Honorable Dennis Bonnen, Chair, House Committee on Ways & Means
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
HB3843 by Anderson, Rodney (relating to a franchise or insurance premium tax credit for low-income housing developments.), Committee Report 1st House, Substituted
No fiscal implication to the State is anticipated.
The bill would amend Chapter 171 of the Tax Code and Subtitle B, Title 3 of the Insurance Code to provide franchise tax and insurance premium tax credits for qualified taxable entities that obtain an allocated interest in a qualified low-income housing development. The new credits are similar to those offered under a federal program known as the Low Income Housing Credit, created by 26 U.S.C. Section 42.
The Low Income Housing Tax Credit is a joint federal-state effort to maximize the amount of affordable rental housing available to low income individuals and families. The program is largely funded through federal income tax credits that are allocated to states based on population. States are responsible for selecting projects and allocating credits. In Texas, the Department Housing and Community Affairs (department) assumes that role.
This bill would supplement the federal credits with tax credits for the franchise and insurance premium taxes. The requirements and rules for obtaining and using an allocation of state tax credits would largely mirror those for the federal credit.
The amount of state tax credits that could be allocated to taxable entities in a year could not exceed the sum of $0, unallocated credits from the previous year, and any recaptured credit. The credit could be taken in six equal installments beginning in the year a qualified development is placed in service. The total credit for a report could also not exceed the amount of franchise or insurance premium tax liability due after any other applicable credit. Credits that could not be applied due to the limit could be carried back for not more than three taxable years and forward for not more than 10 consecutive reports. Credits could be recaptured by the Comptroller under certain circumstances.
The department would be required to report to the Legislature each year on aspects of the developments affected by the credits. The Comptroller and the department would adopt rules and procedures to implement and enforce the credits.
The estimated fiscal impact assumes no credits would be allocated due to the credit allocation limit being limited to $0. However, should a future Legislature increase the credit allocation limit from $0, taxpayers may be entitled to a credit on an amended franchise or insurance premium tax report. This may result in an increase to the cost estimate of future legislation that makes changes to the credit allocation limit.
The bill would take effect on January 1, 2018. Taxable entities cannot claim a tax credit under the bill in connection with a privilege period that begins before January 1, 2019, or on a report filed before January 1, 2020.
Local Government Impact
No fiscal implication to units of local government is anticipated.