Bill Text: TX HB2279 | 2017-2018 | 85th Legislature | Enrolled
Bill Title: Relating to the regulation of residential service contracts.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Passed) 2017-06-15 - Effective on 1/1/18 [HB2279 Detail]
Download: Texas-2017-HB2279-Enrolled.html
H.B. No. 2279 |
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relating to the regulation of residential service contracts. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 1303.002, Occupations Code, is amended | ||
by adding Subdivisions (2-a) and (3-a) and amending Subdivision (5) | ||
to read as follows: | ||
(2-a) "Executive director" means the executive | ||
director of the Texas Real Estate Commission. | ||
(3-a) "Reimbursement insurance policy" means a policy | ||
of insurance issued to a residential service company to: | ||
(A) provide reimbursement to the residential | ||
service company under the terms of the insured residential service | ||
contracts issued or sold by the residential service company; or | ||
(B) pay on behalf of the residential service | ||
company, in the event of the residential service company's | ||
nonperformance, all covered contractual obligations incurred by | ||
the residential service company under the terms of the insured | ||
residential service contracts issued or sold by the residential | ||
service company. | ||
(5) "Residential service contract" means an agreement | ||
that is entered into for a separately stated consideration and for a | ||
specified term under which [ |
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agrees to, in the event of the operational or structural failure of | ||
or damage caused by a defect in materials or workmanship or by | ||
normal wear to [ |
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appliance, or an electrical, plumbing, heating, cooling, or | ||
air-conditioning system of a residential property that is attached | ||
to or located on the residential property: | ||
(A) [ |
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air-conditioning system; | ||
(B) provide incidental payment of indemnity | ||
under limited circumstances, including food spoilage; or | ||
(C) provide payment instead of repair when a | ||
part, structural component, appliance, or service provider or | ||
technician is unavailable [ |
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SECTION 2. Section 1303.052(b), Occupations Code, is | ||
amended to read as follows: | ||
(b) A residential service company shall pay to the | ||
commission a fee for: | ||
(1) filing a [ |
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1303.202; and | ||
(2) any other filing required by this chapter. | ||
SECTION 3. Section 1303.053, Occupations Code, is amended | ||
by adding Subsection (c) to read as follows: | ||
(c) Information prepared or compiled by the commission | ||
relating to an examination conducted under this section, including | ||
the examination file, is confidential and exempt from disclosure | ||
under Chapter 552, Government Code. The commission may withhold | ||
the information without the necessity of requesting a decision from | ||
the attorney general under Subchapter G, Chapter 552, Government | ||
Code. | ||
SECTION 4. Section 1303.103, Occupations Code, is amended | ||
by amending Subsection (b) and adding Subsection (d) to read as | ||
follows: | ||
(b) Each application for a license must contain or be | ||
accompanied by: | ||
(1) a copy of the articles of incorporation, articles | ||
of association, partnership agreement, trust agreement, or any | ||
other basic organizational document of the applicant; | ||
(2) a copy of any amendment to the applicant's basic | ||
organizational document; | ||
(3) a copy of any bylaws, rules, or other similar | ||
document that regulates the conduct of the applicant's internal | ||
affairs; | ||
(4) the name, address, and official position of each | ||
person who will be responsible for the conduct of the applicant's | ||
affairs, including: | ||
(A) each member of the board of directors, board | ||
of trustees, executive committee, or other governing body or | ||
committee of the applicant; | ||
(B) the applicant's principal officer, if the | ||
applicant is a corporation; and | ||
(C) each partner or member of the applicant, if | ||
the applicant is a partnership or association; | ||
(5) a copy of the residential service contract made or | ||
to be made between the applicant and another person; | ||
(6) a general description of the residential service | ||
contract or the contract's coverage or plan; | ||
(7) the most recent [ |
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applicant [ |
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(A) that are [ |
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(i) prepared by an independent certified | ||
public accountant; or | ||
(ii) certified as accurate by at least two | ||
of the residential service company's principal officers, if the | ||
residential service company uses a reimbursement insurance policy | ||
to insure its outstanding residential service contracts written in | ||
this state in accordance with Section 1303.151(b) [ |
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(B) that show [ |
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liabilities, and sources of financial support; | ||
(8) a description of the applicant's proposed method | ||
