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

SPONSOR Gonzales

DATE TYPED 02/23/05 HB 122/a HTRC

SHORT TITLE Film Production Tax Credit Loans

SB

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Indeterminate Indeterminate

Permanent Funds

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

State Investment Council (SIC)

Taxation and Revenue (TRD)

SUMMARY

House Bill 122 has been amended by the House Taxation and Revenue Committee. The

amendment would strike the emergency clause from the original bill. However, the amendment

does not provide a new effective date for the bill.

Synopsis of Original Bill

House Bill 122 would modify the State Investment Officer’s (SIO) allowable transactions with

film production companies with respect to the film company’s tax credits. Currently, the SIO is

allowed to purchase a portion of an anticipated film production tax credit available to a film pro-

duction company. House Bill 122 would no longer allow the purchase of the tax credit, but in-

stead would allow the SIO to loan up to 80 percent of the expected film production tax credit, up

to the maximum permissible under the statute of ($7.5 million).

In order to help ensure the loan payment to the SIO by the film production company, this bill in-

House Bill 122/a HTRC -- Page 2

serts language to include these refundable tax credit payments for film production in the Tax Re-

fund Intercept Program, which permits the interception of tax credits and diverts them to the

SIO. Alternatively, the bill would allow the SIO to file for the tax credit on behalf of the produc-

tion company, if the company does not file on its own behalf.

House Bill 122 is being proposed on behalf of the Revenue Stabilization and Tax Policy Com-

mittee.

FISCAL IMPLICATIONS

The fiscal implications associated with the amended or original bill are indeterminate at this

time, according to SIC.

ADMINISTRATIVE IMPLICATIONS

According to the SIC, since it currently makes loans under other existing statutes, there would be

little or no administrative impact on the agency as a result of this legislation.

TECHNICAL ISSUES

According to the SIC, there are two potential issues in the current draft of the bill.

1.

There is no definition of “market rate of interest” in this context. Would the market rate

reflect the level of risk, collateral, etc. or would the market rate equal some fixed rate

above the prime rate.

2.

The bill should be modified to clearly define the term “agent” to mean that the SIC could

collect money on behalf of the company claiming the tax credit and use that money to

pay back the loan granted to that company.

OTHER IMPACTS AND ISSUES

According to TRD, provisions permitting the state investment officer to loan money to a film

production company against an anticipated film credit may be considered in violation of Article

IX, § 14 of the New Mexico Constitution. Article IX, § 14 prohibits the state, except in certain

delineated circumstances, from directly or indirectly lending or pledging its credit or making any

donation to a person, association or public or private corporation. None of the exceptions set

forth in Subsections A-F of Article IX, § 14 are applicable to the loan transaction contemplated

in the bill.

OPJ/lg