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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
2/01/06
HB
SHORT TITLE Electronic Tax Return Filing and Refunds
SB 320
ANALYST Earnest
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
NFI
NFI
(Parenthesis ( ) Indicate Expenditure Decreases)
Companion to House Bill 382.
SOURCES OF INFORMATION
LFC Files
Responses Received From
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
Senate Bill 320 would amend the Tax Administration Act to:
require a tax return preparer that files over 25 personal income tax returns to file the re-
turns by electronic means unless that taxpayer requests otherwise. A penalty of $5 per
return would be owed for failure to comply with this requirement.
allow the Taxation and Revenue Department to require the electronic delivery of any tax
return or payment by regulation.
lower the threshold -- from $25 thousand to $10 thousand per year -- at which taxpayers
may be required to pay taxes by electronic means.
allow the TRD to modify by regulation the due date for payment of withholding tax.
Under present law, the payments are due by the 25
th
day of the month following the
month for which taxes are due.
pg_0002
Senate Bill 320 – Page 2
FISCAL IMPLICATIONS
No significant fiscal impact would result from enactment of this legislation. The electronic filing
and payment requirements are expected to improve accuracy and timeliness of revenue collec-
tions and distributions, but not necessarily to result in a large net increase in revenue.
SIGNIFICANT ISSUES
The Taxation and Revenue Department has identified the impacts on NM citizens and the de-
partment.
The bill creates new requirements for tax return preparers:
A new form will be required from preparers to show the requirement to electronically file
has been waived by their clients.
Programming changes will be required to even handedly capture, identify and compute
$5 penalty imposed on the preparer.
A new program may be needed to assess tax preparers. For example, out of state tax pre-
parers do not have a CRS or PIT filing requirement. TRD will need to refine their instruc-
tions and regulations to clarify how preparers should identify themselves as a preparer on
the return and who the penalty will be imposed upon. The department could require pre-
parers to register with us, but then we’ll have additional registrations and monitoring to
do.
To change the due date of the withholding tax:
A regulation change will be required before TRD can change the due date of the return.
If the withholding due date were modified by regulation as authorized in the bill, sub-
stantial changes would be required in the department’s revenue processing and informa-
tion systems.
The proposal may create some confusion about the application of certain business tax
credits. Many tax credits can be applied to withholding, and some say “may be claimed
against any tax filed and paid at the same time as GRT”. Currently, this includes the
withholding tax, but under the proposal this might not be the case.
Significant taxpayer and department employee education needs will be associated with these
changes.
PERFORMANCE IMPLICATIONS
The legislation should help the department increase the percentage of PIT and CRS returns filed
electronically, a performance measure mandated by the legislature in the GAA.
ADMINISTRATIVE IMPLICATIONS
TRD indicates that the provisions requiring electronic returns and payments should increase the
speed and accuracy with which the department is able to process taxes. Since the requirements
are limited to larger taxpayers and paid return preparers, the added compliance costs should be
modest.
pg_0003
Senate Bill 320 – Page 3
The modest costs, nevertheless, will be recurring. The department has not quantified a “modest”
expense.
TRD further notes that withholding tax changes would facilitate the department’s participation in
an ongoing effort to integrate the withholding tax program with the Worker’s Compensation
Program and with the Unemployment Insurance program in the effort to streamline reporting and
to improve enforcement capabilities in each program. As an example, the program should help
the department to match withholding tax payments with personal income tax returns to insure
accurate reporting and payment. Computerized matching will enable automated assessments,
vastly increasing the department’s compliance tools on this tax.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Senate Bill 320 is the companion to House Bill 382.
TECHNICAL ISSUES
None identified.
BE/yr