Source: http://www.sos.state.tx.us/texreg/archive/November102017/Proposed%20Rules/34.PUBLIC%20FINANCE.html
Timestamp: 2018-01-17 03:19:45
Document Index: 138708242

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SUBCHAPTER O. STATE AND LOCAL SALES AND USE TAX
34 TAC §3.287
The Comptroller of Public Accounts proposes an amendment to §3.287, concerning exemption certificates. This section is being amended to update information regarding the Texas Sales and Use Tax Exemption Certification Form and to implement provisions of Senate Bill 934, 82nd Legislature, 2011, and House Bills 800 and 1223, 83rd Legislature, 2013. Additional changes are made to improve the clarity of the section.
Subsection (a) is amended to clarify that the term exemption certificate as used in this section refers to the Texas Sales and Use Tax Exemption Certification, Form 01-339 (Back), unless otherwise stated. The reference to using a resale certificate instead of an exemption certificate to claim exemption for taxable items purchased for resale is deleted from subsection (a) and is now addressed in subsection (c).
Subsection (b)(1) is amended to add "or" at the end of the statement to indicate that the subsection is disjunctive. Paragraphs (1) and (2) are also amended to provide the titles of the Tax Code provisions referenced in the paragraphs.
Subsection (c) is amended to provide references to other sections of this title for information concerning exemptions enacted by House Bill 268, 82nd Legislature, 2011, relating to agriculture and timber, House Bill 800, 83rd Legislature, 2013, relating to qualified research, and House Bill 1223, 83rd Legislature, 2013, relating to data centers. Subsection (c) is also amended to reference §3.319 of this title (relating to Prior Contracts), §3.334 of this title (relating to Local Sales and Use Taxes), and §3.285 of this title (relating to Resale Certificate; Sales for Resale). Subsection (c) is also amended to improve readability.
Subsection (d) is amended to replace the word "retailer" with the word "seller" for consistency throughout the subsection. Tax Code, §151.008 ("Seller" or "Retailer") assigns the same meaning to both terms.
Paragraph (1) is amended to follow more closely the language of Tax Code, §151.054 (Gross Receipts Presumed Subject to Tax). The statute provides that all gross receipts of a seller are presumed to have been subject to the sales tax unless the seller has accepted a properly completed resale or exemption certificate. A cross-reference to §3.285 of this title is also added.
Paragraph (2) is amended to explain the good faith safe harbor in greater detail. This subparagraph memorializes longstanding comptroller policy regarding the elements required for such good faith acceptance. See STAR Accession No. 9105L1110D06 (May 20, 1991) and Comptroller's Decision Nos. 35,834 (1997), 48,258 (2009), and 105,608 (2012). In addition, the statement in current subsection (d)(5) that a seller must be familiar with the exemptions that are available for the items it sells is revised and relocated to subsection (d)(2).
Paragraph (3) is amended to track the statutory language of Tax Code, §151.707 (Resale or Exemption Certificate; Criminal Penalty) more closely and implement Section 17 of Senate Bill 934, 82nd Legislature, 2011, which amended Tax Code, §151.707(b) to apply to all offenses described under Tax Code, §151.707(a). Tax Code, §151.707(b) had previously been limited to offenses described under Tax Code, §151.707(a)(1) and (2). Subsection (d)(5) is amended to reference §3.367 of this title (relating to Timber Items) for information on blanket exemption certificates received for timber items.
In paragraph (4), the term "deduction" is deleted and replaced with the term "exemption" for consistency throughout the section. Paragraph (5) is amended to delete information that is now addressed in paragraph (2) and to add a reference to §3.367 of this title (relating to Timber Items) for information on blanket exemption certificates received for timber items.
New paragraph (7) is added to alert sellers of the related record-keeping requirements by cross-referencing §3.281 of this title (relating to Records Required; Information Required) and providing that exemption certificates are subject to the record-keeping requirements set out in that section.
Subsection (e) is amended to describe more completely the topics addressed in the subsection. The phrase "taxable use of items purchased…" replaces the phrase "improper use of items purchased...." A separate clause is added to address improper use of an exemption certificate. In addition, the subsection is amended to mirror language used in other sections of this title.
Paragraph (6), relating to contractors, is deleted because it is no longer applicable. See House Bill 85, 73rd Legislature, 1993. New paragraph (6) is added to provide that subsection (e) does not apply to manufacturing equipment purchased tax-free and then used in a taxable manner.
Subsection (g) is amended to delete references to the Resolution Trust Corporation (RTC) and correct a typographical error. Congressional authorization of the RTC expired in 1995, and its assets and activities were transferred back to the Federal Deposit Insurance Corporation. See Resolution Trust Corporation Completion Act, Pub. L. No. 94-204, 107 Stat. 2369 (1993).
Subsection (h) is amended to include the current form number for the Texas Sales and Use Tax Exemption Certification, Form 01-339 (Back); delete the comptroller's mailing address and phone numbers, which are no longer correct; and add a reference to the comptroller's website. Subsection (h) is also amended to delete statements indicating that the Texas Sales and Use Tax Exemption Certification is adopted by reference and available at the office of the Texas Register.
Comments on the proposal may be submitted to Teresa G. Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711. 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, §111.002 (Comptroller's Rules; Compliance; Forfeiture) 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, as well as taxes, fees, or other charges which the comptroller administers under other law.
The amendment implements Tax Code, §§151.1551 (Registration Number Required for Timber and Certain Agricultural Items), 151.3182 (Certain Property Used in Research and Development Activities; Reporting of Estimates and Evaluation), 151.359 (Property Used in Certain Data Centers; Temporary Exemption), and 151.707 (Resale or Exemption Certificate; Criminal Penalty).
§3.287.Exemption Certificates.
(a) Definition. Exemption certificate--A document that, when properly executed, allows the tax-free purchase of an item that would otherwise be subject to tax. Except as otherwise stated, the exemption certificate described in this section refers to the Texas Sales and Use Tax Exemption Certification, Form 01-339 (Back) or a document substantially in the same format. [A purchaser claiming an exemption because the item purchased is for resale must issue a resale certificate to the seller. See §3.285 of this title (relating to Resale Certificate; Sales for Resale).] There is no provision in Tax Code, Chapter 151 (Limited Sales, Excise, and Use Tax) [the sales and use tax act] for an exemption number or a tax exempt number to be issued or used in connection with the Texas Sales and Use Tax Exemption Certification, Form 01-339 (Back) [an exemption certificate].
(b) Who may issue an exemption certificate. An exemption certificate of the type described in this section may only be issued by one of the following:
(1) an organization that has qualified for exemption under [the] Tax Code, §151.309 (Governmental Entities) or §151.310 (Religious, Educational, and Public Service Organizations). See §3.322 of this title (relating to Exempt Organizations); or
(2) a person purchasing an item that is exempt under [the] Tax Code, Chapter 151, Subchapter H (Exemptions).
(c) Exemptions addressed by other sections of this title: Direct [Maquiladora exemption and direct] payment permit holders, maquiladoras, agriculture, timber, qualifying data centers, qualified research, prior contracts and sales for resale [permits].
(1) Purchasers [People who make purchases] using direct pay permits should refer to §3.288 of this title (relating to Direct Payment Procedures and Qualifications).
(2) Purchasers [People who make purchases] using maquiladora exemption permits should refer to §3.358 of this title (relating to Maquiladoras).
(3) Purchasers claiming an agriculture exemption should refer to §3.296 of this title (relating to Agriculture, Animal Life, Feed, Seed, Plants, Ice Used by Commercial Fishermen and Others, Work Animals (including Guard Dogs),and Fertilizer).
(1) All gross receipts of a seller [retailer ] are presumed subject to sales or use tax unless a valid and properly completed resale or exemption certificate is accepted by the seller. Resale certificates are addressed in detail in §3.285 of this title.
[(2) A sale is exempt if the exemption certificate is accepted in good faith at the time of the transaction and the seller lacks actual knowledge that the claimed exemption is invalid.]
(3) A person commits an offense if the person: intentionally or knowingly makes a false entry in, or a fraudulent alteration of, an exemption certification; makes, presents, or uses an exemption certificate with knowledge that it is false and with the intent that it be accepted as a valid exemption certificate; or intentionally conceals, removes, or impairs the verity or legibility of an exemption certificate or unreasonably impedes the availability of an exemption certificate. [who intentionally or knowingly makes, presents, uses, or alters an exemption certificate for the purpose of evading the Texas sales or use tax is guilty of a criminal offense.]
(4) The seller should obtain the properly executed exemption certificate at the time the transaction occurs. All certificates obtained on or after the date the comptroller's auditor actually begins work on the audit at the seller's place of business or on the seller's records after the entrance conference are subject to verification. All incomplete certificates will be disallowed regardless of when they were obtained. The seller has 60 days from the date written notice is received by the seller from the comptroller in which to deliver the certificates to the comptroller. Written notice shall be given by the comptroller upon the filing of a petition for redetermination or claim for refund. For the purposes of this section, written notice given by mail is presumed to have been received by the seller within three business days from the date of deposit in the custody of the United States Postal Service. The seller may overcome the presumption by submitting proof from the United States Postal Service or by other competent evidence showing a later delivery date. Any certificates delivered to the comptroller during the 60-day period will be subject to independent verification by the comptroller before any exemptions [deductions] will be allowed. Certificates delivered after the 60-day period will not be accepted and the exemption [deduction] will not be granted.
(5) [The exemption certificate will be valid if the seller received it in good faith from a purchaser and if the certificate states valid qualifications for an exemption. A retailer must be familiar with the exemptions that are available for the items the retailer sells.] A seller [retailer] may accept a blanket exemption certificate given by a purchaser who purchases only items that are exempt. For information on blanket exemption certificates received for agricultural exemptions, see §3.296 of this title. For information on blanket exemption certificates received for timber items see §3.367 of this title. [(relating to Agriculture, Animal Life, Feed, Seed, Plants, and Fertilizer).]
(e) Taxable [Improper] use of items purchased under an exemption certificate; improper use of an exemption certificate.
(4) At any time, the person who purchased [using] tangible personal property or a taxable service [purchased ] under a valid exemption certificate and is using the tangible personal property or taxable service in a divergent taxable manner may stop paying tax on the value of tangible personal property or [the value of a] taxable service and instead pay sales tax on the original purchase price. When the person elects to pay sales tax on the purchase price, credit will not be allowed for taxes previously paid based on value.
(5) Sales tax is not due when a taxable [an ] item purchased under a valid exemption certificate is donated to an organization exempt from tax under [the] Tax Code, §151.309 or §151.310(a)(1) or (2), provided the purchaser does not use the donated tangible personal property or the donated taxable service.
(6) This subsection is not applicable when an item purchased under Tax Code, §151.318 (Property Used in Manufacturing) is used in a taxable manner. A purchaser who uses such items in a taxable manner is liable for sales or use tax and should refer to §3.300 of this title (relating to Manufacturing; Custom Manufacturing; Fabricating; Processing). [Contractors using equipment purchased under a valid exemption certificate on both taxable and exempt projects must account for tax based upon the provisions in §3.291 of this title (relating to Contractors).]
(g) Purchases of taxable items by agents of the Federal Deposit Insurance Corporation (FDIC) [or the Resolution Trust Corporation (RTC)]. The FDIC [or RTC] may purchase items tax-free [tax free] for use in operating a property or business to which it has title. An exemption certificate may be issued by the FDIC [or RTC] or by persons acting as agents for the FDIC [or RTC] when purchasing items that are incorporated into or used on the property or business being managed. The certificate must state that the purchases are being made by or for the FDIC [or RTC]. The FDIC [or RTC] or persons managing property or a business for the FDIC [these corporations] may issue an exemption certificate when:
(1) the FDIC [or RTC] provides documentation to the person managing the property or business showing that title to the property or business being managed was transferred to the FDIC [or RTC]; and
(2) the FDIC [or RTC] has entered into a written agreement with the person managing the property or business that designates that person as its agent and authorizes that person to make purchases on its behalf. The agreement must be in the person's files for review by the comptroller. It is not necessary to provide a copy of the agreement to suppliers.
(h) Form of an exemption certificate. An exemption certificate must be in substantially the form of a Texas Sales and Use Tax Exemption Certification, Form 01-339 (Back) [that the comptroller adopts by reference]. Copies of the form [are available for inspection at the office of the Texas Register or] may be obtained from the Comptroller of Public Accounts, Tax Policy Division or[, 111 West 6th Street, Austin, Texas 78701-2913. Copies may also be requested] by calling [our toll-free number] 1-800-252-5555. The form is also available online at https://comptroller.texas.gov/forms/01-339.pdf. [In Austin, call 463-4600. (From a Telecommunication Device for the Deaf (TDD) only, call 1-800-248-4099 toll free. In Austin, the local TDD number is 463-4621).]
