LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: HB 208 HLS 21RS 213
Bill Text Version: ORIGINAL
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: April 18, 2021 10:29 AM Author: DEVILLIER
Dept./Agy.: Revenue
Subject: Corporate Income Tax - Remove Federal Tax Paid Deduction Analyst: Greg Albrecht
TAX/CORP INCOME OR +$89,700,000 GF RV See Note Page 1 of 1
Repeals the income tax deduction for federal income taxes paid for purposes of calculating corporation income tax
Present law provides a deduction for federal income taxes paid for corporate income tax.
Proposed law eliminates the deduction.
Effective for tax periods beginning on and after January 1, 2023.
Contingent upon adoption of a constitutional amendment contained in House Bill # of this session.
EXPENDITURES 2021-22 2022-23 2023-24 2024-25 2025-26 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 2021-22 2022-23 2023-24 2024-25 2025-26 5 -YEAR TOTAL
State Gen. Fd. $0 $16,200,000 $80,700,000 $89,700,000 $89,700,000 $276,300,000
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 $16,200,000 $80,700,000 $89,700,000 $89,700,000 $276,300,000
EXPENDITURE EXPLANATION
Tax system changes will have to be made to incorporate the elimination of the deduction from the tax processing system.
These changes are typically estimated as several thousands of dollars of staff time for design, modification, and testing.
REVENUE EXPLANATION
The current estimate of the corporate income tax liability change resulting from the elimination of the deduction for federal
taxes paid is $89.7 million, based on a recalculation of returns for the 2018 tax year by the Department of Revenue (this is
the first tax year exhibiting the federal tax reductions enacted at the end of 2017).
The fiscal year receipts effect of this liability change is complicated by the fact that in any particular fiscal year returns are
filed for a number of prior tax years. Based on the filing pattern of the 2018 tax year returns, within a fiscal year, 18% of
the corporate income tax returns for a particular tax year (2023 in this case) will be filed within the immediate fiscal year
(2023 estimated payments), 72% within the second fiscal year (2024 returns & extensions), and 10% within the third fiscal
year (2025 returns & extensions). Incorporating these factors, results in a first fiscal year revenue increase of $16.2M
($89.7M x 18%). The second fiscal year increase will include a 72% filing factor applied to the first year’s liability increase
plus the second year’s liability increase and a 18% filing factor, resulting in $80.7M ($89.7M x 90%). The third fiscal year
increase will include a 10% filing factor applied to the first year’s liability increase plus a 72% filing factor applied to the
second year’s liability increase plus the third year’s liability increase with a 10% filing factor, resulting in an $89.7M ($89.7M
x 100%) revenue increase. This pattern accumulates the tax year liability increases realized in fiscal years over a three year
period until the full amount of corporate income tax liability change is reflected in fiscal year revenue collections each year.
Actual annual revenue gains can differ materially from these estimates due to the inherent volatility of the corporate tax
base, and the ability of corporate tax filers to engage in tax planning. Thus, there is considerable uncertainty as to the level
of annual tax liability and tax receipt changes resulting from the bill.
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:
HB208 Original: 47:442(B)(1)