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
SPONSOR: |
Larranaga |
DATE
TYPED: |
|
HB |
753 |
||
SHORT
TITLE: |
Home
Child Care Tax Credit |
SB |
|
||||
|
ANALYST: |
Smith |
|||||
REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
(6,275.0) |
(6,500.0) |
Recurring |
General Fund |
|
|
|
|
|
(Parenthesis
( ) Indicate Revenue Decreases)
Responses
Received From
Taxation
and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
House Bill 753 would
provide a $350 per family non-refundable credit for resident individuals and
families caring for children under the age of 12 at home. The individual
claimant or non-working spouse must not have a job or gainful self-employment
at any time during the year. The credit offsets personal income tax liability.
FISCAL
IMPLICATIONS
TRD notes the estimate
was constructed as follows: Of the 250,000 married household filing joint returns,
35 percent, or 87,500 are estimated to have one child under the age of 12. Of these, 22.5 percent or 19,688 have one
parent not in the workforce. 29.3 percent of these households, or 5,768 have insufficient
liability to claim the $350 credit provided by the proposed legislation, and
therefore claim about half this amount or $175. The remaining 13,919 claim the
full $350. Hence credits claimed by married household total 13,919 x $350 + 5,768 x $175 =
$4,871,672 + $1,009,477 = $5,881,148. Some heads of households, married filing
separate returns and singles are not in the workforce, but care for children at
home. No detailed information is available for this group regarding labor force
information. It was therefore assumed that credits for this group totaled 10
percent of credits claimed by married households. The final estimate was
therefore $5,881,148 x 1.10 = 6,469,263 and rounded to $6.5 million.
OTHER
SUBSTANTIVE ISSUES
TRD
makes the following tax policy arguments”
·
The
proposed credit is non-refundable and thus denies state aid to stay-home
parents with no tax liability. In this
sense, it may not help the low-income and single parents who need it most.
·
The
existing dependent child care credit of 7-2-18.1 NMSA 1978 can be claimed only
for periods when the resident (or if filing jointly, the resident and the
resident’s spouse) is gainfully employed.
Generally, then it will not be possible for one taxpayer to claim both
credits.