LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 82ND LEGISLATIVE REGULAR SESSION March 30, 2011 TO: Honorable Byron Cook, Chair, House Committee on State Affairs FROM: John S O'Brien, Director, Legislative Budget Board IN RE:HB3675 by Eiland (Relating to assessments and taxes on subscription video service providers.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for HB3675, As Introduced: a positive impact of $102,400,000 through the biennium ending August 31, 2013. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 82ND LEGISLATIVE REGULAR SESSION
March 30, 2011
TO: Honorable Byron Cook, Chair, House Committee on State Affairs FROM: John S O'Brien, Director, Legislative Budget Board IN RE:HB3675 by Eiland (Relating to assessments and taxes on subscription video service providers.), As Introduced
TO: Honorable Byron Cook, Chair, House Committee on State Affairs
FROM: John S O'Brien, Director, Legislative Budget Board
IN RE: HB3675 by Eiland (Relating to assessments and taxes on subscription video service providers.), As Introduced
Honorable Byron Cook, Chair, House Committee on State Affairs
Honorable Byron Cook, Chair, House Committee on State Affairs
John S O'Brien, Director, Legislative Budget Board
John S O'Brien, Director, Legislative Budget Board
HB3675 by Eiland (Relating to assessments and taxes on subscription video service providers.), As Introduced
HB3675 by Eiland (Relating to assessments and taxes on subscription video service providers.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB3675, As Introduced: a positive impact of $102,400,000 through the biennium ending August 31, 2013. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Estimated Two-year Net Impact to General Revenue Related Funds for HB3675, As Introduced: a positive impact of $102,400,000 through the biennium ending August 31, 2013.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2012 $36,300,000 2013 $66,100,000 2014 $70,400,000 2015 $75,600,000 2016 $80,700,000
2012 $36,300,000
2013 $66,100,000
2014 $70,400,000
2015 $75,600,000
2016 $80,700,000
All Funds, Five-Year Impact: Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Revenue Gain/(Loss) fromNew Other Fund - Subscription Video Assessment Clearance Fund Probable Savings/(Cost) fromNew Other Fund - Subscription Video Assessment Clearance Fund 2012 $36,300,000 $23,500,000 ($315,000) 2013 $66,100,000 $33,300,000 ($100,000) 2014 $70,400,000 $35,300,000 ($100,000) 2015 $75,600,000 $37,700,000 ($100,000) 2016 $80,700,000 $40,100,000 ($100,000)
Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Revenue Gain/(Loss) fromNew Other Fund - Subscription Video Assessment Clearance Fund Probable Savings/(Cost) fromNew Other Fund - Subscription Video Assessment Clearance Fund 2012 $36,300,000 $23,500,000 ($315,000) 2013 $66,100,000 $33,300,000 ($100,000) 2014 $70,400,000 $35,300,000 ($100,000) 2015 $75,600,000 $37,700,000 ($100,000) 2016 $80,700,000 $40,100,000 ($100,000)
2012 $36,300,000 $23,500,000 ($315,000)
2013 $66,100,000 $33,300,000 ($100,000)
2014 $70,400,000 $35,300,000 ($100,000)
2015 $75,600,000 $37,700,000 ($100,000)
2016 $80,700,000 $40,100,000 ($100,000)
Fiscal Analysis
The bill would amend the Utilities Code to add new Chapter 67, regarding subscription video services. The bill would impose an assessment of 6.25 percent on gross revenues derived from the provision of subscription video services by cable services and direct broadcast satellite services as defined by the bill. Providers of these services would pay the assessment and file an assessment report quarterly to the Comptroller, and file an annual subscription report. A provider would be entitled to a credit against the assessment for fees paid to municipalities. Credits in excess of the assessment could not be carried forward or back. The bill would provide for penalties for a person who fails to pay an assessment, to file an assessment report, or to file a subscription report. Three-fourths of the revenue collected from the assessment would be deposited to the General Revenue Fund, and the remaining one-fourth would be deposited to the new Subscription Video Assessment Clearance Fund, a special fund in the state treasury outside the General Revenue Fund. The Comptroller would retain up to 5 percent of the balance in the new fund for administrative purposes. The balance of the new fund would be distributed to municipalities and to counties based on their pro rata share of subscription video service subscribers. The bill would amend Chapter 151 of the Tax Code, regarding the sales and use tax, to provide for a sales tax rate of 5.75 percent on a taxable item that meets the definition of "subscription video services," as defined by the bill. The bill would take effect October 1, 2011.
The bill would amend the Utilities Code to add new Chapter 67, regarding subscription video services. The bill would impose an assessment of 6.25 percent on gross revenues derived from the provision of subscription video services by cable services and direct broadcast satellite services as defined by the bill. Providers of these services would pay the assessment and file an assessment report quarterly to the Comptroller, and file an annual subscription report. A provider would be entitled to a credit against the assessment for fees paid to municipalities. Credits in excess of the assessment could not be carried forward or back.
