LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session April 23, 2001 TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance FROM: John Keel, Director, Legislative Budget Board IN RE: SB529 by Bernsen (Relating to an exemption from the sales and use tax for tangible personal property rented in connection with the improvement of realty of a navigation district or port authority.), Committee Report 1st House, as amended ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB529, Committee Report 1st House, as amended: a negative impact * * of $(8,222,000) through the biennium ending August 31, 2003, if * * the effective date of the bill is July 1, 2001; and a negative * * impact of $(7,265,000) 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: *************************************************************************** *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 $(311,000) $0 $0 $0 * * 2002 (3,875,000) (700,000) (270,000) (83,000) * * 2003 (4,036,000) (729,000) (281,000) (86,000) * * 2004 (352,000) (127,000) (49,000) (15,000) * * 2005 0 0 0 0 * * 2006 0 0 0 0 * *************************************************************************** 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 $(3,229,000) $(525,000) $(202,000) $(62,000) * * 2003 (4,036,000) (729,000) (281,000) (86,000) * * 2004 (352,000) (127,000) (49,000) (15,000) * * 2005 0 0 0 0 * * 2006 0 0 0 0 * *************************************************************************** Fiscal Analysis The bill would amend Section 151.311(c) of the Tax Code to exempt from sales tax the rental of tangible personal property for use in the performance of a contract for an improvement of realty of a navigation district or port authority. To qualify for the exemption, the property would have to be necessary and essential to perform the contract, rented for the sole purpose of being used to perform the contract, and used only at the job site. Section 151.311(c), as amended by the bill, would expire on August 31, 2003. 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 rental of equipment used in the improvement of Texas water transportation facilities were gathered from the U. S. Census Bureau. The expenditure data were adjusted for improvements within navigation districts or port authorities, multiplied by the state sales tax rate, adjusted for the potential effective dates of July 1, 2001 and October 1, 2001, and extrapolated through the projection period. The fiscal impacts on units of local government were estimated proportionally. The bill's provisions would expire on August 31, 2003. There would be, however, a state revenue impact in fiscal 2004 as August tax-exempt sales would be reflected on September tax reports; units of local government would experience a revenue impact in 2004 equivalent to two months due to the allocation schedule. 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