HBA-TYH, ATS H.B. 3001 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 3001 By: Hartnett Business & Industry 6/21/1999 Enrolled BACKGROUND AND PURPOSE Community foundations assist people in meeting their charitable goals in their local communities by raising money and giving grants to causes identified by the foundation or chosen by the foundation's donors. Thirteen of these private charitable institutions exist in Texas. Ten are organized as nonprofit corporations and three are organized as community trusts (trust). Organization as a nonprofit corporation may offer advantages over organization as a trust. For example, a nonprofit corporation can directly control all assets and funds, increasing investment returns while decreasing transaction costs. Unlike nonprofit organizations, trusts have separate institutional trustees handle trust accounts, which increases costs. Allowing trusts to convert to nonprofit corporations may result in greater operating efficiencies and investment returns. H.B. 3001 sets forth provisions for the conversion of a trust to a nonprofit corporation. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter C, Chapter 112, Property Code, by adding Section 112.058, as follows: Sec. 112.058. CONVERSION OF COMMUNITY TRUST TO NONPROFIT CORPORATION. (a) Defines "community trust" and "assets." (b) Authorizes a community trust (trust) with court approval to transfer the assets of the trust to a nonprofit corporation and terminate the trust as provided by this section. (c) Authorizes the trust to transfer the assets of the trust to a nonprofit corporation if it is organized under Article 1396-1.01 et seq., V.T.C.S. (Texas Non-Profit Corporation Act), and organized for the same purpose as the trust. Provides that the charter of the nonprofit corporation must describe the purpose of the corporation and the proposed use of the assets transferred using language substantially similar to the language used in the instrument creating the trust. (d) Provides that to transfer the assets of and terminate a trust under this section, the governing body of the trust must: _file a petition in the appropriate court requesting the transfer of the assets of the trust to a nonprofit corporation and the termination of the trust; _send to each trust settlor and each trustee of each component trust of the trust who can be located with the exercise of reasonable diligence a copy of the governing body's petition and a notice of the time and place of the hearing on the petition; and _publish a notice, in substantially similar language to the language set forth in this section, once in a newspaper of general circulation in the county in which the proceeding is pending. (e) Requires the court to schedule a hearing on the petition to be held after the 10th day after the notices are deposited in the mail or the date the notice is published, whichever is later. Provides that the hearing must be held at the time and place stated in the notices unless the court, for good cause, postpones the hearing. Provides that if the hearing is postponed, a notice of the rescheduled hearing time and date must be posted at the courthouse of the county in which the proceeding is pending. (f) Authorizes the court, on a request from the governing body of the trust, to, by order, require approval from the Internal Revenue Service (IRS) for an asset transfer. Authorizes the asset transfer to occur on the date the governing body of the trust fund files a notice with the court indicating that the IRS has approved the asset transfer. Provides that the notice must be filed on or before the first anniversary of the date the court's order is signed, and if not filed within that time, the court's order is dissolved. (g) Provides that a court order transferring the assets of and terminating a trust must provide that the duties of each trustee of each component trust fund of the trust are terminated on the date the assets are transferred. Provides that this subsection does not affect the liability of a trustee for acts or omissions occurring before the duties of the trustee are terminated. SECTION 2. Effective date: September 1, 1999. SECTION 3. Emergency clause.