LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION April 1, 2013 TO: Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB1836 by Zedler (Relating to the exclusion of certain flow-through funds by taxable entities in determining total revenue for purposes of the franchise tax.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for HB1836, As Introduced: an impact of $0 through the biennium ending August 31, 2015. Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($435,483,000) for the 2014-15 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION
April 1, 2013
TO: Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB1836 by Zedler (Relating to the exclusion of certain flow-through funds by taxable entities in determining total revenue for purposes of the franchise tax.), As Introduced
TO: Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
FROM: Ursula Parks, Director, Legislative Budget Board
IN RE: HB1836 by Zedler (Relating to the exclusion of certain flow-through funds by taxable entities in determining total revenue for purposes of the franchise tax.), As Introduced
Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
Ursula Parks, Director, Legislative Budget Board
Ursula Parks, Director, Legislative Budget Board
HB1836 by Zedler (Relating to the exclusion of certain flow-through funds by taxable entities in determining total revenue for purposes of the franchise tax.), As Introduced
HB1836 by Zedler (Relating to the exclusion of certain flow-through funds by taxable entities in determining total revenue for purposes of the franchise tax.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB1836, As Introduced: an impact of $0 through the biennium ending August 31, 2015. Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($435,483,000) for the 2014-15 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.
Estimated Two-year Net Impact to General Revenue Related Funds for HB1836, As Introduced: an impact of $0 through the biennium ending August 31, 2015.
Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($435,483,000) for the 2014-15 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2014 $0 2015 $0 2016 $0 2017 $0 2018 $0
2014 $0
2015 $0
2016 $0
2017 $0
2018 $0
All Funds, Five-Year Impact: Fiscal Year Probable Revenue (Loss) fromProperty Tax Relief Fund304 2014 ($217,143,000) 2015 ($218,340,000) 2016 ($222,126,000) 2017 ($218,180,000) 2018 ($216,402,000)
Fiscal Year Probable Revenue (Loss) fromProperty Tax Relief Fund304 2014 ($217,143,000) 2015 ($218,340,000) 2016 ($222,126,000) 2017 ($218,180,000) 2018 ($216,402,000)
2014 ($217,143,000)
2015 ($218,340,000)
2016 ($222,126,000)
2017 ($218,180,000)
2018 ($216,402,000)
Fiscal Analysis
The bill would amend Chapter 171 of the Tax Code, regarding the franchise tax, by adding the term "contract" to the reasons that require a taxable entity to exclude flow through funds from total revenue that are mandated to be distributed to other entities. Under current law, flow through funds mandated by law or fiduciary duty to be distributed to other entities are excluded from total revenue. The bill would repeal Section 171.1011(g) which specifies three instances in which flow through funds mandated by contract to be paid to other entities are required to be excluded from total revenue. Section 171.1011(i) prohibits exclusion from total revenue of payments made under an ordinary contract for the provision of services in the regular course of business except as provided by Section 171.1011(g). This bill would amend Section 171.1011(i) by removing the reference Section 171.1011(g) and adding a reference to amended flow through language which includes mandate by contract. The bill would take effect on January 1, 2014, and apply to franchise tax reports due on or after that date.
Methodology
The bill does not make clear distinctions among payments made by a taxable entity pursuant to a contract that would or would not qualify as flow through funds mandated by contract. The estimated fiscal impact is based on prior estimates of expanding subtractions based on contract payments.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: UP, KK, SD
UP, KK, SD