NOTE:  As provided in LFC policy, this report is intended only 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 for other purposes.

 

The most recent FIR version (in HTML & Adobe PDF formats) is available on the Legislative Website.  The Adobe PDF version includes all attachments, whereas the HTML version does not.  Previously issued FIRs and attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

 

 

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

 

 

 

SPONSOR:

Stewart

 

DATE TYPED:

2/13/03

 

HB

317

 

SHORT TITLE:

National Lab Gross Receipts Tax Deduction

 

SB

 

 

 

ANALYST:

Smith

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

 

 

 

 

30,200.0

33,000.0

Recurring

*Net General Fund (GRT )

 

25,700.0

28,000.0

Recurring

Local Governments *(GRT)

 

7,400.0

8,100.0

Recurring

General Fund (Tangible Property)

 

5,000.0

5,400.0

Recurring

Local Governments (Tangible Property)

 

(7,800.0)

(8,500.0)

Recurring

General Fund (Resale)

 

(5,200.0)

(5,700.0)

Recurring

Local Governments (Resale)

 

 

29,900.0

32,600.0

Recurring

*Net General Fund

 

25,400.0

27,700.0

Recurring

Local Governments

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

 

Responses Received From

 

TRD

 

SUMMARY

 

     Synopsis of Bill

 

HB-317 removes the gross receipts and compensating tax exemptions and deductions for national laboratories and distributes the gross receipts proceeds to the Public School Fund.

 

      Significant Issues

 

The public school fund is effectively a subaccount of the general fund.

 

FISCAL IMPLICATIONS

 

TRD notes that much of the information used to derive the fiscal impact estimate was obtained from “The Economic Impact of the Department of Energy on the State of New Mexico-Fiscal Year 1995” published by the Albuquerque Operations Office of the U.S. Department of Energy. The fiscal impact estimate assumes a $1.8 billion total contract amount for management services provided to the Department of Energy in federal fiscal year 2004.  Of the total contract amount, approximately 56% is presumed to be taxable gross receipts.  The estimate further assumes more than $220 million in taxable gross receipts for sellers of tangible personal property to the lab.

 

The amendments to Section 7-9-60 capture sales of tangible personal property to the laboratory.    The gross receipts tax imposed on sellers of tangible personal property to the laboratory would be split between the general fund and local governments.  The proposal only earmarks the net receipts derived from the gross receipts tax imposed on the laboratory to the general fund. 

Receipts of selling a service for resale to the laboratory would become deductible under Section7-9-48 NMSA 1978.  Under Section 7-9-48, a sale of a service for resale is deductible only if the buyer resells the service in the ordinary course of business and the resale is subject to the gross receipts tax.  Currently, sales of services for resale to a 501(c)(3) organization are taxable because the subsequent sale of the service is not taxable. Bringing the laboratory’s sale of service into the gross receipts tax base allows sellers of services (to the laboratory) for resale to begin deducting these receipts (assuming possession of the requisite Type 5 NTTC).  Hence the negative fiscal impact component presented above.  

 

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

 

This bill conflicts with SB 485 because of its effective date and the way the new revenues are distributed. HB-316 phases-out the gross receipts and compensating tax exemptions and deductions for national laboratories in 20% increments and distributes the gross receipts proceeds to the Public School Fund.

 

OTHER SUBSTANTIVE ISSUES

  • If the lab’s budget was not increased to accommodate the tax, then procurement or wages would be reduced accordingly.

 

  • An Albuquerque Journal article noted that the president’s budget called for a massive increase in weapons research funding; it would be roughly the same (in real terms) as it was during the height of the cold war. A significant portion of this money would flow to Los Alamos.

TRD notes that this proposal targets one taxpayer.  If it were to pass, it could conceivably be challenged on equal protection grounds.

SS/njw