of marketing a residential service contract; | ||
(9) a statement regarding the applicant's sources of | ||
working capital and any other funding sources; | ||
(10) if the applicant is not domiciled in this state, a | ||
power of attorney appointing the executive director | ||
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successors in office, or the executive director's [ |
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authorized deputy, as the applicant's agent for service of process | ||
in this state in a legal action arising in this state against the | ||
applicant or the applicant's agents; and | ||
(11) any other information the commission requires to | ||
make a determination required by this chapter. | ||
(d) The commission shall maintain the confidentiality of | ||
information submitted to the commission by an applicant under this | ||
section that is claimed to be confidential for competitive | ||
purposes. The confidential information is exempt from disclosure | ||
under Chapter 552, Government Code. The commission may withhold | ||
the information without the necessity of requesting a decision from | ||
the attorney general under Subchapter G, Chapter 552, Government | ||
Code. | ||
SECTION 5. Section 1303.151, Occupations Code, is amended | ||
to read as follows: | ||
Sec. 1303.151. RESERVE OR REIMBURSEMENT INSURANCE POLICY | ||
REQUIRED. (a) Except as provided by Subsection (b), a [ |
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residential service company shall maintain a funded reserve against | ||
its liability to provide repair and replacement services under its | ||
outstanding residential service contracts written in this state. | ||
(b) Except as provided by Section 1303.152(d), a | ||
residential service company is not required to maintain a funded | ||
reserve if it insures all of its risk under its outstanding | ||
residential service contracts written in this state under a | ||
reimbursement insurance policy issued by: | ||
(1) an admitted insurer; or | ||
(2) a surplus lines insurer or a surplus lines bonding | ||
company if the insurer or bonding company: | ||
(A) is rated A+ or better by a rating service | ||
recognized by the commission; and | ||
(B) submits to the commission for its approval | ||
evidence, in the form of a certified audit and other pertinent | ||
information the commission may require, of the insurer's or bonding | ||
company's ability to meet its contractual obligations. | ||
SECTION 6. Section 1303.152, Occupations Code, is amended | ||
by amending Subsection (c) and adding Subsection (d) to read as | ||
follows: | ||
(c) For purposes of this chapter, to the extent a | ||
residential service company uses a reimbursement insurance policy | ||
described by Section 1303.151(b) to insure an outstanding | ||
residential service contract written in this state, the company's | ||
reserve is not required to include a contract fee on the [ |
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residential service contract [ |
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(d) If a residential service company's reimbursement | ||
insurance policy is issued by a captive insurance company as | ||
defined by Section 964.001, Insurance Code, the residential service | ||
company shall maintain a funded reserve of at least 25 percent of | ||
the reserve amount described by Subsection (a). | ||
SECTION 7. Subchapter D, Chapter 1303, Occupations Code, is | ||
amended by adding Section 1303.1525 to read as follows: | ||
Sec. 1303.1525. REIMBURSEMENT INSURANCE POLICY. (a) An | ||
insurer that issues a reimbursement insurance policy to a | ||
residential service company is considered to have received the | ||
premiums for the policy on the dates contract holders pay for | ||
residential service contracts issued by the residential service | ||
company. | ||
(b) An insurer may not cancel a reimbursement insurance | ||
policy until the insurer mails or delivers a notice of cancellation | ||
to the commission. The cancellation of the policy does not affect | ||
the issuer's liability for a residential service contract issued by | ||
the insured residential service company before the effective date | ||
of the cancellation. | ||
SECTION 8. Section 1303.153, Occupations Code, is amended | ||
by amending Subsection (a) and adding Subsection (d) to read as | ||
follows: | ||
(a) Except as provided by Subsection (d), as [ |
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guarantee that a residential service company will meet its | ||
obligations to its contract holders, the company shall maintain | ||
with the commission a bond or other security accepted by the | ||
commission. | ||
(d) This section does not apply to a residential service | ||
company that uses a reimbursement insurance policy to insure its | ||
outstanding residential service contracts written in this state in | ||
accordance with Section 1303.151(b). | ||
SECTION 9. Section 1303.154, Occupations Code, is amended | ||
by amending Subsection (a) and adding Subsection (d) to read as | ||
follows: | ||
(a) Except as provided by Subsection (d), an [ |
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for a new license must provide security in the amount of $25,000. | ||
The amount of the security may not be reduced before the residential | ||
service company files a second report under Section 1303.202. | ||
