84(R) - 2015
House Ways & Means
House Ways & Means
Vote Yes; Amend
Relating to the rate of interest on certain tax refunds.
A fiscal note dated May 9, 2015 anticipates a negative two-year net impact to General Revenue Related Funds from CSHB 3111 through the biennium ending August 31, 2017.
Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of $4,456,200 for the 2016-17 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.
House Bill 3111 would amend Section 111.064 of the Tax Code relating to interest on refund or credit on tax reports and payments, to provide that for a refund under Chapter 111 of the Tax Code that was granted for a report period due on or after September 1, 2015, interest would be at the same rate as the one required for interest on delinquent taxes (Section 111.060 of the Tax Code), that is the prime rate plus one percent. It would continue to accrues according to current law.
A refund granted for a report period due on or after January 1, 2000 but before September 1, 2015 would accrue interest either at the rate set in Section 111.060, if the refund is claimed on or before September 1, 2005. If the refund is claimed after September 1, 2005, it would accrue interest at the lesser rate of either the rate set in Section 111.060 or the the annual rate of interest earned on deposits in the state treasury during December of the previous calendar year, as determined by the comptroller.
A refund for a report period due before January 1, 2000 would not accrue interest.
Vote Recommendation Notes
Under current law, interest on a refund accrues at the lesser rate of the Treasury Pool rate or the prime interest rate plus one percent (the latest being the interest rate on delinquent taxes).
The goal of House Bill 3111 is to correct the disparity between the interest rate on delinquent taxes and the accruing of refunds of overpaid taxes. We applaud the intent of House Bill 3111 to apply some equity to taxpayers.
Nevertheless, it is difficult for us to support this bill as-is. Lest we forget, the interest accrued on refunds from overpaid taxes is ultimately paid by the taxpayers. As a consequence, there would be nothing fair in possibly increasing the interest rate.
We recommend that the bill be amended to allow the lesser of either rate to be used for the interest on refunds, as well as for delinquent taxes. Such a move would better correct the disparity that currently exists.