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.

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

SPONSOR Komadina

DATE TYPED 2-25-2005 HB

SHORT TITLE Home School Income Tax Deduction

SB 144/aSCORC

ANALYST Taylor

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($365)

($730)

($730) Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of SCORC amendments

The SCORC amendments make technical changes to the bill. The first clarifies child eligibility

for the deduction; the second requires that people claiming the deduction to attach a copy of the

notification sent pursuant to Section 22-1-2.1 (the section of statute dealing with home school

reporting requirements).

These amendments do not affect the fiscal impact estimate.

Synopsis of Original Bill

Senate Bill 144 provides an income tax deduction for taxpayers providing home school services

for their children (registered with the Public Education Department). The amount of the deduc-

tion is three thousand five hundred dollars ($3,500) per dependent child home schooled for a full

year, and half that for a child home schooled for at least a half year, but not a full year.

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

FISCAL IMPLICATIONS

Taxation and Revenue Department reports that there are approximately 6,250 students who are

home schooled in New Mexico. Their estimate assumes that 4,000 of these would be eligible for

Senate Bill 144/aSCORC -- Page 2

the full deduction; 400 would be eligible for the 50 percent deduction, and the remainder would

not have sufficient tax liability to be eligible for the deduction. They assume an average appli-

cable tax rate of 5 percent.

Multiplying the 4,000 students assumed eligible for the full deduction by the $3,500 deduction

by the 5 percent tax rate implies a revenue loss of $700 thousand. Adding the 400 students as-

sumed eligible for the half deduction and multiplying by $1,750 by the 5 percent tax rate implies

an additional revenue loss of $35 thousand or so.

The estimated FY05 impact is half of the FY06 impact, and results from the January 1, 2005 ap-

plicability date.

ADMINISTRATIVE IMPLICATIONS

TRD reports that the administrative implications are modest and could be handled with existing

resources.

OTHER SUBSTANTIVE ISSUES

TRD’s report included the following graph of the state’s Public Education Department home

school enrollment data.

New Mexico Home School Enrollment

4,038

2,337

6,732

6, 174

6,666

6, 642

6, 083

3,048

6,243

5,669

5,858

6,487

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

School Year Ending In

BT/njw:yr