LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION April 21, 2013 TO: Honorable John Davis, Chair, House Committee on Economic & Small Business Development FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB2061 by Murphy (Relating to a tax credit for investment in certain communities; imposing a monetary penalty; authorizing a fee.), Committee Report 1st House, Substituted No significant fiscal impact to the state is anticipated through the biennium ending August 31, 2015 for HB 2061. However, in fiscal year 2016 the bill will result in a revenue loss of $52.5 million.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION
April 21, 2013
TO: Honorable John Davis, Chair, House Committee on Economic & Small Business Development FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB2061 by Murphy (Relating to a tax credit for investment in certain communities; imposing a monetary penalty; authorizing a fee.), Committee Report 1st House, Substituted
TO: Honorable John Davis, Chair, House Committee on Economic & Small Business Development
FROM: Ursula Parks, Director, Legislative Budget Board
IN RE: HB2061 by Murphy (Relating to a tax credit for investment in certain communities; imposing a monetary penalty; authorizing a fee.), Committee Report 1st House, Substituted
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
HB2061 by Murphy (Relating to a tax credit for investment in certain communities; imposing a monetary penalty; authorizing a fee.), Committee Report 1st House, Substituted
HB2061 by Murphy (Relating to a tax credit for investment in certain communities; imposing a monetary penalty; authorizing a fee.), Committee Report 1st House, Substituted
No significant fiscal impact to the state is anticipated through the biennium ending August 31, 2015 for HB 2061. However, in fiscal year 2016 the bill will result in a revenue loss of $52.5 million.
No significant fiscal impact to the state is anticipated through the biennium ending August 31, 2015 for HB 2061. However, in fiscal year 2016 the bill will result in a revenue loss of $52.5 million.
General Revenue-Related Funds, Eight-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2014 $45,000 2015 $0 2016 ($52,500,000) 2017 ($60,000,000) 2018 ($60,000,000) 2019 ($60,000,000) 2020 ($60,000,000) 2021 $0
2014 $45,000
2015 $0
2016 ($52,500,000)
2017 ($60,000,000)
2018 ($60,000,000)
2019 ($60,000,000)
2020 ($60,000,000)
2021 $0
All Funds, Eight-Year Impact: Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Revenue (Loss) fromFoundation School Fund193 2014 $45,000 $0 2015 $0 $0 2016 ($39,375,000) ($13,125,000) 2017 ($45,000,000) ($15,000,000) 2018 ($45,000,000) ($15,000,000) 2019 ($45,000,000) ($15,000,000) 2020 ($45,000,000) ($15,000,000) 2021 $0 $0
Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Revenue (Loss) fromFoundation School Fund193 2014 $45,000 $0 2015 $0 $0 2016 ($39,375,000) ($13,125,000) 2017 ($45,000,000) ($15,000,000) 2018 ($45,000,000) ($15,000,000) 2019 ($45,000,000) ($15,000,000) 2020 ($45,000,000) ($15,000,000) 2021 $0 $0
2014 $45,000 $0
2015 $0 $0
2016 ($39,375,000) ($13,125,000)
2017 ($45,000,000) ($15,000,000)
2018 ($45,000,000) ($15,000,000)
2019 ($45,000,000) ($15,000,000)
2020 ($45,000,000) ($15,000,000)
2021 $0 $0
Fiscal Analysis
The bill would authorize up to $292.5 million in insurance tax premium credits to be taken during a five-year period beginning in fiscal year 2016. The maximum credit that could be taken is $52.5 million in fiscal year 2016 and $60 million each year in fiscal years 2017 through 2020. The state tax credits would go to insurance companies investing in Community Development Entities (CDEs) certified as eligible for the Federal New Markets Tax Credit Program by Community Development Financial Institutions Fund (CDFI) of the U.S. Treasury. (The Federal New Markets Tax Credit Program grants a 39 percent federal tax credit to investors in CDEs. The state tax credits would be in addition to the federal credits.) In order to secure $292.5 million in state insurance tax credits, the CDE would have to receive $750 million in investments. The CDEs would then invest in projects in low-income census tracts in the state designated by the CDFI as eligible for the federal New Markets Tax Credit Program. The CDEs have one year from the receipt of their funding to invest in projects in low-income census tracts in the state. The investments would have to be deployed for six years. Failure of a CDE to make or maintain the required investments could result in recapture of its tax credits. The bill would impose a $5,000 application fee on CDE applicants. The Comptroller of Public Accounts (CPA) would administer the program and issue biennial reports on the program. Each applicant would also make a $500,000 refundable deposit to the CPA. The refundable performance deposits would be held outside the Treasury. The deposits would be refunded if the CDE is not approved or the CDE meets certain investment requirements.
The bill would authorize up to $292.5 million in insurance tax premium credits to be taken during a five-year period beginning in fiscal year 2016. The maximum credit that could be taken is $52.5 million in fiscal year 2016 and $60 million each year in fiscal years 2017 through 2020. The state tax credits would go to insurance companies investing in Community Development Entities (CDEs) certified as eligible for the Federal New Markets Tax Credit Program by Community Development Financial Institutions Fund (CDFI) of the U.S. Treasury. (The Federal New Markets Tax Credit Program grants a 39 percent federal tax credit to investors in CDEs. The state tax credits would be in addition to the federal credits.)
In order to secure $292.5 million in state insurance tax credits, the CDE would have to receive $750 million in investments. The CDEs would then invest in projects in low-income census tracts in the state designated by the CDFI as eligible for the federal New Markets Tax Credit Program. The CDEs have one year from the receipt of their funding to invest in projects in low-income census tracts in the state. The investments would have to be deployed for six years. Failure of a CDE to make or maintain the required investments could result in recapture of its tax credits. The bill would impose a $5,000 application fee on CDE applicants. The Comptroller of Public Accounts (CPA) would administer the program and issue biennial reports on the program. Each applicant would also make a $500,000 refundable deposit to the CPA. The refundable performance deposits would be held outside the Treasury. The deposits would be refunded if the CDE is not approved or the CDE meets certain investment requirements.
Methodology
The estimate assumes that investments in and by the CDEs would be sufficient to allow all authorized credits to be taken by the end of fiscal year 2020. The estimate assumes that there would be nine applicants at $5,000 each for certification as CDEs for a General Revenue Fund gain of $45,000. The estimate assumes that investment requirements would be met and all refundable performance deposits would be refunded in the fiscal year the deposits are made.
Technology
No technology impact is anticipated.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 301 Office of the Governor, 304 Comptroller of Public Accounts, 454 Department of Insurance
301 Office of the Governor, 304 Comptroller of Public Accounts, 454 Department of Insurance
LBB Staff: UP, RB, JI, RS, KK
UP, RB, JI, RS, KK