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SPONSOR: |
Begaye |
DATE TYPED: |
|
HB |
571 |
||
SHORT TITLE: |
Navajo Nation Special Fuels Tax Credit |
SB |
|
||||
|
ANALYST: |
Reynolds-Forte |
|||||
REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
(978.0-8,900.0)* |
** |
Recurring |
State
Road Fund |
|
(122.0-1,100.0)* |
** |
Recurring |
Local
Governments |
|
|
|
|
|
(Parenthesis ( ) Indicate Revenue Decreases)
(*) – The fiscal impact in FY04 is
uncertain. It is unclear whether the tax
credit would apply before a cooperative agreement is entered into between the
Taxation and Revenue Department and the Navajo Nation, and the timing of such
an agreement cannot be predicted. The Department
is attempting to gather information regarding diesel fuel sales within the
Navajo Nation boundaries, but the Navajo Tax Commission has not yet responded. Assuming,
for purposes of illustration only, a very narrow interpretation of the
applicable geographic area, and a loss of state tax on approximately 6 million
gallons of diesel fuel, the negative fiscal impact would be approximately
$1,100 thousand [a loss of ($978) thousand to the State Road Fund, and a loss
of ($122) thousand to the Local Governments Road Fund].
(**) – The fiscal impact in subsequent years
would be similar to FY04, assuming the very limited definition of “exterior
boundaries”. However, under a broader
interpretation, or in the event some court decision allows the extension of
tribal taxing authority into “Indian Country”, the negative fiscal impact could
be tens of millions of dollars in lost state revenue. Also, it is highly likely that the
Legislature may find it necessary to extend equal treatment to all tribes and
pueblos, in which case the negative fiscal impact could be additional
tens of millions of dollars.
Responses
Received From
State
Highway and Transportation Department
SUMMARY
Synopsis of Bill
HB571
would allow the Taxation & Revenue Department to enter into a cooperative
agreement with the Navajo Nation regarding administration and collection of the
state Special Fuel Excise Tax and a similar tax imposed by the Navajo
Nation. The full amount of the Navajo
Nation tax would be credited against the state’s tax, effectively eliminating
the state’s tax within Navajo Nation boundaries. The Navajo Nation tax credit would operate on
transactions “taking place on land owned by or for the benefit of the Navajo
Nation and located within the
exterior boundaries of the Navajo Nation”.
HB571
has a July1, 2003 effective date.
FISCAL
IMPLICATIONS
As noted in the tables above, the revenue loss
for this bill could be from $1 million to $10 million or even more dependent
upon how the geographic area where the Navajo Nation fuel tax can be imposed is
defined. Also, it is highly likely that
if HB571 became law, the Legislature may find it necessary to extend equal
treatment to all tribes and pueblos, in which case the negative fiscal impact
could be additional tens of millions of dollars.
The
It should be noted that the State Highway
Department has pledged the special fuel tax for repayment of highway debentures
for the next 12 years; HB 571 will
divert some this revenue.
LEGAL
ISSUES
The
First, the Bill states it applies to
transactions “taking place on land owned by or for the benefit of the Navajo
Nation and located within the exterior boundaries of the Navajo Nation.” However, which lands of northwestern
It is plausible that the “exterior boundaries of
the Navajo Nation” language could be interpreted as synonymous with the term
“Indian Country” which is a legal term of art in the area of
federal-tribal-state jurisdiction. See
18 U.S.C. 1151. Transactions occurring
within Indian Country are subject to the jurisdiction of the federal
government, perhaps subject to the tribe’s jurisdiction, and generally state
jurisdiction is barred. The term “Indian
Country” has three components
(a) all land within the limits of any Indian reservation under the
jurisdiction of the United States Government, notwithstanding the issuance of
any patent, and including rights-of-way running through the reservation, (b)
all dependent Indian communities within the borders of the United States . . .
and (c) all Indian allotments, the Indian titles to which have not been
extinguished, including rights-of-way running though the same.
The first component is essentially the Navajo
Indian Reservation, which occupies a relatively small area in northwest
Much of the land in northwest
Linkage of the tax credit to land ownership
decidedly complicates, hence increases the expense of effective enforcement, as
enforcement officers would be required to research the property records at the
County Clerk and Recorders’ offices and property records for the trust lands
which are held by the Bureau of Indian Affairs in order to determine whether a
particular transaction is eligible for the tax credit.
TECHNICAL
ISSUES
Linkage of the tax credit to land ownership
decidedly complicates, hence increases the expense of effective enforcement, as
enforcement officers would be required to research the property records at the
County Clerk and Recorders’ offices and property records for the trust lands
which are held by the Bureau of Indian Affairs in order to determine whether a
particular transaction is eligible for the tax credit.
OTHER
SUBSTANTIVE ISSUES
·
The
·
Tax returns filed by International Fuel Tax Agreement
(IFTA) taxpayers and New Mexico Special Fuel Excise Tax users would not be
affected by the cooperative agreement.
The fuel distributors would make use of the tax credit, and
retail purchasers would be unaware the fuel was not subject to state tax. Fuel users would still report the gallons for
purposes of determining the state taxes paid on gallons of diesel purchased,
even though the state received no tax revenue.
In some cases, the uncollected revenue might still be required to
be forwarded to other states under IFTA.
·
The
state has already granted an exemption from state gasoline excise taxes for gasoline
retailed within Native American Reservation and
PRF/njw