OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

EMERGENCY CERTIFICATION

SB-1000

AN ACT CONCERNING ADJUSTMENTS TO CERTAIN PETROLEUM PRODUCTS TAXES, PETROLEUM FRANCHISE AGREEMENTS, GASOLINE DISCOUNTS FOR CONSUMERS, HOME HEATING OIL AND PROPANE GAS CONTRACT DEPOSITS AND THE FUEL OIL CONSERVATION ACCOUNT.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 09 $

FY 10 $

Department of Revenue Services

GF - Revenue Loss

30. 8 million

30. 8 million

Department of Revenue Services

GF - Revenue Loss

3. 9 million

3. 9 million

Consumer Protection, Dept.

GF - None

See Below

See Below

Comptroller

GF - None

See Below

See Below

Note: GF=General Fund

Municipal Impact: None

Explanation

Sections 1 & 2 of the bill eliminate the 0. 5% increase the Petroleum Companies Gross Earnings Tax (from 7. 0% to 7. 5%) scheduled to occur on 7/1/08. The estimated fiscal impact is: (1) a General Fund revenue loss of $30. 8 million in FY 09 and annual losses of a similar magnitude between FY 10 and FY 13, and (2) a Special Transportation Fund loss of $3. 9 million in each year between FY 09 and FY 13.

Sections 3 and 4 allow for cash discounts to buyers of gasoline. This has no fiscal impact to the state or municipalities.

Sections 5 and 6, which concern deposits made with the purchase, lease or rental of goods including home heating oil and propane, have no fiscal impact to the state or municipalities.

Section 7 places the Fuel Conservation Board under the administration of the State Comptroller and makes various other modifications to the Board that have no fiscal impact.

Further Explanation

General Fund revenue loss – The table below shows the effect of the bill on the Petroleum Gross Receipts Tax rate scheduled to occur on 7/1/08.

Effect of Bill on Petroleum Gross Receipts Tax Rate Increases

On or After

But Before

Current Law1

Rate Change in Bill

% Decrease

-

July 1, 2005

5. 0%

5. 80%

-

July 1, 2005

July 1, 2006

5. 8%

5. 8%

-

July 1, 2006

July 1, 2007

6. 3%

6. 3%

-

July 1, 2007

July 1, 2008

7. 0%

7. 0%

-

July 1, 2008

July 1, 2009

7. 5%

7. 0%

-0. 5%

July 1, 2009

July 1, 2010

7. 5%

7. 0%

-0. 5%

July 1, 2010

July 1, 2011

7. 5%

7. 0%

-0. 5%

July 1, 2011

July 1, 2012

7. 5%

7. 0%

-0. 5%

July 1, 2012

July 1, 2013

7. 5%

7. 0%

-0. 5%

July 1, 2013

-

8. 1%

8. 1%

-

1 Enacted in PA 05-4 (June Special Session)

 

The tax rate reduction is expected to result in a $30. 8 million General Fund revenue loss in FY 09. There will be annual revenue losses of a similar magnitude between FY 10 and FY 13 that will depend on the wholesale price of petroleum products.

Special Transportation Fund revenue loss – Under current law, the rate of the Motor Fuels Excise Tax on diesel fuel is calculated by the Department of Revenue Services (DRS) based on the Petroleum Gross Receipts Tax rate1. The Motor Fuels Tax rate for diesel fuel based on a 7. 5% rate for the Petroleum Gross Receipts Tax is 44. 7 cents per gallon, effective 7/1/08. Reducing the Petroleum Gross Receipts Tax by 0. 5% will reduce the tax on diesel fuel by an estimated 1. 3 cents per gallon (43. 4 rather than 44. 7 cents per gallon), which will result in estimated revenue losses of $3. 9 million to the Special Transportation Fund in each year between FY 09 and FY 13.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future.

The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely for the purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose.

1 PA 07-1(June Special Session) establishes the following method for calculating future diesel tax rates: (1) DRS must, by June 15, 2008, and annually thereafter, determine the average wholesale price per gallon for diesel fuel during the 12 months ending on the preceding March 31 using wholesale price information published by the Oil Price Information Service and average the price information for Hartford/Rocky Hill and New Haven and (2) The diesel tax rate applicable for the 12 months starting the following July 1 each year is 26 cents plus the average wholesale price multiplied by the petroleum products gross earnings tax rate in effect during the same 12 months.