(d) This section does not apply to a residential service | ||
company that uses a reimbursement insurance policy to insure its | ||
outstanding residential service contracts written in this state in | ||
accordance with Section 1303.151(b). | ||
SECTION 10. Section 1303.202, Occupations Code, is amended | ||
to read as follows: | ||
Sec. 1303.202. [ |
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adopt rules requiring [ |
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residential service company to [ |
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report that meets the requirements in Subsection (b) [ |
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(b) The report must: | ||
(1) be on a form prescribed by the commission; | ||
(2) be verified by at least two of the residential | ||
service company's principal officers; and | ||
(3) include: | ||
(A) [ |
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residential service company, including its balance sheet and | ||
receipts and disbursements for the preceding year, certified as | ||
accurate by: | ||
(i) an independent public accountant; or | ||
(ii) at least two of the residential | ||
service company's principal officers, if the residential service | ||
company uses a reimbursement insurance policy to insure its | ||
outstanding residential service contracts written in this state in | ||
accordance with Section 1303.151(b); | ||
(B) any material change to the information | ||
submitted under Section 1303.103, except an amendment to a | ||
residential service contract filed with the commission under | ||
Section 1303.251; | ||
(C) if the residential service company maintains | ||
a reserve required by Section 1303.151(a), the number of | ||
residential service contracts entered into during the year, the | ||
number of contract holders as of the end of the year, and the number | ||
of contracts terminating during the year; and | ||
(D) any other information that: | ||
(i) relates to the performance and solvency | ||
of the residential service company; and | ||
(ii) is necessary for the commission to | ||
perform its duties under this chapter. | ||
(c) The commission shall maintain the confidentiality of | ||
information [ |
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residential service company under this section that [ |
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The confidential information is exempt from disclosure under | ||
Chapter 552, Government Code. The commission may withhold the | ||
information without the necessity of requesting a decision from the | ||
attorney general under Subchapter G, Chapter 552, Government Code | ||
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SECTION 11. Section 1303.251, Occupations Code, is amended | ||
to read as follows: | ||
Sec. 1303.251. CONTRACT DELIVERY AND FILING [ |
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entitled to receive a copy of the [ |
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residential service contract not later than the 15th day after the | ||
date the contract holder pays for the residential service contract | ||
or the effective date of the residential service contract, | ||
whichever is later. The residential service company may provide | ||
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acceptable to the commission [ |
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(b) A residential service company shall file with the | ||
commission for approval [ |
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a previously filed residential service contract that changes the | ||
residential service contract's coverage or substantially amends a | ||
disclosure required by Section 1303.252 [ |
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(c) The commission may require a residential service | ||
company to submit relevant information the commission considers | ||
necessary to determine whether to approve or disapprove a filing | ||
made under Subsection (b) [ |
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(d) The commission shall approve a filing made under | ||
Subsection (b) [ |
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are met. | ||
(d-1) For a filing made under Subsection (b) after a | ||
residential service company is licensed, the commission shall have | ||
30 days to consider the filing from the date of the filing or the | ||
date that the commission receives any associated filing fee, | ||
whichever is later. On the 31st day after that date, the filing is | ||
considered approved unless the commission disapproves the filing or | ||
notifies the residential service company in writing that the filing | ||
violates this section or Section 1303.252. | ||
(d-2) If the commission notifies the residential service | ||
company that the filing violates this section or Section 1303.252, | ||
the residential service company may submit a written response to | ||
that notification. The commission shall have 30 days to reconsider | ||
the filing from the date that the commission receives the | ||
residential service company's written response. On the 31st day | ||
after the commission receives the residential service company's | ||
written response, the filing is considered approved unless the | ||
commission disapproves the filing. If the residential service | ||
company does not respond in writing before the 61st day after being | ||
