COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION



FISCAL NOTE



L.R. NO.: 2457-01

BILL NO.: SB 696

SUBJECT: Corporations; Revenue Dept.; Taxation and Revenue-General-Income

TYPE: Original

DATE: February 10, 2000




FISCAL SUMMARY



ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
General Revenue $0 $0 $0
Outstanding Schools Trust $0 $0 $0
Total Estimated

Net Effect on All

State Funds

$0 $0 $0



ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
Total Estimated

Net Effect on All

Federal Funds

$0 $0 $0



ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
Local Government $0 ($24,500,000) ($24,800,000)

Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 4 pages.

FISCAL ANALYSIS



ASSUMPTION



Officials of the Department of Revenue (DOR) state this proposal eliminates the limit on the corporate federal income tax deduction on January 1, 2001. This proposal will have little or no administrative impact to the Department of Revenue.



In a similar proposal officials of the Office of Administration (COA) stated this proposal restores the full federal income tax deduction for corporate income taxpayers.



COA staff state that their estimate for restoring the full federal income tax deduction is from the FY 2002 Consensus Revenue Forecast and Budget and Planning's Corporate Income Tax Simulator. The corporate income tax loss due to this proposal would be ($24.5 million) in FY 2002 and ($24.8 million) in FY 2003. COA staff stated that the revenue reductions from this proposal would require an equivalent amount of General Revenue in order to fully fund the Foundation Formula. A one percent annual growth rate was assumed.



Oversight will reflect the impact of this proposal as a loss to local school districts.



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



FISCAL IMPACT - State Government FY 2001

(10 Mo.)

FY 2002 FY 2003
GENERAL REVENUE FUND



Loss to General Revenue Fund

Increase in Federal Income Tax Deduction







$0






($24,500,000)






($24,800,000)


Savings to General Revenue Fund

Reduction in funds transferred to Outstanding Schools Trust Fund







$0






$24,500,000






$24,800,000


ESTIMATED NET EFFECT ON

GENERAL REVENUE FUND





$0




$0




$0




OUTSTANDING SCHOOLS TRUST FUND


Loss to Outstanding Schools Trust Fund

Increase in Federal Income Tax Deduction







$0






($24,500,000)






($24,800,000)


Savings Outstanding Schools Trust Fund

Reduction in funds transferred to local school districts







$0






$24,500,000






$24,800,000


ESTIMATED NET EFFECT TO

OUTSTANDING SCHOOLS TRUST FUND







$0






$0






$0




FISCAL IMPACT - Local Government FY 2001

(10 Mo.)

FY 2002 FY 2003
SCHOOL DISTRICTS



Loss to Local School Districts

Reduction in funds transferred from The Outstanding Schools Trust Fund







$0






($24,500,000)






($24,800,000)


ESTIMATED NET EFFECT ON

SCHOOL DISTRICTS





$0




($24,500,000)




($24,800,000)




FISCAL IMPACT - Small Business



Small business would be expected to be fiscally impacted to the extent that they pay income taxes. The increase in the federal income tax deduction would cause small businesses to pay less income tax.





DESCRIPTION



Current law limits the deduction for federal income taxes paid by corporations to 50% of the taxes paid. This act removes that limitation and allows full deductibility of federal income taxes for corporations beginning January 1, 2001.



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





Jeanne Jarrett, CPA

Director

February 10, 2000