration to specific criteria as outlined in Texas Government Code, In the event two or more pre-applications receive the same score, the Department will use the tie breaker factors as outlined PROPOSED RULES October 30, TexReg 7549

48 in 11.7 of this title (relating to Tie Breaker Factors) in the order they are presented to determine which pre-application will receive preference in consideration of a Certificate of Reservation. (e) Inducement Resolution. After the pre-applications have been scored and ranked, the pre-application and proposed financing structure will be presented to the Department's Board for consideration of an inducement resolution declaring the Department's initial intent to issue Bonds with respect to the Development. Approval of the inducement resolution does not guarantee final Board approval of the Bond Application. Department staff may recommend that the Board not approve an inducement resolution for a pre-application. Each Development is unique, and therefore, making the final determination to issue Bonds is often dependent on the issues presented at the time the full Application is considered by the Board Pre-Application Threshold Requirements. The threshold requirements of a pre-application include the criteria listed in paragraphs (1) - (9) of this section. As the Department reviews the pre-application the assumptions as reflected in Chapter 10, Subchapter D of this title (relating to Underwriting and Loan Policy) will be utilized even if not reflected by the Applicant in the pre-application. (1) Submission of the multifamily bond pre-application in the form prescribed by the Department; (2) Completed Bond Review Board Residential Rental Attachment for the current program year; (3) Site Control, evidenced by the documentation required under (10) of this title (relating to Required Documentation for Application Submission). The Site Control must be valid through the date of the Board meeting at which the inducement resolution is considered and must meet the requirements of (10) of this title at the time of Application; (4) Boundary survey or plat clearly identifying the location and boundaries of the subject Property; (5) Local area map that shows the location of the Development Site and the location of at least six (6) community assets within a one mile radius (two miles if in a Rural Area). Only one community asset of each type will count towards the number of assets required. The mandatory community assets and specific requirements are identified in (a)(2) of this title (relating to Site and Development Requirements and Restrictions); (6) Organization Chart showing the structure of the Development Owner and of any Developer or Guarantor, providing the names and ownership percentages of all Persons having an ownership interest in the Development Owner or the Developer or Guarantor, as applicable. (7) Distribution List Form, as provided in the pre-application, to include the anticipated financing participants; (8) Evidence of Entity Registration or Reservation with the Texas Office of the Secretary of State; (9) A certification, as provided in the pre-application, that the Applicant met the requirements and deadlines for public notifications as identified in of this title (relating to Public Notifications ( (9)). Notifications must not be older than three (3) months prior to the date of Application submission. Re-notification will be required by Applicants who have submitted a change from pre-application to Application that reflects a total Unit increase of greater than 10 percent or a 5 percent increase in density (calculated as units per acre) as a result of a change in the size of the Development Site. In addition, should a change in elected official occur between the submission of a pre-application and the submission of an Application, Applicants are required to notify the newly elected (or appointed) official Pre-Application Scoring Criteria. This section identifies the scoring criteria used in evaluating and ranking pre-applications. The criteria identified below include those items required under Texas Government Code, and other criteria considered important by the Department. Any scoring items that require supplemental information to substantiate points must be submitted in the pre-application, as further outlined in the Multifamily Bond Pre-Application Procedures Manual. Applicants proposing multiple sites will be required to submit a separate pre-application for each Development Site. Each Development Site will be scored on its own merits and the final score will be determined based on an average of all of the individual scores. (1) Income and Rent Levels of the Tenants. Pre-applications may qualify for up to (10 points) for this item. (A) Priority 1 designation includes one of clauses (i) - (iii) of this subparagraph. (10 points) (i) Set aside 50 percent of Units rent capped at 50 percent AMGI and the remaining 50 percent of units rents capped at 60 percent AMGI; or (ii) Set aside 15 percent of units rent capped at 30 percent AMGI and the remaining 85 percent of units rent capped at 60 percent AMGI; or (iii) Set aside 100 percent of units rent capped at 60 percent AMGI for Developments located in a census tract with a median income that is higher than the median income of the county, MSA or PMSA in which the census tract is located. (B) Priority 2 designation requires the set aside of at least 80 percent of the Units capped at 60 percent AMGI. (7 points) (C) Priority 3 designation. Includes any qualified residential rental development. Market rate units can be included under this priority. (5 points) (2) Cost of Development per Square Foot. (1 point) For this item, costs shall be defined as either the Building Cost or the Hard Costs as represented in the Development Cost Schedule, as originally provided in the pre-application. This calculation does not include indirect construction costs. Pre-applications that do not exceed $95 per square foot of Net Rentable Area will receive one (1) point. Rehabilitation will automatically receive (1 point). (3) Unit Sizes. (5 points) The Development must meet the minimum requirements identified in this subparagraph to qualify for points. Points for this item will be automatically granted for Applications involving Rehabilitation (excluding Reconstruction) provided they are requested in the Private Activity Bond Pre-Application Scoring Form. (A) five-hundred-fifty (550) square feet for an Efficiency Unit; (B) six-hundred-fifty (650) square feet for a one Bedroom Unit; (C) eight-hundred-fifty (850) square feet for a two Bedroom Unit; (D) one-thousand-fifty (1,050) square feet for a three Bedroom Unit; and (E) one-thousand, two-hundred-fifty (1,250) square feet for a four Bedroom Unit. 40 TexReg 7550 October 30, 2015 Texas Register

49 (4) Extended Affordability. (2 points) A pre-application may qualify for points under this item for Development Owners that are willing to extend the Affordability Period for a Development to a total of thirty-five (35) years. (5) Unit and Development Features. A minimum of (7 points) must be selected, as certified in the pre-application, for providing specific amenity and quality features in every Unit at no extra charge to the tenant. The amenities and corresponding point structure is provided in (b)(6)(B) of this title (relating to Site and Development Requirements and Restrictions). The amenities selected at pre-application may change at Application so long as the overall point structure remains the same. The points selected at pre-application and/or Application and corresponding list of amenities will be required to be identified in the LURA and the points selected must be maintained throughout the Extended Use Period. Applications involving scattered site Developments must have a specific amenity located within each Unit to count for points. Rehabilitation Developments will start with a base score of (3 points). (6) Common Amenities. All Developments must provide at least the minimum threshold of points for common amenities based on the total number of Units in the Development as provided in subparagraphs (A) - (F) of this paragraph. The common amenities include those listed in (b)(5) of this title and must meet the requirements as stated therein. The Owner may change, from time to time, the amenities offered; however, the overall points as selected at Application must remain the same. For Developments with 41 Units or more, at least two (2) of the required threshold points must come from the Green Building Features as identified in (b)(5)(C)(xxxi) of this title. (4 points); (7 points); (10 points); (A) Developments with 16 to 40 Units must qualify for (B) Developments with 41 to 76 Units must qualify for (C) Developments with 77 to 99 Units must qualify for (D) Developments with 100 to 149 Units must qualify for (14 points); (E) Developments with 150 to 199 Units must qualify for (18 points); or (F) Developments with 200 or more Units must qualify for (22 points). (7) Tenant Supportive Services. (8 points) By electing points, the Applicant certifies that the Development will provide supportive services, which are listed in (b)(7) of this title, appropriate for the proposed tenants and that there will be adequate space for the intended services. The provision and complete list of supportive services will be included in the LURA and must be maintained throughout the Extended Use Period. The Owner may change, from time to time, the services offered; however, the overall points as selected at Application must remain the same. The services provided should be those that will directly benefit the Target Population of the Development and accessible to all. No fees may be charged to the tenants for any of the services. Services must be provided on-site or transportation to those off-site services identified on the list must be provided. The same service may not be used for more than one scoring item. All services must be provided by a person on the premises. (8) Underserved Area. An Application may qualify to receive up to (2 points) if the Development Site is located in an Underserved Area as further described in 11.9(c)(6)(A)-(G) of this title. (9) Development Support/Opposition. (Maximum +24 to -24 points) Each letter will receive a maximum of +3 to -3 and must be received ten (10) business days prior to the date of the Board meeting at which the pre-application will be considered. Letters must clearly state support or opposition to the specific Development. State Representatives or Senators as well as local elected officials to be considered are those in office at the time the pre-application is submitted and represent the district containing the proposed Development Site. Letters of support from State or local elected officials that do not represent the district containing the proposed Development Site will not qualify for points under this exhibit. Neutral letters, letters that do not specifically refer to the Development or do not explicitly state support will receive (zero (0) points). A letter that does not directly express support but expresses it indirectly by inference (i.e., a letter that says "the local jurisdiction supports the Development and I support the local jurisdiction") will be treated as a neutral letter. (A) State Senator and State Representative of the districts whose boundaries include the proposed Development Site; (B) Mayor of the municipality (if the Development is within a municipality or its extraterritorial jurisdiction); (C) All elected members of the Governing Body of the municipality (if the Development is within a municipality or its extraterritorial jurisdiction); (D) Presiding officer of the Governing Body of the county in which the Development Site is located; (E) All elected members of the Governing Body of the county in which the Development Site is located; (F) Superintendent of the school district in which the Development Site is located; and (G) Presiding officer of the board of trustees of the school district in which the Development Site is located. (10) Preservation Initiative. (10 points) Preservation Developments, including rehabilitation proposals on properties which are nearing expiration of an existing affordability requirement within the next two (2) years or for which there has been a rent restriction requirement in the past ten (10) years may qualify for points under this item. Evidence must be submitted in the pre-application. (11) Declared Disaster Areas. (7 points) If at the time the complete pre-application is submitted or at any time within the twoyear period preceding the date of submission, the proposed Development Site is located in an area declared to be a disaster area under Texas Government Code, Full Application Process. (a) Application Submission. Once the inducement resolution has been approved by the Board, an Applicant who elects to proceed with submitting a full Application to the Department must submit the complete tax credit Application pursuant to of this title (relating to Procedural Requirements for Application Submission). (b) Eligibility Criteria. The Department will evaluate the Application for eligibility and threshold at the time of full Application pursuant to Chapter 10 of this title (relating to Uniform Multifamily Rules). If there are changes to the Application at any point prior to closing that have an adverse affect on the score and ranking order and that would have resulted in the pre-application being placed below another pre-application in the ranking, the Department will terminate the Application and withdraw the Certificate of Reservation from the Bond Review Board (with the exception of changes to deferred developer's fees and support or opposition points). The Development and the Applicant must satisfy the requirements set forth in Chapter 10 of this PROPOSED RULES October 30, TexReg 7551

50 title (relating to Uniform Multifamily Rules) and Chapter 11 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan) in addition to Texas Government Code, Chapter 1372, the applicable requirements of Texas Government Code, Chapter 2306, and the Code. The Applicant will also be required to select a Bond Trustee from the Department's approved list as published on its website. (c) Bond Documents. Once the Application has been submitted and the Applicant has deposited funds to pay costs, the Department's bond counsel shall draft Bond documents. (d) Public Hearings. For every Bond issuance, the Department will hold a public hearing in order to receive comments from the public pertaining to the Development and the issuance of the Bonds. The Applicant or member of the Development Team must be present at the public hearing and will be responsible for conducting a brief presentation on the proposed Development and providing handouts at the hearing that should contain at a minimum, a description of the Development, maximum rents and income restrictions. If the proposed Development is Rehabilitation then the presentation should include the proposed scope of work that is planned for the Development. All handouts must be submitted to the Department for review at least two (2) days prior to the public hearing. Publication of all notices required for the public hearing shall be at the sole expense of the Applicant, as well as any facility rental fees or required deposits. (e) Approval of the Bonds. Subject to the timely receipt and approval of commitments for financing, an acceptable evaluation for eligibility, the satisfactory negotiation of Bond documents, and the completion of a public hearing, the Board, upon presentation by Department staff, will consider the approval of the final Bond resolution relating to the issuance, final Bond documents and in the instance of privately placed Bonds, the pricing, terms and interest rate of the Bonds. The process for appeals and grounds for appeals may be found under 1.7 of this title (relating to Staff Appeals Process) and 1.8 of this title (relating to Board Appeals Process). To the extent applicable to each specific Bond issuance, the Department's conduit multifamily Bond transactions will be processed in accordance with 34 TAC Part 9, Chapter 181, Subchapter A (relating to Bond Review Board Rules) and Texas Government Code, Chapter (f) Local Permits. Prior to closing on the Bond financing, all necessary approvals, including building permits from local municipalities, counties, or other jurisdictions with authority over the Development Site must have been obtained or evidence that the permits are obtainable subject only to payment of certain fees must be submitted to the Department Refunding Application Process. (a) Application Submission. Owners who wish to refund or modify tax-exempt bonds that were previously issued by the Department must submit to the Department a summary of the proposed refunding plan or modifications. To the extent such modifications constitute a re-issuance under state law the Applicant shall then be required to submit a refunding Application in the form prescribed by the Department pursuant to the Bond Refunding Application Procedures Manual. (b) Bond Documents. Once the Department has received the refunding Application and the Applicant has deposited funds to pay costs, the Department's bond counsel will draft the required Bond documents. (c) Public Hearings. Depending on the proposed modifications to existing Bond covenants a public hearing may be required. Such hearing must take place prior to obtaining Board approval and must meet the requirements pursuant to 12.7(d) of this chapter (relating to Full Application Process) regarding the presence of a member of the Development Team and providing a summary of proposed Development changes. (d) Rule Applicability. Refunding Applications must meet the requirements pursuant to Chapter 10 of this title (relating to Uniform Multifamily Rules) and Chapter 11 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan) with the exception of criteria stated therein specific to the Competitive Housing Tax Credit Program. At the time of the original award the Application would have been subject to eligibility and threshold requirements under the QAP in effect the year the Application was awarded. Therefore, it is anticipated the Refunding Application would not be subject to the site and development requirements and restrictions pursuant to of this title (relating to Site and Development Requirements and Restrictions). The circumstances surrounding a refunding Application are unique to each Development; therefore, upon evaluation of the refunding Application, the Department is authorized to utilize its discretion in the applicability of the Department's rules as it deems appropriate Regulatory and Land Use Restrictions. (a) Filing and Term of Regulatory Agreement. A Bond Regulatory and Land Use Restriction Agreement will be filed in the property records of the county in which the Development is located for each Development financed from the proceeds of Bonds issued by the Department. The term of the Regulatory Agreement will be based on the criteria as described in paragraphs (1) - (3) of this subsection, as applicable: (1) the longer of thirty (30) years, from the date the Development Owner takes legal possession of the Development; (2) the end of the remaining term of the existing federal government assistance pursuant to Texas Government Code, ; or (3) the period required by the Code. (b) Federal Set Aside Requirements. (1) Developments which are financed from the proceeds of Private Activity Bonds must be restricted under one of the two minimum set-asides as described in subparagraphs (A) and (B) of this paragraph: (A) at least 20 percent of the Units within the Development shall be occupied or held vacant and available for occupancy at all times by persons or families whose income does not exceed 50 percent of the area median income; or (B) at least 40 percent of the Units within the Development shall be occupied or held vacant and available for occupancy at all times by persons or families whose income does not exceed 60 percent of the area median income. (2) The Development Owner must designate at the time of Application which of the two set-asides will apply to the Development and must also designate the selected priority for the Development in accordance with Texas Government Code, Units intended to satisfy set-aside requirements must be distributed evenly throughout the Development, and must include a reasonably proportionate amount of each type of Unit available in the Development. (3) No tenant qualifying under either of the set-asides shall be denied continued occupancy of a Unit in the Development because, after commencement of such occupancy, such tenant's income increases to exceed the qualifying limit; provided, however, that should a tenant's income, as of the most recent determination thereof, exceed 140 percent of the applicable income limit and such tenant constitutes a portion of the set-aside requirement of this section, then such tenant shall only continue to qualify for so long as no Unit of 40 TexReg 7552 October 30, 2015 Texas Register

51 comparable or smaller size is rented to a tenant that does not qualify as a Low-Income Tenant Fees. (a) Pre-Application Fees. The Applicant is required to submit, at the time of pre-application, the following fees: $1,000 (payable to TDHCA), $2,500 (payable to the Department's bond counsel) and $5,000 (payable to the Texas Bond Review Board (BRB) pursuant to Texas Government Code, (a)). These fees cover the costs of pre-application review by the Department, its bond counsel and filing fees to the BRB. (b) Application Fees. At the time of Application the Applicant is required to submit a tax credit application fee of $30/unit and $10,000 for the bond application fee (for multiple site Applications the application fee shall be $10,000 or $30/unit, whichever is greater). Such fees cover the costs associated with Application review and the Department's expenses in connection with providing financing for a Development. For Developments proposed to be structured as part of a portfolio such application fees may be reduced on a case by case basis at the discretion of the Executive Director. (c) Closing Fees. The closing fee for Bonds, other than refunding Bonds is equal to 50 basis points (0.005) of the issued principal amount of the Bonds. The Applicant will also be required to pay at closing of the Bonds the first two years of the administration fee equal to 20 basis points (0.002) of the issued principal amount of the Bonds and a Bond compliance fee equal to $25/unit (such compliance fee shall be applied to the third year following closing). (d) Application and Issuance Fees for Refunding Applications. For refunding Applications the application fee will be $10,000 unless the refunding is not required to have a public hearing, in which case the fee will be $5,000. The closing fee for refunding Bonds is equal to 25 basis points (0.0025) of the issued principal amount of the refunding Bonds. If applicable, administration and compliance fees due at closing may be prorated based on the current billing period of such fees. If additional volume cap is being requested other fees may be required as further described in the Bond Refunding Applications Procedures Manual. (e) Administration Fee. The annual administration fee is equal to 10 basis points (0.001) of the outstanding bond amount on its date of calculation and is paid as long as the Bonds are outstanding. (f) Bond Compliance Fee. The Bond compliance monitoring fee is equal to $25/Unit. Filed with the Office of the Secretary of State on October 19, TRD Tom Gouris Deputy Executive Director Texas Department of Housing and Community Affairs For further information, please call: (512) TITLE 16. ECONOMIC REGULATION PART 4. TEXAS DEPARTMENT OF LICENSING AND REGULATION CHAPTER 67. AUCTIONEERS The Texas Department of Licensing and Regulation (Department) proposes amendments to existing rules at 16 Texas Administrative Code (TAC) Chapter 67, 67.20, 67.25, 67.30, and 67.80; proposes new rules 67.21, 67.70, and 67.72; and proposes the repeal of current 67.70, regarding the Auctioneer program. House Bill 2481 (H.B. 2481), 84th Legislature, Regular Session (2015), made substantive changes to Chapter 1802, Occupations Code in the regulation of auctioneers. The bill authorized the Texas Commission of Licensing and Regulation (Commission) to establish an associate auctioneer license; exempted certain auctions of property through the internet from Chapter 1802; and added several exemptions for auctioneers to conduct auctions of certain motor vehicles. The proposed amendments, new rules and repeal are necessary to implement the changes made by H.B and make editorial and technical corrections. The proposed amendments to make editorial corrections and add an alternative path to obtaining an auctioneer license, via experience gained through licensure as an associate auctioneer. Proposed new establishes the requirements for an associate auctioneer. The proposed amendments to add "associate auctioneer" to the continuing education requirements and make an editorial change. The proposed amendments to provide clarity for exemptions regarding internet based auctions. Proposed amendment to the title of removes "Education" from the name of the advisory board to bring about consistency in the names of the Department's boards. The proposed repeal and replacement of current will reorganize the current standards and add certain standards of practice for auctioneers into a more logical format, by separating the duties relating to advertising, auctioneering and recordkeeping. The proposed new creates duties and responsibilities for the sponsoring auctioneer. Proposed new creates duties and responsibilities for associate auctioneers. The proposed amendments to create an application fee and renewal fee for the associate auctioneer license. William H. Kuntz, Jr., Executive Director, has determined that for the first five-year period the proposed amendments, new rules, and repeal are in effect there will be no direct cost to state or local government as a result of enforcing or administering the proposed rules. There is no estimated loss in revenue to the state as a result of enforcing or administering the proposed amendments, new rules or repeal. The anticipated increase in revenue to the state would be $5,000 annually, which is comprised of the annual license application fee and annual renewal fee for the associate which is $25 multiplied by the anticipated population of associates which was 200 at the time the program was abolished by H.B on June 14, PROPOSED RULES October 30, TexReg 7553

52 Mr. Kuntz also has determined that for each year of the first five-year period the proposed amendments, new rules and repeal are in effect, the public benefit will be auctioneers who have had experience in the various aspects of the auction business through the associate program and will also benefit from employment opportunities in this occupation. There will be no anticipated economic effect on small and micro-businesses who are required to comply with the rules as proposed. An auctioneer is not required to hire an associate auctioneer. Since the agency has determined that the proposed amendments and new rules will have no adverse economic effect on small or micro-businesses, preparation of an Economic Impact Statement and a Regulatory Flexibility Analysis, under Texas Government Code , is not required. Comments on the proposal may be submitted by mail to Pauline Easley, Legal Assistant, General Counsel's Office, Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 78711; or by facsimile to (512) ; or electronically to [email protected]. The deadline for comments is 30 days after publication in the Texas Register. 16 TAC 67.20, 67.21, 67.25, 67.30, 67.65, , The amendments and new rules are proposed under Texas Occupations Code, Chapters 51 and 1802, which authorize the Commission, the Department's governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department. The statutory provisions affected by the proposal are those set forth in Texas Occupations Code, Chapters 51 and No other statutes, articles, or codes are affected by the proposal License Requirements--Auctioneer. (a) (No change.) (b) To obtain a license as an auctioneer an applicant must: (1) be at least 18 years of age; (2) be a citizen of the United States or a legal alien; and (3) either: (A) [(3)] pass a written or oral examination provided by the department; or (B) provide proof of employment and licensure as an associate auctioneer for at least two (2) years, and of having participated in at least ten (10) auctions, as described in 67.72(c). (4) hold a high school diploma or a high school equivalency certificate; (5) not have been convicted of a felony during the [within] five (5) years preceding [of] the application date; and (6) show proof of successful completion of at least eighty (80) [80] hours of classroom instruction at an auction school with a curriculum approved by the department License Requirements--Associate Auctioneers. An applicant for licensure as an associate must: (1) submit a completed application along with required fees; (2) be employed under the direct supervision of an auctioneer licensed under this chapter; and (3) either be a citizen of the United States or a legal alien Continuing Education. (a) (No change.) (b) To renew a license as an auctioneer or associate auctioneer, a licensee must complete six hours of continuing education in courses approved by the department, including two hours of instruction in laws and rules that regulate the conduct of auctioneers and associate auctioneers. (c) - (d) (No change.) (e) A licensee must [shall] retain a copy of the certificate of completion for a course for one year after the date of completion. In conducting any inspection or investigation of the licensee, the department may examine the licensee's records to determine compliance with this subsection. (f) To be approved under Chapter 59 of this title, a provider's course must be dedicated to instruction in one or more of the following topics: (1) - (2) (No change.) (3) other laws and rules that regulate the conduct of auctioneers and associate auctioneers; (4) - (5) (No change.) (g) (No change.) Exemptions. (a) Any auction of property conducted by live bid call, regardless of whether the property may be bid upon through the internet, is subject to this chapter and Texas Occupations Code, Chapter 1802 and is not exempt under (14). [A person is not engaged in the business of selling property at auction for purposes of Texas Occupations Code, (4), if the person acquired the property at issue for reasons other than resale at auction.] (b) (No change.) (c) This chapter does not apply to a person providing an online platform to facilitate an auction Auctioneer [Education] Advisory Board. (a) - (d) (No change.) Auctioneer Standards of Practice. (a) Advertising (1) All advertisements designed to solicit auction business, including the advertisement of an auction, shall include the auctioneer's name as it appears on the license and the license number. (2) If an auctioneer advertises an auction as "absolute" or "without reserve", no lots included may have a minimum bid. Advertising may include the wording "many lots are without reserve"; however, the auction may not be titled, headed or called an "absolute" or "without reserve" auction unless all lots meet the criteria. (3) An auctioneer who intends to charge a buyer's premium at an auction must state this condition and the amount of the buyer's premium in all advertising for the auction. (4) An auctioneer may not make a false or misleading statement in an advertisement. 40 TexReg 7554 October 30, 2015 Texas Register

53 (b) Recordkeeping (1) An auctioneer must furnish to the department the name, including assumed names, addresses, website, or social media pages, and telephone numbers of all auction companies that he owns or operates. (2) An auctioneer must report any change of address to the department in writing within thirty (30) days of the change. (3) Each licensed auctioneer shall keep records relative to all auctions for a minimum of two (2) years from the date of the sale. (4) The records for each auction must state the name(s) and address of the owners of the property auctioned, the date of the sale, the name of the auctioneer and clerk of the sale, the gross proceeds, the location and account number of the auctioneer's trust or escrow account, an itemized list of all expenses charged to the consignor or seller, a list of all purchasers at the auction and a description and selling price for each item sold. (5) The auctioneer shall keep, as part of the records for each auction, all documents relating to the auction, These documents shall include, but are not limited to, settlement sheets, written contracts, copies of advertising and clerk sheets. (6) These documents include records and documents online. (7) Each licensed auctioneer must: (A) Maintain a separate trust or escrow account in a federally insured bank or savings and loan association, in which shall be deposited all funds belonging to others which come into the auctioneer's possession and control. (B) Deposit all proceeds from an auction into the trust or escrow account within seventy two (72) hours of the auction unless the owner or consignor of the property auctioned is paid immediately after the sale or the written contract stipulates other terms, such as sight drafts. (C) Pay any public monies, including, but not limited to state sales tax, received into the State Treasury at the times and as per the regulations prescribed by law; and (D) Pay all amounts due the seller or consignor within fifteen (15) banking days of the auction unless otherwise required by statute or a written contract between license holder and seller. (E) A licensed auctioneer shall cooperate with the department in the performance of an investigation. This includes, but is not limited to responding to requests from the department, including producing requested documents or other information, within thirty (30) days of request. (F) The failure of a licensed auctioneer to timely pay a consignor may subject the licensed auctioneer to a claim under the Auctioneer Education and Recovery Fund. (c) At auction (1) Before beginning an auction, a licensee must ensure the announcement of, give notice, display notice or disclose: (A) that the auctioneer conducting the sale is licensed by the department; (B) the terms and conditions of the sale including whether a buyer's premium will be assessed; and (C) if the owner, consignor, or agent thereof has reserved the right to bid. (2) A licensee may not allow any person who is not either a Texas licensed auctioneer or associate auctioneer who is directly supervised by a licensed auctioneer, to call bids at a sale. (3) A licensee may not knowingly use or permit the use of false bidders at any auction. (4) All licensed auctioneers shall notify consumers and service recipients of the department's name, mailing address, telephone number and website " for purposes of directing complaints to the department. The notification shall be included on any auction listing contract and on at least one of the following: (A) A sign prominently displayed at the place of the auction or on any auction website; (B) Bills of sale or receipt to be given to buyers; or (C) Bidder cards Requirements--Sponsoring Auctioneer. (a) There must be a legitimate employee-employer relationship between an associate auctioneer and the sponsoring auctioneer or between the associate and an auction company operated by a licensed auctioneer that employs the sponsoring auctioneer. (b) A sponsoring auctioneer must be on the premises and directly supervising an associate auctioneer when the associate is bid calling. (c) A sponsoring auctioneer is responsible for supervision of an associate auctioneer as the associate performs the items listed in 67.72(c). (d) An auctioneer who terminates his sponsorship of an associate auctioneer must: (1) within thirty (30) days notify the department in writing; and (2) provide signed documentation to the associate auctioneer showing: (A) the beginning and ending date of sponsorship; (B) date and location of up to ten (10) auctions bid called by the associate; (C) items listed in 67.72(c), that the associate has performed Requirements--Associate Auctioneers. (a) An associate auctioneer shall provide auction services only when under the supervision of the licensed Texas auctioneer whose name is on file with the department as the associate's sponsoring auctioneer. (b) When bid calling, an associate auctioneer must be under the direct on-premises supervision of the sponsoring auctioneer. (c) In order to be eligible for licensure as an auctioneer without taking the examination, an associate auctioneer must participate in all aspects of the auction business involving the laws of this state, in at least ten (10) auctions including but not limited to: (1) appraising; (2) inventorying; (3) advertising; (4) property make ready; (5) site selection and preparation; (6) lotting; PROPOSED RULES October 30, TexReg 7555

