Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are available on the NM Legislative Website (legis.state.nm.us). Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and attachments may also be obtained from the LFC in Suite 101 of the State Capitol Building North.

F I S C A L I M P A C T R E P O R T

SPONSOR	Campos		DATE TYPED	1/27/2004		HB	37
SHORT TITLE		Municipal Income Tax Distribution				SB
					ANALYST		Taylor

REVENUE

Estimated Revenue		Subsequent Years Impact	Recurring or Non-Rec	Fund Affected
FY04	FY05
	(4,600.0)	(9,200.0)	Recurring	General Fund
	4,600.0	9,200.0	Recurring	Local

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department

SUMMARY

Synopsis of Bill

House Bill 37 creates a municipal income tax distribution and reduces the municipal gross receipts tax distribution.

The municipal gross receipts tax distribution is decreased from 1.225 percent to 1.0 percent.

A monthly municipal income tax distribution is provided to all municipalities. The amount of the distribution is the greater of what the municipality would have received in the month from the 0.225 percent gross receipts distribution given up or one twelfth of 0.275 percent of total Adjusted Gross Income (AGI) reported by their residents in the tax year two years prior to the calendar year in which the distribution is made.

If the lower municipal gross receipt tax distribution would impair the municipalities ability to meet bond obligations, it would be able to pledge any amount of the income tax distribution.

The bill carries a January 1, 2005 effective date.

FISCAL IMPLICATIONS

TRD estimates that enacting this bill would reduce general fund revenues by $4.6 million in FY05 and by $9.2 million on a full year basis. Municipal government revenues would be increased by an equal amount. The TRD estimate is based on tax year 2001 returns and taxpayers’ mailing addresses. They note that estimates are only approximate because the data is not precise. TRD’s estimate for all municipalities is attached.

ADMINISTRATIVE IMPLICATIONS

TRD reports that 2005 tax year forms will need to be changed to allow them to determine residency. They also note that this will require more data entry. However, they are silent as to whether this will require additional resources.

TECHNICAL ISSUES

TRD’s report raised the following technical issue:

In proposed new Section 7-1-6.43(A) the first alternative distribution amount references the amount that would be distributed under Section 7-1-6.4 “…if the percentage used for purposes of that section was two hundred twenty-five thousandths percent…” The problem is that there are two percentages used in Section 7-1-6.4. The section would be clearer if it read “…if the percentage into which the tax rate imposed by Section 7-9-4 is divided in that section were two hundred twenty-five thousandths percent…”

The proposal does not specify what revenue source TRD is to use in making the required distribution. The bill should specify the intended source.

BT/yr