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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 2/28/05

HB

SHORT TITLE Convenience Store Operation Income Tax Credit

SB 721

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($750.0) ($1,500.0)

Decreasing Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Environment Department (NMED)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 721 provides a tax credit against personal or corporate income taxes for the purchase

of equipment or expenditures on improvements that are necessary to comply with certain statutes

and rules that regulate the operation of convenience stores. The tax credit may be up to 50 per-

cent of the cost of the equipment and improvements. Unused tax credits can be carried forward

for succeeding taxable years.

The provisions of this bill are applicable to taxable years beginning on or after January 1, 2005.

Significant Issues

NMED notes that the Environmental Improvement Board adopted new regulations in 2004 that

require convenience stores to take measures to protect workers from crime. The measures in-

clude surveillance cameras, time lock safes, safety training, exterior lighting, signage and secu-

rity alarms. In addition, stores open between 11:00 PM and 5:00 AM are required to employ two

or more workers at night, control access or provide pass through windows. Senate Bill 721

Senate Bill 721 -- Page 2

would allow convenience store owners to recoup part of the cost of equipment and improvements

necessary for complying with these regulations.

FISCAL IMPLICATIONS

The total fiscal impact, as per TRD’s analysis, is -$1.5 million to the General Fund in FY06.

According to the 2003 National Association of Convenience Stores Official Industry Store

Count, as of December 31, 2002 there were a total of 884 convenience stores in New Mexico.

TRD’s fiscal estimate assumes an average expenditure of $3,000 per store claimed by 1,000 store

owners (or $3 million) times 50 percent (or $1.5 million). TRD cautions, however, that the total

number of stores affected could be substantially different depending on the definition of “con-

venience store,” and the number of convenience stores that would be required to make expendi-

tures to comply with a recent ruling by New Mexico's Environmental Improvement Board per-

taining to convenience store safety.

ADMINISTRATIVE IMPLICATIONS

Minimal impacts.

TECHNICAL ISSUES

TRD cautions that the portion of the statute allowing a credit for purchasing equipment or mak-

ing physical changes as a result of compliance with state or local laws affecting convenience

stores is excessively broad, since the language could be read as allowing a credit for changes re-

quired by general laws applicable to any business, including zoning laws.

Additionally, the carry-forward provision of the credit is unlimited, which means TRD can never

close its books on the credit’s use.

OPJ/yr