TRD-201704336
34 TAC §9.804
The Comptroller of Public Accounts proposes repealing §9.804, concerning arbitration of appraisal review board determinations. This rule is being replaced by new §§9.4251 - 9.4266, which comprise new Subchapter K, titled Arbitration of Appraisal Review Board Determinations.
Tom Currah, Chief Revenue Estimator, has determined that for the first five-year period the repeal 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 repeal is in effect, the public benefit anticipated as a result of enforcing the rule will be by improving the administration of local property valuation and taxation. The proposed repeal would have no fiscal impact on small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the repealed rule. The repeal would have no significant fiscal impact on small businesses or rural communities.
Comments on the repeal may be submitted to Mike Esparza, Director, Property Tax Assistance Division, P.O. Box 13528, Austin, Texas 78711-3528. Comments may be submitted by email sent to: ptad.arb@cpa.texas.gov and must be received no later than 30 days from the date of publication of the proposal in the Texas Register.
The repeal is proposed under Tax Code, §41A.13 (Rules), which authorizes the comptroller to adopt rules necessary to implement and administer Chapter 41A of the Tax Code governing the appeal of appraisal review board orders through binding arbitration.
The repeal implements Tax Code, §41A.13 (Rules), which authorizes the comptroller to adopt rules necessary to implement and administer Tax Code, Chapter 41A governing the appeal of appraisal review board orders through binding arbitration.
§9.804.Arbitration of Appraisal Review Board Determinations.
Filed with the Office of the Secretary of State on October 24, 2017.
TRD-201704290
SUBCHAPTER K. ARBITRATION OF APPRAISAL REVIEW BOARD DETERMINATIONS
34 TAC §§9.4251 - 9.4266
The Comptroller of Public Accounts proposes new §§9.4251 - 9.4266, concerning arbitration of appraisal review board determinations. These new rules replace §9.804, which is being repealed in a separate filing. These new rules will comprise new Subchapter K, titled Arbitration of Appraisal Review Board Determinations. This replacement of §9.804 with new Subchapter K serves three purposes. First, in organizing the rule sections relating to arbitration into 16 separate rules, it is expected that the administrative provisions governing binding arbitration will be more easily readable and understood by the public. Second, many previous requirements regarding arbitration procedures are clarified and several others modified to strengthen and streamline the administration of the binding arbitration process. Third, this proposal also implements legislative changes to Tax Code, Chapter 41A (Appeal through Binding Arbitration), which the 85th Legislature, 2017, enacted through passage of Senate Bill (SB) 731 and SB 1286, §§2 through 4 and 7.
The legislatively-driven changes as well as the most significant changes to the existing binding arbitration administrative provisions are addressed, section by section, beginning with new §9.4251, Definitions. In addition to revising and putting in alphabetical order the seven definitions in existing §9.804, four more definitions are added to new §9.4251: "Appraisal Review Board (ARB)" and "Individual" as well as "Order," the determination the ARB issues which is the subject of the arbitration, and "Person".
New §9.4252, Request for Arbitration, sets out in one section all of the substantive and procedural requirements to properly initiate an appeal of an ARB order through binding arbitration. New subsection (f), in particular, is a critical provision as it succinctly identifies each of the seven (or eight if an agent is involved) jurisdictional requirements that each request for binding arbitration must meet. New subsection (h) provides a ready reference to the types of properties that qualify for binding arbitration along with the corresponding deposit amounts required. Subsections (f)(1) and (h)(6) reflect SB 731's legislative increase from $3 million to $5 million as the jurisdictional property value limit and corresponding deposit amount of $1,550.
New subsection (g) specifies when two or more tracts of land qualify as contiguous for purposes of submitting only one deposit to arbitrate such property. Tracts are contiguous if: 1) each tract of land physically touches another tract of land being appealed; 2) no intervening area, whether natural or manmade, that is owned by another person, entity, or governmental unit, separates the tracts; 3) the property type of each tract being appealed is identified on the request for binding arbitration as "Land" or "Agricultural" or any other category of real property that is not an improvement; and 4) all of the tracts of land being appealed are of the same property type.
New §9.4253, Agent Representation in Arbitration, puts in one place all of the requirements for an arbitration agent and clarifies the manner in which agents may be properly appointed. This section also makes clear the necessity of providing the agent authorization form, signed by the owner, with each request for arbitration in which an agent expects to act on behalf of an owner.
New §9.4254, Appraisal District Responsibility for Request, specifies each of the procedures appraisal districts are to perform within ten calendar days to process requests for binding arbitration. New subsection (b) grants appraisal districts that process 500 or more requests for arbitration during the previous year to perform these tasks within ten business days (rather than calendar days). The new rule makes clear that all requests are to be forwarded to the comptroller's office except those which the appraisal district is to reject for failure to provide the correct deposit.
New §9.4255, Comptroller Processing of Request, specifies the grounds under which the comptroller is required to deny a request for binding arbitration and does so by simply referencing §9.4252(f), the provision which identifies the jurisdictional requirements for a valid request for arbitration. Subsections (c) and (d) identify the limited circumstances under which failure to perform a technical requirement, such as signing the request for arbitration form, may be cured within ten days of notice.
New §9.4256, Comptroller Appointment of Arbitrators, not only implements a part of SB 1286, the new legislative method by which the comptroller is to appoint arbitrators, but also sets out all of the requirements that govern the appointment of arbitrators generally. Under the current rule, owners or agents and appraisal districts are to attempt to agree on an arbitrator. SB 1286 requires the comptroller to select the arbitrator. New subsection (b) provides that the comptroller will use a computerized system to distribute appointments as evenly as possible among arbitrators. In each case, the comptroller shall select first for appointment from among only those arbitrators on the registry who principally reside in the county in Texas where the property that is the subject of the arbitration is located as required under SB 1286. Upon the refusal of all of these arbitrators to accept the appointment to a particular matter, the comptroller may appoint an otherwise eligible arbitrator on the registry residing in another county in Texas. New §9.4256 also makes explicit the circumstances under which an arbitrator may not accept and may not continue with an appointment, such as becoming unqualified or ineligible.
New §9.4257, Application for Inclusion in Comptroller's Registry of Arbitrators, sets out the requirements regarding the application process for inclusion in the arbitrator registry. It also provides that in signing and submitting the application, the applicant attests not only that he or she meets all the qualification requirements, but also principally resides in the state of Texas in the county identified, the new residency requirement of SB 1286.
New §9.4258, Qualifications for Inclusion in the Comptroller's Registry of Arbitrators, sets forth in one section all the qualifications required, including the professional ones, and the particular circumstances which render one not qualified to serve; it also implements the new Texas residency requirement of SB 1286. New subsection (b) requires a person to principally reside in Texas to qualify as an arbitrator and provides that this standard is met if he or she lives in a residential property in Texas more than 50% of his or her time. This residency requirement also is addressed by reference to residence homestead exemptions the individual may hold. New subsection (d) requires that an arbitrator applying for renewal of inclusion in the registry have no history of failure to comply with new Subchapter K, in addition to the previous requirements.
New §9.4259, Arbitrator Eligibility for A Particular Appointment, sets out in one section all of the eligibility requirements for appointment to a particular matter, including the two new eligibility requirements of SB 1286. First, under SB 1286, only arbitrators who principally reside in the county where the property at issue is located are eligible for appointment to each arbitration. An arbitrator who lives outside the county may be appointed, however, if there are no available arbitrators who live in the county where the property is located. County of residence is defined under new subsection (c) in a manner similar to the standard set for Texas residency. Second, also as required under SB 1286, a person is ineligible for appointment in the same county appraisal district where, during the previous five years, the person represented any entity for compensation in any proceeding under the Property Tax Code, or served as an officer or employee of the appraisal district, or as a member of that county's ARB. Representation in any proceeding, as described under new subsection (e), begins with the filing of a notice of protest and includes communications with appraisal district employees regarding a matter under protest; protest settlement negotiations; any appearance at an ARB hearing; any involvement in a binding arbitration under Tax Code, Chapter 41A; and any involvement at either the district court or appellate court level in an appeal pursued under Tax Code, Chapter 42. Likewise, any person who has served as an officer or employee of any firm, company, or other legal entity that represented any person or entity for compensation in any proceeding under the Property Tax Code during the previous five years regarding property in the same appraisal district as the property at issue is ineligible for appointment.
New §9.4260, Arbitrator Duties, makes clear that a person who accepts an arbitration appointment is required to conduct each arbitration pursuant to the terms of Tax Code, Chapter 41A, as well as Subchapter K, and for the fee amount permitted under subsection (d). The arbitrator fee schedule is set out in subsection (d) and includes the new arbitrator fee of $1,500 for property valued at more than $3 million but not more than $5 million, as permitted under SB 731. Arbitrators are required under subsection (b) to notify the comptroller's office within ten days of any material changes in their information on file- including a change in county of residence- and failure to do so may result in removal from the registry and denial of future applications for inclusion in the registry.
New §9.4261, Provision of Arbitration Services, sets forth the procedural requirements under which an arbitrator is to conduct an arbitration proceeding unless the parties agree otherwise. Significant changes are proposed in this area, particularly as they relate to the following matters: in-person hearings at the request of the owner or agent; party input in selection of the hearing date; the detail required for the written hearing notice; arbitrator conduct standards; and those circumstances which require the dismissal of an arbitration proceeding.
New §9.4262, Removal of Arbitrator from the Registry of Arbitrators, sets out clearly and concisely the terms under which an arbitrator will be removed from the registry. This section as well as proposed §9.4256(f) regarding appointment of arbitrators, both implement another portion of SB 1286. This new law mandates that the comptroller not appoint and shall remove a person listed as an arbitrator for good cause, including a finding that the person has engaged in repeated bias or misconduct while acting as an arbitrator. In either instance, new §9.4262 sets out the procedures and standards that govern the refusal to appoint or the removal of an individual from the arbitrator registry for good cause.
The last four provisions of Subchapter K address: new §9.4263, Arbitration Determination and Award; new §9.4264, Payment of Arbitrator Fee, Refund of Property Owner Deposit, and Correction of Appraisal Roll; new §9.4265, Prohibited Communications regarding Pending Arbitrations; and new §9.4266, Forms. These four rules are largely unchanged from current provisions on these same topics, with a couple of exceptions. It is proposed the arbitrator be permitted to transmit the arbitration determination and award to the parties electronically as well as by fax or mail. One provision, new §9.4264(h), addresses the manner in which the withdrawal of a request for arbitration and the payment of the arbitration deposit or fee is to be handled. That is, the 14-day deadline for withdrawal before the hearing is measured from the date the comptroller receives written notice; and the hearing date is the one set in the written notice under §9.4261(d), either by agreement of the parties or 30 days from the date the arbitrator mailed the notice.
Changes are proposed to two forms- the Request for Binding Arbitration form (Form AP-219) and the Arbitration Determination and Award form (Form 50-704)- which are adopted by reference under new §9.4266. Changes to both forms are primarily to reflect the increase to $5 million or less in the jurisdictional value of property subject to arbitration under SB 731. A change to the award and determination form is to clarify when dismissal for delinquent taxes is required. Dismissal of an arbitration is required not only if taxes are delinquent but also if the taxes were not timely paid, that is, before the applicable statutory delinquency date set by the Tax Code. Dismissal is required in the later instance even if the taxes were paid by the time of the arbitration hearing.
Tom Currah, Chief Revenue Estimator, has determined that for the first five-year period the new rules 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 new rules are in effect, the public benefit anticipated as a result of enforcing the rules will be by improving the administration of local property valuation and taxation. The proposed new rules would have no fiscal impact on small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the new rules. The new rules would have no significant fiscal impact on small businesses or rural communities.
Comments on the proposed rules may be submitted to Mike Esparza, Director, Property Tax Assistance Division, P.O. Box 13528, Austin, Texas 78711-3528. Comments may be submitted by email sent to: ptad.arb@cpa.texas.gov and must be received no later than 30 days from the date of publication of the proposal in the Texas Register.
These new sections are proposed under Tax Code, §41A.13 (Rules), which authorizes the comptroller to adopt rules necessary to implement and administer Tax Code, Chapter 41A governing the appeal of appraisal review board orders through binding arbitration.
