TITLE 1. ADMINISTRATION

PART 2. TEXAS ETHICS COMMISSION

CHAPTER 12. SWORN COMPLAINTS

SUBCHAPTER A. GENERAL PROVISIONS AND PROCEDURES

1 TAC §12.13

The Texas Ethics Commission (the Commission) proposes an amendment to Texas Ethics Commission Rule §12.13, to allow a non-resident attorney to represent a respondent in a sworn complaint proceeding if the non-resident attorney follows the pro hac vice (temporary admission) procedures promulgated by the Supreme Court of Texas.

Appearances filed by non-resident attorneys in Commission sworn complaint matters may cause unnecessary delay and raise concerns about the authority of such attorneys to participate in such matters. This amendment will resolve these issues and create a process through which a non-resident attorney may be allowed to practice before the Commission.

The proposed rule amendment is modelled after §155.201 of the State Office of Administrative Hearings (SOAH) Rules of Procedure and would allow a non-resident attorney to follow the procedure set by the Texas Supreme Court for pro hac vice admission found in Rule XIX of the Supreme Court's Rules Governing Admission to the Bar of Texas. In order to comply, a non-resident attorney would pay the admission fee to the state Board of Law Examiners, complete the application form, and file a motion with the Commission. The Commission's presiding officer may then issue an order granting admission to the non-resident attorney for the purpose of representing a respondent in a particular sworn complaint.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed amendment is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed amendment.

The Executive Director has also determined that for each year of the first five years the proposed amendment is in effect the public benefit will be clarity regarding practice before the Commission by a non-resident attorney. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed amendment.

The Executive Director has determined that during the first five years that the proposed amendment is in effect, it will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; increase or decrease the number of individuals subject to the rule's applicability; or positively or adversely affect this state's economy. This amendment creates a new regulation to provide a clear process by which a non-resident attorney may participate in sworn complaint matters before the Commission.

The Texas Ethics Commission invites comments on the proposed amendment from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed amendment may do so at any commission meeting during the agenda item relating to the proposed amendment. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

The amendment to rule §12.13 is proposed under Texas Government Code §571.062, which authorizes the commission to adopt rules to administer Chapter 571 of the Election Code.

The proposed amendment affects Subchapters E and F of Chapter 571 of the Government Code.

§12.13.Representation by Counsel.

(a) A respondent has the right to be represented by counsel retained by the respondent in any proceeding of a complaint.

(b) Counsel representing a respondent shall enter an appearance with the commission that contains the counsel's mailing address, email address, and telephone and fax numbers. If the respondent's counsel is not licensed to practice law in Texas, the representative must show authority to appear as the respondent's counsel.

(c) The commission may, through the approval of its presiding officer, admit an attorney who is a resident of and licensed to practice law in another state, and who is not an active member of the State Bar of Texas, to represent a respondent before the commission if the nonresident attorney complies with the requirements of Tex. Gov't Code §82.0361 and Rule XIX of the Rules Governing Admission to the Bar of Texas and files a motion, accompanied by proof of compliance with those provisions, with the commission requesting to be admitted to represent a respondent.

(d) This rule does not allow a person to engage in the unauthorized practice of law.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 19, 2018.

TRD-201801700

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


1 TAC §12.31, §12.33

The Texas Ethics Commission (the Commission) proposes new Texas Ethics Commission Rules §12.31 and §12.33, regarding conduct and decorum during complaint proceedings.

Proposed new rule §12.31 would clearly set out rules of conduct for Commission enforcement hearings to facilitate order and fairness for all involved parties. Proposed new rule §12.33 specifies the Commission's sanction authority for either a violation of §12.31 or abusing the complaint process, including filing a frivolous or dilatory motion, abuse of discovery, or failing to comply with a Commission order. The proposed rules draw primarily from rules of the State Office of Administrative Hearings (SOAH).

Seana Willing, Executive Director, has determined that for the first five-year period the proposed new rules are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed new rules.

The Executive Director has also determined that for each year of the first five years the proposed new rules are in effect the public benefit will be clarity in what is expected of parties who appear before the Commission or participate in the complaint process, and clarity in what the consequences are for parties who file a frivolous or dilatory motion, abuse the discovery process or fail to comply with a Commission order. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed new rules.

The Executive Director has determined that during the first five years that the proposed new rules are in effect, they will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; expand, limit, or repeal an existing regulation; increase or decrease the number of individuals subject to the rules' applicability; or positively or adversely affect this state's economy. The rules are new and therefore create new regulations. However, proposed new rule §12.31 is similar to reasonable conduct and decorum rules already in place for SOAH proceedings. Further, the Commission's enabling legislation authorizes the Commission to adopt rules and procedures for hearings and proposed new rule §12.33 is similar to SOAH rules that authorize an administrative law judge to impose sanctions for violations of decorum or other procedural requirements in SOAH proceedings.

The Texas Ethics Commission invites comments on the proposed new rules from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed new rules may do so at any commission meeting during the agenda item relating to the proposed new rules. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

New rules §12.31 and §12.33 are proposed under Texas Government Code §571.062, which authorizes the commission to adopt rules to administer Chapter 571 of the Government Code, and Texas Government Code §571.1244 and §571.131, which require the Commission to adopt rules and procedures governing preliminary review hearings and formal hearings, respectively.

The proposed new rules affect Chapter 571 of the Government Code.

§12.31.Conduct and Decorum.

(a) Parties, representatives, and other participants at a hearing shall conduct themselves with dignity, show courtesy and respect for one another and for the commission, and follow any additional guidelines of decorum prescribed by the presiding officer, including adherence to the amount of time allotted for the hearing. Attorneys shall adhere to the standards of conduct in the Texas Lawyer's Creed promulgated by the Supreme Court of Texas and the Court of Criminal Appeals and the Texas Disciplinary Rules of Professional Conduct promulgated by the Supreme Court of Texas.

(b) Attorneys should advise their clients and witnesses of the applicable rules of conduct and decorum.

(c) All objections, arguments, and other comments by parties shall be directed to the commission and not to an opposing party.

(d) While a party is addressing the commission or questioning a witness, any other party shall not interrupt for any purpose except to make a valid objection.

(e) Parties shall not approach the dais without leave of the presiding officer and must not lean on the dais.

(f) Parties shall remain seated at the counsel table at all times except:

(1) when addressing the commission; and

(2) whenever it may be proper to handle documents, exhibits, or other evidence.

(g) Parties must question witnesses and deliver arguments to the commission while seated at the counsel table or standing at the lectern. If a party seeks to question or argue from another location, leave of the presiding officer must be requested and granted.

(h) Parties must request leave of the presiding officer to conduct a demonstration.

(i) The presiding officer may take appropriate action to maintain and enforce proper conduct and decorum, including:

(1) issuing a warning;

(2) sanctioning a party pursuant to §12.33 of this chapter;

(3) excluding persons from the proceeding;

(4) recessing the proceeding; and

(5) clearing the hearing room of persons causing a disruption.

§12.33.Sanctioning Authority.

(a) The presiding officer has the authority to impose appropriate sanctions against a party or its representative for:

(1) filing a motion or pleading that is deemed by the presiding officer to be groundless and brought:

(A) in bad faith;

(B) for the purpose of harassment; or

(C) for any other improper purpose, such as to cause unnecessary delay or needless increase in the cost of the proceeding;

(2) abuse of the discovery process in seeking, making, or resisting discovery;

(3) failure to comply with a commission order; or

(4) violating §12.31 of this chapter.

(b) The presiding officer may issue an order imposing sanctions when justified by party or representative behavior described in subsection (a) of this section and after notice and opportunity for hearing. Sanctions may include:

(1) disallowing or limiting further discovery by the offending party;

(2) charging all or part of the expenses of discovery against the offending party or its representatives;

(3) deeming designated facts be admitted for purposes of the proceeding;

(4) refusing to allow the offending party to support or oppose a claim or defense or prohibiting the party from introducing designated matters into the record;

(5) disallowing in whole or in part requests for relief by the offending party and excluding evidence in support of those requests; and

(6) striking motions or testimony in whole or in part.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 19, 2018.

TRD-201801705

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


SUBCHAPTER B. FILING AND INITIAL PROCESSING OF A COMPLAINT

1 TAC §12.53

The Texas Ethics Commission (the Commission) proposes an amendment to Texas Ethics Commission Rules §12.53, regarding ex parte communications between staff and commissioners in sworn complaint proceedings.

The proposed amendment is intended to clarify the nature of communications that may occur between staff and members of the Commission regarding sworn complaint proceedings and to facilitate the resolution of sworn complaints. The amendment to §12.53 would clarify the express authority for staff and commissioners to communicate ex parte in contemplation of, or in preparation for, initiating a complaint.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed amended rule is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed amended rule.

The Executive Director has also determined that for each year of the first five years the proposed amended rule is in effect the public benefit will be clarity in how staff and commissioners may communicate during the complaint process. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed amended rule.

The Executive Director has determined that during the first five years that the proposed amended rule is in effect, it will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; expand, limit, or repeal an existing regulation; increase or decrease the number of individuals subject to the rule's applicability; or positively or adversely affect this state's economy.

The Texas Ethics Commission invites comments on the proposed amended rule from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed amended rule may do so at any commission meeting during the agenda item relating to the proposed amended rule. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

The amendment to Texas Ethics Commission Rules §12.53 is proposed under Texas Government Code §571.062, which authorizes the commission to adopt rules to administer Chapter 571 of the Government Code.

The proposed amended rule affects Subchapters E and F of Chapter 571 of the Government Code.

§12.53.Commission Initiated Complaint.

(a) Commission staff may gather or present documents or evidence, make recommendations, and otherwise communicate outside the presence of the respondent with commissioners in contemplation of, or in preparation for, a commission initiated preliminary review. Commissioners may request documents, evidence, or recommendations, and otherwise communicate with commission staff outside the presence of the respondent, in contemplation of, or in preparation for, a commission initiated preliminary review.

(b) [(a)] A preliminary review initiated by the commission under section 571.124(b) of the Government Code is deemed to be a complaint for purposes of all further proceedings under chapter 571 of the Government Code and of this chapter.

(c) [(b)] Documents or evidence gathered by the commission and commission staff in contemplation of, or in preparation for, a commission initiated preliminary review are related to the processing of a preliminary review or motion for the purposes of sections 571.139 and 571.140 of the Government Code.

(d) [(c)] Discussions between the commission and commission staff regarding gathering documents or evidence in contemplation of, or in preparation for, a commission initiated preliminary review are related to the processing of a preliminary review or motion for the purposes of sections 571.139 and 571.140 of the Government Code.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801720

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


SUBCHAPTER C. INVESTIGATION AND PRELIMINARY REVIEW

1 TAC §12.83

The Texas Ethics Commission (the Commission) proposes an amendment to Texas Ethics Commission Rules §12.83, regarding ex parte communications between staff and commissioners in sworn complaint proceedings.

The proposed amendment is intended to clarify the nature of communications that may occur between staff and members of the Commission regarding sworn complaint proceedings and to facilitate the resolution of sworn complaints. The amendment to §12.83 would expressly permit staff and commissioners to engage in ex parte communications, outside the presence of a respondent, during a preliminary review and expressly require all such communications to cease regarding a pending complaint once it is set for a preliminary review hearing and notice of the hearing has been sent to the respondent.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed amended rule is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed amended rule.

The Executive Director has also determined that for each year of the first five years the proposed amended rule is in effect the public benefit will be clarity in how staff and commissioners may communicate during the complaint process. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed amended rule.

The Executive Director has determined that during the first five years that the proposed amended rule is in effect, they will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; expand, limit, or repeal an existing regulation; increase or decrease the number of individuals subject to the rule’s applicability; or positively or adversely affect this state’s economy.

The Texas Ethics Commission invites comments on the proposed amended rule from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed amended rule may do so at any commission meeting during the agenda item relating to the proposed amended rule. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission’s website at www.ethics.state.tx.us.

The proposed amendment to Texas Ethics Commission Rules §12.83 is proposed under Texas Government Code §571.062, which authorizes the commission to adopt rules to administer Chapter 571 of the Government Code.

The proposed amended rule affects Subchapters E and F of Chapter 571 of the Government Code.

§12.83.Preliminary Review.

(a) A respondent must respond to written questions submitted to the respondent pursuant to section 571.1243 of the Government Code not later than 15 business days after the respondent receives the written questions. The executive director may grant an extension of the time period for good cause shown.

(b) If the commission staff submits written questions to a respondent pursuant to section 571.1243 of the Government Code, the time period set forth in section 571.1242(a)(2) of the Government Code or section 571.1242(b)(2) of the Government Code, as applicable, is increased by the number of business days during the period beginning on the date the commission sends the written questions and ending on the date the commission receives the respondent's written response.

(c) If the commission staff applies to the commission for the issuance of a subpoena pursuant to section 571.137(a-1) of the Government Code, the time period set forth in section 571.1242(a)(2) of the Government Code or section 571.1242(b)(2) of the Government Code as applicable, is increased by the number of business days during the period beginning on the date the staff applies to the commission for the subpoena and ending on either:

(1) the date the commission rejects the staff's application for a subpoena;

(2) the date the person to whom the subpoena is directed complies with the subpoena; or

(3) the date the commission reports to a district court pursuant to section 571.137(c) of the Government Code.

(d) During a preliminary review, commission staff may present documents or evidence, make recommendations, or otherwise communicate with commissioners outside the presence of the respondent for the purpose of investigating and resolving a sworn complaint. [The executive director may report to the commission any findings and conclusions from a preliminary review of a complaint.]

(e) Commission staff may not communicate with a commissioner outside the presence of the respondent for the purpose of influencing a decision on a pending sworn complaint after the complaint has been scheduled for a preliminary review hearing and notice of the hearing has been sent to the respondent.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801721

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


SUBCHAPTER E. FORMAL HEARING

DIVISION 1. GENERAL PROCEDURES

1 TAC §12.101, §12.102

The Texas Ethics Commission (the commission) proposes new Ethics Commission Rules §12.101 and §12.102, regarding procedures for formal hearings.

