LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 84TH LEGISLATIVE REGULAR SESSION

March 2, 2015

TO:	Honorable Jane Nelson, Chair, Senate Committee on Finance
FROM:	Ursula Parks, Director, Legislative Budget Board
IN RE:	SB330 by Creighton (Relating to the computation of the franchise tax.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for SB330, As Introduced: an impact of $0 through the biennium ending August 31, 2017. 

Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($3,490,989,000) for the 2016-17 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.

General Revenue-Related Funds, Five-Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2016	$0
2017	$0
2018	$0
2019	$0
2020	$0

All Funds, Five-Year Impact:

Fiscal Year	Probable Revenue (Loss) from Property Tax Relief Fund 304
2016	($1,729,879,000)
2017	($1,761,110,000)
2018	($1,754,195,000)
2019	($1,786,846,000)
2020	($1,812,016,000)

Fiscal Analysis

The bill would amend Chapter 171 of the Tax Code, regarding the franchise tax, by changing the way taxable entities determine margin for computation of franchise liability. 
 
Under current law, a taxable entity makes an election to subtract one of four amounts from the entity's total revenue to determine margin: $1 million; the entity's cost of goods sold; the entity's compensation costs; or an amount equal to 30 percent of the entity's total revenue.  Under the bill's provisions, that election would be replaced by a margin calculation that subtracts the sum of $1 million, the entity's cost of goods sold, and the entity's compensation costs from total revenue.  The bill would delete or repeal portions of the code that reference electing one of the existing amounts from total revenue.
 
Note: The EZ calculation would not be directly affected by this bill.
 
The bill would take effect January 1, 2016, and apply to franchise tax reports due on or after that date.

Methodology

The estimated fiscal impact is based on the Comptroller's 2016-2017 Biennial Revenue Estimate and the Comptroller's franchise tax files.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:

304 Comptroller of Public Accounts

LBB Staff:

UP, KK, SD