LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 76th Regular Session
  
                            February 15, 1999
  
  
          TO:  Honorable Bill Ratliff, Chair, Senate Committee on Finance
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  SB5  by Sibley (relating to a franchise tax refund or
               credit for certain research and development activities),
               As Introduced
  
**************************************************************************
*  Two-year Net Impact to General Revenue Related Funds for SB5, As      *
*  Introduced:  negative impact of $(3,278,000) 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                         $(1,583,000)  *
          *       2001                          (1,695,000)  *
          *       2002                          (1,796,000)  *
          *       2003                          (1,910,000)  *
          *       2004                          (2,032,000)  *
          ****************************************************
  
All Funds, Five-Year Impact:
  
         *****************************************************
         * Fiscal Year    Probable Revenue Gain/(Loss) from   *
         *                      General Revenue Fund          *
         *                              0001                  *
         *      2000                             $(1,583,000) *
         *      2001                              (1,695,000) *
         *      2002                              (1,796,000) *
         *      2003                              (1,910,000) *
         *      2004                              (2,032,000) *
         *****************************************************
  
Fiscal Analysis
  
The bill would allow franchise tax refunds for certain research spending
done by Texas corporations.  Refunds would be capped at $125 million
annually.

Unless limited by the refund cap, a refund would be equal to 5 percent of
the quotient of a corporation's qualified research expenditures divided
by the firm's base research amount, plus 5 percent of the firm's
expenditures for basic research conducted by universities and research
laboratories.  Refunds could not exceed 25 percent of the franchise tax
otherwise due from a corporation.

Federal tax code definitions would be used to compute the Texas credit;
these definitions limit the credit to basic, scientific, pre-production
research.  Also, the bill would restrict refunds to research conducted in
Texas.

Should the total amount of refunds claimed in a tax year exceed the $125
million cap, the Comptroller would prorate the refunds; if refund claims
do not exceed the cap, the Comptroller would reimburse the actual credits
claimed.

There would be no significant administrative cost to the Comptroller's
Office.
  
  
Methodology
  
This estimate is based on a Comptroller's Office analysis of federal
corporate and Texas franchise tax data.
  
  
Local Government Impact
  
No fiscal implication to units of local government is anticipated.
  
  
Source Agencies:   
LBB Staff:         JK, BB, BR, CT