Subchapter E, Chapter 571, of the Government Code governs the Commission's sworn complaint process and includes §571.121, which authorizes the Commission to hold hearings and render decisions on complaints. Sections 571.1211 to 571.139 set out the complaint process. The proposed new rules would further the directive provided by §571.131(c) of the Government Code to adopt rules governing discovery, hearings, and related procedures consistent with the Commission's operating statutes and the APA. The intent of this rulemaking is to set out clear procedures for both respondents and agency staff and are largely based on rules promulgated by the State Office of Administrative Hearings (SOAH). The proposed rules would accomplish the following:

§12.101 clarifies the laws that govern a formal hearing. This rule largely repeats §571.139(c), Government Code.

§12.102 provides how the executive director will give a complainant and respondent a copy of the Commission's decision to order a formal hearing.

The Commission is also contemporaneously submitting the following proposed rules, which also further the directive provided by §571.131(c), including §§12.121, 12.123, 12.125, 12.127, 12.131, 12.133, 12.151, 12.153, 12.155, 12.161, 12.163, 12.165, 12.167, 12.171, 12.173, and 12.175.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed new rules are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed new rules.

The Executive Director has also determined that for each year of the first five years the proposed new rules are in effect the public benefit will be clarity, due process, and fairness in the formal hearing process. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed new rules.

The Executive Director has determined that during the first five years that the proposed new rules are in effect, they will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; increase or decrease the number of individuals subject to the rule's applicability; or positively or adversely affects this state's economy. The proposed new rules would further the directive provided by §571.131(c) of the Government Code by setting out specific procedural requirements for Commission staff and respondents in conducting formal hearings.

The Texas Ethics Commission invites comments on the proposed new rules from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed new rules may do so at any commission meeting during the agenda item relating to the proposed new rules. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

The new rules are proposed under Texas Government Code §571.062 and §571.131(c).

The proposed new rules affect Subchapter E of Chapter 571 of the Government Code.

§12.101.Application and Construction.

The proceedings of a formal hearing shall be conducted in accordance with this subchapter, Chapter 571 of the Government Code, and Subchapters C-H, Chapter 2001, of the Government Code (the Administrative Procedure Act) only to the extent they are consistent with Chapter 571. In the event of a conflict, Chapter 571 controls.

§12.102.Order of Formal Hearing.

As soon as practicable after the commission orders a formal hearing, the executive director shall provide to the parties to the complaint, and to the complainant, a copy of the commission's decision to order the hearing. The decision shall include the date, time, and place of the hearing and be signed by the presiding officer.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801722

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


DIVISION 2. SCHEDULING, FILING, AND SERVICE

1 TAC §§12.121, 12.123, 12.125, 12.127

The Texas Ethics Commission (the commission) proposes new Ethics Commission Rules §§12.121, 12.123, 12.125, and 12.127, regarding procedures for formal hearings.

Subchapter E, Chapter 571, of the Government Code governs the Commission's sworn complaint process and includes §571.121, which authorizes the Commission to hold hearings and render decisions on complaints. Sections 571.1211 to 571.139 set out the complaint process. The proposed new rules would further the directive provided by §571.131(c) of the Government Code to adopt rules governing discovery, hearings, and related procedures consistent with the Commission's operating statutes and the APA. The intent of this rulemaking is to set out clear procedures for both respondents and agency staff and are largely based on rules promulgated by the State Office of Administrative Hearings (SOAH). The proposed rules would accomplish the following:

Section 12.121 authorizes the presiding officer to order prehearing conferences to resolve matters prior to the formal hearing.

Section 12.123 provides certain deadlines for motions and responses and requires deadlines to be included in a scheduling order included with a formal hearing notice.

Section 12.125 provides the requirements for filing documents with the Commission for a formal hearing.

Section 12.127 provides the requirements for serving documents on parties.

The Commission is also contemporaneously submitting the following proposed rules, which also further the directive provided by §571.131(c), including §§12.101, 12.102, 12.131, 12.133, 12.151, 12.153, 12.155, 12.161, 12.163, 12.165, 12.167, 12.171, 12.173, and 12.175.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed new rules are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed new rules.

The Executive Director has also determined that for each year of the first five years the proposed new rules are in effect the public benefit will be clarity, due process, and fairness in the formal hearing process. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed new rules.

The Executive Director has determined that during the first five years that the proposed new rules are in effect, they will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; increase or decrease the number of individuals subject to the rule's applicability; or positively or adversely affects this state's economy. The proposed new rules would further the directive provided by §571.131(c) of the Government Code by setting out specific procedural requirements for Commission staff and respondents in conducting formal hearings.

The Texas Ethics Commission invites comments on the proposed new rules from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed new rules may do so at any commission meeting during the agenda item relating to the proposed new rules. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

The new rules are proposed under Texas Government Code §§571.062 and 571.131(c).

The proposed new rules affect Subchapter E of Chapter 571 of the Government Code.

§12.121.Prehearing Conferences.

The presiding officer may order that one or more prehearing conferences be held to address any matters prior to the formal hearing, including motions for discovery or subpoenas, motions for sanction, or other matters related to the hearing. The commission shall provide such an order to the parties and the complainant within 5 business days after the decision is made. The order shall include the date, time, and place of the conference and a list of the matters to be addressed at the conference.

§12.123.Scheduling Orders.

(a) The following deadlines apply to a prehearing conference or formal hearing, as applicable:

(1) All motions must be filed with the commission no later than 30 days before the date of the conference or hearing;

(2) All responses to motions must be filed with the commission no later than 14 days before the date of the conference or hearing; and

(3) All replies to responses must be filed with the commission no later than 7 days before the date of the conference or hearing.

(b) A scheduling order containing the deadlines under this section shall be included with the notice required by section 571.126 of the Government Code. The presiding officer may amend a scheduling order upon the request of a party for good cause shown. A decision by the presiding officer to amend a scheduling order or to deny a motion, response, or evidence shall be issued to the parties to a hearing within 5 business days after the decision is made.

(c) The presiding officer may deny a party's motions, responses, or replies or deny a party's evidence from being admitted into the record of the hearing if the party violates a scheduling order.

§12.125.Filing of Documents.

(a) Motions, responses, and other documents in a formal hearing must be filed with the Commission:

(1) by mail addressed to the commission at P.O. Box 12070, Austin, Texas 78711- 2070;

(2) by hand-delivery to the commission at 201 East 14th Street, 10th Floor, Austin, Texas 78701;

(3) by fax to the commission at (512) 463-5777; or

(4) by email to a dedicated filing address.

(b) All documents must clearly indicate the sworn complaint number and the name of the respondent for which it is filed.

(c) Time of filing. With respect to documents filed by mail, fax, or hand-delivery, the time and date of filing shall be determined by the file stamp affixed by the commission. With respect to documents filed by email, the time and date of filing is the electronic time stamp affixed by the commissions email system. Documents received when the commission is closed shall be deemed filed the next business day.

(d) Non-conforming documents. The commission may not refuse to file a document that fails to conform with this chapter. When a filed document fails to conform to this rule, the executive director or presiding officer may identify the errors to be corrected and state a deadline.

§12.127.Service of Documents.

(a) Service on all parties. On the same date a document is filed with the commission, a copy shall also be sent to each party or the party's authorized representative by hand-delivery; by regular, certified, or registered mail; by email, upon agreement of the parties; or by fax.

(b) Certificate of service. A person filing a document shall include a certificate of service that certifies compliance with this section.

(1) A certificate of service shall be sufficient if it substantially complies with the following example: "Certificate of Service: I certify that on {date}, a true and correct copy of this {name of document} has been sent to {name of opposing party or authorized representative for the opposing party} by {specify method of delivery, e.g., email, regular mail, fax, certified mail.} {Signature}"

(2) If a filing does not certify service, the commission may:

(A) return the filing;

(B) send a notice of noncompliance to all parties, stating the filing will not be considered until all parties have been served; or

(C) send a copy of the filing to all parties.

(c) Presumed time of receipt of served documents. The following rebuttable presumptions shall apply regarding a party's receipt of documents served by another party:

(1) If a document was hand-delivered to a party, the commission shall presume that the document was received on the date of filing at the commission.

(2) If a document was served by courier-receipted overnight delivery, the commission shall presume that the document was received no later than the next business day after filing at the commission.

(3) If a document was served by regular, certified, or registered mail, or non-overnight courier-receipted delivery, the commission shall presume that it was received no later than three days after mailing.

(4) If a document was served by fax or email before 5:00 p.m. on a business day, the commission shall presume that the document was received on that day; otherwise, the commission shall presume that the document was received on the next business day.

(d) Burden on sender. The sender has the burden of proving date and time of service.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801723

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


DIVISION 3. POWERS AND DUTIES OF COMMISSION AND PRESIDING OFFICER

1 TAC §12.131, §12.133

The Texas Ethics Commission (the commission) proposes new Ethics Commission Rules §12.131 and §12.133, regarding procedures for formal hearings.

Subchapter E, Chapter 571, of the Government Code governs the Commission's sworn complaint process and includes §571.121, which authorizes the Commission to hold hearings and render decisions on complaints. Sections 571.1211 to 571.139 set out the complaint process. The proposed new rules would further the directive provided by §571.131(c) of the Government Code to adopt rules governing discovery, hearings, and related procedures consistent with the Commission's operating statutes and the APA. The intent of this rulemaking is to set out clear procedures for both respondents and agency staff and are largely based on rules promulgated by the State Office of Administrative Hearings (SOAH). The proposed rules would accomplish the following:

§12.131 provides the powers and duties of the presiding officer regarding a formal hearing.

§12.133 provides the presiding officer's authority to issue orders and administer a formal hearing.

The Commission is also contemporaneously submitting the following proposed rules, which also further the directive provided by §571.131(c), including §§12.101, 12.102, 12.121, 12.123, 12.125, 12.127, 12.151, 12.153, 12.155, 12.161, 12.163, 12.165, 12.167, 12.171, 12.173, and 12.175.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed new rules are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed new rules.

The Executive Director has also determined that for each year of the first five years the proposed new rules are in effect the public benefit will be clarity, due process, and fairness in the formal hearing process. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed new rules.

The Executive Director has determined that during the first five years that the proposed new rules are in effect, they will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; increase or decrease the number of individuals subject to the rule's applicability; or positively or adversely affect this state's economy. The proposed new rules would further the directive provided by §571.131(c) of the Government Code by setting out specific procedural requirements for Commission staff and respondents in conducting formal hearings.

The Texas Ethics Commission invites comments on the proposed new rules from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed new rules may do so at any commission meeting during the agenda item relating to the proposed new rules. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

The new rules are proposed under Texas Government Code §571.062 and §571.131(c).

The proposed new rules affect Subchapter E of Chapter 571 of the Government Code.

§12.131.Powers and Duties of the Presiding Officer.

(a) Presiding officer's authority and duties. The presiding officer shall have the authority and duty to:

(1) conduct a full, fair, and efficient hearing;

(2) take action to avoid unnecessary delay in the disposition of the proceeding;

(3) maintain order; and

(4) rule on prehearing matters.

(b) Presiding officer's powers. The presiding officer shall have the power to regulate the hearing, and the conduct of the parties and authorized representatives, including the power to:

(1) administer oaths;

(2) take testimony, including the power to question witnesses and to request the presence of a witness from a state agency;

(3) rule on admissibility and other questions of evidence;

(4) rule on discovery issues;

(5) issue orders pursuant to this chapter, including orders imposing sanctions;

(6) exclude irrelevant, immaterial, or unduly repetitious testimony;

(7) reasonably limit the time for presentations of evidence or argument;

(8) order parties to submit legal memoranda and proposed findings of fact and conclusions of law; and

(9) reopen the record when justice requires, if the commission has not issued a final order.

§12.133.Orders from the Commission.

(a) The presiding officer has authority to issue orders to control the conduct and scope of the proceeding, including orders to:

(1) Rule on motions;

(2) Impose sanctions;

(3) Establish deadlines;

(4) Schedule and conduct pre-hearing or post-hearing conferences;

(5) Require the prefiling of exhibits and testimony;

(6) Set out requirements for participation in the case; and

(7) Take other steps conducive to a fair and efficient formal hearing.

(b) Record of rulings. Rulings not made orally at a recorded prehearing conference or hearing shall be in writing and issued to all parties of record.

(c) Consolidation or joinder for hearing. The presiding officer may order that cases be consolidated or joined for hearing if:

(1) there are common issues of law or fact; and

(2) consolidation or joint hearing will promote the fair and efficient handling of the matters.

(d) Severance of issues. The presiding officer may order severance of issues if separate hearings on the issues will promote the fair and efficient handling of the matters.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801724

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


DIVISION 5. PLEADINGS AND MOTIONS

1 TAC §§12.151, 12.153, 12.155

The Texas Ethics Commission (the commission) proposes new Ethics Commission Rules §§12.151, 12.153, and 12.155, regarding procedures for formal hearings.

Subchapter E, Chapter 571, of the Government Code governs the Commission's sworn complaint process and includes §571.121, which authorizes the Commission to hold hearings and render decisions on complaints. Sections 571.1211 to 571.139 set out the complaint process. The proposed new rules would further the directive provided by §571.131(c) of the Government Code to adopt rules governing discovery, hearings, and related procedures consistent with the Commission's operating statutes and the APA. The intent of this rulemaking is to set out clear procedures for both respondents and agency staff and are largely based on rules promulgated by the State Office of Administrative Hearings (SOAH). The proposed rules would accomplish the following:

§12.151 provides the form requirements for pleadings filed for a formal hearing.

§12.153 requires any request in a formal hearing to be filed by motion, including a certificate of conference that certifies that the party attempted to resolve the matter by conferring with the opposing party. The rule authorizes the presiding officer to extend a deadline for good cause.

§12.155 provides requirements for a motion for a continuance or to extend time, including that such motion must be filed at least 5 days before the date of the proceeding or deadline unless the presiding officer permits a late filing for good cause shown.

