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.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB3843, As Introduced: an impact of $0 through the biennium ending August 31, 2019.
However, there would be a negative impact of ($3,300,000) to General Revenue Related Funds through the biennium ending August 31, 2021.
Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($6,700,000) for the 2020-21 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
2018
$0
2019
$0
2020
($1,100,000)
2021
($2,200,000)
2022
($3,300,000)
Fiscal Year
Probable Revenue (Loss) from General Revenue Fund 1
Probable Revenue (Loss) from Foundation School Fund 193
Probable Revenue (Loss) from Property Tax Relief Fund 304
2018
$0
$0
$0
2019
$0
$0
$0
2020
($825,000)
($275,000)
($2,233,000)
2021
($1,650,000)
($550,000)
($4,467,000)
2022
($2,475,000)
($825,000)
($6,700,000)
Fiscal Analysis
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 $20 million, not counting 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 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.
This bill would take effect on January 1, 2018, and only apply to reports due on or after that date.
Methodology
The estimated fiscal impact assumes no credits would be applied by taxable entities until the third year following the effective date, the time generally required to place a qualified development into service.
The Texas Department of Housing and Community Affairs indicates they could absorb the additional responsibilities from the bill within existing resources.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies:
304 Comptroller of Public Accounts, 332 Department of Housing and Community Affairs