LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 76th Regular Session
March 22, 1999
TO: Honorable John Smithee, Chair, House Committee on
Insurance
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1837 by Brimer (Relating to certain premium taxes.),
As Introduced
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1837, As Introduced: impact of $0 through the biennium ending *
* August 31, 2001. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
**************************************************************************
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2000 $0 *
* 2001 0 *
* 2002 0 *
* 2003 0 *
* 2004 0 *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* Texas Department of Insurance *
* Operating Account/ GR-Dedicated *
* 0036 *
* 2000 $0 *
* 2001 25,838,000 *
* 2002 26,484,000 *
* 2003 27,676,000 *
* 2004 28,561,000 *
*****************************************************
Fiscal Analysis
The bill would establish a flat tax rate of 1.725 percent for property
and casualty insurance and a flat rate of 1.35 percent for title
insurance written in the state. Under current law, property and casualty
insurance is taxed at a rate of 1.6 percent, 2.4 percent, or 3.5
percent, depending on the insurer's proportion of investments in the
state. Similarly, title insurance is taxed at a rate of either 1.3
percent or 2.0 percent , depending on the insurer's proportion of
investments in the state. Reference to investment requirements would be
removed from the code.
The bill would also increase the tax rate applicable to HMO revenues and
to life, accident, and health insurance premiums from 1.75 percent to
1.9 percent.
The bill would only apply to a premium tax imposed beginning January 1,
2000.
Methodology
The Comptroller of Public Accounts applied the proposed tax rates to the
insurance premium base for tax (calendar) year 1997 (the last year in
which complete information is available by tax rate and line of
insurance). These amounts were compared to actual collections for the
1998 fiscal year and then adjusted to compute the revenues that would
have been collected in fiscal 1998 under this bill. This figure was
extrapolated forward through the projection period based on the 2000-2001
Biennial Revenue Estimate to show the net effect on the General
Revenue-Dedicated Texas Department of Insurance Operating Account 0036.
Virtually all of the revenue gain shown is attributable to the proposed
rate increase on life, accident, and health premiums. The effect of the
bill on other types of insurance was not taken into account because the
Comptroller's staff had reached no conclusions concerning these premium
taxes.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies:
LBB Staff: JK, TH, DP, RT