LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
April 7, 1997
TO: Honorable David Sibley, Chair IN RE: Senate Bill No. 555
Committee on Economic Development By: Sibley
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on SB555 ( Relating
to certain business organizations.) this office has detemined
the following:
Biennial Net Impact to General Revenue Funds by SB555-As Introduced
Implementing the provisions of the bill would result in a net
negative impact of $(5,604,080) to General Revenue Related Funds
through the biennium ending August 31, 1999.
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
Fiscal Analysis
This bill would amend various portions of the Texas Business
Corporation Act, the Texas Miscellaneous Corporation Laws Act,
the Texas Limited Liability Company Act, the Texas Revised Limited
Partnership Act, and the Texas Revised Partnership Act. This
bill would add the Business Combination Law as part of the Texas
Business Corporation Act.
In addition, the bill would amend
sections 171.252 and 171.255 of the Tax Code, relating to the
liability of corporate officers in cases of non-payment of state
taxes and fees. Current law provides that, when a corporation
fails to pay its franchise tax, the firm's officers become personally
liable for all debts of the corporation. This bill would lower
the standard of personal liability to a standard based only
on payment of state taxes and fees.
This bill would take
effect September 1, 1997 and would apply to all entities affected
regardless of the date of formation or incorporation.
Methodolgy
The changes to the business organization statutes would provide
for a business reorganization process to be known as a "conversion,"
in which a combination of two business entities occurs. In
addition, the bill would provide statutory recognition to shareholder
agreements. The bill also would provide for the electronic
filing of documents with the Secretary of State.
The Secretary
of State estimates that amendments to the Texas Revised Partnership
Act would have a positive impact on general revenue from filing
fees for qualification of foreign limited liability partnerships.
The Secretary of State projects that this revenue would be
$136,500 in fiscal year 1998 and increasing amounts in subsequent
years.
The prospect of personal liability for officers for
all debts of the corporation is considered a significant franchise
tax self-enforcement mechanism but the Comptroller of Public
Accounts projects that changes made by the bill would seriously
diminish the effectiveness of the self-enforcement mechanism.
This fiscal note assumes that additional tax delinquencies
would result from the diminished motivation to remit franchise
taxes. The fiscal impact is the amount of tax otherwise due
from delinquent franchise taxpayers that would not be collected
because the firm's tax liability fell below the minimum threshold
for enforcement action.
This fiscal note does not include
a fiscal effect for additional franchise tax delinquencies for
which enforcement action would be anticipated.
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 Probable Revenue
Gain/(Loss) from Gain/(Loss) from
General Revenue General Revenue
Fund Fund
0001 0001
1998 ($2,891,000) $136,500
1998 (2,997,000) 147,420
2000 (3,079,000) 159,213
2001 (3,238,000) 171,950
2002 (3,560,000) 185,706
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 ($2,754,500)
1999 (2,849,580)
2000 (2,919,787)
2001 (3,066,050)
2002 (3,374,294)
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: 304 Comptroller of Public Accounts
307 Secretary of State
LBB Staff: JK ,TH ,JC