LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 26, 2001
TO: Honorable Rene Oliveira, Chair, House Committee on Ways &
Means
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1601 by Davis, John (Relating to exempting certain
corporations from the franchise tax.), As Introduced
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1601, As Introduced: negative impact of $(3,000,000) 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 $0 *
* 2003 (3,000,000) *
* 2004 (3,200,000) *
* 2005 (3,400,000) *
* 2006 (3,600,000) *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* General Revenue Fund *
* 0001 *
* 2002 $0 *
* 2003 (3,000,000) *
* 2004 (3,200,000) *
* 2005 (3,400,000) *
* 2006 (3,600,000) *
*****************************************************
Fiscal Analysis
The bill amends Chapter 171 of the Tax Code to provide that a
newly-formed corporation, in a county with a population of less than
75,000 and with gross receipts from its entire business for both taxable
capital and taxable earned surplus each less than $10,000,000 during the
period upon which the tax is based, would owe no tax.
The term "newly-formed corporation" would be defined as a corporation
that the Comptroller determined to be chartered in Texas and the result
of an original business effort in the county in which the corporation was
located, and not the result of a relocation of an ongoing business
effort that existed before the date the corporation's charter took
effect.
The bill takes effect January 1, 2002 and would apply to a qualifying
corporation with a charter taking effect on or after that date.
Methodology
This estimate is based on an analysis made by the Comptroller's Office
using data from the U. S. Census Bureau and from Comptroller tax files.
There are 214 Texas counties with a population of less than 75,000. The
ratio of the total population in these 214 counties to the total
population of all the counties in Texas was applied to the projected
number of newly-chartered corporations to determine the estimated number
of newly-chartered corporations in counties with a population of less
than 75,000. This number was adjusted to eliminate newly-formed
corporations projected to have no tax liability. An average amount of
franchise tax paid by a corporation described by the bill was determined
and multiplied by the estimated number of newly-formed corporations that
could become eligible under this bill.
The bill has no fiscal impact in fiscal year 2002 because it only would
apply to newly-formed corporations with a charter taking effect on or
after January 1, 2002. The first franchise tax report that these
corporations would file would be in fiscal year 2003.
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