notified by the commission that the filing violates this section or | ||
Section 1303.252, the filing is automatically disapproved. | ||
(d-3) The commission may not require a residential service | ||
company to waive a 30-day consideration period provided by this | ||
section or make the approval of a filing contingent on waiving a | ||
30-day consideration period provided by this section. | ||
(e) If the commission disapproves a filing made under | ||
Subsection (b) [ |
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disapproval and in the notice shall specify in detail the reason for | ||
the disapproval. | ||
(f) A residential service company whose filing under | ||
Subsection (b) [ |
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commission is entitled to a hearing conducted by the State Office of | ||
Administrative Hearings [ |
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(g) A hearing under Subsection (f) is governed by the | ||
contested case procedures under Chapter 2001, Government Code. | ||
SECTION 12. Section 1303.252, Occupations Code, is amended | ||
to read as follows: | ||
Sec. 1303.252. FORM OF CONTRACT AND REQUIRED DISCLOSURES | ||
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contract marketed, sold, offered for sale, issued, made, proposed | ||
to be made, or administered in this state must be written, printed, | ||
or typed in clear, understandable language that is easy to read and | ||
must disclose the following [ |
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(1) the services or benefits to which the contract | ||
holder is entitled; | ||
(2) any limitation on the services, kinds of services, | ||
or benefits to be provided, including a deductible or co-payment | ||
provision; | ||
(3) where and in what manner information is available | ||
on how to obtain services; | ||
(4) the period during which the coverage is in effect; | ||
(5) the residential service company's agreement to | ||
perform services on the contract holder's telephone request to the | ||
company, without a requirement that a claim form or application be | ||
filed before the services are performed; | ||
(6) the company's agreement that, under normal | ||
circumstances, the company will initiate the performance of | ||
services within 48 hours after the contract holder requests the | ||
services; and | ||
(7) any service fee to be charged for a service call. | ||
(b) A service fee under Subsection (a)(7) is not required to | ||
be preprinted on the residential service contract but must be | ||
disclosed in writing to the contract holder before the purchase of | ||
the residential service contract. | ||
(c) A residential service contract insured under a | ||
reimbursement insurance policy in accordance with Section | ||
1303.151(b) must contain a statement substantially similar to the | ||
following: "The residential service company's obligations under | ||
this residential service contract are insured under a reimbursement | ||
insurance policy." The residential service contract must also: | ||
(1) state the name and address of the insurer; and | ||
(2) state that the contract holder may apply for | ||
reimbursement directly to the insurer if a covered service is not | ||
provided to the contract holder by the residential service company | ||
before the 61st day after the date the contract holder provides | ||
proof of loss. | ||
(d) A residential service contract [ |
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may not contain a provision that encourages misrepresentation or | ||
that is unjust, unfair, inequitable, misleading, deceptive, or | ||
false. | ||
SECTION 13. Section 1303.253, Occupations Code, is amended | ||
to read as follows: | ||
Sec. 1303.253. SCHEDULE OF CHARGES. (a) A residential | ||
service company shall file with the commission [ |
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charges for services covered under a residential service [ |
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contract and any [ |
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schedule before implementation of the schedule of charges or | ||
amendment [ |
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(b) A filing made under Subsection (a) by a residential | ||
service company that uses a reimbursement insurance policy to | ||
insure its outstanding residential service contracts written in | ||
this state in accordance with Section 1303.151(b) is not subject to | ||
approval by the commission and is made for informational purposes | ||
only. | ||
(c) A filing made under Subsection (a) by a residential | ||
service company that maintains a reserve required by Section | ||
1303.151(a) may not be implemented until approved by the | ||
commission. | ||
(d) The commission shall approve a filing made under | ||
Subsection (a) [ |
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that the filing [ |
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term, and conditions of the contract to which the filing applies. | ||
(e) [ |
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under Subsection (a) [ |
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related to the contract as described by Subsection (d) [ |
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commission may disapprove [ |
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commission disapproves [ |
