LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 16, 2001
TO: Honorable Rene Oliveira, Chair, House Committee on Ways &
Means
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB3256 by Davis, Yvonne (Relating to state taxes.), As
Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB3256, As Introduced: positive impact of $2,400,000 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 $1,200,000 *
* 2003 1,200,000 *
* 2004 1,200,000 *
* 2005 1,200,000 *
* 2006 1,200,000 *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* General Revenue Fund *
* 0001 *
* 2002 $1,200,000 *
* 2003 1,200,000 *
* 2004 1,200,000 *
* 2005 1,200,000 *
* 2006 1,200,000 *
*****************************************************
Fiscal Analysis
The bill would amend Chapter 155 of the Tax Code relating to various
provisions of the tobacco products tax. The bill would also amend
Chapter 171 of the Tax Code to conform the franchise tax exemption for
insurance companies with the provisions of this bill relating to the
Insurance Code, and to clarify the use of the business loss carryforward
when a merger occurs. The bill would also amend certain provisions of
the Insurance Code as they relate to taxation.
Methodology
For non-cigar tobacco products, the new weight-based tax rates would
generate the same Cigar and Tobacco Products tax revenue as in the
2002-2003 Biennial Revenue Estimate. Therefore, those sections of the
bill have no fiscal impact.
The franchise tax provisions would codify certain existing policies of
the Comptroller. Currently, insurance companies that pay the gross
premiums tax are exempt from the franchise tax. The bill would preserve
this exemption in Chapter 171 and conform the language of the exemption
with the changes that would be made by this bill in the Insurance Code.
When a corporation that has a business loss carryforward is the
non-survivor of a merger, the Comptroller's long-standing interpretation
has been that the business loss does not transfer to the survivor. The
bill would codify the agency's interpretation by clarifying that no
transfer of a business loss carryforward can occur, even in a merger.
Anticipated annual franchise revenue in the amount of $1.2 million was
withheld from the 2002-2003 Biennial Revenue Estimate as a contingency
for the business loss carryforward issue. The bill's clarification of
agency policy would have the effect of restoring that money to the
estimate.
The sections of the bill relating to insurance companies would clarify
what taxes an insurance company or organization is subject to in Texas.
These provisions would codify the previously-maintained policies of the
Texas Department of Insurance and the current policy of the Comptroller.
These sections would mitigate possible legal vulnerabilities for which
the negative revenue impact on other taxes could be highly significant -
potentially on the order of more than $1 billion in refunds and on-going
base losses.
The bill would clarify that insurance companies that pay gross premium
taxes are exempted from other taxes that are based on gross premium
taxes, but not exempt from any other state or local tax imposed by other
laws unless insurance organizations were specifically exempted by those
laws. Those sections of the bill would have no fiscal impact.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 454 Texas Department of Insurance, 304
Comptroller of Public Accounts
LBB Staff: JK, SD, WP