These new sections implement Tax Code, §§41A.01(2), 41A.03(a)(2)(F), 41A.06(b)(2)(F), 41A.061(c)(2), 41A.07(a)(1) and (2), and 41A.07(e), (f), and (g), and 41A.13.
§9.4251.Definitions.
(5) Binding arbitration--A method to appeal an eligible appraisal review board order a property owner may choose that is governed by Tax Code, Chapter 41A, and this subchapter.
(6) Comptroller or comptroller's office--The Comptroller of Public Accounts of the State of Texas, the state agency responsible for the adoption of rules governing the binding arbitration system pursuant to Tax Code, Chapter 41A.
(7) Individual--A single human being.
(8) Market value--The price at which a property would transfer for cash or its equivalent under prevailing market conditions if:
(9) Order--A written determination an appraisal review board issues pursuant to Tax Code, §41.47, regarding an owner's protest filed pursuant to Tax Code, §41.41(a)(1), for appraised or market value, or pursuant to Tax Code, §41.41(a)(2), for unequal appraisal.
(10) Owner--A person or entity having legal title to property who has the right to appeal an eligible ARB order through binding arbitration under Tax Code, Chapter 41A. It does not include lessees who have the right to protest property valuations before county appraisal review boards.
(11) Person--Includes an individual, corporation, organization, business trust, estate, trust, partnership, association, and any other legal entity.
§9.4252.Request for Arbitration.
(a) An owner may initiate an appeal of an ARB order determining a protest of property value through binding arbitration, upon submission of a written request with the required deposit to the appraisal district responsible for appraising the owner's property, under the terms and conditions of this section.
(b) The request for binding arbitration and a deposit in the appropriate amount under subsection (h) of this section must be filed with the appraisal district not later than the 45th calendar day after the date the owner receives the ARB order determining the protest, as evidenced by the certified mail receipt showing delivery to the owner. The request and deposit shall be submitted to the appraisal district by hand delivery, by certified first-class mail, or as provided by Tax Code, §1.08 or §1.085.
(c) The request for arbitration must be on the comptroller's prescribed Request for Binding Arbitration form (Form AP-219). The ARB shall provide a copy of this form as well as a notice of the owner's right to binding arbitration when it sends to the owner the ARB's order determining a protest filed pursuant to Tax Code, §41.41(a)(1) or (2) if the value of the property determined by the order is $5 million or less or the property qualifies as the owner's residence homestead under Tax Code, §11.13.
(d) If an agent, other than an attorney, has been appointed to represent the owner, and the agent signs the Request for Binding Arbitration form (Form AP-219) on behalf of the owner, the comptroller shall deny the request unless the Appointment of Agent for Binding Arbitration form (Form 50-791), signed by the owner, is properly completed and submitted with the request, Form AP-219.
(e) If the owner signs and submits the Request for Binding Arbitration form (Form AP-219) and indicates on the request form that an agent has been appointed but fails to submit the Appointment of Agent for Binding Arbitration form (Form 50-791), the comptroller's office may recognize the agent as the owner's representative with the authority to receive communications and a refund of the arbitration deposit, as applicable, only if the appointment of agent form (Form 50-791), signed by the owner, is properly completed and submitted within ten (10) calendar days of the comptroller's written or verbal notice to the owner that Form 50-791 was not previously provided with the request for arbitration.
(3) A deposit in the correct amount set forth under subsection (h) of this section, in the form of a check issued and guaranteed by a banking institution (such as a cashier's or teller's check) or by a money order, payable to the Comptroller of Public Accounts, is included with the request. Personal checks, cash, or other forms of payment shall not be accepted.
(4) No taxes on the property at issue are delinquent and the undisputed taxes due on the property were paid before the delinquency date set by Tax Code, Chapter 31, as applicable.
(7) The request is made on the comptroller's Request for Binding Arbitration form (Form AP-219) and is signed by the property owner or by the owner's agent, if authorized.
(8) If the owner's agent signs the comptroller's Request for Binding Arbitration form (Form AP-219), the comptroller's Appointment of Agent for Binding Arbitration form (Form 50-791) must be submitted with the request. The appointment of agent form (Form 50-791) must be signed by the owner, identify as the owner's agent the same individual who signed the request form, and explicitly authorize the individual agent to sign the request form.
(h) A deposit made payable to the Comptroller of Public Accounts is required to be submitted with each request for binding arbitration in the following amounts, as applicable:
§9.4253.Agent Representation in Arbitration.
(a) The parties to an arbitration proceeding may represent themselves or, at their own cost, may be represented by the following agents:
(4) a property tax consultant registered under Occupations Code, Chapter 1152;
(5) an individual who is licensed as a certified public accountant under Occupations Code, Chapter 901; or
(6) an employee of the appraisal district.
(b) An owner may authorize a specific individual, qualified under subsection (a)(1) - (5) of this section, to act as an agent on his or her behalf in a binding arbitration proceeding under Tax Code, Chapter 41A. The terms and conditions of subsections (c) - (f) of this section apply to agents qualified under subsection (a)(2) - (5) of this section.
(c) For a valid appointment of an arbitration agent, other than an attorney, to represent an owner in a binding arbitration proceeding, the owner is required to complete and sign the comptroller-prescribed Appointment of Agent for Binding Arbitration form (Form 50-791). No other agent appointment or authorization form or document is acceptable.
(d) The owner must specify on Form 50-791 the actions the agent is authorized to take on his or her behalf with respect to the binding arbitration. Authorized actions that are to be addressed on the form include:
(1) whether the agent has the authority to sign the Request for Binding Arbitration form (Form AP-219);
(2) whether the agent has the authority to receive deposit refunds; and
(3) whether the agent has the authority to represent the owner in the arbitration hearing.
(e) The owner must identify on Form 50-791 a specific individual to act as agent and provide the agent's license or certificate number and type that qualifies under subsection (a)(2) - (5). A company or business entity does not qualify as an agent. If an owner authorizes an agent to receive deposit refunds, the agent authorization form must include the agent's social security number, federal tax identification number, or Texas state tax identification number. If the owner has authorized an agent to receive deposit refunds, all correspondence from the comptroller regarding the arbitration will be sent to the authorized agent.
(f) If an agent signs and submits on behalf of the owner, a Request for Binding Arbitration form (Form AP-219) for the owner's property, the signed Appointment of Agent for Binding Arbitration form (Form 50-791) must be submitted at the same time which shows the owner authorized the agent to sign the request regarding the property. Failure to timely attach this completed and signed agent appointment form to the request will result in the comptroller's denial of the request for arbitration the agent submitted.
(g) In order for an agent other than an attorney or appraisal district employee to represent an appraisal district, the chief appraiser must sign a written statement authorizing the agent to represent the district in the arbitration proceeding and provide a copy of this authorization to the property owner and the arbitrator at or before the time of the arbitration hearing.
§9.4254.Appraisal District Responsibility for Request.
(a) Except as provided by subsection (b) of this section, within ten (10) calendar days of receipt of each request for binding arbitration, the appraisal district shall complete the following tasks:
(1) review each request for binding arbitration to determine if each of the requirements of §9.4252(f) of this title (relating to Request for Arbitration) have been met;
(3) attach a copy of the ARB order that forms the basis of the request if the property owner has not provided it, and in the case of an appeal relating to two or more contiguous tracts of land pursuant to Tax Code, §41A.03(a-1), a copy of the ARB order for each tract;
(4) complete and sign that portion of the comptroller's Request for Binding Arbitration form applicable to the appraisal district to certify, based on the examination of the documentation submitted, which of the requirements of §9.4252(f) of this title have been met for a valid request for binding arbitration; and
(5) forward, pursuant to subsection (e) of this section, each Request for Binding Arbitration form, the accompanying deposit, and the ARB order (as well as the appointment of agent form 50-791, if provided), to the comptroller's office, except those requests which shall be rejected under subsection (c) of this section for failure to provide the required deposit in the correct amount.
(b) If an appraisal district processed 500 or more requests for binding arbitration forms during the previous calendar year, the appraisal district shall complete the tasks identified in subsection (a) of this section within ten (10) business days of receipt of each request for binding arbitration.
(c) The appraisal district shall reject each request for binding arbitration that does not have the required deposit in the correct amount. In such event, the appraisal district shall return the request with a notification of the rejection to the owner or agent by regular first-class mail unless another form of delivery was requested in writing.
(d) The appraisal district shall provide promptly any additional information the comptroller's office requests to process the request for binding arbitration submission.
(e) The appraisal district shall deliver the materials identified in subsection (a)(5) of this section to the comptroller by hand delivery or by certified first-class mail, and must simultaneously deliver a copy of the submission to the owner or agent, as appropriate, by regular first-class mail.
§9.4255.Comptroller Processing of Request.
(a) Upon receipt of a request for binding arbitration from the appraisal district, the comptroller shall review it to determine whether to accept the request and appoint an arbitrator to the matter, deny the request, or request additional information from the appraisal district or owner or agent. The comptroller shall notify the owner or agent and the appraisal district of the determination to accept or deny the request by regular first-class mail or electronically, at the comptroller's discretion.
(b) Upon review of the request, including the appraisal district's certification, as well as additional information that may have been provided in response to a request from the comptroller under subsection (a) of this section, the comptroller shall deny each request for arbitration that fails to meet the requirements of §9.4252(f) of this title (relating to Request for Arbitration).
(c) If the owner or agent, as applicable, fails either to sign the Request for Binding Arbitration form (Form AP-219), or to provide an opinion of value on this form, the request for binding arbitration shall be denied unless the defect is cured by signing the form or providing the value opinion in writing within ten (10) calendar days of the comptroller's written or verbal notice of the failure.
(d) As provided by §9.4252(e) of this title, if the owner signs and submits the Request for Binding Arbitration form (Form AP-219), indicates on the request form that an agent has been appointed, but fails to submit the Appointment of Agent for Binding Arbitration form (Form 50-791), the comptroller's office shall not recognize the agent as the owner's representative with the authority to receive communications or a refund of the arbitration deposit, as applicable, unless the appointment of agent form (Form 50-791), signed by the owner, is properly completed and submitted within ten (10) calendar days of the comptroller's written or verbal notice to the owner that Form 50-791 was not previously provided with the request for arbitration.
(e) Upon acceptance of a valid request for binding arbitration, the comptroller shall appoint an arbitrator pursuant to §9.4256 of this title (relating to Comptroller Appointment of Arbitrators).
§9.4256.Comptroller Appointment of Arbitrators.
(a) The comptroller shall appoint, pursuant to the terms of this section, an individual included in the registry who is both qualified under §9.4258 of this title (relating to Qualifications for Inclusion in the Comptroller's Registry of Arbitrators) and eligible for the particular appointment under §9.4259 of this title (relating to Arbitrator Eligibility for A Particular Appointment), to resolve each valid request for binding arbitration.
(b) In selecting an individual from among a group of qualified and eligible arbitrators available for assignment, the comptroller may use a computerized system that distributes the arbitration appointments as evenly as possible among arbitrators. In each case, the comptroller shall select first for appointment only from among those arbitrators on the registry who principally reside in the county in Texas where the property that is the subject of the arbitration is located. Upon the refusal of all of these arbitrators to accept the appointment to a particular arbitration matter, the comptroller may appoint an otherwise eligible arbitrator on the registry residing in another county in Texas.
(c) The comptroller shall notify the arbitrator of his or her appointment to a particular matter by regular first-class mail.
(d) The arbitrator shall respond to the comptroller, in writing, within five (5) business days of the arbitrator's receipt of the comptroller's notice of appointment whether he or she accepts or refuses the appointment for any reason. The arbitrator shall deliver notice of his or her acceptance or refusal of the appointment to the comptroller electronically, by facsimile transmission, or by regular first-class mail. If the arbitrator is required to refuse the appointment for any of the reasons set out in subsection (g) or (h) of this section, the arbitrator shall provide the specific reason in writing to the comptroller.
(e) If the comptroller does not receive from the arbitrator written notice of acceptance or refusal of the appointment within five (5) business days, the comptroller shall presume that the appointment has been refused. If the arbitrator refuses the appointment, the comptroller shall appoint a substitute arbitrator from the registry, as provided by subsection (b) of this section, within ten (10) business days of the receipt of notice or presumption of refusal. The process of appointment of arbitrators pursuant to this section shall continue in this fashion until an acceptance is obtained.
(f) The comptroller may not appoint a person listed as an arbitrator on the registry for good cause if the person is found, pursuant to §9.4262 of this title (relating to Removal of Arbitrator from the Registry of Arbitrators), to have engaged in repeated bias or misconduct while acting as an arbitrator.
