TO:	Honorable Tommy Williams, Chair, Senate Committee on Transportation & Homeland Security
FROM:	John S O'Brien, Director, Legislative Budget Board
IN RE:	SB934 by Williams (Relating to the enforcement of tax laws; providing a criminal penalty.), Committee Report 1st House, Substituted

The provisions of the bill that are the subject of this analysis would amend the Code of Criminal Procedure, Government Code, and Penal Code by creating a new felony offense and enhancing existing offenses related to violations of tax law.  Under the provisions of the bill, 1) the definition of proceeds would be amended to include funds acquired due to the failure to pay sales and use taxes collected; 2) organized crime would be amended to include any offense classified as a felony under the Tax Code; 3) failure to pay taxes collected would be expanded to included punishments that range from a Class C Misdemeanor to a first degree felony, would depend on the amount of tax collected and not paid, and allow for the amounts to be aggregated to determine the punishment level; 4) the criminal penalty for a person who intentionally conceals, removes or impairs the verity or legibility of a resale or exemption certificate would be enhanced, and 5) a new offense for the failure to produce certain records after using a sales tax resale certificate would be created and the punishment would range from a Class C Misdemeanor to a second degree felony depending on the amount of tax avoided. 

A Class C Misdemeanor is punishable by a fine not to exceed $500 (up to 180 days of deferred disposition; no confinement). A Class B Misdemeanor is punishable by confinement in county jail for a term not to exceed 180 days and/or a fine not to exceed $2,000. A Class A Misdemeanor is punishable by confinement in county jail for a term not to exceed one year and/or a fine not to exceed $4,000. A state jail felony is punishable by confinement in a state jail for a term from 180 days to 2 years and, in addition to confinement, an optional fine not to exceed $10,000 or Class A Misdemeanor punishment (mandatory post conviction community supervision). A felony of the third degree is punishable by confinement in prison for a term from 2 to 10 years and, in addition to confinement, an optional fine not to exceed $10,000. A felony of the second degree is punishable by confinement in prison for a term from 2 to 20 years and, in addition to confinement, an optional fine not to exceed $10,000. A felony of the first degree is punishable by confinement in prison for life or a term from 5 to 99 years and, in addition to confinement, an optional fine not to exceed $10,000.

Under current statute failure to pay taxes collected is a Class C Misdemeanor if the amount of tax collected and not paid is less than $10,000.  Under the provisions of the bill, taxes collected but not paid between $1,500 and $9,999.99, previously punishable as a Class C Misdemeanor, would now be punishable as a state jail felony. The bill would also allow taxes collected and not paid to be considered pursuant to one scheme or a continuous course of conduct when determining the level of the offense. Under current statute, intentionally concealing, removing, or impairing the verity or legibility of an exemption or resale certificate or unreasonably impeding the availability of an exemption or resale certificate is an offense but is not punished under Sec. 151.707 (b), Tax Code. A check of Texas Department of Criminal Justice records, Department of Public Safety records, Office of Court Administration records, and Jail Standards Commission records did not reveal any information that would help in an accurate assumption regarding the number of times in which failure to pay taxes collected was more than at least $1,500 but not more than $9,999.99, the number of times a person intentionally conceals, removes or impairs the verity or legibility of a resale or exemption certificate or the number of times a person failed to produce certain records after using a sales tax resale certificate.

Increasing the penalty for any criminal offense is expected to result in increased demands upon the correctional resources of counties or of the State due to longer terms of supervision in the community, or longer terms of confinement in county jail, state jail or prison. When an offense is changed from a misdemeanor to a felony, there is a transfer of the burden of confinement of convicted offenders from the counties to the State. For this analysis it is assumed the number of offenders convicted under this statute would not result in a significant impact on the programs and workload of state corrections agencies or on the demand for resources and services of those agencies. It is expected that individuals who would be affected under the provisions of this bill are currently being sentenced for other offenses.