Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
FROM:
John S O'Brien, Director, Legislative Budget Board
IN RE:
HB98 by Paxton (Relating to the E-Z computation and rate of the franchise tax.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB98, As Introduced: an impact of $0 through the biennium ending August 31, 2013.
The bill will have a direct impact of a revenue loss of ($775,700,000) from the Property Tax Relief Fund during the 2012-13 biennium. The loss would be required to be made up with an equal amount of General Revenue to fund the Foundation School Program.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2012
$0
2013
$0
2014
$0
2015
$0
2016
$0
Fiscal Year
Probable Revenue (Loss) from Property Tax Relief Fund 304
2012
($382,400,000)
2013
($393,300,000)
2014
($401,400,000)
2015
($402,400,000)
2016
($405,700,000)
Fiscal Analysis
The bill would amend Chapter 171 of the Tax Code, regarding the franchise tax, by changing the method for calculating tax liability using the E-Z computation.
Under current law, a taxable entity whose total revenue is not more than $10 million may elect to calculate the tax due by multiplying the revenue apportioned to Texas by a tax rate of 0.575 percent. This bill would change the calculation of the tax base by providing that a taxable entity subtract from the revenue apportioned to Texas the amount of federal income taxes paid during the period on which the report is based, then subtract an additional amount of $1 million. The tax rate on the first $1 million of the resulting base would be 0.25 percent. The tax rate on the resulting base in excess of $1 million would be 0.5 percent.
The bill would provide that the Comptroller could require a taxable entity that owes no tax because its tax base computed under the bill's provision is zero or less to file an information report.
This bill would take effect on January 1, 2012, and would apply to reports due on or after that date.
Methodology
Data from the Comptrollers franchise tax files were used to estimate the impact of the bill's provisions that provide for subtracting $1 million from apportioned revenue and for applying the tax rates in the bill to the resulting base. The impact from the subtraction of federal income taxes paid was estimated using published Internal Revenue Service data.
Technology
There would be a one-time technology cost of $170,000 in fiscal year 2012 for programming and project management.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.