§9.4257.Application for Inclusion in Comptroller's Registry of Arbitrators.
(a) An individual seeking to be listed in the comptroller's registry of arbitrators must submit a completed application on the comptroller-prescribed form, providing all requested information and documentation, and affirming that the applicant meets the qualifications set forth in §9.4258 of this title (relating to Qualifications for Inclusion in the Comptroller's Registry of Arbitrators). The application must state that false statements provided by applicants may result in misdemeanor or felony convictions.
(b) By signing and submitting the application for inclusion in the comptroller's registry of arbitrators, and any documentation required on the prescribed form, the applicant attests that he or she:
(1) principally resides in the state of Texas in the county identified;
(2) meets all of the qualifications required under §9.4258 of this title;
(3) has read and understands the provisions of this subchapter and the Property Tax Code, including Chapter 41A (Appeal through Binding Arbitration);
(4) will conduct any and all arbitrations pursuant to the terms of Tax Code, Chapter 41A, and this subchapter, including §9.4261(m) of this title (relating to Provisions of Arbitration Services);
(5) will perform these arbitration services for the applicable fee set out in §9.4260(d) of this title (relating to Arbitrator Duties); and
(6) will notify the comptroller of any change in the applicant's qualifications, eligibility to serve, contact information, or any material change regarding information provided in the application, within ten (10) calendar days of the change.
(c) The attestation provided pursuant to subsection (b) of this section shall remain in effect until the renewal date of the applicant's license or certification under which the applicant was qualified professionally as provided by §9.4258(c) of this title.
(d) The comptroller shall deny an application if it is determined that the applicant does not meet all of the qualifications of §9.4258 of this title or if inclusion of the applicant in the arbitration registry would otherwise not be in the interest of impartial arbitration proceedings.
(e) If the application is approved, the applicant's name, county of residence in Texas, and other pertinent information provided in the application and the applicant's professional resume or curriculum vitae may be added to the comptroller's registry of arbitrators.
(f) The comptroller must notify the applicant of the approval or denial of the application as soon as practicable and must provide a brief explanation of the reason(s) for the denial. The applicant may provide a written statement of why the comptroller should reconsider the denial within thirty (30) calendar days of the applicant receiving the denial notice. The comptroller may approve the application if the applicant provides information to justify the approval. If the application is subsequently approved, the comptroller shall notify the applicant as soon as practicable.
(g) Owners, agents, arbitrators, and appraisal districts are responsible for verifying the accuracy of the information provided in the arbitrator registry and communicating any inaccuracies to the comptroller as soon as practicable in order that the registry may be corrected. Inclusion of an arbitrator in the comptroller's registry is not and shall not be construed as a representation by the comptroller that all information provided is true and correct and shall not be construed or represented as a professional endorsement of the arbitrator's qualifications to conduct arbitration proceedings.
(h) The registry shall be maintained on the comptroller's Internet website or in non-electronic form and will be updated within thirty (30) calendar days of the date the comptroller's office approves and processes applications.
§9.4258.Qualifications for Inclusion in the Comptroller's Registry of Arbitrators.
(a) To qualify initially as an arbitrator for inclusion in the comptroller's registry of arbitrators and to continue to be included in the registry, an individual must satisfy or comply with the requirements of this section.
(b) A person must principally reside in the state of Texas to qualify for inclusion in the arbitrator registry. A person who has been granted a residence homestead exemption on property he or she owns and occupies in Texas qualifies as an arbitrator. A person does not qualify for inclusion in the registry of arbitrators if he or she has been granted a residence homestead exemption in another state or has been granted more than one such exemption. If an arbitrator owns no property for which a residence homestead exemption has been granted in any state, including Texas, then the arbitrator's principal residence is in the state of Texas if the arbitrator lives in a residential property in Texas more than 50% of his or her time. Falsely claiming to principally reside in Texas will result in the immediate removal of the individual from the registry and the reporting of this misconduct to the individual's professional licensing or certification board or regulatory authority.
(c) To qualify professionally to serve as an arbitrator, a person must either:
(1) be licensed as an attorney and hold a current, active Texas law license; or
(2) have completed at least 30 hours of training in arbitration and alternative dispute resolution procedures from a university, college, or legal or real estate trade association; and hold a current, active license or certification and have been licensed or certified continuously during the five years preceding the date the person agrees to serve as an arbitrator, in any one of the following professions or occupations:
(A) a real estate broker or sales agent under Occupations Code, Chapter 1101;
(B) a real estate appraiser under Occupations Code, Chapter 1103; or
(C) a certified public accountant under Occupations Code, Chapter 901.
(d) For an arbitrator to continue to qualify for inclusion in the registry, he or she must:
(1) complete and submit a new or renewal application form issued by the comptroller on or before:
(A) each renewal date of the applicant's license or certification under which the applicant was qualified previously pursuant to subsection (c) of this section; or
(B) the second anniversary of the date the arbitrator was initially added to the registry or his or her listing on the registry renewed;
(2) be in compliance with subsections (b) and (c) of this section;
(3) have no history of failure to comply with this subchapter; and
(4) have completed during the preceding two years at least eight (8) hours of continuing education in arbitration and alternative dispute resolution procedures offered by a university, college, real estate trade association, or legal association. This continuing education requirement may be satisfied by submission of documentation that the arbitrator attended or taught personally at least eight (8) hours of one or more training courses that meet the requirements of this paragraph.
(e) An individual does not qualify for inclusion in the registry of arbitrators during any period in which he or she holds any one of the following positions in this state:
(1) member of a board of directors of any appraisal district;
(2) member of any appraisal review board;
(3) employee, contractor, or officer of any appraisal district;
(4) employee of the comptroller; or
(5) member of a governing body, officer, or employee of any taxing unit.
§9.4259.Arbitrator Eligibility for a Particular Appointment.
(a) To be eligible for appointment as an arbitrator to a particular arbitration proceeding, an individual must satisfy or comply with the requirements of this section.
(b) To be eligible for initial appointment in an arbitration, the arbitrator must principally reside in the county in Texas where the property that is the subject of the arbitration is located. If no available arbitrator on the registry principally resides in the county in which the property that is the subject of the arbitration is located, the comptroller may appoint an otherwise eligible arbitrator on the registry residing in another county in Texas.
(c) An arbitrator is considered to principally reside in Texas in that county where the arbitrator owns property on which a residence homestead exemption has been granted to the arbitrator. If an arbitrator owns no property for which a residence homestead exemption has been granted in any state, including Texas, then the arbitrator's principal residence is that residential property in the county in which the arbitrator resides more than 50% of his or her time.
(d) A person is ineligible for and may not accept any appointment as an arbitrator in a county in which the property that is the subject of the arbitration is located, if at any time during the five (5) years preceding the appointment at issue, the person has engaged in the following activities in that same county's appraisal district:
(1) represented any person or entity for compensation in any proceeding under the Property Tax Code;
(2) served as an officer or employee of the appraisal district; or
(3) served as a member of the appraisal review board for the appraisal district.
(e) For purposes of subsection (d)(1) of this section:
(1) any proceeding under the Property Tax Code begins with the filing of a notice of protest and includes: communications with appraisal district employees regarding a matter under protest; protest settlement negotiations; any appearance at an ARB hearing; any involvement in a binding arbitration under Tax Code, Chapter 41A; and any involvement at either the district court or appellate court level of an appeal pursued under Tax Code, Chapter 42; and
(2) any person who has served as an officer or employee of any firm, company, or other legal entity that has represented any person or entity for compensation in any proceeding as described by subsection (e)(1) of this section, is ineligible and may not accept the appointment.
(f) An individual is ineligible for and may not accept an appointment as an arbitrator in any arbitration matter in which the individual is related by affinity within the second degree or by consanguinity within the third degree as determined under Government Code, Chapter 573, to any of the following people who are deemed to be a party to the arbitration matter itself:
(2) an officer, employee, or contractor of the appraisal district responsible for appraising the property at issue;
(3) a member of the board of directors of the appraisal district responsible for appraising the property at issue; or
(4) a member of the appraisal review board in the area in which the property at issue is located.
(g) An individual is ineligible for and may not accept an appointment as an arbitrator in any arbitration matter in which the individual currently or during the previous five (5) years has had a business relationship with the owner, the agent, or the appraisal district involved in that particular arbitration matter.
§9.4260.Arbitrator Duties.
(a) Upon inclusion in the comptroller's registry of arbitrators, an individual who accepts an arbitration appointment shall conduct each arbitration proceeding pursuant to the terms of Tax Code, Chapter 41A, and this subchapter; and for a fee that is not more than the applicable amount stated in the fee schedule set out in subsection (d) of this section.
(b) Each arbitrator included in the comptroller's registry is required to notify the comptroller in writing of any changes in contact information (including address, phone number, email address, website), and any material change in the information provided in his or her application or in his or her qualifications or eligibility for appointment within ten (10) calendar days of the change. A material change includes, but is not limited to a change in county of residence, loss of required licensure, incapacity, ineligibility or other condition that would prevent the person from lawfully and professionally performing arbitration duties.
(d) The arbitrator' s fee shall not exceed:
§9.4261.Provision of Arbitration Services.
(a) The arbitrator may require written agreements with the appraisal district and the owner or agent concerning provision of arbitration services, including but not limited to the time, date, place, and manner of conducting and concluding the arbitration proceeding. Arbitration services shall be provided pursuant to this section unless the parties agree otherwise.
(b) Unless the property owner or agent and the appraisal district both agree to arbitration by submission of written documents only, the arbitration will be conducted in person or by teleconference. The arbitrator may decide whether to conduct the arbitration in person or by teleconference unless the property owner or agent indicates on the Request for Binding Arbitration form (Form AP-219) that the arbitration be conducted in person only. If the arbitration is conducted in person, the arbitrator and both parties shall appear in person for the hearing. If the arbitration is conducted in person, the proceeding must be held in the county where the appraisal district office is located and from which the appraisal review board order determining protest was issued, unless the parties agree to another location. The selected location must be in an office-type setting generally open to the public.
(c) Upon acceptance of an appointment, the arbitrator shall contact promptly by telephone or electronic mail the property owner or agent and the appraisal district to notify the parties of his or her appointment, to propose one or more dates for the arbitration hearing, and to request alternate hearing dates from the parties if the date(s) proposed is not acceptable. The arbitrator should cooperate with the appraisal district and the owner or agent in scheduling the arbitration hearing.
(1) if the arbitrator, property owner or agent, and appraisal district have all agreed in writing to the same hearing date after consultation under subsection (c) of this section, the notice of hearing with the agreed date may be served electronically or by first-class mail; or
(2) if no agreement is reached after three (3) or more business days of the arbitrator's initial contact attempt under subsection (c) of this section, the arbitrator shall set the hearing date at least 30 days from the date of mailing of the notice which shall be served by registered or certified mail with return receipt requested.
(1) the date and time of the arbitration hearing;
(2) the physical address of the hearing location if the hearing is in person;
(3) the date by which the parties must exchange evidence before the hearing;
(4) the arbitrator's contact information, including email address, phone number, and mailing address, as well as a fax number if available;
(5) a copy of the arbitrator's written procedures for the hearing;
(6) the methods, including electronic mail, U.S. first-class mail, overnight or personal delivery, by which the parties are to communicate and exchange materials; and
(7) any other matter about which the arbitrator wishes to advise the parties before the hearing.
(g) Each party at the hearing is entitled to be heard; present evidence material to the controversy; and cross-examine any witness. The arbitrator shall administer to each witness testifying the same oath required of a witness in a civil action in district court.
(k) The confidentiality provisions of Tax Code, §22.27, concerning information provided to an appraisal office, apply to information provided to arbitrators. The information may not be disclosed except as provided by law.
(1) that taxes on the property subject to the appeal are delinquent or undisputed taxes were not paid before the delinquency date set by the applicable section of Tax Code, Chapter 31;
(4) that the request for arbitration was filed with the appraisal district more than 45 calendar days after the date the owner received the ARB order determining the protest; or
(5) that the owner filed an appeal with the district court under Tax Code, Chapter 42, concerning the value of the property at issue in the pending arbitration.
(o) The arbitrator must complete an arbitration proceeding in a timely manner and will make every effort to complete the proceeding within 120 days from his or her acceptance of the appointment. Failure to comply with the timely completion of arbitration proceedings may result in the removal of the arbitrator from the comptroller's registry of arbitrators.