54 (7) registration; (8) clerking; (9) cashiering; (10) bid-calling; (11) ring working; (12) property check out; (13) security; (14) accounting; and (15) managing an escrow account. (d) An associate auctioneer must report any change of address to the department within thirty (30) days. (e) When a sponsoring auctioneer terminates the sponsorship of an associate auctioneer, the associate may not provide auction services until an agreement with a new sponsoring auctioneer, whose name and signature are on file with the department, has been made Fees. (a) (No change.) $25. (b) The application fee for an associate auctioneer license is (c) [(b)] The annual application fee to renew an auctioneer license is $50. $25. (d) The annual fee to renew an associate auctioneer license is (e) [(c)] Late renewal fees for licenses issued under this chapter are provided under of this title (relating to Late Renewal Fees). (f) [(d)] Inactive License Status--Auctioneer (1) The fee to place a license on 'inactive' status--no charge. (2) The fee to renew a license on 'inactive' status--renewal fee as stated in subsection (c) or (d). is $25. (3) The fee to change from 'inactive' status to 'active status' (g) [(e)] Revised/Duplicate License/Certificate/Permit/Registration--$25. (h) [(f)] A $250 curriculum review fee will be assessed to all schools submitting their curriculum for review and approval by the department. (i) [(g)] The initial recovery fund fee is $50. (j) [(h)] All fees are non-refundable. Filed with the Office of the Secretary of State on October 19, TRD William H. Kuntz, Jr. Executive Director Texas Department of Licensing and Regulation For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Department of Licensing and Regulation or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The repeal is proposed under Texas Occupations Code, Chapters and 1802, which authorize the Commission, the Department's governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department. The statutory provisions affected by the proposal are those set forth in Texas Occupations Code, Chapters 51 and No other statutes, articles, or codes are affected by the proposal Requirements--Auctioneer. Filed with the Office of the Secretary of State on October 19, TRD William H. Kuntz, Jr. Executive Director Texas Department of Licensing and Regulation For further information, please call: (512) TITLE 19. EDUCATION PART 1. TEXAS HIGHER EDUCATION COORDINATING BOARD CHAPTER 9. PROGRAM DEVELOPMENT IN PUBLIC TWO-YEAR COLLEGES SUBCHAPTER M. BLOCK SCHEDULING 19 TAC The Texas Higher Education Coordinating Board (Coordinating Board) proposes new regarding Rules Applying to Program Development in Public Two-Year Colleges concerning Block Scheduling. The intent of these new sections is to establish the Board's oversight for public junior colleges regarding block scheduling of certain associate degree and certificate programs. House Bill 1583, 84th Texas Legislature, Regular Session requires public junior colleges to adopt at least five associate degree or certificate programs from the allied health, nursing, or career and technology education fields as block scheduled programs. In addition, Senate Bill 215, 83rd Texas Legislature, Regular Session, called for the Board to engage institutions of higher education in a negotiated rulemaking process as described in Subchapter 2008, Government Code in the development of such rules. The new Block Scheduling rules proposed for this chapter were reviewed and approved by the Negotiated Rulemaking Committee on Block Scheduling on October 13, 40 TexReg 7556 October 30, 2015 Texas Register

55 Dr. Rex C. Peebles, Assistant Commissioner for Academic Quality and Workforce, has determined that for the first five years there will be no fiscal implications for state or local governments as a result of these proposed new rules. Dr. Peebles has also determined that for the first five years the new rules are in effect, the program will encourage more students to complete associate degree or certificate programs in a timelier manner and with fewer semester credit hours that do not apply to the program of study. There are no anticipated economic costs to persons who are required to comply with the section as proposed. There is no impact on local employment. Comments on the proposed new rules may be submitted by mail to Rex C. Peebles, Assistant Commissioner, Texas Higher Education Coordinating Board, P.O. Box 12788, Austin, Texas or via at [email protected]. Comments will be accepted for 30 days following publication of the proposal in the Texas Register. The new rules are proposed under the Texas Education Code, Chapter 130, , which provides the Coordinating Board with the authority to adopt rules to administer the section. The new rules affect the implementation of Texas Education Code, Chapter Purpose. The purpose of this subchapter is to establish the coordinating board's oversight for public junior colleges regarding block scheduling of certain associate degree or certificate programs Authority. Authority for this subchapter is provided by Texas Education Code, , which provides the board with the authority to administer block schedule programs Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. (1) Block Scheduling--Co-registration in a group of courses equal to a full-time load related to a specific program of study or major to facilitate schedule predictability from semester to semester and encourage timely degree completion. (2) Board or Coordinating Board--The Texas Higher Education Coordinating Board. (3) Full-time load--the number of semester credit hours a student is required to complete per semester to complete the program in the amount of time the degree or certificate represents. As examples, a Level I certificate should be completed in one year or less; a Level II certificate should be completed in less than two years; and an associate degree should be completed in two years. (4) Block Scheduled Program--A Coordinating Board approved associate of applied science degree or credit-bearing certificate program in the fields of allied health, nursing, or career education and technology utilizing block scheduling. (5) Public Junior College--Has the meaning as defined in Texas Education Code, (2) Block Scheduled Program. A block scheduled program established at a public junior college under this section must allow a student to enroll in courses equal to that of a full-time load for the program of study and shall be offered each semester in scheduled blocks, such as a morning, full-day, afternoon, evening, or weekend block to provide scheduling predictability from semester to semester for students enrolled in the program. Clinical, practicum and other externships may deviate from the block schedule Adoption of Block Scheduled Programs. Each public junior college shall establish a block scheduled program curriculum from among the allied health, nursing, and career education and technology associate degree or certificate programs offered by the public junior college in at least five of those programs not previously offered as a block scheduled curriculum Block Enrollment. Each public junior college shall publish in advance of each semester the available curricula for each associate degree or certificate program identified as a block scheduled program offered by the college for that semester. Students may enroll in an entire block scheduled program curriculum offered under the program in a semester, rather than enrolling in individual courses leading toward the degree or certificate Demonstration of Hardship. If a public junior college does not offer the minimum number of block scheduled programs as described by this subchapter, the institution must provide detailed written documentation to the coordinating board describing the reason why offering the required number of programs creates a hardship for the institution and how students would be impacted by offering additional block scheduled programs. Factors creating an institutional hardship may include, but are not limited to, programmatic accreditation requirements; statutory requirements; number of students enrolled in the program; availability of faculty; or availability of classroom, laboratory, or other types of instructional/experiential spaces. The Coordinating Board will review the documentation provided and make a determination to approve or deny a request to not offer the minimum number of block scheduled programs as defined by this subchapter. Filed with the Office of the Secretary of State on October 19, TRD Bill Franz General Counsel Texas Higher Education Coordinating Board For further information, please call: (512) CHAPTER 15. NATIONAL RESEARCH UNIVERSITIES SUBCHAPTER A. GENERAL PROVISIONS 19 TAC The Texas Higher Education Coordinating Board (Coordinating Board) proposes amendments to 15.10, pertaining to the Texas Research Incentive Program (TRIP). The proposed amendment to this section explicitly allows matches for donations restricted to undergraduate research and disallows matches for donations restricted to undergraduate financial aid grants. Dr. Julie Eklund, Interim Assistant Commissioner, Strategic Planning and Funding, Texas Higher Education Coordinating Board (THECB), has determined that for each year of the first PROPOSED RULES October 30, TexReg 7557

56 five years the section is in effect, there will not be a fiscal impact to the state. Dr. Eklund has determined that there will be no impact on the public. There is no effect on small businesses. There are no anticipated economic costs to persons who are required to comply with the section as proposed. There is no impact on local employment. Comments on the proposed amendments may be submitted to Mr. David Young, Senior Director, Special Projects, Strategic Planning and Funding, 1200 East Anderson Lane, Austin, TX 78752, [email protected]. Comments will be accepted for 30 days following publication of the proposal in the Texas Register. The amendments are proposed under the Texas Education Code, Section provides the coordinating board with the authority to adopt rules relating to the Texas Research Incentive Program (TRIP). The amendments affect Texas Education Code, , Matching Grants Texas Research Incentive Program (TRIP). (a) - (b) (No change.) (c) Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. (1) - (2) (No change.) (3) Eligible Funds-Gifts or endowments certified on or after September 1, 2009, to an eligible public institution from private sources in a state fiscal year for the purpose of enhancing research activities at the institution, including a gift or endowment for endowed chairs, professorships, research facilities, research equipment, program costs, [or] graduate research stipends or fellowships, or undergraduate research. These include [Including] gifts that are bundled from a private source. All gifts, cash and non-cash, must have been originally donated for research purposes. (4) - (5) (No change.) (6) Ineligible Funds-A gift for undergraduate scholarships or undergraduate financial aid grants, bundled gifts, or any portion in excess of $10 million of gifts or endowments received from a single source in a state fiscal year or gifts that are bundled by a [an] university [universities]-associated entity. (7) - (8) (No change.) (9) University-Affiliated Entity-An entity whose sole purpose is to support the mission or programs of the university. (d) - (h) (No change.) Filed with the Office of the Secretary of State on October 19, TRD Bill Franz General Counsel Texas Higher Education Coordinating Board For further information, please call: (512) TITLE 22. EXAMINING BOARDS PART 31. TEXAS STATE BOARD OF EXAMINERS OF DIETITIANS CHAPTER 711. DIETITIANS SUBCHAPTER A. LICENSED DIETITIANS The Texas State Board of Examiners of Dietitians (board) proposes the repeal of and amendments to 711.7, 711.8, , and , concerning the licensing and regulation of dietitians. BACKGROUND AND PURPOSE The proposed amendments remove obsolete requirements regarding preplanned professional experience programs for applicants; remove references to concerning preplanned professional experience programs throughout the chapter; remove examination requirements that are not under the board's jurisdiction; and add the ability for licensees to show their highest academic degrees on their license certificates. SECTION-BY-SECTION SUMMARY The repeal of deletes language concerning applicants for the preplanned professional experience program, which no longer exists. The amendment to deletes the requirement for applying to take the examination for licensure. The national examination is administered by the Commission on Dietetic Registration and is not administered by the board. The amendment to deletes the reference to 711.6, which is proposed for repeal. The amendment to deletes the reference to which is proposed for repeal. The amendment to adds new text that allows the licensee to add their highest academic degree to their license certificate. The amendment to deletes the reference to which is proposed for repeal. FISCAL NOTE Bobbe Alexander, Executive Secretary, has determined that for each year of the first five years the sections are in effect, there will be no fiscal implications to state or local governments as a result of enforcing or administering the sections as proposed. SMALL AND MICRO-BUSINESS IMPACT ANALYSIS Ms. Alexander has also determined that there will be no adverse economic impact on small businesses or micro-businesses. This was determined by finding that small businesses and micro-businesses will not be required to alter their business practices to comply with the sections as proposed. 40 TexReg 7558 October 30, 2015 Texas Register

57 ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT There are no anticipated economic costs to persons who are required to comply with the sections as proposed. There is no anticipated negative impact on local employment. PUBLIC BENEFIT Ms. Alexander has also determined that for each year of the first five years the sections are in effect, the public will benefit from adoption of the sections. The public will benefit by having updated rules, which will promote public health, safety, and welfare. REGULATORY ANALYSIS The board has determined that this proposal is not a "major environmental rule" as defined by Government Code, "Major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment or the public health and safety of a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure. TAKINGS IMPACT ASSESSMENT The board has determined that the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, do not constitute a taking under Government Code, PUBLIC COMMENT Comments on the proposal may be submitted to Bobbe Alexander, Executive Secretary, State Board of Examiners of Dietitians, Department of State Health Services, Mail Code 1982, and P.O. Box , Austin, Texas or by to [email protected]. When ing comments to the board, please indicate "Comments on Proposed Rules" in the subject line. Comments will be accepted for 30 days following publication of the proposal in the Texas Register. 22 TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas State Board of Examiners of Dietitians or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) STATUTORY AUTHORITY The repeal is authorized by Occupations Code, , which requires licensing agencies to adopt rules for issuance of a license to spouses of active members of the U.S. armed forces; and Occupations Code, , which authorizes the board to adopt rules consistent with Chapter Preplanned Professional Experience Requirements for Licensure. Filed with the Office of the Secretary of State on October 16, TRD Janet S. Hall, R.D., L.D. Chair Texas State Board of Examiners of Dietitians For further information, please call: (512) TAC 711.7, 711.8, , , STATUTORY AUTHORITY The proposed amendments are authorized by Occupations Code, , which requires licensing agencies to adopt rules for issuance of a license to spouses of active members of the U.S. armed forces; and Occupations Code, , which authorizes the board to adopt rules consistent with Chapter Examination for Dietitian Licensure. (a) - (b) (No change.) [(c) Applications for examination.] [(1) The board shall notify an applicant whose application has been approved. The board or its designee shall forward an examination registration form to each approved applicant.] [(2) An applicant who wishes to take a scheduled examination must complete the registration form and return it with the appropriate fee to the board or its designee by the established deadline.] [(3) Any applicant who fails to apply for and take the licensure examination within a period of three years after an examination approval notice is mailed to the applicant may have such approval withdrawn.] [(d) Locations. Examinations administered by the commission or its designee will be held in locations to be announced by the commission.] [(e) Grading. Examinations administered by the commission shall be graded by the commission or its designee.] [(f) Results.] [(1) If the examination is graded or reviewed by a national or state testing service, the board shall notify each examinee of the examination results within 14 days of the date the board receives the results from the testing service.] [(2) If examination results will be delayed for more than 90 days after the examination, the board shall notify each applicant of the reason for the delay before the 90th day.] [(3) No matter what numerical or other scoring system the national or state testing service may use in arriving at examination results, the official notice of results to applicants shall be stated in terms of "pass" or "fail."] [(g) Failures.] [(1) An applicant who fails the examination prescribed by the board may take a subsequent examination after paying the examination fee.] [(2) If requested in writing, the board shall furnish an applicant who fails an examination an analysis of performance.] [(3) An applicant who fails the licensing examination three times shall have his/her application denied unless the applicant furnished the board an official transcript from an accredited college or university indicating completed course work taken for credit with a passing grade in the area(s) of weakness determined by analysis of the PROPOSED RULES October 30, TexReg 7559

58 previous examination(s). Before the applicant will be scheduled for another examination, the applicant shall submit an official transcript showing course work completed in the area of weakness after the date of the last examination taken by the applicant.] [(4) An applicant who completes course work as described in paragraph (3) of this subsection must file an updated application for examination with the application fee.] Application Procedures. (a) - (b) (No change.) (c) Required application materials. (1) (No change.) (2) The internship [or preplanned professional experience program] documentation form shall contain: (A) - (D) (No change.) (E) the type of setting, the type of clients served, and the type of work performed; and (F) the credentials of the director or coordinator of each program.[; and] [(G) the signed statement(s) of endorsements from the person(s) who can formally attest to the applicant's successful completion of experience as set out in 711.6(a)(1) and (2) of this title (relating to Preplanned Professional Experience Requirements for Licensure).] (3) - (6) (No change.) Provisional Licensed Dietitians. (a) - (b) (No change.) (c) Upgrading a provisional license. The purpose of this subsection is to set out the procedure to upgrade from PLD to a licensed dietitian. [(1) The PLD who has completed a board approved experience program in accordance with of this title (relating to Preplanned Professional Experience Requirements for Licensure) shall submit to the board a letter from the sponsor indicating the date the PLD completed the program.] (1) [(2)] A PLD who becomes registered by the commission shall submit proof of current registration status with a written request to upgrade and submit the required fee for upgrade to a licensed dietitian. (2) [(3)] The requirements of sponsorship as defined in subsection (a)(4)(f) of this section, shall continue until the PLD becomes a licensed dietitian. (d) - (e) (No change.) Licensing. (a) - (b) (No change.) (c) The highest academic degree in Dietetics or Nutrition may appear on the license certificate. (d) [(c)] Licensing of Military Service Members, Military Veterans, and Military Spouses. (1) This section sets out licensing procedures for military service members, military veterans, and military spouses required under Occupations Code, Chapter 55 (relating to Licensing of Military Service Members, Military Veterans, and Military Spouses). For purposes of this section: (A) "Military service member" means a person who is currently serving in the armed forces of the United States, in a reserve component of the armed forces of the United States, including the National Guard, or in the state military service of any state. (B) "Military spouse" means a person who is married to a military service member who is currently on active duty. (C) "Military veteran" means a person who has served in the army, navy, air force, marine corps, or coast guard of the United States, or in an auxiliary service of one of those branches of the armed forces. (2) An applicant shall provide documentation of the applicant's status as a military service member, military veteran, or military spouse. Acceptable documentation includes, but is not limited to, copies of official documents such as military service orders, marriage licenses, and military discharge records. The application of a person who fails to provide documentation of his or her status shall not be processed under the requirements of this section. (3) Upon request, an applicant shall provide acceptable proof of current licensure issued by another jurisdiction. Upon request, the applicant shall provide proof that the licensing requirements of that jurisdiction are substantially equivalent to the licensing requirements of this state. (4) The board's authority to require an applicant to undergo a criminal history background check, and the timeframes associated with that process, are not affected by the requirements of this section. (5) For an application for a license submitted by a verified military service member or military veteran, the applicant shall receive credit towards any licensing or internship requirements, except an examination requirement, for verified military service, training, or education that is relevant to the occupation, unless he or she holds a restricted license issued by another jurisdiction or if he or she has an unacceptable criminal history as described by the Act and this chapter. (6) An applicant who is a military spouse who holds a current license issued by another jurisdiction that has substantially equivalent licensing requirements shall complete and submit an application form and fee. The board shall issue a license to a qualified applicant who holds such a license as soon as practicable and the renewal of the license shall be in accordance with paragraph (9) of this subsection. (7) In accordance with Occupations Code, (c), the executive director may waive any prerequisite to obtaining a license after reviewing the applicant's credentials and determining that the applicant holds a license issued by another jurisdiction that has licensing requirements substantially equivalent to those of this state. (8) A military spouse who within the five years preceding the application date held the license in this state that expired while the applicant lived in another state for at least six months is qualified for licensure based on the previously held license, if there are no unresolved complaints against the applicant and if there is no other bar to licensure, such as criminal background or non-compliance with a board order. (9) If the board issues an initial license to an applicant who is a military spouse in accordance with paragraph (6) of this subsection, the board shall assess whether the applicant has met all licensing requirements of this state by virtue of the current license issued by another jurisdiction. The board shall provide this assessment in writing to the applicant at the time the license is issued. If the applicant has not met all licensing requirements of this state, the applicant must provide proof of completion at the time of the first application for license renewal. A license shall not be renewed, shall be allowed to expire, and shall become ineffective if the applicant does not provide proof of completion at the time of the first application for licensure renewal Temporary License. 40 TexReg 7560 October 30, 2015 Texas Register

59 (a) - (c) (No change.) (d) Status change. The board shall issue a license to the holder of a temporary license after: (1) (No change.) (2) the board verifies that the temporary licensee has met the academic requirements set out in of this title (relating to Academic Requirements for Licensure) [and the experience requirements in of this title (relating to Preplanned Professional Experience Requirements for Licensure), if applicable]. Filed with the Office of the Secretary of State on October 16, TRD Janet S. Hall, R.D., L.D. Chair Texas State Board of Examiners of Dietitians For further information, please call: (512) TITLE 25. HEALTH SERVICES PART 1. DEPARTMENT OF STATE HEALTH SERVICES CHAPTER 61. CHRONIC DISEASES SUBCHAPTER A. KIDNEY HEALTH CARE The Executive Commissioner of the Health and Human Services Commission, on behalf of the Department of State Health Services (department), proposes the amendments to and , new and repeal of 61.11, concerning the Kidney Health Care (KHC) Program (program). BACKGROUND AND PURPOSE The KHC Program serves Texas residents with an end-stage renal disease (ESRD) diagnosis, who are not Medicaid eligible, and have a gross income of less than $60,000 annually. The program provides Medicare Part D premium payment, deductible and coinsurance benefits; limited drug benefits; travel reimbursement for ESRD related travel up to 13 round trips monthly; and allowable dialysis and access surgery benefits. The KHC rules implement Texas Health and Safety Code, Chapter 42, Kidney Health Care, and set guidelines necessary for the administration of the program. The proposed amendments to and , repeal of 61.11, and new are necessary to strengthen and clarify understanding of the program, and improve flow, accuracy, and clarity of the rules. Government Code, , requires that each state agency review and consider for re-adoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Sections and have been reviewed, and the department has determined that reasons for adopting the sections continue to exist because rules on this subject are needed to administer the program effectively. SECTION-BY-SECTION SUMMARY Proposed amendments to 61.1 update existing language for accuracy and clarity by adding the term "authorized entities" and replacing the acronym "KHC" with the word "program." Proposed amendments to 61.2 revise existing definitions, remove unnecessary definitions, and add new definitions. New terms used in this subchapter include authorized entity; enrolled provider; incomplete claim; resubmitted claim; and veterans programs. Proposed amendments to 61.3 update the program requirement to align with eligibility requirements of the Social Security Administration and replace the acronym "KHC" with the word "program." Proposed amendments to 61.4 add language which stipulates that applications must be submitted by an authorized entity. The notary requirement was removed to streamline the application process. Proposed amendments to 61.5 replace the term "drug products" with "supplies" to accurately reflect program benefits; add language that better describes benefit limitations; and replace the acronym "KHC" with the word "program." Section 61.6 was moved into new 1 TAC , concerning Kidney Health Care Provider Requirements and Effective Dates, to comply with the consolidation of contract and procurement rules under the Health and Human Services Commission. Section defines some words and terms used in Subchapter G (relating to Contracting with Providers for Certain DSHS Programs) and establishes certain requirements for providers to qualify as providers for the program. This section also establishes effective dates for all enrolled provider agreements and pharmacy agreements. Proposed amendments to 61.7 add language that specifies who may file claims; remove reference to the Automated System for Kidney Information Tracking to allow for an updated software application; and replace the acronym "KHC" with the word "program." Amendments in this section also add new language that the program will not pay claims for medical benefits until the provider has entered into a fully executed provider agreement. Proposed amendments to 61.8 clarify existing language by explaining that claims that do not meet the filing deadlines will be denied; and replacing the term "approved" provider with "enrolled" provider for consistency throughout the subchapter. Proposed amendments to 61.9 clarify existing language related to client and provider rights and responsibilities; add new language to outline responsibilities for authorized entities; and replace the acronym "KHC" with the word "program." Proposed amendments to clarify existing language by specifying that clients must reapply for benefits when program eligibility is terminated, and by replacing the acronym "KHC" with the word "program." Proposed new clarifies the rights of appeal for applicants, clients, and providers by outlining the circumstances for which an administrative review may be requested. FISCAL NOTE Sam Cooper, LMSW-IPR, Director, Specialized Health Services Section, has determined that for each year of the first five years that the sections will be in effect, there will be no fiscal implica- PROPOSED RULES October 30, TexReg 7561

60 tions to state or local governments as a result of enforcing and administering the sections as proposed. SMALL AND MICRO-BUSINESSES IMPACT ANALYSIS Mr. Cooper has also determined that there will be no adverse effect on small businesses or micro-businesses required to comply with the sections as proposed because small businesses and micro-businesses will not be required to alter their business practices in order to comply with the sections. ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT There are no anticipated economic costs to persons who are required to comply with the sections as proposed. There is no anticipated negative impact on local employment. PUBLIC BENEFIT Mr. Cooper has determined that for each year of the first five years the sections are in effect, the public will benefit from adoption of the sections. The anticipated benefits include improved consistency and interpretation of the rules for clients and providers, as well as efficiencies in program operations and functions regarding eligibility, enrollment, and administrative reviews. REGULATORY ANALYSIS The department has determined that this proposal is not a "major environmental rule" as defined by Government Code, "Major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment or the public health and safety of a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure. TAKINGS IMPACT ASSESSMENT The department has determined that the proposed amendments, repeal and new rule do not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, do not constitute a taking under Government Code, PUBLIC COMMENT Comments on the proposal may be submitted by mail to Laura Ethridge, Purchased Health Services Unit, Mail Code 1938, Department of State Health Services, P.O. Box , Austin, Texas ; by telephone at (512) ; or by to [email protected]. Comments will be accepted for 30 days following publication of the proposal in the Texas Register. LEGAL CERTIFICATION The Department of State Health Services General Counsel, Lisa Hernandez, certifies that the proposed rules have been reviewed by legal counsel and found to be within the state agencies' authority 25 TAC , STATUTORY AUTHORITY The amendments and new section are authorized by Health and Safety Code, (c), which authorizes the Executive Commissioner of the Health and Human Services Commission to adopt rules necessary to carry out Chapter 42 and to provide adequate kidney care and treatment for citizens of this state; and by Government Code, (e), and the Health and Safety Code, , which authorize the Executive Commissioner of the Health and Human Services Commission to adopt rules and policies necessary for the operation and provision of health and human services by the department and for the administration of Health and Safety Code, Chapter The amendments and new section affect Government Code, Chapter 531; and Health and Safety Code, Chapters 42 and Review of the sections implements Government Code, General. (a) (No change.) (b) Confidentiality of Information. (1) All information submitted, as required by this subchapter, may be verified at the discretion of the Department of State Health Services (department) with or without notice to applicants, clients, authorized entities, or providers of program [KHC] benefits or services. This information is confidential to the extent authorized by law. (2) (No change.) (c) Forms. The program provides approved forms to applicants, clients, authorized entities, and providers Definitions. The following words and terms when used in this subchapter [shall] have the following meanings, unless the context clearly indicates otherwise. (1) (No change.) (2) Action--A suspension, modification, denial, or termination of program [KHC] eligibility, benefits, or participation. (3) - (4) (No change.) (5) Applicant--A person [An individual] who has submitted an application for program [KHC] benefits and has not received a final determination of eligibility. (6) Authorized entity--any individual or organization approved by the program to submit applications for benefits or travel verification reports on behalf of an applicant or client. (7) [(6)] Claim--A request for payment or reimbursement of services. (8) [(7)] Client--A person who has applied for program services and who meets all program [KHC] eligibility requirements and is determined to be eligible for program services. (9) [(8)] CMS--The Centers for Medicare and Medicaid Services. (10) [(9)] Co-insurance--A cost-sharing arrangement in which a covered person is responsible for paying a specified percentage of the charge for a covered service or product. (11) [(10)] Commissioner--The commissioner of the Department of State Health Services. 40 TexReg 7562 October 30, 2015 Texas Register

