Honorable Dustin Burrows, Chair, House Committee on Ways & Means
FROM:
John McGeady, Assistant Director Sarah Keyton, Assistant Director Legislative Budget Board
IN RE:
HB52 by Hinojosa (relating to a franchise tax credit pilot program for taxable entities that contribute to an employee dependent care flexible spending account.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for HB52, Committee Report 1st House, Substituted: a negative impact of ($800,000) through the biennium ending August 31, 2021.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2020
($200,000)
2021
($600,000)
2022
($600,000)
2023
$0
2024
$0
Fiscal Year
Probable Revenue (Loss) from Property Tax Relief Fund 304
Probable Savings from Property Tax Relief Fund 304
Probable (Cost) from General Revenue Fund 1
2020
($200,000)
$200,000
($200,000)
2021
($600,000)
$600,000
($600,000)
2022
($600,000)
$600,000
($600,000)
2023
$0
$0
2024
$0
$0
Fiscal Analysis
The bill would amend Chapter 171 of the Tax Code, regarding the franchise tax, by adding a Subchapter P to establish a tax credit pilot program for employer contributions to dependent care flexible spending accounts.
The bill would define "dependent care flexible spending account" as a pretax benefit account used to pay eligible dependent care services as authorized by the Internal Revenue Code of 1986, as effective on January 1, 2019.
The tax credit would be available to taxable entities with not more than 500 employees who made contributions to the dependent care flexible spending account of each employee who receives an annual salary or wage of not more than $65,000. A combined group would qualify for the credit to the extent that any member of the group qualifies for the credit. The amount of credit in connection with each eligible employee would equal the lesser of 50 percent of the contributions or $2,500. The total amount of credits allowed for a report would be limited to the amount of franchise tax due after applying all other credits.
The bill would require the Comptroller to deposit annually into the Property Tax Relief Fund - 0304 an amount equal to the loss related to credits issued under this Subchapter from General Revenue Fund 0001.
The Comptroller would be required to prepare a report by September 1, 2022 that evaluates the effect of the pilot program on contributions to dependent care flexible spending accounts. The report would be required to recommend whether the credit allowed under the program should be reestablished.
The bill would take effect on September 1, 2019, and apply to contributions made on or after that date, and before January 1, 2022, and only to reports due on or after January 1, 2020 and before January 1, 2023. The pilot program would expire December 31, 2021.
Methodology
The estimated fiscal impact of this bill is based on data from a similar credit available under the franchise tax prior to 2008, as well as industry survey data regarding employee benefits and dependent care flexible spending accounts. The loss of revenue to the Property Tax Relief Fund would be offset by an annual transfer from General Revenue Fund in an amount equal to the loss attributed to credits issued under this Subchapter.
Local Government Impact
No fiscal implication to units of local government is anticipated.