Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

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

SPONSOR Smith

ORIGINAL DATE

LAST UPDATED

2/04/06

HB

SHORT TITLE Local Government Gross Receipts Tax Info Access SB 314

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

None

(Parenthesis ( ) Indicate Expenditure Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY06

FY07

FY08 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

($0.1)

($0.1)

($0.1) Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Senate Bill 314 duplicates House Bill 658.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 314 would expand the exception to confidentiality of tax return information to allow

the Taxation and Revenue Department (TRD) to release to municipalities and counties the

amount of gross receipts taxes paid by individuals in their jurisdiction.

Under current law TRD is authorized to release to a county or municipality, which has imposed a

local option gross receipts tax, the names, taxpayer identification numbers, and addresses of reg-

Senate Bill 314 – Page 2

istered gross receipts taxpayers reporting gross receipts within their jurisdiction. SB 314 would

allow TRD to provide information on “gross receipts and gross receipts taxes paid” by taxpayers.

FISCAL IMPLICATIONS

None identified.

ADMINISTRATIVE IMPLICATIONS

TRD is already subject to preparing reports for municipalities and counties upon their request.

This legislation would add additional information to that report. TRD expects most jurisdictions

will want these reports on a regular basis, and anticipates the new responsibility will require an

FTE to handle the requests. Moreover, the department finds that data processing system changes

will require additional non-recurring expenses. TRD notes that the bill these functions will have

to be met out of the department’s existing budget.

According to TRD, providing this information will lead to numerous requests for department au-

dits or other informal methods to verify data accuracy. The Department’s auditors are fully

committed, and any new functions performed pursuant to the bill might crowd out ongoing audit

and collection activities.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Senate Bill 314 duplicates House Bill 658.

OTHER SUBSTANTIVE ISSUES

TRD indicates that the proposal is motivated by the desire on the part of local governments to

know whether all taxpayers in their jurisdiction are reporting and paying all their due taxes. It is

unclear, however, how local governments would use this information. They do not have the au-

thority to conduct audits, would not be allowed to publish the information, or to confront taxpay-

ers themselves. The most likely outcome is that they would make a series of requests of the De-

partment to conduct investigations into whether taxpayers are paying correctly. These requests

will probably not provide important audit leads because the local governments do not have ac-

cess to as much information – and do not have as much expertise with the tax code – as the De-

partment’s audit managers, who currently determine the Department’s priorities for audit work.

The Department already applies the overwhelming majority of its audit and collection resources

to the Gross Receipts Tax. The proposal does not contain an appropriation to enable the De-

partment to expand those resources. Thus, the most likely outcome of the proposal is a series of

requests for audits to which the Department will be unable to respond.

Confidentiality of taxpayer information is an extremely important component in securing the

voluntary compliance of taxpayers. Over 97 percent of all amounts colleted by the state are vol-

untarily reported. Any policy change that undermines taxpayers’ motivation to voluntarily com-

ply with tax requirements poses significant risks to the tax system.

BE/nt