61 (12) [(11)] Co-pay/Co-payment--A cost-sharing arrangement in which a covered person is responsible for paying a specified or fixed charge for a covered service or product. (13) [(12)] CRNA--Certified registered nurse anesthetist. (14) [(13)] Date of service (DOS)--The date a service is rendered. (15) [(14)] Denial--An action by the program that disallows program eligibility, benefits, or provider enrollment [administrative review requests]. (16) [(15)] Department--The Department of State Health Services. (17) [(16)] Effective date--the [initial] date a program client or enrolled provider is approved to receive program benefits or reimbursements [of eligibility for a KHC client or provider]. (18) [(17)] End-Stage Renal Disease (ESRD)--The final stage of renal failure [impairment] that requires dialysis or [and/or] kidney transplant to reduce uremic symptoms and [and/or] prevent the death of the patient. (19) Enrolled provider--any individual or entity who has completed all the requirements located in the Texas Health and Human Services Commission rule at 1 TAC , Kidney Health Care Provider Requirements and Effective Dates, and is deemed enrolled by the program to furnish covered services to program clients including: (A) outpatient dialysis facilities; (B) out-of-state outpatient dialysis facilities; (C) hospitals and ambulatory surgical centers (ASCs) located in Texas and operating in compliance with applicable law; (D) out-of-state hospitals and ASCs; (E) military or Veterans Administration hospitals located in Texas which have a renal unit; (F) pharmacies approved as Texas Medicaid providers and licensed to operate within the United States and its territories, including mail order pharmacies; (G) physicians and certified registered nurse anesthetists (CRNAs) licensed in Texas; (H) out-of-state physicians and CRNAs; and (I) Medicare Prescription Drug Plan (PDP) providers. (20) [(18)] Explanation of benefits (EOB) [EOB]--A form, in paper or electronic format, which provides an explanation of benefits. It is used to explain a payment or denial of a claim. (21) [(19)] Fair hearing--the informal hearing process the department follows under of this title (relating to Fair Hearing Procedures). (22) [(20)] Filing deadline--the last date that a claim may be received by the program and still be considered eligible for benefit. (23) [(21)] Final decision--a decision that is made by a decision maker after conducting a fair hearing under of this title. (24) Incomplete claim--a claim that is submitted to the program without the required information to enable determination of program liability or payment. [(22) Interim approval--the status given by the program to an outpatient dialysis facility, free-standing or hospital-based, which has applied for participation as a KHC provider but has not executed an agreement with the program.] (25) [(23)] KHC--Kidney Health Care. (26) [(24)] KHC formulary--a list of general therapeutic categories of drugs, over-the-counter products, and limited diabetic supplies that are covered for reimbursement by the program. (27) [(25)] Low Income Subsidy (LIS)--The subsidy provided under the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003 for Medicare Part D plan premiums and related costs, at varying levels, for some low-income Medicare beneficiaries. (28) [(26)] Medical benefit--any medical treatment or procedure approved by the program as a covered service. (29) [(27)] Medicare Advantage Plan--A Medicare health plan that is similar to a health maintenance organization, participating provider organization, or other Medicare health plan, and includes medical, drug coverage and other benefits. (30) [(28)] Medicare Part A--Hospital insurance for people age 65 or older, or under age 65 with certain disabilities, that helps cover inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. (31) [(29)] Medicare Part B--Health insurance for people age 65 or older, or under age 65 with certain disabilities, and any age with ESRD, that helps cover medically necessary services, such as doctors' services and outpatient care, and some preventive services. (32) [(30)] Medicare Part D--Established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), it provides members with prescription drug coverage, expanded health plan options, improved health care access for rural Americans, and preventive care services. (33) [(31)] Medicare Part D out-of-pocket expenses--include premiums, deductibles, co-payments, or [and] co-insurance amounts. (34) [(32)] Medicare Part D Premium--The amount paid monthly under a Medicare Part D contract to insure coverage. (35) [(33)] Medicare Prescription Drug Plan (PDP)--A stand-alone drug plan offered by insurers and other private companies to individuals eligible for Medicare Part D. (36) [(34)] Medigap plan--a Medicare supplement insurance policy sold by private insurance companies to fill "gaps" in Medicare coverage. (37) [(35)] Modification--A change made to a client or provider account [client's record] that can affect [affects a] program benefits, [benefit or] eligibility, or enrollment [status]. (38) [(36)] Program--Kidney Health Care [Program]. (39) [(37)] Provider--Any individual or entity who furnishes benefits or [approved by the program to furnish covered] services to program [KHC] clients. [including:] [(A) outpatient dialysis facilities;] [(B) out-of-state outpatient dialysis facilities;] [(C) hospitals and ambulatory surgical centers (ASCs) located in Texas and operating in compliance with applicable law;] [(D) out-of-state hospitals and ASCs;] PROPOSED RULES October 30, TexReg 7563

62 [(E) military or Veterans Administration hospitals located in Texas which have a renal unit approved by the Joint Commission on Accreditation of Healthcare Organizations or the American Osteopathic Association]; [(F) pharmacies approved as Texas Medicaid providers and licensed to operate within the United States and its territories, including mail order pharmacies;] [(G) physicians and certified registered nurse anesthetists (CRNAs) licensed in Texas;] [(H) out-of-state physicians and CRNAs; and] [(I) Medicare Prescription Drug Plan (PDP) and Medicare Advantage Plan (MA-PD) providers.] (40) [(38)] Qualified Individual (QI) Program--A Medicaid program for beneficiaries who need help in paying for Medicare Part B premiums. The beneficiary must be entitled to [have] Medicare Part A, have [and] limited income and resources as calculated using federal and state guidelines, and not be otherwise eligible for Medicaid. For those who qualify, the Medicaid program pays full Medicare Part B premiums only. (41) [(39)] Qualified Medicare Beneficiary (QMB) Program--A Medicaid program for beneficiaries who need help in paying for Medicare services. The beneficiary must be entitled to [have] Medicare Part A, have [and] limited income and resources as calculated using federal and state guidelines. For those who qualify, the Medicaid program pays Medicare Part A premiums, Part B premiums, and Medicare deductibles and coinsurance amounts for Medicare services. (42) [(40)] Reimbursement--Payment of a claim for covered benefits or services [allowable services or transportation]. (43) [(41)] Reimbursement rate--the program [KHC] payment rate for covered benefits or services [allowable products, services, and transportation determined annually for the following fiscal year]. (44) Resubmitted claim--a claim that is submitted to the program more than once to correct errors. (45) [(42)] Specified Low Income Medicare Beneficiary (SLMB) Program--A Medicaid program that pays for Medicare Part B premiums for individuals who have Medicare Part A, a low monthly income, and limited resources as calculated using federal and state guidelines. (46) [(43)] Suspension--An action by the program, [Eligibility for benefits] which holds client benefits or reimbursement to enrolled providers [is held without final action] pending satisfaction of a program request or requirement. (47) [(44)] Termination--A final action by the program, which ends client or enrolled provider participation in the [KHC] program. (48) Veterans programs--health care programs authorized and administered by the United States Department of Veterans Affairs and the United States Department of Defense Client Eligibility Requirements. (a) A person must [shall] meet all of the following requirements to be eligible for program [KHC] benefits: (1) - (5) (No change.) (b) - (c) (No change.) (d) Maintenance of Benefits Eligibility. (1) A client must meet the following requirements within the first 3 months of program [KHC] eligibility: (A) - (D) (No change.) (2) A client must meet the following requirements to continue benefit eligibility: (A) continue premium payments to [on] health insurance plans under Medicare, individual or group health insurance plans, and prepaid medical plans, where enrollment was effective prior to program [KHC] eligibility; (B) re-apply for LIS as required by the Social Security Administration [annually]; (C) - (D) (No change.) (E) notify the program within 30 days of changes in the following: (i) - (ii) (No change.) (iii) coverage under Medicaid, Medicare, individual or group insurance, Veterans programs, or any other health benefits coverage; [insurance coverage; and] (iv) location of treatment; and[.] (v) income Applications. Persons meeting the eligibility requirements set forth in 61.3(a) - (c) of this title (relating to Client Eligibility Requirements) must submit an [make a complete] application packet for benefits. (1) A complete application packet must be submitted by an authorized entity and include all of the following: (A) a completed, signed and dated program application [complete and notarized Application for Benefits, with the applicant's, or the applicant's representative's, original signature or "mark;"]; (B) a copy of the completed, signed and dated Centers for Medicare and Medicaid Services (CMS) End-Stage Renal Disease Medical Evidence Report or, with program approval, the Kidney Health Care Physician Assessment Form; (C) documentation of Texas residency as required by 61.3 of this title; (D) a copy of the applicant's social security card issued by the Social Security Administration (SSA), or an allowable substitute, as follows: (i) (No change.) (ii) a copy of a valid Medicare card, if the Medicare account is established in the applicant's own social security number and the social security number is printed on the Medicare card; and[.] (E) applicant's financial data. The applicant or the person(s) legally obligated to support the applicant must verify income by providing one of the following: (i) a copy of the first page of the federal individual income tax return for the most recent tax year, if self-employed; or (ii) a statement of estimated or declared income for the current tax year, and supporting documentation[, if requested]. (2) (No change.) (3) [Eligibility date for KHC benefits.] The program [KHC] eligibility date is the date the program receives a complete application packet; if approved, the client receives an effective date. 40 TexReg 7564 October 30, 2015 Texas Register

63 (4) If program [KHC] benefits are terminated, the eligibility date for any subsequent benefit period is the date the program receives a subsequent complete application packet for program [KHC] benefits. (5) (No change.) Benefits and Limitations. (a) Benefits. (1) Outpatient drugs and supplies [drug products] listed on the current KHC formulary. (2) - (4) (No change.) (5) Medicare Part B immunosuppressive drug co-insurance amounts. To qualify for this benefit, clients must: (A) be eligible for program [KHC] drug benefits; (B) - (F) (No change.) (6) Limited Medicare Part D out-of-pocket expenses. To qualify for this benefit, clients must: (A) be eligible for program [KHC] drug benefits; (B) - (E) (No change.) (7) Benefits are payable beyond the Medicare three-month qualifying period for eligible clients who have applied for and have been denied Medicare coverage based on ESRD. Clients must submit a copy of the official Social Security Administration Medicare denial notification (based on chronic renal disease) to the department. (b) Limitations. (1) Only enrolled [out-of-state] providers [approved by the program] may be reimbursed for [provide] covered services and [KHC] allowable drugs. (2) Covered services are limited to a maximum allowable amount [per client] based upon: (A) - (B) (No change.) (C) an agreement between the department and the enrolled [client's] provider; (D) - (F) (No change.) (3) Clients eligible for drug coverage under Medicaid, Medicare Advantage Plan, individual or group insurance, Veterans programs, or any other health benefits coverage [an individual or group health insurance plan] are not eligible to receive program [KHC] drug benefits. A client that has exhausted drug coverage under Medicaid, Medicare Advantage Plan, individual or group insurance, Veterans programs, or any other health benefits coverage [an individual or group health insurance plan] may be eligible to receive drug benefits from the program. (4) Access surgery benefits are payable only if the services are performed on or after the date Texas residency is established and not more than 180 days prior to the client's program [KHC eligibility] effective date. (5) Program [KHC] medical benefits are payable during the Medicare three-month qualifying period. Benefits are payable for services received on or after the client's program [KHC eligibility] effective date. The three-month qualifying period is calculated from the first day of the month the client begins chronic maintenance dialysis. When a client becomes eligible for Medicare during the three-month period, program [KHC] medical benefits are not payable from the date of Medicare eligibility. (6) Transportation reimbursement is available from the first day of the month following the program [KHC eligibility] effective date for in-center dialysis clients or from the program [KHC] effective date for transplant and home peritoneal dialysis clients. (7) Clients eligible for coverage under Medicaid, Medicare, individual or group insurance, Veterans programs, or any other health benefits coverage [hospital and medical benefits from Medicare, or other government programs] which cover the treatment of ESRD are not eligible to receive program [KHC] medical benefits. (8) (No change.) [(9) Clients eligible for hospital and medical benefits from private/group health insurance which covers the treatment of ESRD are not eligible for KHC medical benefits.] (9) [(10)] The program is the payor of last resort. All third parties must be billed prior to the program. The Commissioner may waive this requirement in individually considered cases where its enforcement will deny services to a class of ESRD patients because of conflicting state or federal laws or regulations, under the Texas Health and Safety Code, may: (10) [(11)] If budgetary limitations exist, the department (A) restrict or categorize covered services. Categories will be prioritized based upon medical necessity, other third party eligibility and projected third party payments for the different treatment modalities, caseloads, and demands for services. Caseloads and demands for services may be based on current or [and/or] projected data. In the event covered services must be reduced, they will be reduced in a manner that takes into consideration medical necessity and other third party coverage. The department may change covered services by adding or deleting specific services, entire categories or by making changes proportionally across a category or categories, or by a combination of these methods; or (B) establish a waiting list of eligible applicants. Information will be collected from each applicant who is placed on a waiting list to facilitate contacting the applicant when benefits become available and to allow efficient enrollment of the applicant for benefits Claims Submission and Payment Rates. (a) (No change.) (b) Medical benefit claims must be submitted to the program by the provider who rendered the service(s) to the program [KHC] client or by the provider's designee. (c) Transportation benefit claims must be submitted to the program by the client or an authorized entity [the provider performing outpatient dialysis services]. Claims must be submitted electronically through the current automated [Automated System for Kidney Information Tracking (ASKIT), or any other designated] claims payment system, except when the program allows or requires paper submissions. (d) Payments are made using the rates in effect on the date the service is rendered[, and not prospectively]. (e) Claims for medical benefits will not be considered for payment by the program until the program has a fully executed agreement with the provider. (f) [(e)] Incomplete or incorrect claims will not be considered for payment. [Claims which are not received by the program within the deadlines established in 61.8 of this title (relating to Claim Filing Deadlines) will be denied payment.] Claim Filing Deadlines. PROPOSED RULES October 30, TexReg 7565

64 (a) The program must receive all claims [for transportation reimbursement, hospital, out-patient dialysis, and access surgery services,] within the claim filing deadlines established in this section. (1) - (2) (No change.) (b) In addition to the requirements in subsection (a) of this section, the program must receive claims for out-patient dialysis and access surgery services within 60 days from the date on the agreement approval letter for newly enrolled [approved] providers, but no later than 180 days from the date of service. (c) - (e) (No change.) (f) Claims which are not received by the program within the filing deadlines will be denied payment Rights and Responsibilities. (2) choose providers subject to program [KHC] limitations; (a) An [The] applicant and client [shall] have the right to: (1) (No change.) (3) be notified of the program's decisions relating to modifications, suspensions, denials, or terminations; and (4) appeal the program's decisions and receive a response within the deadline as described in of this title (relating to Rights of Appeal).[; and] [(5) assurance that all information concerning his or her status as an applicant or client shall be confidential in the manner and to the extent authorized by law.] (b) A provider has [Providers shall have] the right to: (1) (No change.) (2) appeal the program's decisions and receive a response within the deadline as described in of this title. [(2) assurance that all information concerning the provider's program status shall be confidential in the manner and to the extent authorized by law.] (c) A client has [The applicant and client shall have] the responsibility to: (1) provide accurate medical information to providers and notify providers of program [KHC] eligibility prior to delivery of services; (2) abide by program [KHC] rules and policies; and (3) (No change.) (d) An enrolled provider has [The provider shall have] the responsibility to: [(1) enroll as a KHC provider and submit a completed application to the program, including all documents requested;] (1) [(2)] abide by [the] program rules and policies; (2) [(3)] not discriminate against applicants or clients based on source of payment; and (3) [(4)] notify the program of any lawsuit(s) contemplated or filed concerning the cause of the medical condition for which the program has made payment. (e) An authorized entity has the responsibility to: (1) abide by program rules and policies; and (2) not discriminate against applicants or clients Modifications, Suspensions, Denials, and Terminations. (a) (No change.) (b) A provider's participation may be modified, suspended or denied for failing to comply with the provider responsibilities listed in 1 TAC [ 61.6(a) of this title] (relating to Kidney Health Care Provider Requirements and Effective Dates) and 61.9(d) of this title. (c) A client's eligibility may be terminated for any of the following reasons: (1) (No change.) (2) failing to continue to meet the income requirements for program eligibility or to provide income data as requested by the department to determine continued program [KHC] eligibility; (d) (3) - (12) (No change.) (No change.) (e) A client [An applicant] must reapply for [KHC] benefits when eligibility for program [KHC] benefits is terminated. (f) - (g) (No change.) (h) An enrolled [A] provider's participation may be terminated or suspended for any of the following reasons: (1) - (4) (No change.) (5) filing false or fraudulent information or claims for program [KHC] benefits; (6) (No change.) (7) failure to maintain the participation criteria contained in 1 TAC [ 61.6(a) of this title]. (i) Enrolled providers [Providers] may appeal a termination or suspension under of this title Rights of Appeal. (a) Administrative review. (1) If the program denies eligibility to an applicant, the program will give the applicant written notice of the denial and the applicant's right to request an administrative review of the denial within 30 days of the date of the notification. (2) If the program proposes to modify, suspend, or terminate a client's eligibility for covered benefits, the program will give the client written notice of the proposed action and the client's right to request an administrative review of the proposed action within 30 days of the date of notification. (3) If the program denies a prior-authorization or authorization request for program services, the program will give the client and provider written notice of the denial and the right of the client or provider to request an administrative review of the denial within 30 days of the date of notification. (4) If the program denies a client's or enrolled provider's claim for benefits or services, according to 61.7 of this title (relating to Claims Submission and Payment Rates) and 61.8 of this title (relating to Claim Filing Deadlines), the program will give the client or enrolled provider written notice of the denial. The client or enrolled provider has the right to request an administrative review of the denial within 30 days of the date of notification. (5) If the program denies or proposes to modify, suspend, or terminate a provider's participation in the program, the program 40 TexReg 7566 October 30, 2015 Texas Register

65 will give the provider written notice of the proposed action and the provider's right to request an administrative review of the proposed action within 30 days of the date of notification. (6) The department establishes the program's reimbursement rates. Clients and providers may not request an administrative review of reimbursement amounts for claims that are paid in accordance with the reimbursement rates as described in 61.5 of this title (relating to Benefits and Limitations). (7) A client or provider may not request administrative review of the program's decision to restrict or categorize program services or reduce provider reimbursement amounts that are authorized by 61.5(b)(10) of this title. (8) If the program receives a written request for administrative review within 30 days of the date of the notification, the program will conduct an administrative review of the circumstances surrounding the proposed action. Within 30 days following receipt of a request for administrative review, the program will send the applicant, client, or provider written notice of: (A) the program decision, including the supporting reasons for the decision; or (B) the need for extended time to research the circumstances, including an expected date for response to the request. (9) If the program does not receive a written request for administrative review within 30 days of the date of the notification, the applicant, client, or provider is presumed to have waived the administrative review as well as access to a fair hearing, and the program's action is final. (b) Fair hearing. (1) If the applicant, client, or provider is dissatisfied with the program's decision and supporting reasons following the administrative review, the applicant, client, or provider may request a fair hearing in writing, addressed to the program, within 20 days of receipt of the administrative review decision notice. (2) If the program receives a written request for fair hearing within 20 days of receipt of the administrative review decision notice, a fair hearing will be conducted in accordance with of this title (relating to Fair Hearing Procedures). (A) The program may not terminate a client or enrolled provider's eligibility until a final decision is rendered under the department's fair hearings process. (B) The program may withhold claims payment pending final decision under the department's fair hearings process. (C) The program must release any withheld payments and reinstate participation if the final determination is in favor of the client or provider. (D) The program must not enter into, extend, or renew an agreement with a provider until a final decision is rendered under the department's fair hearings process. (3) If the applicant, client, or provider fails to request a fair hearing within the 20-day period, the applicant, client, or provider is presumed to have waived the request for a fair hearing, and the program may take final action. Filed with the Office of the Secretary of State on October 16, TRD Lisa Hernandez General Counsel Department of State Health Services For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Department of State Health Services or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) STATUTORY AUTHORITY The repeal is authorized by Health and Safety Code, (c), which authorizes the Executive Commissioner of the Health and Human Services Commission to adopt rules necessary to carry out Chapter 42 and to provide adequate kidney care and treatment for citizens of this state; and by Government Code, (e), and the Health and Safety Code, , which authorize the Executive Commissioner of the Health and Human Services Commission to adopt rules and policies necessary for the operation and provision of health and human services by the department and for the administration of Health and Safety Code, Chapter Review of the sections implements Government Code, The repeal affects Government Code, Chapter 531; and Health and Safety Code, Chapters 42 and Rights of Appeal. Filed with the Office of the Secretary of State on October 16, TRD Lisa Hernandez General Counsel Department of State Health Services For further information, please call: (512) TITLE 34. PUBLIC FINANCE PART 1. COMPTROLLER OF PUBLIC ACCOUNTS CHAPTER 3. TAX ADMINISTRATION SUBCHAPTER O. STATE AND LOCAL SALES AND USE TAXES 34 TAC The Comptroller of Public Accounts proposes an amendment to 3.344, concerning telecommunications services. This PROPOSED RULES October 30, TexReg 7567

66 section is amended to implement Senate Bill 140, 84th Legislature, 2015, which amended Tax Code, , subject to , to exempt telecommunications services exclusively provided or used for the navigation of specified machinery and equipment exclusively used on a farm or ranch effective September 1, Subsection (c) is amended to more accurately describe the content in the subsequent paragraphs includes nontaxable and exempt items. Paragraph (2) is amended to correct the name of Subsection (c)(7) is added to enumerate the exemption for telecommunications services exclusively provided or used for navigating machinery and equipment exclusively used on a farm or ranch. The purchaser must be an agricultural registrant and provide the seller with an agricultural exemption certificate. Tom Currah, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government. Mr. Currah also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be by conforming the rule to current state statutes. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule. Comments on the proposal may be submitted to Teresa G. Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register. This amendment is proposed under Tax Code, , which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2. This amendment implements Tax Code, (Registration Number Required for Timber and Certain Agricultural Items) and (Agricultural Items) Telecommunications Services. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Basic local exchange telephone service--the provision by a telephone company of each access line and each dial tone to a fixed location for sending and receiving telecommunications in the telephone company's local exchange network. Services are considered basic irrespective of whether the customer has access to a private or party line, or whether the customer has limited or unlimited access. The term does not include international, interstate, or intrastate long-distance telecommunications services or mobile telecommunications services. (2) Internet--Collectively the myriad of computer and telecommunications facilities, including equipment and operating software, that comprise the interconnected worldwide network of networks that employ the Transmission Control Protocol/Internet Protocol, or any predecessor or successor protocols to the protocol, to communicate information of all kinds by wire or radio. (3) Internet access service--a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers. The term does not include telecommunications services. See of this title (relating to Internet Access Services). (4) Interstate long-distance telecommunication service--a telecommunication service that originates in one state, crosses state lines, and terminates in another state. (5) Intrastate long-distance telecommunications service--a telecommunication service that originates and terminates within one state, but crosses the boundaries on subdivisions or jurisdictions within the state. (6) Mobile telecommunications service--the provision of a commercial mobile radio service, as defined in 47 C.F.R of the Federal Communications Commission's (FCC) regulations in effect on June 1, 1999, under the Mobile Telecommunications Sourcing Act (4 U.S.C ). The term includes cellular telecommunications services, personal communications services (PCS), specialized mobile radio services, wireless voice over Internet protocol services, and paging services. The term does not include telephone prepaid calling cards or air-ground radio telephone services as defined in 47 C.F.R of FCC regulations in effect on June 1, (7) Pay telephone coin sent--telecommunications service paid for by the insertion of coins into a coin-operated telephone. (8) Place of primary use--the physical street address that is representative of where a customer primarily uses a mobile telecommunications service. That location must be either the customer's residential street address or the customer's primary business street address that is within the licensed service area of the service provider. The individual or entity that contracts with the service provider is the customer. If the individual or entity that contracts with the service provider is not the end user, then the physical street address where the end user primarily uses the service determines the customer's place of primary use. For example, a business owner who is located in Austin, Texas establishes mobile telecommunication service accounts for employees who are located in other cities. One employee does business from his home in Dallas, Texas. Two other employees work at an office that is located in Houston, Texas. Another employee works at an office that is located in New Orleans, Louisiana. The home street address of the employee in Dallas is the place of primary use for that cellular phone account. The place of primary use for the two Houston employees is the street address of the Houston office. The place of primary use for the employee in Louisiana is the street address of the New Orleans office. (9) Prepaid telecommunications service--a wireless or wire telecommunications service for which the provider requires a customer to prepay the full amount prior to provision of the service. The term does not include the sale or use of a telephone prepaid calling card as defined in paragraph (15) of this subsection. A card, pin number, access code or similar device that allows a user to access only a specific network, or that is intended for use with a specific user account or device (e.g., to add more minutes to an existing account), is a prepaid telecommunications service and is taxed as the sale of a telecommunications service. Local sales tax is collected as explained in subsection (h) of this section. (10) Private communication service--a telecommunication service that entitles the customer to exclusive or priority use of a communications channel or group of channels between or among termination points, regardless of the manner in which such channel or channels are connected, and includes switching capacity, extension lines, stations, and any other associated services that are provided in connection with the use of such channel or channels. 40 TexReg 7568 October 30, 2015 Texas Register

