Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB5268 by Muñoz (Relating to the maximum amount of penalties that may be imposed for delinquent taxes and tax reports and the application of taxpayer payments to taxes, penalties, and interest.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB5268, As Introduced: a negative impact of ($29,000,000) through the biennium ending August 31, 2027.
General Revenue-Related Funds, Five- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2026
($6,000,000)
2027
($23,000,000)
2028
($67,000,000)
2029
($133,000,000)
2030
($198,000,000)
All Funds, Five-Year Impact:
Fiscal Year
Probable Revenue (Loss) from General Revenue Fund 1
2026
($6,000,000)
2027
($23,000,000)
2028
($67,000,000)
2029
($133,000,000)
2030
($198,000,000)
Fiscal Analysis
The bill would limit the maximum amount of penalties that may be imposed for delinquent taxes and tax reports; and modify the application of taxpayer payments to taxes, penalty, and interest.
The bill would direct the Comptroller to apply a payment made by a taxpayer to the amount of tax due before applying any portion of the payment to a penalty or interest owed by the taxpayer, unless the taxpayer provides written instructions for a different application of the payment.
The bill would limit the penalty imposed on a person who fails to pay a tax or file a report required by Title 2 (State Taxation) or Title 3 (Local Taxation) of the Tax Code to no more than $500. The limitation would not apply to a penalty for fraud or intent to evade tax under Section 111.061(b).
This bill would take effect September 1, 2025.
Methodology
In the last two years, the total amounts of penalty assessments in excess of $500 have averaged about $220 million annually. But penalty assessments typically lag the date the tax originally due. As SECTION 4 of the bill provides that prior law would continue with respect to amounts of tax originally due before the effective date of the bill, the $500 limit would have only minor effect on penalty assessments initially, growing in effect over time as more assessments are made with respect to taxes originally due after the effective date of the bill. It would likely be five years or more before the full effect of the $500 limit would be apparent in penalty revenue in a fiscal year.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.