NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature. The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.
Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Suite 101 of the State Capitol Building North.
| SPONSOR: | Cisneros | DATE TYPED: | 02/06/01 | HB | |||
| SHORT TITLE: | Investment Credit & Double-weighted Sales | SB | 139 | ||||
| ANALYST: | Eaton | ||||||
| Subsequent
Years Impact |
Recurring
or Non-Rec |
Fund
Affected | ||
| FY01 | FY02 | |||
| NFI | Indeterminate | Recurring | General Fund | |
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates House Bill 342
SOURCES OF INFORMATION
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
This legislation extends the Investment Credit Act in its current form to Fiscal Year 2011, at which time the credit requirement becomes 1 FTE per $100,000 in credit claimed. This bill requires the Interim Revenue Stabilization and Tax Policy Committee to review the investment credit's effectiveness in the year 2005 and report its conclusions to the Legislature. The bill extends the option for manufacturers to employ a "double-weighted sales factor" apportionment formula against corporate income until tax years beginning on January 1, 2011. The double-weighted corporate income tax apportionment procedure is scheduled by current statute to expire in January, 2003. The investment credit will, in absence of legislation to the contrary, expire in tax year 2004.
FISCAL IMPLICATIONS
This bill has no fiscal impact in FY02 because it extends current deadlines that are contained beyond fiscal year 2002. After 2004, the Taxation and Revenue Department states the fiscal impacts of the proposed measure are uncertain.
Manufacturers currently comprise about one-third of the corporate income tax base. Under the double-weighted sales factor procedure, the maximum tax reduction available to a corporation is 25 percent of tax obligations. If all manufacturers are currently making use of the formula and receive the maximum possible benefit, the result is a tax savings of about 8 percent of current corporate income tax obligations or between $10 million and $15 million annually from what collection would otherwise be.
However, it is arguable that this will cause firms to locate or expand in New Mexico that would not otherwise do so. If that is correct, the apportionment option may actually increase New Mexico corporate income tax obligations.
JBE/ar