67 (A) As it relates to private communication service, the term "communications channel" means a physical or virtual path of communications over which signals are transmitted between or among customer channel termination points. (B) As it relates to private communication service, the term "customer channel termination point" means the location where the customer either inputs or receives the communications. (11) Seller--Any person who sells telecommunications services including a hotel, motel, owner or lessor of an office, residential building or development that contracts and pays for telecommunications services for resale to guests or tenants. (12) Taxable service--a telecommunications service or other taxable service listed in Tax Code, (13) Telecommunications services--the electronic or electrical transmission, conveyance, routing, or reception of sounds, signals, data, or information utilizing wires, cable, radio waves, microwaves, satellites, fiber optics, Voice over Internet Protocol (VoIP), or any other method now in existence or that may be devised, including but not limited to long-distance telephone service. The term includes mobile telecommunications services and prepaid telecommunications services. The term does not include: (A) the storage of data or other information for subsequent retrieval or the processing, or reception and processing, of data or information intended to change its form or content; (B) the sale or use of a telephone prepaid calling card; (C) Internet access service; or (D) pay telephone coin sent. (14) Telephone company--a person who owns or operates a telephone line or telephone in this state and charges for its use. (15) Telephone prepaid calling card--a card or other item, including an access code, that represents the right to access telecommunications services, other than prepaid telecommunications services as defined in paragraph (9) of this subsection, through multiple devices, regardless of the network providing direct service to the device used, for which payment is made in incremental amounts and before the call or transmission is initiated. For example, a calling card that allows a user to access a long distance telecommunications network for the purpose of making international calls through a pay phone is a telephone prepaid calling card. The sale of a telephone prepaid calling card is taxed as the sale of tangible personal property. (16) Voice over Internet Protocol (VoIP)--A telecommunication service where a phone call is transmitted over a data network. The term "Internet Protocol" is a catchall phrase for the protocols and technologies of encoding a voice call that allow the voice call to be slotted in between data on a data network, including the Internet, a company's Intranet, or any other type of data network. (b) Taxable telecommunications services. The total amount charged for a taxable telecommunications service is subject to sales tax. Sales tax is due on a charge for the following: (1) basic local exchange telephone services; (2) enhanced services such as metro service, extended area service, multiline hunting, and PBX trunk; (3) auxiliary services such as call waiting and call forwarding; (4) intrastate long-distance telecommunications services; (5) interstate long-distance telecommunications services that are both originated from, and billed to, a telephone number or billing or service address within Texas such that if a call originates in Texas and is billed to a Texas service address, the charge is taxable even if the invoice, statement, or other demand for payment is sent to an address in another state; (6) mobile telecommunications services for which the place of primary use is located in Texas; (7) telegraph services that are both originated from, and billed to, a person within Texas; (8) a telecommunications service paid for by the insertion of tokens, credit or debit card into a coin-operated telephone located in Texas; (9) subject to subsection (e) of this section, the lease, rental, or other charges for telecommunication equipment including separately stated installation charges. Separately stated charges for labor to install wiring will not be taxable if the wiring is installed in new structures or residences in such manner as to become a part of the realty. Separately stated charges for labor to install wiring in existing nonresidential real property are taxable. See and of this title (relating to Contractors; Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property Maintenance) for additional information. If charges for the installation of wiring and charges for the equipment are not separated, the total charge will be treated as a sale and installation of tangible personal property. Equipment sold by a telecommunications service provider is subject to sales or use tax and is not taxed as part of the telecommunications service if the service provider separately invoices the sale of the equipment. The sale of equipment is not separately invoiced if it is identified on the same bill, receipt or invoice as the sale of the telecommunications service, even if it is identified as a separate line item on the same bill, receipt, or invoice; (10) installation of telecommunications services, including service connection fees; (11) private communication services. Taxable receipts include the channel termination charge imposed at each channel termination point within this state, the total channel mileage charges imposed between channel termination points or relay points within this state, and an apportionment of the interoffice channel mileage charge that crosses the state border. An apportionment on the basis of the ratio of the miles between the last channel termination point in Texas and the state border to the total miles between that channel termination point and the next channel termination point in the route will be accepted. If there is a single charge for a private communication service in which the customer has channel termination points both inside and outside of Texas, the apportionment can also be determined by dividing the number of customer channel termination points in Texas by the total number of customer channel termination points to establish the percentage of the charge subject to state sales tax for Texas. Other apportionment methods may be used by the seller if first approved in writing by the comptroller; (12) charges that are passed through to a purchaser for federal, state, or local taxes or fees that are imposed on the seller of the telecommunications service rather than on the purchaser. Such charges are a cost or expense of the seller and are included in the total price subject to sales tax; and (13) prepaid wireless telecommunications services as defined by subsection (a)(9) of this section when the purchase is made in person at a Texas business or is made by telephone or the Internet and the purchaser's primary business address or residential address is in Texas. PROPOSED RULES October 30, TexReg 7569

68 (c) Nontaxable or exempt charges [services]. Sales tax is not due on charges for: (1) interstate long-distance telecommunications services that are not both originated from, and billed to, a telephone number or billing or service address within Texas. Records must clearly distinguish between taxable and exempt long-distance services; (2) broadcasts by commercial radio or television stations licensed or regulated by the FCC. See of this title (relating to Cable Television Service and Bundle Cable Service) for the tax status of cable television services; (3) telecommunications services purchased for resale; (4) telegraph services that are not both originated from and billed to a person within Texas; (5) mobile telecommunications services for which the place of primary use is located outside of Texas; [and] (6) charges for federal, state, or local taxes or fees that are imposed on the purchaser rather than on the seller of the telecommunications service. For example, no sales tax is due on a separately stated charge for federal excise tax or for Emergency Service Fee and Equalization Surcharge because these taxes or fees are imposed on the purchaser and are not a cost of doing business of the seller; and[.] (7) telecommunications services exclusively provided or used for the navigation of machinery and equipment exclusively used or employed on a farm or ranch in the building or maintaining of roads or water facilities or in the production of: (A) food for human consumption; (B) grass; (C) feed for animal life; or (D) other agricultural products to be sold in the regular course of business. (E) The purchaser must be an agricultural registrant and provide the seller with an agricultural exemption certificate. (F) This paragraph is effective September 1, 2015, and applies to telecommunication services provided after this date. (d) Billing and records requirements. If any nontaxable charges are combined with and not separately stated from taxable telecommunications service charges on the purchaser's bill or invoice from a provider of telecommunications services, the combined charge is subject to tax unless the service provider can identify the portion of the charges that are nontaxable through the provider's books and records kept in the regular course of business. If the nontaxable charges cannot reasonably be identified, the charges from the sale of both nontaxable services and taxable telecommunications services are attributable to taxable telecommunications services. The provider of telecommunications services has the burden of proving nontaxable charges. (e) Resale of tangible personal property. See of this title (relating to Resale Certificate; Sales for Resale). (1) Transfer of tangible personal property to the care, custody and control of the purchaser. A telecommunications service provider may claim a resale exemption on the purchase of tangible personal property that is transferred by the telecommunications service provider to the care, custody, and control of the purchaser. A telecommunications service provider must collect sales tax on charges for such items. (2) Wireless voice communication devices. A person may claim a resale exemption on the purchase of a cell phone or other wireless voice communication device as an integral part of a taxable service, regardless of whether there is a separate charge for the wireless voice communication device or whether the purchaser is the provider of the taxable telecommunications service, if payment for the service is a condition for receiving the wireless voice communication device. For example, if a person signs a contract for the purchase of telecommunications services at the location of a retailer and the retailer sells the person a cell phone as a condition of entering the contract for the telecommunications services that will be provided by someone other than the retailer, the retailer can purchase the cell phone tax free with a properly completed resale certificate. title. (f) Resale of a telecommunications service. See of this (1) Sales tax is not due on the charge by one telephone company to another for providing access to a local exchange network. The telecommunications service provider must collect sales tax from the final purchaser on the total charge for the taxable service including the charge for access. (2) A telecommunications service may be purchased tax free for resale if resold by the purchaser as an integral part of a taxable service. The purchaser must give the service provider a properly completed resale certificate to purchase the telecommunications service tax free for resale. A telecommunications service is an integral part of a taxable service if the telecommunications service is essential to the performance of the taxable service and without which the taxable service could not be rendered. For example, an Internet access service provider (ISP) may give a resale certificate when purchasing the dedicated dial-up line services to be used by the ISP's customers. However, the ISP must pay sales tax when purchasing its own personal or business use of telecommunications services such as charges for its office phone lines, mobile telecommunications services for its traveling salespersons, or for a customer service call-center. (3) A mobile telecommunications service provider may purchase roaming services from another mobile telecommunications service provider tax free for resale to its customers that are using the roaming services. For example, an out-of-state mobile telecommunications service provider purchases roaming services in Texas for resale to its out-of-state customers (i.e., persons who have a place of primary use outside Texas). To be exempt from sales tax, the out-of-state mobile telecommunications service provider must give the seller of the roaming services a resale certificate showing either a Texas sales tax permit number or the sales tax permit number or registration number issued by its home state. Effective for billing periods that begin on or after August 1, 2002, these out-of-state customers do not owe Texas sales tax on roaming charges incurred while visiting or traveling through Texas. (g) Taxable purchases. Subject to the provisions of subsections (e) and (f) of this section, a telecommunications service provider owes sales or use tax on all tangible personal property and services that are used to provide the service. See of this title (relating to Use Tax), of this title (relating to Records Required; Information Required), and of this title (relating to Auditing Taxpayer Records). (h) Local tax. (1) Subject to the provisions of paragraph (2) of this subsection, jurisdictions that impose local sales and use taxes may repeal the local sales tax exemption on telecommunications services. See Publication (Jurisdictions That Impose Local Sales Tax on 40 TexReg 7570 October 30, 2015 Texas Register

69 Telecommunications Services) for a list of jurisdictions that impose local taxes on telecommunications services. (2) Taxable interstate long-distance telecommunications are only subject to state sales tax. Local taxing jurisdictions may not repeal the local sales tax exemption on interstate long-distance telecommunications services. (3) A seller of taxable telecommunications services, with the exception of mobile telecommunications services as explained in paragraph (4) of this subsection and prepaid wireless telecommunications services as explained in paragraph (6) of this subsection, must collect local sales taxes based on the location from which the telecommunications service originates. If the point of origin cannot be determined, the telecommunications service provider must collect local taxes based on the address to which the telecommunications service is billed. (4) A seller of mobile telecommunications services must collect local sales taxes based on the place of primary use as defined in subsection (a)(8) of this section and per Tax Code, The location from which a mobile telecommunications service originates does not determine whether the service is exempt or is subject to state or local sales tax. (5) A seller of telephone prepaid calling cards is not selling a telecommunications service and must collect state and local sales or use tax on the sale of the cards in the same manner as sales of other tangible personal property. (6) A seller of prepaid wireless telecommunications services as defined in subsection (a)(9) of this section must collect local tax based on the business address of the seller when the sale occurs in Texas in person. However, if the sale occurs over the telephone or Internet, tax is due if the primary business address of the purchaser or residential address of the purchaser is in Texas. Filed with the Office of the Secretary of State on October 19, TRD Lita Gonzalez General Counsel Comptroller of Public Accounts For further information, please call: (512) TAC The Comptroller of Public Accounts proposes amendments to 3.355, concerning insurance services. This section is amended to implement House Bill 1841, 84th Legislature, 2015, which amended Tax Code, (b)(2) to exclude services performed by a public insurance adjuster from the scope of taxable insurance services. House Bill 1841 is effective October 1, The section is also amended to make clerical edits and to update rule references. Subsection (a)(8) is added to define a public insurance adjuster as set out in, and by reference to, Insurance Code, (3). Subsequent paragraphs are renumbered accordingly. Subsection (c)(4) is added to state that services performed on behalf of an insured by a public insurance adjuster on or after October 1, 2015, are not taxable insurance services. This subsection also provides that the date the services are performed, and not the date billed or paid, determines the taxability of the services. Subsection (i) is amended to correct a typographical error. Subsection (k) is amended to refer to Local Sales and Use Taxes and to delete references to previous rules which were repealed with the adoption of Tom Currah, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government. Mr. Currah also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be by conforming the rule to current state law. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule. Comments on the proposal may be submitted to Teresa G. Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register. The amendment is proposed under Tax Code , which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of provisions of Tax Code, Title 2, and taxes, fees, or other charges or refunds which the comptroller administers under other law. The amendment implements amendments to Tax Code, (Insurance Service) Insurance Services. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Insurance loss or damage appraisal--any activity performed for purposes of valuing damages, or estimating the quantity, value, or extent of loss of property. Appraisal activities performed prior to damage or loss, such as the appraisal of jewelry for scheduling on a homeowners insurance policy, are not considered loss or damage appraisal. (2) Insurance inspection--any activity performed to evaluate risks to property, to survey or value property in connection with the furnishing of insurance coverage, or any other similar activity. (3) Insurance investigation--any activity performed to evaluate an individual's eligibility or qualifications for insurance coverage, or for the payment of benefits, or any other similar activity. For example, the assembly or evaluation of information for the purpose of determining whether to issue a life insurance policy to a specific individual would be considered an insurance investigation. (4) Insurance or annuity actuarial analysis or research--any activity performed in connection with the calculation of rates for a policy of insurance or annuity rates, reserves, refunds, dividends, insurance benefits, or other similar activities. PROPOSED RULES October 30, TexReg 7571

70 (5) Insurance claims adjustment or claims processing--any activities to supervise, handle, investigate, pay, settle, or adjust claims or losses. (6) Insurance loss prevention service--any activities performed in an effort to identify, analyze, evaluate, control, anticipate and/or eliminate the occurrence of accidents, losses, or damage. Examples include: survey recommendations, training programs, consultations, analysis of accident causes, and industrial hygiene and health services. (7) Insurance carrier--every type of insurer engaged in the business of insurance that is licensed or operates under or is required to be licensed or to operate under the provisions of the Insurance Code. (8) Public insurance adjuster--a person, as set out in Insurance Code, (3), who: (A) for direct, indirect, or any other compensation: (i) acts on behalf of an insured in negotiating for or effecting the settlement of a claim or claims for loss or damage under any policy of insurance covering real or personal property; or (ii) on behalf of any other public insurance adjuster, investigates, settles, or adjusts or advises or assists an insured with a claim or claims for loss of damage under any policy of insurance covering real or personal property; or (B) advertises, solicits business, or holds himself or herself out to the public as an adjuster of claims for loss or damage under any policy of insurance covering real or personal property. (9) [(8)] Self-insured plan--a plan whereby an employer maintains funds for providing employee benefits rather than transferring risk by purchasing insurance from an insurance carrier. This plan is not considered a policy of insurance for sales tax purposes. (10) [(9)] Third-party administrator--a person hired by an employer to administer the provisions of the employer's self-insured plan. (b) Taxable services. Insurance services defined in subsection (a) of this section performed on behalf of an insurance carrier, its insured, its policyholders, or others pertaining to a policy or policies of insurance for monetary fees, dues, or other consideration are taxable. These services performed pursuant to a self-insured plan or for a third-party administrator handling distribution of funds under a self-insured plan are not taxable. (c) Nontaxable services. The following services are not taxable as insurance services: (1) insurance coverage for which a premium is paid or sales commissions are paid to insurance agents. Insurance services provided by an insurance agent without charge to the customer are not taxable. If a customer pays a separate amount for these services over and above the amount paid as a commission for a policy, this separate charge is taxable; (2) medical services provided by any medical provider, including physicians, medical staff at the physician's direction, hospitals, clinics, chiropractors, and other practitioners of the healing arts; (3) services related to automobile warranties or service contracts for which the State Board of Insurance allows an exclusion to third-party administrators; and[.] (4) services performed on behalf of an insured by a public insurance adjuster on or after October 1, Insurance services performed by a public insurance adjuster before October 1, 2015, are subject to tax regardless of the date billed, invoiced, or paid. (d) Doing business. Insurance services will be subject to taxation in Texas if the individual, entity, or property which is the object of the service is in Texas and the company for which the services are performed is either an insurance carrier as that term is defined in subsection (a)(7) of this section, or if not an insurance carrier, is doing business in Texas. (e) Fees and premiums. Insurance premiums and any other form of compensation subject to gross administrative or service fees taxes under the Insurance Code are subject to tax hereunder if paid in connection with the performance of an insurance service. Insurance premiums subject to gross premiums taxes under the Insurance Code are not subject to sales tax. (f) Not insurance related. Where an insurance service is performed as a part of a nontaxable service and the primary purpose for purchasing the nontaxable service is not insurance related, no part of the fee or charge is taxable. For example, the charge for an appraisal required by a lender as a condition of extending credit is not taxable as an insurance service because the primary purpose in obtaining the service is financing the loan. The fact that the appraisal may also be used as the basis for establishing minimum property insurance required by the lender as a condition of financing does not render the service taxable as an insurance service. (g) Responsibilities of persons providing insurance services. Persons providing insurance services must obtain a tax permit and collect tax on the entire sales price of their services. The presumption is that all services are taxable unless the service provider obtains an exemption certificate from a customer claiming an exemption. For example, a third-party administrator may issue an exemption certificate for charges for claim adjustment activities done pursuant to a self-insured plan. (h) Resale certificates. (1) Providers of insurance service may issue a resale certificate in lieu of tax to suppliers of tangible personal property only if care, custody, and control of the property will be transferred to the service provider's client. For example, an insurance service provider purchases magnetic tape to transfer the results of actuarial research to service provider's client. The tape is transferred to the client and the client owns and uses the tape to review the results of the actuarial research. The insurance service provider may purchase the tape tax free by issuing a resale certificate. Tax is due on the total amount charged the customer, including amounts for the tape and for the services. (2) A resale certificate may be issued for a service if the buyer intends to transfer the service as an integral part of taxable services. A service will be considered an integral part of a taxable service if the service purchased is essential to the performance of the taxable service and without which the taxable service could not be rendered. (3) A resale certificate may be issued for a taxable service if the buyer intends to incorporate the service into tangible personal property which will be resold. If the entire service is not incorporated into the tangible personal property, it will be presumed the service is subject to tax and the service will only be exempt to the extent the buyer can establish the portion of the service actually incorporated into the tangible personal property. If the buyer does not intend to incorporate the entire service into the tangible personal property, no resale certificate may be issued, but credit may be claimed at the time of sale of the tangible personal property to the extent the service was actually incorporated into the tangible personal property. (i) Unrelated services. (1) A service will be considered as unrelated if: 40 TexReg 7572 October 30, 2015 Texas Register

71 (A) it is not an insurance service, nor a service taxed under other provisions of [the] Tax Code, Chapter 151; (B) it is of a type which is commonly provided on a stand-alone basis; and (C) the performance of the unrelated service is distinct and identifiable. Examples of an unrelated service which may be excluded from the tax base include activities as third-party administrators, appraisals for reasons other than loss or damage, or doctor's fees. (2) Where nontaxable unrelated services and taxable services are sold or purchased for a single charge and the portion relating to taxable services represents more than 5.0% of the total charge, the total charge is presumed to be taxable. The presumption may be overcome by the insurance service provider at the time the transaction occurs by separately stating to the customer a reasonable charge for the taxable services. However, if the charge for the taxable portion of the services is not separately stated at the time of the transaction, the service provider or the purchaser may later establish for the comptroller, through documentary evidence, the percentage of the total charge that relates to nontaxable unrelated services. The insurance service provider's books must support the apportionment between exempt and nonexempt activities based on the cost of providing the service or on a comparison to the normal charge for each service if provided alone. If the charge for exempt services is unreasonable when the overall transaction is reviewed considering the cost of providing the service or a comparable charge made in the industry for each service, the comptroller will adjust the charges and assess additional tax, penalty, and interest on the taxable services. (3) Charges for services or expenses directly related to and incurred while providing the taxable service are taxable and may not be separated for the purpose of excluding these charges from the tax base. Examples would be charges for meals, telephone calls, hotel rooms, or airplane tickets. (j) Service benefit location--multistate customer. (1) To the extent an insurance service is used to support a separate, identifiable segment of a customer's business (other than general administration or operation of the business) the service is presumed to be used at the location where that part of the business is conducted. (2) If that part of the business is conducted at locations both within and outside the state, the service is not taxable to the extent it is used outside Texas. A multistate customer may use any reasonable method for allocation which is supported by business records. (3) A multistate customer purchasing insurance services, such as actuarial services, for the benefit of both in-state and out-of-state locations is responsible for issuing to the insurance services provider an exemption certificate asserting a multistate benefit, and for reporting and paying the tax on that portion of the insurance services charge which will benefit the Texas location. A provider of insurance services that accepts such a certificate in good faith is relieved of responsibility for collecting and remitting tax on transactions to which the certificate relates. (4) The customer's books must support the assignment of the service to an identifiable segment of the business, the determination of the location or locations of the use of the service, and the allocation of the taxable charge to Texas. (5) To the extent the use of the service cannot be assigned to an identifiable segment of a customer's business, the service is presumed to be used to support the administration or operation of the customer's business generally. The service is presumed to be used at the customer's principal place of business. The principal place of business means the place from which the trade or business is directed or managed. (k) Local tax. [Local sales and use taxes (city, county, transit authority, and special purpose district) apply to services in the same way as they apply to tangible personal property. Generally, service providers must collect local sales taxes if their place of business is within a local taxing jurisdiction, even if the service is actually provided at a location outside that jurisdiction. However, MTA and CTD sales taxes do not apply to services provided outside the boundaries of the transit area. If the place of business is outside such a jurisdiction but the service is provided to a customer within a local taxing jurisdiction, local use taxes apply and the service provider is responsible for collecting them.] For information on the collection and reporting responsibilities of providers and purchasers of taxable services, see of this title (relating to Local Sales and Use Taxes) [ of this title (relating to Imposition of the Sales Tax; Collection by Retailer; Bracket System Formula; Determining City Tax); of this title (relating to Administration of Use Tax; Collection by Retailer); of this title (relating to Imposition of Sales Tax); and of this title (relating to Administration of Use Tax; Imposition and Collection)]. (l) Use tax. If a provider of an insurance service is not doing business in Texas or in a specific local taxing jurisdiction and is not required to collect Texas state or local tax, it is the Texas customer's responsibility to report and pay the use tax directly to this office. Filed with the Office of the Secretary of State on October 15, TRD Lita Gonzalez General Counsel Comptroller of Public Accounts For further information, please call: (512) SUBCHAPTER S. MOTOR FUEL TAX 34 TAC The Comptroller of Public Accounts proposes amendments to 3.434, concerning liquefied gas tax decal. The amendments are proposed to implement the provisions of House Bill 1905, 84th Legislature, 2015 which repealed the tax on liquefied gas effective September 1, The section is amended by adding new subsection (a) indicating that the rule applies to periods prior to September 1, All subsequent subsections are relettered accordingly and corresponding cross-references in those subsections are also relettered. The subsection cross-reference in the attached graphic is relettered. Tom Currah, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government. Mr. Currah also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as PROPOSED RULES October 30, TexReg 7573

72 a result of enforcing the rule will be by conforming the rule to current state statutes. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule. Comments on the proposal may be submitted to Teresa G. Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register. The amendments are proposed under Tax Code, , which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2. The amendments implement the repeal of Tax Code, Chapter 162, Subchapter D (Motor Fuel Taxes) Liquefied Gas Tax Decal. (a) This section applies to periods prior to September 1, Effective September 1, 2015, the tax on liquefied gas is repealed. (b) [(a)] Use of decal. Except as provided in subsections (c) [(b)], (d) [(c)], and (g) [(f)] of this section, a person who operates a motor vehicle that is required to be licensed in Texas for use on the public highways of Texas and that is powered by ethane, propane, butane, or a mixture of those gases, including a motor vehicle equipped to use liquefied gas interchangeably with another motor fuel, must: (1) obtain from the comptroller a liquefied gas decal; and (2) prepay the liquefied gas tax to the comptroller on an annual basis. (c) [(b)] Motor Vehicle Dealer. A motor vehicle dealer registered under Transportation Code, Chapter 503, must pay the liquefied gas tax to a licensed liquefied gas dealer when the fuel is delivered into the fuel supply tanks of each motor vehicle that display a motor vehicle dealer decal and that is held for resale. (d) [(c)] Interstate trucker. An interstate trucker registered under a multistate tax agreement (International Fuel Tax Agreement), must pay the liquefied gas tax to a licensed liquefied gas dealer when the fuel is delivered into the fuel supply tanks of motor vehicles that have two axles and a registered gross weight in excess of 26,000 pounds; have three or more axles, or are used in combination and the registered gross weight of the combination exceeds 26,000 pounds, and that display current multistate tax agreement (International Fuel Tax Agreement) decals. (e) [(d)] Vehicle registered in another state. A liquefied gas tax decal cannot be issued to a motor vehicle registered in a state other than Texas. Owners of such vehicles must pay tax to a licensed liquefied gas dealer on fuel delivered into the fuel supply tanks. (f) [(e)] Application. Each person purchasing liquefied gas for use in a liquefied gas powered motor vehicle must submit an annual application to the comptroller for each vehicle. (1) Initial application. An applicant initially applying for a liquefied gas tax decal for a Class A - F motor vehicle must purchase a decal based on an estimate of miles that will be driven during the next one-year period. (2) Renewal. The applicant must produce an ending odometer reading on the renewal application. In the absence of an ending odometer reading, the previous year's mileage will be presumed to be at least 15,000 miles. Applications for the upcoming year should be submitted during the month of expiration of the current decal. (A) The liquefied gas tax does not apply to miles traveled outside the state. A record of miles traveled by the motor vehicle outside Texas must be maintained and submitted with the renewal each year. The record must include the date(s) of travel, beginning and ending odometer readings and destination. (B) Special use vehicles. Vehicles required to be licensed for highway use but whose main purpose, design, and use is off the highway may renew a liquefied gas decal for a rate less than the mileage indicated on the odometer if a record or log indicating the miles traveled on the highway by the vehicle is maintained and attached to the renewal application. (g) [(f)] Exceptions. (1) School district transportation and county exceptions. The liquefied gas tax does not apply to liquefied gas sold to public school districts and counties in this state, or to commercial transportation companies providing transportation services to public school districts in this state. These transportation companies must obtain letters of exception from the comptroller, as discussed in of this title (relating to Transportation Services for Texas Public School Districts). (2) Decal not required. A public school district, a commercial transportation company providing transportation services to a public school district and holding a valid letter of exception from the comptroller, or a county in this state operating a motor vehicle powered by liquefied gas is not required to prepay the liquefied gas tax and obtain a decal for the motor vehicle. (h) [(g)] Rate schedule. (1) The following rate schedule (based on mileage driven the previous year) applies. Figure: 34 TAC 3.434(h)(1) [Figure: 34 TAC 3.434(g)(1)] (2) Transit company. A special use liquefied gas tax decal and tax is required for the following type of vehicles: Class T: Transit carrier vehicles operated by a transit company, $444. The Class T special use liquefied gas decal may be displayed by compressed natural gas and liquefied natural gas transit carrier vehicles that qualify under Tax Code, (i) [(h)] Display of decal. The decal shall be affixed to the inside, lower right corner of the windshield (passenger side) of the vehicle. An expired or invalid liquefied gas tax decal shall be removed before installing a new decal or transferring ownership of the motor vehicle. (j) [(i)] Refunds; transfer of decal. If a motor vehicle bearing a liquefied gas tax decal is sold, transferred, destroyed, or the liquefied gas carburetor system (regulator or fuel supply tank) is removed from the motor vehicle the owner is entitled to a refund of the unused portion of the advanced taxes paid for the decal year. The owner must submit to the comptroller the liquefied gas tax decal with an affidavit identifying the motor vehicle and circumstances for requesting a refund. The comptroller shall refund that portion of the tax payment that corresponds to the number of complete months remaining in the decal year. 40 TexReg 7574 October 30, 2015 Texas Register

