LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                              April 23, 2001
  
  
          TO:  Honorable Rene Oliveira, Chair, House Committee on Ways &
               Means
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB679  by Homer (Relating to providing a deduction of not
               more than $100,000 for a corporation under the franchise
               tax.), As Introduced
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB679, As Introduced:  negative impact of $(525,939,000) through      *
*  the biennium ending August 31, 2003.                                  *
**************************************************************************
  
General Revenue-Related Funds, Five-Year Impact:
  
          ****************************************************
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2002                       $(257,773,000)  *
          *       2003                        (268,166,000)  *
          *       2004                        (277,069,000)  *
          *       2005                        (292,267,000)  *
          *       2006                        (309,537,000)  *
          ****************************************************
  
All Funds, Five-Year Impact:
  
         *****************************************************
         * Fiscal Year    Probable Revenue Gain/(Loss) from   *
         *                      General Revenue Fund          *
         *                              0001                  *
         *      2002                           $(257,773,000) *
         *      2003                            (268,166,000) *
         *      2004                            (277,069,000) *
         *      2005                            (292,267,000) *
         *      2006                            (309,537,000) *
         *****************************************************
  
Fiscal Analysis
  
The bill amends the Texas franchise tax law, Chapter 171 of the Tax Code,
permitting a corporation to deduct from its unapportioned taxable
capital tax base, as well as from its unapportioned earned surplus tax
base, an amount not to exceed $100,000.

The bill takes effect January 1, 2002, and applies to tax reports and
payments due on or after that date. 

  
  
Methodology
  
This estimate is based on analyses done by the Comptroller's Office.

The Office determined the bill's fiscal implications using data from the
Comptroller tax files.  The proposed change in law was modeled on a
corporation-by-corporation basis to simulate an aggregate tax impact.

Once the static fiscal impact was estimated, the dynamic fiscal impact
was calculated using a Texas-specific general equilibrium model to
distribute among the state's economic sectors the savings that otherwise
would have been paid in taxes by businesses.  The revenue feedback
calculation was based on the historical relationship between state tax
revenues and associated economic factors. 

  
  
Local Government Impact
  
No significant fiscal implication to units of local government is
anticipated.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, SD, CT