LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 17, 2001
TO: Honorable Rene Oliveira, Chair, House Committee on Ways &
Means
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1483 by Homer (Relating to franchise tax incentives
for recycling.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1483, As Introduced: negative impact of $(6,300,000) through *
* the biennium ending August 31, 2003. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(2,500,000) *
* 2003 (3,800,000) *
* 2004 (5,300,000) *
* 2005 (6,900,000) *
* 2006 (8,600,000) *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* General Revenue Fund *
* 0001 *
* 2002 $(2,500,000) *
* 2003 (3,800,000) *
* 2004 (5,300,000) *
* 2005 (6,900,000) *
* 2006 (8,600,000) *
*****************************************************
Fiscal Analysis
The bill amends the Texas franchise tax law, Chapter 171 of the Tax Code,
authorizing certain franchise tax incentives for recycling.
Sales of recycled products manufactured by a corporation would be
excluded from Texas gross receipts and total gross receipts for both the
taxable capital and earned surplus components. Such sales also would be
subtracted from a corporation's reportable federal taxable income in
determining taxable earned surplus. The term "recycled product" would be
defined, by reference, as a product that meets the requirements for
recycled material content.
Further, the bill establishes a credit for capital expenditures for
certain recycling equipment. "Recycling equipment" would be defined as
equipment necessary to assist a corporation in recycling waste and used
predominantly for that purpose. The credit would be equal to the lesser
of $50,000 or the total amount of capital expenditure made during the
period, not to exceed the amount of franchise tax due after other
applicable credits. The credit would be claimed in five equal
installments over five consecutive reports.
The bill takes effect January 1, 2002 and applies to a report due on or
after that date. For purposes of claiming the credit, a qualifying
expenditure must be made on or after January 1, 2002.
Methodology
This estimate is derived from analyses made by the Comptroller's Office.
The provisions permitting a company to exclude sales of recycled
manufactured products from its Texas gross receipts and its total gross
receipts for taxable capital and earned surplus purposes would not change
the apportionment factor and would have no fiscal impact.
The bill allows for "any amount" derived from the sale of recycled
products to be subtracted from reportable federal taxable income in
determining the earned surplus tax base. A sample of companies from a
list of qualified sellers that manufacture recycled products was compared
to Comptroller tax files and adjusted to reflect all corporations
affected by the bill's provisions to establish the fiscal impact of the
deduction from the earned surplus tax base.
The tax benefit of a credit for pollution control equipment was estimated
using data on pollution control investment by manufacturers and data
from Comptroller franchise tax records. A share was assumed to be
related to recycling and allocated over a five-year period, in
accordance with the bill's provisions. This part of the bill would have
no fiscal impact in fiscal year 2002 because the corporate accounting
year on which the fiscal year 2002 tax report is based would be
concluded before the bill's effective date.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK, SD, WP, CT