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SPONSOR: |
Heaton |
DATE TYPED: |
|
HB |
632 |
||
SHORT TITLE: |
High-Wage Jobs Tax Credit |
SB |
|
||||
|
ANALYST: |
Neel |
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REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
($0.1) |
($1,000.0) |
Recurring |
General
Fund |
(Parenthesis ( ) Indicate Revenue Decreases)
Relates to:
HB 21 Amend Lab Partnership/Small Business Act
SB 12 Amend Lab Partnership/Small Business
Act
HB 14 Technology Startup Tax Credit Act
LFC files
Responses
Received From
Taxation
Revenue Department (TRD)
SUMMARY
Synopsis
of Bill
House Bill 632 enacts
a new section of statute to provide for “high wage jobs tax credits” for newly
created private sector positions. The
amount of the tax credit is graduated as follows:
The period by which
the employer can claim the credit is based on the location and size of the
county and municipality with the smaller counties (i.e. municipality or county
less than 15,000) qualifying for three periods, medium sized municipalities or
counties (populations of between 15,000 and 30,000) qualifying for two periods,
and larger areas (larger than 30,000) qualifying for one period.
The tax credit can be taken against the taxpayer’s modified combined tax liability (gross receipts tax, compensating tax and others), personal income tax liability or corporate income tax liability and may be carried forward for three years or may be sold or transferred.
HB 632 stipulates that the enterprise qualifying for the
tax credit must be a growing business with employment greater on the last
qualifying day of the credit than the day when the new positions
was created. An eligible high-wage job must be one created
on or after
HB 632 requires the
eligible employer to certify to TRD pursuant to a specified
criteria that they are qualified to receive the tax credit. Eligible
employer is defined as an employer who made more than 50 percent of its sales
to persons outside
Significant
Issues
The Legislature has consistently emphasized high
technology job creation. During the 2002
session, it passed HB 40 Software Development GRT Credit (Laws 2002,
Chapter 10) to provide a gross receipts tax deduction for receipts for software
design and development and web-site design and development. The 2000 Legislature passed HB 19 Technology
Jobs Tax Credits (Laws 2000, Chapter 22, 2nd SS) that provides a
basic tax credit and an additional tax credit, both in the amount of 4 percent
of the qualified expenditure made by a taxpayer conducting “qualified” research
at a “qualified facility”. To be
eligible for the additional credit, the taxpayer must increase its payroll by
$75.0 over the base payroll of the taxpayer for each $1.0 million of qualified
expenditures.
Attachments 1 and 2 graphically depict
FISCAL IMPLICATIONS
TRD notes the following assumptions in
determination of the fiscal impact:
The fiscal impact is based on an analysis of the In-Plant Training program provided by the Economic Development Department. A review of training awards from 2002 found that 22 employers were awarded training funds for 1,502 employees. Only 10 of these employees received wages between 110% and 125% of the county average. 212 employees received wages above 125% of the county average. The average wage of the first group was $16.78 per hour, while that of the second group was $21.78 per hour. Based on these data, this group of employers would qualify for approximately $1 million per year in credits. The department does not have a reasonable basis for extrapolating from the population of in-plant training employers to the wider population potentially eligible for the new credits. It is possible that a much larger group would receive credits, but the complicated record keeping required will probably hold down overall utilization of the credit.
There would be a limited fiscal impact in FY04 because of the requirement that an employee hold a job for 48 weeks before the employer can certify their eligibility for the credit.
ADMINISTRATIVE IMPLICATIONS
According to TRD, provisions in HB 632 would require
significant revisions
to forms, instructions
and publications will have to be modified for the CIT, PIT, PTE and CRS systems. The new credit will require manual processes
to track and record the credit. An
application form and a claim form will have to be developed. An additional 0.2 FTE will be
required because of the manual processing required. The new forms will require 60 to 80 hours to
develop and approve. The forms will have
to be updated annually for the average county wage information.
TECHNICAL ISSUES
TRD notes that record keeping on the part of the taxpayer and TRD would
be extremely cumbersome and time consuming.
As an example, there are several overlapping time periods the employer
and the department must track to determine eligibility for the credit. One relevant period is the “qualifying
period” for the job itself. The average
wage during this period is compared to “the most recent” published annual
average wage for the county, which would correspond to a different time
period. Another relevant period is the
most recent twelve months of the employer’s combined tax liability reporting
periods, which is needed to determine whether 50% of the employer’s sales were
to persons outside New Mexico. This
latter determination will require extensive record keeping and reporting. It will also be difficult or impossible to
confirm the validity of information on the destination point of sales.
SN/yr
Attachments