LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION April 4, 2025 TO: Honorable Charles Schwertner, Chair, Senate Committee on Business & Commerce FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: SB1405 by Nichols (relating to increasing access to and reducing taxation of Internet services.), Committee Report 1st House, Substituted No fiscal implication to the State is anticipated. This bill would amend several provisions in the Government Code and the Tax Code related to broadband development and funding, and taxation of internet service and broadband grants.The bill would change the deadline for the Comptroller to publish statistics related to the pole replacement program from the 60th day after receiving funds to November 1 of each year.The bill would increase the minimum broadband service speed requirements, defining broadband service as having a download speed of at least 100 megabits per second (versus the current 25 megabits per second) and an upload speed of at least 20 megabits per second (versus the current three megabits per second). For provisions concerning underserved locations, the bill would also increase the download speed of at least 250 megabits per second (versus the current 100 megabits per second) and an upload speed of at least 25 megabits per second (versus the current 20 megabits per second).The bill would require the broadband development office to classify broadband serviceable locations and establish a program for grants and financial incentives to expand broadband access to unserved and underserved locations.The bill would amend Chapter 151 (Limited Sales, Excise, and Use Tax) to exclude Internet access service from being classified as a taxable service. Section 151.325, exempting the first $25 of monthly internet access charges from sales tax, would be repealed.The bill would repeal certain provisions related to broadband funding and clarify by amending Chapter 171 (Franchise Tax) of the Tax Code that grants received under specific federal programs would be considered qualifying broadband grants. The bill would repeal Chapter 490H (Governor's Broadband Development Council) and Sections 490I.0105(g)-(l), (n)-(p) of the Government Code.The bill provisions amending Section 171.10132 of the Tax Code would apply only to a report originally due on or after January 1, 2026.The bill would take effect July 1, 2025, assuming it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2025.According to the Comptroller, state and local sales taxation of internet access ceased after June 30, 2020, as required by federal law, and this bill amends statute to accord with that fact. Consequently, the amendments of Chapter 151, Tax Code would have no fiscal implications. The amendment of Section 171.10132, Tax Code is a clarification regarding exclusion of broadband grants from revenue for purposes of franchise tax and will have no fiscal implications. Local Government ImpactNo fiscal implication to units of local government is anticipated. Source Agencies: b > td > 304 Comptroller of Public Accounts LBB Staff: b > td > JMc, RStu, KK, SD
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION
April 4, 2025
TO: Honorable Charles Schwertner, Chair, Senate Committee on Business & Commerce FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: SB1405 by Nichols (relating to increasing access to and reducing taxation of Internet services.), Committee Report 1st House, Substituted
TO: Honorable Charles Schwertner, Chair, Senate Committee on Business & Commerce
FROM: Jerry McGinty, Director, Legislative Budget Board
IN RE: SB1405 by Nichols (relating to increasing access to and reducing taxation of Internet services.), Committee Report 1st House, Substituted
Honorable Charles Schwertner, Chair, Senate Committee on Business & Commerce
Honorable Charles Schwertner, Chair, Senate Committee on Business & Commerce
Jerry McGinty, Director, Legislative Budget Board
Jerry McGinty, Director, Legislative Budget Board
SB1405 by Nichols (relating to increasing access to and reducing taxation of Internet services.), Committee Report 1st House, Substituted
SB1405 by Nichols (relating to increasing access to and reducing taxation of Internet services.), Committee Report 1st House, Substituted
No fiscal implication to the State is anticipated.
No fiscal implication to the State is anticipated.
This bill would amend several provisions in the Government Code and the Tax Code related to broadband development and funding, and taxation of internet service and broadband grants.The bill would change the deadline for the Comptroller to publish statistics related to the pole replacement program from the 60th day after receiving funds to November 1 of each year.The bill would increase the minimum broadband service speed requirements, defining broadband service as having a download speed of at least 100 megabits per second (versus the current 25 megabits per second) and an upload speed of at least 20 megabits per second (versus the current three megabits per second). For provisions concerning underserved locations, the bill would also increase the download speed of at least 250 megabits per second (versus the current 100 megabits per second) and an upload speed of at least 25 megabits per second (versus the current 20 megabits per second).The bill would require the broadband development office to classify broadband serviceable locations and establish a program for grants and financial incentives to expand broadband access to unserved and underserved locations.The bill would amend Chapter 151 (Limited Sales, Excise, and Use Tax) to exclude Internet access service from being classified as a taxable service. Section 151.325, exempting the first $25 of monthly internet access charges from sales tax, would be repealed.The bill would repeal certain provisions related to broadband funding and clarify by amending Chapter 171 (Franchise Tax) of the Tax Code that grants received under specific federal programs would be considered qualifying broadband grants. The bill would repeal Chapter 490H (Governor's Broadband Development Council) and Sections 490I.0105(g)-(l), (n)-(p) of the Government Code.The bill provisions amending Section 171.10132 of the Tax Code would apply only to a report originally due on or after January 1, 2026.The bill would take effect July 1, 2025, assuming it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2025.According to the Comptroller, state and local sales taxation of internet access ceased after June 30, 2020, as required by federal law, and this bill amends statute to accord with that fact. Consequently, the amendments of Chapter 151, Tax Code would have no fiscal implications. The amendment of Section 171.10132, Tax Code is a clarification regarding exclusion of broadband grants from revenue for purposes of franchise tax and will have no fiscal implications.
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, RStu, KK, SD
JMc, RStu, KK, SD