§9.4262.Removal of Arbitrator from the Registry of Arbitrators.
(a) The comptroller shall remove a person from the arbitrator registry if:
(1) the person fails or declines to renew the person's agreement to serve as an arbitrator in the manner required under §9.4258 of this title (relating to Qualifications for Inclusion in the Comptroller's Registry of Arbitrators); or
(2) the director of the Property Tax Assistance Division of the comptroller's office determines by clear and convincing evidence there is good cause for removal.
(b) Good cause for removal includes the following grounds:
(1) the person is not qualified or becomes not qualified to serve as an arbitrator under the terms of §9.4258 of this title;
(2) the person is not eligible or becomes ineligible under the terms of §9.4259 of this title (relating to Arbitrator Eligibility for A Particular Appointment);
(3) the person fails to respond to or refuses to comply with requests for information from the comptroller's office;
(4) the person has violated one or more provisions of §9.4260 of this title (relating to Arbitrator Duties), §9.4261 of this title (relating to Provision of Arbitration Services), or §9.4263(d) of this title (relating to Arbitration Determination and Award) (20-day deadline for arbitrator to issue determination and award); and
(5) the person has engaged in repeated instances of bias or misconduct while acting as an arbitrator.
(c) Clear and convincing evidence means the measure or degree of proof that produces a firm belief or conviction of the truth of the allegations regarding the arbitrator and that the allegations constitute good cause for removal.
(d) A person may request the removal of an arbitrator from the registry by filing the following items with the comptroller's Property Tax Assistance Division within sixty (60) calendar days of the last incident giving rise to the request:
(1) a letter, addressed to the division director and signed by the requestor, that identifies the arbitrator sought to be removed and the grounds under subsection (b) of this section that constitute good cause for removal;
(2) at least one sworn statement from an individual with first-hand knowledge of the conduct complained of that sets forth the facts in detail to support the grounds for removal; and
(3) for grounds for removal alleged under subsection (b)(4) or (5) of this section, copies of all available communications exchanged between the arbitrator and the parties, including emails, documents, and any other materials, as well as electronic video or audio recordings.
(e) The confidentiality provisions of Tax Code, §22.27, concerning information provided to an appraisal office, apply to information reviewed or submitted under this section and may not be disclosed except as provided by law. If any of the materials submitted are deemed confidential, that portion of the materials that is considered confidential must be designated as such to protect it from disclosure.
(f) Requests for removal that are not timely or that fail to meet the requirements in subsection (d) of this section will be denied. Requests for removal under subsection (b)(5) of this section that do not identify and include evidence of more than one incident of alleged bias or misconduct will be denied. Requests under subsection (b)(5) of this section based on substantive arbitration issues and the resulting awards will be denied summarily.
(g) Within thirty (30) calendar days after submission, the division will notify the requestor whether the request is accepted for review or denied. There is no appeal for denial of a request. If accepted for review, all materials the requestor submitted will be forwarded by certified mail, return receipt requested or electronically, to the arbitrator who is the subject of the request for a response. The arbitrator has thirty (30) calendar days from receipt of the materials to respond to the division, explaining why a finding of good cause for removal should not be made.
(h) Within thirty (30) calendar days of receipt of the arbitrator's response, the division director will determine whether clear and convincing evidence supports a finding of good cause for removal of the arbitrator from the registry. The division will notify promptly the requestor and the arbitrator of the director's determination.
(i) If good cause for removal under subsection (a)(2) of this section is found, the arbitrator will be removed from the registry for a period of two (2) years from the date of the determination.
(j) There is no appeal for removal of a person from the registry under this section. An arbitrator removed under subsection (a)(2) of this section may reapply for inclusion in the registry two (2) years from the date of the removal determination. The circumstances giving rise to the removal under this section may be considered in evaluating the re-application.
§9.4263.Arbitration Determination and Award.
(d) Within twenty (20) calendar days of the conclusion of the arbitration hearing, the arbitrator shall render and issue his or her decision by completing and signing the comptroller-prescribed Arbitration and Determination Award form (Form 50-704). The comptroller's office generates and delivers this form by first-class mail to the arbitrator for his or her completion and signature. The arbitrator shall deliver a copy of the completed and signed Arbitration and Determination Award form electronically, or by facsimile transmission, or by regular first-class mail, to the owner or agent, the comptroller, and the appraisal district.
(e) An arbitration award is final and may not be appealed except as permitted under Civil Practice and Remedies Code, §171.88, and may be enforced in the manner provided by Civil Practice and Remedies Code, Chapter 171, Subchapter D.
§9.4264.Payment of Arbitrator Fee, Refund of Property Owner Deposit, and Correction of Appraisal Roll.
(a) Deposits owners or agents submit to appraisal districts with requests for arbitration which the appraisal districts forward to the comptroller's office pursuant to §9.4254 of this title (relating to Appraisal District Responsibility for Request) shall be deposited into individual accounts for each owner and according to assigned arbitration numbers.
(b) The provisions of Government Code, Chapter 2251, shall apply to the payment of arbitrator fees by the comptroller, if applicable, beginning on the date that the comptroller receives a copy of the arbitrator's determination and award by regular first-class mail.
(c) The payment of arbitrators' fees and arbitration deposit refunds shall be processed, after the comptroller retains $50 for administrative costs, in the following manner:
(1) If the arbitrator determines that the appraised or market value, as applicable, of the property that is the subject of the appeal is nearer to the property owner's opinion of value of the property as stated in the request for binding arbitration than the value reflected in the ARB order, the comptroller shall refund the property owner's arbitration deposit. In this case, the appraisal district, on receipt of a copy of the award, shall pay the arbitrator's fee.
(2) If the arbitrator determines that the appraised or market value, as applicable, of the property that is the subject of the appeal is not nearer to the property owner's opinion of value of the property as stated in the request for binding arbitration than the value reflected in the ARB order, the comptroller shall pay the arbitrator's fee out of the owner's arbitration deposit.
(3) If the arbitrator determines that the appraised or market value, as applicable, of the property that is the subject of the appeal is exactly one-half of the difference in value between the property owner's opinion of value of the property as stated in the request for binding arbitration and the ARB order, the comptroller shall process payment of the arbitrator's fee and arbitration deposit pursuant to paragraph (2) of this subsection.
(d) The chief appraiser shall correct the appraised or market value, as applicable, of the property as shown on the appraisal roll to reflect the arbitrator's determination if the conditions of either subsection (c)(1) or (3) of this section are met. The chief appraiser shall correct the appraised or market value, as applicable, of the property as shown on the appraisal roll to reflect the arbitrator's determination if the conditions of subsection (c)(2) of this section are met and if the value, as determined by the arbitrator, is less than the value reflected on the ARB order.
(e) Unless the appraisal district is to pay the arbitrator's fee pursuant to subsection (c)(1) of this section, the arbitrator's fee will be paid to him or her from the owner's deposit and mailed to the address shown on the arbitrator's registry application. If the arbitrator's fee is less than the maximum allowable fee under §9.4260(d) of this title (relating to Arbitrator Duties), the comptroller shall refund to the owner or agent any remaining deposit, less $50 retained by the comptroller for administrative costs. If the arbitrator's fee is the maximum allowable fee under §9.4260(d) of this title, the comptroller shall retain $50 of the deposit for administrative costs and no refund will be paid.
(f) If the comptroller denies a request for arbitration as provided by §9.4255(b) of this title (relating to Comptroller Processing of Request), the comptroller shall refund to the owner or agent the deposit, less the $50 retained by the comptroller for administrative costs.
(g) If an arbitrator dismisses a pending arbitration pursuant to §9.4261(m) of this title (relating to Provision of Arbitration Services), the comptroller shall refund to the owner or agent the deposit, less the $50 retained by the comptroller for administrative costs. In such event, the arbitrator must seek payment from the owner or agent for the services rendered prior to the dismissal of the proceeding.
(h) An owner or agent may withdraw a request for arbitration only by written notice delivered to the appraisal district, the comptroller, and the arbitrator, if one has been appointed. If the owner or agent notifies the comptroller of the withdrawal of a request for arbitration in writing fourteen (14) or more calendar days before the arbitration hearing date set in the written notice under §9.4261(d) of this title, the comptroller shall refund to the owner or agent the deposit, less the $50 retained by the comptroller for administrative costs. If the owner or agent withdraws a request for arbitration less than fourteen (14) calendar days before the arbitration hearing date set in the written notice under §9.4261(d) of this title, the comptroller shall pay out of the deposit the fee, if any, charged by the arbitrator.
(i) A refund to an owner or agent or a payment to an arbitrator is subject to the provisions of Government Code, §403.055. The comptroller's form for request for binding arbitration will require identification of the social security number or tax identification number of the individual authorized to receive deposit refunds. For an owner, the owner is required to provide the owner's social security number, federal tax identification number, or Texas state tax identification number. If an agent has been authorized by the owner to receive deposit refunds, the agent is required to provide the agent's social security number, federal tax identification number, or Texas state tax identification number. Deposit refunds will not be processed without the required identification. The comptroller shall not issue a warrant for payment to a person who is indebted to the state or has a tax delinquency owing to the state until the indebtedness or delinquency has been fully satisfied.
§9.4265.Prohibited Communications Regarding Pending Arbitrations.
No party to an arbitration including, but not limited to, a property owner, a property owner's agent, an appraisal district, or an arbitrator, may seek the comptroller's advice or direction on a matter relating to a pending arbitration under Tax Code, Chapter 41A. An arbitration is pending from the date a request for arbitration is filed and continues until delivery of the arbitrator's final arbitration determination and award pursuant to Tax Code, §41A.09. The prohibition in this subsection shall not apply to administrative matters assigned to the comptroller, such as the processing of arbitration requests and deposits.
§9.4266.Forms.
(a) The Comptroller of Public Accounts adopts by reference the Request for Binding Arbitration form (Form AP-219), which owners and agents are required to complete and sign to initiate an appeal by arbitration; and the Arbitration Determination and Award form (Form 50-704), which arbitrators are required to complete and sign to render and issue his or her decision.
(c) All current forms regarding arbitration, including the Appointment of Agent for Binding Arbitration form (Form 50-791), can be obtained from the Comptroller of Public Accounts, Property Tax Assistance Division, P.O. Box 13528, Austin, Texas 78711-3528. Current arbitration forms, except the Arbitration Determination and Award form (Form 50-704), are available on the comptroller's website.
TRD-201704291
SUBCHAPTER H. FORFEITURES OF ACCRUED BENEFITS
34 TAC §29.90, §29.91
The Teacher Retirement System of Texas (TRS) proposes new rules §29.90, relating to Forfeiture of Certain Benefits Due to Criminal Offense and §29.91, relating to Restoring Forfeited Benefits After Conviction is Overturned. The proposed new rules will be located in proposed new subchapter H of chapter 29, titled Forfeitures of Accrued Benefits.
Proposed new rule §29.90 addresses Senate Bill 7 which requires that if a defendant who is or was an employee of a public primary or secondary school is convicted of a qualifying felony of which the victim is a student, the defendant forfeits the right to receive any service retirement benefits payable by TRS. Proposed new rule §29.91 addresses a requirement in the same bill providing that benefits must be restored to the defendant when the conviction is overturned on appeal or the defendant meets the requirements for innocence under §103.001(a)(2), Civil Practices and Remedies Code. The requirements of the bill take effect on the effective date of the rules adopted by the Board of Trustees. Senate Bill 7 requires the Board of Trustees to adopt rules necessary to implement the new section of the law, §824.009, Government Code, no later than December 31, 2017.
Senate Bill 7 was passed during the regular session of the 85th Legislature and added §824.009, Government Code, to the TRS plan terms. The new statute addresses when a person who is a member or retiree of TRS forfeits the right to receive service retirement benefits by being convicted of a felony under §21.02, Penal Code, relating to continuous sexual abuse of young child or children; §21.12, Penal Code, relating to improper relationship between educator and student; §22.011, Penal Code, relating to sexual assault; or §22.021, Penal Code, relating to aggravated sexual assault, of which a student is the victim and the crime occurred while the defendant was employed by a TRS-covered employer. The proposed new rule details how TRS will comply with the new statute.
