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

SPONSOR:	Tsosie		DATE TYPED:	02-05-02		HB
SHORT TITLE:		Tribal Capital Improvements Tax Credit				SB	283
					ANALYST:		Neel

REVENUE

Estimated Revenue		Subsequent Years Impact	Recurring or Non-Rec	Fund Affected
FY02	FY03
	($1,350.0)		Recurring	General Fund
	($1,297.0)		Recurring	Severance Tax Bonding Fund
	($62.0)		Recurring	General Fund
	($3.0)		Recurring	Reclamation Fund

(Parenthesis ( ) Indicate Revenue Decreases) In thousands

Duplicates to HB 165

SOURCES OF INFORMATION

LFC files

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 283 enacts a new section of statute titled the “Tribal Capital Improvements Tax Credit” to allow for intergovernmental tax credits for payment of oil and gas severance tax, oil and gas conservation tax, or oil and gas emergency school tax on products severed from Indian Tribal Lands. The credit provided by SB 283 will be the lesser of:

The amount of the Tribal Capital Improvements Tax imposed by the Indian Nation upon products severed from qualifying wells, or

Two percent of the taxable value of the products severed from qualifying wells.

SB 283 defines Tribal Capital Improvements Tax to mean a tax imposed by the Indian Nation that is exclusively dedicated to fund capital improvements projects on tribal lands.

Significant Issues

The capital improvements credits would be taken proportionately against the various oil and severance taxes listed above. They would also be in addition to credits claimed against the intergovernmental tax credits allowed under Section 7-29C-1 NMSA 1978.

Effective Date – July 1, 2002

FISCAL IMPLICATIONS

TRD notes the following assumptions in determining the impact on revenues:

· Based on severance tax returns filed with the State’s ONGARD system, approximately 1 percent of oil severance and about 3.8 percent of natural gas production currently occurs on Indian land.

· a total 2 percent of net taxable value of oil and gas production on Indian lands.

· Taxable value varies widely from year-to-year with average oil and natural gas prices.

· The estimates in the table assume annual average oil price of $22.00 and gas price of $2.50. (See Attached tables).

The estimates are the maximum impacts possible because the actual amount of credit claimed would be less if tribes with oil and gas production do not all impose tribal improvements taxes equal to at least 2% of the value of all tribal lands oil and gas production

ADMINISTRATIVE IMPLICATIONS

TRD notes an administrative expense associated with SB 283 of $64.0 for System programming hours.

OTHER SUBSTANTIVE ISSUES

TRD notes that the proposed credit would be in addition to the intergovernmental tax credit currently available for wells drilled after July 1, 1995. The present law credit amount is 75% of the lesser of the tribal taxes on production in effect March 1, 1995 and the aggregate production taxes imposed currently by the state. Rather than providing two separate types of credits, administration and compliance would be simplified if the present law credit were eliminated at the same time the new credit is created