LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session March 28, 1999 TO: Honorable Bill Ratliff, Chair, Senate Committee on Finance FROM: John Keel, Director, Legislative Budget Board IN RE: SB1321 by Ratliff (relating to the settlement and collection of taxes and penalties and interest on taxes, refunds, and credits), As Introduced ************************************************************************** * Estimated Two-Year Net Impact to General Revenue Related Fundsfor * * SB1321, As Introduced: positive impact of $12,089,000 through the * * biennium ending August 31, 2001. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2000 $8,004,000 * * 2001 4,085,000 * * 2002 2,117,000 * * 2003 1,634,000 * * 2004 1,309,000 * **************************************************** All Funds, Five-Year Impact: ************************************************************************** *Fiscal Probable Revenue Probable Revenue Probable Revenue * * Year Gain/(Loss) from Gain/(Loss) from Gain/(Loss) from All * * General Revenue Fund State Highway Fund Local Units of * * 0001 0006 Government * * 2000 $8,004,000 $728,000 $1,307,000 * * 2001 4,085,000 366,000 665,000 * * 2002 2,117,000 188,000 348,000 * * 2003 1,634,000 142,000 270,000 * * 2004 1,309,000 113,000 220,000 * ************************************************************************** Fiscal Analysis Under current law, the annual interest rate charged on delinquent state taxes is 12%, and no interest is paid on tax refunds. The bill would set the interest rate on delinquent taxes and tax refunds at the prime rate plus one percent. The revised rate would apply to taxes due or refunds granted on or after January 1, 2000. Under current law, the Comptroller may settle a claim for tax due, penalty, and interest if the cost of collection would exceed the amount due and the amount due is less than $300. The bill would eliminate the $300 limit, allowing the Comptroller to settle a claim for tax due, penalty, and interest if the cost of collection would exceed the amount due regardless of the amount due. The bill would also allow the Comptroller to settle a claim for a tax refund if the cost of defending against the claim would exceed the amount of the refund claimed. Methodology The Comptroller estimates that the revenue gains from increased tax settlements would be greater than the revenue loss from reduced interest earnings on delinquent taxes and interest paid on tax refunds. The Comptroller used an 8.75 percent interest rate in the calculation. The estimates are revenue only. Any savings from reduced administrative cost would be in addition to the revenue gains. Local Government Impact Local units of government would have a corresponding positive fiscal impact, as indicated in the table above. Source Agencies: LBB Staff: JK, BB, RS