Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
HB1463 by Hughes (Relating to the computation of taxable margin for purposes of the franchise tax by certain taxable entities.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB1463, As Introduced: an impact of $0 through the biennium ending August 31, 2015.
Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($290,118,000) for the 2014-15 biennium. Any loss to the Property Tax Relief Fund must 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
2014
$0
2015
$0
2016
$0
2017
$0
2018
$0
Fiscal Year
Probable Revenue (Loss) from Property Tax Relief Fund 304
2014
($144,762,000)
2015
($145,356,000)
2016
($148,084,000)
2017
($145,457,000)
2018
($144,268,000)
Fiscal Analysis
This bill would amend Chapter 171 of the Tax Code, regarding the franchise tax, to add a new section providing that a taxable entity electing to subtract compensation from total revenue to compute taxable margin could include as wages and cash compensation any compensation paid to an independent contractor as reported on Internal Revenue Service (IRS) Form 1099.
The bill would take effect January 1, 2014, and apply to franchise tax reports due on or after that date.
Methodology
There are numerous 1099 forms used to report income to a recipient, including cancellation of debt, broker and barter exchange transactions, dividends, interest, miscellaneous income, rental income, taxable distributions from cooperatives, and distributions from pensions and IRAs. Without limiting the subtraction allowed to the nonemployee compensation on the 1099 Misc form or defining "compensation" or "independent contractor," the income reported on the various 1099 forms could be allowed as a compensation deduction. The estimated fiscal impact reflects use of all 1099 payments.
Local Government Impact
No fiscal implication to units of local government is anticipated.