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

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ORIGINAL DATE

LAST UPDATED

2/27/07

HB 872

SHORT TITLE Child Daycare Service Gross Receipts

SB

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($600.0)

Recurring General Fund

($400.0)

Recurring

Local

Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Children, Youth and Families Department (CYFD)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 872 creates a new gross receipts tax deduction for receipts from fees paid to a child

daycare provider for providing child daycare services. The effective date of this provision will be

July 1, 2007.

FISCAL IMPLICATIONS

Based on past gross receipts tax collections, TRD estimates the bill will reduce gross receipts tax

revenue by about $1 million in FY08. About 60 percent of that revenue loss will accrue to the

general fund and the remaining 40 percent to local governments.

SIGNIFICANT ISSUES

Currently, regulations governing child care assistance allow child care providers to collect gross

receipts tax from clients.

House Bill 872 – Page

2

LFC notes that while individual deductions from the gross receipts tax may have small fiscal

impacts, their cumulative effect significantly narrows the gross receipts tax base. Narrowing the

gross receipts tax base increases revenue volatility and requires a higher tax rate to generate the

same amount of revenue.

The bill will reduce local government gross receipts tax collections. Many of New Mexico’s

local governments are highly dependent on gross receipts tax revenue.

ADMINISTRATIVE IMPLICATIONS

The bill will have a minimal administrative impact on TRD.

TECHNICAL ISSUES

TRD notes that the language of the proposal seems redundant; TRD suggests deleting the words

“that are received from the fees paid to the child daycare provider for providing child daycare

services."

SS/nt