TO: | Honorable Rene Oliveira, Chair, House Committee on Ways & Means |
FROM: | John S. O'Brien, Director, Legislative Budget Board |
IN RE: | HB831 by Taylor (Relating to exempting from ad valorem taxation property used by certain nonprofit community business organizations to provide services to aid in the economic development of local communities.), Committee Report 1st House, Substituted |
Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
---|---|
2010 | $0 |
2011 | ($1,194,000) |
2012 | ($1,448,000) |
2013 | ($162,000) |
2014 | $0 |
Fiscal Year | Probable Savings/(Cost) from Foundation School Fund 193 |
Probable Revenue Gain/(Loss) from School Districts - Net Impact |
Probable Revenue Gain/(Loss) from Counties |
Probable Revenue Gain/(Loss) from Cities |
---|---|---|---|---|
2010 | $0 | $0 | $0 | $0 |
2011 | ($1,194,000) | ($397,000) | ($467,000) | ($448,000) |
2012 | ($1,448,000) | ($329,000) | ($518,000) | ($495,000) |
2013 | ($162,000) | $162,000 | $0 | $0 |
2014 | $0 | $0 | $0 | $0 |
The bill would amend Chapter 11 of the Tax Code to exempt from ad valorem taxation property used by certain nonprofit community business organizations providing services to support the economic development of local communities.
The bill would require organizations receiving this exemption to have been in existence for at least five years, maintained a dues-paying membership of at least 50 members for at least the past three years, been organized and registered as a nonprofit corporation, not been a statewide organization, and other factors indicating public support and purpose. The bill would make the exemption effective for the applicable portion of the tax year if the owner qualifies after January 1 of that tax year.The bill would provide that the new Tax Code section requiring this exemption (proposed Section 11.231, Tax Code) expire on December 31, 2011.
The bill would be effective January 1, 2010.
The bill's requirement for mandatory exemptions for qualifying nonprofit community business organization property would create a cost to cities, counties, school districts and the state through the operation of the school finance formulas. The bill would be effective on January 1, 2010, so the fiscal costs would appear in fiscal 2011. The new Tax Code section providing the exemption would expire, however, on December 31, 2011 so there would be no cost to cities and counties in fiscal 2013 and forward, and no cost to the state in fiscal 2014 and forward. School districts would receive a one-time gain in fiscal 2013 and the state would suffer an equivalent loss in that fiscal year because of the one-year lag in the enrichment and facilities funding formulas.
The number of qualifying nonprofit community business organizations that own eligible property was estimated and multiplied by the estimated average value of the property to estimate potential value losses under the proposed bill. The appropriate trended tax rates were applied to the trended value losses to estimate the tax revenue losses. Because of the operation of the hold harmless provisions of HB 1, 79th Legislature, Third Called Session (2006), the school district cost related to the compressed rate would be transferred to the state. Portions of the enrichment cost and the school district debt (facilities) cost would also be transferred to the state after a one-year lag because of the operation of the enrichment and facilities funding formulas.
According to the Comptroller of Public Accounts, the exemption that would be provided by the bill does not appear to be authorized by the Texas Constitution and the bill is not accompanied by a joint resolution for a constitutional amendment that would authorize the exemption.
Source Agencies: | 304 Comptroller of Public Accounts
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LBB Staff: | JOB, MN, SD, SJS
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