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

 

 

 

SPONSOR:

Harrison

 

DATE TYPED:

02/04/03

 

HB

324

 

SHORT TITLE:

Tangible Personal Property Tax Exemption

 

SB

 

 

 

ANALYST:

Smith

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

 

 

 

 

Positive

 

Recurring

Owners of

Personal Property

 

Negative

 

Recurring

Owners of

Real Property 

 

NFI

 

 

State and Local Funds

 

 

 

 

 

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

 

Responses Received From

 

Taxation and Revenue Department

 

SUMMARY

 

     Synopsis of Bill

 

House Bill 324 exempts “other tangible personal property used for business purposes that has been deducted for federal tax purposes by the owner” from the property tax.

 

FISCAL IMPLICATIONS

 

Because of yield control, the effect of this bill is to shift taxes from businesses to households and businesses that are heavily invested in real property and personal property that will still be subject to tax. TRD notes that as a general rule, the yield control statutes have the effect that, when the property tax base is reduced by a new exemption, operating mill levies are adjusted upward to offset the impact on local government revenues.  However, under some circumstances, the limits on total operating levies will prevent the upward adjustment, so the new exemption can lead to lower operating revenue.  Essentially two conditions must be met for operating revenue losses to occur as a result of the type of base reduction caused by the proposed bill. First, the entity must have imposed the maximum rate allowed under existing statute. Secondly, the actual (i.e., ‘yield controlled”) rate must equal the imposed rate. In cases where the entity has imposed the maximum rate but the rate has been reduced via the yield control mechanism, the loss of base will be compensated for via operating rate increases. In cases where the actual and imposed rates are at the maximum, however, rate adjustments will not compensate for losses in tax base. Debt rates, including the one employed for state debt purposes, will essentially always adjust in a way that compensates for base reductions.

 

OTHER SUBSTANTIVE ISSUES

 

TRD has provided the following table showing the county level impacts.

 

 

Illustration: Effects of Eliminating Depreciable Personal Property Taxation by County

 

 Column:

 (1)

 (2)

 (3)

 (4)

 (5)

 (6)

 County

Depreciable Personal Property

%

of Total

Total Net Taxable Value**

Depreciable Personal Property Percent of Total

Weighted Average Non Residential Rate (Mills)

Approximate Revenues -- Col (5) x Col (1)/$1,000

 Bernalillo

      396,638,917

          39.1

     9,284,129,807

                  4.27

                39.6

     15,712,485

 Catron

             200,380

            0.0

          66,595,079

                  0.30

                15.4

              3,084

 Chaves

        24,448,330

            2.4

        663,854,170

                  3.68

                26.0

          634,773

 Cibola

        13,885,082

            1.4

        194,521,689

                  7.14

                28.4

          394,200

 Colfax

        11,449,477

            1.1

        245,549,748

                  4.66

                25.2

          288,377

 Curry

        22,147,928

            2.2

        404,520,396

                  5.48

                23.7

          525,041

 DeBaca

             591,402

            0.1

          33,376,964

                  1.77

                25.8

            15,243

 Dona Ana

        68,884,699

            6.8

     1,984,387,702

                  3.47

                30.9

       2,131,154

 Eddy

        46,772,267

            4.6

     1,737,463,068

                  2.69

                17.7

          828,412

 Grant

          9,483,227

            0.9

        476,190,212

                  1.99

                15.0

          142,715

 Guadalupe

          1,880,345

            0.2

          84,671,621

                  2.22

                31.3

            58,850

 Harding

          3,691,323

            0.4

          41,884,792

                  8.81

                16.8

            61,910

 Hidalgo

          1,845,801

            0.2

          93,534,417

                  1.97

                22.6

            41,680

 Lea

        52,169,328

            5.1

     1,610,522,658

                  3.24

                24.7

       1,286,982

 Lincoln

          8,814,167

            0.9

        545,555,677

                  1.62

                27.7

          244,116

 Los Alamos

          8,116,703

            0.8

        510,919,259

                  1.59

                20.5

          166,149

 Luna

        13,960,542

            1.4

        259,915,140

                  5.37

                20.8

          290,969

 McKinley

        29,017,820

            2.9

        580,702,177

                  5.00

                32.4

          939,110

 Mora

             587,656

            0.1

          61,946,552

                  0.95

                23.8

            13,968

 Otero

        14,558,772

            1.4

        586,678,227

                  2.48

                30.2

          439,000

 Quay

          3,970,042

            0.4

        108,656,349

                  3.65

                26.6

          105,617

 Rio Arriba

          5,553,406

            0.5

     1,254,383,846

                  0.44

                23.3

          129,439

 Roosevelt

        11,006,558

            1.1

        204,410,623

                  5.38

                19.0

          208,761

 San Juan

      104,953,914

          10.3

     3,106,092,088

                  3.38

                23.7

       2,483,573

 San Miguel

          7,040,426

            0.7

        362,502,900

                  1.94

                28.0

          197,401

 Sandoval

        31,837,092

            3.1

     1,433,443,667

                  2.22

                26.9

          856,549

 Santa Fe

        74,608,982

            7.3

     3,789,882,990

                  1.97

                23.3

       1,739,459

 Sierra

          3,582,132

            0.4

        184,856,384

                  1.94

                23.9

            85,544

 Socorro

          3,124,981

            0.3

        122,164,319

                  2.56

                32.0

            99,902

 Taos

          8,027,814

            0.8

        676,500,978

                  1.19

                19.3

          154,900

 Torrance

          3,528,047

            0.3

        216,174,461

                  1.63

                22.3

            78,751

 Union

        16,283,433

            1.6

        120,074,290

                13.56

                22.0

          357,794

 Valencia

        12,497,155

            1.2

        704,391,594

                  1.77

                30.0

          374,460

 

 

SS/sb