LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 1 SLS 202ES 49
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: October 20, 2020 12:50 PM Author: WARD
Dept./Agy.: Revenue
Subject: Inventory Tax Credit - Extend Carryforward Period Analyst: Benjamin Vincent
TAX/AD VALOREM EN DECREASE GF RV See Note Page 1 of 1
Extends the carryforward period for the inventory tax credit for certain businesses. (1/1/21) (Items #26 and #65)
Current law provides a state tax credit against income and franchise taxes for ad valorem taxes paid to local governments
on inventory held by manufacturers, distributors, retailers, and on natural gas used in storage facilities. The credit is
refundable or nonrefundable depending on various factors applicable to each taxpayer. To the extent a portion of the credit
is nonrefundable, a taxpayer has a five-year carryforward period within which to utilize unused credit amounts against tax
liabilities.
Proposed law changes the carryforward period from five years to ten years.
Effective January 1, 2021.
EXPENDITURES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $0 $0 $0 $0 $0 $0
REVENUES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. DECREASE DECREASE DECREASE DECREASE DECREASE
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total
EXPENDITURE EXPLANATION
The Department estimates approximately $65,000 of programming, testing, and system development IT staff time costs to
be able to distinguish credits that still have the five-year carryforward limitation associated with them from credits subject to
the new ten-year carryforward provision of this bill.
REVENUE EXPLANATION
The bill extends the allowed time to apply tax credits against liabilities rather than have unused credit amounts expire. This
can only work to reduce annual net tax collections from what they would otherwise be. The effectiveness of the bill, January
1, 2021, seems to imply that the first fiscal year of revenue loss exposure could be FY21, for income tax returns filed in the
spring of 2021 and franchise which is due at the start of the year and payable by May of the year.
An estimate of the potential revenue loss is not possible. The Dept. of Revenue does not have data on the amount of credit
across taxpayers that is available for carryforward use, nor any schedule of how much might be expiring in any particular
year that this bill would keep available for use.
Over the life of the inventory credit through FY14, and in the aggregate, firms claiming the credit have never had sufficient
tax liabilities to exhaust the amount of credit available only through offsetting those liabilities. Consequently, refunds of
excess credit were made of typically 82% of the credit, with 18% offsetting tax liabilities. Changes made to the credit in
2015 and 2016 have reduced the total annual cost of the credit by some 31%; from approximately $388 million per year
before 2015, to approximately $267 million per year after 2015, as well as constrained the refundability of excess credit
amounts. Current information indicates that of the lower total credit amounts in recent periods, refunds of excess credit are
about 40% of the total credit, with 60% offsetting tax liabilities. While flipped from the earlier periods of the credit, the data
still suggests that tax liabilities are not sufficient to exhaust the amount of credit available through offsetting tax liabilities.
While the bill can only work to to decrease revenue by allowing some taxpayers to claim, against tax liabilities, credits that
would have otherwise expired, it still does not seem likely that the extension of the carryfoward time limit would significantly
increase the amount of credit possible to claim in the aggregate each year.
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Christopher A. Keaton
x 13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Legislative Fiscal Officer
or a Net Fee Decrease {S}


Statutes affected:
SB1 Original: 47:6006(B)(1)
SB1 Engrossed: 47:6006(B)
SB1 Enrolled: 47:6006(B)
SB1 Act 50: 47:6006(B)