HBA-GUM S.B. 1321 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 1321 By: Ratliff Ways & Means 5/10/1999 Engrossed BACKGROUND AND PURPOSE Currently, the state does not pay interest to a taxpayer along with a tax refund or credit on an amount found to be erroneously paid.. A delinquent taxpayer is charged a 12 percent rate. One-year certificate of deposit rates are between four and five percent, which makes interest on the delinquent amount an additional penalty to the 10 percent already charged. If taxpayers remain delinquent beyond 60 days, interest begins to accrue at an annual rate of 12 percent. The combined penalty and interest charged to a taxpayer is 20 percent of the tax due, after only one year. Interest assessment is subject to the same collection procedures available for non-payment of taxes, even after the full tax liability has been remitted and the interest assessment is the only remaining balance. S.B. 1321 enables a taxpayer to receive interest payments, along with the tax refund, and establishes a variable interest rate based on the prime rate plus one percent for payments due by delinquent taxpayers. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the comptroller of public accounts in SECTION 5 of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 111.060, Tax Code, as follows: Sec. 111.060. INTEREST ON DELINQUENT TAX. (a) Provides that the yearly interest rate on all delinquent taxes imposed by this title is at the rate of 12 percent for report periods originally due on or before December 31, 1999, after which the rate of interest is variable and determined as provided in Subsection (b). (b) Provides that the rate of interest to be charged to the taxpayer is the prime rate plus one percent, as published in The Wall Street Journal on the first day of each calendar year that is not a Saturday, Sunday, or legal holiday. (c) Redesignated from existing Subsection (b). Makes nonsubstantive and conforming changes. (d) Redesignated from existing Subsection (c). Makes nonsubstantive and conforming changes. SECTION 2. Amends Subchapter B, Chapter 111, Tax Code, by adding Section 111.064, as follows: Sec. 111.064. INTEREST ON REFUND OR CREDIT. (a) Provides that in a comptroller of public account's (comptroller's) final decision on a claim for refund or in an audit, interest is at the rate set in Section 111.060 (Interest on Delinquent Tax) on the amount found to be erroneously paid for a certain period, except as provided by Subsections (b) and (c). (b) Provides that a credit taken by a taxpayer on the taxpayer's return does not accrue interest. (c) Provides that for a refund granted for a report period due on or after January 1, 2000, the rate of interest is the rate set in Section 111.060. Provides that a refund for a report period due before January 1, 2000, does not accrue interest. (d) Provides that this section does not apply to an amount paid to the comptroller under Title 6 (Unclaimed Property), Property Code, or under an agreement made under Section 153.017 (Cooperative Agreements With Other States). (e) Requires all warrants for interest payments to be drawn against the fund or account into which the erroneously paid tax was deposited. Requires the interest to be paid from funds appropriated for that purpose. SECTION 3. Amends Section 111.101, Tax Code, as follows: Sec. 111.101. New title: SETTLEMENT. (a) Authorizes the comptroller to settle a claim for a tax, penalty, or interest imposed by this title, if the total costs of collection, as conclusively determined by the comptroller, of the total amount due would exceed the total amount due, rather than exceed $300. Makes conforming changes. (b) Authorizes the comptroller to settle a claim for a refund of tax, penalty, or interest imposed by this title, if the total costs of defending a denial of the claim, as conclusively determined by the comptroller, would exceed the total amount claimed. Deletes text regarding the comptroller examining a taxpayer's records. SECTION 4. Amends Section 111.102, Tax Code, to delete text authorizing the comptroller, as part of a redetermination order, to settle a claim for a tax, penalty, or interest imposed by this title if the cost of collection would eceed the amount of tax due and that amount is $1,000 or less. Makes conforming changes. SECTION 5. Authorizes the comptroller to adopt rules and take other actions before January 1, 2000, as the comptroller considers necessary or advisable to prepare for SECTIONS 3 and 4 of this Act taking effect. SECTION 6. (a) Provides that SECTIONS 3, 4, and 5 of this Act to take effect on the first date on which they may take effect under Section 39 (Time of Taking Effect of Laws; Emergencies, Entry on Journal), Article III, Texas Constitution. (b) Effective date: January 1, 2000, for SECTIONS 1 and 2 of this Act. SECTION 7. Emergency clause.