The Commission is also contemporaneously submitting the following proposed rules, which also further the directive provided by §571.131(c), including §§12.101, 12.102, 12.121, 12.123, 12.125, 12.127, 12.131, 12.133, 12.161, 12.163, 12.165, 12.167, 12.171, 12.173, and 12.175.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed new rules are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed new rules.

The Executive Director has also determined that for each year of the first five years the proposed new rules are in effect the public benefit will be clarity, due process, and fairness in the formal hearing process. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed new rules.

The Executive Director has determined that during the first five years that the proposed new rules are in effect, they will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; increase or decrease the number of individuals subject to the rule's applicability; or positively or adversely affects this state's economy. The proposed new rules would further the directive provided by §571.131(c) of the Government Code by setting out specific procedural requirements for Commission staff and respondents in conducting formal hearings.

The Texas Ethics Commission invites comments on the proposed new rules from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed new rules may do so at any commission meeting during the agenda item relating to the proposed new rules. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

The new rules are proposed under Texas Government Code §571.062 and §571.131(c).

The proposed new rules affect Subchapter E of Chapter 571 of the Government Code.

§12.151.Required Form of Pleadings.

(a) Content generally. Written requests for action in a formal hearing shall be typewritten or printed legibly on 8-1/2 x 11-inch paper and timely filed with the commission. Photocopies are acceptable if copies are clear and legible. All filings shall contain or be accompanied by the following:

(1) the name of the party seeking action;

(2) the sworn complaint number;

(3) the parties to the case and their status as commission staff or respondent;

(4) a concise statement of the type of relief, action, or order desired and identification of the specific reasons for and facts to support the action requested;

(5) a certificate of service, as required by §12.127(b)(1) of this chapter;

(6) any other matter required by statute or rule; and

(7) the signature of the submitting party or the party's authorized representative.

(b) Amendment or supplementation of pleadings. A party may amend or supplement its pleadings as follows:

(1) If a notice of a hearing or other documents provided to the complainant or respondent under §571.126(b)(2) of the Government Code contain a material defect, the commission may correct the notice or other document and deliver it to the complainant and respondent as soon as practicable and in the same manner as the original notice. If the respondent does not receive the correction at least 10 days before the date of the hearing, the presiding officer may by order reschedule the hearing. The executive director shall notify the parties and the complainant of the date, time, and place of the hearing as soon as practicable.

(2) As to all other matters in a pleading, an amendment or supplementation that includes information material to the substance of the hearing, requests for relief, changes to the scope of the hearing, or other matters that unfairly surprise other parties may not be filed later than seven days before the date of the hearing, except by agreement of all parties or by permission of the presiding officer.

§12.153.Motions, Generally.

(a) Purpose and effect of motions. To make a request, including to obtain a ruling, order, or any other procedural relief, a party shall file a written motion. The motion shall describe specifically the action requested and the basis for the requested action. Unless otherwise specified in this chapter, a motion is not granted until it has been ruled on by the presiding officer or commission, as applicable, even if the motion is uncontested or agreed.

(b) General requirements for motions. Except as provided in this chapter, or unless otherwise ordered by the presiding officer, all motions shall:

(1) be filed in writing no later than the applicable deadline; except, for good cause demonstrated in the motion, the presiding officer may consider a motion filed after that time or presented orally at a hearing;

(2) include a certificate of conference that complies substantially with one of the following examples:

(A) Example one: "Certificate of Conference: I certify that I conferred with {name of other party or other party's authorized representative} on {date} about this motion. {Succinct statement of other party's position on the action sought and/or a statement that the parties negotiated in good faith but were unable to resolve their dispute before submitting it to the commission for resolution.} Signature."; or

(B) Example two: "Certificate of Conference: I certify that I made reasonable but unsuccessful attempts to confer with {name of other party or other party's authorized representative} on {date or dates} about this motion. {Succinctly describe these attempts.} Signature.";

(3) include a reference in the motion's title to a request for a hearing on the motion if the moving party seeks a hearing; and

(4) include a proposed order sought by the moving party.

(c) Responses to motions. Except as otherwise provided in this chapter or as ordered or allowed by the commission, responses to motions shall be in writing and filed by the applicable deadline. However, if the presiding officer finds good cause has been shown, responses to written motions may be presented orally at hearing.

(d) Other motions. In addition, other types of motions are addressed in other sections of this chapter. If there is a conflict between this section and a requirement found in another section relating to a specific type of motion, the more specific provision applies.

§12.155.Motions for Continuance and to Extend Time.

(a) Contents of a motion for continuance. A request to postpone or delay a hearing or prehearing conference shall include:

(1) a statement of the number of motions for continuance previously filed in the case by each party;

(2) the specific reason for the continuance;

(3) whether the movant is available if the hearing or prehearing conference is continued to the next tentatively scheduled commission meeting;

(4) a certificate of conference that complies substantially with one of the examples set out in §12.153(b)(2) of this subchapter.

(b) Contents of a motion to extend time. A request for more time to file a document or respond to discovery shall include:

(1) a statement of the number of extension requests previously sought in the case by the movant;

(2) the specific reason for the request;

(3) a proposed date for the deadline the movant seeks to extend; and

(4) a certificate of conference that complies substantially with one of the examples set out in §12.153(b)(2) of this subchapter.

(c) Date of filing. Motions for continuance or to extend time shall be filed no later than five days before the date of the proceeding or deadline at issue or shall state good cause for presenting the motion after that time. If the presiding officer finds good cause has been demonstrated, the presiding officer may consider a motion filed after that time or presented orally at the proceeding.

(d) Date of service. Motions for continuance or extension shall be served in accordance with §12.127 of this chapter. However, a motion for continuance that is filed five days or less before the date of the proceeding shall be served:

(1) by hand-delivery, fax, or email on the same day it is filed with the commission, if feasible; or

(2) if same-day service is not feasible, by overnight delivery on the next business day.

(e) Responses to motions for continuance. Responses to motions for continuance shall be in writing, except a response to a motion for continuance made on the date of the proceeding may be presented orally at the proceeding. Unless otherwise ordered or allowed by the presiding officer, responses to motions for continuance shall be made by the earlier of:

(1) three days after receipt of the motion; or

(2) the date and time of the proceeding.

(f) Responses to motions to extend time. Unless otherwise ordered by the presiding officer, responses to motions for extension of a deadline are due three days after receipt of the motion.

(g) A motion for continuance or extension of time is not granted until it has been ruled on by the presiding officer, even if the motion is uncontested or agreed. A case is subject to default or dismissal for a party's failure to appear at a scheduled hearing in which a motion for continuance has not been ruled on by the presiding officer, even when the motion is agreed or unopposed.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801725

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


DIVISION 6. HEARINGS AND PREHEARING CONFERENCES

1 TAC §§12.161, 12.163, 12.165, 12.167

The Texas Ethics Commission (the commission) proposes new Ethics Commission Rules §§12.161, 12.163, 12.165 and 12.167, regarding procedures for formal hearings.

Subchapter E, Chapter 571, of the Government Code governs the Commission's sworn complaint process and includes §571.121, which authorizes the Commission to hold hearings and render decisions on complaints. Sections 571.1211 to 571.139 set out the complaint process. The proposed new rules would further the directive provided by §571.131(c) of the Government Code to adopt rules governing discovery, hearings, and related procedures consistent with the Commission's operating statutes and the APA. The intent of this rulemaking is to set out clear procedures for both respondents and agency staff and are largely based on rules promulgated by the State Office of Administrative Hearings (SOAH). The proposed rules would accomplish the following:

Section 12.161 requires the presiding officer to provide each party with an amount of time to present their case at a formal hearing, which can be adjusted for good cause or for a violation of procedural rules.

Section 12.163 provides how the parties shall make their presentation at a formal hearing.

Section 12.165 specifies that the Texas Rules of Evidence as applied in a nonjury civil case in district court govern a formal hearing to the extent they are consistent with Chapter 571, Government Code, and that evidence may be admitted if it meets the standards set out in §2001.081, Government Code.

Section 12.167 specifies the procedural requirements for admitting evidence at a formal hearing.

The Commission is also contemporaneously submitting the following proposed rules, which also further the directive provided by §571.131(c), including §§12.101, 12.102, 12.121, 12.123, 12.125, 12.127, 12.131, 12.133, 12.151, 12.153, 12.155, 12.171, 12.173, and 12.175.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed new rules are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed new rules.

The Executive Director has also determined that for each year of the first five years the proposed new rules are in effect the public benefit will be clarity, due process, and fairness in the formal hearing process. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed new rules.

The Executive Director has determined that during the first five years that the proposed new rules are in effect, they will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; increase or decrease the number of individuals subject to the rule's applicability; or positively or adversely affect this state's economy. The proposed new rules would further the directive provided by §571.131(c) of the Government Code by setting out specific procedural requirements for Commission staff and respondents in conducting formal hearings.

The Texas Ethics Commission invites comments on the proposed new rules from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed new rules may do so at any commission meeting during the agenda item relating to the proposed new rules. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

The new rules are proposed under Texas Government Code §§571.062 and 571.131(c).

The proposed new rules affect Subchapter E of Chapter 571 of the Government Code.

§12.161.Time Allotted to Parties.

The presiding officer shall determine the amount of time allotted to each party for the presentation of its case to the commission. Upon request of a party, the presiding officer may adjust the time allotted for good cause shown or for a violation of a rule under this chapter. A determination shall be made by order or orally during the course of the proceeding.

§12.163.Presentation of Evidence.

(a) Presentation by parties. After the resolution of all prehearing matters, each party shall make its presentation during the formal hearing. Commission staff shall make the first opening statement. The respondent or respondent's authorized representative shall then make an opening statement, should the respondent wish to do so at that time. The respondent may reserve the opening statement until the presentation of the respondent's case.

(b) Following opening statements, commission staff may present evidence in its case. At the conclusion of the presentation of the evidence, commission staff may rest. The respondent or the respondent's authorized representative may then make an opening statement, or, if an opening statement has already been made, present evidence in its defense of the allegations raised in the notice of formal hearing. At the conclusion of the presentation of evidence by the respondent, the respondent may rest.

(c) After both parties have rested their case, commission staff shall make a closing argument. The respondent may then make a closing argument. Commission staff may then make a reply.

(d) Unless otherwise ordered by the presiding officer, after closing arguments, evidence will be closed and the case will be turned over to the members of the commission for deliberation and decision.

§12.165.Rules of Evidence.

(a) The Texas Rules of Evidence as applied in a nonjury civil case in district court govern a formal hearing only to the extent consistent with Chapter 571 of the Government Code.

(b) Evidence may be admitted if it meets the standards set out in section 2001.081 of the Government Code.

§12.167.Numbering of Exhibits.

(a) Each exhibit to be offered shall first be numbered by the offering party.

(b) Copies of the original exhibit shall be furnished by the party offering the exhibit to the commission and to each party present at the hearing unless otherwise ordered by the presiding officer.

(c) Excluded exhibits. An exhibit excluded from evidence will be considered withdrawn by the offering party and will be returned to the party.

(d) Pre-numbered exhibits may be filed with the commission prior to the formal hearing. Pre-numbered exhibits that are not offered and admitted at the hearing will be deemed withdrawn.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801726

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


DIVISION 7. DISPOSITION OF FORMAL HEARING

1 TAC §§12.171, 12.173, 12.175

The Texas Ethics Commission (the commission) proposes new Ethics Commission Rules §§12.171, 12.173, and 12.175, regarding procedures for formal hearings.

Subchapter E, Chapter 571, of the Government Code governs the Commission's sworn complaint process and includes §571.121, which authorizes the Commission to hold hearings and render decisions on complaints. Sections 571.1211 to 571.139 set out the complaint process. The proposed new rules would further the directive provided by §571.131(c) of the Government Code to adopt rules governing discovery, hearings, and related procedures consistent with the Commission's operating statutes and the APA. The intent of this rulemaking is to set out clear procedures for both respondents and agency staff and are largely based on rules promulgated by the State Office of Administrative Hearings (SOAH). The proposed rules would accomplish the following:

Section 12.171 specifies that the Commission shall determine at a formal hearing whether a violation occurred by preponderance of the evidence.

Section 12.173 provides how the Commission may proceed in a respondent's absence at a formal hearing, including deeming the allegations admitted and granting the relief sought.

Section 12.175 clarifies that the Commission may deliberate in closed session regarding certain formal hearing matters, including the resolution of the hearing.

The Commission is also contemporaneously submitting the following proposed rules, which also further the directive provided by §571.131(c), including §§12.101, 12.102, 12.121, 12.123, 12.125, 12.127, 12.131, 12.133, 12.151, 12.153, 12.155, 12.161, 12.163, 12.165, and 12.167.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed new rules are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed new rules.

The Executive Director has also determined that for each year of the first five years the proposed new rules are in effect the public benefit will be clarity, due process, and fairness in the formal hearing process. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed new rules.

The Executive Director has determined that during the first five years that the proposed new rules are in effect, they will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; increase or decrease the number of individuals subject to the rule's applicability; or positively or adversely affects this state's economy. The proposed new rules would further the directive provided by §571.131(c) of the Government Code by setting out specific procedural requirements for Commission staff and respondents in conducting formal hearings.

The Texas Ethics Commission invites comments on the proposed new rules from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed new rules may do so at any commission meeting during the agenda item relating to the proposed new rules. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

The new rules are proposed under Texas Government Code §§571.062 and 571.131(c).

The proposed new rules affect Subchapter E of Chapter 571 of the Government Code.

§12.171.Standard of Proof.

At a formal hearing, the commission shall determine by preponderance of the evidence whether a violation within the jurisdiction of the commission has occurred.

§12.173.Default Proceedings.

(a) If a respondent to whom a notice of hearing with factual allegations is served or provided fails to appear for the hearing, the commission may proceed in the respondent's absence on a default basis.

