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 Heaton

ORIGINAL DATE

LAST UPDATED

2/06/07

3/16/07 HB 434/aSFC

SHORT TITLE Permanent High-Wage Jobs Tax Credit

SB

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

*See Narrative Recurring General Fund

*See Narrative Recurring

Local

Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

No Response Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Committee amendment to House Bill 434 reinserts language to cause the

high-wage jobs tax credit to continue to apply only to jobs created before July 1, 2009.

Synopsis of Original Bill

House Bill 434 makes permanent the high-wage jobs tax credit, which was enacted in 2004 and

currently applies only to jobs created before July 1, 2009. The bill repeals the credit’s January 1,

2010 repeal date and amends the credit to apply to all jobs created in the future.

FISCAL IMPLICATIONS

The bill will only have a fiscal impact in the last half of FY10 and beyond, when it will prevent

the high-wage jobs tax credit from being repealed. Without a response from TRD, it is difficult

House Bill 434 – Page

2

to estimate the fiscal impact in FY10 and beyond. However, LFC analysis of data provided by

TRD indicates high wage jobs tax credits claimed from September 2005 to December 2006

totaled $249.3 thousand. This indicates that credits of about $187.0 thousand are being claimed

each year.

The bill will reduce general fund and local government revenues because one-quarter of the

state’s 5 percent gross receipts tax is shared with local governments and because 20 percent of

compensating tax revenues is distributed to the small cities and small counties assistance funds.

SIGNIFICANT ISSUES

The high-wage jobs tax credit may currently be claimed by an eligible employer who creates a

new economic-based job that is filled for at least 48 weeks of the prior year. The credit may be

claimed against the state gross receipts tax, the compensating tax, withholding taxes, and several

smaller surcharges. To be eligible for the credit, more than half of an employer’s sales in the

previous year must have been made to persons outside of New Mexico.

The amount of the credit is equal to 10 percent of wages, not to exceed $12 thousand per year,

for each job that pays over $40 thousand per year in a municipality with population over 40

thousand or for each job that pays over $28 thousand per year in a smaller municipality or in an

unincorporated area of a county. The credit is refundable and may be claimed for up to four years

for each job created.

ADMINISTRATIVE IMPLICATIONS

Processes are already in place to administer this credit.

SS/nt