Proposed new §29.90, concerning the forfeiture of certain benefits due to a criminal offense, requires that upon receipt of notice of judgment from a state or federal district court, a district attorney or U.S. Attorney, or the defendant's employer that includes the information required for TRS to determine that the defendant's benefits are forfeited under §824.009, TRS will terminate the distribution of monthly service retirement benefits to the defendant if the defendant has retired and refund the balance of accumulated contributions in the member's account at the time of retirement or refund the balance of accumulated contributions in the member account to the defendant if he/she has not retired. Because the statute requires that benefits payable to an alternate payee under certain domestic relations orders are not affected by the defendant's ineligibility to receive a retirement annuity, the proposed new rule addresses how TRS will ensure that the alternate payee receives the benefits due under the qualified domestic relations order (QDRO).
Proposed new §29.91, concerning restoring forfeited benefits after a conviction is overturned, addresses how benefits will be restored to a person whose conviction identified in §29.90 is overturned or who meets the requirements for innocence under §103.001(a)(2), Civil Practices and Remedies Code. The new rule addresses how annuity payments that were forfeited will be restored to the member and the amount of the benefit payment if the annuities were divided based on the terms of a qualifying QDRO. It also distinguishes between annuities that were forfeited in the past and annuities that are due in the future. Annuities that were forfeited in the past must immediately be paid to the person along with interest, while annuities that are due in the future may be paid only upon repayment by the person of the accumulated contributions distributed on his/her behalf under §29.90. The proposed new rule also addresses what benefits will be paid to certain alternate payees. Because Senate Bill 7 specifically addresses QDRO's in place before September 1, 2017 and QDRO's entered pursuant to §824.009, but does not address QDRO's entered after September 1 2017 but not pursuant to §824.009, there is a difference in how payments to alternate payees under the different QDRO's are affected.
Don Green, Chief Financial Officer, has determined that, for each year of the first five years that the rules will be in effect, enforcing or administering them does not have foreseeable implications relating to cost or revenues of the state or local governments. Any implications relating to cost or revenues of the state or local governments are due to the enacted legislation requiring TRS to enforce or administer the law. Mr. Green has further determined that, for each year of the first five years that the rules will be in effect, the public benefits expected as a result of adoption of the proposed rules will be to specify how TRS will implement the provisions of recently enacted legislation requiring the forfeiture of certain service retirement benefits due to conviction of certain criminal offenses and the restoration of those benefits upon the overturning of a related conviction. Mr. Green has also determined that the proposed rules impose no economic cost to entities or persons required to comply with the proposed rules. Rather, any cost to entities or persons required to comply with the proposed rules is due to the enacted legislation the rules implement. Consequently, §2001.0045, Government Code, does not apply to the proposed rules. Mr. Green has determined that there will be no effect on a local economy because of the proposal, and therefore no local employment impact statement is required under §2001.022, Government Code. Mr. Green has also determined that there will be no direct adverse economic effect on small businesses or micro-businesses as a result of the proposed rule; therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002, Government Code.
Comments must be submitted in writing to Brian Guthrie, Executive Director, 1000 Red River Street, Austin, Texas 78701-2698. Written comments must be received by TRS no later than 30 days after publication of this notice in the Texas Register.
New rules §29.90 and §29.91 are proposed under the authority of §824.009, Government Code, as added by Senate Bill 7, 85th Legislature (Regular Session), 2017, concerning certain ineligibility for retirement annuity.
§29.90.Forfeiture of Certain Benefits Due to Criminal Offense.
(a) Upon receipt of a notice of judgment prescribed in subsection (b) of this section from a state or federal district court, state district or U.S. attorney, or the defendant's employer related to a qualifying felony described in §824.009, Government Code, that was committed by a member or retiree and in which each and every element of the offense occurred after the effective date of this rule, the Teacher Retirement System of Texas (TRS) shall make only the disbursements described in this section on behalf of the defendant. Disability retirement benefits payable on behalf of a defendant are not affected by this section.
(b) A notice of judgment must include the following:
(1) the name and social security number of the defendant or other identifying information sufficient for TRS to correctly identify the defendant as a member or retiree of TRS;
(2) a statement or sufficient information for TRS to conclude that the crime was a felony described in §824.009(a) or (a-1), Government Code;
(3) an affirmative statement that each and every element of the crime occurred after the effective date of this rule;
(4) a statement that the defendant was a member or service retiree of TRS when the crime was committed;
(5) a statement that the defendant was an employee of a TRS-covered employer at the time the crime was committed and that the crime related to the defendant's employment; and
(6) a statement that the victim of the crime was a student at the time the qualifying felony occurred.
(c) If the defendant is a member of TRS but has not retired under service retirement at the time TRS receives the prescribed notice of judgment required in subsection (a) of this section, TRS shall terminate the defendant's membership and issue a refund of the accumulated contributions in the member account, and in the event the defendant participated in the Deferred Retirement Option Plan (DROP) the refund shall include amounts in the defendant's DROP account, subject to the following:
(1) The defendant or a person authorized to act on the behalf of the defendant must complete the documents required by TRS to effectuate the refund;
(2) The refund of the defendant's accumulated contributions and any DROP balance is subject to the terms of any domestic relations order (DRO) determined by TRS to be a qualified domestic relations order (QDRO) that is in effect before September 1, 2017 and is subject to the terms of any QDRO entered on or after September 1, 2017 except as provided in paragraph (3) of this subsection;
(3) Upon receipt of a certified copy of a DRO related to a division of retirement plan benefits entered on or after September 1, 2017 pursuant to §824.009(i), Government Code, and a determination by TRS that the DRO is a qualified order under Chapter 804, Government Code, TRS shall apply the QDRO to the accumulated contributions in the member account and in any DROP account at the time notice is received by TRS and issue a refund to the defendant of any accumulated contribution amounts or DROP account balance not awarded to the alternate payee in the QDRO. In addition:
(A) If the member has fewer than five years of service credit at the time the notice of judgment is received by TRS, TRS shall distribute to the alternate payee the portion of the accumulated contributions awarded to alternate payee, and TRS shall have no further obligation for the payment of benefits to the alternate payee;
(B) If the member has five or more years of service credit at the time the notice of judgment is received by TRS, TRS shall maintain the portion of the accumulated contributions and any portion of a DROP account awarded to the alternate payee under the terms of the QDRO until the earliest month the defendant would have been eligible for service retirement benefits, including a benefit reduced for early age, and at that time shall commence distribution to the alternate payee of the alternate payee's portion of a standard annuity benefit, reduced for early age if applicable, based on the defendant's annual compensation and service credit maintained by TRS at the time of the refund to the defendant under this subsection. In addition to a portion of the standard annuity, TRS shall also distribute to the alternate payee in the form of a lump sum any portion of the balance remaining in a DROP account awarded to the alternate payee under the QDRO plus applicable interest; and
(C) If the defendant dies before reaching the earliest age eligible for retirement, TRS shall distribute to the alternate payee the portion of the accumulated contributions plus applicable interest awarded to the alternate payee under the QDRO in the form of a lump sum payment, and TRS shall have no further obligation for payments of benefits to the alternate payee;
(4) The alternate payee's interest in the standard annuity benefits payable by TRS under paragraph (3) of this subsection terminates at the earlier of the death of the defendant or the alternate payee as required in §804.101, Government Code. If there are any unpaid accumulated contributions or amounts in the defendant's DROP account awarded to the alternate payee under the terms of the QDRO remaining at the time of the alternate payee's death, the unpaid accumulated contributions, unpaid amounts in the DROP account, and any excess unpaid accumulated contributions remaining if monthly annuity payments have commenced to the alternate payee, are payable to the defendant; and
(5) The refund of accumulated contributions to an alternate payee under the terms of a QDRO pursuant to this subsection terminates the interest of the alternate payee in any future benefits payable by TRS on behalf of the defendant.
(d) If the defendant is a service retiree at the time TRS receives the prescribed notice of judgment required in subsection (a) of this section, TRS shall cease distributions to the defendant of any future service retirement benefits, including any partial lump sum option (PLSO) payments, and any remaining DROP account balance, effective with the annuity for the month following the month in which TRS receives notice of judgment required in this section and shall, in lieu of future service retirement benefits, issue a refund of the accumulated contributions in the member account at the time of retirement and any balance remaining in the defendant's DROP account at the time of the refund, subject to the following:
(1) The refund of accumulated contributions and payment of any unpaid DROP account balance is subject to the terms of any DRO determined by TRS to be a qualified order that is in effect on or after September 1, 2017 that is not entered pursuant to §824.009(i), Government Code and the alternate payee shall receive the share of the accumulated contributions and any remaining DROP account balance awarded by the QDRO;
(2) The refund of accumulated contributions and any DROP account balance pursuant to this subsection to an alternate payee under the terms of a QDRO entered on or after September 1, 2017 but not entered pursuant to §824.009(i), Government Code terminates the interest of the alternate payee in any future benefits payable by TRS on behalf of the defendant;
(3) The defendant shall receive the portion of a refund of accumulated contributions and any unpaid DROP balance awarded to the defendant pursuant to a DRO approved by TRS as a QDRO before September 1, 2017; however payments to the alternate payee of the portion of the service retirement annuity awarded to the alternate payee shall continue under the terms of the QDRO and the pension plan as set forth in paragraph 4 of this subsection. The alternate payee of a QDRO approved before September 1, 2017 shall not receive any portion of the refund of the accumulated contributions to the member required in this subsection;
(4) Upon receipt of a certified copy of a DRO related to a division of property made pursuant to §824.009(i), Government Code, entered on or after September 1, 2017, and a determination by TRS that the DRO is a qualified order under Chapter 804, Government Code, TRS shall apply the QDRO to the service retirement annuity amount and shall pay the alternate payee the portion of each service retirement annuity payment, including a portion of any PLSO payments remaining, and any remaining DROP amount ordered in the QDRO. The QDRO award shall also be applied to the amount of accumulated contributions in the defendant's account at the time of retirement and any balance remaining in the defendant's DROP account at the time the notice of judgment is implemented by TRS and TRS shall issue a refund to the defendant of the amount of accumulated contributions in the member's account at the time of retirement that is not awarded to the alternate payee in the QDRO and the portion of any remaining balance in a DROP account after distributions due to service retirement that were not awarded to the alternate payee. The alternate payee under a QDRO entered pursuant to §824.009(i), Government Code, shall not receive any portion of the refund of the account balance; and
(5) The alternate payee's interest in the benefits payable by TRS on behalf of the defendant, established in a QDRO approved by TRS before September 1, 2017 or entered pursuant to §824.009(i), Government Code, terminates at the earlier of the death of the defendant or the alternate payee. In the event the defendant elected an optional annuity retirement plan, the alternate payee shall receive the portion awarded in the QDRO of the benefit amount payable to the beneficiary of the optional annuity but benefits shall not be paid to the beneficiary. The alternate payee's interest in the benefits payable by TRS under an optional annuity retirement plan terminates at the earlier of the death of the beneficiary or the expiration period, or the alternate payee as required in §804.101, Government Code. If there are any remaining unpaid excess accumulated contributions or any DROP account balance awarded to the alternate payee under the terms of the QDRO remaining at the time of the alternate payee's death, the unpaid excess accumulated contributions and unpaid remaining DROP balance are payable to the defendant or the defendant's estate.
§29.91.Restoring Forfeited Benefits After Conviction is Overturned.
(a) Upon receipt of a notice of a judgment overturning the conviction of a former TRS member or service retiree for a qualifying felony that resulted in the termination of membership in TRS or the forfeiture of service retirement benefits required in §824.009, Government Code, or upon receipt of a notice of judgment that the person whose membership in TRS was terminated or who forfeited service retirement benefits as required in §824.009, Government Code meets the requirements for innocence under §103.001(a)(2), Civil Practice and Remedies Code, TRS shall restore the person to membership or distribute service retirement benefits to the person as provided in this section.
(b) A person whose membership in TRS was terminated as provided in §29.90 of this subchapter before the distribution of service retirement benefits commenced shall be restored to membership in TRS as follows:
(1) If there was a qualified domestic relations order (QDRO) in effect before September 1, 2017, membership shall be restored upon receipt from the former member of an amount equal to the total accumulated contributions paid on behalf of the member under §29.90 of this subchapter, including any accumulated contributions paid to an alternate payee under the terms of a QDRO. However, TRS shall not pay to the alternate payee any portion of any benefits restored under this section under the terms of a QDRO in effect before September 1, 2017, even if the benefits result in part from the reinstatement of service credit initially credited during the marriage.