(b) A default proceeding under this section requires adequate proof of the following:

(1) the notice of hearing to the respondent stated that the allegations listed in the notice could be deemed admitted and that the relief sought in the notice of hearing might be granted by default against the party that fails to appear at the hearing;

(2) the notice of hearing satisfies the requirements of sections 2001.051, 2001.052, and 571.126 of the Government Code; and

(3) the notice of hearing was:

(A) received by the defaulting party; or

(B) as authorized by Chapter 571 of the Government Code and this chapter, sent by regular mail or by certified mail, restricted delivery, return receipt requested, to the party's last known address as shown by the commission's records.

(c) In the absence of adequate proof to support a default, the presiding officer shall continue the hearing and direct commission staff to provide adequate notice of hearing. If adequate notice is unable to be provided, the commission may dismiss the complaint.

(d) Upon receiving the required showing of proof to support a default, the commission may by vote deem admitted the allegations in the notice of hearing and issue a default decision.

§12.175.Resolution of Formal Hearing.

(a) As provided by section 571.139 of the Government Code, the commission may deliberate in private regarding the resolution of a sworn complaint or motion, including a dismissal of a complaint, a determination of whether a violation within the jurisdiction of the commission has occurred, and an appropriate penalty upon a finding of a violation. As provided by section 2001.061 of the Government Code, the presiding officer may permit the executive director, general counsel, or other employee of the commission who has not participated in a hearing in the complaint for the purpose of using the special skills or knowledge of the agency and its staff in evaluating the evidence.

(b) The presiding officer may announce the commission's decision on the resolution of a sworn complaint or motion after the conclusion of a formal hearing.

(c) The commission should issue a final order within 60 days after the conclusion of a formal hearing.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801727

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


CHAPTER 26. POLITICAL AND LEGISLATIVE ADVERTISING

1 TAC §26.1

The Texas Ethics Commission (the commission) proposes an amendment to Texas Ethics Commission Rules §26.1, regarding the requirements for a political advertising disclosure statement.

Section 255.001 of the Election Code requires political advertising containing express advocacy to require a disclosure statement containing the full name of "(A) the person who paid for the political advertising; (B) the political committee authorizing the political advertising; or (C) the candidate or specific-purpose committee supporting the candidate, if the political advertising is authorized by the candidate." The rule, consistent with the statutory language, would exempt from the disclosure statement requirement any political advertising by a person who, without authorization of a candidate or political committee, creates, publishes, or broadcasts a communication on an Internet website without payment. The rule also excludes from the meaning of "payment" the use of goods or equipment acquired for purposes other than political advertising or the consumption of electricity.

Seana Willing, Executive Director, has determined that for the first five-year period the proposed amendment is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the proposed amendment.

The Executive Director has also determined that for each year of the first five years the proposed amendment is in effect the public benefit will be clarity in the requirements for a political advertising disclosure statement. There will not be an effect on small businesses or rural communities. There is no anticipated economic cost to persons who are required to comply with the proposed amendment.

The Executive Director has determined that during the first five years that the proposed amendment is in effect, it will not: create or eliminate a government program; require the creation of new employee positions or the elimination of existing employee positions; require an increase or decrease in future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; expand or repeal an existing regulation; increase or decrease the number of individuals subject to the rule's applicability; or positively or adversely affect this state's economy. The rule limits an existing regulation by narrowing the disclosure statement requirement for political advertising appearing on an Internet website based on §255.001 of the Election Code.

The Texas Ethics Commission invites comments on the proposed amendment from any member of the public. A written statement should be emailed to public_comment@ethics.state.tx.us, or mailed or delivered to Seana Willing, Texas Ethics Commission, P.O. Box 12070, Austin, Texas 78711-2070, or by facsimile (FAX) to (512) 463-5777. A person who wants to offer spoken comments to the commission concerning the proposed amendment may do so at any commission meeting during the agenda item relating to the proposed amendment. Information concerning the date, time, and location of commission meetings is available by telephoning (512) 463-5800 or on the Texas Ethics Commission's website at www.ethics.state.tx.us.

The amendment to rule §26.1 is proposed under Texas Government Code §571.062, which authorizes the commission to adopt rules to administer Chapter 255 of the Election Code.

The proposed amendment affects §255.001 of the Election Code.

§26.1.Disclosure Statement.

(a) A disclosure statement that is required by §255.001, Election Code, must contain the words "political advertising" or any recognizable abbreviation, and must:

(1) appear on one line of text or on successive lines of text on the face of the political advertising; or

(2) be clearly spoken in the political advertising if the political advertising does not include written text.

(b) A disclosure statement is not required on political advertising printed on letterhead stationery if the letterhead contains the full name of one of the following:

(1) the person who paid for the political advertising;

(2) the political committee authorizing the political advertising; or

(3) the candidate authorizing the political advertising.

(c) A disclosure statement is not required on campaign buttons, pins, or hats, or on objects whose size makes printing the disclosure impractical.

(d) A disclosure statement is not required on political advertising appearing on an Internet website if:

(1) no payment was made to create, publish, or broadcast the political advertising, and

(2) the political advertising was not authorized by a candidate or political committee.

(e) For purposes of subsection (d) of this section, "payment" does not include the use of goods or equipment acquired for purposes other than political advertising or the consumption of electricity.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 19, 2018.

TRD-201801706

Seana Willing

Executive Director

Texas Ethics Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5800


PART 4. OFFICE OF THE SECRETARY OF STATE

CHAPTER 87. NOTARY PUBLIC

The Office of the Secretary of State (hereinafter referred to as "the Office") proposes to reorganize Chapter 87, relating to notaries public, by proposing the repeal of 1 TAC §§87.1 - 87.7, 87.10, 87.11, 87.20 - 87.26, 87.30, 87.40 - 87.44, 87.50, 87.60 - 87.62, and 87.70 and the concurrent proposal of new §§87.1 - 87.4, 87.10 - 87.15, 87.20 - 87.22, 87.30 - 87.35, 87.40 - 87.44, 87.50 - 87.54, 87.60 - 87.63, 87.70, 87.71. The repeal and replacement of Chapter 87 is proposed to reorganize the chapter, update outdated language, and to conform to the statutory revisions to the Government Code enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, (hereinafter referred to as "HB 1217").

In addition to the general changes noted above, the following specific changes are proposed:

Section 87.1 of the proposed rules sets forth definitions of key terms used throughout the amended subchapter.

Section 87.2 of the proposed rules sets forth requirements for an applicant to be commissioned as a traditional notary public.

Section 87.3 of the proposed rules sets forth the process for electronic submission of a traditional notary public application.

Section 87.4 of the proposed rules sets forth the requirements for an applicant to be commissioned as an online notary public.

Section 87.10 of the proposed rules provides the eligibility requirements for a notary public.

Section 87.11 of the proposed rules provides the eligibility requirements specific to an online notary public.

Section 87.12 of the proposed rules sets forth the requirements for the commissioning of an escrow officer who resides in an adjacent state.

Section 87.13 of the proposed rules sets forth the process by which a traditional notary public commission is issued by the secretary of state.

Section 87.14 of the proposed rules sets forth the process by which an online notary public commission is issued by the secretary of state.

Section 87.15 of the proposed rules sets forth the process for renewal of commission.

Section 87.20 of the proposed rules sets forth the process by which an employee of a state agency can be commissioned as a notary without bond.

Section 87.21 of the proposed rules sets forth the requirements for notaries without bond who change their employment status.

Section 87.22 of the proposed rules sets forth the requirements for notaries without bond.

Section 87.30 of the proposed rules sets forth the procedures for rejection of an application and for revocation of a notary public commission.

Section 87.31 of the proposed rules sets forth the violations which constitute good cause for the office to take disciplinary action against a notary public.

Section 87.32 of the proposed rules specifies the process for submitting a complaint against a notary.

Section 87.33 of the proposed rules sets forth the procedures followed by the office when a complaint is submitted.

Section 87.34 of the proposed rules sets forth the procedures for and range of disciplinary actions by the office taken against a notary in response to a complaint.

Section 87.35 of the proposed rules sets forth specifies when the office can take disciplinary action against a notary public.

Section 87.40 of the proposed rules sets forth the procedures to be followed when performing a traditional notarization.

Section 87.41 of the proposed rules sets forth the procedures to be followed when performing an online notarization.

Section 87.42 of the proposed rules sets forth the circumstances under which a notary may refuse a request for notarial services.

Section 87.43 of the proposed rules sets forth the circumstances under which an online notary public may refuse a request for notarial services.

Section 87.44 of the proposed rules sets forth the requirements for a notary seal.

Section 87.50 of the proposed rules sets forth the restrictions to be followed when determining which personal information can be recorded in the notary record book.

Section 87.51 of the proposed rules sets forth the requirements for a notary record book.

Section 87.52 of the proposed rules sets forth the requirements of a notary public to respond to requests for copies of their record book.

Section 87.53 of the proposed rules sets forth the consequences for failure to respond to a request for public information.

Section 87.54 of the proposed rules sets forth the requirements for retaining the notary record book.

Section 87.60 of the proposed rules sets forth the requirements for and process to change a notary’s official address with the office.

Section 87.61 of the proposed rules sets forth the process by which a notary can update the name under which the notary is commissioned.

Section 87.62 of the proposed rules sets forth the process by which a notary obtains a new commission.

Section 87.63 of the proposed rules sets forth the process for an online notary public to update the notary’s electronic signature and seal.

Section 87.70 of the proposed rules sets forth the requirements to be followed by an online notary public to perform identity proofing and credential analysis.

Section 87.71 of the proposed rules sets forth the requirements for the online notarization system used by an online notary public.

FISCAL NOTE

Briana Godbey, Legal Manager of the Business and Public Filings Division, has determined that for each year of the first five years that the sections are in effect, the expected fiscal impact on state government is estimated income of approximately $5,000 per year for the first four years and $5,000 - 10,000 in subsequent years, depending on the number of online notaries, as a result of enforcing or administering the rules as proposed. There are no expected fiscal implications for local government as a result of enforcing or administering the proposed rules and no anticipated effect on local employment or the local economy.

PUBLIC BENEFIT

Ms. Godbey has also determined that for each year of the first five years the sections are in effect the public benefit anticipated as a result of enforcing or administering the sections as proposed will be to implement the statutory provisions HB 1217 and to clarify the online notarization process. Additionally, the rules reorganize and clarify provisions related to all notaries public which will have the effect of providing clearer guidance to the over 425,000 notaries public commissioned in Texas.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES.

As required by Government Code §2006.002(c), the agency has determined that the proposed chapter may have an adverse economic effect on approximately 100 notaries per year, most of which may work as part of a small or micro business. Notaries fall within the legal industry on the NAICS chart. There are approximately 12,921 businesses in that industry in Texas and approximately 12,480 are small businesses. There will be a $50 application fee associated with the cost of compliance which will not vary between large businesses and small or micro businesses.

The application fee of $50 is associated with the application for appointment as an online notary. The fee is set to defray the costs associated with the development and maintenance of the new online commissioning system, website and educational changes, and staff to answer questions. While there is a cost associated with applying to be commissioned as an online notary public, the choice to become an online notary public is optional and there are not expected to be a high percentage of notaries who will seek to be commissioned as an online notary because of the technological requirements associated with these types of notarizations. Virginia was the first state in the nation to have online notaries and during the first six years after implementation, only .14% of the total notaries opted to also be commissioned as an online notary public. If the same trend follows in Texas, it is expected that by the end of six years, we will have approximately 600 online notaries, which equates to about 100 new online notaries being commissioned each year.

In accord with Government Code §2006.002(c-1), the agency has considered other methods to implement HB 1217 that will also minimize any adverse impact on small and micro businesses. The other methods considered by the agency to minimize any adverse impact on small and micro businesses include: (i) establishing separate commissioning requirements for small businesses and (ii) exempting small and micro businesses from the commissioning requirements.

For the following reasons, both alternate methods have been rejected. HB 1217 requires that all individuals seeking to be commissioned as an online notary public apply through the secretary of state. It would be contrary to HB 1217 to make exceptions or exemptions to the application requirement for individuals who work for small or micro businesses. Additionally, as almost all notary businesses under the legal industry are small businesses, it would negate the collection of any fee to waive or reduce the fee for small or micro businesses and HB 1217 makes no such distinction, nor does it provide for a tiered fee schedule.

The agency, after considering the purpose of the authorizing statute, does not believe it is legal or feasible to waive or modify the statutorily mandated requirements of the proposed chapter for small and micro businesses. There is no anticipated fiscal impact on rural communities.

Government Growth Impact Statement

Finally, Ms. Godbey has determined that for each year of the first five years the sections are in effect, the rules will have the following effect on government growth. The proposed changes will not create or eliminate any government programs and will not create or eliminate any employee positions. Additionally, the proposed changes will not have an effect on appropriations to the agency. The new rules do set an application fee of $50 which will be paid to the agency and deposited in General Revenue. The proposed changes do include new rules; therefore, by definition, the proposed changes create new regulations. The new regulations provide for implementation of the online notary public application and notarization process. The proposed changes do not expand, limit, or repeal any existing regulations, though the rules are renumbered and modernized. Additionally, the proposed changes neither increase nor decrease the number of individuals subject to the applicability of the rules. The rules implement the online notarization process and require all individuals who want to provide online notarizations to apply for a separate online commission. However, in order to be an online notary one must already be a commissioned notary public and therefore the proposed rules are not expanding or limiting the individuals subject to the rules. The proposed rules are not anticipated to have a significant effect on the state’s economy.

COMMENTS

Comments on the proposed repeal and replacement of Chapter 87 may be submitted in writing to: Briana Godbey, Office of the Secretary of State, Business and Public Filings Division, P.O. Box 13697, Austin, Texas 78711-3697 or bgodbey@sos.texas.gov. Comments must be received not later than 12:00 noon, Friday, June 1, 2018.

SUBCHAPTER A. NOTARY PUBLIC QUALIFICATIONS

1 TAC §§87.1 - 87.7

STATUTORY AUTHORITY

The repeal of 1 TAC §§87.1 - 87.7 is proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.1.Application for a Commission as a Notary Public.

§87.2.Eligibility to Hold the Office of Notary Public.

§87.3.Issuance of the Notary Public Commission by the Secretary of State.

