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

SPONSOR Sharer

ORIGINAL DATE

LAST UPDATED

1/23/06

HB

SHORT TITLE Electronic Card Reader Tax Credit

SB 215

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(4.0)

(8.0)

(8.0) Recurring

General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 215 raises the amount for an existing credit for the purchase of electronic age verifi-

cation equipment used by alcohol and tobacco retailers to $1,000. The credit is currently set at

$300. The new credit may be applied for beginning in tax year 2006.

FISCAL IMPLICATIONS

According to the Taxation and Revenue Department (TRD), the impact of raising the credit from

$300 to $1,000 will be $8,000 per tax year. Since the amount is for a tax year, the fiscal impact

in FY06, which contains six months of tax year 2006, is $4 thousand. The impact for FY07 and

beyond is $8 thousand.

TRD reported that only $900 in credits have been claimed by three taxpayers in 2003 and 2004.

Senate Bill 215 – Page 2

SIGNIFICANT ISSUES

TRD notes:

The usual practice in establishing tax credits is to provide a credit for a specified percent-

age of the cost of a targeted category of spending. The investment credit for manufactur-

ers, for example, provides credits at the rate of 5 percent of the qualified expenditure.

This credit is a fixed dollar amount, regardless of the cost of equipment. It is unclear to

what extent the equipment purchases are being subsidized by the tax credits.

ADMINISTRATIVE IMPLICATIONS

TRD reports that since the credit is already in place and the only parameter changing is the

amount of the credit, there should be no additional administrative burdens.

NF/mt