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  H.B. No. 89
 
 
 
 
AN ACT
  relating to state contracts with and investments in companies that
  boycott Israel.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle F, Title 10, Government Code, is
  amended by adding Chapter 2270 to read as follows:
  CHAPTER 2270. PROHIBITION ON CONTRACTS WITH COMPANIES BOYCOTTING
  ISRAEL
         Sec. 2270.001.  DEFINITIONS. In this chapter: 
               (1)  "Boycott Israel" has the meaning assigned by
  Section 808.001.
               (2)  "Company" has the meaning assigned by Section
  808.001.
               (3)  "Governmental entity" has the meaning assigned by
  Section 2251.001.
         Sec. 2270.002.  PROVISION REQUIRED IN CONTRACT.  A
  governmental entity may not enter into a contract with a company for
  goods or services unless the contract contains a written
  verification from the company that it:
               (1)  does not boycott Israel; and
               (2)  will not boycott Israel during the term of the
  contract.
         SECTION 2.  Subtitle A, Title 8, Government Code, is amended
  by adding Chapter 808 to read as follows:
  CHAPTER 808. PROHIBITION ON INVESTMENT IN COMPANIES THAT BOYCOTT
  ISRAEL
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 808.001.  DEFINITIONS.  In this chapter:
               (1)  "Boycott Israel" means refusing to deal with,
  terminating business activities with, or otherwise taking any
  action that is intended to penalize, inflict economic harm on, or
  limit commercial relations specifically with Israel, or with a
  person or entity doing business in Israel or in an
  Israeli-controlled territory, but does not include an action made
  for ordinary business purposes.
               (2)  "Company" means a for-profit sole proprietorship,
  organization, association, corporation, partnership, joint
  venture, limited partnership, limited liability partnership, or
  limited liability company, including a wholly owned subsidiary,
  majority-owned subsidiary, parent company, or affiliate of those
  entities or business associations that exists to make a profit.
               (3)  "Direct holdings" means, with respect to a
  company, all securities of that company held directly by a state
  governmental entity in an account or fund in which a state
  governmental entity owns all shares or interests.
               (4)  "Indirect holdings" means, with respect to a
  company, all securities of that company held in an account or fund,
  such as a mutual fund, managed by one or more persons not employed
  by a state governmental entity, in which the state governmental
  entity owns shares or interests together with other investors not
  subject to the provisions of this chapter. The term does not
  include money invested under a plan described by Section 401(k) or
  457 of the Internal Revenue Code of 1986.
               (5)  "Listed company" means a company listed by the
  comptroller under Section 808.051.
               (6)  "State governmental entity" means:
                     (A)  the Employees Retirement System of Texas,
  including a retirement system administered by that system;
                     (B)  the Teacher Retirement System of Texas;
                     (C)  the Texas Municipal Retirement System;
                     (D)  the Texas County and District Retirement
  System;
                     (E)  the Texas Emergency Services Retirement
  System; and
                     (F)  the permanent school fund.
         Sec. 808.002.  OTHER LEGAL OBLIGATIONS.  With respect to
  actions taken in compliance with this chapter, including all good
  faith determinations regarding companies as required by this
  chapter, a state governmental entity and the comptroller are exempt
  from any conflicting statutory or common law obligations, including
  any obligations with respect to making investments, divesting from
  any investment, preparing or maintaining any list of companies, or
  choosing asset managers, investment funds, or investments for the
  state governmental entity's securities portfolios.
         Sec. 808.003.  INDEMNIFICATION OF STATE GOVERNMENTAL
  ENTITIES, EMPLOYEES, AND OTHERS.  In a cause of action based on an
  action, inaction, decision, divestment, investment, company
  communication, report, or other determination made or taken in
  connection with this chapter, the state shall, without regard to
  whether the person performed services for compensation, indemnify
  and hold harmless for actual damages, court costs, and attorney's
  fees adjudged against, and defend:
               (1)  an employee, a member of the governing body, or any
  other officer of a state governmental entity;
               (2)  a contractor of a state governmental entity;
               (3)  a former employee, a former member of the
  governing body, or any other former officer of a state governmental
  entity who was an employee, member of the governing body, or other
  officer when the act or omission on which the damages are based
  occurred;
               (4)  a former contractor of a state governmental entity
  who was a contractor when the act or omission on which the damages
  are based occurred; and
               (5)  a state governmental entity.
         Sec. 808.004.  NO PRIVATE CAUSE OF ACTION. (a)  A person,
  including a member, retiree, or beneficiary of a retirement system
  to which this chapter applies, an association, a research firm, a
