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
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SPONSOR: |
Papen |
DATE
TYPED: |
3/8/03 |
HB |
|
||
SHORT
TITLE: |
Space Vehicle Gross Receipts |
SB |
623/aSFC |
||||
|
ANALYST: |
Smith |
|||||
REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
NFI |
|
Recurring |
State General Fund |
|
|
|
|
|
(Parenthesis
( ) Indicate Revenue Decreases)
Responses
Received From
TRD
SUMMARY
Synopsis of SFC Amendments
The
Senate Finance 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
Senate 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 7-9-30
NMSA 1978 to allow space vehicles to qualify for the compensating tax deduction
currently provided to railroad equipment and aircraft.
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
New Mexico are deductible from gross receipts.
The current provisions allow deductions from the period July 1, 2001
through June 30, 2006. This section is
amended to remove the time restriction, thus making it a permanent
provision.
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 (White Sands Missile Range and Air Force
test facilities at Holloman Air Force Base).
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 New Mexico for research and testing
related activities.
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
although 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/yr:sb