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

SPONSOR Lujan, B

ORIGINAL DATE

LAST UPDATED

3/01/07

3/01/07 HB 1297

SHORT TITLE Authorize County Health Care Gross Receipts

SB

ANALYST Schardin

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$937.5

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

$1,875.0

Recurring Los Alamos

County

($937.5)

Recurring

County-

Supported

Medicaid Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Conflicts with HB 1017 and SB 1099.

SOURCES OF INFORMATION

LFC Files

Response Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 1297 amends Section 7-20E-18 NMSA 1978 to require a Class H county (Los

Alamos County) to impose a 1/8 percent county health care gross receipts tax in response to a

windfall increase in gross receipts tax revenue resulting from reorganization of the national

laboratory.

House Bill 1297 – Page

2

Revenue generated from the 1/8 percent tax will be dedicated to nonprofit hospitals located

within a 50 mile radius of the county to be used to support indigent patients, reimbursement for

uncompensated care or contributions to the sole community provider fund to benefit nonprofit

hospitals.

Because the bill has no effective date, its provisions will become effective 90 days after the

legislature adjourns on June 15, 2007.

FISCAL IMPLICATIONS

TRD estimates that Los Alamos County will have a taxable gross receipts tax base of about $1.5

billion in FY08. Therefore, an additional 1/8 percent tax would generate about $1,875.0 thousand

additional gross receipts tax revenue to be dedicated to the health services noted above.

Under current law, all counties are required to impose a 1/16 percent county health care gross

receipts tax, which is dedicated to the county-supported Medicaid fund, or to send an equal

amount to that fund (Section 27-10-4 NMSA 1978). Because Los Alamos County will be

imposing a county health care gross receipts tax but it will not be distributed to the county-

supported Medicaid fund, the bill would reduce revenue to the county-supported Medicaid fund

by 1/16 percent of Los Alamos taxable gross receipts, or about $937.5 thousand in FY08.

By reducing the amount of revenue to the county-supported Medicaid fund by $937.5 thousand,

the bill will require an additional general fund appropriation of $937.5 thousand to support the

Medicaid program.

SIGNIFICANT ISSUES

Los Alamos County is the only Class H county in New Mexico. Due to Los Alamos National

Laboratory’s new contract with a private entity (Bechtel Corporation), receipts of many

laboratory activities are now subject to New Mexico’s gross receipts tax. The new contract

resulted in a gross receipts tax windfall for both the state and for Los Alamos County.

Under current law, Los Alamos County, like all other counties except Bernalillo, is allowed to

impose a 1/16 percent county health care gross receipts tax. Revenues from that tax are restricted

for deposit in the county-supported Medicaid fund, a non-reverting fund that is appropriated to

the human services department to support the Medicaid program. If a county chooses not to

impose a 1/16 percent county health care gross receipts tax, that county must dedicate an amount

equal to 1/16 percent of gross receipts to the county-supported Medicaid fund (Section 27-10-

4(A) NMSA 1978). As of January 1, 2007, Los Alamos County had not elected to impose that

1/16 percent tax increment.

The bill would allow Los Alamos County to impose a higher tax of 1/8 percent with revenues

dedicated to the uses noted above instead of the county-supported Medicaid fund.

At the time of this analysis, it is unclear which health care facilities are located within a 50 mile

radius of Los Alamos County.

Under current law, New Mexico’s local governments are authorized to impose up to 4.6875

percent of local option gross receipts taxes (that figure excludes several additional local option

House Bill 1297 – Page

3

taxes that have been authorized for selected local governments). On average, a local option gross

receipts tax of about 1.6 percent is actually imposed by local governments statewide. Combined

with the state gross receipts tax of 5 percent, the statewide tax rate is therefore 6.6 percent.

ADMINISTRATIVE IMPLICATIONS

The bill will create minimal administrative impacts on TRD. TRD notes that gross receipts tax

provisions are easier to implement if they contain an effective date of January 1 or July 1 since

that is when instructions are revised.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Bill 1297 conflicts with House Bill 1017 and Senate Bill 1099. These bills amend the

same section to eliminate the sunset on language allowing Bernalillo County to impose a second

1/16 percent increment of the county health care gross receipts tax.

ALTERNATIVES

Consider allowing Los Alamos County to choose whether to impose the county health care gross

receipts tax at either 1/16 percent or 1/8 percent. The bill will make Los Alamos County the only

county that cannot choose to impose a lower tax of 1/16 percent.

TECHNICAL ISSUES

It is unclear whether there are legal issues that prevent the state from requiring one county to

dedicate tax revenues to other counties.

The bill states that revenue generated from the tax in Los Alamos County will be dedicated to

support indigent patients, uncompensated care or contributions to the sole community provider

fund. However, the bill does not determine who will be responsible for choosing exactly how the

revenue will be spent.

SS/mt