LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 30, 2001
TO: Honorable Rene Oliveira, Chair, House Committee on Ways &
Means
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB2815 by Hartnett (Relating to a phased-in and limited
exemption for certain purchases of machinery and
equipment used for research and development from sales
and use taxes.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB2815, As Introduced: negative impact of $(22,727,000) 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 $(9,789,000) *
* 2003 (12,938,000) *
* 2004 (16,082,000) *
* 2005 (19,145,000) *
* 2006 (21,062,000) *
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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 *
* 2002 $(9,789,000) $(1,768,000) $(682,000) $(209,000) *
* 2003 (12,938,000) (2,336,000) (901,000) (276,000) *
* 2004 (16,082,000) (2,904,000) (1,120,000) (344,000) *
* 2005 (19,145,000) (3,457,000) (1,334,000) (409,000) *
* 2006 (21,062,000) (3,803,000) (1,467,000) (450,000) *
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Fiscal Analysis
The bill would amend Chapter 151 of the Tax Code to exempt machinery,
equipment, or replacement parts that are used directly in the research or
development of inventions, products, processes, or technology. To
qualify for exemption, the item would have to be used by a person
primarily engaged either in the manufacturing, processing, or fabrication
of tangible personal property for ultimate sale, or in the performance
of scientific or technical services for a such a person.
In 2002, the exemption would be limited to the first $100,000 of tax on
qualifying purchases for each taxpayer. For each following year, the
limit would be increased annually by $100,000, until it reached $500,000
per taxpayer in 2006, where it would remain thereafter.
The exemption would not apply to office equipment or supplies or to
equipment or supplies used in sales, distribution, or transportation
activities.
The bill would take effect January 1, 2002.
Methodology
Data on expenditures for research and development were gathered from the
National Science Foundation. Expenditures were adjusted to reflect
average taxpayer outlays for qualifying machinery and equipment sold in
Texas. Qualifying expenditures were then multiplied by the state sales
tax rate, extrapolated through 2006, and adjusted to reflect the
appropriate annual limit per taxpayer. 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 table above.
Source Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK, SD, SM