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 Foley

DATE TYPED 2-18-2005 HB 1016

SHORT TITLE Retirement Tax Savings Account Income Taxes

SB

ANALYST Taylor

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($80,000.0) ($160,000.0)

Similar Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department

SUMMARY

House Bill 1016 amends the Income Tax by allowing a deduction for certain withdrawals from

retirement tax savings account.

Persons fifty-nine and one-half or older would be permitted to claim a deduction equal to deduc-

tions from a qualified retirement account, a deferred compensation plan or a thrift savings fund.

Persons under fifty nine and one-half would be permitted to claim a deduction from withdrawals

from those accounts if the withdrawals are used for either medical care expenses or higher edu-

cation expenses permitted by the Internal Revenue Code.

Provisions of the bill would be applicable as of January 1, 2005.

FISCAL IMPLICATIONS

TRD estimates that this legislation would reduce general fund revenues by $160 million on a

full-year basis. The estimate is based on IRS statistics that show New Mexicans reported $2.9

billion of income that would qualify for the deduction as of 2003. They assume this tax base has

grown by 10 percent in the subsequent two-years to $3.3 billion. Applying an average rate of 5

percent, they arrive at the full-year estimate of $160 million. The FY05 estimate represents an

accrual of half the full year impact.

House Bill 1016 -- Page 2

ADMINISTRATIVE IMPLICATIONS

TRD reported that the bill would not impose any administrative difficulties.

TECHNICAL ISSUES

TRD submitted the following technical issue:

The bill refers to provisions of the Internal Revenue Code to identify the plans from

which withdrawals will qualify, to avoid problems if concepts of qualified retirement

plans are revised. It would probably be appropriate, however, to add, after all references

to the Internal Revenue Code: “as amended or renumbered”.

BT/lg