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commission shall notify the company of the disapproval [ |
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and shall specify in detail the reason for the disapproval | ||
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(f) For a filing made under Subsection (a) by a residential | ||
service company described by Subsection (c) after the residential | ||
service company is licensed, the commission shall have 30 days to | ||
consider the filing from the date of the filing or the date that the | ||
commission receives any associated filing fee, whichever is later. | ||
On the 31st day after that date, the filing is considered approved | ||
unless the commission disapproves the filing or notifies the | ||
residential service company in writing that the filing is not | ||
reasonably related to the amount, term, and conditions of the | ||
contract to which the filing applies. | ||
(g) If the commission notifies the residential service | ||
company that the filing is not reasonably related to the amount, | ||
term, and conditions of the contract to which the filing applies, | ||
the residential service company may submit a written response to | ||
that notification. The commission shall have 30 days to reconsider | ||
the filing from the date that the commission receives the | ||
residential service company's written response. On the 31st day | ||
after the commission receives the residential service company's | ||
written response, the filing is considered approved unless the | ||
commission disapproves the filing. If the residential service | ||
company does not respond in writing before the 61st day after being | ||
notified by the commission that the filing is not reasonably | ||
related to the amount, term, and conditions of the contract to which | ||
the filing applies, the filing is automatically disapproved. | ||
(h) The commission may not require a residential service | ||
company to waive a 30-day consideration period provided by this | ||
section or make the approval of a filing contingent on waiving a | ||
30-day consideration period provided by this section. | ||
(i) [ |
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Subsection (a) [ |
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the commission is entitled to [ |
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the State Office of Administrative Hearings [ |
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(j) A hearing under Subsection (i) is governed by the | ||
contested case procedures under Chapter 2001, Government Code. | ||
SECTION 14. Section 1303.301(a), Occupations Code, is | ||
amended to read as follows: | ||
(a) A residential service company may not cause or permit | ||
the use of: | ||
(1) a false or misleading advertisement or | ||
solicitation; or | ||
(2) any deceptive residential service contract | ||
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SECTION 15. Section 1303.352(a), Occupations Code, is | ||
amended to read as follows: | ||
(a) The commission may discipline a residential service | ||
company under Section 1303.351 if the continued operation of the | ||
company would be hazardous to its contract holders or if the | ||
company: | ||
(1) operates in conflict with its basic organizational | ||
document or in a manner that is contrary to that described in and | ||
reasonably inferred from information submitted under Section | ||
1303.103, unless an amendment to the information has been filed | ||
with and approved by the commission; | ||
(2) issues a residential service contract [ |
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(3) uses a schedule of charges that does not comply | ||
with Section 1303.253; | ||
(4) is not financially responsible and may be | ||
reasonably expected to be unable to meet the company's obligations | ||
to contract holders; | ||
(5) did not comply with Subchapter D; | ||
(6) advertised or marketed the company's services in a | ||
false, misrepresentative, misleading, deceptive, or unfair manner; | ||
or | ||
(7) otherwise did not substantially comply with this | ||
chapter or a rule adopted under this chapter. | ||
SECTION 16. The changes in law made by this Act apply only | ||
to a residential service contract entered into or renewed on or | ||
after the effective date of this Act. A residential service | ||
contract entered into or renewed before that date is governed by the | ||
law as it existed immediately before the effective date of this Act, | ||
and that law is continued in effect for that purpose. | ||
SECTION 17. This Act takes effect January 1, 2018. | ||
______________________________ | ______________________________ | |
President of the Senate | Speaker of the House | |
I certify that H.B. No. 2279 was passed by the House on April | ||
27, 2017, by the following vote: Yeas 144, Nays 0, 3 present, not | ||
voting; and that the House concurred in Senate amendments to H.B. | ||
No. 2279 on May 25, 2017, by the following vote: Yeas 143, Nays 0, | ||
2 present, not voting. | ||
______________________________ | ||
Chief Clerk of the House | ||
I certify that H.B. No. 2279 was passed by the Senate, with | ||
amendments, on May 22, 2017, by the following vote: Yeas 31, Nays | ||
0. | ||
______________________________ | ||
Secretary of the Senate | ||
APPROVED: __________________ | ||
Date | ||
__________________ | ||
Governor |