SB 0104 - Fiscal Note

Fiscal Note - SB 0104 - Authorizes state income tax credit for property tax paid on manufacturing equipment or machinery

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0063-01

BILL NO.: SB 104

SUBJECT: Revenue Department; Taxation and Revenue - General; Taxation and Revenue - Income; Taxation and Revenue - Property

TYPE: Original

DATE: February 2, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	$0	($12,000,000)	($16,000,000)
Total Estimated Net Effect on All State Funds	$0	($12,000,000)	($16,000,000)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
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 (TAX) note that assessors do not keep records on the basis of age of machinery, nor do assessors or the Commission separately classify the machinery which would be eligible for the exemption. TAX estimates the possible effect of the proposal by assuming one-third of "other" personal property assessments would be represented by affected machinery. ($0 in FY 2000; $12,000,000 in FY 2001; $16,000,000 in FY 2002)

Department of Revenue (DOR) officials state this proposal would authorize a tax credit for manufacturing equipment and machinery purchased after December 31, 1999. The tax credit would be equal to twenty percent of the property taxes paid in the first year of the purchase and four years thereafter.

ADMINISTRATIVE IMPACT:

DOR states the number of taxpayers eligible for this tax credit is unknown. DOR assumes the Division of Taxation and Collections would have to approve the tax credit, one Tax Processing Technician I (along with equipment and expenses) would be needed for every 3,680 tax credits claimed. One Tax Processing Technician I would be needed for every 20,000 individual income tax errors and one Tax Processing Technician I for every 12,000 corporate tax errors generated from this credit.

DOR further states this proposal would require modifications to the income tax system. The Division of Taxation and Collections estimates these modifications, including programming changes, would require 692 hours of overtime at a cost of $15,606. Modifications to the income tax return and schedules would completed with existing resources. State Data Center charges would increase due to the additional storage and fields to be captured. Funding in the amount of $4,503 would be requested.

Oversight assumes no additional costs for modifications and/or charges for the income tax system. These additional costs would be requested through normal budgetary procedures.

Officials from the Office of Administration - Division of Budget and Planning did not respond to our fiscal impact request.

This proposal would result in a decrease in Total State Revenues.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
GENERAL REVENUE FUND
Loss - Machinery and Equipment
Property Tax Credit	$0	($12,000,000)	($16,000,000)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	$0	($12,000,000)	($16,000,000)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(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 authorize an income tax credit in an amount equal to twenty percent of the property taxes paid on manufacturing equipment or machinery purchased after December 31, 1999.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Department of Revenue

State Tax Commission

NOT RESPONDING: Office of Administration - Division of Budget and Planning

Jeanne Jarrett, CPA

Director

February 2, 1999