FISCAL NOTE, 2005 LEGISLATIVE SESSION

FISCAL NOTE 2005-HB1122A

HB 1122, An Act to clarify that agents for property owners may make certain deductions from gross receipts.

House Bill 1122, in its House Taxation Committee Engrossed form, would allow agents performing property management services for property owners to deduct from the gross receipts of those businesses, including hotels and restaurants, the costs of items purchased on behalf of the property owner(s). These costs must be itemized as expenses incurred by the property manager as a reimbursement due the property manager. Property managers may also deduct from gross receipts the costs of wages, salaries, and employee benefits of employees of the property manager performing services for the property owner(s). The deductions would be taken off the gross receipts of the business when calculating the amount of sales and use tax remittances due to the state.

After consultation with the Department of Revenue and Regulation, it is estimated that House Bill 1122 would have the following impact on the state's finances:

Agency/Item	General Fund	Federal Funds	Other Funds	Total	FTE
Revenue:	($2,800,000)	$0	$0	($2,800,000)
Expenses:	$0	$0	$0	$0	0.0
Net Impact	($2,800,000)	$0	$0	($2,800,000)	0.0

The loss of revenue could be as low as $900,000 or as high as $4,700,000. Also, the bill applies the change in deductibility to situations before the law would take effect; hence, the department may have to issue tax refunds that had been collected over a number of years. The amount of refunds is not readily discernable.

APPROVED BY:______________________________________ DATE:____________