LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                              April 2, 2001
  
  
          TO:  Honorable Rene Oliveira, Chair, House Committee on Ways &
               Means
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB1170  by Eiland (Relating to an exemption from the
               sales and use tax for taxable items used in the
               performance of a space flight contract.), As Introduced
  
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*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB1170, As Introduced: a negative impact of $(156,736,000) through    *
*  the biennium ending August 31, 2003, if the effective date of the     *
*  bill is July 1, 2001; and a negative impact of $(138,298,000)         *
*  through the biennium ending August 31, 2003, if the effective date    *
*  of the bill is October 1, 2001.                                       *
**************************************************************************
  
The following table assumes an effective date of July 1, 2001.
  
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      Cities         Transit      Counties/SPDs   *
*              Fund                        Authorities                    *
*              0001                                                       *
*  2001      $(6,046,000)              $0              $0              $0 *
*  2002      (74,351,000)    (13,425,000)     (5,180,000)     (1,588,000) *
*  2003      (76,339,000)    (13,784,000)     (5,319,000)     (1,631,000) *
*  2004      (78,444,000)    (14,164,000)     (5,465,000)     (1,676,000) *
*  2005      (80,583,000)    (14,550,000)     (5,614,000)     (1,721,000) *
*  2006      (82,667,000)    (14,926,000)     (5,759,000)     (1,766,000) *
***************************************************************************
  
The following table assumes an effective date of October 1, 2001.
  
***************************************************************************
*Fiscal      Probable        Probable        Probable        Probable     *
* Year       Revenue         Revenue         Revenue         Revenue      *
*         Gain/(Loss) to  Gain/(Loss) to  Gain/(Loss) to  Gain/(Loss) to  *
*        General Revenue      Cities         Transit      Counties/SPDs   *
*              Fund                        Authorities                    *
*              0001                                                       *
*  2002     $(61,959,000)   $(10,069,000)    $(3,885,000)    $(1,191,000) *
*  2003      (76,339,000)    (13,784,000)     (5,319,000)     (1,631,000) *
*  2004      (78,444,000)    (14,164,000)     (5,465,000)     (1,676,000) *
*  2005      (80,583,000)    (14,550,000)     (5,614,000)     (1,721,000) *
*  2006      (82,667,000)    (14,926,000)     (5,759,000)     (1,766,000) *
***************************************************************************
  
Fiscal Analysis
  
The bill would amend Chapter 151 of the Tax Code to create a sales and
use tax exemption for items sold or used by a person in the performance
of a space flight contract.  Taxable items would be exempt if they were
included as a direct or indirect item of cost, regardless of whether the
contract was a cost-reimbursement contract.

A space flight contract would be defined as a contract with the United
States Department of Defense, the National Aeronautics and Space
Administration, or another nongovernmental party for the use or provision
of taxable items related to the development, construction or
fabrication, testing, research and development, vehicle assembly,
processing, remodeling, repair, operation, or maintenance of space
vehicles and related facilities.

The bill would take effect July 1, 2001, assuming that it received the
requisite two-thirds majority votes in both houses of the Legislature.
Otherwise, it would take effect October 1, 2001.
  
  
Methodology
  
Public and private data on contracts that would qualify as space flight
contracts were gathered, including information from the U.S. Census
Bureau.  The data were adjusted to reflect only activity in Texas and for
contract-related costs that would qualify for the exemption.  The
resulting figure was multiplied by the state sales tax rate, adjusted for
the potential effective dates, and extrapolated through 2006.  The
fiscal impact on units of local government were estimated proportionally.

Note:  Direct costs related to a space flight contract (as defined by the
bill) - between a person and NASA or the Department of Defense - are
currently exempt from the state sales tax.  The bill would exempt
indirect costs for contracts with NASA and the Department of Defense and
direct and indirect costs for private contracts, including any
subcontracts.
  
  
Local Government Impact
  
Local units of government would have a corresponding fiscal impact from
sales tax revenues, as indicated in the table above.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, SD, SM