The bill would provide for penalties for a person who fails to pay an assessment, to file an assessment report, or to file a subscription report.
Three-fourths of the revenue collected from the assessment would be deposited to the General Revenue Fund, and the remaining one-fourth would be deposited to the new Subscription Video Assessment Clearance Fund, a special fund in the state treasury outside the General Revenue Fund. The Comptroller would retain up to 5 percent of the balance in the new fund for administrative purposes. The balance of the new fund would be distributed to municipalities and to counties based on their pro rata share of subscription video service subscribers.
The bill would amend Chapter 151 of the Tax Code, regarding the sales and use tax, to provide for a sales tax rate of 5.75 percent on a taxable item that meets the definition of "subscription video services," as defined by the bill. The bill would take effect October 1, 2011.
Methodology
Subscription video service revenues were estimated from Comptroller tax file data supplemented with data from public sources. For providers with municipal franchise obligations, as defined by the bill, this estimate assumed the credits would offset the assessment liability. Thus the estimated assessment revenue reflects anticipated collections from providers without municipal fee liabilities. The provision lowering the sales tax rate for subscription video services would reduce sales tax collections, and was estimated by multiplying the difference between 5.75 percent and 6.25 percent by the estimated taxable value of video subscription services, and subtracting the result from the share of assessment revenue allocable to the General Revenue Fund. The estimated gain to the General Revenue Fund is therefore the net of the gain due to the assessment and the loss due to the reduction in the applicable sales tax rate. The Comptroller estimates an administrative cost in the first year of $315,000 to create a new audit reporting system, do programming maintenance, develop security controls, and pay for printing costs for notifying taxpayers via mail. Ongoing administrative costs would be $100,000 per year thereafter. This analysis assumes these costs would be paid for from the new Subscription Video Assessment Clearance Fund. This legislation would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either with or outside of the Treasury, or create a dedicated revenue source. Legislative policy, implemented as Government Code 403.094, consolidated special funds (except those affected by constitutional, federal, or other restrictions) into the General Revenue Fund as of August 31, 1993 and eliminated all applicable statutory revenue dedications as of August 31, 1995. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.
Subscription video service revenues were estimated from Comptroller tax file data supplemented with data from public sources. For providers with municipal franchise obligations, as defined by the bill, this estimate assumed the credits would offset the assessment liability. Thus the estimated assessment revenue reflects anticipated collections from providers without municipal fee liabilities.
The provision lowering the sales tax rate for subscription video services would reduce sales tax collections, and was estimated by multiplying the difference between 5.75 percent and 6.25 percent by the estimated taxable value of video subscription services, and subtracting the result from the share of assessment revenue allocable to the General Revenue Fund. The estimated gain to the General Revenue Fund is therefore the net of the gain due to the assessment and the loss due to the reduction in the applicable sales tax rate.
The Comptroller estimates an administrative cost in the first year of $315,000 to create a new audit reporting system, do programming maintenance, develop security controls, and pay for printing costs for notifying taxpayers via mail. Ongoing administrative costs would be $100,000 per year thereafter. This analysis assumes these costs would be paid for from the new Subscription Video Assessment Clearance Fund.
This legislation would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either with or outside of the Treasury, or create a dedicated revenue source. Legislative policy, implemented as Government Code 403.094, consolidated special funds (except those affected by constitutional, federal, or other restrictions) into the General Revenue Fund as of August 31, 1993 and eliminated all applicable statutory revenue dedications as of August 31, 1995. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.
Technology
There would be a one-time technology cost of $215,000 in fiscal year 2012 for programming, project management and security controls for the new system.
There would be a one-time technology cost of $215,000 in fiscal year 2012 for programming, project management and security controls for the new system.
Local Government Impact
One-fourth of revenues generated from assessments under the bill would be deposited in the Subscription Video Assessment Clearance Fund to be distributed to municipalities and counties based on their pro rata share of subscription video service subscribers. Based on the analysis of the Comptroller of Public Accounts, funds distributed to municipalities and counties are projected to be approximately: $23,500,000 for FY 2012, $33,300,000 for FY 2013, $35,300,000 for FY 2014, $37,700,000 for FY 2015, and $40,100,000 for FY 2016.
One-fourth of revenues generated from assessments under the bill would be deposited in the Subscription Video Assessment Clearance Fund to be distributed to municipalities and counties based on their pro rata share of subscription video service subscribers.
Based on the analysis of the Comptroller of Public Accounts, funds distributed to municipalities and counties are projected to be approximately: $23,500,000 for FY 2012, $33,300,000 for FY 2013, $35,300,000 for FY 2014, $37,700,000 for FY 2015, and $40,100,000 for FY 2016.
Source Agencies: 304 Comptroller of Public Accounts, 473 Public Utility Commission of Texas
304 Comptroller of Public Accounts, 473 Public Utility Commission of Texas
LBB Staff: JOB, KJG, JI, PM
JOB, KJG, JI, PM