August 19, 1991
TO: BOARD OF GOVERNORS NO. 62-91
STATE SECURITIES MEMBERS NO. 33-91
TAX MEMBERS NO. 35-91
UNIT INVESTMENT TRUST MEMBERS NO. 34-91
INVESTMENT ADVISER MEMBERS NO. 35-91
INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 34-91
RE: TEXAS PASSES TAX BILL
__________________________________________________________
The Institute is pleased to inform you that on August 12,
1991, the Texas Legislature passed a budget that does not include
a sales tax on investment advisory or other financial services.
As you may be aware, during the past several months the
Texas Legislature and Governor's Office have grappled with the
severe budget crisis in Texas. The budget shortfall at the end
of the regular session was estimated to be between five and six
billion dollars. In an effort to resolve the revenue shortfall,
Texas legislators and key governmental officials (including a
special Task Force on Revenue appointed by the Governor) reviewed
every possible source of revenue, including different plans to
raise additional tax revenue by expanding the sales tax to
services (including brokerage transactions and investment
advisory fees) and revision of the franchise tax.
In May and June of this year, the Governor's Task Force on
Revenue held a series of public hearings throughout the state to
solicit public comment regarding a variety of proposals to
restructure the Texas tax system. The Institute and its Texas
based members submitted written testimony to the Task Force
opposing expansion of the sales tax to financial services by
specifically addressing the adverse impact such a tax would have
on mutual fund shareholders and the mutual fund and Texas
investment advisory industries.
In mid-July, a thirty day special session of the
Legislature was called to approve a budget for the 1992-93 fiscal
biennium. The Institute and the Institute's lobbyist met with
several key legislators and constantly monitored the various
legislative proposals to ensure that the sales tax was not
expanded to investment advisory or other financial services.
The legislature ultimately enacted a tax package that
amends the franchise tax to apply to corporate income, raises the
state gasoline tax, increases university tuition, and imposes a
$200 annual fee on doctors, lawyers and other professionals. The
legislature also adopted several budget cuts and reorganization
proposals suggested by the Comptroller and approved a
constitutional amendment authorizing a state lottery.
Inasmuch as the revision to the Texas franchise tax may
affect you, we have attached a copy of the chapter relating to
the amendments to the franchise tax. Please note that Section
171.106 includes a single apportionment formula for regulated
investment companies.
We will keep you advised of further developments.
Lawrence A. Rogers
Senior Counsel
Attachment