LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 76th Regular Session
April 15, 1999
TO: Honorable Tom Haywood, Chair, Senate Committee on
Agriculture
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB 977 by Ratliff (Relating to exemptions from ad valorem
and sales and use taxation of certain timber and certain
items used in timber operations and the valuation of
certain timber land for ad valorem tax purposes.), As
Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB977, As Introduced: negative impact of $(35,303,000) 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2000 $(15,814,000) *
* 2001 (19,489,000) *
* 2002 (29,115,000) *
* 2003 (30,680,000) *
* 2004 (32,301,000) *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Probable *
* Year Revenue Revenue Revenue Revenue *
* Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* General Revenue School Districts Cities Counties *
* Fund *
* 0001 *
* 2000 $(15,814,000) $0 $(2,272,000) $(275,000) *
* 2001 (19,489,000) (8,796,000) (3,155,000) (3,314,000) *
* 2002 (29,115,000) 0 (3,284,000) (3,566,000) *
* 2003 (30,680,000) 0 (3,421,000) (3,830,000) *
* 2004 (32,301,000) 0 (3,562,000) (4,108,000) *
***************************************************************************
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) to *
* Transit Authorities *
* 2000 $(178,000) *
* 2001 (248,000) *
* 2002 (258,000) *
* 2003 (269,000) *
* 2004 (280,000) *
*****************************************************
Fiscal Analysis
The bill would provide for tax exclusions and exemptions by amending the
property tax, sales tax, and motor vehicle sales tax chapters of the Tax
Code.
Methodology
The fiscal impact of the exemption for standing timber and timber in the
hands of the producer cannot be determined. Current property tax policy
treats standing timber as part of the land and, as such, it is not
separately taxed. It is assumed that no change in current practice is
intended and, therefore, no cost has been attached to the exemption for
standing timber.
The fiscal impact of exempting implements of husbandry (timber) was taken
from a previous study prepared for the Texas Forestry Association. The
fiscal implications of the 50 percent exemption for timber in aesthetic
management zones, critical wildlife habitat zones, or streamside
management zones were developed from reported school district timber
values for 1998 (assuming that 15 percent of the timber value is included
in one or more of the applicable zones), reduced by 50 percent, and
extrapolated through the forecast period.
The fiscal impact of the 10-year 50 percent exemption for timber in newly
harvested areas was estimated under the assumptions that 75 percent of
the value of timber (timber not in an applicable zone) would be subject
to the exemption, that timber is harvested once every 25 years and
accumulating the cost by one-twenty-fifth per year.
Fiscal implications would exist for the state, school districts, and
counties. The implications for cities and special districts would not be
significant. Although the property tax sections would take effect
January 1, 2000, school districts and counties would not experience an
impact until fiscal 2001. The operation of the school funding formula
would effectively zero-out the school district cost and shift the school
district cost to the state after a one-year lag.
To estimate the fiscal implications of exempting timber-related items
from the sales tax, a number of sources of data were used, both public
and private, including Comptroller tax files. The estimated taxable
value of items to be exempt by the bill was estimated and multiplied by
the state sales tax rate. In the case of the existing exemption for the
first $50,000 of the purchase price of certain timber equipment, only
that part currently taxable was estimated by this analysis. The
resulting figure was then extrapolated through fiscal 2004 and adjusted
for an effective date of October 1, 1999.
The fiscal impact on the state motor vehicle sales tax was determined by
estimating the number of vehicle registrations in the East Texas region
comprised of trucks associated in any way with the timber industry which
are currently subject to tax, dividing by an assumed truck life of five
years to estimate yearly unit sales, multiplying by an average cost of
$30,000 (assuming both light trucks and tractor/trailer combinations),
multiplying by the tax rate, and extrapolating through fiscal 2004.
Local Government Impact
The fiscal impact on local units of government is reflected in the above
table.
Source Agencies: 592 Soil and Water Conservation Board, 576 Texas
Forest Service, 551 Department of Agriculture, 802
Parks and Wildlife Department, 304 Comptroller of
Public Accounts
LBB Staff: JK, DE, BR