Honorable Tommy Williams, Chair, Senate Committee on Finance
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
SB868 by Eltife (Relating to the exclusion of certain flow-through payments related to petroleum and mineral interests in determining total revenue for purposes of the franchise tax.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for SB868, 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 ($18,233,000) 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
($9,098,000)
2015
($9,135,000)
2016
($9,306,000)
2017
($9,141,000)
2018
($9,067,000)
Fiscal Analysis
The bill would amend Chapter 171 of the Tax Code, regarding the franchise tax.
The bill would add a provision to Section 171.1011(g), which deals with exclusions from total revenue for calculating the franchise tax, to require a taxable entity to exclude from total revenue subcontracting payments made to individuals for services related to the acquisition of petroleum interests or the performance of title or contract functions related to the exploration, exploitation, or disposition of petroleum or mineral interests.
The bill would take effect on January 1, 2014, and apply to franchise tax reports due on or after that date
Methodology
The language in the bill is broad in scope and terms such as "management of petroleum interest" or "contract functions related to the exploration, exploitation or dispositions of petroleum or mineral interest" could include a large number of businesses that serve the oil and gas service industry. The bill would give these businesses additional exclusions from total revenue in computing franchise tax liability.
The estimated fiscal impact is based on franchise tax data for taxable entities classified as providing support activities for the oil and gas industry.
Local Government Impact
No fiscal implication to units of local government is anticipated.