  company, or any other person may not sue or pursue a private cause
  of action against the state, a state governmental entity, a current
  or former employee, a member of the governing body, or any other
  officer of a state governmental entity, or a contractor of a state
  governmental entity, for any claim or cause of action, including
  breach of fiduciary duty, or for violation of any constitutional,
  statutory, or regulatory requirement in connection with any action,
  inaction, decision, divestment, investment, company communication,
  report, or other determination made or taken in connection with
  this chapter.
         (b)  A person who files suit against the state, a state
  governmental entity, an employee, a member of the governing body,
  or any other officer of a state governmental entity, or a contractor
  of a state governmental entity, is liable for paying the costs and
  attorney's fees of a person sued in violation of this section.
         Sec. 808.005.  INAPPLICABILITY OF REQUIREMENTS INCONSISTENT
  WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES.  A state
  governmental entity is not subject to a requirement of this chapter
  if the state governmental entity determines that the requirement
  would be inconsistent with its fiduciary responsibility with
  respect to the investment of entity assets or other duties imposed
  by law relating to the investment of entity assets, including the
  duty of care established under Section 67, Article XVI, Texas
  Constitution.
         Sec. 808.006.  RELIANCE ON COMPANY RESPONSE.  The
  comptroller and a state governmental entity may rely on a company's
  response to a notice or communication made under this chapter
  without conducting any further investigation, research, or
  inquiry.
  SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
         Sec. 808.051.  LISTED COMPANIES. (a)  The comptroller shall
  prepare and maintain, and provide to each state governmental
  entity, a list of all companies that boycott Israel. In maintaining
  the list, the comptroller may review and rely, as appropriate in the
  comptroller's judgment, on publicly available information
  regarding companies, including information provided by the state,
  nonprofit organizations, research firms, international
  organizations, and governmental entities.
         (b)  The comptroller shall update the list annually or more
  often as the comptroller considers necessary, but not more often
  than quarterly, based on information from, among other sources,
  those listed in Subsection (a).
         (c)  Not later than the 30th day after the date the list of
  companies that boycott Israel is first provided or updated, the
  comptroller shall file the list with the presiding officer of each
  house of the legislature and the attorney general and post the list
  on a publicly available website.
         Sec. 808.052.  IDENTIFICATION OF INVESTMENT IN LISTED
  COMPANIES.  Not later than the 30th day after the date a state
  governmental entity receives the list provided under Section
  808.051, the state governmental entity shall notify the comptroller
  of the listed companies in which the state governmental entity owns
  direct holdings or indirect holdings.
         Sec. 808.053.  ACTIONS RELATING TO LISTED COMPANY. (a)  For
  each listed company identified under Section 808.052, the state
  governmental entity shall send a written notice:
               (1)   informing the company of its status as a listed
  company;
               (2)   warning the company that it may become subject to
  divestment by state governmental entities after the expiration of
  the period described by Subsection (b); and
               (3)  offering the company the opportunity to clarify
  its Israel-related activities.
         (b)  Not later than the 90th day after the date the company
  receives notice under Subsection (a), the company must cease
  boycotting Israel in order to avoid qualifying for divestment by
  state governmental entities.
         (c)  If, during the time provided by Subsection (b), the
  company ceases boycotting Israel, the comptroller shall remove the
  company from the list maintained under Section 808.051 and this
  chapter will no longer apply to the company unless it resumes
  boycotting Israel.
         (d)  If, after the time provided by Subsection (b) expires,
  the company continues to boycott Israel, the state governmental
  entity shall sell, redeem, divest, or withdraw all publicly traded
  securities of the company, except securities described by Section
  808.055, according to the schedule provided by Section 808.054.
         Sec. 808.054.  DIVESTMENT OF ASSETS. (a)  A state
  governmental entity required to sell, redeem, divest, or withdraw
  all publicly traded securities of a listed company shall comply
  with the following schedule:
               (1)  at least 50 percent of those assets must be removed
  from the state governmental entity's assets under management not
  later than the 180th day after the date the company receives notice
  under Section 808.053 or Subsection (b) unless the state
  governmental entity determines, based on a good faith exercise of
  its fiduciary discretion and subject to Subdivision (2), that a
  later date is more prudent; and
               (2)  100 percent of those assets must be removed from
  the state governmental entity's assets under management not later
  than the 360th day after the date the company receives notice under
