SB 0146 - Fiscal Note

Fiscal Note - SB 0146 - Authorizes state income tax credit for personal property tax paid on non-business motor vehicles

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0271-01

BILL NO.: SB 146

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

TYPE: Original

DATE: February 5, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	$0	($72,462,500)	($153,752,243)
Total Estimated Net Effect on All State Funds	$0	($72,462,500)	($153,752,243)

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 from the Department of Revenue (DOR) state this proposal authorizes an income tax credit for personal property taxes paid on motor vehicles. The credit would be phased in, the first year would be equal to 25% of the taxes paid, the second year would be equal to 50%, the third year would be equal to 75%, and the fourth year would be equal to 100%. The credit could not exceed the tax liability.

ADMINISTRATIVE IMPACT:

The number of taxpayers eligible for this tax credit is unknown at this time. The Division of Taxation estimates the credit would have a five percent processing impact and would need one temporary tax season employee for every 180,000 returns impacted and one Tax Processing Technician I for every 20,000 individual income tax errors generated from this proposal.

The proposal would require modifications to the income tax system. The Division of Taxation and Collections estimates the modifications, including programming changes, would require 1,254 hours of overtime at a cost of $34,334. Modifications to the income tax return and schedules would be 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 $8,162 would be requested for implementation costs and $1,309 for ongoing costs per year.

Office of Administration officials defer to the State Tax Commission on revenue estimates.

Officials from the State Tax Commission (TAX) stated that for 1996 tax on motor vehicles was $401,000,000. TAX assumes that 93% of motor vehicles were for non-business uses and that 15% of filers would owe no state income tax or would not be able to use the full credit. TAX assumes the proposal would reduce the General Revenue Fund by $341,000,000 annually. TAX assumes a three percent growth rate.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
GENERAL REVENUE FUND
Loss - General Revenue Fund
Tax credit for personal property taxes	$0	($72,462,500)	($153,750,934)
Cost - Department of Revenue
Reprogramming costs	$0	($42,496)	($1,309)
FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
(continued)	(6 Mo.)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	$0	($72,504,996)	($153,752,243)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

This proposal would authorize a state income tax credit for personal property taxes paid on motor vehicles used primarily for non-business purposes. The credit would be phased in as follows: for tax year 2000, a taxpayer would be allowed to take 25% of the personal property taxes paid on a motor vehicle; for tax year 2001, the amount would be increased to 50%; for tax year 2002, 75%

of the property taxes would be taken as a credit; and for tax year 2003 and subsequent years, the taxpayer would be allowed to take as a credit 100% of the personal property taxes paid on motor vehicles.

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

Office of Administration

Division of Budget and Planning

State Tax Commission

Jeanne Jarrett, CPA

Director

February 5, 1999