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

SPONSOR Smith

DATE TYPED 02/1/2005 HB

SHORT TITLE

Increase Commercial Vehicle Penalties

SB 280/aSFC

ANALYST Moser

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates Appropriation in the General Appropriation Act

Relates to Appropriation in the General Appropriation Act

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Unknown – See

notes in Fiscal

Implications

Unknown – See notes in

Fiscal Implications

Recurring

State Road Fund

Unknown – See

notes in Fiscal

Implications

Unknown – See notes in

Fiscal Implications

Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Public Safety (DPS)

Department of Transportation (DOT)

SUMMARY

Synopsis of SFC Amendment

The amendments adopted by the Senate Finance Committee add “(5) saddle mounts” to the ve-

Senate Bill 280/aSFC -- Page 2

hicles considered specialized equipment that may exceed an overall length of sixty-five feet, in-

crease the penalty assessment for failure to register motor carrier to $300.00 from $100.00, and

reduce to $50.00 from the proposed $300.00 the penalty for failure to carry tax identification per-

mit.

Synopsis of Bill

Senate Bill 280 would allow commercial motor carrier vehicles that are not in compliance with

the weight distance tax to be detained until that tax is paid. The current penalty for failure to

register a commercial vehicle (misdemeanor - $100 to $500 and/or up to 90 days) is extended to

apply to failure to stop at ports-of-entry. The fine (penalty assessment) for failure to stop at

ports-of-entry is increased for multiple offenders from $100 to be $250 for a second offense and

$500 for a third or subsequent offense.

Fines for oversize vehicles would be doubled. Fines for overweight vehicles (applicable to

“divisible loads” where it is possible to avoid an overweight situation) would be doubled. Fines

for operating without an oversize-overweight permit (applicable to loads that are not divisible)

are increased from $50 to $100 for a first offense, $250 for a second offense, and $500 for a third

or subsequent offense. The fine for failure to carry a weight distance tax identification permit is

increased from $50 to $300. New penalty assessment categories are added to coordinate with

recent changes in federal rules regarding the number of hours a commercial driver may be on

duty, and revised federal requirements related to driver log books.

An exception to current vehicle length limits is proposed for a bus operating on the national

network of highways, and state law is changed to conform to federal law regarding the length of

automobile and boat transports, beverage semitrailers, and munitions carriers using dromedary

equipment.

Numerous technical changes are made to change references to the tax identification “card” to be

the tax identification “permit”, and to update statute for past recompilation revisions.

Significant Issues

•

State fiscal analysts and others familiar with the weight distance tax have increasingly

observed that compliance with that tax declined following a 2001 revision to the way tax

identification permits were issued. During the 2003 Special Session, HB-15 proposed a

revision to tax identification permits, requiring vehicle-specific permits be issued. HB-15

also increased the rate of the weight distance tax as part of the funding package for Gov-

ernor Richardson’s Investment Partnership (GRIP) transportation infrastructure initiative.

Revenue analysts thought long and hard about the wisdom of increasing a tax program

that was already experiencing compliance problems, but in the end two facts were com-

pelling. First, the tax was long overdue for tax rate maintenance, and second, the fact that

the revenue was sorely needed to address the damage to the state’s infrastructure caused

by the heavy vehicle transportation industry. This bill proposes significant revisions de-

signed to encourage tax compliance and regulatory compliance, and to allow motor car-

rier regulatory officials (the Motor Transportation Division of the Department of Public

Safety in particular) to assist the Taxation and Revenue Department in furthering tax

compliance efforts.

Senate Bill 280/aSFC -- Page 3

•

The majority of firms operating heavy trucks are conscientious taxpayers operating in a

very competitive, highly regulated, cost-conscious environment. The fact that there ap-

pears to be a substantial degree of tax evasion by a portion of the industry creates a “level

playing field” problem for the conscientious segment of the industry. Every effort the

state can make to further universal compliance with tax laws and obligations serves to

keep the playing field more level in this competitive industry. This bill provides many of

the tools that are needed to promote tax and regulatory compliance.

•

Recent advances in the technological tools available to the Motor Transportation Division

now allow the identification of delinquent or noncompliant taxpayers. The current prob-

lem is: what can MTD do when it recognizes a tax compliance problem. The current an-

swer is: not much. The Taxation and Revenue Department is charged with administra-

tion of the tax, but MTD who has the only significant contact with the industry has no

current authority to take action for noncompliance with tax obligations. This bill pro-

vides MTD with a very effective tool to assist with and promote tax compliance.

PERFORMANCE IMPLICATIONS

From DOT’s point of view, the performance criteria for MTD should involve not only regulation

of heavy vehicle safety issues, but collection of revenue for the State Road Fund. If the penalties

for tax evasion and regulatory noncompliance are not sufficiently motivating to the taxpayer, it

makes MTD’s job that much harder. The increase in penalties associated with avoiding ports-of-

entry or traveling without an appropriate oversize-overweight permit, should promote MTD’s

effectiveness in its mission.

FISCAL IMPLICATIONS

State Road Fund: The bill would be expected to have a significant eventual positive impact on

weight distance tax compliance. However, since the degree of current noncompliance is not

known it is difficult to forecast the weight distance tax impact. Also, other recent changes in law

(particularly the vehicle specific tax identification permit required under 2003 Special Session,

Chapter 3 [HB-15]) is expected to enhance revenue at some point. It is difficult to attribute a

particular revenue impact to a specific proposal, since this bill and other initiatives all work to-

gether for the overall improvement in administration of the tax. Overall, an improvement in

weight distance tax revenue in the $5 million to $10 million range may be conservative. Im-

provement in overweight permit fees and the newly-implemented ton-mile tax revenue is not es-

timable due to a lack of data at this time.

State General Fund: The Motor Transportation Division has not supplied historical information

to DOT on the number of Penalty Assessment citations issued for the various offenses included

in the bill. MTD did suggest that about 770 citations per year are issued for overweight vehicles

(presumably of the type that are overweight with a “divisible load”). DOT is unable to estimate

the positive fiscal impact on the State General Fund from the proposed increases in certain Pen-

alty Assessment fees.

Aside from the positive fiscal impact to the general fund associated with increased penalty as-

sessment fees, the likely affect this bill would have on weight distance tax and overweight permit

fees compliance is of utmost importance to DOT.

Senate Bill 280/aSFC -- Page 4

ADMINISTRATIVE IMPLICATIONS

MTD will need to provide training to port-of-entry and other field staff regarding tax issues, pro-

cedural changes, and perhaps some new situations that may require a “judgement call”. MTD

staff should also be reminded that their mission will now include an expanded focus on tax com-

pliance.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

None

OTHER SUBSTANTIVE ISSUES

•

The provision in Section 1 allowing a vehicle be detained until tax is paid should prove to be

an extremely effective one. As MTD is aware, it will also require careful administration.

However, once a few trucks are validly detained for noncompliance with tax obligations, it is

likely word would spread through the trucking community that “you better not get busted for

nonpayment of taxes in New Mexico!”

ALTERNATIVES

In the absence of provisions similar to those proposed in this bill, continued and increasing prob-

lems with weight distance tax and overweight permit fee compliance by a segment of the tax-

payer population would be expected.

EM/lg:yr