Honorable Joan Huffman, Chair, Senate Committee on Finance
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
SB2774 by Hinojosa, Adam (Relating to the classification of certain entities as primarily engaged in retail trade for purposes of the franchise tax.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for SB2774, As Introduced: an impact of $0 through 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 ($2,860,000) 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
2026
$0
2027
$0
2028
$0
2029
$0
2030
$0
All Funds, Five-Year Impact:
Fiscal Year
Probable Revenue (Loss) from Property Tax Relief Fund 304
2026
$0
2027
($2,860,000)
2028
($3,000,000)
2029
($3,130,000)
2030
($3,270,000)
Fiscal Analysis
The bill would redefine activities involving the rental of industrial uniforms, garments, and linen supplies-classified as Industry 7213 (Linen Supply) or 7218 (Industrial Launderers) of the 1987 Standard Industrial Classification Manual; published by the federal Office of Management and Budget-as “retail trade,” for franchise tax purposes.
The bill would take effect January 1, 2027.
Methodology
This estimate is based on franchise tax liabilities of entities currently classified as SIC Industry 7213 or 7218 (NAICS 812331 or 812332), adjusted for the lower tax rate applicable for retail trade, and extrapolated to subsequent years based on rate of franchise tax growth the 2026-2027 Biennial Revenue Estimate.
Local Government Impact
No fiscal implication to units of local government is anticipated.