§87.4.Notary Seal.

§87.5.Qualification by an Officer or Employee of a State Agency Who Does Not Furnish a Notary Public Bond.

§87.6.Change in Employment Status by an Officer or Employee of a State Agency Who Has Qualified Without a Surety Bond.

§87.7.Renewal of Commission.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801792

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER B. REJECTION AND REVOCATION

1 TAC §87.10, §87.11

STATUTORY AUTHORITY

The repeal of 1 TAC §87.10 and §87.11 is proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.10.Rejection of Application and Revocation of Commission.

§87.11.Good Cause.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801793

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER C. ADMINISTRATIVE ACTION

1 TAC §§87.20 - 87.26

STATUTORY AUTHORITY

The repeal of 1 TAC §§87.20 - 87.26 is proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.20.Qualification Under New Name.

§87.21.Rejection of Change of Name.

§87.22.Issuance of Amended Commission.

§87.23.Submitting a Complaint.

§87.24.Complaint Procedures.

§87.25.Disciplinary Action.

§87.26.Time for Action.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801794

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER D. REFUSAL TO PERFORM NOTARIAL SERVICES

1 TAC §87.30

STATUTORY AUTHORITY

The repeal of 1 TAC §87.30 is proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.30.Refusal of Requests for Notarial Services.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801795

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER E. NOTARY RECORDS

1 TAC §§87.40 - 87.44

STATUTORY AUTHORITY

The repeal of 1 TAC §§87.40 - 87.44 is proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.40.Prohibition Against Recording Personal Information.

§87.41.Form of Record Book.

§87.42.Public Information.

§87.43.Failure to Provide Public Information.

§87.44.Records Retention.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801796

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER F. CHANGE IN ADDRESS

1 TAC §87.50

STATUTORY AUTHORITY

The repeal of 1 TAC §87.50 is proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.50.Change of Address.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801797

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER G. ELECTRONIC SUBMISSIONS OF NOTARY APPLICATIONS AND BONDS

1 TAC §§87.60 - 87.62

STATUTORY AUTHORITY

The repeal of 1 TAC §§87.60 - 87.62 is proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.60.Electronic Submission.

§87.61.Records Retention for Electronic Submissions.

§87.62.Applications on Behalf of an Applicant with a Criminal Conviction.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801798

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER H. APPOINTMENT OF QUALIFIED ESCROW OFFICER AS NOTARY PUBLIC

1 TAC §87.70

STATUTORY AUTHORITY

The repeal of 1 TAC §87.70 is proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.70.Qualification by an Escrow Officer Residing in an Adjacent State.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801799

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER A. GENERAL PROVISIONS

1 TAC §§87.1 - 87.4

STATUTORY AUTHORITY

The new §§87.1 - 87.4 are proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, as enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.1.Definitions.

Words and terms defined in the Texas Government Code, Chapter 406, shall have the same meaning in this chapter. For the purposes of this chapter the following words and terms shall have the following meanings, unless the context clearly indicates otherwise.

(1) Credential means a valid, unexpired identification card or other document issued by the federal government or any state government, as defined by §311.05 of the Government Code, that contains the photograph and signature of the principal.

(2) Credential Analysis means the process which complies with Subchapter H of this chapter by which the validity of a government-issued identification credential is affirmed by a third party through review of public and proprietary data sources.

(3) Digital Certificate means a computer-based record or electronic file issued to an online notary public for the purpose of creating an official electronic signature in accordance with Subchapter C, Chapter 406 of the Government Code, and this chapter.

(4) Identity Proofing means the process which complies with Subchapter H of this chapter by which the identity of an individual is affirmed by a third party through review of public and proprietary data sources.

(5) Online Notary Public means an individual commissioned by the secretary of state as an online notary. An online notary has authority:

(A) as a traditional notary public; and

(B) to perform an online notarization as provided by Subchapter C, Chapter 406 of the Government Code and this chapter.

(6) Personal appearance or personally appear means:

(A) when performing a notarization other than an online notarization, the principal for whom the notarization is being performed physically appeared before the notary public at the time of the notarization in a manner permitting the notary public and the principal to see, hear, communicate and give identification credentials to each other; and

(B) for an online notarization, the principal for whom the notarization is being performed appears by an interactive two-way audio and video communication that meets the online notarization requirements as provided by Subchapter C, Chapter 406 of the Government Code and this chapter.

(7) Principal means an individual:

(A) whose signature is notarized in a traditional or online notarization; or

(B) taking an oath or affirmation from a notary.

(8) Notary Public means an individual commissioned by the secretary of state under both Subchapters A and C, Chapter 406 of the Government Code.

(9) Traditional Notary Public means an individual commissioned by the secretary of state under Subchapter A, Chapter 406 of the Government Code. A traditional notary public does not have the authority to perform an online notarization unless also commissioned as an online notary public.

§87.2.Application for Commission as a Traditional Notary Public.

(a) The secretary of state appoints notaries public under the provisions of article IV, §26 of the Texas Constitution and Chapter 406, Government Code.

(b) An individual applying for a traditional notary public commission shall use the application form prescribed by the secretary of state. The application shall include:

(1) the applicant's name to be used in acting as a traditional notary public;

(2) the applicant's mailing address;

(3) the applicant's county of residence;

(4) the applicant's date of birth;

(5) the applicant's driver's license number or the number of other official state-issued identification; and

(6) the applicant's social security number.

(c) An applicant must secure a bond if required to do so by §406.010 of the Government Code. To evidence the bond, the application shall include the signature of a person authorized by the surety company providing the bond.

(d) The applicant shall execute, in the name under which the commission is sought, the statement of officer as required by article XVI, §1 of the Texas Constitution.

(e) The application form is available on the secretary of state web site or may be obtained by writing the Office of the Secretary of State, Notary Public Unit, P.O. Box 13375, Austin, Texas 78711. See Form 2301. The application form for a notary who is an officer or employee of a state agency is Form 2301-NB, available on the web site maintained by the State Office of Risk Management.

§87.3.Electronic Submission of Traditional Notary Public Application.

(a) The secretary of state has developed a system for electronic submission of the application for a traditional notary public commission, the bond required under §406.010 of the Government Code, and the statement of officer. The secretary of state authorizes the submission of these documents electronically on behalf of a traditional notary public under the following terms and conditions:

(1) the submitter must comply with the technical specifications contained in the eNotary Web Service Consumer's Guide available through the Information Technology Division of the Office of the Secretary of State;

(2) the traditional notary public application and the statement of officer signed by the applicant and the surety bond signed by an officer or attorney-in-fact for the surety must be attached to the electronic submission as an image in the format specified in the eNotary Web Service Consumer's Guide; and

(3) all fees must be paid by prepaid account, LegalEase® or credit card.

(b) If the applicant is commissioned, the secretary of state shall cause the commission to be issued and the educational materials to be sent to the traditional notary public. On commission, the applicable fees will be charged to the prepaid account, LegalEase® or the credit card.

(c) If the application is rejected, the secretary of state will return a notice of the rejection to the submitter electronically. On rejection, no fees are charged to the account, LegalEase® or to the credit card.

(d) Status of a traditional notary public application submission may be checked through use of a web service interface.

(e) If the submitter is not able to consistently comply with the technical specifications and the submissions are failing as a result, the secretary of state may revoke the privilege of the submitter to submit electronically until all technical issues are resolved to the satisfaction of the secretary of state.

(f) As part of the electronic submission, the submitter is responsible for accurately entering the data elements related to the application. Repeated and consistent entry errors may result in a revocation of the privilege of the submitter to submit electronically.

(g) The submitter shall retain the original signed application, surety bond and statement of officer until the commission is issued by the secretary of state.

(h) The secretary of state will not accept electronic applications on behalf of an applicant who has been convicted of a felony or a crime of moral turpitude. The application under these circumstances (along with the statement of officer, the bond, the explanation of the criminal conviction and the applicable fees) must be delivered to the secretary of state by mail, courier or personal delivery.

§87.4.Submission of Online Notary Public Application.

(a) An individual applying for an online notary public commission shall use the electronic submission platform developed by the secretary of state.

(b) The application shall include:

(1) the applicant’s name to be used in acting as an online notary public, which shall match the name on the applicant’s traditional notary public commission;

(2) the applicant’s email address;

(3) a copy of applicant’s digital certificate;

(4) a copy of applicant’s electronic signature in one of the following formats:

(A) JPG;

(B) BMP;

(C) PNG; or

(D) TIF;

(5) a copy of applicant’s electronic seal in one of the following formats:

(A) JPG;

(B) BMP;

(C) PNG; or

(D) TIF;

(6) the applicant’s notary public identification number, as assigned by the secretary of state; and

(7) an executed statement of officer, as required by article XVI, §1 of the Texas Constitution; and

(8) a statement certifying:

(A) that the applicant will comply with the standards set forth in this chapter relating to identity proofing and credential analysis;

(B) that the applicant will use an electronic technology standard that utilizes Public Key Infrastructure (PKI) technology from a PKI service provider that is X.509 compliant when attaching or logically associating the notary’s electronic signature, seal and digital certificate to an electronic document; and

(C) that the applicant will, upon request by the secretary of state, promptly provide any necessary instructions or techniques supplied by a vendor that allow the online notary public’s electronic signature and seal to be read and authenticated.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801800

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER B. ELIGIBILITY AND QUALIFICATION

1 TAC §§87.10 - 87.15

STATUTORY AUTHORITY

The new §§87.10 - 87.15 are proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, as enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.10.Eligibility to Hold the Office of Notary Public.

(a) Subject to the provision in subsection (b) of this section and §87.12 of this title (relating to Qualification by an Escrow Officer Residing in an Adjacent State), a person is eligible to be a notary public if the person is 18 years of age or older and a resident of Texas.

(b) A person is not eligible to be a notary public if the person was convicted of a crime involving moral turpitude or a felony and the conviction has become final, has not been set aside, and no pardon or certificate of restoration of citizenship rights has been granted.

(c) A crime involving moral turpitude includes the commission of a crime involving dishonesty, fraud, deceit, misrepresentation, deliberate violence, moral depravity, or that reflects adversely on the applicant's honesty, trustworthiness, or fitness as a notary public, which may include, but not be limited to:

(1) Class A and B type misdemeanors; and

(2) felony convictions which have not been set aside, or for which no pardon or certificate of restoration of citizenship rights have been granted.

(d) Class C type misdemeanor convictions shall not be considered in determining eligibility.

(e) If the secretary of state discovers, at any time, that an applicant or commissioned notary public is not eligible, the secretary of state will reject the notary public application or revoke the notary public commission.

§87.11.Eligibility to be Commissioned as an Online Notary Public.

In addition to the eligibility requirements in §87.10 of this title (relating to Eligibility to Hold the Office of Notary Public), an applicant must hold a commission as a traditional notary public before being eligible for appointment as an online notary public.

§87.12.Qualification by an Escrow Officer Residing in an Adjacent State.

(a) An applicant who is qualified as an escrow officer within the meaning assigned by §2652.051, Insurance Code, is not required to be a resident of Texas if the applicant is a resident of New Mexico, Oklahoma, Arkansas or Louisiana.

(b) The secretary of state shall commission the applicant if, notwithstanding the residency requirements, the applicant satisfies the conditions of subsection (a) of this section and §87.13 and §87.14 of this title (relating to Issuance of the Traditional Notary Public Commission by the Secretary of State and Issuance of the Online Notary Public Commission by the Secretary of State).

(c) A notary public, appointed under this section, who ceases to be qualified under this section, must voluntarily surrender the notary public commission.

§87.13.Issuance of the Traditional Notary Public Commission by the Secretary of State.

(a) The secretary of state shall issue a traditional notary public commission to a qualified applicant. An applicant is qualified if:

(1) the applicant meets the eligibility requirements stated in §87.10 of this title (relating to Eligibility to Hold the Office of Notary Public);

(2) the applicant submits:

(A) a properly completed and executed application;

(B) the bond as provided in §406.010, Government Code, if required;

(C) the statement of officer and oath of office required by article XVI, §1 Texas Constitution;

(D) payment to the secretary of state of fees required by §406.007, Government Code; and

(3) no good cause exists for rejecting the application.

(b) The secretary of state shall not commission an applicant if the applicant had a prior application rejected or a commission revoked due to a finding of ineligibility or good cause and the reason for ineligibility or grounds for good cause continues to exist.

(c) When all conditions for qualification have been met, the application shall be approved and filed. The secretary of state shall cause a commission to be issued and sent to each traditional notary public who has qualified. A commission is effective as of the date of qualification.

§87.14.Issuance of the Online Notary Public Commission by the Secretary of State.

(a) The secretary of state shall issue an online notary public commission to a qualified applicant. An applicant is qualified if:

(1) the applicant meets the eligibility requirements stated in §87.11 of this title (relating to Eligibility to be Commissioned as an Online Notary Public);

(2) the applicant submits:

(A) a properly completed and executed application;

(B) the statement of officer and oath of office required by article XVI, §1 Texas Constitution;

(C) payment to the secretary of state the application fee of $50; and

(3) no good cause exists for rejecting the application.

(b) The secretary of state shall not commission an applicant if the applicant had a prior application rejected or a commission revoked due to a finding of ineligibility or good cause and the reason for ineligibility or grounds for good cause continues to exist.

(c) When all conditions for qualification have been met, the application shall be approved and filed. The secretary of state shall cause a commission to be issued and sent to each online notary public who has qualified. A commission is effective as of the date of qualification and shall expire on the same date as applicant’s corresponding traditional notary public commission.

§87.15.Renewal of Commission.

(a) A notary public seeking to renew either a traditional commission or both a traditional and online commission shall file an application for renewal in the same manner and on the same form as if filing an original application for commission. The secretary of state will accept applications for renewal not sooner than 90 days before the expiration of the notary public's current commission. The renewal must be received by the secretary of state no later than the expiration date of the notary public's current commission.

