SB 0949 - Fiscal Note

Fiscal Note - SB 0949 - Allows income tax credit for 20% of property taxes on manufacturing equipment or machinery

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 3970-01

BILL NO. SB 949

SUBJECT: Taxation and Revenue: Credit

TYPE: Original

DATE: March 9, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	($8,000,000)	($12,000,000)	($16,000,000)
Total Estimated Net Effect on All State Funds	($8,000,000)	($12,000,000)	($16,000,000)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the State Tax Commission note that assessors do not keep records on the basis of age of machinery, not do assessors or the Commission separately classify the machinery which would be eligible for the exemption. They estimated the possible effect of the proposal by assuming one-third of "other" personal property assessments would be represented by affected machinery. ($8,000,000 in FY 1999; $12,000,000 in FY 2000; $16,000,000 in FY 2001)

Officials of the Department of Revenue (DOR) assume the number of taxpayers eligible for this tax credit is unknown. Therefore, the resources needed by the DOR are unknown. However, for every 3,680 credits received, one Tax Processing Technician would be needed to pre-edit and verify the credit. For every 20,000 errors generated from this credit on individual tax returns, and every 12,000 errors generated on corporate income tax returns one Tax Processing Technician would be needed. The modifications to the income and corporate tax systems and to the forms and reports will be completed by the Information Systems Division with existing staff and resources.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
GENERAL REVENUE FUND
Loss - Machinery and Equipment
Property Tax Credit	($8,000,000)	($12,000,000)	($16,000,000)
NET EFFECT ON GENERAL
REVENUE	($8,000,000)	($12,000,000)	($16,000,000)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business

Small businesses which own manufacturing machinery and equipment would benefit fiscally from this proposal.

DESCRIPTION

This proposal would allow an income tax credit of twenty percent of personal property tax paid on manufacturing equipment or machinery purchased after December 31, 1998. The credit would be limited to the first five years after the purchase of machinery or equipment. The credit could be "carried forward" for up to five years. The proposal also defined manufacturing equipment and machinery.

SOURCES OF INFORMATION

Department of Revenue

State Tax Commission

Jeanne Jarrett, CPA

Director

March 9, 1998