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F I S C A L I M P A C T R E P O R T
SPONSOR Gonzales
ORIGINAL DATE
LAST UPDATED
2/12/07
HB 969
SHORT TITLE Municipality Compensating Tax Distributions
SB
ANALYST Schardin
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
6,414.2 Recurring Municipalities
(5,131.4) Recurring General Fund
(641.4) Recurring Small Cities
Assistance Fund
(641.4) Recurring Small Counties
Assistance Fund
(Parenthesis ( ) Indicate Revenue Decreases)
Relates to HB 265 and SB 144
SOURCES OF INFORMATION
LFC Files
Responses Received From
New Mexico Municipal League (NMML)
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
House Bill 969 creates a phased-in distribution to each municipality from the compensating tax.
The distribution for each municipality will be equal to 1.225 percent divided by the
compensating tax rate (5 percent) times total compensating tax collections times the amount of
gross receipts tax collections attributable to businesses in the municipality divided by total state
gross receipts tax collections.
Based on the formula described above, the distribution to municipalities will be one-third of the
formula amount in FY09, two-thirds of the formula amount in FY10, and the entire amount in
FY11 and beyond.
pg_0002
House Bill 969 – Page
2
Because the bill does not state an effective date, it is assumed it will become effective 90 days
after the legislature’s adjournment on June 25, 2007.
FISCAL IMPLICATIONS
Based on the December 2006 consensus revenue estimate, total compensating tax collections are
expected to be $ 95.4 million in FY09, $99.5 million in FY10, and $103.9 million in FY11.
Under current law, 80 percent of those amounts will be transferred to the general fund, 10
percent to the small cities assistance fund, and 10 percent to the small counties assistance fund.
Based on data from the Report 80: Analysis of Gross Receipts by Industry, TRD estimates that
the ratio of municipal gross receipts tax collections to all gross receipts tax collections is about
82.3 percent. Based on the formula contained in the bill, municipal distributions are expected to
total $6.4 million in FY09, $13.4 million in FY10, and $20.9 million in FY11 when the
provisions are completely phased in. The table on page 3 of this analysis details the amount of
this total municipal distribution that will be allocated to each of New Mexico’s municipalities.
As a result of these municipal distributions, general fund revenues will fall by $5.1 million in
FY09, $10.7 million in FY10, and $16.8 million in FY11. Distributions to both the small cities
and small counties assistance funds will fall by $0.6 million in FY09, $1.3 million in FY10, and
$2.1 million in FY11.
SIGNIFICANT ISSUES
According to NMML, this bill addresses the fact that as more business is conducted via the
internet, sales become taxable under the compensating tax instead of the gross receipts tax.
Although municipalities receive a share of gross receipts tax revenue, they currently do not
receive a share of compensating tax revenue.
ADMINISTRATIVE IMPLICATIONS
According to TRD, this bill will create significant administrative impacts. The bill will require
reprogramming of the Combined Revenue System (CRS).
TRD reports that the provisions of this bill would be easier to administer if the words, “net
receipts" on page 6, line 12 and line 14, were replaced with the word, “liability." Basing the
distribution on net receipts would require that actual payments be matched to tax returns prior to
calculating distributions to municipalities.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
House Bill 969 relates to House Bill 265 and Senate Bill 144. These bills would impose local
option compensating taxes to mirror all local option gross receipts taxes.
TECHNICAL ISSUES
This analysis is based on the language in the bill that bases the municipal distribution formula on
net receipts of the compensating tax. If the intent was to base the municipal distribution on net
compensating tax receipts to the general fund, LFC recommends adding the words “to the
pg_0003
House Bill 969 – Page
3
general fund," after the word “receipts" on page 6, line 11.
According to TRD, the provisions of this bill would be easier to administer if the words, “net
receipts" on page 6, line 12 and line 14, were replaced with the word, “liability."
Alamogordo
114.5 Eunice
19.9 Mountainair
1.9
Albuquerque
2558.1 Farmington
394.3 Pecos
1.5
Angel Fire
12.3 Floyd
0.5 Portales
34.7
Artesia
89.5 Folsom
0.1 Questa
3.0
Aztec
28.8 Fort Sumner
2.4 Raton
24.8
Bayard
3.5 Gallup
127.3 Red River
6.1
Belen
34.0 Grady
0.1 Reserve
1.0
Bernalillo
22.2 Grants
30.1 Rio Rancho
244.1
Bloomfield
36.8 Grenville
0.0 Roswell
169.0
Bosque Farm s
8.9 Hagerman
1.7 Roy
0.6
Capitan
2.6 Hatch
4.0 Ruidoso
49.6
Carlsbad
106.8 Hobbs
258.9 Ruidoso Downs
17.1
Carrizozo
1.6 Hope
0.1 San Jon
0.8
Causey
0.1 House
0.6 San Ysidro
0.4
Chama
4.6 Hurley
0.6 Santa Clara (Central)
0.6
Cimarron
1.6 Jal
4.6 Santa Fe
600.4
Clayton
6.7 Jemez Springs
0.8 Santa Rosa
13.2
Cloudcroft
4.0 Lake Arthur
0.2 Silver City
51.5
Clovis
141.6 Las Cruces
449.5 Socorro
30.3
Columbus
1.4 Las Vegas
48.1 Springer
1.5
Corona
0.3 Logan
2.4 Sunland Park
21.9
Corrales
15.6 Lordsburg
8.0 T aos
69.9
Cuba
4.3 Los Alamos
138.2 T aos Ski Valley
5.5
Deming
55.9 Los Lunas
91.0 T atum
3.3
Des Moines
0.5 Los Ranchos de Albuq. 17.7 T exico
0.8
Dexter
4.0 Loving
1.4 T ijeras
5.6
Dora
0.8 Lovington
38.2 T ruth or Consequences 14.5
Eagle Nest
1.0 Magdalena
1.5 T ucumcari
18.1
Edgewood
14.3 Maxwell
0.3 T ularosa
3.7
Elephant Butte
3.1 Melrose
0.7 Vaughn
1.6
Elida
0.7 Mesilla
6.2 Virden
0.1
Encino
0.1 Milan
6.6 W agon Mound
0.3
Espanola
63.5 Moriarty
14.2 Willard
0.2
Estancia
1.4 Mosquero
0.1 Williamsburg
0.4
FY09 Distribution by Mu nicipality ($ in thousands)
SS/csd