(b) The secretary of state shall determine eligibility for renewals according to the same standards as initial applicants, in accordance with this chapter and §406.004, Government Code. The secretary of state is not bound by prior determinations of eligibility.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801801

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER C. NOTARIES WITHOUT BOND

1 TAC §§87.20 - 87.22

STATUTORY AUTHORITY

The new §§87.20 - 87.22 are proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, as enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.20.Qualification by an Officer or Employee of a State Agency.

(a) An applicant who is an officer or employee of a state agency is not required to provide a surety bond. For the purpose of this chapter, "state agency" has the meaning assigned by §2052.101, Government Code.

(b) An applicant who is an officer or employee of a state agency and does not provide a surety bond must complete the traditional notary public application entitled "Application for Appointment as a Notary Public Without Bond" (Form 2301-NB).

(c) The State Agency employing the applicant must submit the completed application to the State Office of Risk Management.

(d) The State Office of Risk Management shall complete the verification certificate on the application and forward the completed application to the Office of the Secretary of State for processing.

(e) The secretary of state shall commission the applicant if:

(1) the applicant meets the eligibility requirements stated in §87.10 of this title (relating to Eligibility to Hold the Office of Notary Public);

(2) the applicant submits:

(A) a properly completed and executed application verified by the State Office of Risk Management;

(B) the statement of officer and oath of office required by article XVI, §1 Texas Constitution;

(C) the payment of fees required by §406.007(a)(2) and §406.007(b), Government Code; and

(3) no good cause exists for rejecting the application.

§87.21.Change in Employment Status by an Officer or Employee of a State Agency Who Has Qualified Without a Surety Bond.

(a) If a notary public who has qualified without a surety bond transfers to another state agency, the agency to which the notary public transfers shall notify the State Office of Risk Management and the Office of the Secretary of State of the transfer.

(b) If a notary public terminates state employment, the notary public shall:

(1) voluntarily surrender the notary public commission;

(2) purchase and provide evidence to the secretary of state of the purchase of a notary public bond for the time period remaining on the notary's current term of office; or

(3) voluntarily surrender the notary public commission and apply for a new term of office, provide a notary public bond, and pay the applicable fees.

(c) Failure to take one of the actions set forth in subsection (b) of this section within 30 days of termination of state employment is good cause for revocation of the notary public's commission.

§87.22.Special Requirements for Notaries Without Bond.

(a) A notary public commissioned as a notary public without bond shall obtain a seal which complies with the requirements of §406.013, Government Code and §87.44 of this title (relating to Notary Seal) and which contains an additional line reading "Notary without Bond".

(b) A state employee is not prohibited from purchasing a notary bond at personal expense. However, an individual commissioned as a notary without bond shall only notarize documents pursuant to their official state duties.

(c) Agencies shall require notaries without bond to attend a notary training class, either provided internally or externally.

(d) Notaries without bond who notarize documents outside of their official state duties or who fail to use the "Notary without Bond" seal shall be subject to disciplinary action by their respective agencies and such action may constitute good cause under §87.31 of this title (relating to Good Cause).

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801802

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER D. ADMINISTRATIVE ACTION

1 TAC §§87.30 - 87.35

STATUTORY AUTHORITY

The new §§87.30 - 87.35 are proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, as enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.30.Rejection of Application and Revocation of Commission.

The secretary of state shall, for ineligibility or good cause, reject any application, revoke the commission of any notary public, or take other disciplinary action, as outlined in §87.34 of this title (relating to Disciplinary Action), against a notary public as the secretary of state deems appropriate. Rejection, revocation, and suspension proceedings will be held pursuant to the right of notice, hearing, and adjudication as set out in the rules of practice and procedure before the Office of the Secretary of State, the rules of the State Office of Administrative Hearings and the Administrative Procedure Act, Government Code, §§2001.001 - 2001.902. Any party to a contested case has the right to be represented by legal counsel. Such action will be subject to the right of appeal to a district court of Travis County.

§87.31.Good Cause.

Good cause may include the following:

(1) a false statement knowingly made in a notary public application;

(2) a final conviction for the violation of any law concerning the regulation of the conduct of notaries public in this state or any other state;

(3) use of the phrase "notario" or "notario publico" in connection with advertising or offering the services of a notary public;

(4) false representation as an attorney as specified in §406.017, Government Code;

(5) a failure to fully and faithfully discharge any of the duties or responsibilities required of a notary public;

(6) the unauthorized practice of law;

(7) a failure to utilize a correct notary seal as described in §406.013 and §406.101(5), Government Code and this chapter;

(8) a failure to administer an oath or affirmation as required by law;

(9) the collection of a fee in excess of the fees authorized by §406.024 and §406.111, Government Code;

(10) the execution of any certificate as a notary public containing a statement known to the notary public to be false;

(11) a failure to complete the notarial certificate at the time the notary public's signature and seal are affixed to the document;

(12) the advertising or holding out in any manner that the notary public is an immigration specialist, immigration consultant, or any other title or description reflecting an expertise in immigration matters;

(13) the use of false or misleading advertising of either an oral or written nature, whereby the notary public has represented or indicated that he or she has duties, rights, powers, or privileges that are not possessed by law;

(14) performing a notarization when the purported signer did not personally appear before the notary public at the time the notarization is executed;

(15) previous disciplinary action against the notary public in accordance with these sections;

(16) a failure to comply with, or violation of, a previous disciplinary action taken pursuant to §87.34 of this title (relating to Disciplinary Action);

(17) a failure to promptly respond to a request for public information in accordance with §87.52 of this title (relating to Public Information);

(18) a failure to properly identify the individual whose signature is being notarized;

(19) a failure to keep a notary record as described in §406.014 and §406.108, Government Code, and Chapter 87 of this title;

(20) a failure to include in the notarial certificate for an online notarization a notation that the notarization is an online notarization;

(21) a failure to take reasonable steps to ensure that the two-way audio-visual communication used during an online notarization is secure from unauthorized interception;

(22) a failure to safely and securely maintain notary materials;

(23) performing a notarial act that the notary public is not authorized to perform;

(24) a failure to report a new online signature or seal as required by §87.63 of this title (relating to Changes to Electronic Seal and Signature for Online Notary);

(25) notarizing one’s own signature;

(26) a failure to pay the filing fee required by §406.007, Government Code, and §87.13 and §87.14 of this title (relating to Issuance of the Traditional Notary Public Commission by the Secretary of State and Issuance of the Online Notary Public Commission by the Secretary of State) or when such payment was made by an instrument that was dishonored when presented by the state for payment;

(27) a failure to timely respond to a request for information from the secretary of state; and

(28) a failure to maintain a current address as required by §406.019, Government Code.

§87.32.Submitting a Complaint.

(a) The jurisdiction of the secretary of state to investigate a complaint is limited to individuals that are commissioned or have applied for commission or renewal of a commission as a Texas notary public. The jurisdiction of the secretary of state to investigate a complaint ceases upon the expiration, revocation or surrender of a notary public commission, except as provided in §87.35 of this title (relating to Time for Action).

(b) A person harmed by the actions of a notary public may file a complaint with the secretary of state on a form prescribed by the secretary of state. The complaint shall include:

(1) the name of the notary public that is the subject of the complaint;

(2) the expiration date of the notary public's current commission;

(3) the name, mailing address, and email address of the individual filing the complaint;

(4) a recitation of the facts, within the personal knowledge of the complainant, relating to the alleged misconduct by the notary public; and

(5) copies of the notarized documents that are the subject of the complaint.

(c) The complaint shall be signed and verified by the person alleging misconduct on the part of the notary public.

(d) The secretary of state may, for good cause, as defined in §87.31 of this title (relating to Good Cause), and/or as otherwise referenced in this title, initiate its own complaint against a notary public.

§87.33.Complaint Procedures.

(a) The secretary of state may determine that the allegations in the complaint are not sufficient to warrant formal disciplinary action. In such case, the secretary of state may:

(1) take no action on the complaint;

(2) informally advise the notary public of the appropriate conduct and the applicable statutes and rules governing the conduct; or

(3) request further information from the complainant or the notary public prior to taking action.

(b) If the secretary of state determines that the complaint alleges sufficient facts to constitute good cause for disciplinary action against the notary public, and the complaint complies with §87.32 of this title (relating to Submitting a Complaint), the secretary of state shall send a copy of the complaint, with any attachments the secretary of state deems to be relevant, to the notary public with a request to the notary to respond to the statements in the complaint.

(c) The notary public must respond to the complaint in writing. The response must:

(1) specify any disputed facts and provide such additional information as the notary public shall desire;

(2) be signed and sworn to by the notary public before a person authorized to administer oaths;

(3) include copies of the pages of the notary record book referencing the notarization that is the subject of the complaint; and

(4) be received by the secretary of state within 21 days of the date of the secretary of state’s notice of the complaint to the notary public.

(d) The secretary of state shall review the response and determine whether further administrative action is appropriate. If the secretary determines that no further action is appropriate, the secretary shall notify the notary public and the complainant of the determination in writing.

(e) If the secretary determines that further administrative action is appropriate, the secretary shall follow the procedures set forth in this §87.34 of this title (relating to Disciplinary Action).

§87.34.Disciplinary Action.

(a) The secretary of state has discretion to determine that the conduct that forms the basis of a complaint against a notary public does not warrant disciplinary action against the notary public and take no further action on the complaint. If the secretary of state determines that disciplinary action should be taken, the secretary of state may pursue the following disciplinary actions against individuals commissioned pursuant to Subchapter A or C, Chapter 406, Government Code:

(1) issue a written reprimand to the notary public; or

(2) require the notary public to enter into an agreement to:

(A) not engage in any further misconduct;

(B) agree to voluntarily surrender the notary public commission;

(C) accept a suspension of the notary public commission for a set period of time;

(D) complete a course of study relating to the powers, duties, and responsibilities of a notary public;

(E) not seek renewal of the notary public commission for a specified period of time; or

(F) take such other action as the secretary deems appropriate; or

(3) take action to revoke the notary public commission.

(b) If an individual has been commissioned as a notary public under both Subchapters A and C of Chapter 406, Government Code, the office has the discretion to pursue revocation of either the traditional or online notary public commission alone or both the traditional and online notary public commission.

(c) If no agreement can be reached, before taking action to suspend or revoke the notary public commission, the secretary of state shall give written notice to the notary of a right to a hearing in accordance with the rules of practice and procedure before the secretary of state. If a hearing is timely requested, the secretary of state shall follow the provisions of the Administrative Procedure Act, Chapter 2001, Texas Government Code governing the initiation and conduct of a contested case proceeding.

(d) It is within the secretary of state's discretion to determine that no action should be taken or to enter into an agreement with the notary public regarding the appropriate action. The secretary of state shall close a complaint file upon a determination that no further action is necessary or conclusion of an agreement with the notary public. After a complaint file is closed, the secretary of state will take no further action on the complaint and will not accept an additional complaint with the same or substantially similar allegations.

§87.35.Time for Action.

The secretary of state may take disciplinary action for an act or omission which occurred during a prior term of office. The secretary may also require any pending complaints against a notary public that remain at the expiration of the notary public’s prior commission to be resolved prior to accepting a renewal or new application for appointment as a notary public. Failure to reach a resolution on an unresolved complaint may result in the rejection of an application for appointment or renewal.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801803

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER E. NOTARY PROCEDURES

1 TAC §§87.40 - 87.44

STATUTORY AUTHORITY

The new §§87.40 - 87.44 are proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, as enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.40.Traditional Notarization Procedures.

(a) A traditional notary public shall not perform a notarization if the document signer does not personally appear before the notary at the time of notarization in accordance with §87.1 of this title (relating to Definitions).

(b) The methods by which a traditional notary public identifies a signer are as follows:

(1) Traditional notary public personally knows the principal; or

(2) Principal is introduced by oath of credible witness who either is personally known to the traditional notary public or provides qualifying identification in accordance with paragraph (3) of this subsection; or

(3) Principal or credible witness is identified by a credential.

(c) The traditional notary public shall attach a notarial certificate to all written notarial acts that names the principal, the date of the notarization, the state and county in which the notarization is performed, and the type of notarial act performed. The notarial certificate shall be signed and include an impression of the notary’s seal.

(d) The traditional notary public shall keep a record of all notarial acts in accordance with §406.014, Government Code, and this chapter.

(e) This section shall apply to a traditional notary public who performs notarizations on tangible or electronic records.

§87.41.Online Notarization Procedures.

(a) An online notarization may only be performed by a notary who is commissioned as an online notary public.

(b) An online notary public shall not perform an online notarization if the online notary public is not physically in Texas at the time of the notarization.

(c) An online notary public shall not perform an online notarization if the document signer does not personally appear before the notary public at the time of notarization in accordance with §87.1 of this title (relating to Definitions).

(d) The methods by which an online notary public identifies a signer are as follows:

(1) Online notary public personally knows the principal; or

(2) Principal is introduced by oath of credible witness who either is personally known to the online notary public or provides qualifying identification in accordance with paragraph (3) of this subsection; or

(3) Principal or credible witness is identified using the identity proofing and credential analysis standards in accordance with subchapter H of this chapter.

(e) The online notary public shall attach an electronic notarial certificate to all written notarial acts that identifies the principal, the date of the notarization, the state and county in which the notarization was performed, that the notarial act was an online notarization, and the type of the notarial act performed. The notarial certificate shall be signed and include an attachment of the online notary public’s seal.

(f) The liability, sanctions, and remedies for the improper performance of online notarial acts are the same as described and provided by law for the improper performance of traditional notarial acts.

(g) An online notary public shall keep a record of all notarial acts in accordance with §406.108, Government Code, and Chapter 87 of this title. The record of the audio-visual communication shall include:

(1) the means by which the online notary public establishes the identity of the principal and any credible witnesses; and

(2) the actual notarial act performed.

(h) The online notary public shall not disclose any access information used to affix the notary’s electronic signature and seal except when requested by the secretary of state, law enforcement, the courts, and with reasonable precautions, electronic document preparation and transmission vendors.

§87.42.Refusal of Requests for Notarial Services.

