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F I S C A L I M P A C T R E P O R T
SPONSOR: |
Nunez |
DATE TYPED: |
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HB |
682/aHTRC |
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SHORT TITLE: |
Space Vehicle Gross Receipts |
SB |
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ANALYST: |
Smith |
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REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or Non-Rec |
Fund Affected |
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FY03 |
FY04 |
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NFI |
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(Parenthesis
( ) Indicate Revenue Decreases)
Duplicates SB623/aSFC
Responses Received From
TRD
SUMMARY
Synopsis of
HTRC Amendment
The House Taxation and Revenue Committee amendments remove sections 3 and 5 from the bill. These new deductions were responsible for most of the fiscal impact in the original bill. Further, TRD has reconsidered the fiscal impact of section 4; they now score this deduction at $0.0.
Synopsis of Original
Bill
House
Bill 623 proposes several changes regarding the gross receipts taxation of
space-related activities.
Section
1: Adds a new section to the Gross Receipts and Compensating Tax Act
(“GR&CTA”) to allow gross receipts and compensating tax deductions for the
use of fuel for space vehicles or launchers.
Section
2: Amends Section
Section
3:Adds a new section to the
GR&CTA to allow a gross receipts tax deduction for the receipts from
manufacturing space vehicles or components and receipts from selling the
service of processing component parts of a space vehicle.
Section
4: Under present law Section 7-9-54.2 NMSA 1978, receipts from
launching, operating or recovering space vehicles and payloads, preparing
payloads, and operating a spaceport in
Section
5: Adds a new section to the
GR&CTA to provide a deduction for receipts from testing services at
federally-owned facilities on a federal reservation (
Section
6: Adds a new section to the GR&CTA to
allow a compensating tax deduction for the value of test articles, equipment,
and materials used in
FISCAL
IMPLICATIONS
TRD relied on
information provided by the New Mexico Economic Development Department (EDD);
the 1997 Census of Professional, Scientific, and Technical Services; and the
1997 Census of Manufacturing.
·
Section
1 has no current fiscal
impact because there are no space vehicles or space vehicle launchers using
fuel in the state.
·
Section
2 has no current fiscal
impact because there are no space vehicles currently being brought into use in
the state.
·
Section
3 results in a fiscal
impact estimated to be approximately $1.5 million in state and local gross
receipts taxes. The estimate assumes a
taxable base of approximately $25 million, which was derived from economic
census estimates of space vehicle and component part manufacturing
services.
·
Section
4 has no current fiscal
impact, but the deductions allowed under Section 7-9-54.2 are scheduled to be
discontinued in fiscal year 2007. The
deduction is currently worth about $500 thousand in state and local gross
receipts taxes. Thus, this provision
would have a recurring impact beginning in FY 2007.
·
Section
5 would result in most
of the total fiscal impact. Currently,
testing services at the affected facilities generate roughly $360 million in
taxable gross receipts. Hence these
provisions will result in a combined state and local revenue loss of nearly $22
million. This estimate is based on
information provided by EDD.
·
Section
6 results in a fiscal
impact of about $2.5 million. The fiscal
impact estimate assumes $50 million in test articles would no longer be subject
to the compensating tax. Compensating tax collections are distributed 80% to
the general fund and 20% to small cities/small counties assistance funds.
TECHNICAL ISSUES
TRD notes that some of the new sections of the GR&CTA
created in this bill do not contain key definitions. For example, Section 1 does not provide
definitions of “space vehicles” or “space vehicle launchers”. Some definitions can be borrowed from present
law Section 7-9-54.2, but it would probably be wise to include the
“space-related” definitions that now appear in Section 7-9-54.2, and other key
definitions, into the general definitions section of the GR&CTA (Section
7-9-3 NMSA 1978). That way, the
definitions will apply to all of the existing and proposed statutes, and the
provisions of this proposal will be more administrable
OTHER SUBSTANTIVE ISSUES
The Economic Development
Department reports that NASA and Air Force test articles are free from state
taxation. During test programs, ownership of the test article stays with the
manufacturer and is thus subject to compensating tax.
SS/njw:yr