Interest rate for produced minerals.

13LSO-0405.L1

FISCAL NOTE

	FY 2014	FY 2015	FY 2016
NON-ADMINISTRATIVE IMPACT
Anticipated Revenue (Decrease):
GENERAL FUND	(980,000)	(1,960,000)	(2,940,000)

Source of revenue decrease:

Reduction of interest rate applied to delinquent severance taxes on minerals produced on or after January 1, 2013.

Assumptions:

This bill reduces the interest rates on delinquent severance taxes and delinquent gross products taxes on minerals produced on or after January 1, 2013 from the current interest rates to the average short term rate plus 2% as determined by the State Treasurer. This current interest rate on delinquent severance taxes is 12 percent. The current interest rate on delinquent gross products taxes is 18 percent. To determine the short term rate, the State Treasurer shall use the short term rate as determined by the Secretary of Treasury under 26 U.S.C. Section 6621 for December of the preceding fiscal year.

The Treasurer's Office states that in checking the Secretary of Treasury website, it indicates this rate is the short-term rate plus 3 percentage points. The Treasurer's Office indicates that the short-term rate for December 2011 of the preceding fiscal year (FY12) would be 0.24 percent plus 3 percentage points, or 3.24 percent. This 3.24 percent rate plus 2 percent as required in the bill would be 5.24 percent. While the Treasurer's Office seeks clarification on the interest rate proposed in this bill, for purposes of this estimate, the new interest rate is estimated at 5.24 percent.

The average distribution of interest on delinquent severance taxes to the General Fund from FY 2009 through FY 2012 was $6,972,375.37. A decrease in the interest rate on delinquent severance taxes from the current 12 percent to the above estimate of 5.24 percent would result in an estimated decrease in interest distributed to the General Fund of roughly $3.92 million per year for years in which the new interest rate is completely phased in. It is estimated that this interest rate reduction would be completely phased in just before the beginning of fiscal year 2017 (July 1, 2016). Again, for purposes of this estimate, it is assumed that this revenue decrease would phase in at rates of 25 percent in FY 2014, 50 percent in FY 2015, and 75 percent in FY 2016.

The average annual interest collected on delinquent gross products taxes by counties is unknown. However, it is assumed that the decrease in interest collected by the counties would be greater than the impact to the state due to the difference in the current interest rates.

Prepared by:   Dean Temte, LSO  Phone: 777-7881

(Information provided by Craig Grenvik, DOR; 777-5237: Sharon Garland, State Treasurer's Office; 777-7475)