LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session March 26, 1997 TO: Honorable Tom Craddick, Chair IN RE: House Bill No. 760, Committee Report 1st House, Substituted Committee on Ways & Means By: Shields House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on HB760 ( Relating to a franchise tax credit for contributions made to medical savings accounts.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by HB760-Committee Report 1st House, Substituted Implementing the provisions of the bill would result in a net impact of $0 to General Revenue Related Funds through the biennium ending August 31, 1999. Fiscal Analysis The bill would allow corporations, employing 50 or fewer employees and not offering employer-paid health insurance, eligible for a franchise tax credit. The credit would be limited to 50 percent of the total amount of money contributed by the employer to the employee medical savings accounts, on and after January 1, 1997. Unused credits could be carried over until another tax year or until completely used. The bill would apply to franchise tax reports and payments due on or after January 1, 2000 and would be effective September 1, 1997. Methodolgy The estimate assumes that the use of the medical savings accounts would allow a representative employer to reduce the cost of employer-provided health benefits by 30 percent, a cost savings that would be split between contributions to a medical savings account and the cost of high deductible insurance policy. The estimate assumes the use of medical savings accounts by corporations would begin slowly, but accelerate over time. The bill has no fiscal impact in fiscal years 1998 and 1999, because the bill would apply only to franchise tax reports and payments due during and after fiscal year 2000. The probable fiscal implications of implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Five Year Impact: Fiscal Year Probable Revenue Gain/(Loss) from General Revenue Fund 0001 1998 $0 1998 0 2000 (15,184,000) 2001 (31,936,000) 2002 (58,512,000) Net Impact on General Revenue Related Funds: The probable fiscal implication to General Revenue related funds during each of the first five years is estimated as follows: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 $0 1999 0 2000 (15,184,000) 2001 (31,936,000) 2002 (58,512,000) Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. No fiscal implication to units of local government is anticipated. Source: Agencies: LBB Staff: JK ,RR ,CT