(2) If a QDRO was entered on or after September 1, 2017 under the authority provided in §824.009(i), Government Code, the person shall repay all of the accumulated contributions distributed under §29.90, and:
(A) If a distribution of service retirement benefits has not yet commenced to the alternate payee, the amount of accumulated contributions held under §29.90(c)(3) for the benefit of the alternate payee shall be restored to the member account. Any future distribution of benefits on behalf of the member shall be subject to the terms of the QDRO entered under the authority of §824.009, Government Code; or
(B) If a distribution of service retirement benefits has commenced to the alternate payee, the former member shall pay the amount of accumulated contributions refunded on his or her behalf less the portion of accumulated contributions retained by TRS under the terms of the QDRO and TRS shall commence distributing to the member the portion of the retirement benefits elected by the member and not awarded to the alternate payee. The alternate payee shall continue to receive the portion of the standard service retirement annuity awarded under the terms of the QDRO until the earlier of the death of the alternate payee or the member.
(3) If a QDRO was entered on or after September 1, 2017 but not under the authority provided in §824.009(i), membership shall be restored upon receipt from the person of an amount equal to the total accumulated contributions paid on behalf of the member under §29.90, including any accumulated contributions paid to an alternate payee. However, TRS shall not pay to the alternate payee any portion of any benefits restored under this section under the terms of a QDRO in effect before September 1, 2017, even if the benefits result in part from the reinstatement of service credit initially credited during the marriage.
(4) If there was no QDRO in effect with respect to the member, membership is restored upon receipt by TRS of an amount equal to all accumulated contributions refunded to the member.
(c) A person whose membership in TRS was terminated as provided in §29.90 after the commencement of service retirement benefits shall be restored to TRS membership as follows:
(1) If there was a QDRO in effect before September 1, 2017 or on or after September 1, 2017 under the authority provided in §824.009(i), Government Code:
(A) the member shall receive an amount equal to the accrued total of annuity payments, including any PLSO payments, previously forfeited due to the conviction through the calendar month of notice of the judgement overturning the conviction to TRS plus interest, less any amounts paid to the alternate payee under the terms of a QDRO;
(B) the member shall repay to TRS an amount equal to the portion of the accumulated contributions refunded to the member. A distribution of service retirement annuities, less any amount distributed to the alternate payee under the terms of the QDRO, may resume to the member effective with the annuity payable for the calendar month in which TRS receives the member's payment of the amount refunded under this section;
(2) If there was a QDRO in effect after September 1, 2017 and not under the authority of provided in §824.009(i), Government Code:
(A) the member shall receive an amount equal to the accrued total of annuity payments, including any PLSO payments, previously forfeited due to the conviction through the calendar month of notice of the judgement overturning the conviction to TRS plus interest;
(B) the member shall repay to TRS an amount equal to all accumulated contributions refunded by TRS, including any accumulated contributions paid to an alternate payee pursuant to the QDRO. A distribution of service retirement annuities may resume to the member effective with the annuity payable for the calendar month in which TRS receives the member's payment of the amount of refunded accumulated contributions. TRS shall not pay to the alternate payee any portion of any benefits restored under this section under the terms of the QDRO, even if the benefits result in part from the reinstatement of service credit initially credited during the marriage.
(3) If there was no QDRO in effect with respect to the member, the member shall receive an amount equal to the accrued total of annuity payments, including any PLSO payments, previously forfeited due to the conviction through the calendar month of notice of the judgement overturning the conviction to TRS plus interest. A distribution of service retirement annuities may resume to the member effective with the annuity payable for the calendar month in which TRS receives the member's payment of the total amount accumulated contributions refunded to the member.
(d) The amount of interest payable under subsection (c) of this section is the amount of interest provided for member contributions in §825.307, Government Code, for the time period that the service retirement benefits were previously forfeited.
TRD-201704311
For further information, please call: (512) 542-6506
SUBCHAPTER A. RETIREE HEALTH CARE BENEFITS (TRS-CARE)
34 TAC §§41.1, 41.5, 41.7, 41.12
The Teacher Retirement System of Texas (TRS or system) proposes amendments to §41.1, relating to Initial Enrollment Periods for the Health Benefit Program under the Texas Public School Retired Employees Group Benefits Act (TRS-Care), §41.5, relating to Payment of Contributions, and §41.7, relating to Effective Date of Coverage.
TRS also proposes new §41.12 relating to Eligibility for the Alternative Plan for Medicare-Eligible Participants.
The proposed amended or new rules all concern TRS-Care, the health benefit program TRS administers for retired eligible public school employees and their eligible dependents. The proposed amendments to §§41.1, 41.5, and 41.7 and new §41.12 affect Chapter 1575, Insurance Code, which provides for the establishment and administration of TRS-Care.
The proposed changes to subsections (c) and (d) of §41.1 address changes to the TRS-Care plans that will take effect in early January of 2018. For the sake of consistency, the proposed changes to subsection (c) provide that the initial enrollment period for surviving spouses and surviving dependent children of a deceased retiree shall be similar to the initial enrollment periods of an eligible service retiree (under subsection (a)) and an eligible disability retiree (under subsection (b)) of this rule. The same can be said of the proposed changes to subsection (d) with regard to the proposed initial enrollment period for surviving spouses and surviving dependent children of a deceased active member. TRS-Care will continue its current practice of providing advance written notice of these initial enrollment periods to surviving spouses and surviving dependent children that are known to TRS.
The proposed changes to subsections (e) and (h) of §41.5 address upcoming changes to the TRS-Care plans that are being implemented in response to recent legislation, including House Bill 3976 (85th Legislature, Regular Session, 2017) ("HB 3976"). Beginning on January 1, 2018, there will no longer be a free TRS-Care plan (i.e., TRS-Care 1) and there will no longer be two other levels of coverage; the TRS-Care 2 and TRS-Care 3 plans are being eliminated. Accordingly, failure to timely pay the full amount of a required contribution for coverage of a retiree or a surviving spouse will result in termination of coverage under TRS-Care. TRS will no longer have the option to downgrade the retiree's or surviving spouse's coverage to a free TRS-Care plan. TRS-Care will continue to work with retirees and surviving spouses over a period of months in an effort to bring their balances current before termination of coverage occurs.
The reference to §1575.1581, Insurance Code in §41.7(b) is proposed for deletion because recent legislation repealed that statute effective January 1, 2018.
The proposed substantive changes to §41.7(d) address upcoming changes to the TRS-Care plans that are being implemented in response to recent legislation. As noted above, beginning on January 1, 2018, there will no longer be multiple levels of coverage in TRS-Care. Therefore, the reference to "level[s] of coverage" is no longer appropriate. Also, with upcoming eligibility requirements, the ability of surviving spouses and surviving dependent children to remain in a given plan will be subject to the applicable eligibility requirements of the given plan.
The proposed substantive changes to §41.7(h) are in response to recent legislation which, effective January 1, 2018, replaces the current Age 65 enrollment opportunity with a broader, new Age 65 enrollment opportunity. The effective date of coverage will be (1) the first day of the month following the month of the retiree's or surviving spouse's 65th birthday if the application for coverage is received before or during the month of the retiree's or surviving spouse's 65th birthday; or (2) the first day of the month following the receipt of the application if the application for coverage is received after the month of the retiree's or surviving spouse's 65th birthday but within the enrollment period.
In §41.7(i), the proposed addition of the two references to Medicare Part B is needed because, effective January 1, 2018, a participant will be eligible for the Medicare Advantage plan if the participant only has Medicare Part B. Accordingly, TRS-Care will begin adjusting the costs of coverage for participants upon receiving proof of enrollment not only in Medicare Part A but also in Medicare Part B. The re-lettering of the references to the last three subsections of §41.7 result from the proposed elimination of §41.7(j), discussed immediately below.
Current §41.7(j) is proposed for deletion because, as noted above, beginning on January 1, 2018, there will no longer be different levels of coverage (i.e., plans with reduced levels of coverage). The three existing levels of coverage, embodied in the TRS-Care 1, TRS-Care 2, and TRS-Care 3 plans, are being eliminated at the end of this current plan year.
In new, re-lettered §41.7(j), the proposed changes provide that all retirees, surviving spouses, and surviving dependent children may cancel their TRS-Care coverage by submitting an appropriate notice of cancellation form. Cancellations will be effective on the later of: (1) the first day of the month following TRS-Care's receipt of the completed notice of cancellation form; or (2) the date requested by the retiree, surviving spouse, or surviving dependent child on the completed notice of cancellation form received by TRS-Care. The removal of the "fourteen day" retroactive cancellation option will streamline TRS-Care operations without a substantial impact upon participants.
In response to recent legislation, TRS will begin offering a new "alternative Plan" on January 1, 2018. Proposed new TRS-Care rule §41.12, entitled Eligibility for the Alternative Plan for Medicare-Eligible Participants, establishes the eligibility criteria for enrollment in this plan. An individual will be eligible to enroll in the Alternative Plan if: (1) the individual is eligible to enroll in TRS-Care; and (2) the individual is eligible for Medicare and either: (i) does not have reasonable access to a particular provider, as determined by TRS; or (ii) as of January 1, 2018, does not have Medicare Part B coverage and the individual's ability to obtain Medicare Part B coverage is cost prohibitive, as determined by TRS.
Don Green, Chief Financial Officer, has determined that, for each year of the first five years that the rules will be in effect, enforcing or administering them does not have foreseeable implications relating to cost or revenues of the state or local governments. Any implications relating to cost or revenues of state or local governments are due to recently enacted legislation requiring TRS to enforce or administer the law, including HB 3976. Mr. Green has further determined that, for each year of the first five years that the rules will be in effect, the public benefits expected as a result of adoption of the proposed rules will be to specify how TRS will implement the provisions of recently enacted legislation, including HB 3976, which entails plan design changes and new enrollment opportunities for the TRS-Care program. Mr. Green has also determined that the proposed rules impose no economic cost to entities or persons required to comply with the proposed rules. Any cost to entities or persons required to comply with the proposed rules is due to recently enacted legislation, including HB 3976. Consequently, §2001.0045, Government Code, does not apply to the proposed rules. Mr. Green has determined that there will be no effect on a local economy because of the proposals, and therefore no local employment impact statement is required under §2001.022, Government Code. Mr. Green has also determined that there will be no direct adverse economic effect on small businesses or micro-businesses as a result of the proposed rule; therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002, Government Code.
The amendments to §§41.1, 41.5, and 41.7 and new §41.12 are proposed under the authority of §1575.052, Insurance Code, which authorizes the TRS Board of Trustees to adopt rules it considers reasonably necessary to implement and administer the TRS-Care program.
§41.1.Initial Enrollment Periods for the Health Benefit Program under the Texas Public School Retired Employees Group Benefits Act (TRS-Care).
(a) The initial enrollment period in the health benefits program under the Texas Public School Retired Employees Group Benefits Act (TRS-Care) for eligible Teacher Retirement System of Texas (TRS) retirees who take a service retirement and who are eligible to enroll in TRS-Care at the time of retirement expires at the end of the later of:
(1) the last day of the month that is 3 consecutive calendar months, but in no event less than 90 days, after their effective retirement date; or
(2) the last day of the month that is 3 consecutive calendar months, but in no event less than 90 days, following the last day of the month in which their election to retire is received by TRS.
(b) The initial enrollment period in TRS-Care for eligible TRS disability retirees expires at the end of the last day of the month that is 3 consecutive calendar months, but in no event less than 90 days, after the date that the disability retirement is approved by the TRS Medical Board.
(c) The initial enrollment period in TRS-Care for an eligible [a] surviving spouse of a deceased retiree and for an eligible [a] surviving dependent child of a deceased [an eligible] retiree expires on the last day of the month that is 3 consecutive calendar months, but in no event less than 90 days, after the retiree died. [at the end of the later of:]
[(1) the 31st day after the end of the month in which the eligible retiree died; or]
[(2) the 31st day after the date of the notice of eligibility that is sent to the surviving spouse or the surviving dependent child at the individual's last known address, as shown in the TRS-Care records.]
(d) The initial enrollment period in TRS-Care for an eligible [a] surviving spouse of a deceased active member and for an eligible [a] surviving dependent child of a deceased active member expires on the last day of the month that is 3 consecutive calendar months, but in no event less than 90 days, after the active member died.[, as both are defined by §1575.003, Insurance Code, expires at the end of the later of:]
[(1) the 31st day after the end of the month in which the active member died; or]
[(2) the 31st day following the date of the notice of opportunity to enroll that is sent to the surviving spouse or the surviving dependent child at the individual's last known address, as shown in the TRS-Care records.]
