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F I S C A L I M P A C T R E P O R T

SPONSOR Jennings

DATE TYPED 01/26/04 HB

SHORT TITLE Transport Aircraft Maintenance Gross Receipts

SB 261

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($1,400.0)

Increasing Recurring

General Fund

($940.0)

Increasing Recurring Local Governments

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates: House Bill 202

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 261 expands the eligibility for receiving a tax deduction against gross tax receipts

from aircraft services. The bill would add the service of “maintaining” an aircraft carrier to a list

of existing services that qualify for the deduction (such as refurbishing, remodeling, or otherwise

modifying). The type of aircraft specified on which the services would be performed would also

be changed from “transport category aircraft”, to a broader specification of “commercial or mili-

tary carrier”. The bill also reduces the weight requirement for the aircraft from 65 thousand

pounds to ten thousand pounds.

This bill is being proposed on behalf of the Revenue Stabilization and Tax Policy Committee.

The effective tax date is July 1, 2005.

Senate Bill 261 -- Page 2

FISCAL IMPLICATIONS

TRD estimates that the total fiscal impact of Senate Bill 261 will be $1.4 million to the general

fund in FY06 and $940.0 to local governments, for a total impact of $2.34 million. TRD analy-

sis utilized information provided by the Economic Development Department, which indicated

that firms currently providing the newly eligible services have gross receipts of approximately

$40 million per year. Approximately 90 percent of this revenue is attributable to aircraft in the

eligible size range. Thus, according to TRD, the total tax base is $36 million and total tax liabil-

ity is $2.34 million (implying an average tax rate of 6.5 percent). TRD analysis noted that recent

news reports indicate that the state may see a significant increase in the level of aircraft manufac-

turing activity in the near future, which could have the effect of increasing the fiscal impacts of

the proposal.

ADMINISTRATIVE IMPLICATIONS

TRD anticipates minimal impacts on the Department. They report that changes would be needed

for forms, instructions and publication for the CRS program. In addition, taxpayer and TRD em-

ployee education would be required and audit and compliance procedures would have to be de-

veloped.

OPJ/lg