LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION April 14, 2013 TO: Honorable John Davis, Chair, House Committee on Economic & Small Business Development FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB1623 by Gonzalez, Naomi (Relating to a sales and use tax exemption for certain property and services used in research and development activities by a qualifying biotechnology start-up.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for HB1623, As Introduced: a negative impact of ($16,480,000) through the biennium ending August 31, 2015.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION
April 14, 2013
TO: Honorable John Davis, Chair, House Committee on Economic & Small Business Development FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB1623 by Gonzalez, Naomi (Relating to a sales and use tax exemption for certain property and services used in research and development activities by a qualifying biotechnology start-up.), As Introduced
TO: Honorable John Davis, Chair, House Committee on Economic & Small Business Development
FROM: Ursula Parks, Director, Legislative Budget Board
IN RE: HB1623 by Gonzalez, Naomi (Relating to a sales and use tax exemption for certain property and services used in research and development activities by a qualifying biotechnology start-up.), As Introduced
Honorable John Davis, Chair, House Committee on Economic & Small Business Development
Honorable John Davis, Chair, House Committee on Economic & Small Business Development
Ursula Parks, Director, Legislative Budget Board
Ursula Parks, Director, Legislative Budget Board
HB1623 by Gonzalez, Naomi (Relating to a sales and use tax exemption for certain property and services used in research and development activities by a qualifying biotechnology start-up.), As Introduced
HB1623 by Gonzalez, Naomi (Relating to a sales and use tax exemption for certain property and services used in research and development activities by a qualifying biotechnology start-up.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB1623, As Introduced: a negative impact of ($16,480,000) through the biennium ending August 31, 2015.
Estimated Two-year Net Impact to General Revenue Related Funds for HB1623, As Introduced: a negative impact of ($16,480,000) through the biennium ending August 31, 2015.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2014 ($7,980,000) 2015 ($8,500,000) 2016 ($8,670,000) 2017 ($8,840,000) 2018 ($9,020,000)
2014 ($7,980,000)
2015 ($8,500,000)
2016 ($8,670,000)
2017 ($8,840,000)
2018 ($9,020,000)
All Funds, Five-Year Impact: Fiscal Year Probable Revenue (Loss) fromGeneral Revenue Fund1 Probable Revenue (Loss) fromCities Probable Revenue (Loss) fromTransit Authorities Probable Revenue (Loss) fromCounties and Special Districts 2014 ($7,980,000) ($1,470,000) ($500,000) ($250,000) 2015 ($8,500,000) ($1,570,000) ($530,000) ($270,000) 2016 ($8,670,000) ($1,600,000) ($540,000) ($270,000) 2017 ($8,840,000) ($1,630,000) ($560,000) ($280,000) 2018 ($9,020,000) ($1,660,000) ($570,000) ($280,000)
Fiscal Year Probable Revenue (Loss) fromGeneral Revenue Fund1 Probable Revenue (Loss) fromCities Probable Revenue (Loss) fromTransit Authorities Probable Revenue (Loss) fromCounties and Special Districts 2014 ($7,980,000) ($1,470,000) ($500,000) ($250,000) 2015 ($8,500,000) ($1,570,000) ($530,000) ($270,000) 2016 ($8,670,000) ($1,600,000) ($540,000) ($270,000) 2017 ($8,840,000) ($1,630,000) ($560,000) ($280,000) 2018 ($9,020,000) ($1,660,000) ($570,000) ($280,000)
2014 ($7,980,000) ($1,470,000) ($500,000) ($250,000)
2015 ($8,500,000) ($1,570,000) ($530,000) ($270,000)
2016 ($8,670,000) ($1,600,000) ($540,000) ($270,000)
2017 ($8,840,000) ($1,630,000) ($560,000) ($280,000)
2018 ($9,020,000) ($1,660,000) ($570,000) ($280,000)
Fiscal Analysis
The bill would amend Chapter 151, Tax Code, relating to a sales and use tax exemption for a qualifying biotechnology start-up. A new Section 151.3183 would be added to provide that the sale, storage, use, or other consumption of tangible personal property directly used or consumed in qualified research or of qualified services is exempted from sales and use tax if the items are sold, leased, or rented to, or stored, used, or consumed by, a qualifying biotechnology start-up engaged in qualified research. "Qualified research" and "qualified services" would have the meanings assigned by Section 41 of the Internal Revenue Code. "Qualifying biotechnology start-up" would mean a start-up business located in this state on or after September 1, 2013 engaged primarily in the study of biological systems to develop products or processes for a specific use. The bill would take effect October 1, 2013.
The bill would amend Chapter 151, Tax Code, relating to a sales and use tax exemption for a qualifying biotechnology start-up.
A new Section 151.3183 would be added to provide that the sale, storage, use, or other consumption of tangible personal property directly used or consumed in qualified research or of qualified services is exempted from sales and use tax if the items are sold, leased, or rented to, or stored, used, or consumed by, a qualifying biotechnology start-up engaged in qualified research.
"Qualified research" and "qualified services" would have the meanings assigned by Section 41 of the Internal Revenue Code.
"Qualifying biotechnology start-up" would mean a start-up business located in this state on or after September 1, 2013 engaged primarily in the study of biological systems to develop products or processes for a specific use.
The bill would take effect October 1, 2013.
Methodology
Data from the National Science Foundation on funds spent for business research and development (R&D) by companies in Texas and on the distribution of such expenditures by type was used to estimate amounts of biotechnology R&D expenditures on items subject to sales and use tax. Because the bill lacks a definition of "start-up", it is assumed that a significant fraction of R&D activity of extant firms, if transferred into a newly formed subsidiary or other new legal entity, could claim the exemption. The estimate was extrapolated through 2018, and multiplied by the state sales tax rate to estimate the probable effect on state sales tax collections. Effects on units of local government were estimated proportionately.
Local Government Impact
There would be a corresponding loss of sales and use tax revenue to local taxing jurisdictions.
Source Agencies: 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: UP, RB, SD, KK
UP, RB, SD, KK