LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 29, 2001
TO: Honorable David Sibley, Chair, Senate Committee on
Business & Commerce
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB601 by Carona (Relating to certain investments and
rate reductions by insurance companies and related
organizations; providing an administrative penalty.),
Committee Report 1st House, Substituted
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB601, Committee Report 1st House, Substituted: negative impact *
* of $(10,437,900) through the biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(5,291,244) *
* 2003 (5,146,656) *
* 2004 (5,146,656) *
* 2005 (5,146,656) *
* 2006 (5,146,656) *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Revenue Probable Change in Number of *
* Year Gain/(Loss) from Savings/(Cost) from State Employees from *
* General Revenue Fund General Revenue Fund FY 2001 *
* 0001 0001 *
* 2002 $(5,000,000) $(291,244) 3.0 *
* 2003 (5,000,000) (146,656) 3.0 *
* 2004 (5,000,000) (146,656) 3.0 *
* 2005 (5,000,000) (146,656) 3.0 *
* 2006 (5,000,000) (146,656) 3.0 *
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Technology Impact
Additional programming for a premium tax assessment subsystem totaling
$110,880 in fiscal year 2002.
Fiscal Analysis
The bill would reorganize Chapter 4 of the Insurance Code into two
subchapters. New Subchapter B would be entitled "Premium Tax Credit for
Investment in Certified Capital Company". The Comptroller would be
granted the authority to administer Subchapter B and to adopt rules as
necessary to implement it. The new subchapter would allow for the
creation of "certified capital companies" which would have as their
primary business activity the investment of cash in qualified business.
To become a certified investment company and to continue existence as a
certified investment company, an entity would have to meet specific
organizational and capitalization requirements specified by this new
subchapter and apply to the Comptroller for certification. The
application would include a nonrefundable fee of $7,500 and annual
renewal fees of $5,000. Each year the company would have to go through a
review conducted by the Comptroller.
The maximum amount of certified capital qualifying for credits would be
capped at $200 million limiting the total tax credits to $20 million.
The bill would take effect immediately upon enactment, assuming it
received two-thirds majority votes in both houses. Otherwise, it would
take effect September 1, 2001.
Methodology
According to the Comptroller's Office, the administrative cost estimate
reflects the funds that would be necessary for three additional Full-time
Equivalent Positions and equipment to handle the increased workload for
auditing activities. The additional staff would include three auditors
to insure mandatory time frame turnarounds.
Assuming the new subchapter's maximum limit on the aggregate amount of
capital for which premium tax credits could be claimed and a 10 percent
tax credit, the maximum loss each year would be $20 million, beginning in
2002.
This analysis presumes that twenty-five percent of the maximum possible
credits would be taken and granted in any one year with total premium tax
losses of $5 million annually.
The bill could only take effect if the Comptroller determined after
adjournment of the 77th Legislature, Regular Session, that sufficient
revenues would be available to finance all appropriations after
accounting for all tax reductions, including the premium tax reductions
that would be caused by the bill. Upon a finding by the Comptroller
that the anticipated revenues would be sufficient to cover less than all
of the premium tax credits authorized by the bill, the Comptroller would
be required to reduce the amount of available credits accordingly. In
addition, the Comptroller would be granted the authority to adjust, as
necessary, any deadline or other date established by the bill.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK, JO, DE