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

SPONSOR Sanchez, M

ORIGINAL DATE

LAST UPDATED

1/24/06

2/14/06 HB

SHORT TITLE Laboratory and Small Business Credit

SB 259/aSFC

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(600.0)

(1,200.0) Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB440/aHBIC

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

Economic Development Department (EDD)

Sandia National Laboratories (SNL)

Responses Received From

Economic Development Department (EDD)

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Committee amended Senate Bill 259 to include eligibility requirements for

the Laboratory Partnership with Small Business Tax Credit and make technical corrections. The

amendment adds a new section that directs TRD to track credits claimed and match the credit

with specific instances of assistance. The laboratory must notify each small business receiving

assistance of the option to obtain ownership of tangible or intangible property, receive from the

small business acknowledgement of assistance, and obtain a form that indicate request and com-

pletion of small business.

The amendment also changes the required filing date of the annual report to October 15 and re-

quires the report of a national laboratory on its own as well as one operating jointly with another

laboratory. The original left the single laboratory requirement out of the language.

Senate Bill 259/aSFC– Page

2

These amendments may modestly affect the reporting burdens of the national laboratories. This

language conforms to House Bill 440 as amended by House Business and Industry Committee

and the language included in House Taxation and Revenue Committee substitute for House Bill

82. Fiscal impacts have changed from the original due to new information and collaboration with

TRD.

Synopsis of Original Bill

Senate Bill 259 amends the “Laboratory Partnership with Small Business Tax Credit Act” by

doubling the amount of the credit for urban and rural small business assistance, increasing the

maximum amount a national laboratory may qualify for, and requiring an activity report by the

national laboratories in New Mexico. The required report includes the following information:

Summary of program results and the number of small businesses assisted by county

Description of projects involving multiple small businesses

Survey results from assisted businesses

Total tax credits claimed pursuant to the Laboratory Partnership with Small Business Tax

Credit Act

An economic impact study of jobs created, jobs retained, cost savings, and increased

sales generated by small businesses for which assistance is provided

The new credit will be $20,000 per small business for rural areas, defined as non-Class A coun-

ties with property tax valuation of less than $7 billion, and $10,000 per small business for urban

areas. The maximum annual credit increases to $2.4 million from up from $1.8 million per na-

tional laboratory.

The effective date is July 1, 2006.

FISCAL IMPLICATIONS

The Economic Development Department (EDD) has indicated that the revision would result in

decreased general fund revenue of $1.2 million per year. According to Sandia National Laborato-

ries (SNL), they have taken the credit each year since 2001 and the amount has been very near

the maximum. Since the University of California has operated the Los Alamos National Labs

(LANL), they have not qualified for the credit. The new contract however is expected to qualify

for the credit since they will most likely subject to the gross receipts tax, according to the Eco-

nomic Development. Hence, the increase in the amount of the credit is the increase for SNL

from $1.8 million to $2.4 million, or $0.6 million, and $0.6 million for LANL. LANL will add

another $1.8 million due to the change in the contract: this is excluded here because it is not an

impact of this legislation.

SIGNIFICANT ISSUES

EDD: Sandia National Laboratories has assisted more than 1,300 small businesses in both urban

and rural New Mexico since 2000. More than $8.1 million was invested in expansion efforts and

purchases of local goods and services. Participating companies realized a decrease in operating

costs of more than $2.6 million and increased revenues of nearly $7.6 million. Over 235 addi-

tional jobs were created by participating companies as the result of this technical assistance pro-

gram.

Senate Bill 259/aSFC– Page

3

POSSIBLE QUESTIONS

When will it be decided that Los Alamos National Labs is subject to the gross receipts tax.

NF/mt