LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 74th Regular Session April 28, 1995 TO: Honorable Tom Craddick, Chair IN RE: Committee Substitute Committee on Ways & Means for House House of Representatives Bill No. 3155 Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on House Bill No. 3155 (relating to tax credits for real property contributed to institutions of higher education) this office has determined the following: This bill allows certain universities to acquire real estate, which would otherwise not be acquired due to insufficient funding sources, in exchange for a state sales or franchise tax credit granted to the property owner. The bill's provisions would be effective only for the University of Houston (UH) and only for property transferred to UH before August 31, 1996. The bill allows UH to petition the Higher Education Coordinating Board for approval to obtain the desired real estate. The board could approve the acquisition if the real estate was included in UH's master plan as a desired acquisition, if the real estate were fairly priced, and if UH did not have sufficient funds available otherwise. If the board approved the petition, the Comptroller would be required to grant the property owner a franchise or sales tax credit within 10 days of the approval. The tax credit would equal 50 percent of the fair market value of the property. The tax credit could be taken by the former property owners in equal increments over twenty years (five percent of the total credit per year) against their franchise tax or sales tax liability. The bill becomes effective September 1, 1995 and expires on September 1, 1997. This fiscal note is premised on the transfer of one property to the University of Houston worth $13 million and is the minimum estimate of revenue losses. Actual losses might be greater. The probable fiscal implication of implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Fiscal Probable Revenue Probable Year Loss to General Administrative Revenue Fund 001 Cost to the Comptroller's Office from of General Revenue Fund 001 1995 $83,322 1996 325,000 1997 325,000 1998 325,000 1999 325,000 2000 325,000 Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. The fiscal implication to units of local government cannot be determined. Source: Comptroller of Public Accounts LBB Staff: JK, CT, DF