LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION

April 26, 2009

TO:	Honorable Rene Oliveira, Chair, House Committee on Ways & Means
FROM:	John S. O'Brien, Director, Legislative Budget Board
IN RE:	HB1996 by McCall (Relating to exempting the sale of certain property used for research and development from the sales tax.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for HB1996, As Introduced: a negative impact of ($162,224,000) through the biennium ending August 31, 2011.

General Revenue-Related Funds, Five-Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2010	($71,917,000)
2011	($90,307,000)
2012	($96,430,000)
2013	($102,620,000)
2014	($108,072,000)

All Funds, Five-Year Impact:

Fiscal Year	Probable Revenue (Loss) from General Revenue Fund 1	Probable Revenue (Loss) from Cities	Probable Revenue (Loss) from Transit Authorities	Probable Revenue (Loss) from Counties
2010	($71,917,000)	($12,038,000)	($4,105,000)	($1,701,000)
2011	($90,307,000)	($16,795,000)	($5,727,000)	($2,373,000)
2012	($96,430,000)	($17,934,000)	($6,116,000)	($2,534,000)
2013	($102,620,000)	($19,085,000)	($6,508,000)	($2,697,000)
2014	($108,072,000)	($20,099,000)	($6,854,000)	($2,840,000)

Fiscal Analysis

The bill would amend Chapter 151 of the Tax Code to create a sales tax exemption for tangible personal property used directly in research or development by a person primarily engaged in manufacturing, telecommunications, or the performance of scientific or technical services related to manufacturing or telecommunications.

The exemption would apply to tangible personal property used or consumed in research or development regardless of whether it was used in the actual manufacturing or fabrication of items for ultimate sale or directly used for the provision of telecommunications services. The exemption would not apply to office equipment or supplies, or equipment or supplies used in sales, distribution, or transportation activities.

A taxpayer who pays tax on items that qualify for the exemption would be entitled to either a credit of the amount paid against sales taxes owed or a refund of the amount paid.

The bill would take effect October 1, 2009.

Methodology

Sales of tangible personal property used for research and development in manufacturing and telecommunications were estimated based on data gathered from the National Science Foundation and from Comptroller tax files. Sales were multiplied by the state sales tax rate; adjusted for the effective date of October 1, 2009; and extrapolated through fiscal 2014.

Local Government Impact

There would be a proportional loss of sales tax revenue to units of local government.

Source Agencies:

304 Comptroller of Public Accounts

LBB Staff:

JOB, MN, SD, KK