(e) Notwithstanding the other provisions of this section:
(1) A retiree may enroll a new spouse within 31 days of the date on which the retiree marries;
(2) A retiree or surviving spouse may enroll a child who becomes a dependent as defined by § 1575.003, Insurance Code, within 31 days after the date on which the child becomes a dependent eligible for coverage under TRS-Care; and
(3) A participant shall be entitled to all applicable COBRA rights under the Federal Public Health Service Act.
(f) If a retiree fails to enroll a newly eligible spouse or dependent child or if a surviving spouse fails to enroll a newly eligible dependent child within the time periods set out in subsection (e) of this section, the retiree or surviving spouse will not be able to enroll the spouse or dependent child in TRS-Care until a subsequent enrollment period.
§41.5.Payments of Contributions.
(a) Retirees, surviving spouses, and surviving dependent children or their representative (collectively, "participants") shall pay monthly contributions as set by the trustee for their and their dependents' participation in TRS-Care.
(b) To be eligible for TRS-Care coverage, a participant must authorize the trustee in writing to deduct the contribution amount from the annuity payment. After such authorization, the trustee may deduct the amount of the contribution from the annuity payment.
(c) If the amount of the contribution is more than the amount of the annuity payment, the participant will be billed directly by TRS or the TRS-Care administrator for the entire contribution amount.
(d) Failure to timely pay the full amount of a required contribution for coverage of a dependent or a surviving dependent child will result in termination of coverage for the dependent or surviving dependent child at the end of the month for which the last contribution was made.
(e) Failure to timely pay the full amount of a required contribution for coverage of a retiree or a surviving spouse [enrolled in a TRS-Care 2 plan or a TRS-Care 3 plan] will result in termination of coverage [in the TRS-Care 2 plan or the TRS-Care 3 plan, as applicable, and enrollment in TRS-Care 1] for the retiree or surviving spouse[, resulting in a decrease in coverage] at the end of the month for which the last contribution was made. [The retiree or surviving spouse will not be able to change his or her TRS-Care coverage tier (level of coverage) unless and until the retiree or surviving spouse has an additional enrollment opportunity as set out in §41.2 of this title (relating to Additional Enrollment Opportunities) or some other opportunity under Insurance Code, §1575.161.]
(f) A disability retiree whose annuity payments are forfeited under §31.36 of this title (Relating to Forfeiture of Disability Retirement Annuity Payments Due to Excess Compensation) shall pay the total monthly cost of coverage, as determined by the trustee, attributable to the participation of that disability retiree and the dependents of that disability retiree during the months for which the disability retiree's annuity payments are forfeited. A disability retiree shall pay the total monthly cost of coverage starting with the calendar month for which the first annuity payment is forfeited. The disability retiree shall continue to pay the total monthly cost of coverage for each month of coverage in which the annuity payment for that month is forfeited in accordance with §31.36 of this title. Nothing in this section shall be construed to prevent TRS from collecting the total monthly cost of coverage for months in which annuities should have been but were not forfeited if TRS determines that a disability retiree knowingly failed to report compensation as required and the failure resulted in payment of annuities by TRS that the disability retiree was not eligible to receive.
(g) Notwithstanding subsections (d) and (e) of this section, a disability retiree whose annuity payments are forfeited under §31.36 of this title who fails to timely pay the full amount of a required contribution for coverage attributable to his participation or that of his dependents, including but not limited to amounts found due and owing pursuant to a TRS determination that a disability retiree knowingly failed to report compensation as required and the failure resulted in payment of annuities by TRS that the disability retiree was not eligible to receive, shall have coverage under TRS-Care for himself and his dependents suspended unless TRS-Care receives full payment of all costs of coverage currently due and owing within thirty-one (31) days after TRS-Care mails written notice to the disability retiree of the current amount due and owing. Under such circumstances, the suspension of coverage will be effective at midnight of the last day of the month in which TRS-Care mailed the above written notice to the disability retiree of the current amount due and owing. During such a suspension, coverage under TRS-Care will cease and the costs of coverage for TRS-Care will no longer accrue.
(h) If TRS resumes payment of an annuity to a disability retiree whose coverage has been suspended as described in subsection (g) of this section, the following shall apply:
(1) Such disability retiree shall pay, no later than the last day of the month in which TRS resumes annuity payments to the disability retiree, all costs of coverage due and owing attributable to the participation of that disability retiree and the dependents of that disability retiree, including past due amounts for coverage prior to the suspension and the costs of coverage for all months during which the disability retiree's annuity payments are resumed, if any.
(2) Upon payment, reinstatement of TRS-Care coverage shall be effective the first day of the earliest month for which the disability retiree's annuity payments are resumed.
(3) If payment in full of all required contributions then due and owing is not timely received by TRS-Care, then [notwithstanding subsections (d) and (e) of this section]:
(A) TRS-Care coverage for the dependents of that disability retiree shall be terminated effective the last day of the month in which the dependents' coverage was suspended under subsection (g) of this section;
(B) TRS-Care coverage for the disability retiree shall be terminated [enrolled in a TRS-Care 2 plan or a TRS-Care 3 plan prior to the suspension, as applicable, will terminate] effective the last day of the last month in [during] which the disability retiree's coverage was suspended under subsection (g) of this section. [and the disability retiree will be enrolled in TRS-Care 1, effective the first day of the earliest month for which the disability retiree's annuity payments are resumed following the suspension, resulting in a decrease in coverage; and]
[(C) TRS-Care coverage for the disability retiree enrolled prior to the suspension in TRS-Care 1 will resume effective the first day of the earliest month for which the disability retiree's annuity payments are resumed following the suspension. The disability retiree will not be able to change his TRS-Care coverage tier (level of coverage) or add dependents unless and until the disability retiree has an additional enrollment opportunity as set out in §41.2 of this title or some other opportunity under Insurance Code, §1575.161.]
§41.7.Effective Date of Coverage.
(a) Except as allowed by subsection (c) of this section, for TRS members who take a service or disability retirement and enroll in coverage during their initial enrollment period as described in §41.1 of this title (relating to Initial Enrollment Periods for the Health Benefits Program Under the Texas Public School Retired Employees Group Benefits Act (TRS-Care)), the effective date of coverage is:
(1) the first day of the month following the effective date of retirement if the application for coverage is received by TRS-Care on or before the effective retirement date; or
(2) the first day of the month following the receipt of the application for coverage by TRS-Care if the application is received after the effective retirement date but within the initial enrollment period.
(b) A [Subject to §1575.1581, Insurance Code, a] TRS member who takes a service or disability retirement and enrolls in coverage during his or her initial enrollment period may, at any time during his or her initial enrollment period, make changes to his or her coverage elections. The effective date of coverage for the new elections is the first day of the month following receipt by TRS-Care of the application requesting the change in coverage.
(c) Regardless of the date a TRS member submits his application for retirement, if a TRS member enrolls in coverage during his initial enrollment period as described in §41.1 of this title, the TRS member may defer the effective date of coverage described in subsection (a) of this section for himself and his eligible dependents to the first day of any of the three (3) months immediately following the month after the effective date of retirement. This deferment period runs concurrent with, and does not extend, the enrollment period as described in §41.1 of this title. In no event may a TRS member defer the effective date of TRS-Care coverage to a date prior to the date upon which TRS-Care receives the application for coverage from the TRS member.
(d) Surviving spouses and surviving dependent child(ren) who are currently enrolled with the retiree [participant] at the time of the retiree's [participant's] death will continue to be enrolled in the same [level of coverage and the same] coverage plan, subject to the applicable eligibility requirements of that coverage plan.
(e) If the surviving spouse or the surviving dependent child was not enrolled in TRS-Care immediately preceding his or her becoming eligible for coverage, the effective date of coverage will be, at the election of the surviving spouse or the surviving dependent child, either the first day of the month following:
(1) TRS-Care's receipt of an application during the initial enrollment period as described in §41.1 of this title; or
(2) the month of the death of the deceased TRS service or disability retiree or deceased active TRS member, provided TRS-Care receives an application during the initial enrollment period as described in §41.1 of this title.
(f) The effective date of coverage for an eligible dependent who is enrolled under a retiree's or surviving spouse's TRS-Care coverage during the initial enrollment period is the same date as the retiree or surviving spouse's effective date of coverage unless the dependent is enrolled after the retiree's effective retirement date and after the retiree has enrolled but within the initial enrollment period, in which case the dependent's effective date of coverage will be the first day of the month following TRS-Care's receipt of the application to enroll the dependent.
(g) The effective date of coverage for an eligible individual who is enrolled in TRS-Care as a result of a special enrollment event, as described in §41.2(c) [(b)(1)] of this title [chapter] (relating to Additional Enrollment Opportunities), is the date specified under the provisions of the Health Insurance Portability and Accountability Act of 1996 (Pub. L. No. 104-191, 110 Stat. 1936 (1996)).
(h) The effective date of coverage for an eligible individual who is enrolled in TRS-Care as a result of the Age 65 enrollment opportunity, as [a retiree, a surviving spouse, and an eligible dependent] described in §41.2(b) [(a)(2) or (3) of this title who submit an application within the time period described by §41.2(a)(8)] of this title is:
(1) the first day of the month following the month of the retiree's or surviving spouse's 65th birthday if the application for coverage is received by TRS-Care [on or] before or during the month of the retiree's or surviving spouse's 65th birthday; or
(2) the first day of the month following the receipt of the application by TRS-Care if the application for coverage is received after the month of the retiree's or surviving spouse's 65th birthday but within the enrollment period.
(i) Except as provided in subsections (k), (l), and (m)[, and (n)] of this section, the effective date of changes in coverage due to the acquisition of Medicare Part A and/or Medicare Part B is the first of the month following the date of TRS-Care's receipt of proof, satisfactory to TRS-Care, of the participant's or dependent's Medicare Part A and/or Medicare Part B coverage.
[(j) Except as provided in subsections (l), (m), and (n) of this section, the effective date of reduction in coverage shall be the first day of the month following TRS-Care's receipt of a signed request for reduced coverage.]
(j) [(k)] A retiree, surviving spouse, or surviving dependent child may cancel any coverage by submitting the appropriate notice of cancellation form [notice ] to TRS-Care. Cancellations will be effective on the later of:
(1) the first day of the month following TRS-Care's receipt of the completed [date printed on the] notice of cancellation form [("notice date") sent to the retiree at the retiree's last known address, as shown in the TRS-Care records, if TRS-Care receives the completed notice of cancellation within fourteen days of the notice date]; or
(2) the date requested by the retiree, surviving spouse, or surviving dependent child on the [first day of the month following TRS-Care's receipt of the retiree's] completed notice of cancellation form received by TRS-Care. [ if the form is received more than fourteen calendar days after the notice date; or]
[(3) the first day of the month following TRS-Care's receipt of a written request to cancel coverage from a surviving spouse or from or on behalf of a surviving dependent child.]
(k) [(l)] Where a participant has Medicare Part A coverage and TRS-Care has been paying primary to Medicare on Medicare Part A claims, TRS-Care may seek the recovery of funds and may make the effective date of the correct coverage retroactive to the first day of the earliest month for which recovery of such overpaid funds is possible under Medicare rules.
(l) [(m)] Where a participant has Medicare Part A coverage and TRS-Care has been paying primary to Medicare on Medicare Part A claims, TRS-Care may make the effective date of the correct coverage retroactive to when the participant was first enrolled in both Medicare and TRS-Care to a maximum retroactive period of twelve months, including the month in which proof, satisfactory to TRS-Care, of Medicare Part A coverage is received by TRS-Care, and based thereon, TRS-Care may refund or credit the amount due to the participant.
(m) [(n)] Upon TRS-Care's discovery that a participant does not have Medicare Part A coverage, in contrast to TRS-Care records indicating the participant has Medicare Part A coverage, TRS-Care will contact the participant and advise the participant that the cost of coverage and the coverage will be adjusted prospectively effective the first day of the next month unless proof, satisfactory to TRS-Care, of Medicare Part A coverage is received by TRS-Care prior to that date. Claims will be paid based upon the coverage in effect at the time the services were provided. Any claims already paid as if Medicare Part A were in effect will not be adjusted.
§41.12.Eligibility for the Alternative Plan for Medicare-Eligible Participants.
An individual is eligible to enroll in the Alternative Plan offered under TRS-Care if:
(1) the individual is eligible to enroll in TRS-Care; and
(2) the individual is eligible for Medicare and either:
(A) does not have reasonable access to a particular provider, as determined by TRS; or
(B) as of January 1, 2018, does not have Medicare Part B coverage and the individual's ability to obtain Medicare Part B coverage is cost prohibitive, as determined by TRS.
TRD-201704312
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