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





SPONSOR: Russell DATE TYPED: 02/23/01 HB 422
SHORT TITLE: Tuition Scholarship Tax Credit SB
ANALYST: Williams


REVENUE



Estimated Revenue
Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY01 FY02
$ (1,000.0) $ (10,700.0) Recurring General Fund



(Parenthesis ( ) Indicate Revenue Decreases)



Duplicates/Conflicts with/Companion to/Relates to HB 55, HB 420, HB 421



SOURCES OF INFORMATION



LFC Files

Taxation and Revenue Department (TRD)

State Department of Education (SDE)



SUMMARY



Synopsis of Bill



The bill authorizes a non-refundable, personal income tax credit for contributions to a New Mexico school for tuition scholarships for low income students, i.e. up to 185% of the poverty level. The credit is not to exceed $500. A tuition scholarship for a low income student must not exceed 95 percent of the cost of tuition to attend the school. The taxpayer cannot designate an individual student as intended beneficiary of the contribution. The school must provide a receipt to the taxpayer. The credit would be effective beginning tax year 2001.



Significant Issues



According to the distribution of income as reported on tax returns, 47.3% of New Mexico's population is at or below 185% of poverty.



If the school is organized as a non-profit, then the donation may also be deducted for federal and state income tax purposes.







SDE notes pre-school programs would not be eligible.



SDE notes the bill does not specify the type of accreditation that would be required.



FISCAL IMPLICATIONS



TRD estimates the fiscal impact in the first year at a general fund revenue loss of $1,000.0. In the second year, the revenue loss is estimated at $10,700.0 as schools and parents adjust their behavior to fully maximize their tax advantages under the law.



OTHER SUBSTANTIVE ISSUES



TRD notes concerns about state money devoted to education be appropriated to public schools.



AW/ar