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).

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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 Marquardt

DATE TYPED 02/10/05 HB 233

SHORT TITLE Income Tax Credit For Certain School Tuition

SB

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

(-$37,500.0) (-$75,000.0)

Similar Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Public Education Department (NMPED)

No Response from Taxation and Revenue Department

SUMMARY

Synopsis of Bill

House Bill 233 establishes a new section of the Income Tax Act to provide an income tax credit

for tuition payments made by a taxpayer for a dependent who is enrolled in an accredited private

elementary or secondary school in New Mexico. The tax credit can be claimed in an amount

equal to the tuition paid during the taxable year, but not to exceed $3 thousand for each depend-

ent. This credit is refundable, so that if the credit exceeds the taxpayer’s tax liability, the excess

will be refunded.

The provisions of this bill are applicable to taxable years beginning on or after January 1, 2005.

Significant Issues

According to NMPED, a possible consequence of this bill might be that while it would provide a

reduction of income taxes for taxpayers with a child or children in a private school, it might pro-

vide an incentive for parents to enroll their child or children in a private school thus reducing

public school enrollment. It should be noted that the school choice provision of the Assessment

House Bill 233 -- Page 2

and Accountability Act [§22-2C-7(E)] favors a student’s choice to attend a higher ranked public

school if the student’s public school fails to make Adequate Yearly Progress for two or more

consecutive school years.

FISCAL IMPLICATIONS

Since the official analysis from TRD was not received at the time this FIR was being written,

LFC staff makes a preliminary estimate for the fiscal impact of this bill of $75 million in FY06.

According to NMPED 25,885 students were enrolled in private schools in New Mexico during

the school year 2001-2002. Using this number, and assuming that the entire $3,000 credit would

be used, LFC staff calculates that the full-year impact would be $75 million (approximately

25,000 enrolled dependents x $3 thousand). This estimate is conservative given the fact that pri-

vate school enrollment has probably increased since the 2001-2002 school year. LFC staff esti-

mates an FY05 fiscal impact of half of the full-year impact, or $37.5 million. The FIR fiscal im-

pact will be revised upon the receipt of TRD’s analysis, if their fiscal impact estimate is signifi-

cantly different from the LFC estimate.

ADMINISTRATIVE IMPLICATIONS

No analysis had been received from TRD at this time.

TECHNICAL ISSUES

NMPED notes that Page 1, Line 22 of the bill uses the term “accredited” but does not indicate by

whom these private schools would have to be accredited to qualify for the credit.

OPJ/lg