TITLE 16. ECONOMIC REGULATION

PART 8. TEXAS RACING COMMISSION

CHAPTER 303. GENERAL PROVISIONS

SUBCHAPTER G. HORSE INDUSTRY ESCROW ACCOUNT

DIVISION 3. BREED REGISTRIES

16 TAC §§303.321, 303.322, 303.325

The Texas Racing Commission ("the Commission") adopts amendments to 16 TAC §§303.321, Allocations to Breed Registries; 303.322, Limitations on Use of Funds by Breed Registries; and 303.325, Quarterly Reports. The amendments clarify certain provisions of the rules that were adopted in October 2019 regarding the horse industry escrow account ("account") created by House Bill 2463 (86th Legislature, Regular Session, 2019).

The amendments to Sections 303.321 and 303.325 are adopted without changes from the text as proposed in the June 5, 2020, issue of the Texas Register (45 TexReg 3725) and will not be republished. Amendments to Section 303.321 require events funded from the account to serve certain types of public purposes, require breed registries to use forms approved by the executive director when applying for funding from the account, and delete a provision regarding executive director approval of requests prior to January 1, 2020. Amendments to Section 303.325 clarify the quarterly reporting requirements.

The amendments to Section 303.322 are being adopted with changes from the text as proposed in the June 5, 2020, issue of the Texas Register (45 TexReg 3725). The proposed amendments to this section clarify the 5% limitation on administrative costs paid from the fund and the requirement to comply with the Texas Uniform Grant Management Standards and require unused funds from canceled events to be repaid within 45 days. In response to public comments, the provisions regarding unused funds from canceled events were moved to a new subsection (f) and subsection (g) was added to address unused funds from events that took place. These changes are not so substantial as to constitute a different rule or to involve parties not already on notice of the changes.

REASONED JUSTIFICATION

The reasoned justification for these amendments is clarity regarding requirements for applying for, using, and reporting on funding from the account.

PUBLIC COMMENTS

Comments regarding Section 303.322, were submitted jointly by the Texas Quarter Horse Association, Texas Thoroughbred Association, Texas Arabian Breeders Association, and Texas Paint Horse Association, requesting that the rule address funds remaining after an event takes place. New subsection (g) addresses that situation, allowing the Commission to require the return of funds in that instance.

STATUTORY AUTHORITY

The amendments are adopted under Tex. Occ. Code §2023.004, which authorizes the Commission to adopt rules to administer the Act, and §2028.201, which requires the Commission to adopt rules relating to Tex. Occ. Code Subchapter E, Chapter 2028.

No other statute, code, or article is affected by the amendments.

§303.322.Limitations on Use of Funds by Breed Registries.

(a) A breed registry may use horse industry escrow account funds only for events that further the horse industry.

(b) The following types of costs may not be paid from funds allocated from the account:

(1) capital improvements;

(2) donations or contributions made to any individual or organization without express approval from the Commission for such contribution or donation;

(3) costs of entertainment, amusements, social activities, and incidental costs relating thereto, including tickets to shows or sports events, meals, alcoholic beverages, lodging, rentals, transportation, tips, and gratuities;

(4) fines, penalties, or other costs resulting from violations of or failure to comply with federal, state, or local laws and regulations;

(5) liability insurance coverage not specific to a particular event or series of events for which the Commission has allocated funds from the account;

(6) expenses related to litigation;

(7) professional association fees or dues for the breed registry or an individual;

(8) legislative expenses such as salaries and other expenses associated with lobbying the state or federal legislature or similar local governmental bodies, whether incurred for purposes of legislation or executive direction; or

(9). fundraising.

(c) The following types of costs may only be paid with funds allocated from the account, in an amount not to exceed five percent of the amount allocated for the event for which it is allocated, if specifically approved by the Commission:

(1) operating expenses, including the salaries of breed registry staff, interest and other financial costs related to borrowing and the cost of financing, contributions to a contingency reserve or any similar provision for unforeseen events, and audits or other accounting services; and

(2) the purchase of capital assets.

(d) A breed registry may pay a cost out of funds awarded from the horse industry escrow account if it satisfies subsections (a) through (c) of this section and is reasonable and adequately documented.

(1) A cost is reasonable if the cost does not exceed that which would be incurred by a prudent individual or organization under the circumstances prevailing at the time the decision was made to incur the cost and it is necessary to achieve the purpose for which the funds were sought.

(2) A cost is adequately documented if the cost is supported by Generally Accepted Accounting Principles, the breed registry's accounting records, and documented in accordance with §303.325 of this subchapter (relating to Quarterly Reports).

(e) Use of funds allocated to a breed registry from the account shall comply with the current Uniform Grant Management Standards or Texas Grant Management Standards.

(f) If a previously approved and funded event is canceled, the funds shall be returned to the Commission within 45 days after the cancelation of the event. All funds expended with respect to any canceled event or event that does not otherwise occur shall be accounted for and such accounting shall accompany the return of the balance of such related canceled event funds.

(g) The Commission may require a breed registry to repay any funds not expended in accordance with Section 2028.204 of the Act and this section after the completion of an event.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on July 22, 2020.

TRD-202003006

Chuck Trout

Executive Director

Texas Racing Commission

Effective date: August 11, 2020

Proposal publication date: June 5, 2020

For further information, please call: (512) 833-6699