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

SPONSOR Stapleton

ORIGINAL DATE

LAST UPDATED

2/1/06

HB HJR 9

SHORT TITLE

PROPERTY TAXES OF CERTAIN

ORGANIZATIONS, CA

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

NFI

See Narrative for Detail

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of Bill

House Joint Resolution 9 proposes to amend the New Mexico Constitution to exempt fraternal

societies, orders and associations from property taxes under certain conditions. The fraternal or-

der must provide for the payment of life, sick, accident and other benefits. They also must have

been granted a federal income tax exemption. The order can not conduct gaming activities.

The amendment will go before the voters in the next general election.

FISCAL IMPLICATIONS

The fiscal impact is primarily on the local governments. Due to “yield control,” there is no net

fiscal impact but rather the property tax that would have been paid by the fraternal orders gets

shifted to other taxpayers in the form of higher mill rates. TRD reports that because of the way

the property tax rates are set, there is no impact but rather the rates will be adjusted for all tax-

payers as the proportions of valuation changes. The millage rates for property taxes are set ac-

cording to the need (for debt service, etc) so the rates adjust for all taxpayers to ensure that the

same total amount of revenue is generated. This is the “yield control” provision of property tax

rate setting.

House Joint Resolution Bill 9 – Page

2

TRD has previously reported that the value of the property is approximately $12.4 million and,

using an average 30-mill, $372 thousand in property taxes will be shifted to non-exempt tax pay-

ers.

SIGNIFICANT ISSUES

To be considered a 501(c)(8) organization, the organization must be fraternal in nature, operate

under the lodge system, and provide for the payment of life, sick, accident or other benefits to its

members. An example would be the Fraternal Order of Police which provides benefits to its

members made up of the police force. The IRS defines “fraternal” as sharing common ties and

coming together for a common purpose.

HJR 9 does not include 501(c)(10) organizations, which do not provide benefits to members but

are fraternal charitable organizations. The earnings of these organizations are devoted to com-

munity charitable purposes.

Article 8, Section 3 of the NM Constitution refers to certain tax exempt properties:

The property of the United States, the state and all counties, towns, cities and school districts

and other municipal corporations, public libraries, community ditches and all laterals

thereof, all church property not used for commercial purposes, all property used for educa-

tional or charitable purposes, all cemeteries not used or held for private or corporate profit

and all bonds of the state of New Mexico, and of the counties, municipalities and districts

thereof shall be exempt from taxation.

NF/mt