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 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	Stell		DATE TYPED	2-4-04		HB	60a/HBIC
SHORT TITLE		Water Conservation Gross Receipts				SB
					ANALYST		Neel

REVENUE

Estimated Revenue		Subsequent Years Impact	Recurring or Non-Rec	Fund Affected
FY05	FY06
(180.0)	(190.0)	Increasing	Recurring	General Fund
(120.0)	(125.0)	Increasing	Recurring	Local Gov.

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to:

SB 12, Agricultural Water Conservation Tax Credit;

SB 47, Sandia National Laboratories Water Model

SB 78, National Lab Water Treatment Tax Credit

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Department of Agriculture

Taxation and Revenue Department (TRD)

No Responses Received From

Office of State Engineer (OSE)

SUMMARY

Synopsis of HBIC Amendment

The House Business and Industry Committee amendment changes the original GRT exemption to a deductions, and requires certification of water conserving irrigation technologies to qualify for the proposed deduction.

Synopsis of Original Bill

House Bill 60 amends statute to exempt from gross receipts tax the sale and installation of water conservation equipment for irrigation of agricultural land. The State Engineer and Interstate Stream Commission with New Mexico State University and New Mexico Institute of Mining and Technology will develop standards for water-conserving irrigation technologies eligible for the tax exemption.

FISCAL IMPLICATIONS (Amendment)

TRD notes the following assumptions in determining the fiscal impact:

Irrigation expenditures are a major category of spending for farm operations in New Mexico. The Farm and Ranch Irrigation Survey conducted by the United States Department of Agriculture reports that New Mexico farms spent $12 million for the purchase of irrigation equipment and machinery in 1998. Approximately 12% of total irrigation equipment expenditures were for conservation purposes in 1998. The revenue estimate assumes a 5% annual growth rate for agricultural irrigation expenditure for a total of about $17 million in FY 2005. Of the $17 million total irrigation expenditures, 30% ($5.0 million) is assumed to be on qualified technologies. The assumed eligible expenses are higher than the survey results because the bill lacks detailed definitions of eligible technologies.

FISCAL IMPLICATIONS (Original bill)

The following analysis is from identical legislation (HB 481) introduced in the 2003 session:

TRD relied on data from the Farm and Ranch Irrigation Survey conducted by the United States Department of Agriculture reports that New Mexico farms spent $12 million for the purchase of irrigation equipment and machinery in 1998. Approximately 12% ($1.5 million) of total irrigation equipment expenditures were for conservation purposes. The revenue estimate assumes agricultural expenditures for irrigation equipment total about $14 million per year. The estimate

further assumes non-agricultural irrigation equipment expenditures total approximately $3 million. Of the $17 million total irrigation expenditures, 12% ($2 million) is assumed to be on qualified technologies.

TECHNICAL ISSUES

· TRD notes that if this proposal is meant to be an agriculturally based exemption, then language should be added to clarify the point.

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