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 a vailable 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 Hanosh

DATE TYPED 01/26/04 HB 202

SHORT TITLE Transport Aircraft Maintenance Gross Receipts

SB

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($1,400.0)

Increasing Recurring

General Fund

($940.0)

Increasing Recurring Local Governments

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates: Senate Bill 261

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 202 expands the eligibility for receiving a tax deduction against gross tax receipts

from aircraft services. The bill would add the service of “maintaining” an aircraft carrier to a list

of existing services that qualify for the deduction (such as refurbishing, remodeling, or otherwise

modifying). The type of aircraft specified on which the services would be performed would also

be changed from “transport category aircraft”, to a broader specification of “commercial or mili-

tary carrier”. The bill also reduces the weight requirement for the aircraft from 65 thousand

pounds to ten thousand pounds.

This bill is being proposed on behalf of the Revenue Stabilization and Tax Policy Committee.

The effective tax date is July 1, 2005.

House Bill 202 -- Page 2

FISCAL IMPLICATIONS

TRD estimates that the total fiscal impact of House Bill 202 will be $1.4 million to the general

fund in FY06 and $940.0 to local governments, for a total impact of $2.34 million. TRD analy-

sis utilized information provided by the Economic Development Department, which indicated

that firms currently providing the newly eligible services have gross receipts of approximately

$40 million per year. Approximately 90 percent of this revenue is attributable to aircraft in the

eligible size range. Thus, according to TRD, the total tax base is $36 million and total tax liabil-

ity is $2.34 million (implying an average tax rate of 6.5 percent). TRD analysis noted that recent

news reports indicate that the state may see a significant increase in the level of aircraft manufac-

turing activity in the near future, which could have the effect of increasing the fiscal impacts of

the proposal.

ADMINISTRATIVE IMPLICATIONS

TRD anticipates minimal impacts on the Department. They report that changes would be needed

for forms, instructions and publication for the CRS program. In addition, taxpayer and TRD em-

ployee education would be required and audit and compliance procedures would have to be de-

veloped.

OPJ/lg