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:  HB2402  by Lewis, Ron (Relating to sales tax exemptions
               to promote water conservation.), As Introduced
  
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*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB2402, As Introduced: a negative impact of $(20,515,000) through     *
*  the biennium ending August 31, 2003, if the effective date of the     *
*  bill is July 1, 2001; and a negative impact of $(18,133,000)          *
*  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        $(772,000)              $0              $0              $0 *
*  2002       (9,656,000)     (1,743,000)       (673,000)       (206,000) *
*  2003      (10,087,000)     (1,821,000)       (703,000)       (215,000) *
*  2004      (10,545,000)     (1,904,000)       (735,000)       (225,000) *
*  2005      (11,023,000)     (1,990,000)       (768,000)       (235,000) *
*  2006      (11,513,000)     (2,079,000)       (802,000)       (246,000) *
***************************************************************************
  
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      $(8,046,000)    $(1,308,000)      $(505,000)      $(155,000) *
*  2003      (10,087,000)     (1,821,000)       (703,000)       (215,000) *
*  2004      (10,545,000)     (1,904,000)       (735,000)       (225,000) *
*  2005      (11,023,000)     (1,990,000)       (768,000)       (235,000) *
*  2006      (11,513,000)     (2,079,000)       (802,000)       (246,000) *
***************************************************************************
  
Fiscal Analysis
  
The bill would amend Chapter 151 of the Tax Code to exempt piping or
conveyor systems, used by manufacturers, that are a component part of
certain water conservation systems.  Additionally, tangible personal
property would be exempted from the state sales and use tax if it was
used for rainwater harvesting, water recycling and reuse, or reducing or
eliminating water use.  To qualify for the exemption, the purchaser would
have to certify in writing to the seller that the item of tangible
personal property would be used for the specified purposes.

A clothes washer would be exempt from the state sales and use tax if it
met the standards of the Energy Star Program maintained by the U.S.
Department of Energy (DOE) and the Environmental Protection Agency, and
if it had a water factor of 9.5 or less, based on standard test
procedures contained in DOE regulations, 10 C.F.R. Part 430, Subpart B,
Appendix J.

The exemption for clothes washers would expire January 1, 2007.

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
  
Data on the sale of clothes washers, rainwater harvesting, and water
recycling equipment that would qualify for the proposed sales tax
exemption were gathered from public and private sources, including the
U. S. Census Bureau.  Sales were multiplied by the state sales tax rate,
adjusted for the potential effective dates of July 1, 2001 and October
1, 2001, and extrapolated through 2006.  The fiscal impact on units of
local government were estimated proportionally.
  
  
Local Government Impact
  
Local units of government would have a corresponding fiscal impact from
sales tax revenues, as indicated in the tables above.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, SD, SM