Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Woods
LAST UPDATED
ORIGINAL DATE 1/27/2025
SHORT TITLE Corporate Income Tax to State Road Fund
BILL
NUMBER Senate Bill 28
ANALYST Graeser
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
CIT
($741.200.0) ($746,000.0) ($758,200.0) Recurring General Fund
$741.200.0 $746,000.0 $758,200.0 Recurring State Road Fund
Parentheses ( ) indicate revenue decreases.
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
TRD
No fiscal
impact
$47.7
No fiscal
impact
$47.7 Nonrecurring General Fund
Parentheses ( ) indicate expenditure decreases.
Sources of Information
LFC Files
Agency Analysis Received From
Taxation & Revenue Department
Agency Analysis was Solicited but Not Received From
Department of Transportation (DoT)
SUMMARY
Synopsis of Senate Bill 28
Senate Bill 28 changes the distribution of corporate income tax net collections from the general
fund to the state road fund.
The effective date of this bill is July 1, 2026.
FISCAL IMPLICATIONS
LFC staff, based on the consensus revenue estimating group’s December 2024 corporate income
tax forecast, assessed the impact of shifting the entirety of projected corporate income tax
collections from the general fund to the state road fund.
Senate Bill 28 – Page 2
The bill does not include a recurring appropriation but diverts or “earmarks” revenue,
representing a recurring loss from the general fund. LFC has concerns with including continuing
distribution language in the statutory provisions for funds because earmarking reduces the ability
of the Legislature to establish spending priorities.
SIGNIFICANT ISSUES
TRD notes the significant impacts of this transfer of funding sources:
Directing all corporate income tax revenue to the state road fund will eliminate a
recurring general fund revenue source, reducing the Legislature’s budgetary flexibility
with respect to the broad appropriation needs of the state in future years. In FY24,
corporate income tax contributed $627.2 million to the general fund, or approximately
4.8 percent of recurring general fund revenue. This is up from $439.1 million in FY23,
3.8 percent of general fund revenue, due to the shifting of pass-through entity revenue to
the corporate income tax program at the half-way point in FY24. The closer alignment of
pass-through entity filings with the corporate income tax program required this
accounting change. In FY25 pass-through entity revenue will be fully recognized in
corporate income tax. This is forecasted to result in corporate income tax becoming 5.4
percent of recurring general fund revenue in FY25. Both corporate income tax and
personal income tax are aggregated as one revenue source, income taxes, on the
consensus revenue estimating group’s forecast. Shifting one income tax source from the
general fund will mark a significant change.
Corporate income tax revenue is notably volatile due to a large share of corporate
revenue being tied to oil and natural gas extraction and the volatility of that industry.
With new pass-through entity revenue recognized in corporate income tax, the volatility
may increase as the entity-level tax is new and taxpayer preference on how to file is still
being observed. In addition, changes at the federal level, including possible changes to
the federal Tax Cuts and Jobs Act of 2017, and its imposition of a state and local tax
deduction cap, could lead to changes at the state level for pass-through entities. While
this volatility leads to challenges in forecasting the revenue for the general fund, being
only 5.4 percent of general fund revenue, the general fund can absorb the volatility more
easily. Shifting this revenue to the state road fund would more than double the revenue to
this fund and lead to over 50 percent of the fund being subject to volatility. This would
substantially increase the amount of revenue for budgeting but would likely lead to
higher uncertainty in the budget planning of funding road projects.
While corporate taxpayers’ use and need of roads could validate corporate income tax
revenue being diverted to the state road fund to aid in maintaining roads, individual
taxpayers also use roads. The diversion of Motor Vehicle Excise Tax is seen as a
supportable earmark to the fund to directly tie vehicles sales to
Senate Bill 28 – Page 3
ADMINISTRATIVE IMPLICATIONS
TRD Administrative Services Division will need to update the general ledger, revenue
reporting and create a new distribution. It is anticipated this work will take approximately 60
hours split between 2 FTE of a pay band 70 and a pay band 80 at a cost of approximately
$3,800. Collaboration and input from the Department of Finance and Administration is
required as this will decrease general fund revenue distributions.
Implementing this bill will have a moderate impact on TRD Information Technology
Division, approximately 510 hours or 3 months for an estimated $33,900 of staff workload
costs.
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