HB34

HB34 restricts investments by covered public entities in securities and banks linked to designated countries, and creates a company-listing and divestment process. It names China, Iran, North Korea and Russia, and lets the governor designate additional countries after the required public-safety and Homeland Security Council consultations. Signed June 20, 2025, it took effect September 1, 2025. Final law; official history.

This is not a ban on ordinary Texans owning investments. The existing definition covers entities subject to the Public Funds Investment Act, the Employees Retirement System, the Teacher Retirement System, and the comptroller’s investment of state funds. It can therefore reach covered local-government and other public funds as well as state funds, subject to the statutory applicability limits. Government Code Chapter 2270 definitions; Chapter 2256 applicability.

The law has separate restrictions: a covered entity may not acquire a security issued by a country of concern or an entity owned, controlled by, or subject to that country’s jurisdiction; and it may not invest or deposit money in a bank whose principal place of business is there. These are distinct from the following company-listing rules. New Sections 2270.0122–.0124.

A company can enter the new “scrutinized” category if it is organized, headquartered or principally based in a country of concern; is controlled by that country, its government, ruling party or military; or is majority-owned or controlled through ownership interests by the country or its citizens. “Control” includes power over management or policy, with an exception for power arising solely from an official company position. But the category excludes a company qualifying as a U.S. person under the incorporated federal definition, or receiving no more than 50% of its total annual global revenue from a country of concern, even if it has an otherwise-covered subsidiary or affiliate. The federal definition includes U.S.-organized legal entities and their foreign branches; it is not merely a test of shareholders’ citizenship. These exceptions are written into the company-category provision, not as blanket exemptions from the separate security-acquisition and bank rules. Final law, Sections 1 and 3; 15 CFR 772.1, “U.S. Person” definition.

The comptroller had to add the new category to its list by January 1, 2026. For affected listed holdings, the investor must notify the company and offer 90 days from receipt to change its organization, ownership or location so it no longer qualifies. Otherwise, it must dispose of the company’s publicly traded securities, retaining the stated private-equity-fund exception. The Senate text overrides the older general exception for indirect holdings in actively managed funds. The law also expands the exception for a company the U.S. government affirmatively excludes from the relevant federal sanctions regime; merely being absent from a sanctions list is not the stated test. Final law, Sections 2, 4–6.

The new divestment section refers to an existing schedule—at least half by day 270 and all by day 450—but HB34 did not update that schedule’s notice cross-references to name the new section. It should not be used here to calculate a particular company’s deadline. Existing provisions also allow documented, limited delay or reinvestment when statutory portfolio-loss tests are met: the benchmark is 99.7% of the hypothetical portfolio value without divestment, supported by the required evidence and reports, not a general discretion to ignore the law. The underlying chapter also provides attorney-general enforcement and a September 1, 2037 expiration. This review explains the enacted framework, not a specific holding’s eligibility, a current company list or completed divestments. Sections 2270.0206–.0209.