  Section 808.053 or Subsection (b).
         (b)  If a company that ceased boycotting Israel after
  receiving notice under Section 808.053 resumes its boycott, the
  state governmental entity shall send a written notice to the
  company informing it that the state governmental entity will sell,
  redeem, divest, or withdraw all publicly traded securities of the
  company according to the schedule in Subsection (a).
         (c)  Except as provided by Subsection (a), a state
  governmental entity may delay the schedule for divestment under
  that subsection only to the extent that the state governmental
  entity determines, in the state governmental entity's good faith
  judgment, and consistent with the entity's fiduciary duty, that
  divestment from listed companies will likely result in a loss in
  value or a benchmark deviation described by Section 808.056(a).  If
  a state governmental entity delays the schedule for divestment, the
  state governmental entity shall submit a report to the presiding
  officer of each house of the legislature and the attorney general
  stating the reasons and justification for the state governmental
  entity's delay in divestment from listed companies.  The report
  must include documentation supporting its determination that the
  divestment would result in a loss in value or a benchmark deviation
  described by Section 808.056(a), including objective numerical
  estimates.  The state governmental entity shall update the report
  every six months.
         Sec. 808.055.  INVESTMENTS EXEMPTED FROM DIVESTMENT. A
  state governmental entity is not required to divest from any
  indirect holdings in actively or passively managed investment funds
  or private equity funds. The state governmental entity shall
  submit letters to the managers of each investment fund containing
  listed companies requesting that they remove those companies from
  the fund or create a similar actively or passively managed fund with
  indirect holdings devoid of listed companies. If a manager creates
  a similar fund with substantially the same management fees and same
  level of investment risk and anticipated return, the state
  governmental entity may replace all applicable investments with
  investments in the similar fund in a time frame consistent with
  prudent fiduciary standards but not later than the 450th day after
  the date the fund is created.
         Sec. 808.056.  AUTHORIZED INVESTMENT IN LISTED COMPANIES.
  (a) A state governmental entity may cease divesting from one or
  more listed companies only if clear and convincing evidence shows
  that:
               (1)  the state governmental entity has suffered or will
  suffer a loss in the hypothetical value of all assets under
  management by the state governmental entity as a result of having to
  divest from listed companies under this chapter; or
               (2)  an individual portfolio that uses a
  benchmark-aware strategy would be subject to an aggregate expected
  deviation from its benchmark as a result of having to divest from
  listed companies under this chapter.
         (b)  A state governmental entity may cease divesting from a
  listed company as provided by this section only to the extent
  necessary to ensure that the state governmental entity does not
  suffer a loss in value or deviate from its benchmark as described by
  Subsection (a).
         (c)  Before a state governmental entity may cease divesting
  from a listed company under this section, the state governmental
  entity must provide a written report to the comptroller, the
  presiding officer of each house of the legislature, and the
  attorney general setting forth the reason and justification,
  supported by clear and convincing evidence, for deciding to cease
  divestment or to remain invested in a listed company.
         (d)  The state governmental entity shall update the report
  required by Subsection (c) semiannually, as applicable.
         (e)  This section does not apply to reinvestment in a company
  that is no longer a listed company.
         Sec. 808.057.  PROHIBITED INVESTMENTS. Except as provided
  by Section 808.056, a state governmental entity may not acquire
  securities of a listed company.
  SUBCHAPTER C. REPORT; ENFORCEMENT
         Sec. 808.101.  REPORT. Not later than January 5 of each
  year, each state governmental entity shall file a publicly
  available report with the presiding officer of each house of the
  legislature and the attorney general that:
               (1)  identifies all securities sold, redeemed,
  divested, or withdrawn in compliance with Section 808.054;
               (2)  identifies all prohibited investments under
  Section 808.057; and
               (3)  summarizes any changes made under Section 808.055.
         Sec. 808.102.  ENFORCEMENT. The attorney general may bring
  any action necessary to enforce this chapter.
         SECTION 3.  This Act takes effect September 1, 2017.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 89 was passed by the House on April
  20, 2017, by the following vote:  Yeas 131, Nays 0, 12 present, not
  voting.
 
  ______________________________
  Chief Clerk of the House   
 
 
         I certify that H.B. No. 89 was passed by the Senate on April
  27, 2017, by the following vote:  Yeas 27, Nays 4.
 
  ______________________________
  Secretary of the Senate    
  APPROVED:  _____________________
                     Date          
   
            _____________________
                   Governor