73 Filed with the Office of the Secretary of State on October 19, TRD Lita Gonzalez General Counsel Comptroller of Public Accounts For further information, please call: (512) PART 5. TEXAS COUNTY AND DISTRICT RETIREMENT SYSTEM CHAPTER 103. CALCULATIONS OR TYPES OF BENEFITS 34 TAC The Texas County and District Retirement System ("TCDRS") proposes an amendment to concerning actuarial tables used to calculate annuity purchase rates. Annuity purchase rates convert member savings into lifetime monthly benefits. The proposed amendment is based on the recommendation of the actuary, Milliman Inc., after consideration of the results of a longevity study that was conducted for the system. The amendment would update the annuity purchase rates to reflect improving longevity. This proposed update would keep retirement costs in line with life expectancy, keep employers from experiencing cost creep due to improving life expectancy, and strengthen the retirement system for the future. Application of these new rates will not impact retirees or any member benefits earned before January 1, To ensure that benefits already earned are not affected and to minimize impact on members, any benefits earned on or before January 1, 2018, would use the current annuity purchase rates to calculate benefits. The current annuity purchase rates also apply to future interest on those pre-2018 benefits. The updated annuity purchase rates would only apply to benefits earned after January 1, 2018, and annuity purchase rates would be based on the member's and beneficiaries' attained ages in years and months. Subsection (a) of the proposed amendment provides that service and disability retirement benefits in which the first benefit payment is payable before January 1, 2018 will be calculated under the existing annuity purchase rates. Subsection (a)(2) provides that the annuity purchase rate would be based on the respective retiree's and beneficiary's attained age in years. Subsection (b) applies to benefits payable after January 1, Subsection (b)(1) provides the benefit that is associated with service credit that accrued before January 1, 2018 would be calculated using the current annuity purchase rates. Subsection (b)(2) provides that the portion of the benefit that is associated with service credit that accrues on or after January 1, 2018 would be calculated using the new annuity purchase rates that are determined on a generational mortality basis using the RP-2000 Combined Mortality Table projected to 2014 using Scale AA and for projections after 2014 using 110% of MP-2014 Ultimate Projection Scale, with a 32.79% reserve refund assumption for the standard benefit. Mortality assumptions for these calculations are blended 50% male and 50% female for retirees, and blended 30% male and 70% female for beneficiaries. Subsection (b)(3) provides that the annuity purchase rates are based on the respective retiree's and beneficiary's attained ages in years and months. Subsection (b)(4) provides that service credit, has the meaning as denied in (16) of the Texas Government Code. Subsection (c) is proposed to be removed as it is duplicative of existing law. Ann McGeehan, General Counsel of TCDRS, has determined that for the first five-year period the rule is in effect there will be no fiscal implications for state government, and only potential immaterial fiscal implications for local governments participating in TCDRS as a result of enforcing or administering the rule. In the first five-year period, it is expected that participating counties and districts will experience decreases or increases in their employer contribution rates due to the combined effects of economic and other demographic factors. However, this proposed amendment reduces the risk of employer cost increases due to improving longevity. Ms. McGeehan has also determined that for each year of the first five years the rule is in effect the public benefit anticipated as a result of administering the rule will be to keep retirement costs in line with life expectancy, to prevent employers from experiencing cost creep due to improving life expectancy, and to strengthen the retirement system. There will be no costs to small businesses. Individuals who might be affected by the amendment are TCDRS members whose retirement is based wholly or partly on service credit accrued on or after January 1, The portion of the retirement benefit associated with service credit that accrues on or after January 1, 2018 will continue to be the actuarial equivalent of the retirement benefit that would have been calculated using existing annuity purchase rates. The monthly payment amount will be less but will be expected to continue over a longer period of time due to longer life expectancies. Comments on the proposed amendment may be submitted to Ann McGeehan, General Counsel, TCDRS, P.O. Box 2034, Austin, Texas , faxed to (512) , or submitted electronically to [email protected]. The amendment is proposed under the Government Code, (1) and , which authorizes the TCDRS board of trustees to adopt rates and tables, including a mortality basis to be used in determining actuarial equivalents. The Government Code, (1) is affected by this proposed rule Actuarial Tables. (a) Service retirement benefits and disability retirement benefits for [on service retirements, on] which the first benefit payment is payable before January 1, 2018, [on or after October 1, 1985,] shall be calculated under the following rules: (1) The annuity purchase rate is calculated on the basis of the UP-1984 table with an age setback of five years for retirees [retired members] and an age setback of 10 years for beneficiaries [of retired members], with a 30% reserve refund assumption for the standard benefit. (2) Annuity purchase rates are based on the respective retiree's and beneficiary's attained ages in years. PROPOSED RULES October 30, TexReg 7575

74 (b) For benefits payable on or after January 1, 2018, service retirement benefits and disability retirement benefits shall be calculated under the following rules: [Disability retirement benefits on disability retirements, on which the first benefit is payable on or after January 1, 1992, shall be calculated with a 30% reserve refund assumption for the standard benefit, and on the basis of the UP-1984 table with an age setback of five years for disabled annuitants and an age setback of 10 years for beneficiaries of disabled annuitants.] (1) The annuity purchase rate for the portion of the benefit that is associated with service credit that accrued before January 1, 2018, and all future interest earned and employer matching attributable to this portion shall be calculated based on the assumptions described in Subsection (a)(1) of this section. (2) The annuity purchase rate for the portion of the benefit that is associated with service credit that accrues on or after January 1, 2018, and is not included in amounts described in Subsection (b)(1) above shall be calculated on a generational mortality basis using the RP-2000 Combined Mortality Table projected to 2014 using Scale AA and for projections after 2014 using 110% of MP-2014 Ultimate Projection Scale, with a 32.79% reserve refund assumption for the standard benefit. Mortality assumptions for these calculations are blended 50% male and 50% female for retirees, and blended 30% male and 70% female for beneficiaries. (3) The annuity purchase rates are based on the respective retiree's and beneficiary's attained age in years and months regardless of when the service credit was accrued. (4) For the purpose of this rule, service credit means the monetary credits allowed a member for service for a participating employer as defined in Section (16) of the Texas Government Code. [(c) The actuarial tables may be changed by the board on recommendations of the actuary to more nearly conform to the actual experience of the system with affected categories.] Filed with the Office of the Secretary of State on October 16, TRD Ann McGeehan General Counsel Texas County and District Retirement System For further information, please call: (512) TITLE 37. PUBLIC SAFETY AND CORREC- TIONS PART 7. TEXAS COMMISSION ON LAW ENFORCEMENT CHAPTER 211. ADMINISTRATION 37 TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 211.1, concerning Definitions. Subsection (a)(8) is amended to make this a broader definition which encompasses not only pre-employment investigation, but preenrollment investigations. Subsection (a)(16) is a new definition for a contract jailer. New subsection (a)(19) removes redundant information. New subsection (a)(32) is a new definition for an honorably retired peace officer for clarification in response to legislation. Subsection (a)(17) - (31) and (33) - (68) are amended for renumbering. Subsection (b) is amended to reflect the effective date of the changes. These amendments are necessary to make background investigation a broader definition which encompasses not only pre-employment investigation, but pre-enrollment investigations, provide a definition for a contract jailer, to remove redundant information, and to define honorably retired peace officer for clarification in response to legislation. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by removing redundant information and defining contract jailer and honorably retired peace officer. five years the section as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed section. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority. The rule amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority. No other code, article, or statute is affected by this proposal Definitions. (a) The following words and terms, when used in this part, shall have the following meanings, unless the context clearly indicates otherwise. (1) Academic alternative program--a program for college credit offered by a training provider recognized by the Southern Association of Colleges and Schools and the Texas Higher Education Coordinating Board, authorized by the commission to conduct preparatory law enforcement training as part of a degree plan program, and consisting of commission-approved curricula. (2) Academic provider--a school, accredited by the Southern Association of Colleges and Schools and the Texas Higher Education Coordinating Board, which has been approved by the commission to provide basic licensing courses. (3) Accredited college or university--an institution of higher education that is accredited or authorized by the Southern Association of Colleges and Schools, the Middle States Association of Colleges and Schools, the New England Association of Schools and Colleges, the North Central Association of Colleges and Schools, the Northwest Commission on Colleges and Universities, the Western Association of Schools and Colleges, or an international college or university evaluated and accepted by a United States accredited college or university. 40 TexReg 7576 October 30, 2015 Texas Register

75 (4) Active--A license issued by the commission that meets the current requirements of licensure and training as determined by the commission. (5) Administrative Law Judge (ALJ)--An administrative law judge appointed by the chief administrative law judge of the State Office of Administrative Hearings. (6) Agency--A law enforcement unit or other entity, whether public or private, authorized by Texas law to appoint a person licensed or certified by the commission. (7) Appointed--Elected or commissioned by an agency as a peace officer, reserve or otherwise selected or assigned to a position governed by the Texas Occupations Code, Chapter 1701, without regard to pay or employment status. (8) Background investigation--an [A pre-employment background] investigation into an applicant's personal history that meets or exceeds the commission-developed questionnaire or personal [/]history statement. (9) Basic licensing course--any current commission developed course that is required before an individual may be licensed by the commission. (10) Certified copy--a true and correct copy of a document or record certified by the custodian of records of the submitting entity. (11) Chief administrator--the head or designee of a law enforcement agency. (12) Commission--The Texas Commission on Law Enforcement. (13) Commissioned--Has been given the legal power to act as a peace officer or reserve, whether elected, employed, or appointed. (14) Commissioners--The nine commission members appointed by the governor. (15) Contract jail--a correctional facility, operated by a county, municipality or private vendor, operating under a contract with a county or municipality, to house inmates convicted of offenses committed against the laws of another state of the United States, as provided by Texas Government Code, (16) Contract Jailer--A person licensed as a Jailer in a Contract Jail or employed by an agency outside of a County Jail whose employing agency provides services inside of a County Jail which would require the person to have a Jailer License. (17) [(16)] Contractual training provider--a law enforcement agency or academy, a law enforcement association, alternative delivery trainer, distance education, academic alternative, or proprietary training provider that conducts specific education and training under a contract with the commission. (18) [(17)] Convicted--Has been adjudged guilty of or has had a judgment of guilt entered in a criminal case that has not been set aside on appeal, regardless of whether: (A) the sentence is subsequently probated and the person is discharged from probation; (B) the charging instrument is dismissed and the person is released from all penalties and disabilities resulting from the offense; or (C) the person is pardoned, unless the pardon is expressly granted for subsequent proof of innocence. (19) [(18)] Community [Court-ordered community] supervision--any court-ordered community supervision or probation resulting from a deferred adjudication or conviction by a court of competent jurisdiction. However, this does not include supervision resulting from a pretrial diversion. (20) [(19)] Diploma mill--an entity that offers for a fee with little or no coursework, degrees, diplomas, or certificates that may be used to represent to the general public that the individual has successfully completed a program of secondary education or training. (21) [(20)] Distance education--study, at a distance, with an educational provider that conducts organized, formal learning opportunities for students. The instruction is offered wholly or primarily by distance study, through virtually any media. It may include the use of: videotapes, DVD, audio recordings, telephone and communications, and Web-based delivery systems. (22) [(21)] Duty ammunition--ammunition required or permitted by the agency to be carried on duty. (23) [(22)] Executive director--the executive director of the commission or any individual authorized to act on behalf of the executive director. (24) [(23)] Experience--Includes each month, or part thereof, served as a peace officer, reserve, jailer, telecommunicator, or federal officer. Credit may, at the discretion of the executive director, be awarded for relevant experience from an out-of-state agency. (25) [(24)] Family Violence--In this chapter, has the meaning assigned by Chapter 71, Texas Family Code. (26) [(25)] Field training program--a program intended to facilitate a transition from the academic setting to the performance of the general duties of the appointing agency. (27) [(26)] Firearms--Any handgun, shotgun, precision rifle, patrol rifle, or fully automatic weapon that is carried by the individual officer in an official capacity. (28) [(27)] Firearms proficiency--successful completion of the annual firearms proficiency requirements. (29) [(28)] Fit for duty review--a formal specialized examination of an individual, appointed to a position governed by the Texas Occupations Code, Chapter 1701, without regard to pay or employment status, to determine if the appointee is able to safely and/or effectively perform essential job functions. The basis for these examinations should be based on objective evidence and a reasonable basis that the cause may be attributable to a medical and/or psychological condition or impairment. Objective evidence may include direct observation, credible third party reports; or other reliable evidence. The review should come after other options have been deemed inappropriate in light of the facts of the case. The selected Texas licensed medical doctor or psychologist, who is familiar with the duties of the appointee, conducting an examination should be consulted to ensure that a review is indicated. This review may include psychological and/or medical fitness examinations. (30) [(29)] High School Diploma--An earned high school diploma from a United States high school, an accredited secondary school equivalent to that of United States high school, or a passing score on the general education development test indicating a high school graduation level. Documentation from diploma mills is not acceptable. (31) [(30)] Home School Diploma--An earned diploma from a student who predominately receives instruction in a general elementary or secondary education program that is provided by the PROPOSED RULES October 30, TexReg 7577

76 parent, or a person in parental authority, in or through the child's home. (Texas Education Code ) (32) Honorably Retired Peace Officer--An unappointed person with a Texas Peace Officer license who has a cumulative total of 15 years of full-time service as a Peace Officer. An Honorably Retired Peace Officer does not carry any Peace Officer authority. (33) [(31)] Individual--A human being who has been born and is or was alive. (34) [(32)] Jailer--A person employed or appointed as a jailer under the provisions of the Local Government Code, , or Texas Government Code (35) [(33)] Killed in the line of duty--a death that is the directly attributed result of a personal injury sustained in the line of duty. (36) [(34)] Law--Including, but not limited to, the constitution or a statute of this state, or the United States; a written opinion of a court of record; a municipal ordinance; an order of a county commissioners' court; or a rule authorized by and lawfully adopted under a statute. (37) [(35)] Law enforcement academy--a school operated by a governmental entity which may provide basic licensing courses and continuing education under contract with the commission. (38) [(36)] Law enforcement automobile for training--a vehicle equipped to meet the requirements of an authorized emergency vehicle as identified by Texas Transportation Code and (39) [(37)] Lesson plan--a plan of action consisting of a sequence of logically linked topics that together make positive learning experiences. Elements of a lesson plan include: measurable goals and objectives, content, a description of instructional methods, tests and activities, assessments and evaluations, and technologies utilized. (40) [(38)] License--A license required by law or a state agency rule that must be obtained by an individual to engage in a particular business. (41) [(39)] Licensee--An individual holding a license issued by the commission. (42) [(40)] Line of duty--any lawful and reasonable action, which an officer identified in Texas Government Code, Chapter 3105 is required or authorized by rule, condition of employment, or law to perform. The term includes an action by the individual at a social, ceremonial, athletic, or other function to which the individual is assigned by the individual's employer. (43) [(41)] Moral character--the propensity on the part of a person to serve the public of the state in a fair, honest, and open manner. (44) [(42)] Officer--A peace officer or reserve identified under the provisions of the Texas Occupations Code, (45) [(43)] Patrol rifle--any magazine-fed repeating rifle with iron/open sights or with a frame mounted optical enhancing sighting device, 5 power or less, that is carried by the individual officer in an official capacity. (46) [(44)] Peace officer--a person elected, employed, or appointed as a peace officer under the provisions of the Texas Occupations Code, (47) [(45)] Personal Identification Number (PID)--A unique computer-generated number assigned to individuals for identification in the commission's electronic database. (48) [(46)] Placed on probation--has received an adjudicated or deferred adjudication probation for a criminal offense. (49) [(47)] POST--State or federal agency with jurisdiction similar to that of the commission, such as a peace officer standards and training agency. (50) [(48)] Precision rifle--any rifle with a frame mounted optical sighting device greater than 5 power that is carried by the individual officer in an official capacity. (51) [(49)] Proprietary training contractor--an approved training contractor who has a proprietary interest in the intellectual property delivered. (52) [(50)] Public security officer--a person employed or appointed as an armed security officer identified under the provisions of the Texas Occupations Code, (53) [(51)] Reactivate--To make a license issued by the commission active after a license becomes inactive. A license becomes inactive at the end of the most recent unit or cycle in which the licensee is not appointed and has failed to complete legislatively required training. (54) [(52)] Reinstate--To make a license issued by the commission active after disciplinary action or failure to obtain required continuing education. (55) [(53)] Reserve--A person appointed as a reserve law enforcement officer under the provisions of the Texas Occupations Code, (56) [(54)] School marshal--a person employed and appointed by the board of trustees of a school district or the governing body of an open-enrollment charter school under Texas Code of Criminal Procedure, Article and in accordance with and having the rights provided by Texas Education Code, (57) [(55)] Self-assessment--Completion of the commission created process, which gathers information about a training or education program. (58) [(56)] Separation--An explanation of the circumstances under which the person resigned, retired, or was terminated, reported on the form currently prescribed by the commission, in accordance with Texas Occupations Code, (59) [(57)] SOAH--The State Office of Administrative Hearings. (60) [(58)] Successful completion--a minimum of: (A) 70 percent or better; or (B) C or better; or (C) pass, if offered as pass/fail. (61) [(59)] TCLEDDS--Texas Commission on Law Enforcement Data Distribution System. (62) [(60)] Telecommunicator--A person employed as a telecommunicator under the provisions of the Texas Occupations Code, (63) [(61)] Training coordinator--an individual, appointed by a commission-recognized training provider, who meets the requirements of of this title. (64) [(62)] Training cycle--a 48-month period as established by the commission. Each training cycle is composed of two contiguous 24-month units. 40 TexReg 7578 October 30, 2015 Texas Register

77 (65) [(63)] Training hours--classroom or distance education hours reported in one-hour increments. (66) [(64)] Training program--an organized collection of various resources recognized by the commission for providing preparatory or continuing training. This program includes, but is not limited to, learning goals and objectives, academic activities and exercises, lesson plans, exams, skills training, skill assessments, instructional and learning tools, and training requirements. (67) [(65)] Training provider--a governmental body, law enforcement association, alternative delivery trainer, or proprietary entity credentialed by or authorized under a training provider contract with the commission to provide preparatory or continuing training for licensees or potential licensees. (68) [(66)] Verification (verified)--the confirmation of the correctness, truth, or authenticity of a document, report, or information by sworn affidavit, oath, or deposition. (b) The effective date of this section is February 1, [February 1, 2014.] Filed with the Office of the Secretary of State on October 12, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of 211.5, concerning Licensee Lists. The repealed section removes redundant information that is already stated in statute. This repeal is necessary to remove redundant information that is already stated in statute. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by removing redundant information. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Active and Inactive Peace Officers. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority and , Active and Inactive Peace Officers. No other code, article, or statute is affected by this proposal Licensee Lists. Filed with the Office of the Secretary of State on October 12, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 211.7, concerning Meeting Dates and Procedures. Subsection (a) removes the commission meeting requirements which gives the presiding officer flexibility to call meetings as needed. Subsections (b) and (c) are amended for relettering. New subsection (c) reflects the effective date. Subsection (d) has been relettered as new subsection (c). This amendment is necessary to give the presiding officer more flexibility in scheduling meetings. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by adding flexibility in the scheduling of meetings. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Meetings. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority and , Meetings. PROPOSED RULES October 30, TexReg 7579

78 No other code, article, or statute is affected by this proposal Meeting Dates and Procedures. [(a) The commission will comply with the open meetings law and may hold quarterly meetings throughout each calendar year, time and place to be determined by the presiding officer and executive director, in March, June, September, and December, unless:] [(1) the date, and location is altered by vote of the commissioners; or] [(2) more frequent meetings are called by the presiding officer on the presiding officer's own motion or upon the written request of five voting commissioners.] (a) [(b)] At least once every two years, a regular or special meeting will receive public comment on training and standards for officers, jailers, and telecommunicators. (b) [(c)] Each meeting will be conducted by the presiding officer or, in the absence of the presiding officer, by the assistant presiding officer, the secretary, the most senior commissioner, or another commissioner selected by vote, in that order. (c) [(d)] The effective date of this section is February 1, 2016.[March 1, 2001.] Filed with the Office of the Secretary of State on October 12, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Notice of Commission Rulemaking. This repeal is being replaced by a new This repeal is necessary to conform with Texas Government Code John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the repeal as proposed will be in effect, there will be a positive benefit to the public by conforming to Texas Government Code five years the repeal as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed repeal. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code, , General Powers of the Commission; Rulemaking Authority, and Texas Government Code , Notice of Proposed Law Enforcement Rules. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and Texas Government Code , Notice of Proposed Law Enforcement Rules. No other code, article, or statute is affected by this proposal Notice of Commission Rulemaking. Filed with the Office of the Secretary of State on October 12 TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning Notice of Commission Rulemaking. This new rule conforms with Texas Government Code This new rule is necessary to conform with Texas Government Code John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this subsection. five years the section as proposed will be in effect, there will be a positive benefit to the public by conforming with Texas Government Code five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and Texas Government Code , Notice of Proposed Law Enforcement Rules. 40 TexReg 7580 October 30, 2015 Texas Register

79 The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority and Texas Government Code, , Notice of Proposed Law Enforcement Rules. No other code, article, or statute is affected by this proposal Notice of Commission Rulemaking. (a) When required by Texas Government Code Chapter 2001, the commission will notify each law enforcement agency of adopted rules. (b) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 12, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to , concerning Establishment of an Appointing Entity. Subsection (b) is amended to remove the reference to the current agency number as that number is assigned only after the application has been approved. Subsection (c) is amended to accurately reflect the reference to the Local Government Code. Subsection (f) is amended to reflect the effective date of the changes. These amendments are necessary to correct the application requirement and the reference to the Local Government Code. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by providing the public with competent law enforcement agencies. five years the section as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed section. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Information Provided by Commissioning Entities. The rule amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Information Provided by Commissioning Entities. No other code, article, or statute is affected by this proposal Establishment of an Appointing Entity. (a) On or after September 1, 2009, an entity authorized by statute or by the constitution to create a law enforcement agency or police department and commission, appoint, or employ peace officers that first creates a law enforcement agency or police department and first begins to commission, appoint, or employ peace officers shall make application to the commission. (b) On creation of the law enforcement agency or police department, and as part of the application process, the entity shall submit to the commission the [current agency number,] application form, any associated application fee, and information regarding: (1) the need for the law enforcement agency or police department in the community; (2) the funding sources for the law enforcement agency or police department; (3) the physical resources available to officers; (4) the physical facilities that the law enforcement agency or police department will operate, including descriptions of the evidence room, dispatch area, and public area; (5) law enforcement policies of the law enforcement agency or police department, including policies on: (A) use of force; (B) vehicle pursuit; (C) professional conduct of officers; (D) domestic abuse protocols; (E) response to missing persons; (F) supervision of part-time officers; (G) impartial policing; and (H) fitness for duty. (6) the administrative structure of the law enforcement agency or police department; (7) liability insurance; and (8) any other information the commission requires [by rule]. (c) An entity authorized by Local Government Code, [ ] to operate a correctional facility to house inmates, in this state, convicted of offenses committed against the laws of another state of the United States, and appoint jailers requiring licensure by the commission, may make application for an agency number by submitting the current agency number application form, any associated application fee, and a certified copy of the contract under which the facility will operate. (d) A political subdivision wanting to establish a consolidated emergency telecommunications center and appoint telecommunicators, as required by Texas Occupations Code, , may make application for an agency number by submitting the current agency number application form, any associated application fee and a certified copy of the consolidation contract. (e) The Texas Department of Criminal Justice - Pardon and Parole Division, a community supervision and corrections department, or a juvenile probation department may make application for an agency number if seeking firearms training certificates for parole officers, community supervision and corrections officers, or juvenile probation of- PROPOSED RULES October 30, TexReg 7581

80 ficers by submitting the current agency number application form and any associated application fee. (f) The effective date of this section is February 1, [January 1, 2012.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to , concerning Date of Appointment. Subsection (a) is amended to include telecommunicators to the list of licensees. Subsection (b) reflects the effective date. This amendment is necessary to add telecommunicators to the licensee list. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by adding telecommunicators to the licensee list. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, , Rules Relating to Hiring Date of Peace Officer, and , Telecommunicators. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Rules Relating to Hiring Date Of Peace Officer; and , Telecommunicators. No other code, article, or statute is affected by this proposal Date of Appointment. (a) If a proper report of appointment is received by the commission for the appointment as a peace officer, [and/or] county jailer, or telecommunicator, the commission shall accept the date of appointment that is reported to the commission by the appointing agency. (b) The effective date of this section is February 1, [March 1, 2008.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to , concerning Responsibilities of Agency Chief Administrators. Subsection (c) removes the cross-reference to Subchapter L of the Texas Occupations Code, Chapter Subsection (q) reflects the effective date. This amendment is necessary to remove the cross-reference to Subchapter L of the Texas Occupations Code, Chapter John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by removing a cross-reference. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , License Application; Duties of Appointing Entity; , Criminal Penalty for Appointment or Retention of Certain Persons; , Criminal Penalty for Appointment of Person Not Certified for Investigative Hypnosis; and , Criminal Penalty for Appointment or Retention of Persons with Certain Convictions. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , License Application; Duties of Appointing Entity; , Criminal Penalty for Appointment or Retention of Certain Persons; , Criminal Penalty for Appointment of Person Not Certified for Investigative Hypnosis; and , Criminal Penalty for Appointment or Retention of Persons with Certain Convictions. No other code, article, or statute is affected by this proposal. 40 TexReg 7582 October 30, 2015 Texas Register

