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 Cravens

DATE TYPED 2-20-2005 HB

SHORT TITLE Health Gross Receipts and Medicaid Service Tax

SB 372

ANALYST Taylor

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

3,780.0

12,134.0 Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

Human Services Department (HSD)

SUMMARY

Senate Bill 372 phases out the gross receipts tax deduction for payments from managed care

providers, health care insurer for commercial contract services or medicare part C services. The

phase-out would begin after December 31, 2005, after which 80 percent of receipts would be de-

ductible. An additional 20 percent of the deduction would be phased-out each year thereafter

until the deduction is completely eliminated on January 1, 2010.

The bill also creates a new tax: the Medicaid Services Tax. The tax is imposed against the re-

ceipts from managed care providers, health care insurer for commercial contract services or

medicare part C services. The tax rate is 1 percent in the year that 20 percent of the receipts are

deductible (calendar year 2009). The rate would increase to 2 percent in the year that these ser-

vices were no longer deductible (2010). Revenues raised by the tax are earmarked to the Medi-

caid program.

The bill carries an emergency clause, making it effective upon signature by the governor.

FISCAL IMPLICATIONS

The Taxation and Revenue Department estimates that the phase-out of the gross receipts tax de-

duction would increase state general fund revenues by $3.8 million in FY06 and by $12.1 million

Senate Bill 372 -- Page 2

in FY07. When fully phased-out, general fund revenues would increase by $44.6 million. No

local government impact is reported: the deduction includes provisions holding local govern-

ments harmless.

The impacts of the new “Medicaid Services Tax” are delayed until FY09. TRD estimates that

the tax would raise $3.8 million in FY09 and $11.4 million in FY10.

ADMINISTRATIVE IMPLICATIONS

TRD’s reported the following administrative note:

By Dec 31, 2009, a new tax program will need to be developed and implemented with

new forms, instructions and publication changes. Taxpayer and staff education would be

needed over and above the usual updates. Audit and compliance procedures would be

needed.

TECHNICAL ISSUES

TRD also submitted this technical issue:

The bill proposes to impose a new tax on receipts that are defined in a separate section of

statute. This could create problems if that other section is amended or repealed.

BT/yr