TO: | Honorable John T. Smithee, Chair, House Committee on Insurance |
FROM: | Ursula Parks, Director, Legislative Budget Board |
IN RE: | HB2717 by Eiland (Relating to an insurer that establishes or significantly expands physical operations in this state; authorizing a premium tax credit.), As Introduced |
Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
---|---|
2014 | ($24,000,000) |
2015 | ($24,000,000) |
2016 | ($24,000,000) |
2017 | ($24,000,000) |
2018 | ($24,000,000) |
Fiscal Year | Probable Revenue Gain/(Loss) from General Revenue Fund 1 |
Probable Revenue Gain/(Loss) from Foundation School Fund 193 |
---|---|---|
2014 | ($18,000,000) | ($6,000,000) |
2015 | ($18,000,000) | ($6,000,000) |
2016 | ($18,000,000) | ($6,000,000) |
2017 | ($18,000,000) | ($6,000,000) |
2018 | ($18,000,000) | ($6,000,000) |
The bill does not limit the aggregate amount of premium tax credits that could be taken under new Chapter 230 in any one year. Insurance premium tax revenue in fiscal 2012 was $1.36 billion. To the extent that insurers would apply for and receive premium tax credits for establishment or expansion of operations, insurance premium tax revenue would be reduced. The amount of that reduction cannot be determined, however it could be significant. For example, according to the San Antonio Business Journal and the San Antonio Express News, a prominent Texas insurer recently announced plans to expand operations in San Antonio by hiring at least 1,000 new workers and leasing 128,000 square feet of office space. The annual lease amount of the additional office space is estimated to be $1.92 million; assuming the average salary of the additional 1,000 employees is equal to the Texas Workforce Commission estimate of the average salary of Texas nonfarm employees ($41,700), the additional wage bill would be $41,700,000. For tax year 2011 (fiscal 2012) the insurer paid approximately $12.1 million in property and casualty premium tax. Under the terms of this bill, premium tax credits received from this one expansion could reduce the insurer's property and casualty premium tax liability to zero for up to 15 years.
The bill would allow for premium tax credits to be applied to, inter alia, premium tax liability under Chapter 225 (surplus lines insurance premium tax) of the Insurance Code. However, surplus lines premium tax is paid by an insured to an agent who then remits the tax to the Comptroller, and it is not clear how the premium tax credit would be administered for tax liability under this chapter.
The bill would allow the Commissioner of Insurance, with the concurrence of the Comptroller, to award the premium tax credit. Although the bill describes the procedures and requirements for approval of the premium tax credit by the Commissioner of Insurance, there is no description of the procedures and requirements for approval of the premium tax credit by the Comptroller.
The fiscal impact presented in the table reflects the premium tax loss from the tax credits that would be received by Texas insurers as the result of two previously planned expansions of the type described above.
Source Agencies: | 304 Comptroller of Public Accounts, 454 Department of Insurance
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LBB Staff: | UP, AG, SD
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