(a) A notary public is authorized to refuse to perform a notarial act if:

(1) the notary public has reasonable grounds to believe that the signer is acting under coercion or undue influence;

(2) the notary public has reasonable grounds to believe that the document in connection with which the notarial act is requested may be used for an unlawful or improper purpose;

(3) the notary public has reasonable grounds to believe the signing party does not have the capacity to understand the contents of the document;

(4) the notary public is not familiar with the type of notarization requested.

(b) A notary public who is employed by a governmental body shall not perform notarial services that interfere with the notary's discharge of the notary's duties as a public employee.

(c) An employer may limit or prohibit an employee that is a notary public from notarizing during work hours.

(d) A notary public may not refuse a request for notarial services on the basis of the sex, age, religion, race, ethnicity or national origin of the requesting party.

(e) A notary public should refuse a request for notarial services only after careful deliberation.

§87.43.Reasons to Refuse Online Notarization.

In addition to those in §87.42 of this title (relating to Refusal of Requests for Notarial Services), an online notary is authorized to refuse to perform an online notarization if:

(1) The online notary public is unable to verify the identity of the principal using an acceptable means of identification in accordance with Subchapter H;

(2) The online notary public is unable to verify the security of the two way audio visual transmission;

(3) The signature of the principal cannot be attached to the electronic document; or

(4) The signature or seal of online notary public cannot be attached to the electronic document in a manner that renders any subsequent change or modification to the document evident.

§87.44.Notary Seal.

(a) The name on the notary public seal must match the name, as stated on the application, under which the notary public is commissioned and performs all notarial acts.

(b) For all applicants commissioned or recommissioned on or after January 1, 2016, the notary public seal must contain the identifying number issued by the secretary of state.

(c) For notaries public who were commissioned or recommissioned prior to January 1, 2016, the seal of such notaries is not required to contain the identifying number issued by the secretary of state until the notary is recommissioned in accordance with the procedures specified in §406.011, Texas Government Code, and §87.15 of this title (relating to Renewal of Commission). The seal of notaries who were commissioned or recommissioned prior to January 1, 2016, may, however, contain the identifying number issued by the secretary of state prior to the notary being recommissioned in accordance with the procedures specified in §406.011, Texas Government Code, and §87.15 of this title.

(d) Online notaries public shall attach their seal to the electronic notarial certificate of an electronic document in a manner that is capable of independent verification and renders any subsequent change or modification to the electronic document evident.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801804

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER F. NOTARY RECORDS

1 TAC §§87.50 - 87.54

STATUTORY AUTHORITY

The new §§87.50 - 87.54 are proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, as enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.50.Prohibition Against Entering Personal Information in a Notary Record Book.

(a) A notary public (other than a court clerk notarizing instruments for the court) shall not record in the notary's record book:

(1) an identification number that was assigned by a governmental agency or by the United States to the signer, grantor or maker and that is set forth on the identification card or passport presented as identification;

(2) any other number that could be used to identify the signer, grantor or maker of the document; or

(3) biometric information, including a thumbprint or fingerprint.

(b) This section does not prohibit a notary public from recording a number related to the residence of the signer, grantor or maker of the document or the instrument.

(c) This section does not apply to an online notary public making an audio visual recording of the means by which the notary establishes the identity of the principal.

(d) A notary public who inadvertently records information prohibited under subsection (a) of this section shall redact such information prior to providing public access to or copies of the notary record book.

§87.51.Form of Record Book.

(a) Notary records, other than records of online notarizations, may be maintained either in a book or electronically in a computer or other storage device so long as the records are adequately backed-up and are capable of being printed in a tangible medium when requested.

(b) Records of an online notarization shall be maintained electronically in a computer or other storage device that is capable of recording the information required by §406.108, Government Code, including a recording of any video and audio conference that is the basis for identifying the principal. An online notary public may contract with a reputable vendor to provide such storage if the vendor:

(1) has provided reasonable evidence to the online notary public that it is capable of providing such services; and

(2) provides complete access to the online notary public of all the notary’s records for an agreed period of time, which at minimum, complies with the retention requirements in §87.54 of this title (relating to Records Retention) even if such a contract is terminated. If the contract between the online notary public and the vendor is terminated, all records must be transferred to the online notary public.

(c) A notary public who performs multiple notarizations for the same signer within a single document may abbreviate the entry of those notarizations in the notary record book, except that a separate entry must be made for each type of notarial act. The abbreviated entry must contain all the information required by §406.014, Government Code, and must include the number of notarizations performed within the specified document.

§87.52.Public Information.

(a) Subject to subsection (b) of this section, records regarding notarial acts performed are public information. On payment of all fees, the notary public shall promptly provide a certified copy of any entries in the notary public's records to any person requesting the copy. The notary shall provide the certified copy no later than 10 business days from the date of receipt of the fees, unless the notary cannot produce the certified copy within 10 business days from the date of receipt of the fees, in which case the notary shall certify that fact in writing to the person requesting the copy on or before the 10th business day from the date of receipt of the fees, and set a date and hour within a reasonable time when the certified copy will be provided, and shall provide the information by that date and hour. If the notary has inadvertently included personal identifiable information in the record contrary to §87.40 of this title (relating to Prohibition Against Recording Personal Information), the notary must redact that personal information prior to release of the information.

(b) The portion of an audio and visual recording of an online notarization that is the basis for identifying the principal or any credible witnesses is confidential and shall not be released without consent of the individual(s) whose identity is being established, unless ordered by a court of competent jurisdiction or upon request by the secretary of state.

§87.53.Failure to Provide Public Information.

Failure of a notary public to promptly respond to a request for public information in accordance with §87.42 of this title (relating to Public Information) may be good cause for suspension or revocation of a notary commission or other disciplinary action against the notary.

§87.54.Records Retention.

(a) Records of a notarization other than an online notarization shall be retained, in a safe and secure manner, for the longer of the term of the commission in which the notarization occurred or three years following the date of notarization.

(b) Records of an online notarization shall be retained, in a safe and secure manner, for five years following the date of the notarization. An online notary public must also maintain a back-up of the electronic records for the same period of time. Both the original records and the back-up shall be protected from unauthorized use.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801805

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER G. CHANGES AFTER COMMISSIONING

1 TAC §§87.60 - 87.63

STATUTORY AUTHORITY

The new §§87.60 - 87.63 are proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, as enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.60.Change of Address.

(a) A notary public must notify the secretary of state in writing of a change in address within 10 days of the change. To notify the secretary of state of a change of address, the notary public should complete and submit Form 2302 (Notary Public Change of Address Form). This form is available on the secretary of state web site.

(b) The secretary of state sends all official notices, including notices of complaints and requests to respond to complaints, to the notary public at the address on file with the secretary's office. Failure to change the address may, consequently, result in a revocation of the notary commission if the notary fails to timely respond to a complaint or to a request for public information.

(c) A notary public who removes his or her residence from Texas or no longer qualifies under the residency exceptions provided under §87.12 of this title (relating to Qualification by an Escrow Officer Residing in an Adjacent State) vacates the office of notary public and must surrender the notary commission to the secretary of state.

§87.61.Qualification Under New Name.

(a) During the four-year term of office, a notary public may change the name on the notary commission by submitting the following to the secretary of state:

(1) an Application for Change of Name as a Texas Notary Public (Form 2305 available on the secretary of state web site;

(2) for traditional notaries public, a rider or endorsement to the bond on file with the secretary of state from the surety company or its agent or representative specifying the change of name;

(3) the current certificate of commission or a signed and notarized statement that the notary public will perform all future notarial acts under the name specified on the amended commission; and

(4) the statutory fee equal to the sum of the fee for the issuance of a commission and the fee for filing of a bond.

(b) An online notary public shall check the appropriate box on Form 2305 to update the name on both the traditional and online notary commission and shall pay the fee for issuance of two commissions and the bond.

§87.62.Issuance of Amended Commission.

(a) If the submission of the change of name complies with §87.61 of this title (relating to Qualification Under New Name), the secretary of state shall issue an amended commission to the notary public in the name requested. Upon issuance of the amended commission, the notary public must perform all notarial acts using the name on the amended commission.

(b) Upon qualifying under a new name, a notary public must obtain a new seal that contains the name, as specified on the amended commission, under which the notary will perform all future notarial acts.

(c) If the notary public who qualifies under a new name is commissioned as both a traditional and online notary, the notary shall obtain both a new traditional seal and new electronic seal that contains the name, as specified on the amended commission, under which the notary will perform all future notarial acts.

§87.63.Changes to Electronic Seal and Signature for Online Notary.

(a) An online notary public shall at all times maintain an electronic signature and electronic seal that comply with the provisions of Chapter 406, Government Code, and this chapter.

(b) An online notary public shall replace an electronic signature or electronic seal under the following circumstances:

(1) the electronic signature or electronic seal has expired;

(2) the electronic signature or electronic seal has been revoked or terminated by the device’s issuing or registering authority; or

(3) the electronic signature or electronic seal is for any reason no longer valid or capable of authentication.

(c) An online notary public who replaces an electronic signature or electronic seal shall provide the following to the secretary of state within 10 days of the replacement:

(1) the electronic technology or technologies to be used in attaching or logically associating the new electronic signature, seal or certificate to an electronic document;

(2) a copy of applicant’s new digital certificate, if applicable;

(3) a copy of applicant’s new electronic signature, if applicable;

(4) a copy of applicant’s new electronic seal, if applicable; and

(5) any necessary instructions or techniques supplied by the vendor that allow the notary’s electronic signature and seal to be read and authenticated.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801806

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


SUBCHAPTER H. MINIMUM REQUIREMENTS FOR ONLINE NOTARIZATIONS

1 TAC §87.70, §87.71

STATUTORY AUTHORITY

The new §87.70 and §87.71 are proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, as enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code

§87.70.Identity Proofing and Credential Analysis Standards.

(a) Identity proofing and credential analysis must be performed by a reputable third party who has provided evidence to the online notary public of the ability to satisfy the requirements of this chapter.

(b) Identity proofing is performed through dynamic knowledge based authentication which meets the following requirements:

(1) principal must answer a quiz consisting of a minimum of five questions related to the principal’s personal history or identity, formulated from public and proprietary data sources;

(2) each question must have a minimum of five possible answer choices;

(3) at least 80% of the questions must be answered correctly;

(4) all questions must be answered within two minutes;

(5) if the principal fails their first attempt, they may retake the quiz one time;

(6) during the retake, a minimum of 40% of the prior questions must be replaced; and

(7) if the principal fails their second attempt, they are not permitted to retry with the same online notary public for 24 hours.

(c) Credential analysis is performed utilizing public and proprietary data sources to verify the credential presented by the principal.

(d) Credential analysis shall, at a minimum:

(1) use automated processes which include, but are not limited to:

(A) image correction and edge detection;

(B) credential type classification based on format, style, layout and other identifying features;

(C) data extraction, when possible, using optical character recognition (OCR) for text, and barcode scanning when necessary; or

(D) forensic inspection to identify expected security features based on credential type.

(2) confirm that the data on the credential is valid and matches the principal’s claimed identity; and

(3) enable the online notary public to visually compare the following for consistency:

(A) available credential analysis automated process output;

(B) the credential itself; and

(C) the principal.

(e) If the principal must exit the workflow, the principal must meet the criteria outlined in this section and must restart the identity proofing and credential analysis from the beginning.

§87.71.Online notarization system.

An online system used to perform online notarial acts by means of audio-video communication shall:

(1) provide for an uninterrupted audio-visual workflow, including the identity proofing and credential analysis portion;

(2) provide sufficient video resolution and audio clarity to enable the online notary public and the principal to see and speak to each other simultaneously through live, real time transmission;

(3) provide sufficient captured image resolution for credential analysis to be performed in accordance with subchapter H of this chapter.

(4) include a means of authentication that reasonably ensures only the proper parties have access to the audio-video communication;

(5) provide some manner of ensuring that the electronic record that is presented for online notarization is the same record electronically signed by the principal;

(6) be capable of securely creating and storing or transmitting securely to be stored an electronic recording of the audio-video communication, keeping confidential the record of identity proofing and credential analysis; and

(7) provide reasonable security measures to prevent unauthorized access to:

(A) the live transmission of the audio-video communication;

(B) a recording of the audio-video communication;

(C) the verification methods and credentials used to verify the identity of the principal; and

(D) the electronic documents presented for electronic notarization.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801807

Carmen Flores

Interim General Counsel

Office of the Secretary of State

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 463-5590


PART 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 353. MEDICAID MANAGED CARE

SUBCHAPTER O. DELIVERY SYSTEM AND PROVIDER PAYMENT INITIATIVES

1 TAC §353.1303

The Texas Health and Human Services Commission (HHSC) proposes amendments to §353.1303, concerning the Quality Incentive Payment Program for Nursing Facilities.

BACKGROUND AND PURPOSE

The amendment would delete the good cause exception to the geographic proximity criterion in the Quality Incentive Payment Program (QIPP) rule. The rule was drafted to avoid possible deferrals and disallowances by the Centers for Medicare and Medicaid Services (CMS), as it closely monitors state funding arrangements that involve intergovernmental transfers (IGTs), especially in instances when a nursing facility (NF) is outside the effective reach of the owner's location. Use of the good cause exception for the sole purpose of enhancing Federal funding potentially jeopardizes the integrity of the QIPP program. None of the exception requests received to date included sufficient documentation to indicate there would be no risk to Federal funds, therefore HHSC has not granted any such requests. Additionally, this good cause exception appears administratively unworkable.

The amendment would also modify the calculation of the eligibility cut-off point for participation by private NFs. As amended, the private NF QIPP eligibility cut-off point for state fiscal year (SFY) 2019 and beyond will be equal to the mean percentage plus one-quarter of one standard deviation of historical Medicaid NF days of service provided under fee-for service (FFS) and managed care (MC) by all private NFs. Additionally, a private NF that was eligible to participate in QIPP during Eligibility Period One is eligible to participate in the eligibility period for SFY 2019 regardless of its Medicaid NF days of service for the SFY 2019 eligibility period. These modifications will continue to ensure that QIPP funds are focused on the Medicaid population while increasing the number of eligible providers.

