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F I S C A L I M P A C T R E P O R T
SPONSOR Lujan
DATE TYPED 02/17/05 HB 634
SHORT TITLE Clinical Laboratory Gross Receipts
SB
ANALYST Padilla-Jackson
REVENUE
Estimated Revenue
Subsequent
Years Impact
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
($2,112.0) ($2,260.0)
Increasing Recurring
General Fund
($1,320.0) ($1,413.0)
Increasing Recurring General Fund (Lo-
cal Gov. hold harm-
less distribution)
($3,432.0) ($3,673.0)
Increasing Recurring
Net Change to
General Fund
($1,320.0) ($1,413.0)
Increasing Recurring Local Governments
$1,320.0
$1,413.0
Increasing Recurring Local Governments
Hold Harmless
distribution
0
0
0 Recurring Net Change to Lo-
cal Governments
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicate of Senate Bill 570.
SOURCES OF INFORMATION
LFC Files
Responses Received From
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
House Bill 634 provides a gross receipts tax deduction for an accredited clinical laboratory for
medical services reimbursed by managed care. The current law, which was passed in the 2004
legislative session, provides a tax deduction from gross receipts for receipts from payments by a
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House Bill 634 -- Page 2
managed health care provider or health care insurer for commercial contract services or Medi-
care part c services provided by a health care practitioner. House Bill 634modifies the definition
of health care practitioner to include certain clinical laboratories.
Significant Issues
TRD notes that the proposed deductions would be eligible for the local government “hold harm-
less” provisions that were adopted as part of the 2004 legislation.
FISCAL IMPLICATIONS
The total fiscal impact, as estimated by TRD, is -$3,432.0 to the general fund in FY06. The new
tax deduction would have an impact of -$2,112.0 and the hold harmless provision would have a
negative impact to the general fund of -$1,320.0. As noted by the table above, the net change to
the general fund includes the estimated payment to local governments in lieu of revenues that
would have been received by before the new tax deduction.
Based on aggregate industry trends, TRD’s analysis assumes that approximately half of these
providers’ receipts are assumed to come from managed care insurers, and are thus eligible for the
new deduction. Assuming an average gross receipts tax rate, the fiscal estimate would imply to-
tal eligible receipts of approximately $52.6 million for FY06 and a seven percent growth rate in
FY07. TRD noted that gross receipts data from the department’s “Analysis of Gross Receipts by
North American Industry Classification System (NAICS)” was gathered for the industry Medical
and Diagnostic Laboratories and the remaining industries in Health Care, based on industry
composition from the 1997 Economic Census
ADMINISTRATIVE IMPLICATIONS
If the bill is passed, TRD anticipates that system coding and troubleshooting must be performed;
forms and instructions must be revised; taxpayer education materials and instruction publications
must be prepared; and Department personnel must be trained on the new provisions. These
changes can be implemented with existing resources.
OPJ/lg