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

SPONSOR Taylor

ORIGINAL DATE

LAST UPDATED

1/24/06

HB

SHORT TITLE Municipal Property Tax Rebate

SB 222

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

NFI

NFI Recurring Local Government

NFI

NFI Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB 201

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

NM Municipal League (NMML)

Department of Finance and Administration (DFA)

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 222 amends the property tax rebate in the Income Tax Act to allow a local option for

municipalities. Currently, only counties have the ability to issue a property tax rebate to low-

income residents. SB 222 also allows for municipalities to hold an election for the purpose of

levying additional property tax up to a maximum of one mill ($1.00 per $1,000.00 of assessed

value) to pay for the rebate to low-income residents.

The rebate is 75 percent of property tax liability for the lowest income scaling to 35 percent for

taxpayers with modified gross income between $22,000 and $24,000 with a maximum credit of

$350.00. The rebate is also refundable which means that if the rebate exceeds the tax liability the

taxpayer receives a refund of the remaining amount.

Senate Bill 222 – Page

2

FISCAL IMPLICATIONS

TRD reports that there are no significant fiscal implications for state and local funding sources as

the rebates will likely be a rare occurrence. Los Alamos County has so far been the only county

to provide a rebate which totaled $21,000 in 2004. Since the bill contains language that calls for

an election to increase the property tax mill levy to pay for the rebate, the costs will be covered

by the increased revenue in most cases.

The only eligibility criteria is modified gross income so low-income taxpayers who are over 65

years old will be eligible for both credits with an individual maximum of $600 ($350 for the low

income rebate and $250 for the low income over 65 rebate). Since it is a municipal credit and

not a state credit, there would be no state fiscal impact.

ADMINISTRATIVE IMPLICATIONS

TRD:

Modest administrative impacts would be imposed on the Department by the proposed legis-

lation. Personal income tax forms would, for example, need to be modified to allow taxpay-

ers to claim the rebates. Changes in the state's computer system would also be necessary.

Taxpayer education would also be required. Representatives of the Department of Finance

and Administration's Local Government Division would also be required to modify property

tax rate certificates to display the new debt-service rates resulting from the proposed rebate

program.

DUPLICATION

HB 201 is a duplicate bill.

TECHNICAL ISSUES

TRD:

A few New Mexico municipalities extend across county boundaries. In such cases, if one

county has adopted the current rebate system and another has not, the prohibition on the

municipality adopting the proposed rebate if the county has already adopted it would mean

that the proposed rebate could only be implemented in part of the municipality, creating

numerous difficulties.

OTHER SUBSTANTIVE ISSUES

TRD:

Current statutes (Section 7-2-14.3 H) require counties to consider providing the rebates in

every odd-numbered year in which they are not currently providing them. Counties often re-

quest estimates of the numbers of taxpayers that would qualify for the rebates. This is prob-

lematic because data available to the Department does not contain information on modified

gross income by county (or municipality) that can be linked with property tax liability.

Counties may be reluctant to provide the rebates because they have no way of generating

accurate estimates of their net fiscal impacts, i.e., revenue raised with one-mill rate imposi-

tions compared with the likely amount of the personal income tax rebates.

Senate Bill 222 – Page

3

ALTERNATIVES

The property tax rebate for low income taxpayers who are over 65 years old allows credit for

renters as well as owners with an implicit assumption that 6 percent of rent is passed-through

property taxes from the landlord. This feature could be added by adding language to include

renters.

NF/yr