HBA-LJP C.S.H.B. 2816 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2816 By: Brown, Fred Higher Education 4/8/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Under current law, qualified scholarship funding corporations are authorized at the request of a city or cities to issue revenue bonds to acquire student loan notes guaranteed under the federal education loan program. In 1996, Congress amended law to authorize these non-profit corporations to change their tax status to that of a 501(c)(3) corporation, but retain the original tax exemptions on the bonds by transferring them to a taxable subsidiary. To enable a nonprofit corporation to transfer all of its bond obligations under the federal requirements of these amendments, current provisions regulating higher education authorities need to be amended. C.S.H.B. 2816 authorizes a governing body of a city or cities to create a nonprofit corporation as a higher education authority to issue revenue bonds and loan the proceeds to an entity that has assumed the obligations of the nonprofit corporation for the purpose of refunding the tax-exempt obligations. 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. ANALYSIS C.S.H.B. 2816 amends the Education Code to authorize the governing body of a city to create a nonprofit corporation as a higher education authority in the manner provided by the Texas Non-Profit Corporation Act to act on its behalf with an appointed board of directors that are selected in the manner specified by the articles of incorporation. The bill provides that the governing body of the city must approve the articles of incorporation of the nonprofit corporation and any amendments in the ordinance or resolution authorizing the creation of the nonprofit corporation. The bill requires the secretary of the state to indicate on the certificate of incorporation that the nonprofit corporation is created under the provisions regarding higher education authorities. The bill authorizes the nonprofit corporation, upon approval of the city, to issue revenue bonds and loan the proceeds of the revenue bonds to an entity that has assumed the outstanding bond obligations of a nonprofit corporation. The bill requires that the loan be for the purpose of refunding outstanding bonds. The bonds to be refunded must be originally issued as qualified scholarship funding bonds by a nonprofit corporation, in accordance with the provisions regarding bonds for purchase of loan notes, that subsequently elects to cease operation as a qualified scholarship funding corporation. The bill provides that any refunded bond is the sole obligation of the nonprofit corporation and the nonprofit corporation is prohibited from constituting a debt or obligation of the city. EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 2816 modifies the original to establish provisions for the articles of incorporation of a nonprofit corporation created as a higher education authority and to provide that the governing body of the nonprofit corporation is selected in the manner specified by the articles of incorporation, rather than appointed and subject to removal by the governing board of the city.