Honorable Trent Ashby, Chair, House Committee on Culture, Recreation & Tourism
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB3600 by Price (Relating to the establishment of the Texas Multimedia Production Program; providing tax credits; authorizing fees.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB3600, As Introduced : a negative impact of ($1,010,596) through the biennium ending August 31, 2025.
However, implementing the provisions of of the bill would have a negative impact to General Revenue Related Funds of ($783,993,096) in the biennium ending August 31, 2027. Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($137,000,000) for the 2026-27 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
2024
($514,048)
2025
($496,548)
2026
($538,496,548)
2027
($245,496,548)
2028
($269,496,548)
All Funds, Five-Year Impact:
Fiscal Year
Probable Savings/(Cost) from General Revenue Fund 1
Probable Revenue Gain/(Loss) from General Revenue Fund 1
Probable Revenue Gain/(Loss) from Foundation School Fund 193
Probable Revenue Gain/(Loss) from Property Tax Relief Fund 304
2024
($514,048)
$0
$0
$0
2025
($496,548)
$0
$0
$0
2026
($496,548)
($404,000,000)
($134,000,000)
($94,000,000)
2027
($496,548)
($184,000,000)
($61,000,000)
($43,000,000)
2028
($496,548)
($202,000,000)
($67,000,000)
($47,000,000)
Fiscal Year
Change in Number of State Employees from FY 2023
2024
5.0
2025
5.0
2026
5.0
2027
5.0
2028
5.0
Fiscal Analysis
The bill would add a new tax credit program entitled the Texas Multimedia Production Program, which provides tax credits to production companies, as defined in the proposed legislation, spending $15 million or more in-state on film, television, or commercial and educational projects.
The bill would require that to qualify for a certificate, a production company must demonstrate to the Commission that at least 25 percent of the project is filmed in Texas and the company must submit a ledger of expenses that shows that at least 25 percent of the total number of individuals employed are Texas residents.
The bill would assigns tax credit percentages to applicants based on their resident hires, instate expenditures, as well as planned underutilized and economically distressed community usage.
The methodology for determining the applications process, applicant eligibility and calculating the amount of the credit is tasked to the Texas Film Commission.
The bill would require the Commission to reduce the tax credit for outstanding Texas debt in Section 485B.054.
The bill would require that a taxable entity must apply for the credit on or with the franchise report for the period for which the credit is claimed. The total amount of the credit may not exceed the amount of the franchise tax due for the report after any other applicable credit. The remaining credit may be carried forward for five consecutive years.
The bill would establish procedures by which an entity awarded certificate of eligibility by the Commission would be able to sell or assign all or part of the credit to one or more entities.
Methodology
The bill does not permit for the tax credits to be used until after September 1, 2025, which would mean that the first year that would be impacted would be fiscal year 2026. However, since the credits can be earned staring in fiscal year 2024, the estimates included in this analysis assumed credits earned in 2024 and 2025 would be used in fiscal year 2026.
This Comptroller's Office estimates that the current level of moving image projects would increase between 10 and 20 percent once entities could plan for future projects based on the credits. This estimate does not include any digital interactive media productions since the bill does not include those projects in the definition under Section 485B.001. The total estimated credit claims were allocated between franchise tax and insurance premiums taxes and the pertinent funds based on the same proportions that certified historic structure credits were claimed against those taxes for fiscal year 2022. Since the credits can be sold, this estimate assumes all the credits will be used each year.
The bill would not exclude from credit in-state expenditures paid for with grant money from the Texas Film Commission. Consequently, a significant amount of Movie Image Industry Incentive Program grants awarded each year could result in tax credits when spent, depending on the portion of grants to projects that might qualify as films for purposes of the bill, regardless of how designated by the Commission.
According to the Office of the Governor, the Texas Film Commission would need five additional FTEs would be required to administer the program. This would include one Program Specialist II, two Program Specialist III, one Program Specialist V, and one Compliance Analyst II. In addition to the salaries and benefits related to the additional FTEs, costs would include professional fees, IT set-up and maintain, and other operating costs, for a total biennial cost of $1,010,596.
Technology
The technology impact includes one-time costs of $17,500 in fiscal year 2024. One-time costs include standard office equipment (computer, telecom/voicemail, etc.).
Local Government Impact
Local governments might see a positive impact to sales and use tax revenues from an increase in production projects coming to the state. Potential negative impact could occur if the number of qualifying projects receiving tax credits exceeds any increase in revenue the projects are generating.
Source Agencies:
300 Trusteed Programs Within the Office of the Governor, 304 Comptroller of Public Accounts