LEGISLATIVE BUDGET BOARD
Austin, Texas
 
FISCAL NOTE, 80TH LEGISLATIVE REGULAR SESSION
 
May 16, 2007

TO:
Honorable Robert Duncan, Chair, Senate Committee on State Affairs
 
FROM:
John S. O'Brien, Director, Legislative Budget Board
 
IN RE:
HB1849 by Hancock (Relating to certain fees for valuing life insurance policies.), As Engrossed



Estimated Two-year Net Impact to General Revenue Related Funds for HB1849, As Engrossed: a positive impact of $8,400,000 through the biennium ending August 31, 2009.



Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2008 $0
2009 $8,400,000
2010 $8,539,000
2011 $8,565,000
2012 $8,565,000




Fiscal Year Probable Revenue Gain from
GENERAL REVENUE FUND
1
Probable Revenue Gain from
FOUNDATION SCHOOL FUND
193
Probable Revenue (Loss) from
DEPT INS OPERATING ACCT
36
Probable Revenue Gain from
DEPT INS OPERATING ACCT
36
2008 $0 $0 ($9,150,000) $9,150,000
2009 $6,300,000 $2,100,000 ($9,300,000) $9,300,000
2010 $6,404,000 $2,135,000 ($9,330,000) $9,330,000
2011 $6,424,000 $2,141,000 ($9,330,000) $9,330,000
2012 $6,424,000 $2,141,000 ($9,330,000) $9,330,000

Fiscal Analysis

The bill would amend the Insurance Code to eliminate the life valuation fee that is imposed on issuers of life insurance.  The bill would eliminate the tax credit for fees paid for valuing life insurance policies.

The bill would take effect September 1, 2007.


Methodology

The life valuation fee is assessed on March 1 of each year on domestic life insurers at a rate of $10 per $1 million of life insurance in force at the end of the previous calendar year.  The life valuation fee is collected by the Comptroller, initially deposited to the credit of General Revenue Fund 1, and then transferred to General Revenue - Dedicated Account Fund 36.

Based on the analysis of the Comptroller, the elimination of the tax credit would result in an increase to General Revenue Fund 1 and the Foundation School Fund 193.  Life insurers are allowed to take a credit on any premium tax liability due on the following year's premium tax report and are not allowed to carry this credit forward.  If the amount of the premium tax due is less than the credit available for that tax report, the portion of the credit in excess of the amount due is lost.  The amount paid to the General Revenue - Dedicated Account Fund 36 typically exceeds the credits claimed against premium tax liability.  This analysis assumes that insurers would be allowed to take a premium tax credit on their March 1, 2008 premium tax report for the life valuation fee payments made in the previous calendar year.

Based on the analysis of the Texas Department of Insurance, because General Revenue - Dedicated Account Fund 36 is a self-leveling account, it is assumed the elimination of the life valuation fee would result in an increase in other maintenance taxes.  Because the life, accident, and health maintenance tax is currently assessed at the maximum rate allowed by statute, it is assumed this increase would affect other lines' of insurance maintenance tax rates.


Local Government Impact

No fiscal implication to units of local government is anticipated.


Source Agencies:
304 Comptroller of Public Accounts, 454 Department of Insurance
LBB Staff:
JOB, KJG, JRO, MW, SK