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

SPONSOR Arnold-Jones

ORIGINAL DATE

LAST UPDATED

1-30-06

1-30-06 HB 388

SHORT TITLE Public Inspection of Certain Tax Records

SB

ANALYST Dearing

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation & Revenue Department (TRD)

Attorney General’s Office (AGO)

SUMMARY

Enactment of House Bill 388 would make two changes to the provisions of Section 7-1-29

NMSA 1978, which authorizes the Taxation and Revenue Department to make refunds and cred-

its of overpaid tax.

1. In cases where the Department applies a portion of a refund against an outstanding liabil-

ity of the taxpayer, the Department would be required to provide notice of this action to the tax-

payer. A taxpayer may be entitled to interest on the refund if it is not credited to the tax liability

within the time periods set out in Section 7-1-68. This provision was approved by the Legislature

and signed by the Governor as part of HB 64 of the 2003 Legislative Session. However, the same

section of statute was amended by another provision in a separate statute that was signed after

HB 64. Therefore, this provision was not incorporated into the statute.

2. Records of tax credits in excess of $10 thousand would be kept by the Department and

made available for inspection by the public.

FISCAL IMPLICATIONS

Enactment of this legislation would incur no significant impact on state revenues. There is no

associated fiscal impact.

House Bill 388 – Page

2

SIGNIFICANT ISSUES

HB 388 specifically includes within the right to inspect pursuant to the Inspection of Pub-

lic Records Act records of tax “credits” made in excess of $10,000, records which are maintained

by the Taxation and Revenue Department, and requires the Department to keep such records for

at least three years. Currently, only records of tax “refunds” made in excess of $10,000 are spe-

cifically made subject to inspection.

While records of such tax “credits” may already be subject to inspection under the In-

spection of Public Records Act, HB 388 leaves no room for interpretation that such records are

in fact specifically included within the scope of the Inspection of Public Records Act.

ADMINISTRATIVE IMPLICATIONS

The Taxation and Revenue Department has already adopted, as a matter of policy, the require-

ment to make notice of offsets and the requirement to pay out interest until the date the tax liabil-

ity is credited with the refund amount.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates SB 312

Relates to SB 318

HB 388 relates to SB 318 as this bill, if enacted, would amend the current method of calculating

interest amounts paid on both under and over-payments of taxes by corporations and individuals.

TECHNICAL ISSUES

To completely reflect the content of the bill, the title could include reference to the requirement

to make notice of offsets and to pay out interest until the date the tax liability is credited with the

refund amount.

The proposed requirement raises a question about the application of a refund that the taxpayer

requests be carried forward. Currently, the Department does not pay interest if the taxpayer re-

quests to have the refund carried forward. The proposal could be made explicit as to whether this

policy should be continued.

The proposed amendment that would authorize release of information on tax credits could be in-

terpreted as conflicting with the confidentiality requirements in Section 7-1-8. To avoid possible

conflicts, an amendment to Section 7-1-8 could be included that would authorize the release of

the information as proposed in the current bill.

OTHER SUBSTANTIVE ISSUES

According to Taxation and Revenue department, authorizing the department to publish informa-

tion on tax credits could provide additional information about the utilization of the credits. This

information could in turn help the Legislature evaluate whether the tax credits are achieving their

intended purposes.

House Bill 388 – Page

3

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

There will remain some level of ambiguity as to whether tax “credits” made in excess of

$10,000 are specifically subject to the Inspection of Public Records Act.

PD/mt