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SPONSOR: |
Rodella |
DATE TYPED: |
|
HB |
62/aHTRC |
||
SHORT TITLE: |
Increase Jet Fuel Tax Deductions |
SB |
|
||||
|
ANALYST: |
Reynolds-Forte |
|||||
REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
(76.4) |
(83.3) |
Recurring |
State General Fund |
|
(*) |
(*) |
Recurring |
Small Cities
Assistance Fund |
|
(*) |
(*) |
Recurring |
Small Counties
Assistance Fund |
|
(54.0) |
(58.9) |
Recurring |
Local Governments |
|
None |
None |
Recurring |
State Aviation Fund |
(Parenthesis
( ) Indicate Revenue Decreases)
(*) The Department has no information
regarding the amount of jet fuel subject to the Compensating Tax. It is assumed that amount is negligible.
The assumptions used for the Gross
Receipts Tax impact were: 1) taxable base of about $13.9 million based on FY04
revenue estimate for the State Aviation Fund; 2) 100% of taxable base subject
to municipal taxes; 3) tax rate in municipal areas of 5.8125% (
Relates
to Appropriation in the General Appropriation Act
Responses
Received From
SUMMARY
Synopsis
of HTRC Amendment
The House Taxation and Revenue Committee amendment to HB62 increases the gross receipts and compensating tax deduction for jet fuel from the current 40% deduction to a 50% deduction. The original bill proposed a 100% deduction. The HTRC amendment also adjusts the distribution to the State Aviation Fund to maintain the current level of revenue to that fund.
The House Taxation and
Revenue Committee amendment to HB62 decreases the amount of gross receipts and
compensating tax which will be paid on jet fuel by airline companies each year
by $142.2. The annual decrease of
revenue of $142.2 will decrease the state general fund by $83.3 and the local governments funds by $58.9.
The FY04 impact will be $130.4 revenue loss, $76.4 to the general fund
and $54.0 to the local government funds.
Synopsis
of Original Bill
House Bill 62 changes the current gross receipts
tax deduction and compensating tax deduction for jet fuel from 40% to
100%. This means jet fuel will be
totally exempt from gross receipts tax and the revenues from the tax are eliminated.
The effective date for
collection of the tax is
Significant
Issues
Twelve months of this revenue was appropriated
by both the LFC and the Executive for use in the Aviation Division of the
FISCAL IMPLICATIONS
The FY04 eleven month
estimated revenue loss from the Jet Fuel is $759.4 which impacts the State,
municipalities and counties. The first
full year of revenue loss will be in FY 05 and is estimated to be $868.7.
The State portion of
the funds ($458.3 in FY04 and $525.0 in FY05) are used to fund the Aviation
Division of the
The $500.0 loss to the
State Aviation Fund will result in a $10 million plus decrease in funds
available for airport construction projects each year. This revenue is used to match federal
money. The match ratio is 5%: the $500.0
in state funds leverages $9.5 million of federal funds.
The $10+ million per year of airport
construction is mostly federal money and is subject to state and local gross receipts
taxes.
Municipalities and
counties will also be impacted by House Bill 62. Municipalities will have a revenue loss of
$262.8 in FY 04 and the counties will have a loss of $38.3.
RELATIONSHIP
House Bill 62 relates
to House Bill 4 that appropriates the jet fuel revenues in FY04 for operation
of the Aviation Division of the
OTHER SUBSTANTIVE ISSUES
The
·
The
price of jet fuel in
|
Price |
State Tax Imposed |
Total Price |
|
$1.10 |
3.4875% |
$1.138 |
|
$1.14 |
none |
$1.140 |
|
$1.12 |
3% |
$1.154 |
|
$1.24 |
$0.03 per gallon |
$1.270 |
|
$1.16 |
none |
$1.160 |
|
$1.09 |
5.725% |
$1.152 |
|
$1.10 |
none |
$1.100 |
|
$1.20 |
unknown |
$1.200 |
Average |
|
|
$1.164 |
·
Fluctuations in jet fuel gross receipts (total,
before deductions) appear to follow price fluctuations both before and after
imposition of the current 40% deduction.
It does not appear that imposition of the 40% deduction in 1993 resulted
in any large increase in
the amount of jet fuel sold in
ALTERNATIVES
·
The
State Aviation Fund could be held harmless by an additional, permanent
distribution of a share of general fund gross receipts tax. The average level of jet fuel GRT revenue
over the past 5 years was $565 thousand per fiscal year, so the State Aviation
Fund might be held harmless by a new distribution of 0.0417 percent of general
fund gross receipts revenue. The hold
harmless distribution could be added to Section 1 of the bill (Section
7-1-6.7).
PRF/yr/njw:yr