81 Responsibilities of Agency Chief Administrators. (a) An agency chief administrator is responsible for making any and all reports and submitting any and all documents required of that agency by the commission. (b) An individual who is appointed or elected to the position of the chief administrator of a law enforcement agency shall notify the Commission of the date of appointment and title, through a form prescribed by the Commission within 30 days of such appointment. (c) An agency chief administrator must comply with the appointment and[/or] retention requirements under [Subchapter L of the] Texas Occupations Code, Chapter (d) An agency chief administrator must report to the commission within 30 days, any change in the agency's name, physical location, mailing address, electronic mail address, or telephone number. (e) An agency chief administrator must report, in a standard format, incident-based data compiled in accordance with Texas Occupations Code (f) Line of duty deaths shall be reported to the commission in current peace officers' memorial reporting formats. (g) An agency chief administrator has an obligation to determine that all appointees are able to safely and effectively perform the essential job functions. An agency chief administrator may require a fit for duty review upon identifying factors that indicate an appointee may no longer be able to perform job-related functions safely and effectively. These factors should be based on objective evidence and a reasonable basis that the cause may be attributable to a medical or psychological condition or impairment. (h) An agency must provide training on employment issues identified in Texas Occupations Code and field training. (i) An agency must provide continuing education training required in Texas Occupations Code and (j) Before an agency appoints any licensee to a position requiring a commission license it shall complete the reporting requirements of Texas Occupations Code (k) An agency appointing a person who does not hold a commission license must file an application for the appropriate license with the commission. (l) An agency must notify the commission electronically following the requirements of Texas Occupations Code , when a person under appointment with that agency resigns or is terminated. (m) An agency chief administrator must comply with orders from the commission regarding the correction of a report of resignation/termination or request a hearing from SOAH. (n) An agency shall notify the commission electronically within 30 days, when it receives information that a person under appointment with that agency has been arrested, charged, indicted, or convicted for any offense above a Class C misdemeanor, or for any Class C misdemeanor involving the duties and responsibilities of office or family violence. (o) Except in the case of a commission error, an agency that wishes to report a change to any information within commission files about a licensee shall do so in a request to the commission, containing: (1) the licensees name, date of birth, last four digits of the social security number, or PID; (2) the requested change; and (3) the reason for the change. (p) An agency chief administrator may not appoint an applicant subject to pending administrative action based on: (1) enrollment or licensure ineligibility; or (2) statutory suspension or revocation. (q) The effective date of this section is February 1, [January 17, 2013.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning Tuition Reimbursement for Commission Employees. This new rule is necessary to comply with a new legislative requirement for all state agencies concerning approval of tuition reimbursement. This new rule is necessary to comply with HB 3337 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by ensuring that reimbursement will first be approved by the executive director. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; Texas Government Code , Payment of Program Expenses; and , Rules Related to Training and Education. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; Texas Government Code , Payment of Program Expenses; and , Rules Related to Training and Education. No other code, article, or statute is affected by this proposal Tuition Reimbursement for Commission Employees. PROPOSED RULES October 30, TexReg 7583

82 (a) Before a Commission employee may receive reimbursement for tuition, the reimbursement must be approved by the Executive Director. (b) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) CHAPTER 215. TRAINING AND EDUCATIONAL PROVIDERS 37 TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 215.9, concerning Training Coordinator. Subsection (b)(2)(d) creates additional options for posting of training calendars. Subsection (b)(3)(b)(i) - (v) defines minimum requirement of training files. Subsection (b)(3)(j) added training files to the retention period. Subsection (e) reflects the effective date. This amendment is necessary to define the posting of a training calendar and requirements of training files. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by defining the posting of a training calendar and requirements of training files. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Training Programs; Instructors. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Training Programs; Instructors. No other code, article, or statute is affected by this proposal Training Coordinator. (a) A training coordinator must hold a valid instructor license or certificate and must be a full-time paid employee. (b) The training coordinator must: (1) ensure compliance with commission rules and guidelines: (2) prepare, maintain, and submit the following reports within the time frame specified: (A) reports of training: (i) basic licensing course shall be submitted prior to students attempting a licensing exam; and (ii) within 30 days of completion of continuing education course; (B) self-assessment reports as required by the commission; (C) a copy of advisory board minutes during an on-site evaluation; (D) training calendars-schedules must be available for review and [or] posted on the internet, or another public venue, no later than 30 days prior to the beginning of each calendar quarter or academic semester. A continually updated and posted (live) calendar will meet this requirement; (E) any other reports or records as requested by the commission; (3) be responsible for the administration and conduct of each course, including those conducted at ancillary sites, and specifically: (A) appointing and supervising qualified instructors; (B) maintaining course schedules and training files. At a minimum, training files shall contain: [course files, including lesson plans;] (i) complete lesson plan; (ii) clear learning objectives; (iii) instructor biography indicating subject matter expertise and teaching experience; (iv) approved class roster and original sign-in sheet; and (v) course evaluation; (C) enforcing all admission, attendance, retention, and other standards set by the commission and approved by the advisory board; (D) securing and maintaining all facilities necessary to meet the inspection standards of this section; (E) controlling the discipline and demeanor of each student and instructor during class; (F) distributing a current version of the Texas Occupations Code, Chapter 1701 and commission rules to all students at the time of admission to any course that may result in the issuance of a license; (G) distributing learning objectives to all students at the beginning of each course; 40 TexReg 7584 October 30, 2015 Texas Register

83 evaluated; (H) ensuring that all learning objectives are taught and (I) proctoring or supervising all examinations to ensure fair, honest results; and (J) maintaining training files, records of tests, and other evaluation instruments for a period of five years. (4) receive all commission notices on behalf of the training provider and forward each notice to the appointing authority; and (5) attend or have a designee attend each academy coordinator's workshop conducted by the commission. No person may serve as a representative for more than one provider per conference. Each representative must be affiliated with the training provider. (c) If the position of training coordinator becomes vacant, upon written request from the chief administrator of the training provider the commission may, at the discretion of the executive director, waive the requirements for a period not to exceed six months. (d) Upon written request from the chief administrator of a training provider that does not have a full-time paid staff, the commission may, at the discretion of the executive director, waive the requirements in subsection (a) of this section. (e) The effective date of this section is February 1, [November 1, 2014.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to , concerning Risk Assessment. Subsection (a)(1) removes redundant information. Subsection (h) reflects the effective date. This amendment is necessary to remove redundant information. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by removing redundant information. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Risk Assessment and Inspections. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Risk Assessment and Inspections. No other code, article, or statute is affected by this proposal Risk Assessment. (a) A training provider may be found at risk and placed on at-risk probationary status if: (1) for those providing licensing courses, the passing rate on a licensing exam for first attempts for any three consecutive state fiscal years[, beginning with state fiscal year 2007 (September 1, 2006 through August 31, 2007)] is less than 80 percent of the students attempting the licensing exam; (2) courses taught by academic alternative providers are not conducted in compliance with Higher Education Program Guidelines accepted by the commission; (3) commission required learning objectives are not taught; (4) lesson plans for classes conducted are not on file; (5) examination and other evaluative scoring documentation is not on file; (6) the training provider submits false reports to the commission; (7) the training provider makes repeated errors in reporting; (8) the training provider does not respond to commission requests for information; (9) the training provider does not comply with commission rules or other applicable law; (10) the training provider does not achieve the goals identified in its application for a contract; (11) the training provider does not meet the needs of the officers and law enforcement agencies served; or (12) the commission has received sustained complaints or evaluations from students or the law enforcement community concerning the quality of training or failure to meet training needs for the service area. (b) A training provider may be found at risk and placed on at-risk probationary status if: (1) the contractor provides licensing courses and fails to comply with the passing rates in subsection (a)(1) of this section; (2) lesson plans for classes conducted are not on file; (3) examination and other evaluative scoring documentation is not on file; (4) the provider submits false reports to the commission; (5) the provider makes repeated errors in reporting; (6) the provider does not respond to commission requests for information; PROPOSED RULES October 30, TexReg 7585

84 (7) the provider does not comply with commission rules or other applicable law; (8) the provider does not achieve the goals identified in its application for a contract; (9) the provider does not meet the needs of the officers and law enforcement agencies served; or (10) the commission has received sustained complaints or evaluations from students or the law enforcement community concerning the quality of training or failure to meet training needs for the service area. (c) An academic alternative provider may be found at risk and placed on at-risk probationary status if: (1) the academic alternative provider fails to comply with the passing rates in subsection (a)(1) of this section; (2) courses are not conducted in compliance with Higher Education Program Guidelines accepted by the commission; taught; (3) the commission required learning objectives are not (4) the program submits false reports to the commission; (5) the program makes repeated errors in reporting; (6) the program does not respond to commission requests for information; (7) the program does not comply with commission rules or other applicable law; (8) the program does not achieve the goals identified in its application for a contract; (9) the program does not meet the needs of the students and law enforcement agencies served; or (10) the commission has received sustained complaints or evaluations from students or the law enforcement community concerning the quality of education or failure to meet education needs for the service area. (d) If at risk, the chief administrator of the sponsoring organization, or the training coordinator, must report to the commission in writing within 30 days what steps are being taken to correct deficiencies and on what date they expect to be in compliance. (e) The chief administrator of the sponsoring organization, or the training coordinator, shall report to the commission the progress toward compliance within the timelines provided in the management response as provided in subsection (d) of this section. (f) The commission shall place providers found at-risk on probationary status for one year. If the provider remains at-risk after a 12-month probationary period, the commission shall begin the revocation process. If a provider requests a settlement agreement, the commission may enter into an agreement in lieu of revocation. (g) A training or educational program placed on at-risk probationary status must notify all students and potential students of their at-risk status. (h) The effective date of this section is February 1, [February 1, 2014.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) CHAPTER 217. ENROLLMENT, LICENSING, APPOINTMENT, AND SEPARATION 37 TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 217.1, concerning Minimum Standards for Enrollment and Initial Licensure. Subsection (b)(7) raises the standards for licensure for offenses involving family violence. If the individual was convicted or placed on community supervision, then the individual is barred from licensure. Subsection (j) reflects the effective date. This amendment is necessary to raise the standards for licensure. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by raising the standards for licensure. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training Programs; Instructors; , Enrollment Qualifications; , Issuance of Officer or County Jailer License; , Issuance of Telecommunicator License; , Qualified Applicant Awaiting Appointment; , Appointment of County Jailer; Training Required; , Provisional License for Workforce Shortage; , Disqualification: Felony Conviction or Placement on Community Supervision; and , Telecommunicators. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training Programs; Instructors; , Enrollment Qualifications; , Issuance of Officer or County Jailer License; , Issuance of Telecommunicator License; , Qualified Applicant Awaiting Appointment; , Appointment 40 TexReg 7586 October 30, 2015 Texas Register

85 of County Jailer; Training Required; , Provisional License for Workforce Shortage; , Disqualification: Felony Conviction or Placement on Community Supervision; and , Telecommunicators. No other code, article, or statute is affected by this proposal Minimum Standards for Enrollment and Initial Licensure. (a) In order for an individual to enroll in any basic licensing course the provider must have on file documentation that the individual meets eligibility for licensure and: (1) a high school diploma; (2) a high school equivalency certificate; or (3) for the basic peace officer training course, an honorable discharge from the armed forces of the United States after at least 24 months of active duty service; (b) The commission shall issue a license to an applicant who meets the following standards: (1) age requirement: (A) for peace officers and public security officers, is 21 years of age; or 18 years of age if the applicant has received: (i) an associate's degree; or 60 semester hours of credit from an accredited college or university; or (ii) has received an honorable discharge from the armed forces of the United States after at least two years of active service; (B) for jailers and telecommunicators is 18 years of age; (2) minimum educational requirements: (A) has passed a general educational development (GED) test indicating high school graduation level; or (B) holds a high school diploma; (3) is fingerprinted and is subjected to a search of local, state and U.S. national records and fingerprint files to disclose any criminal record; (4) has never been on court-ordered community supervision or probation for any criminal offense above the grade of Class B misdemeanor or a Class B misdemeanor within the last ten years from the date of the court order; (5) is not currently charged with any criminal offense for which conviction would be a bar to licensure; (6) has never been convicted of an offense above the grade of a Class B misdemeanor or a Class B misdemeanor within the last ten years; (7) has never been convicted or placed on community supervision in any court of an offense involving family violence as defined under Chapter 71, Texas Family Code; (8) for peace officers, is not prohibited by state or federal law from operating a motor vehicle; (9) for peace officers, is not prohibited by state or federal law from possessing firearms or ammunition; (10) has been subjected to a background investigation; (11) examined by a physician, selected by the appointing or employing agency, who is licensed by the Texas Medical Board. The physician must be familiar with the duties appropriate to the type of license sought and appointment to be made. The appointee must be declared by that professional, on a form prescribed by the commission, within 180 days before the date of appointment by the agency to be: (A) physically sound and free from any defect which may adversely affect the performance of duty appropriate to the type of license sought; (B) show no trace of drug dependency or illegal drug use after a blood test or other medical test; and (C) for the purpose of meeting the requirements for initial licensure, an individual's satisfactory medical exam that is conducted as a requirement of a basic licensing course may remain valid for 180 days from the individual's date of graduation from that academy, if accepted by the appointing agency; (12) examined by a psychologist, selected by the appointing, employing agency, or the academy, who is licensed by the Texas State Board of Examiners of Psychologists. This examination may also be conducted by a psychiatrist licensed by the Texas Medical Board. The psychologist or psychiatrist must be familiar with the duties appropriate to the type of license sought. The individual must be declared by that professional, on a form prescribed by the commission, to be in satisfactory psychological and emotional health to serve as the type of officer for which the license is sought. The examination must be conducted pursuant to professionally recognized standards and methods. The examination process must consist of a review of a job description for the position sought; review of any personal history statements; review of any background documents; at least two instruments, one which measures personality traits and one which measures psychopathology; and a face to face interview conducted after the instruments have been scored. The appointee must be declared by that professional, on a form prescribed by the commission, within 180 days before the date of the appointment by the agency; (A) the commission may allow for exceptional circumstances where a licensed physician performs the evaluation of psychological and emotional health. This requires the appointing agency to request in writing and receive approval from the commission, prior to the evaluation being completed; or (B) the examination may be conducted by qualified persons identified by Texas Occupations Code This requires the appointing agency to request in writing and receive approval from the commission, prior to the evaluation being completed; and (C) for the purpose of meeting the requirements for initial licensure, an individual's satisfactory psychological exam that is conducted as a requirement of a basic licensing course may remain valid for 180 days from the individual's date of graduation from that academy, if accepted by the appointing agency; (13) has never received a dishonorable or other discharge based on misconduct which bars future military service; (14) has not had a commission license denied by final order or revoked; (15) is not currently on suspension, or does not have a surrender of license currently in effect; (16) meets the minimum training standards and passes the commission licensing examination for each license sought; (17) is a U.S. citizen. (c) For the purposes of this section, the commission will construe any court-ordered community supervision, probation or conviction for a criminal offense to be its closest equivalent under the Texas Penal Code classification of offenses if the offense arose from: PROPOSED RULES October 30, TexReg 7587

86 (1) another penal provision of Texas law; or (2) a penal provision of any other state, federal, military or foreign jurisdiction. (d) A classification of an offense as a felony at the time of conviction will never be changed because Texas law has changed or because the offense would not be a felony under current Texas laws. (e) A person must meet the training and examination requirements: (1) training for the peace officer license consists of: (A) the current basic peace officer course(s); (B) a commission recognized, POST developed, basic law enforcement training course, to include: and fee; or (i) out of state licensure or certification; and (ii) submission of the current eligibility application (C) a commission approved academic alternative program, taken through a licensed academic alternative provider and at least an associate's degree. (2) training for the jailer license consists of the current basic county corrections course(s) or training recognized under Texas Occupations Code ; (3) training for the public security officer license consists of the current basic peace officer course(s); (4) training for telecommunicator license consists of telecommunicator course; and (5) passing any examination required for the license sought while the exam approval remains valid. (f) The commission may issue a provisional license, consistent with Texas Occupations Code , to an agency for a person to be appointed by that agency. An agency must submit all required applications currently prescribed by the commission and all required fees before the individual is appointed. Upon the approval of the application, the commission will issue a provisional license. A provisional license is issued in the name of the applicant; however, it is issued to and shall remain in the possession of the agency. Such a license may neither be transferred by the applicant to another agency, nor transferred by the agency to another applicant. A provisional license may not be reissued and expires: (1) 12 months from the original appointment date; (2) on leaving the appointing agency; or (3) on failure to comply with the terms stipulated in the provisional license approval. (g) The commission may issue a temporary jailer license, consistent with Texas Occupations Code An agency must submit all required applications currently prescribed by the commission and all required fees before the individual is appointed. Upon the approval of the application, the commission will issue a temporary jailer license. A temporary jailer license expires: (1) 12 months from the original appointment date; or (2) on completion of training and passing of the jailer licensing examination. (h) The commission may issue a temporary telecommunicator license, consistent with Texas Occupations Code An agency must submit all required applications currently prescribed by the commission and all required fees before the individual is appointed. Upon the approval of the application, the commission will issue a temporary telecommunicator license. A temporary telecommunicator license expires 12 months from the original appointment date. (i) A person who fails to comply with the standards set forth in this section shall not accept the issuance of a license and shall not accept any appointment. If an application for licensure is found to be false or untrue, it is subject to cancellation or recall. (j) The effective date of this section is February 1, [November 1, 2014.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) CHAPTER 218. CONTINUING EDUCATION 37 TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 218.9, concerning Continuing Firearms Proficiency Requirements. Subsection (c)(1) removes misnomer language. Subsection (f) reflects the effective date. This amendment is necessary to remove the phrase "including at least five rounds of ammunition." John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by removing unnecessary information. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Weapons Proficiency; and , Continuing Demonstration of Weapons Proficiency. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; 40 TexReg 7588 October 30, 2015 Texas Register

87 Rulemaking Authority; , Weapons Proficiency; and , Continuing Demonstration of Weapons Proficiency. No other code, article, or statute is affected by this proposal Continuing Firearms Proficiency Requirements. (a) Each agency or entity that employs at least one peace officer shall: (1) require each peace officer that it employs to successfully complete the current firearms proficiency requirements at least once each calendar year for each type of firearm carried; (2) designate a firearms proficiency officer to be responsible for the documentation of annual firearms proficiency. The documentation for each officer shall include: (A) date of qualification; (B) identification of officer; (C) firearm manufacturer, model; (D) results of qualifying; and (E) course(s) of fire; (3) keep on file and in a format readily accessible to the commission a copy of all records of this proficiency. (b) The annual firearms proficiency requirements shall include: (1) an external inspection by the proficiency officer, range officer, firearms instructor, or gunsmith to determine the safety and functioning of the weapon(s); (2) a proficiency demonstration in the care and cleaning of the weapon(s) used; and (3) a course of fire that meets or exceeds the minimum standards. (c) The minimum standards for the annual firearms proficiency course of fire shall be: (1) handguns - a minimum of 50 rounds, [including at least five rounds of ammunition,] fired at ranges from point-blank to at least 15 yards with at least 20 rounds at or beyond seven yards, including at least one timed reload; (2) shotguns - a minimum of five rounds of ammunition fired at a range of at least 15 yards; (3) precision rifles - a minimum of 20 rounds of ammunition fired at a range of at least 100 yards; however, an agency may, in its discretion, allow a range of less than 100 yards but not less than 50 yards if the minimum passing percentage is raised to 90; (4) patrol rifles - a minimum of 30 rounds of ammunition fired at a range of at least 50 yards, including at least one timed reload; however, an agency may, in its discretion, allow a range of less than 50 yards but not less than 10 yards if the minimum passing percentage is raised to 90; (5) fully automatic weapons - a minimum of 30 rounds of ammunition fired at ranges from seven to at least 10 yards, including at least one timed reload, with at least 25 rounds fired in full automatic (short bursts of two or three rounds), and at least five rounds fired semiautomatic, if possible with the weapon. (d) The minimum passing percentage shall be 70 for each firearm. (e) The executive director may, upon written agency request, waive a peace officer's demonstration of weapons proficiency based on a determination that the requirement causes a hardship. (f) The effective date of this section is February 1, [February 1, 2014.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning Child Safety Check Alert List Training. This new rule is necessary to reflect legislative changes. This new rule is necessary to reflect legislative changes from HB 2053 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by providing training and knowledge regarding the child safety check list. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Training Program Relating to Child Safety Check Alert List, as passed under HB 2053 (84R). The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Training Program Relating to Child Safety Check Alert List, as passed under HB 2053 (84R). No other code, article, or statute is affected by this proposal Child Safety Check Alert List Training. (a) An education and training program on the Texas Crime Information Center's child safety check alert list will include instruction relating to: PROPOSED RULES October 30, TexReg 7589

88 (1) the procedures for placing a child or other person on the child safety check alert list; (2) the manner in which an officer should interact with a child or other person on the child safety check alert list whom the officer locates; and (3) the procedures for removing a child or other person from the child safety check alert list. (b) The training program will be made available to employees in the child protective services division of the Department of Family and Protective Services, including caseworkers, supervisors, and special investigators. (c) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) CHAPTER 219. PRELICENSING, REACTIVA- TION, TESTS, AND ENDORSEMENTS 37 TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 219.1, concerning Eligibility to Take State Examinations. Subsection (c) clarifies the minimum enrollment and licensure language. Subsection (i) reflects the effective date. This amendment is necessary to clarify language concerning enrollment and licensure. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by clarifying language. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement 6330, E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Examination. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Examination. No other code, article, or statute is affected by this proposal Eligibility to Take State Examinations. (a) An individual may not take a licensing exam for a license they actively hold. (b) To be eligible to take a state licensing exam, an individual must: (1) have successfully completed a commission-approved basic licensing course or academic alternative program; (2) meet the requirements for reactivation if the individual is currently licensed; (3) meet the requirements for reinstatement if the individual is currently licensed; (4) meet the requirements if an individual is an out of state peace officer, federal criminal investigator, or military; or (5) be eligible to take the county corrections licensing exam as provided in Texas Occupations Code, Chapter 1701, (c) To maintain eligibility to attempt a licensing exam the applicant must meet the minimum [basic licensing enrollment] standards for enrollment and initial licensure.[; or if previously licensed, meet minimum initial licensing standards.] (d) An eligible examinee will be allowed three attempts to pass the examination. All attempts must be completed within 180 days from the completion date of the licensing course. Any remaining attempts become invalid on the 181st day from the completion date of the licensing course, or if the examinee passes the licensing exam. If an attempt is invalidated for any other reason, that attempt will be counted as one of the three attempts. (e) The examinee must repeat the basic licensing course for the license sought if: (1) the examinee fails all three attempts to pass the licensing exam; (2) the examinee fails to complete all three attempts within 180 days from the completion date of the licensing course; or (3) the examinee is dismissed from an exam for cheating. If dismissed from an exam for cheating, all remaining attempts are invalidated. (f) An examinee that is required to repeat a basic licensing course under the provisions in subsection (e) of this section will not be allowed to repeat an academic alternative program. (g) If an individual is not licensed within 2 years from the date of their successful completion of the licensing exam, the basic licensing course must be repeated. (h) When applicable and in addition to this section, school marshal licenses are subject to the requirements of Chapter 227 of this title. (i) The effective date of this section is February 1, [February 1, 2014.] 40 TexReg 7590 October 30, 2015 Texas Register

89 Filed with the Office of the Secretary of State on October 30, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Reactivation of a License. The repealed section was replaced with new rule This repeal is necessary to comply with HB 872 (84R) which addresses reactivation requirements for individuals holding an inactive peace officer license. Due to the new requirements, a more streamlined rule was developed to ensure clarification of the reactivation process. It also incorporates honorably retired reactivation. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by clarifying the reactivation process. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas This repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Reactivation of Peace Officer License; and , Reactivation of Peace Officer License: Retired Peace Officers. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking; , Reactivation of Peace Officer License; and , Reactivation of Peace Officer License: Retired Peace Officers. No other code, article, or statute is affected by this proposal Reactivation of a License. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning Reactivation of a License. This new rule conforms to statutory amendments concerning the reactivation of a license. This new rule is necessary to conform with HB 872 (84R) and incorporates the former honorably retired reactivation provision. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by lessening the time restrictions for certain inactive peace officer licensees to return to public service. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Reactivation of Peace Officer License; and , Reactivation of Peace Officer License: Retired Peace Officers. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Reactivation of Peace Officer License; and , Reactivation of Peace Officer License: Retired Peace Officers. No other code, article, or statute is affected by this proposal Reactivation of a License. (a) The commission will place all licenses in an inactive status at the end of the most recent training unit or cycle in which the licensee: (1) was not appointed at the end of the unit or cycle; and (2) did not meet continuing education requirements. (b) The holder of an inactive license is unlicensed for all purposes. (c) This section includes any permanent peace officer qualification certificate with an effective date before September 1, PROPOSED RULES October 30, TexReg 7591

90 (d) The requirements to reactivate a license for a person with less than 10 years of full-time service are: (1) If less than two years from last appointment: (A) meet current licensing standards; (B) successfully complete continuing education requirements; and (C) make application and submit any required fee(s) in the format currently prescribed by the commission. (2) If two years but less than five years from last appointment: (A) meet current licensing standards; (B) successfully complete continuing education requirements, and, if applicable, a supplemental peace officer training course; and (C) make application and submit any required fee(s); (D) pass the licensing exam. (3) If more than five years but less than ten years from last appointment: (A) meet current licensing standards; (B) successfully complete continuing education requirements, and, if applicable, a supplemental peace officer training course and a skills assessment course; and (C) successfully complete the applicable basic licensing course; and (C) make application and submit any required fee(s); (D) pass the licensing exam. (4) Ten years or more from last appointment: (A) meet current enrollment standards; (B) meet current licensing standards; (D) make application and submit any required fee(s); (E) pass the licensing exam. (e) The requirements to reactivate a license for a person with 10 years but less than 15 years of full-time service are: (1) If less than two years from last appointment: (A) meet current licensing standards; (B) successfully complete continuing education requirements; and (C) make application and submit any required fee(s) in the format currently prescribed by the commission. (2) If two years but less than five years from last appointment: (A) meet current licensing standards; (B) successfully complete continuing education requirements, and, if applicable, a supplemental peace officer training course; and (C) make application and submit any required fee(s); (D) pass the reactivation exam. (3) If more than five years from last appointment: (A) meet current licensing standards; (B) successfully complete continuing education requirements, and, if applicable, a supplemental peace officer training course and a skills assessment course; and (C) make application and submit any required fee(s); (D) pass the reactivation exam. (f) Unless exempted by Texas Occupations Code Section , the requirements to reactivate a license for an honorably retired peace officer are: (1) meet current licensing standards; (2) meet current continuing education requirements; and (3) make application and submit any required fee(s). (g) School marshal licenses are subject to the reactivation and renewal procedures related to school marshals under of Chapter 227 of this title. (h) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Retired Peace Officer Reactivation. The repealed section was consolidated into new rule This repeal is necessary to consolidate all reactivation processes into one rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by consolidating peace officer reactivation. five years the repeal as proposed will be in effect, there will be 40 TexReg 7592 October 30, 2015 Texas Register

