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

SPONSOR Garcia, MH

ORIGINAL DATE

LAST UPDATED

2/09/07

HB 785

SHORT TITLE Border Zone Trade Support Gross Receipts

SB

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

Minimal Recurring General Fund

Minimal Recurring

Local

Governments

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates SB 701, Relates to HB 547 and HB 1081

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

Economic Development Department (EDD)

New Mexico Border Authority

SUMMARY

Synopsis of Bill

House Bill 785 extends the sunset of an existing gross receipts tax deduction for the receipts of a

trade-support company that locates within twenty miles of a port of entry on New Mexico’s

border with Mexico. For the purposes of this deduction, a trade-support company is defined as a

customs brokerage firm or a freight forwarder. To be eligible for the deduction, receipts must be

received within five years of the trade-support company’s establishment in New Mexico and the

company must employ at least two people in New Mexico.

Currently, the deduction applies to companies locating near a port of entry between July 1, 2003

and July 1, 2008, but the bill would allow companies locating near a New Mexico port of entry

before July 1, 2013 to qualify for the deduction.

House Bill 785 – Page

2

FISCAL IMPLICATIONS

TRD expects the fiscal impacts of this bill, beginning in FY09, to be minimal. However, LFC

notes that construction of a large Union Pacific facility near Santa Teresa may lead more

companies to claim this deduction in future years.

SIGNIFICANT ISSUES

New Mexico’s ports of entry that may benefit from this bill are located in Santa Teresa and

Columbus.

EDD reports that as trade between Mexico and New Mexico grows so will the demand for trade

support services. Customs brokers assist firms that trade internationally with necessary

documentation. Currently, custom broker services are usually performed in El Paso instead of

Santa Teresa. The additional time of stopping in El Paso before Santa Teresa may be a deterrent

to trade in New Mexico.

EDD also reports that the deduction extended in this bill is currently being requested for the first

time since it was enacted by a company moving to Santa Teresa. Another company, Juarez

Customs Brokers’ Association, is reportedly considering constructing a facility in Santa Teresa.

ADMINISTRATIVE IMPLICATIONS

TRD will experience minimal administrative impacts.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Bill 785 duplicates SB 701.

House Bill 785 relates to HB 547 and HB 1081. These bills provide gross receipts and

compensating tax deductions for locomotive fuel as part of a deal to move Union Pacific’s El

Paso facility to Santa Teresa.

TECHNICAL ISSUES

The New Mexico Border Authority recommends amending page 3, line 11 to read, “provided by

United States Customs and Border Protection; and"

SS/csd