Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2024	($506,466)
2025	($516,390)
2026	($516,390)
2027	($75,516,390)
2028	($75,516,390)

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	Change in Number of State Employees from FY 2023
2024	($506,466)	$0	$0	4.0
2025	($516,390)	$0	$0	4.0
2026	($516,390)	$0	$0	4.0
2027	($516,390)	($56,250,000)	($18,750,000)	4.0
2028	($516,390)	($56,250,000)	($18,750,000)	4.0

The bill would amend the Government Code by adding Chapter 487A, relating to small business recovery funds.

The bill would require the Texas Economic Development and Tourism Office (office) to process applications from entities seeking approval as small business recovery funds. At the time op application, entities would be responsible for a nonrefundable application fee of $5,000 that would be deposited to the General Revenue Fund to be dedicated for the purposes of administering new Chapter 487A.

The office would approve new Chapter 487A investment authority in an amount up to a total of $300 million, resulting in premium tax credits of up to $75 million that could be claimed in each of four consecutive years beginning in fiscal 2027.

The bill would describe the application process, including grounds for denial of an application, and a process for resubmission of additional information.

Upon approval of an application, the office would provide a tax credit certificate to each investor of tax-credit-eligible capital included in the application. The certificate would include the amount of the investor's credit-eligible capital contribution. The office could revoke a tax credit certification under certain circumstances. The office would notify the Comptroller in the event of a revocation. A small business recovery fund would have the opportunity to correct any violation prior to revocation. The bill would describe the process in which a small business recovery fund could exit the program. Tax credits could not be revoked after a small business recovery fund has exited the program.

The bill would authorize certain penalties on a small business recovery fund for distributions to the fund's equity holders in certain circumstances. Penalty revenue would be deposited to the General Revenue Fund.

A small business recovery fund would be required to submit an annual report to the office that would include certain information, including information on the number of jobs created and retained as a result of the fund's growth investments.

The bill would amend the Insurance Code to add new Chapter 232, regarding tax credit for investment in small business recovery funds.

Under the provisions of the bill, an entity that holds a tax credit certificate issued under new Chapter 487A described above, would be eligible for a premium tax credit in tax years in which the third, fourth, fifth, or sixth anniversary of the date in which the certificate was issued falls. The amount of the tax credit would be 25 percent of the amount of the entity's credit-eligible capital contribution per year. Entities would be allowed to carry forward unused credits. An entity could not transfer the credit to another entity. The Comptroller would be instructed to recapture the amount of a credit claimed if the tax credit certification on which it was based is revoked.

The bill would require the office to begin accepting applications not later than October 1, 2021. The bill states that new Chapter 232 would apply only to a tax report due on or after January 1, 2021. When estimating the anticipated revenue loss from the bill the Comptroller of Public Accounts assumed that 2023 is meant in both instances. The bill would prohibit the office from accepting applications from entities seeking approval as small business recovery funds after January 1, 2022, under certain circumstances. It is assumed January 1, 2024 is meant.

The amounts and timing of any application fee and penalty revenue are unknown. .

The amounts and timing of any additional state and local tax revenue that might be generated by small business recovery funds' investments are unknown.

This analysis assumes that the maximum amount which new Chapter 487A could ever approve in investment authority is $300.0 million and, further, it is assumed that amount will be approved by the Texas Economic Development and Tourism Office in calendar year 2023. Under the provisions of the bill, entities would first be able to redeem premium tax credits in fiscal 2027. This analysis assumes that $75.0 million in premium tax credits would be redeemed in each of fiscal years 2027 - 2030.

Premium tax revenue is allocated 75 percent to the General Revenue Fund and 25 percent to General Revenue Account 0193—Foundation School Fund.

This analysis estimates that implementing the provisions of the bill would result in a total cost to the Governor's Office of $2,572,025 over five years. This includes the addition of four FTEs: (1) Manager V, (1) Program Specialist VI, (1) Attorney IV, and (1) Accountant IV.

Note: The maximum amount of investment authority (487A.0052(b)) lacks clarity. If this section of the bill were to be finally interpreted, for example, as meaning annually and on a per investor basis, the implications to premium tax revenue could be dramatic. Reduced insurance premium tax collections—deposited to both General Revenue and the Foundation School Account—could total hundreds of millions of dollars each year.

Note: This legislation would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either in, with, or outside the Treasury, or create a dedicated revenue source. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 88TH LEGISLATIVE REGULAR SESSION


March 12, 2023

TO:	Honorable Joan Huffman, Chair, Senate Committee on Finance

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB675 by Springer (Relating to small business recovery funds and insurance tax credits for certain investments in those funds; imposing a monetary penalty; authorizing fees.), As Introduced