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

SPONSOR Trujillo

ORIGINAL DATE

LAST UPDATED

1/29/08

HB 258

SHORT TITLE Child Daycare Gross Receipts Tax Credit

SB

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

(876.9)

(945.8) Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Children, Youth and Families Department (CYFD)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 258 creates a new gross receipts tax credit for the state share of gross receipts tax due

on all taxable gross receipts of child daycare providers licensed by CYFD. The state gross

receipts tax rate is 5 percent in unincorporated areas and 3.775 percent in municipalities.

The provisions of the bill will be effective on July 1, 2008.

FISCAL IMPLICATIONS

TRD estimates that taxable gross receipts totaling $22.6 million will be eligible for the proposed

credit in FY09. About 91 percent of that tax base will be in municipalities and the remaining 9

percent will be in unincorporated areas. Taxed at 3.775 percent in municipalities and 5 percent in

counties, the proposed credit is expected to reduce general fund gross receipts tax revenue by

$876.9 thousand in FY09. Claims for the credit are expected to grow by 7.9 percent per year,

based on growth in that tax base from FY06 to FY07.

House Bill 258 – Page

2

SIGNIFICANT ISSUES

The proposed credit will apply to licensed child care providers but not registered child care

providers.

CYFD reports that under current regulations, child care providers are authorized pass gross

receipts tax liability on to clients. Therefore, the credit could result in lower costs to consumers

for child daycare. CYFD also indicates that the proposal could increase child daycare access.

LFC notes that while individual credits, deductions and exemptions from the gross receipts tax

may have small fiscal impacts, their cumulative effect significantly narrows the gross receipts tax

base. Narrowing the gross receipts tax base increases revenue volatility and requires a higher tax

rate to generate the same amount of revenue.

ADMINISTRATIVE IMPLICATIONS

TRD will experience some cost in administering the credit due to processing credit claims.

SS/mt