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 ************************************************************************** * 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: *************************************************************************** *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