LEGISLATIVE BUDGET BOARD
Austin, Texas
 
FISCAL NOTE, 82ND LEGISLATIVE REGULAR SESSION
 
April 26, 2011

TO:
Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
 
FROM:
John S O'Brien, Director, Legislative Budget Board
 
IN RE:
HB1170 by Madden (Relating to the computation of the franchise tax by certain taxable entities that rent or lease equipment.), As Introduced



Estimated Two-year Net Impact to General Revenue Related Funds for HB1170, 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 ($13,000,000) 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 ($6,400,000)
2013 ($6,600,000)
2014 ($6,700,000)
2015 ($6,700,000)
2016 ($6,800,000)

Fiscal Analysis

The bill would amend Chapter 171 of the Tax Code, regarding the franchise tax, by adding to the exceptions for the requirement that a taxable entity classified as primarily engaged in retail or wholesale trade receive less than 50 percent of its total revenue from the sale of products it or its affiliates produce.  The added exception would apply to total revenue in a trade that rents or leases tangible personal property described by Industry Group 735 of the Standard Industrial Classification Manual.  Group 735 includes miscellaneous equipment rental and leasing.
 
This bill would take effect on January 1, 2012, and apply to reports due on or after that date.

Methodology

The estimate assumes that the bill's provisions would allow certain taxable entities in the business of renting or leasing commercial and industrial machinery and equipment to calculate franchise tax using a tax rate of 0.5 percent rather than 1.0 percent.  The estimate is based on the Comptroller's franchise tax data files.

Local Government Impact

No significant fiscal implication to units of local government is anticipated.


Source Agencies:
304 Comptroller of Public Accounts
LBB Staff:
JOB, KK, SD