LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 85TH LEGISLATIVE REGULAR SESSION March 29, 2017 TO: Honorable Jane Nelson, Chair, Senate Committee on Finance FROM: Ursula Parks, Director, Legislative Budget Board IN RE:SB1083 by Perry (relating to the applicability of the sales and use tax to certain insurance services.), Committee Report 1st House, Substituted Estimated Two-year Net Impact to General Revenue Related Funds for SB1083, Committee Report 1st House, Substituted: a negative impact of ($3,000,000) through the biennium ending August 31, 2019.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 85TH LEGISLATIVE REGULAR SESSION
March 29, 2017
TO: Honorable Jane Nelson, Chair, Senate Committee on Finance FROM: Ursula Parks, Director, Legislative Budget Board IN RE:SB1083 by Perry (relating to the applicability of the sales and use tax to certain insurance services.), Committee Report 1st House, Substituted
TO: Honorable Jane Nelson, Chair, Senate Committee on Finance
FROM: Ursula Parks, Director, Legislative Budget Board
IN RE: SB1083 by Perry (relating to the applicability of the sales and use tax to certain insurance services.), Committee Report 1st House, Substituted
Honorable Jane Nelson, Chair, Senate Committee on Finance
Honorable Jane Nelson, Chair, Senate Committee on Finance
Ursula Parks, Director, Legislative Budget Board
Ursula Parks, Director, Legislative Budget Board
SB1083 by Perry (relating to the applicability of the sales and use tax to certain insurance services.), Committee Report 1st House, Substituted
SB1083 by Perry (relating to the applicability of the sales and use tax to certain insurance services.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for SB1083, Committee Report 1st House, Substituted: a negative impact of ($3,000,000) through the biennium ending August 31, 2019.
Estimated Two-year Net Impact to General Revenue Related Funds for SB1083, Committee Report 1st House, Substituted: a negative impact of ($3,000,000) through the biennium ending August 31, 2019.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2018 $0 2019 ($3,000,000) 2020 ($3,400,000) 2021 ($3,700,000) 2022 ($4,000,000)
2018 $0
2019 ($3,000,000)
2020 ($3,400,000)
2021 ($3,700,000)
2022 ($4,000,000)
All Funds, Five-Year Impact: Fiscal Year Probable Revenue (Loss) fromGeneral Revenue Fund1 Probable Revenue (Loss) fromState Highway Fund6 Probable Savings/(Cost) fromCities Probable Savings/(Cost) fromTransit Authorities 2018 $0 ($2,000,000) ($380,000) ($130,000) 2019 ($3,000,000) $0 ($570,000) ($200,000) 2020 ($3,400,000) $0 ($650,000) ($230,000) 2021 ($3,700,000) $0 ($710,000) ($250,000) 2022 ($4,000,000) $0 ($770,000) ($260,000) Fiscal Year Probable Savings/(Cost) fromCounties and Special Districts 2018 ($70,000) 2019 ($100,000) 2020 ($120,000) 2021 ($130,000) 2022 ($140,000)
Fiscal Year Probable Revenue (Loss) fromGeneral Revenue Fund1 Probable Revenue (Loss) fromState Highway Fund6 Probable Savings/(Cost) fromCities Probable Savings/(Cost) fromTransit Authorities 2018 $0 ($2,000,000) ($380,000) ($130,000) 2019 ($3,000,000) $0 ($570,000) ($200,000) 2020 ($3,400,000) $0 ($650,000) ($230,000) 2021 ($3,700,000) $0 ($710,000) ($250,000) 2022 ($4,000,000) $0 ($770,000) ($260,000)
2018 $0 ($2,000,000) ($380,000) ($130,000)
2019 ($3,000,000) $0 ($570,000) ($200,000)
2020 ($3,400,000) $0 ($650,000) ($230,000)
2021 ($3,700,000) $0 ($710,000) ($250,000)
2022 ($4,000,000) $0 ($770,000) ($260,000)
Fiscal Year Probable Savings/(Cost) fromCounties and Special Districts 2018 ($70,000) 2019 ($100,000) 2020 ($120,000) 2021 ($130,000) 2022 ($140,000)
2018 ($70,000)
2019 ($100,000)
2020 ($120,000)
2021 ($130,000)
2022 ($140,000)
Fiscal Analysis
The bill would amend Chapter 151 of the Tax Code, regarding sales and use taxation of certain insurance services. Section 151.0039 would be amended to exclude from the definition of "insurance service", and thus from taxability, a service performed by a licensed certified public accountancy firm, or on behalf of the firm by an owner, employee, or affiliate of the firm, if less than one percent of the firm's total revenue in the prior calendar year is from services that otherwise constitute insurance service. This bill would take effect January 1, 2018.
Methodology
Because an affiliate of a certified public accountancy firm is a legal entity distinct from the firm, the revenue of an affiliate would not be part of the total revenue of the CPA firm and thus not be part of the de minimus one percent of revenue test proposed by the bill for exclusion of certain insurance services from taxablility. Consequently, a CPA firm could create or acquire an insurance service firm (of potentially unlimited size) that would be authorized to sell nontaxed insurance services that would be taxable if sold by an insurance service provider not affiliated with a CPA firm. This fiscal estimate assumes that the opportunity established by the bill to sell taxable insurance services on a nontaxable basis would result in declines in tax collections from providers of insurance services subject to tax. The fiscal implications were estimated based on Comptroller data for sales tax remittances from providers of taxable insurance services. Pursuant to Proposition 7 (2015), any sales tax collections in excess of $28 billion and less than$30.5 billion will be deposited into the State Highway Fund. Because total 2018 collections areprojected to fall in that range, the 2018 revenue loss is from the State Highway Fund instead ofGeneral Revenue.
Local Government Impact
There would be a proportional loss of sales and use tax revenue from units of local government. The estimated losses are displayed in the above tables.
Source Agencies: 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: UP, KK, SD
UP, KK, SD