HBA-NIK, ATS C.S.S.B. 333 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 333 By: Sibley Insurance 4/4/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE The Texas Insurance Code defines a "charitable gift annuity" as a transfer of cash or other property by a donor to a charitable organization in return for an annuity payable over one or two lives, under which the actuarial value of the annuity is less than the value of the cash or other property transferred and the difference in value constitutes a charitable deduction for federal tax purposes. In essence, the annuitant trades a donation to a charity for a guaranteed stream of income that continues as long as the donor lives. These types of annuities are commonly sold by charitable organizations, such as charities, churches, foundations, and universities because of the benefits to both donor and donee. A donor receives tax deductions and the donee receives the residue of money when the donor dies. For more than 50 years, the sale of charitable gift annuities in Texas had gone unchallenged. In 1992, relatives of an elderly woman filed lawsuits in state and federal court challenging the legal right of charitable organization to issue gift annuities. The plaintiffs alleged that the charitable organization had pressured the woman, who suffered from dementia and Alzheimer's disease, into investing the estate she inherited from her brother with the organization, a portion of which went to buy charitable gift annuities from the organization. In addition, the plaintiffs claimed that the organization, along with numerous other charitable organizations, had violated federal and state antitrust laws by fixing the rate of return, and that the organization had violated several state laws, including the illegal sale of annuities. During the trials, the charitable organization persuaded both the U.S. Congress and the Texas Legislature to enact legislation specifically designed to limit the scope of the lawsuit. In total, four laws were passed; two by Texas and two by the U.S. Congress. All four were aimed at guaranteeing charities the right to issue gift annuities. The Texas laws stated that the issuance of a qualified charitable gift annuity does not constitute engaging in the business of insurance, and that a charitable gift annuity issued before September 1, 1995, is a qualified charitable gift annuity for purposes of the Insurance Code. The law was intended to apply retroactively. Although a state judge ruled that the Texas laws could be applied retroactively to the case and dismissed the case, a federal court judge ruled that it was unclear whether the Texas laws were intended to apply to those charitable gift annuities which were being challenged in pending lawsuits. C.S.S.B. 333 provides that the law applies to any charitable gift annuity issued before, on, or after its effective date, including any charitable gift annuity that is the subject of litigation or another proceeding that is pending before, on, or after its effective date. This bill also requires any person or entity involved in the issuance of a qualified charitable gift annuity to have immunity from suit as to any claim brought by a donor or the donor's heirs or distributees alleging that the issuance of a charitable gift annuity constitutes engaging in the business of insurance in this state. 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 Section 2, Article 1.14-1A, Insurance Code, by adding Subsection (c), to provide that any individual or entity involved in the issuance of a charitable gift annuity is immune from suit and from liability with respect to a claim brought by or on behalf of a donor or the donor's heirs or distributees alleging that the issuance of a charitable gift annuity constitutes engaging in the business of insurance in this state. Provides that immunity granted by this subsection provides to the individual or entity protection from bearing the cost, burden, and risk of discovery and trial in a suit described by this section. SECTION 2. Amends Article 1.14-1A, Insurance Code, by adding Section 7, as follows: Sec. 7. TREATMENT OF ANNUITY AS CHARITABLE GIFT ANNUITY; ESTOPPEL. Requires an annuity that a donor has treated as a charitable gift annuity in an Internal Revenue Service filing to be considered a qualified charitable gift annuity issued by a charitable organization, in any litigation or other proceeding brought by the donor or the donor's heirs or distributees. SECTION 3. Amends Subsection (a), Section 51.014, Civil Practice and Remedies Code, to include an interlocutory order, issued by a district court, county court at law, or county court, that denies or otherwise fails to grant a motion for summary judgment that is based on an assertion of immunity arising under Section 1.14-1A (Charitable Gift Annuities), Insurance Code, among the enumerated list of interlocutory orders from which a person is authorized to appeal. Makes conforming changes. SECTION 4. (a) Provides that Sections 1, 2, and 6, Article 1.14-1A, Insurance Code; Section 2(b), Article 1.14-1, Insurance Code, apply to any charitable gift annuity issued before, on, or after the effective date of this Act. (b) Provides that this section applies without regard to the effective date of the legislation enacting Article 1.14-1A, Insurance Code, or any other legislation that amended Article 1.14-1A, Insurance Code. SECTION 5. Provides that this Act applies to any charitable gift annuity issued before, on, or after the effective date of this Act, including any charitable gift annuity that is the subject of litigation or another proceeding that is pending before, on, or after the effective date of this Act. SECTION 6.Emergency clause. Effective date: upon passage. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 333 modifies the original bill by reorganizing SECTION 1 for purposes of clarification. C.S.S.B. 333 modifies the original bill in SECTION 4 by removing Section 7, Article 1.14-1A, and Section 51.014(a)(6), Civil Practice and Remedies Code, from the list of enumerated sections which, as they existed immediately before, rather than on, the effective date of this Act, apply to any charitable gift annuity issued before, on, or after the effective date, of this Act.