LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 87TH LEGISLATIVE REGULAR SESSION April 22, 2021 TO: Honorable Morgan Meyer, Chair, House Committee on Ways & Means FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: HB3777 by Noble (relating to eligible costs and expenses for purposes of the franchise tax credit for the certified rehabilitation of certified historic structures.), Committee Report 1st House, Substituted Estimated Two-year Net Impact to General Revenue Related Funds for HB3777, Committee Report 1st House, Substituted : a positive impact of $7,590,000 through the biennium ending August 31, 2023. Additionally, the bill will have a direct impact of a revenue gain to the Property Tax Relief Fund of $4,910,000 for the 2022-23 biennium. Any gain to the Property Tax Relief Fund will result in an equal amount of savings to General Revenue for funding the Foundation School Program. General Revenue-Related Funds, Five- Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact toGeneral Revenue Related Funds2022$02023$7,590,0002024$7,760,0002025$7,950,0002026$8,130,000All Funds, Five-Year Impact: Fiscal Year Probable Revenue Gain fromGeneral Revenue Fund1 Probable Revenue Gain fromFoundation School Fund193 Probable Revenue Gain fromProperty Tax Relief Fund3042022$0$0$02023$5,690,000$1,900,000$4,910,0002024$5,820,000$1,940,000$5,040,0002025$5,960,000$1,990,000$5,150,0002026$6,100,000$2,030,000$5,270,000 Fiscal AnalysisThe bill would amend Subchapter S, Chapter 171, Tax Code (Tax Credit for Certified Rehabilitation of Certified Historic Structures) to exclude certain costs and expenses from eligibility for the credit.Cost and expenses to rehabilitate a structure by a nonprofit corporation or other corporation exempt from tax under Section 171.063 would no longer be eligible if the structure is leased to a tax-exempt entity in a disqualified lease. Tax-exempt entity and disqualified lease would be defined as those terms are defined by Section 168(h), Internal Revenue Code.The bill would take effect January 1, 2022 and apply only to costs and expenses incurred on or after that date.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 87TH LEGISLATIVE REGULAR SESSION
April 22, 2021
TO: Honorable Morgan Meyer, Chair, House Committee on Ways & Means FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: HB3777 by Noble (relating to eligible costs and expenses for purposes of the franchise tax credit for the certified rehabilitation of certified historic structures.), Committee Report 1st House, Substituted
TO: Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM: Jerry McGinty, Director, Legislative Budget Board
IN RE: HB3777 by Noble (relating to eligible costs and expenses for purposes of the franchise tax credit for the certified rehabilitation of certified historic structures.), Committee Report 1st House, Substituted
Honorable Morgan Meyer, Chair, House Committee on Ways & Means
Honorable Morgan Meyer, Chair, House Committee on Ways & Means
Jerry McGinty, Director, Legislative Budget Board
Jerry McGinty, Director, Legislative Budget Board
HB3777 by Noble (relating to eligible costs and expenses for purposes of the franchise tax credit for the certified rehabilitation of certified historic structures.), Committee Report 1st House, Substituted
HB3777 by Noble (relating to eligible costs and expenses for purposes of the franchise tax credit for the certified rehabilitation of certified historic structures.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for HB3777, Committee Report 1st House, Substituted : a positive impact of $7,590,000 through the biennium ending August 31, 2023. Additionally, the bill will have a direct impact of a revenue gain to the Property Tax Relief Fund of $4,910,000 for the 2022-23 biennium. Any gain to the Property Tax Relief Fund will result in an equal amount of savings to General Revenue for funding the Foundation School Program.
Estimated Two-year Net Impact to General Revenue Related Funds for HB3777, Committee Report 1st House, Substituted : a positive impact of $7,590,000 through the biennium ending August 31, 2023. Additionally, the bill will have a direct impact of a revenue gain to the Property Tax Relief Fund of $4,910,000 for the 2022-23 biennium. Any gain to the Property Tax Relief Fund will result in an equal amount of savings to General Revenue for funding the Foundation School Program.
Additionally, the bill will have a direct impact of a revenue gain to the Property Tax Relief Fund of $4,910,000 for the 2022-23 biennium. Any gain to the Property Tax Relief Fund will result in an equal amount of savings to General Revenue for funding the Foundation School Program.
General Revenue-Related Funds, Five- Year Impact:
2022 $0
2023 $7,590,000
2024 $7,760,000
2025 $7,950,000
2026 $8,130,000
All Funds, Five-Year Impact:
2022 $0 $0 $0
2023 $5,690,000 $1,900,000 $4,910,000
2024 $5,820,000 $1,940,000 $5,040,000
2025 $5,960,000 $1,990,000 $5,150,000
2026 $6,100,000 $2,030,000 $5,270,000
Fiscal Analysis
The bill would amend Subchapter S, Chapter 171, Tax Code (Tax Credit for Certified Rehabilitation of Certified Historic Structures) to exclude certain costs and expenses from eligibility for the credit.Cost and expenses to rehabilitate a structure by a nonprofit corporation or other corporation exempt from tax under Section 171.063 would no longer be eligible if the structure is leased to a tax-exempt entity in a disqualified lease. Tax-exempt entity and disqualified lease would be defined as those terms are defined by Section 168(h), Internal Revenue Code.The bill would take effect January 1, 2022 and apply only to costs and expenses incurred on or after that date.
Methodology
Revenue gains to the state would occur to the extent that historic structure tax credits that would be granted under current law would not be granted under the bill. This estimate is based on information from the Texas Historical Commission regarding the frequency of applications for certification for historic structure tax credits by tax-exempt entities and the average estimated qualified rehabilitation expenses for such projects. Because the tax credits are assignable, it is assumed that the full value of credits received by tax-exempt entities would be sold to taxable entities able to claim their value against franchise tax or insurance premiums taxes. Ineligibility for credit of costs and expenses incurred by tax-exempt entities beginning January 1, 2022 would result in reduced credit claims on franchise tax reports filed beginning in fiscal 2023.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: b > td > 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: b > td > JMc, KK, SD
JMc, KK, SD