91 no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Reactivation of Peace Officer License; and , Reactivation of Peace Officer License: Retired Peace Officers. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Reactivation of Peace Officer License; and , Reactivation of Peace Officer License: Retired Peace Officers. No other code, article, or statute is affected by this proposal Retired Peace Officer Reactivation. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes amendments to , concerning License Requirements for Persons with Military Special Forces Training. The proposed amendments update the qualifications to take the state licensing examination outlined in subsection (b). New licensing standards are added as subsection (b)(1) and the subsequent paragraphs are amended and renumbered. The proposed amendments remove service time restrictions from subsection (b)(2). New subsection (b)(3) adds a special forces training course and eliminates the need for the individual to show proof of completion. New subsection (b)(4) is amended for grammatical change. Subsections (c) and (d) are removed because of redundancy. Subsection (e) is relettered as subsection (c) and reflects the new effective date. These amendments are necessary to streamline the licensing process for persons with military special forces training. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by lessening the time restrictions for military special forces to begin public service. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , License Requirements for Persons with Military Special Forces Training. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , License Requirements for Persons with Military Special Forces Training. No other code, article, or statute is affected by this proposal License Requirements for Persons with Military Special Forces Training. (a) In this section, "special forces" means a special forces component of the United States armed forces, including: (1) the United States Army Special Forces; (2) the United States Navy SEALs; (3) the United States Air Force Pararescue; (4) the United States Marine Corps Force Reconnaissance; and (5) any other component of the United States Special Operations Command approved by the commission. (b) An applicant qualifies [The commission shall adopt rules to allow an applicant to qualify] to take the basic licensing [an] examination [described by Texas Occupations Code, ] if the applicant: (1) meets minimum licensing standards; (2) [(1)] has provided military service records documenting that the applicant has served in the special forces [for 2 continuous years within the 4 years prior to application]; (3) [(2)] [has] successfully completes [completed] a [special forces] training course developed for special forces veterans; and [and provides to the commission documentation verifying completion of the course;] (4) [(3)] completes a supplemental peace officer training course.[; and] [(4) completes any other training required by the commission after the commission has reviewed the applicant's military training.] [(c) Commission rules adopted under subsection (b) of this section shall include rules:] [(1) to determine acceptable forms of documentation that satisfy the requirements of subsection (b) of this section;] [(2) under which the commission may waive any other license requirement for an applicant described by subsection (b) of this section based on other relevant military training the applicant has received, as determined by the commission, including intelligence or medical training; and] PROPOSED RULES October 30, TexReg 7593

92 [(3) to establish an expedited application process for an applicant described by subsection (b) of this section.] [(d) The commission shall review the content of the training course for each special forces component described by subsection (a) of this section and in adopting rules under subsection (b) of this section specify the training requirements an applicant who has completed that training course must complete and the training requirements from which an applicant who has completed that training course is exempt.] (c) [(e)] The effective date of this section is February 1, 2016.[February 1, 2014.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) CHAPTER 221. PROFICIENCY CERTIFICATES 37 TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of 221.3, concerning Peace Officer Proficiency. The repealed section is replaced with new rule 221.3, which combines Peace Officer, Jailer, and Telecommunicator Proficiency Certificates into one rule. This repeal is necessary to condense the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by condensing similar rules. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Proficiency Certificates. This repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Proficiency Certificates. No other code, article, or statute is affected by this proposal Peace Officer Proficiency. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new 221.3, concerning Proficiency Certificates. This new rule condenses the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. This new rule is necessary to condense the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by condensing similar rules. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Proficiency Certificates; and , Telecommunicators. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Proficiency Certificates; and , Telecommunicators. No other code, article, or statute is affected by this proposal Proficiency Certificates. (a) To qualify for a basic, intermediate, advanced, or master proficiency certificate, an applicant must meet all current proficiency requirements set by the commission. (b) The effective date of this section is February 1, TexReg 7594 October 30, 2015 Texas Register

93 Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of 221.5, concerning Jailer Proficiency. The repealed section was replaced with new rule 221.3, which combines Peace Officer, Jailer, and Telecommunicator Proficiency Certificates into one rule. This repeal is necessary to condense the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by condensing similar rules. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Proficiency Certificates. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority and , Proficiency Certificates. No other code, article, or statute is affected by this proposal Jailer Proficiency. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Emergency Telecommunications Proficiency. The repealed section was replaced with new rule 221.3, which combines Peace Officer, Jailer, and Telecommunicator Proficiency Certificates into one rule. This repeal is necessary to condense the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by condensing similar rules. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Telecommunicators. This repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority and , Telecommunicators. No other code, article, or statute is affected by this proposal Emergency Telecommunications Proficiency. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) PROPOSED RULES October 30, TexReg 7595

94 37 TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning School-Based Law Enforcement Proficiency Certificate. This new rule is necessary to reflect legislative changes. This new rule is necessary to reflect legislative changes from HB 2684 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by having highly trained and qualified individuals holding this proficiency certificate. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for School District Peace Officers and School Resource Officers, as passed by HB 2684 (84R); , Education and Training Program for School District Peace Officers and School Resource Officers; and Texas Education Code , Training Policy: School District Peace Officers and School Resource Officers. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for School District Peace Officers and School Resource Officers, as passed by HB 2684 (84R); , Education and Training Program for School District Peace Officers and School Resource Officers; and Texas Education Code , Training Policy: School District Peace Officers and School Resource Officers. No other code, article, or statute is affected by this proposal School-Based Law Enforcement Proficiency Certificate. (a) To qualify for a school-based law enforcement proficiency certificate, an applicant must complete a course approved by the commission under Texas Occupations Code (b) School district peace officers and school resource officers providing law enforcement at a school district with an enrollment of 30,000 or more students must obtain a school-based law enforcement proficiency certificate within 120 days of the officer's commission or placement in the district or campus of the district. (c) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) CHAPTER 223. ENFORCEMENT 37 TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 223.1, concerning License Action and Notification. Subsection (a) removes redundancies appearing in other existing rules and proposed amendments. Subsection (b) is relettered as subsection (a) and removes unnecessary wording. New (a)(3) adds the last known address provision, providing more efficient and accurate notifications to licensees. Subsection (c) is relettered to (b). New subsection (c) reflects the effective date. This amendment is necessary to remove the redundancy and to add provisions to provide more efficient and accurate notifications to licensees. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by removing the redundancy and to add provisions to provide more efficient and accurate notifications to licensees. five years the section as proposed will be in effect there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority. No other code, article, or statute is affected by this proposal License Action and Notification. [(a) The commission shall revoke or suspend a license, place on probation a person whose license has been suspended, or reprimand a license holder for a violation of:] [(1) Texas Occupations Code, Chapter 1701;] [(2) the reporting requirements provided by Articles and 2.134, Code of Criminal Procedure; or] 40 TexReg 7596 October 30, 2015 Texas Register

95 [(3) a commission rule.] (a) [(b)] The holder of a commission issued license or certificate can [must] be sent notice of any hearing, or other action or matter before the commission at: (1) the address of the agency shown in commission records to have the holder under current or last appointment; (2) the address shown on the Texas driver's license record of the holder; [or] or (3) the last known address on record with the commission; (4) [(3)] any other address requested by the holder in a written request to the executive director. (b) [(c)] An action by the commission to deny, suspend, or revoke one license operates [will, if so pled, also operate] against any other commission license or certificate held by the same person. (c) [(d)] The effective date of this section is February 1, [January 14, 2010.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 223.3, concerning Answer Required. Amendments to subsections (a) - (e) remove redundancies appearing in other existing rules and proposed amendments. Subsection (a) removes unnecessary wording. Relettered subsection (e) reflects the effective date. This amendment is necessary to remove redundancies appearing in other existing rules and proposed amendments and removes unnecessary wording. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by removing redundancies and unnecessary wording. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Administrative Procedure. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Administrative Procedure. No other code, article, or statute is affected by this proposal Answer Required. (a) In order to preserve the right to a hearing as described under this subchapter, an [in of this chapter (relating to License Action and Notification), a person whose license the executive director proposes to deny, cancel, suspend, or revoke must file an answer either consenting to the penalty recommended by the executive director in his petition, or requesting a contested case hearing. An] answer must be filed not later than 20 days after the date the respondent is provided with notice of the executive director's petition or notice of violation. Failure to file a timely answer may result in the issuance of a default order. (b) The answer [described in subsection (a) of this section] may be in the form of a general denial as that term is used in the district courts of the State of Texas. (c) [If a respondent fails to file a timely answer as required by subsection (a) of this section, the executive director may recommend to the commission that it enter a default order against the respondent. The executive director may support the motion with documentary evidence, including affidavits, exhibits and pleadings, and oral testimony, as may be appropriate to demonstrate that the respondent received the petition and failed to file a timely answer. The commission will consider motions for default orders at its quarterly commission meetings. If the executive director moves for issuance of a default order under this section, it is not necessary to set the matter for hearing under of this chapter (relating to Contested Cases and Hearings).] The commission may grant the default order [requested by the executive director,] or refer the case [may order the case referred] to SOAH for a contested case hearing. (d) If a person files a timely answer as required by [subsection (a) of] this section, but fails to appear at the contested case hearing after receiving timely and adequate notice, the executive director may move for default judgment against the respondent as provided by SOAH rules [rule, 1 Texas Administrative Code, ]. [(e) Upon issuance of a default order by the commission, notice shall be provided to the respondent in accordance with of this chapter (relating to License Action and Notification).] (e) [(f)] The effective date of this section is February 1, [March 1, 2002.] Filed with the Office of the Secretary of State on October 13, TRD PROPOSED RULES October 30, TexReg 7597

96 Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of 223.5, concerning Filing of Documents. The repealed section is recodified into new rule This repeal is necessary to combine several rules into one to simplify the process. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on contested cases and hearings. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure; and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure; and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. No other code, article, or statute is affected by this proposal Filing of Documents. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new 223.5, concerning Contested Cases and Hearings. This new rule consolidates and recodifies contested case procedures. This new rule is necessary to consolidate and recodify contested case procedures. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by streamlining wording regarding contested case procedures. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure; and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure; and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. No other code, article, or statute is affected by this proposal Contested Cases and Hearings. (a) Contested cases, hearings and appeals will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter (b) The commission may consider exceptions or briefs filed within 20 days after a party's notification of a proposal for decision. Responses are due within 15 days after exceptions are filed. (c) All or part of the proceedings of a contested case will be transcribed upon the written request of a party with cost to that party, unless the executive director provides otherwise. (d) Any party who appeals a final decision must pay all preparation costs for the original or certified copy of the record of any proceeding to be submitted to the court. (e) The commission may assess transcript costs to one or more parties. 40 TexReg 7598 October 30, 2015 Texas Register

97 (f) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of 223.7, concerning Contested Cases and Hearings. The repealed section is recodified into new rule This repeal is necessary to combine several rules into one to simplify the process. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on contested cases and hearings. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure, and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure; and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. No other code, article, or statute is affected by this proposal Contested Cases and Hearings. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of 223.9, concerning Place and Nature of Hearings. The repealed section is recodified into new rule This repeal is necessary to combine several rules into one to simplify the process. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on contested cases and hearings. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure; and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure; and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. No other code, article, or statute is affected by this proposal Place and Nature of Hearings. PROPOSED RULES October 30, TexReg 7599

98 Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Proposal for Decision and Exceptions or Briefs. The repealed section is recodified into new rule This repeal is necessary to combine several rules into one to simplify the process. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on contested cases and hearings. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure; and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Administrative Procedure; and Texas Government Code , Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. No other code, article, or statute is affected by this proposal Proposal for Decision and Exceptions or Briefs. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning Construction of Other Laws. This new rule recodifies previous rules related to criminal dispositions. This new rule is necessary to recodify previous rules related to criminal dispositions. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on criminal dispositions. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Disqualification: Felony Conviction or Placement on Community Supervision. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Disqualification: Felony Conviction or Placement on Community Supervision. No other code, article, or statute is affected by this proposal Construction of Other Laws. (a) A criminal disposition under the law of Texas, another state, federal, military, tribal, or foreign jurisdiction, will be construed under the closest equivalent under the Texas Penal Code classification of offenses. (b) A classification of an offense as a felony at the time of conviction will never be changed because Texas law has changed or because the offense would not be a felony under current Texas laws. (c) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD TexReg 7600 October 30, 2015 Texas Register

99 Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Suspension of License. The repealed section is recodified into new rule This repeal is necessary to recodify into a new rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by rewriting the rule on license suspension. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; , Disqualification: Felony Conviction or Placement on Community Supervision; and , License Suspension for Officer Dishonorably Discharged. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; , Disqualification: Felony Conviction or Placement on Community Supervision; and , License Suspension for Officer Dishonorably Discharged. No other code, article, or statute is affected by this proposal Suspension of License. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning License Suspension. This new rule recodifies the previous rules related to license suspension. This new rule is necessary to recodify previous rules related to license suspension. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp also has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on license suspension. Mr. Beauchamp also has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; , Disqualification: Felony Conviction or Placement on Community Supervision; and , License Suspension for Officer Dishonorably Discharged. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; , Disqualification: Felony Conviction or Placement on Community Supervision; and , License Suspension for Officer Dishonorably Discharged. No other code, article, or statute is affected by this proposal License Suspension. (a) Unless revocation is required, the commission may suspend a license or certificate for violating any provision of the Texas Occupations Code, Chapter 1701 or commission rule. (b) The license of a person charged with a felony and placed on community supervision shall be suspended for thirty years. (c) The license of a person convicted or placed on community supervision for any offense above the grade of Class C misdemeanor may be suspended for 10 years. (d) A suspension based on a Class A misdemeanor shall be at least 120 days. PROPOSED RULES October 30, TexReg 7601

100 (e) A suspension based on a Class B misdemeanor shall be at least 60 days. (f) The license of a person who fails to comply with legislative continuing education requirements may be suspended: (1) up to 90 days for first-time noncompliance; (2) up to 180 days for second-time noncompliance; and (3) one year for third-time noncompliance. (g) The commission may suspend the license of a person who has previously received two written reprimands from the commission. (h) Factors the commission may consider in determining a term of suspension include: (1) the seriousness of the conduct resulting in the arrest; (2) the required mental state of the disposition offense; (3) whether the disposition offense contains an element of actual or threatened bodily injury or coercion against another person under the Texas Penal Code or the law of the jurisdiction where the offense occurred; (4) the licensee's previous violations of commission statutes or rules; (5) actual or potential harm to public safety, including personal injury and property damage, resulting from the conduct resulting in the arrest; (6) aggravating evidence existing in a particular case; and (7) evidence used in rebuttal to mitigating factors. (i) A suspension can begin no sooner than the date of the statute or rule violation. (j) A suspension or probation may be ordered to run concurrently or consecutively with any other suspension or probation. (k) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Suspension of License for Constitutionally Elected Officials. This repealed section is consolidated in new This repeal is necessary to consolidate in new John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp also has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by consolidating rules. Mr. Beauchamp also has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; , Certain Elected Law Enforcement Officers; License Required; , Disqualification: Felony Conviction or Placement on Community Supervision; and , License Suspension for Officer Dishonorably Discharged.. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; , Certain Elected Law Enforcement Officers; License Required; , Disqualification: Felony Conviction or Placement on Community Supervision; and , License Suspension for Officer Dishonorably Discharged. No other code, article, or statute is affected by this proposal Suspension of License for Constitutionally Elected Officials. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning Probation and Mitigating Factors. This new rule recodifies the previous rules related to license suspension. This new rule is necessary to recodify previous rules related to license suspension. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be 40 TexReg 7602 October 30, 2015 Texas Register

101 in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on license suspension. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code, Chapter 1701, , General Powers of the Commission; Rulemaking Authority; , Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; , Disqualification: Felony Conviction or Placement on Community Supervision; and , License Suspension for Officer Dishonorably Discharged. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; , Disqualification: Felony Conviction or Placement on Community Supervision; and , License Suspension for Officer Dishonorably Discharged. No other code, article, or statute is affected by this proposal Probation and Mitigating Factors. (a) The commission may consider probating a suspension term or issue a written reprimand based on proof of the following mitigating factors: (1) the licensee's history of compliance with the terms of court-ordered community supervision; (2) the licensee's post-arrest continuing rehabilitative efforts not required by the terms of community supervision; (3) the licensee's post-arrest employment record; and (4) the type and amount of any post-arrest, non-court ordered restitution made by the licensee. (b) The commission may impose reasonable terms of probation, including: (1) continued employment requirements; (2) special reporting conditions; (3) special document submission conditions; (4) voluntary duty requirements; or (5) any other reasonable term of probation. (c) A probated or suspended license remains as such until: (1) the term of suspension has expired; (2) all other terms of probation have been fulfilled; and (3) a written request for reinstatement has been received and accepted by the commission from the licensee unless the probation has been revoked by the commission for violation of probation; or (4) revoked. (d) A suspended license remains suspended until: (1) the term of suspension has expired and the term of court-ordered community supervision has been completed; and (2) a written request for reinstatement has been received from the licensee and accepted by the commission; or (3) the remainder of the suspension is probated and the license is reinstated. (e) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to , concerning Reinstatement of a License. Cross-references have been removed from subsections (a), (b), (b)(1)(a) and (B), (b)(2)(a) and (D), and (b)(3)(a) and (E). Subsection (c) reflects the effective date. This amendment is necessary to remove redundant cross-references. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by removing redundant crossreferences. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Disciplinary Action; and , Felony Conviction or Placement on Community Supervision. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Disciplinary Action; and PROPOSED RULES October 30, TexReg 7603

102 , Felony Conviction or Placement on Community Supervision. No other code, article, or statute is affected by this proposal Reinstatement of a License. (a) To reinstate a suspended or probated license for a licensee that meets current training requirements and has continually maintained [the] legislatively required continuing education [provided in of this title] for the duration of the suspension or probation, a licensee must: (1) make application for reinstatement in the format currently prescribed by the commission; and (2) submit any required fee(s). (b) A licensee that does not meet current training requirements, or has failed to continually maintain the legislatively required continuing education [provided in of this title] for the duration of the suspension or probation, must meet the following requirements: (1) If less than two years from last appointment held: (A) meet [the] current licensing standards [as provided in of this title]; (B) successfully complete [the] legislatively required continuing education [as provided in of this title]; and (C) make application and submit any required fee(s) in the format currently prescribed by the commission. (2) If two years but less than five years from last appointment held: (A) meet [the] current licensing standards [as provided in of this title]; (B) successfully complete a supplementary peace officer training course approved by the commission; (C) make application and submit any required fee(s) in the format currently prescribed by the commission; and (D) pass the licensing exam [as provided in of this title]. (3) If five years or more from last appointment held: (A) meet [the] current enrollment standards [in of this title]; (B) meet [the] current licensing standards [in of this title]; (C) successfully complete the basic licensing course for the license sought; (D) make application and submit any required fee(s) in the format currently prescribed by the commission; and (E) pass the licensing exam [as provided in of this title]. (c) The effective date of this section is February 1, [July 12, 2012.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning Suspension Following Felony Arrest. The proposed rule allows the commission to suspend the license of an appointed person arrested or indicted for certain felony offenses. The rule is necessary to protect the safety and welfare of the public and the integrity of the profession by preventing licensed felony arrestees from engaging in the duties of peace officers, jailers, and telecommunicators during the pendency of a criminal disposition. This new rule is necessary to protect the safety and welfare of the public and the integrity of the profession. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there may be an effect on state or local governments as a result of administering this section due to the removal of some of their Commission licensed workforce. five years the section as proposed will be in effect, there will be a positive benefit to the public by ensuring that the public is served by highly trained and ethical law enforcement personnel. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and Texas Government Code , Licenses. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and Texas Government Code , Licenses. No other code, article, or statute is affected by this proposal Suspension Following Felony Arrest. (a) The commission may suspend the license of a person arrested or indicted for a felony offense which would constitute an immediate peril to the public health, safety or welfare if the person were to remain licensed during the pendency of criminal proceedings. (b) By virtue of their nature, the following felony arrests constitute immediate peril: (1) Sexual offenses; (2) Assaultive offenses; and 40 TexReg 7604 October 30, 2015 Texas Register

103 (3) Offenses directly relating to the duties and responsibilities of any related office held by that person. (c) In determining whether any other felony arrest creates an immediate peril to the public health, safety or welfare, factors the commission may consider include: (1) the seriousness of the conduct resulting in the arrest; (2) the required mental state of the alleged offense; (3) whether the alleged offense contains an element of actual or threatened bodily injury or coercion against another person under the Texas Penal Code or the law of the jurisdiction where the offense occurred; (4) the licensee's previous violations of commission statutes or rules; (5) actual or potential harm to public safety resulting from the conduct resulting in the arrest; and (6) aggravating circumstances existing in a particular case. (d) If an offense constitutes immediate peril, the commission will notify the person of the summary suspension order and the intention to initiate proceedings, if applicable, upon final disposition of criminal proceedings. (e) If a person does not receive notice of the intent to initiate proceedings within 30 days of the commission's order, the person may appeal to the Travis County district court. (f) A person may request a hearing regarding the summary suspension within 20 days after the summary suspension order is received. Otherwise, the license remains suspended until final disposition of the case. (g) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Revocation of License. The repealed section is recodified into new rule This repeal is necessary to recodify into a new rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has also determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by rewriting the rule on license revocation. Mr. Beauchamp has also determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , License Suspension for Officer Dishonorably Discharged; , Disciplinary Action; and , Felony Conviction or Placement on Community Supervision. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , License Suspension for Officer Dishonorably Discharged; , Disciplinary Action; and , Felony Conviction or Placement on Community Supervision. No other code, article, or statute is affected by this proposal Revocation of License. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes new , concerning License Revocation. This new rule recodifies the previous rules related to license revocation. This new rule is necessary to recodify previous rules related to license revocation. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has also determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on license revocation. Mr. Beauchamp has also determined that for each year of the first five years the section as proposed will be in effect, there will PROPOSED RULES October 30, TexReg 7605

104 be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The new rule is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , License Suspension for Officer Dishonorably Discharged; , Disciplinary Action; and , Felony Conviction or Placement on Community Supervision. The new rule as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , License Suspension for Officer Dishonorably Discharged; , Disciplinary Action; and , Felony Conviction or Placement on Community Supervision. No other code, article, or statute is affected by this proposal License Revocation. (a) The license of a person convicted of a felony shall be immediately revoked. (b) The license of a person convicted or placed on community supervision for an offense directly related to the duties and responsibilities of any related office held by that person may be revoked. In determining whether an offense directly relates to such office, the commission will consider: (1) the nature and seriousness of the crime; (2) the relationship of the crime to the purpose for requiring a license for such office; (3) the extent to which a license might offer an opportunity to engage in further criminal activity of the same type as that in which the person previously had been involved; and (4) the relationship of the crime to the ability, capacity, or fitness required to perform the duties and discharge the responsibilities of such office. (c) The license of a person convicted or placed on community supervision for any offense involving family violence shall be revoked. (d) The license of a person who is noncompliant for the third time in obtaining continuing education shall be revoked. (e) The license of a person who has received a dishonorable or other discharge based on misconduct which bars future military service shall be revoked. (f) The license of a person who has made, submitted, caused to be submitted, or filed a false or untruthful report to the commission may be revoked. (g) The license of a person who has been found to be in unauthorized possession of any commission licensing examination or portion of a commission licensing examination, or a reasonable facsimile shall be revoked. (h) Revocation permanently bars the person from any future licensing or certification by the commission. (i) A revoked license cannot be reinstated unless the licensee provides proof of facts supporting the revocation have been negated, such as: (1) the felony conviction has been reversed or set aside on direct or collateral appeal, or a pardon based on subsequent proof of innocence has been issued; (2) the dishonorable or bad conduct discharge has been upgraded to above dishonorable or bad conduct conditions; or (3) the report alleged to be false or untruthful was found to be truthful. (j) During the direct appeal of any appropriate conviction, a license may be revoked pending resolution of the mandatory direct appeal. The license will remain revoked unless and until the holder proves that the conviction has been set aside on appeal. (k) The holder of any revoked license may informally petition the executive director for reinstatement of that license based upon proof by the licensee that the facts supporting the revocation have been negated. (l) If granted, the executive director shall inform the commissioners of such action no later than at their next regular meeting. (m) If denied, the holder of a revoked license may petition the commission for a hearing to determine reinstatement based upon the same proof. (n) The effective date of this section is February 1, Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of concerning Revocation of License for Constitutionally Elected Officials. The repealed section is consolidated into new This repeal is necessary to consolidate into new John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by consolidating rules. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. 40 TexReg 7606 October 30, 2015 Texas Register

105 Comments on the proposal may be submitted electronically to or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , License Suspension for Officer Dishonorably Discharged; , Disciplinary Action; and , Felony Conviction or Placement On Community Supervision. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , License Suspension for Officer Dishonorably Discharged; , Disciplinary Action; and , Felony Conviction or Placement On Community Supervision. No other code, article, or statute is affected by this proposal Revocation of License for Constitutionally Elected Officials. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Appeal. The repealed section is recodified in new rule This repeal is necessary to be recodified in a new rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rule on appeals. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Appeal; and Texas Government Code, Chapter 2001, Administrative Procedure Act. The repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Appeal; and Texas Government Code, Chapter 2001, Administrative Procedure Act. No other code, article, or statute is affected by this proposal Appeal. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) CHAPTER 227. SCHOOL MARSHALS 37 TAC The Texas Commission on Law Enforcement (Commission) proposes amendment to 227.1, concerning School District Responsibilities. The rule title is amended. Subsection (a)(3) and (4) and subsections (b) and (c) amend the rule to include public junior college. Subsection (d) reflects the effective date. This amended rule is necessary to reflect legislative changes from SB 386 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by allowing public junior colleges to appoint school marshals. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School PROPOSED RULES October 30, TexReg 7607

