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

SPONSOR Ruiz

ORIGINAL DATE

LAST UPDATED

2/2/06

2/14/06 HB 507

SHORT TITLE

LOW-INCOME RESIDENT CAR INSURANCE

TAX CREDIT

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(13,000.0)

(26,000.0)

(26,000.0) Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates SB 659

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 507 amends the Income Tax Act to provide an income tax credit for low income

households for motor vehicle liability insurance. The maximum credit is $150 per vehicle in the

household with a limit on two credits. The threshold for low income is 150 percent of the federal

poverty guidelines. The credit is only allowed for members of the household who are (a) US

citizen and NM resident, (b) has a valid NM Driver’s license with no moving violations within

the last 3 years, (c) has not had a conviction for driving under the influence in the last three years

and (d) has proof of insurance. If the credit is more than the tax liability than the excess is re-

funded.

The effective date is January 1, 2006.

House Bill 507 – Page

2

FISCAL IMPLICATIONS

TRD reports that 71.4 percent of driver’s license holders have had no moving violation or DWI,

Using data from 2004 tax returns, approximately 142,800 people are deemed eligible for the

credit which would cost $26 million per year. Half of this amount, or $13 million, is in FY06.

Family

Size

Federal Poverty Income Thresholds, 2006

100%

120%

133%

150%

1

9,800 11,760 13,034

14,700

2

13,200 15,8400 17,556

19,800

3

16,600 19,920 22,078

24,900

4

20,000 24,000 26,600

30,000

5

23,400 28,080 31,122

35,100

6

26,800 32,160 35,644

40,200

7

30,200 36,240 40,166

45,300

8

33,600 40,320 44,688

50,400

Information source: U.S. Department of Health and Human Services web site:

http://aspe.hhs.gov/poverty/06poverty.shtml .

ADMINISTRATIVE IMPLICATIONS

TRD reports that the Motor Vehicle Division would probably require additional resources to ver-

ify eligibility and issue credits. HB 507 requires the division to verify citizenship, residency and

income, information that is not currently available to the division.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates SB 659.

TECHNICAL ISSUES

Other credits on the PIT-RC form use “modified gross income” which is a measure of total

household income. HB 507 refers to “gross annual household income.”

TRD:

•

Language in the proposal is unclear regarding whether the proposed if credit is $150 per

vehicle or in total.

•

Paragraph C(2), Section 1 of the proposal requires a person claiming the credits to pos-

sess a valid driver’s license. As written, the measure could be interpreted to include an

ignition interlock license.

•

Paragraph C(3) does not allow anyone with a DWI conviction in the past thirty-six

months to claim this tax credit. However, someone with multiple DWI convictions can

be on a lifetime revocation and have an interlock license. These people pay substantial

amounts for insurance but it because of their own actions. Hence there is no apparent

reason for those people to be eligible for this credit. Paragraph 3 of the proposal should

probably therefore be amended to state that there person has not had a DWI conviction

within the past 55 years. That language would match the retention period in Section 66-

House Bill 507 – Page

3

8-135 NMSA 1978. Insurance companies check records and the convictions are on the

public record for 55 years, the insurance costs reflect that.

•

Several violations should probably be added to the list of disqualifying actions to obtain

the tax credit. They include: 1) individuals with an implied consent revocation on the re-

cord. Like the conviction it is on the public record for 55 years; 2) individuals with open

conviction(s) during the past thirty-six months, and 3) taxpayers that have been convic-

tion under Section 66-8-102 NMSA 1978 – vehicular homicide/great bodily injury.

Again this should be for the 55 year time period, consistent with New Mexico law.

•

Eligibility for the credit should probably be based on adjusted gross income or some

other income measure that is readily available to the Department.

NF/nt