The amendment would also clarify the rule in regards to submission of the Quality Assurance Performance Improvement (QAPI) Validation Report. The QAPI Validation Report must be submitted by NFs to HHSC monthly.

Finally, the amendment would delete a reference to audited cost reports. Upon initial adoption, HHSC removed all references to audited cost reports in response to a comment. This specific reference mistakenly remained in the rule language upon adoption.

SECTION-BY-SECTION SUMMARY

The proposed amendment to §353.1303(b)(10) replaces "an MCO" as the point of submission of the QAPI Validation Report to "HHSC."

The proposed amendment to §353.1303(c)(1)(A)(iii) removes the good cause exception to the geographic proximity criterion. Due to the risk of Federal funds, HHSC is no longer allowing exceptions to the 150 mile radius requirement.

The proposed amendment to §353.1303(c)(2) adds a subparagraph (A) to indicate the revised formula for calculating the eligibility cut-off point for participation by private NFs in future eligibility periods. It also adds a subparagraph (B) to make private NFs that were eligible to participate in QIPP during Eligibility Period One eligible to participate in state fiscal year 2019, regardless of their Medicaid NF days of service for that eligibility period.

The proposed amendment to §353.1303(d)(4)(A) deletes the reference to an "audited" cost report. This reference should have been removed upon adoption.

The proposed amendment to §353.1303(g)(1)(C) replaces "the MCOs" as the point of submission of the QAPI Validation Report to "HHSC."

FISCAL NOTE

Greta Rymal, Deputy Executive Commissioner for Financial Services, has determined that for each year of the first five years the amendments will be in effect, there may be fiscal implications to local governments as a result of enforcing and administering the amendments as proposed.

The rule may limit a local government NF's ability to increase their revenue by not allowing a good cause exemption to the existing 150 mile rule, thus disqualifying some local government NF's from participation in QIPP. This potential limit would apply only to local government NF's who are not currently participating in QIPP. The potential increase in entrants to the program related to the change in the eligibility cut-off point will impact a local governmental NF's potential share of the QIPP pool of funds.

Through a separate administrative action, HHSC intends to size the pool if this rule is adopted, such that local government NFs already participating in QIPP do not experience a negative impact in the absolute amount of funds received on a per-day/per-bed basis relative to the first QIPP program year (FY18) provided the quality metrics are achieved.

GOVERNMENT GROWTH IMPACT STATEMENT

HHSC has determined that during the first five years that the amendments will be in effect:

(1) the proposed amendments will not create or eliminate a government program;

(2) implementation of the proposed amendments will not require the creation or elimination of employee positions;

(3) implementation of the proposed amendments will not require an increase or decrease in future legislative appropriations;

(4) the proposed amendments will not require an increase or decrease in fees paid to the agency;

(5) the proposed amendments will not create a new rule;

(6) the proposed amendments will both limit and expand an existing rule; and

(7) the proposed amendments will increase the number of individuals subject to the rule.

HHSC has insufficient information to determine the proposed amendments' effects on the state's economy.

SMALL BUSINESS, MICRO-BUSINESS, AND RURAL COMMUNITY IMPACT ANALYSIS

Ms. Rymal has also determined that there may be an adverse economic effect on small businesses, micro-businesses, or rural communities. The rule may limit a provider's ability to increase their revenue by not allowing a good cause exemption to the 150 mile rule thus disqualifying some providers from participation in QIPP. This potential limit would apply only to providers who are not currently participating in QIPP, including small and micro-businesses.

The potential increase in entrants to the program related to the change in the eligibility cut-off point could impact a small business or micro-business NF's potential share of the QIPP pool of funds, however, no small business or micro-business currently participates.

Under §2006.002 of the Government Code, a state agency proposing an administrative rule that may have an adverse economic effect on small businesses must prepare an economic impact statement and a regulatory flexibility analysis. The economic impact statement estimates the number of small businesses subject to the rule and projects the economic impact of the rule on small businesses. The regulatory flexibility analysis describes the alternative methods the agency considered to achieve the purpose of the proposed rule while minimizing adverse effects on small businesses. The purpose of the proposed rules is to remove the good cause exception to the geographic proximity criterion, modify the calculation of the eligibility cut-off point for participation by private NFs, update the submission requirements of the QAPI Validation Report to align with current policies, and delete a reference to audited cost reports. Only the removal of the good cause exemption may have an adverse economic impact on small businesses, micro-businesses, or rural communities.

It is not possible to estimate the number of small businesses, micro businesses, or rural communities this rule may adversely impact. This rule may only adversely impact private providers who do not currently participate in QIPP, who will not meet the amended eligibility cut-off point, and who do not meet the geographic proximity criterion. It is not possible to determine which small business or micro business will request enrollment in QIPP and which of those may be impacted by the geographic proximity criterion.

HHSC considered four alternatives to removing the good cause exemption to the geographic proximity criterion.

Alternative 1: Alternative 1 would remove the good cause exemption to the geographic proximity criterion.

Alternative 2: Alternative 2 would retain the good cause exemption to the geographic proximity criterion.

Alternative 3: Alternative 3 would retain the good cause exemption to the geographic proximity criterion and provide informal guidance on what constitutes a good cause exemption to the geographic proximity criterion and how to ensure there is a legitimate, recognizable patient flow relationship between the hospital district and the NF.

Alternative 4: Alternative 4 would retain the good cause exemption to the geographic proximity criterion and establish in the rule specific criteria that must be met for a good cause exception to be granted.

HHSC selected Alternative 1. Elimination of the good cause exemption removes the potential risk of deferrals or disallowances by CMS due to the perception that the exception merely enhances Federal funds. Also, while Alternative 1 limits a provider's ability to increase its revenue, it does not reduce existing rates or revenues.

Alternative 2 was not selected. Retaining the good cause exception does not alleviate the risk of deferrals or disallowances.

Alternatives 3 and 4 were also not selected. The definition of "good cause" is subjective and open to interpretation. Elimination of the good cause exemption ensures all providers are treated equally. Additionally, if an exception is granted and is later determined to be inappropriate, it could place Federal funds at risk and jeopardize the integrity of the QIPP program.

HHSC considered 4 alternatives to modifying the eligibility cut-off point for private NFs.

Alternative 1: Alternative 1 would modify the eligibility cut-off point to allow additional entrants to the pool at the cut-off point determined by the proposed methodology.

Alternative 2: Alternative 2 would allow all private NFs to participate regardless of historical Medicaid days.

Alternative 3: Alternative 3 would increase the eligibility cut-off point for private NFs.

Alternative 4: Alternative 4 would disallow the participation of private NFs.

HHSC selected Alternative 1. Modifying the eligibility cut-off point allows for increased participation in QIPP which increases the opportunity for small businesses or micro-businesses to potentially participate as private NFs. Because there are no existing micro-businesses or small businesses that participate, it does not reduce existing revenues to these provider types.

Alternative 2 was not selected due to the risk of deferrals or disallowances.

Alternative 3 and 4 were not selected because they would further restrict potential participation by small businesses or micro-businesses.

ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT

There are no anticipated economic costs to persons who are required to comply with the amendments as proposed. The implementation of the proposed amendment does not require any changes in practice or impose any cost on NFs.

There is no anticipated negative impact on local employment.

COSTS TO REGULATED PERSONS

Texas Government Code, §2001.0045 does not apply to this rule because the rule does not impose a cost on regulated persons since it does not reduce existing rates or revenues. In addition, the rule is necessary to receive a source of federal funds or comply with federal law.

PUBLIC BENEFIT

Selvadas Govind, Director of Rate Analysis, has determined that for each year of the first five years the amendment is in effect, the public will benefit from adoption of the amendment. The public benefit anticipated as a result of enforcing or administering the amendment will be administrative simplification and mitigation of potential risk to Federal funds, and will increase the number providers eligible to participate in QIPP.

TAKINGS IMPACT ASSESSMENT

HHSC has determined that the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under Government Code, §2007.043.

PUBLIC HEARING

HHSC will conduct a public hearing on May 14, 2018, at 1:00 p.m. to receive public comments on these proposed rules. The public hearing will be held in the Public Hearing Room of the Brown-Heatly Building at 4900 N. Lamar Blvd, Austin, Texas. Entry is through security at the main entrance of the building facing Lamar Blvd. Persons with disabilities who wish to attend the hearing and require auxiliary aids or services should contact Rate Analysis by calling (512) 730-7401 at least 72 hours prior to the hearing so appropriate arrangements can be made.

PUBLIC COMMENT

Written comments on the proposal may be submitted to the Long Term Services and Supports section of the Rate Analysis Department, Texas Health and Human Services Commission, Mail Code H-400, P.O. Box 85200, Austin, TX 78705-5200; by fax to (512) 730-7475; or by e-mail to rad-ltss@hhsc.state.tx.us within 30 days after publication of this proposal in the Texas Register.

STATUTORY AUTHORITY

The amendment is proposed under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; Texas Government Code §531.021(b), which establishes HHSC as the agency responsible for adopting reasonable rules governing the determination of fees, charges, and rates for medical assistance payments under the Texas Human Resources Code, Chapter 32; and with Texas Government Code §533.002, which authorizes HHSC to implement the Medicaid managed care program.

The proposed amendment affects Texas Government Code Chapters 531 and 533 and Texas Human Resources Code Chapter 32. No other statutes, articles, or codes are affected by this proposal.

§353.1303.Quality Incentive Payment Program for Nursing Facilities.

(a) Introduction. This section establishes the Quality Incentive Payment Program (QIPP) for nursing facilities (NFs) providing services under Medicaid managed care (MC). QIPP is designed to incentivize NFs to improve quality and innovation in the provision of NF services to Medicaid recipients, using the Centers for Medicare & Medicaid Services (CMS) Five-Star Quality Rating System as its measure of success.

(b) Definitions. The following definitions apply when the terms are used in this section. Terms that are used in this and other sections of this subchapter may be defined in §353.1301 of this subchapter (related to General Provisions).

(1) - (9) (No change.)

(10) Quality Assurance Performance Improvement (QAPI) Validation Report--A monthly report submitted by a NF, that is eligible for and enrolled in QIPP, to HHSC [an MCO] that demonstrates that the NF has convened a meeting to review the NF's CMS-compliant plan for maintaining and improving safety and quality in the NF.

(11) Regional Healthcare Partnership (RHP)--A collaboration of interested participants that work collectively to develop and submit to the state a regional plan for health care delivery system reform as defined and established under Chapter 354, Subchapter D, of this title (relating to Texas Healthcare Transformation and Quality Improvement Program).

(c) Eligibility for participation in QIPP. A NF is eligible to participate in QIPP if it complies with the requirements described in this subsection for each eligibility period.

(1) Eligibility Period One. A NF is eligible to participate in QIPP for Eligibility Period One if it meets the following requirements:

(A) The NF is a non-state government-owned NF.

(i) - (ii) (No change.)

(iii) The NF must have been a participant in the Minimum Payment Amounts Program (MPAP) or must be located in the same RHP as, or within 150 miles of, the non-state governmental entity taking ownership of the facility. [This geographic proximity criterion does not apply to NFs that can establish good cause for an exception to this criterion.]

(B) Private NFs. The NF must have a percentage of Medicaid NF days of service that is greater than or equal to the private NF QIPP eligibility cut-off point. The private NF QIPP eligibility cut-off point will be equal to the mean percentage of historical Medicaid NF days of service provided under fee-for-service (FFS) and MC by all private NFs plus one standard deviation, as determined by HHSC. For each private NF, the percentage of Medicaid NF days is calculated by summing the NF's Medicaid NF FFS and MC days of service and dividing that sum by the facility's total days of service in all licensed beds. Medicaid hospice days of service are included in the denominator but excluded from the numerator.

(2) Future eligibility periods. Eligibility requirements for eligibility periods after Eligibility Period One are the same as the requirements under paragraph (1) of this subsection except that:

(A) the private NF QIPP eligibility cut-off point will be equal to the mean percentage of historical Medicaid NF days of service provided under FFS and MC by all private NFs plus one-quarter of one standard deviation, as determined by HHSC;

(B) a private NF that was eligible to participate in QIPP during Eligibility Period One is eligible to participate in the eligibility period for state fiscal year 2019 regardless of its Medicaid NF days of service for that eligibility period; and

(C) the deadlines specified in paragraph (1)(A)(i) will be updated by HHSC. Updated deadlines will be shared with all NFs by a date to be determined by HHSC.

(d) Data sources for historical units of service. Historical units of service are used to determine the private NF QIPP eligibility cut-off point, individual private NF QIPP eligibility status, and the distribution of QIPP funds across eligible and enrolled NFs.

(1) - (3) (No change.)

(4) Data sources for determination of distribution of QIPP funds across eligible and enrolled NFs. For each eligibility period, the data source must align with the NF's fiscal year that ends no more recently than in the calendar year four years prior to the calendar year within which the eligibility period ends. For example, for the eligibility period ending on August 31, 2018, the data source must align with the NF's 2014 fiscal year or an earlier fiscal year and for the eligibility period ending on August 31, 2019, the data source must align with the NF's 2015 fiscal year or an earlier fiscal year.

(A) The most recently available Medicaid NF cost report for the NF. If the cost report covers less than a full year, reported values are annualized to represent a full year. If no [audited] Medicaid NF cost report is available, the data source in subparagraph (B) of this paragraph must be used.

(B) - (D) (No change.)

(e) - (f) (No change.)

(g) QIPP capitation rate components. QIPP funds will be paid to MCOs through three new components of the STAR+PLUS NF MC per member per month (PMPM) capitation rates. The MCOs' distribution of QIPP funds to the enrolled NFs will be based on each NF's performance on a set of defined quality metrics.

(1) Component One.

(A) - (B) (No change.)

(C) Monthly payments to non-state government-owned NFs will be triggered by the NF's submission to HHSC [the MCOs] of a monthly QAPI Validation Report.

(D) - (E) (No change.)

(2) - (4) (No change.)

(h) - (k) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 23, 2018.

TRD-201801776

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 707-6066