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

SPONSOR Steinborn

ORIGINAL DATE

LAST UPDATED

2/13/07

2/28/07 HB 719/aHFL

SHORT TITLE Veterans' Organization Property Tax Exemption

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

NFI

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates, Relates to, Conflicts with, Companion to

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Department of Veterans Services

SUMMARY

Synopsis of HFl Amendment

House Bill 719 was amended on the House Floor to make the act effective contingent on passage

of a constitutional amendment (HJR 16) by the voters.

Synopsis of Bill

House Bill 719 exempts the property of veteran’s organizations that are chartered by the US

Congress from property taxation if the property is used by local, state or federal governmental

activity for events or by nonprofit community organizations or other veterans’ organizations.

FISCAL IMPLICATIONS

Assuming each property is valued at $250,000, the 500 veteran’s organizations that would

qualify would own $125 million in property. The taxable value is $41.7 million and the liability

House Bill 719/aHFL – Page

2

would be approximately $1.1 million statewide. If more of the organizations are in Bernalillo

County, the impact could be much higher as Bernalillo County has a higher property tax rate.

Since most counties adjust the property tax rate according to their funding needs, any property

tax exemption for one group of taxpayers has the effect of raising property tax rates for all other

taxpayers.

SIGNIFICANT ISSUES

Department of Finance and Administration (DFA):

Current assessments for these organizations would be excluded from the tax roles and

property tax collection and distribution would be diminished. Fiscal impact would likely

be spread throughout the state. NM counties, cities and schools will take the big hits on

operating revenues. With voter-approved bond issues, the total debt service is divided by

the current taxable value to get a debt rate. Thus, the effect of this bill on capital would be

to shift burden from the veteran’s organizations to the general public. The county that

would probably take the hardest hit would be Bernalillo County, due to the fact that the

county has the largest number of veterans’ organizations headquarters.

This legislation exempts from property taxation the VFW, DAV, American Legion and

AMVETS along with many smaller organizations chartered by the US Congress. In NM

there are between 500 and 600 active chartered veterans’ organizations. Out of the

approximately 600 organizations, probably the majority rent out space to governments for

events or to other community organizations. Since the bill does not quantity how much

community or government use is necessary to qualify for the exemption, we must assume

that every active chartered veteran’s organization that owns property will qualify for this

exemption.

This legislation is narrowly written to only apply to veterans’ organizations that are

chartered by US Congress. What is the need to isolate these groups and not include all

organizations that are related to veterans’ if the intent is to aid veterans. This could be

viewed as a major policy issue and could have repercussions.

OTHER SUBSTANTIVE ISSUES

DFA has questioned whether the exemption should apply to all veterans’ organizations rather

than just those chartered by Congress.

DFA reports that NM already is a low property tax state in comparison with other states and so

the state needs to be careful in allowing exemptions from property tax.

NF/mt