106 Marshal; Texas Education Code , Public Junior College School Marshals; and Texas Code of Criminal Procedure, 2.127, School Marshals. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code , Public Junior College School Marshals; and Texas Code of Criminal Procedure, 2.127, School Marshals. No other code, article, or statute is affected by this proposal Appointing Entity Responsibilities [School District Responsibilities]. (a) A school district or public junior college shall: (1) submit and receive approval for an application to appoint a person as a school marshal; (2) upon authorization, notify the commission using approved format prior to appointment; (3) report to the commission, within seven days, when a person previously authorized to act as a school marshal is no longer employed with the school district or public junior college; (4) report to the commission, within seven days, when a person previously authorized to act as a school marshal is no longer authorized to do so by the school district, public junior college, commission standards, another state agency, or under other law; and (5) immediately report to the commission a school marshal's violation of any commission standard, including the discharge of a firearm carried under the authorization of this chapter outside of a training environment. (b) A school district or public junior college shall not appoint or employ an ineligible person as a school marshal. (c) For five years, the school district or public junior college must retain documentation that the district and person has met all requirements under law in a format readily accessible to the commission. This requirement does not relieve a school district or public junior college from retaining all other relevant records not otherwise listed. (d) The effective date of this section is February 1, [February 1, 2014.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 227.3, concerning School Marshal Licensing and Reporting Requirements. Subsection (b)(1) is amended to include public junior college. Subsection (c) reflects the effective date. This amended rule is necessary to reflect legislative changes from SB 386. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by allowing public junior colleges to appoint school marshals. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code , Public Junior College School Marshals; and Texas Code of Criminal Procedure, 2.127, School Marshals. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code , Public Junior College School Marshals; and Texas Code of Criminal Procedure, 2.127, School Marshals. No other code, article, or statute is affected by this proposal School Marshal Licensing and Reporting Requirements. (a) To be eligible for appointment as a school marshal, an applicant shall: (1) successfully complete all prerequisite commission training; (2) pass the state licensing exam; (3) be employed and appointed by an authorized school district; and (4) meet all statutory requirements, including psychological fitness. (b) Once appointed, a school marshal shall: (1) immediately report to the commission and school district any circumstance which would render them unauthorized to act as a school marshal by virtue of their employment with the school district or public junior college, failure to meet the standards of the commission, another state agency, or under law; (2) immediately report to the commission any violation of applicable commission standards, including any discharge of a firearm carried under the authorization of this chapter outside of training environment; and 40 TexReg 7608 October 30, 2015 Texas Register

107 (3) comply with all requirements under law, including Texas Education Code, (c) The effective date of this section is February 1, [February 1, 2014.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 227.5, concerning School Marshal Training Entities. Subsection (a) is amended to include public junior colleges. Subsection (c) reflects the effective date. This amended rule is necessary to reflect legislative changes from SB 386 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by allowing public junior colleges to appoint school marshals. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code , Public Junior College School Marshals; and Texas Code of Criminal Procedure, 2.127, School Marshals. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code , Public Junior College School Marshals; and Texas Code of Criminal Procedure, 2.127, School Marshals. No other code, article, or statute is affected by this proposal School Marshal Training Entities. (a) A school marshal training program is open to any employee of a school district, open-enrollment charter school, or public junior college who holds a license to carry a [concealed] handgun issued under Texas Government Code, Chapter 411, Subchapter H. (b) The training program must be preapproved and conducted by commission staff or approved provider. The training program shall include 80 hours of instruction designed to: (1) emphasize strategies for preventing school shootings and for securing the safety of potential victims of school shootings; (2) educate a trainee about legal issues relating to the duties of peace officers and the use of force or deadly force in the protection of others; (3) introduce the trainee to effective law enforcement strategies and techniques; (4) improve the trainee's proficiency with a handgun; and (5) enable the trainee to respond to an emergency situation requiring deadly force, such as a situation involving an active shooter. (c) The effective date of this section is February 1, [February 1, 2014.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC The Texas Commission on Law Enforcement (Commission) proposes an amendment to 227.9, concerning License Action. Subsection (a) and subsection (b)(1) are amended to remove the term "concealed" in response to legislative changes. This amended rule reflects legislative changes from HB 910 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. five years the section as proposed will be in effect, there will be a positive benefit to the public by ensuring no school marshals remain licensed when ineligible. five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law En- PROPOSED RULES October 30, TexReg 7609

108 forcement, 6330 E. Highway 290, Suite 200, Austin, Texas The amendment is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code , Public Junior College School Marshals; and Texas Code of Criminal Procedure, 2.127, School Marshals. The amendment as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority; , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code , Public Junior College School Marshals; and Texas Code of Criminal Procedure, 2.127, School Marshals. No other code, article, or statute is affected by this proposal License Action. (a) The commission shall immediately revoke a school marshal license if the license holder's ability to carry a [concealed] handgun has been suspended or revoked by the Texas Department of Public Safety. (b) A person whose school marshal license is revoked may obtain recertification by: (1) furnishing proof to the commission that the person's [concealed] handgun license has been reinstated; and (2) completing initial training to the satisfaction of the commission staff, paying the fee for the training, and demonstrating psychological fitness on the psychological examination. (c) If a school marshal license holder violates any commission standard, the commission shall immediately suspend the license for ten years. Mitigating factors are inapplicable to a suspension action under this chapter. (d) The effective date of this section is February 1, [February 1, 2014.] Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of , concerning Confidentiality of Information. This is redundant information that is already in statute. This repeal is necessary to comply with SB 386 and SB 996 (84R), which address the confidentiality of information on school marshals. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by removing redundant information. five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to [email protected] or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas This repeal is proposed under Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal. This repeal as proposed is in compliance with Texas Occupations Code , General Powers of the Commission; Rulemaking Authority, and , Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal. No other code, article, or statute is affected by this proposal Confidentiality of Information. Filed with the Office of the Secretary of State on October 13, TRD Kim Vickers Executive Director Texas Commission on Law Enforcement For further information, please call: (512) PART 15. TEXAS FORENSIC SCIENCE COMMISSION CHAPTER 651. DNA, CODIS, FORENSIC ANALYSIS, AND CRIME LABORATORIES The Texas Forensic Science Commission ("Commission") proposes amendments to 37 Texas Administrative Code 651.1, and to correct references to the Texas Department of Public Safety ("DPS") and internal rule citations. The Commission also proposes the repeal of The amendments and the repeal are necessary to update rule language to reflect the transfer of the rules from Title 37, Part 40 TexReg 7610 October 30, 2015 Texas Register

109 1, Chapter 28 to new Part 15, Chapter 651. The transfer was made in accordance with Senate Bill 1287, which was passed in the 84th Legislative Session. Fiscal Note. Leigh Tomlin, Associate General Counsel, has determined that for each year of the first five years the proposed amendments and repeal will be in effect, there will be no fiscal impact to state or local governments as a result of the enforcement or administration of the proposal. There will be no anticipated effect on local employment or the local economy as a result of the proposal. Public Benefit/Cost Note. Ms. Tomlin has also determined that for each year of the first five years the proposed amendments and repeal are in effect, the anticipated public benefit will be accurate and updated rules. Economic Impact Statement and Regulatory Flexibility Analysis for Small and Micro Businesses. As required by the Government Code (c) and (f), Ms. Tomlin has determined that the proposed amendments and repeal will not have an adverse economic effect on any small or micro business because there are no anticipated economic costs to any person who is required to comply with the rules as proposed. Takings Impact Assessment. Ms. Tomlin has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code Request for Public Comment. The Texas Forensic Science Commission invites comments on the proposal from any member of the public. Please submit comments to Leigh Tomlin, 1700 North Congress Avenue, Suite 445, Austin, Texas or [email protected]. Comments must be received by November 29, 2015 to be considered by the commission. SUBCHAPTER A. ACCREDITATION 37 TAC 651.1, Statutory Authority. The amendments are proposed under Tex. Code Crim. Proc. art d. Cross reference to statute. The proposal affects 37 TAC Purpose. (a) Generally. This subchapter contains the Texas Forensic Science Commission (Commission) [director's] rules adopted under Government Code, , that govern: (1) the recognition of an accrediting body by the Commission [director]; and (2) the accreditation of an individual laboratory or other entity by the Commission [director]. (b) Accreditation sequence. To be accredited by the Commission [director] under this subchapter, a laboratory must first be accredited by a recognized accrediting body. (c) Source of evidence predicate. The Code of Criminal Procedure, Article 38.35, requires Commission [DPS] accreditation of an individual laboratory or other entity for admission of evidence or testimony if the laboratory or entity conducts a forensic analysis of physical evidence for use in a criminal proceeding. (d) Statutory Commission [DPS] accreditation. A laboratory may apply to the Commission [director] for [statutory DPS] accreditation if accreditation is required for evidence admissibility under Code of Criminal Procedure, Article Recognition Process. The Commission [director] shall recognize an accrediting body under this section if the Commission [director] determines that the accrediting body: (1) issues an accreditation that is accepted throughout the relevant scientific community and appropriate or available to a laboratory; (2) has established adequate accreditation criteria reasonably likely to ensure trustworthy forensic analysis; (3) requires a periodic competency audit or review of the personnel, facilities, and procedures employed by a laboratory to conduct a forensic analysis; and (4) withholds, grants, or withdraws its accreditation of a laboratory based on its own determination of a reasonable likelihood of meaningful corrective action for each deficiency noted during the periodic audit or review List of Recognized Accrediting Bodies. (a) The Commission [director] recognizes the accrediting bodies in this subsection, subject to the stated discipline or subdiscipline limitations: (1) American Board of Forensic Toxicology (ABFT)--recognized for accreditation of toxicology discipline only. (2) American Society of Crime Laboratory Directors, Laboratory Accreditation Board (ASCLD/LAB)--recognized for accreditation of all disciplines which are eligible for accreditation under this subchapter. (3) ANSI-ASQ National Accreditation Board (ANAB) formerly known as Forensic Quality Services (FQS and FQS-I) or National Forensic Science Technology Center (NFSTC)--recognized for accreditation of all disciplines which are eligible for accreditation under this subchapter. (4) Substance Abuse and Mental Health Services Administration of the Department of Health and Human Services (HHS/SAMSHA) [(HHS/SAMHA)], formerly known as the National Institute on Drug Abuse of the Department of Health and Human Services (HHS/NIDA)--recognized for accreditation of toxicology discipline in the subdiscipline of Urine Drug Testing for all classes of drugs approved by the accrediting body. (5) College of American Pathologists (CAP)--recognized for accreditation of toxicology discipline. (6) American Association for Laboratory Accreditation (A2LA)--recognized for accreditation of all disciplines which are eligible for accreditation under this chapter. (b) If an accrediting body is recognized under subsection (a) of this section and the recognized body approves a new discipline, subdiscipline, or procedure, the Commission [director] may temporarily recognize the new discipline, subdiscipline, or procedure. A temporary approval shall be effective for 120 days Disciplines and Subdisciplines Subject to Commission [DPS] Accreditation. (a) 'Forensic analysis'/recognized accreditation. This section describes a discipline or subdiscipline that involves forensic analysis PROPOSED RULES October 30, TexReg 7611

110 for use in a criminal proceeding and for which accreditation is available from a recognized accrediting body. (b) By entire discipline. A laboratory may apply [to the director] for Commission [DPS] accreditation for one or more of the following disciplines: (1) controlled substances; (2) toxicology; (3) biology; (4) firearms/toolmark; (5) questioned documents; (6) trace evidence; or (7) other discipline if approved by a recognized accrediting body and the Commission [director]. (c) Limited to subdiscipline. A laboratory may apply [to the director] for Commission [DPS] accreditation limited to one or more of the following subdisciplines: (1) under the controlled substances discipline, subdiscipline may include controlled substances marihuana, precursor analysis, and clandestine laboratory analysis; (2) under the toxicology discipline, subdiscipline may include forensic toxicology, urine drug testing, and blood alcohol analysis; (3) under the biology discipline, subdiscipline may include biology, serology, and DNA; (4) under the firearms/toolmark discipline, subdiscipline may include: firearms, ballistics, and toolmarks; (5) under the questioned documents discipline, subdiscipline may include questioned documents, handwriting, and ink analysis (including forensic handwriting comparison); (6) under the trace evidence discipline, subdiscipline may include: fire debris, explosives, fibers, gun shot residue, glass, hairs, paint, filaments, and unknown substances; and (7) other discipline and its related subdiscipline if accredited by a recognized accrediting body and the Commission [director]. (d) A laboratory may choose to assign a particular subdiscipline to a different administrative section or unit in the laboratory. For example, the subdiscipline of impression evidence, including footwear, tiretrack, and similar impression evidence, may be administratively assigned by the laboratory to its trace evidence section, firearms section, or questioned document section. The Commission [director] deems impression evidence to be a subdiscipline of several disciplines under this subchapter, including trace evidence, firearms/toolmark, or questioned documents. (e) If an accreditation for a subdiscipline is accompanied by the term 'only' or a similar notation, the Commission [director] will deem the accreditation to exclude other subdisciplines in that discipline. (f) Accreditation of a confirmation test procedure does not carry automatic accreditation of an associated field, spot, screening, or other presumptive test Disciplines, Subdisciplines, and Procedures to Which Statutory Commission [DPS] Accreditation Does Not Apply. This section describes disciplines, subdisciplines, or procedures excluded from the definition of forensic analysis or otherwise exempted by the Code of Criminal Procedure, Article 38.35, or by this subchapter based on their nature. (1) This paragraph describes a discipline, subdiscipline, or procedure that is excluded from the definition of forensic analysis or otherwise exempted by the Code of Criminal Procedure, Article 38.35, and for which no recognized accreditation is appropriate or available. A laboratory may not apply for Commission [to the director for DPS] accreditation for: (A) Chapter 724; breath specimen testing under Transportation Code, (B) latent print examination; (C) digital evidence (including computer forensics, audio, or imaging); or (D) an examination or test excluded by rule under Government Code, (c). (E) the portion of an autopsy conducted by a medical examiner or other forensic pathologist who is a licensed physician. (2) This paragraph describes a discipline, subdiscipline, or procedure that does not normally involve forensic analysis of physical evidence for use in a criminal proceeding and for which recognized accreditation is inappropriate or unavailable. A laboratory may not apply for Commission [to the director for DPS] accreditation for: (A) forensic photography; (B) non-criminal paternity testing; (C) non-criminal testing of human or nonhuman blood, urine, or tissue; (D) a crime scene search team (whether or not associated with an accredited laboratory) if the team does not engage in forensic analysis because it only engages in the location, identification, collection, or preservation of physical evidence and the activity is not integral to an expert examination or test; (E) other evidence processing or handling that is excluded under 651.2(2) [ (2)] of this title (relating to Definitions); or (F) other discipline or subdiscipline so determined by the Commission [director] Disciplines, Subdisciplines, and Procedures Exempt from Statutory Commission [DPS] Accreditation. (a) This section describes a discipline, subdiscipline, or procedure that is 'forensic analysis' but is not subject to accreditation by one or more recognized accrediting bodies. (b) Even though a discipline or subdiscipline is forensic analysis, the Commission [director] has determined that no accreditation is appropriate or available from a recognized accrediting body for the following disciplines, subdisciplines, or procedures and a laboratory may not apply for Commission [to the director for DPS] accreditation for: (1) sexual assault examination of the person; (2) forensic anthropology, entomology, or botany; (3) environmental testing; (4) facial or traffic accident reconstruction; (5) serial number restoration; (6) polygraph examination; (7) voice stress, voiceprint, or similar voice analysis; 40 TexReg 7612 October 30, 2015 Texas Register

111 (8) forensic hypnosis; (9) statement analysis; (10) profiling; or (11) other discipline or subdiscipline so determined by the Commission [director], including those identified and listed at the Commission's [department's] website. (c) A request for exemption shall be submitted in writing to the Commission [director] Full Commission [DPS]Accreditation. (a) Issuance and renewal. The Commission [director] may issue or renew accreditation under this section. (b) Application. An applicant for full Commission [DPS] accreditation shall complete and submit to the Commission [director] a current Laboratory Accreditation Form [form LAB-5] and attach copies of the following: (1) an accreditation certificate and letter of notification of accreditation from a recognized accrediting body; and (2) each document provided by the recognized accrediting body that identifies the discipline or subdiscipline for which the laboratory has received accreditation and any limitation or restriction regarding that accreditation. (c) Additional information. The Commission [director] may require additional information to properly evaluate the application either as part of the original application or as supplemental information. (d) Reports to the Commission [director]. (1) If accredited by ASCLD/LAB, a laboratory shall provide the Commission [director] with a copy of each Annual Accreditation Review Report. If accredited by another recognized accrediting body, a laboratory shall provide the Commission [director] with a copy of each equivalent annual accreditation assessment document. The copy shall be submitted to the Commission [director] at the same time that it is due to the recognized accrediting body. (2) A laboratory shall provide the Commission [director] with a copy of correspondence and each report or communication between the laboratory and the recognized accrediting body. The laboratory shall submit the copy to the Commission [director] no later than 30 days after the date the laboratory receives or transmits the correspondence, report, or communication. (3) A laboratory that discontinues a specific forensic discipline or subdiscipline: (A) if known beforehand, should submit written notification to the Commission [director] at least 30 days before the effective date of the discontinuation; or (B) if unknown beforehand, shall submit written notification to the Commission [director] at least 5 business days after the effective date of the discontinuation. (e) Federal forensic laboratories. A federal forensic laboratory is deemed to be accredited by the Commission [director] without application provided that the laboratory is accredited by a recognized accrediting body as provided under [ ] of this title (relating to List of Recognized Accrediting Bodies). A laboratory deemed accredited is not subject to the reporting requirements of this subchapter or the processes provided under Subchapter B [J] of this chapter (relating to Complaints, Special Review, and Administrative Action) Provisional Commission [DPS] Accreditation. (a) Issuance and renewal. The Commission [director] may issue provisional accreditation under this section that is non-renewable for that discipline, subdiscipline, or procedure. (b) Application. An applicant for provisional Commission [DPS] accreditation shall complete and submit to the Commission [director] a current Laboratory Accreditation Form [form LAB-5] as referenced in 651.8(b) [ (b)] of this title (relating to Full Commission [DPS] Accreditation) and attach copies of the following: (1) the application for accreditation by a recognized accrediting body; (2) the initial audit, inspection, or review report from an independent auditor based on the standards of the recognized accrediting body; (3) a full response in writing to the initial audit, inspection, or review report described in paragraph (2) of this subsection; and (4) each document provided by the recognized accrediting body that identifies the discipline or subdiscipline for which the laboratory seeks accreditation. (c) Provisional-Interim. If a laboratory is in good standing with its accrediting body and has made application to renew or replace its accreditation, the laboratory may apply for Provisional Commission [DPS] Accreditation if necessary to cover a period between times that it qualifies for full Commission [DPS] accreditation. For this Provisional Commission [DPS] Accreditation, the laboratory may complete and submit to the Commission [director] a current Laboratory Accreditation Form [form LAB-5] as referenced in 651.8(b) [28.148(b)] of this title and attach copies of the following: (1) the application for accreditation by a recognized accrediting body; and (2) each document provided by the recognized accrediting body that identifies the discipline or subdiscipline for which the laboratory seeks accreditation. (d) Additional information. The Commission [director] may require additional information to properly evaluate the application either as part of the original application or as supplemental information. (e) Reports to the Commission [director]. (1) The laboratory shall request that the recognized accrediting body provide the Commission [director] with a copy of each audit, inspection, or review report conducted before full Commission [DPS] accreditation. (2) A laboratory shall provide the Commission [director] with a copy of correspondence and each report or communication between the laboratory and the recognized accrediting body. The laboratory shall submit the copy to the Commission [director] no later than 30 days after the date the laboratory receives or transmits the correspondence, report, or communication. (3) A laboratory that discontinues a specific forensic discipline, subdiscipline, or procedure shall submit written notification to the Commission [director] at least 30 days before the effective date of the discontinuation. (f) Second sample required. A laboratory with provisional Commission [DPS] accreditation under this section must: (1) preserve one or more separate samples of the physical evidence for use by the defense attorney or use under order of the convicting court; and PROPOSED RULES October 30, TexReg 7613

112 (2) agree to preserve, and preserve those samples until all appeals in the criminal case are final Accreditation Term. (a) Normal term. The normal term for Commission [DPS] accreditation: (1) begins on the date of issuance of the initial Commission [DPS] accreditation letter; and (2) extends until withdrawn by the recognized accrediting body or by the Commission [director] under [ ] of this title (relating to Automatic Withdrawal of Commission [DPS] Accreditation). (b) Provisional term. (1) A laboratory or its discipline or subdiscipline that applies for accreditation from a recognized accrediting body may apply to the Commission [director] for [a] provisional [DPS] accreditation in accordance with [ ] of this title (relating to Provisional Commission [DPS] Accreditation) for a term not to exceed one year from the date the Commission [director] issues the accreditation unless formally extended for good cause by the Commission [director]. (2) If a currently accredited laboratory is in the process of renewing or replacing its accreditation from a recognized accrediting body, prior to the end of its term, and applies for provisional Commission [DPS] accreditation, the term of that provisional accreditation may not exceed six (6) months. (c) Limited term. A laboratory, including an out of state, federal, or private laboratory, may request Commission [DPS] accreditation for a term less than the term normally available under this subchapter Automatic Withdrawal of Commission [DPS] Accreditation. The Commission [director] shall automatically withdraw: (1) the full Commission [DPS] accreditation for a laboratory, discipline, or subdiscipline at the date and time that the recognized accrediting body withdraws its relevant laboratory, discipline, or subdiscipline accreditation; or (2) the provisional Commission [DPS] accreditation for a laboratory, discipline, or subdiscipline at the date and time that the recognized accrediting body notifies the Commission [director] that the laboratory has withdrawn its application for the relevant laboratory, discipline, or subdiscipline accreditation. Filed with the Office of the Secretary of State on October 16, TRD Leigh Tomlin Associate General Counsel Texas Forensic Science Commission For further information, please call: (512) TAC (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Forensic Science Commission or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) Statutory Authority. The repeal is proposed under Tex. Code Crim. Proc. art d. Cross reference to statute. The proposal affects 37 TAC Consent to Cooperate with the Texas Forensic Science Commission. Filed with the Office of the Secretary of State on October 16, TRD Leigh Tomlin Associate General Counsel Texas Forensic Science Commission For further information, please call: (512) SUBCHAPTER B. COMPLAINTS, SPECIAL REVIEW, AND ADMINISTRATIVE ACTION 37 TAC Statutory Authority. The amendments are proposed under Tex. Code Crim. Proc. art d. Cross reference to statute. The proposal affects 37 TAC Complaint Process. (a) Question or complaint. If the Commission [director] learns of a fact, circumstance, or complaint that raises a question about the integrity or trustworthiness of a laboratory, or a procedure, examination, or test conducted by the laboratory since the date of application for Commission [DPS] accreditation, the Commission [director] may take any of the following actions: (1) communicate further with the source of the complaint to assess the appropriateness of further action; (2) refer the matter to the laboratory's director for evaluation, audit, correction, or other appropriate action; (3) initiate an audit under [ ] of this title (relating to Unscheduled Audit); (4) issue a letter to the laboratory: (A) demanding an immediate response and explanation of the matter; (B) demanding that the laboratory permit or arrange for an immediate inspection or audit of the matter; or (C) explaining the action to be taken by the Commission [director] in the matter; (5) notify or refer the matter to a law enforcement agency or prosecutor and recommend appropriate criminal action; (6) refer the matter to a district judge and recommend appropriate action to convene a court of inquiry under Code of Criminal Procedure, Chapter 52; and 40 TexReg 7614 October 30, 2015 Texas Register

113 [(7) refer the matter to the Texas Forensic Science Commission; and] (7) [(8)] any other actions deemed appropriate by the Commission [director]. (b) Source and scope. A question or complaint may be raised by any source, including an individual, entity, or audit. The scope of any action taken or proposed by the Commission [director] under this section shall be determined by the Commission [director], based on the nature of the question or complaint. (c) Records. The Commission [director] may maintain a public record of a laboratory's accreditation or approval status. (1) The Commission [director] may maintain on the public record a notation of an action taken under this subchapter, including a question, complaint, or audit. (2) A question, complaint, or audit is public information when in the possession of the Commission [director] Unscheduled Audit. (a) If the Commission [director] determines that there is reasonable cause to believe that a laboratory has failed to maintain quality assurance standards as provided under the laboratory's specific policy required by its recognized accrediting body or the FBI DNA Quality Assurance Audit Document, or has violated any rule in this chapter, the Commission [director] may take appropriate action, including one or more of the following: (1) direct the laboratory to conduct an internal audit and implement appropriate corrective action; (2) order the laboratory to obtain, at its own expense, a special external audit by an auditor approved by the laboratory's recognized accrediting body and provide that report to the Commission [director] within a reasonable time frame determined by the Commission [director] not to exceed 60 days from the date of the order; (3) notify the laboratory that further testing is not approved by the Commission [DPS]; (4) initiate an evaluation of continued accreditation under Subchapter A [I] of this chapter (relating to Accreditation); or [(5) provide appropriate compliance information to the Texas Forensic Science Commission and/or any entity that may be responsible for oversight of the laboratory; or] (5) [(6)] any other actions deemed appropriate by the Commission [director]. (b) An audit under this subchapter [subsection] shall comply with minimum standards for audits or inspections as established by the Commission [director of the department's Crime Laboratory Service]. (c) The Commission [director of the department] may enter an accredited laboratory at any reasonable time to conduct an inspection or audit under this chapter Corrective Action Plan. (a) If a laboratory is subject to an unscheduled audit that has resulted in a finding of non-compliance, the laboratory shall propose a corrective action plan and submit the plan to the Commission [director] within 30 days from the date that the laboratory receives the audit results. If the laboratory has been notified that further testing is not approved, the plan should identify the date that the laboratory intends to reinstate approved testing. (b) A proposed corrective action plan under this section must fully address each non-compliance finding and identify corrective action that meets or exceeds the standards: (1) required by the laboratory's recognized accrediting body; and (2) approved by the Commission [director]. (c) The Commission [director] shall promptly review a proposed corrective action plan and take the following action: (1) approve the corrective plan if it meets the requirements of this section; or (2) decline to approve the corrective plan and identify necessary revisions to the plan. (d) The Commission [director] shall notify the laboratory of approval or disapproval of the audit response. If disapproved, the Commission [director] shall notify the laboratory of required corrective action, and the laboratory shall implement the corrective action in a timely manner specified in the notification, except as provided by subsection (e) of this section. (e) A laboratory shall implement and complete an approved corrective action plan described in subsection (d) of this section, unless the laboratory demonstrates good cause for extension to the Commission [director] before the due date for completion Withdrawal of Commission [DPS] Accreditation. The Commission [director] may withdraw [DPS] accreditation for a laboratory, discipline, or subdiscipline if the laboratory: (1) violates this chapter; (2) fails to respond meaningfully within five business days to a letter issued by the Commission [director] under this subchapter; (3) fails to timely submit an audit required under this subchapter; or (4) fails to allow or substantially interferes with an inspection or audit conducted under this subchapter Review by the Commission [Director]. (a) Reconsideration. A laboratory that has been ordered to take action under this subchapter may request reconsideration by the Commission [director] in writing within 15 days of the order. (b) Reinstatement. An accredited laboratory that has had Commission [DPS] accreditation withdrawn automatically under [ ] of this title (relating to Automatic Withdrawal of Commission [DPS] Accreditation) may have its accreditation reinstated by the Commission [director] if the laboratory shows that it presently meets or exceeds the quality assurance standards required by the laboratory's recognized accrediting body. Filed with the Office of the Secretary of State on October 16, TRD Leigh Tomlin Associate General Counsel Texas Forensic Science Commission For further information, please call: (512) PROPOSED RULES October 30, TexReg 7615