| TO: | Honorable Jim Keffer, Chair, House Committee on Ways & Means |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | HB2636 by Isett (Relating to the rate of and the period for which interest is paid on certain tax refunds.), Committee Report 1st House, Substituted |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2006 | $10,051,000 |
| 2007 | $11,726,000 |
| 2008 | $12,045,000 |
| 2009 | $10,945,000 |
| 2010 | $12,473,000 |
| Fiscal Year | Probable Savings from GENERAL REVENUE FUND 1 |
Probable Savings from General Revenue Dedicated - Various |
Probable Savings from Other Funds - Various |
|---|---|---|---|
| 2006 | $10,051,000 | $24,000 | $975,000 |
| 2007 | $11,726,000 | $28,000 | $1,138,000 |
| 2008 | $12,045,000 | $29,000 | $1,168,000 |
| 2009 | $10,945,000 | $27,000 | $1,061,000 |
| 2010 | $12,473,000 | $30,000 | $1,210,000 |
The bill would implement a recommendation in the Legislative Budget Board’s "Staff Performance Report, State Government Efficiency and Operations" Submitted to the 79th Legislature. The recommendation in the “Reduce the Interest Rate Paid on Tax Refunds” report proposes reducing the interest rate paid on tax refunds of voluntary overpayments to the average yield earned on funds in the state treasury.
Under current law, the state pays interest on refunds of taxes paid for a report period on or after January 1, 2000. Interest is earned starting from the later of 60 days after payment or the due date of the tax report. The interest rate is set annually at the prime rate plus one percent.
The bill would change the period of which interest is earned. Under the provisions of the bill, interest would be earned starting at the later of 1) 60 days after payment, 2) the due date of the tax report, or 3) the date the refund claim is filed.
The bill would change the rate of interest paid on certain tax refunds claimed after September 1, 2005 for any report period due on or after January 1, 2000. The rate would be the lesser of: 1) the prime rate plus one percent, or 2) the average rate of interest earned on state treasury deposits during the period for which interest is paid on the refund.
The bill would take effect September 1, 2005.
| Source Agencies: | 304 Comptroller of Public Accounts
|
| LBB Staff: | JOB, SD, JI, RS
|