LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 88TH LEGISLATIVE REGULAR SESSION March 21, 2023 TO: Honorable Joan Huffman, Chair, Senate Committee on Finance FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: SB1243 by Huffman (Relating to the franchise tax treatment of certain broadband grants made for the purposes of broadband deployment in this state.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for SB1243, As Introduced : an impact of $0 through the biennium ending August 31, 2025.Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($9,000,000) for the 2024-25 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 toGeneral Revenue Related Funds2024$02025$02026$02027$02028$0All Funds, Five-Year Impact: Fiscal Year Probable Revenue (Loss) fromProperty Tax Relief Fund3042024($4,500,000)2025($4,500,000)2026($4,500,000)2027($4,500,000)2028$0 Fiscal AnalysisThe bill would add Section 171.10132 to Chapter 171 of the Tax Code relating to grants received for Broadband Deployment in Texas. The bill defines what constitutes a qualifying broadband grant.The bill would allow a taxable entity to exclude from its total revenue qualifying broadband grant proceeds for the purposes of broadband deployment in Texas. The bill also allows a taxable entity to include, as a cost of goods under Section 171.1012, any expenses paid using qualifying broadband grant proceeds for the purposes of broadband deployment in Texas if the expense is otherwise includable as a cost of goods sold under that section. A taxable entity would be permitted to include as compensation, under Section 171.1013, any expense paid using qualifying broadband grant proceeds for the purposes of broadband deployment in Texas if the expense is otherwise includable as compensation under that section. It applies to franchise reports due on or after January 1, 2023.The bill would take effect immediately upon enactment, assuming it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2023.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 88TH LEGISLATIVE REGULAR SESSION
March 21, 2023
TO: Honorable Joan Huffman, Chair, Senate Committee on Finance FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: SB1243 by Huffman (Relating to the franchise tax treatment of certain broadband grants made for the purposes of broadband deployment in this state.), As Introduced
TO: Honorable Joan Huffman, Chair, Senate Committee on Finance
FROM: Jerry McGinty, Director, Legislative Budget Board
IN RE: SB1243 by Huffman (Relating to the franchise tax treatment of certain broadband grants made for the purposes of broadband deployment in this state.), As Introduced
Honorable Joan Huffman, Chair, Senate Committee on Finance
Honorable Joan Huffman, Chair, Senate Committee on Finance
Jerry McGinty, Director, Legislative Budget Board
Jerry McGinty, Director, Legislative Budget Board
SB1243 by Huffman (Relating to the franchise tax treatment of certain broadband grants made for the purposes of broadband deployment in this state.), As Introduced
SB1243 by Huffman (Relating to the franchise tax treatment of certain broadband grants made for the purposes of broadband deployment in this state.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for SB1243, As Introduced : an impact of $0 through the biennium ending August 31, 2025.Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($9,000,000) for the 2024-25 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 SB1243, As Introduced : an impact of $0 through the biennium ending August 31, 2025.Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($9,000,000) for the 2024-25 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.
Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($9,000,000) for the 2024-25 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:
2024 $0
2025 $0
2026 $0
2027 $0
2028 $0
All Funds, Five-Year Impact:
2024 ($4,500,000)
2025 ($4,500,000)
2026 ($4,500,000)
2027 ($4,500,000)
2028 $0
Fiscal Analysis
The bill would add Section 171.10132 to Chapter 171 of the Tax Code relating to grants received for Broadband Deployment in Texas. The bill defines what constitutes a qualifying broadband grant.The bill would allow a taxable entity to exclude from its total revenue qualifying broadband grant proceeds for the purposes of broadband deployment in Texas. The bill also allows a taxable entity to include, as a cost of goods under Section 171.1012, any expenses paid using qualifying broadband grant proceeds for the purposes of broadband deployment in Texas if the expense is otherwise includable as a cost of goods sold under that section. A taxable entity would be permitted to include as compensation, under Section 171.1013, any expense paid using qualifying broadband grant proceeds for the purposes of broadband deployment in Texas if the expense is otherwise includable as compensation under that section. It applies to franchise reports due on or after January 1, 2023.The bill would take effect immediately upon enactment, assuming it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2023.
Methodology
It is anticipated that of $4.1 billion of qualifying broadband grants to be awarded in the state, $3.7 billion would be received by taxable entities with franchise tax liabilities. Under current law, receipt of such grants would be revenue for purposes of franchise tax. This bill would exclude such receipts from revenue, and provide for expenditure of some of such revenue to be included as cost of goods sold or compensation in the determination of taxable margin. The result would be reduction of franchise tax liabilities for the entities receiving the grants, relative to current law. Although the timing of awards and subsequent expenditures is unknown and may be irregular, this estimates assumes the amounts affecting franchise tax liabilities will be distributed evenly over the next four years.
Local Government Impact
No significant 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