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

SPONSOR Nava

ORIGINAL DATE

LAST UPDATED

1/31/07

2/01/07 HB

SHORT TITLE Ambulance Service Provider Gross Receipts

SB 547/aSCORC

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($155.3)

($333.8) Recurring General Fund

$155.3

$333.8 Recurring

Local

Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

New Mexico Ambulance Association (NMAA)

Responses Received From

Department of Health (DOH)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Amendment

The Senate Corporations and Transportation Committee amendment to Senate Bill 547 fixes a

typographical error contained on page 3, line 15 of the original bill by changing “2008" to

“2009."

Synopsis of Bill

Senate Bill 547 creates a phased-in gross receipts tax credit for the receipts of ambulance service

providers licensed by the public regulation commission. The credit equals one third of the state

gross receipts tax rate in FY08, two-thirds of state gross receipts tax in FY09, and the entire state

gross receipts tax rate in FY10 and beyond (see Technical Issues).

The bill will be applicable to tax reporting periods after July 1, 2007.

Senate Bill 547/aSCORC – Page

2

FISCAL IMPLICATIONS

All of the state’s ambulance service providers are currently located within municipal areas,

where the state tax rate is 3.775 percent. The credit will eliminate the state gross receipts tax paid

by ambulance service providers once it is fully phased-in in FY10. The bill does not apply to

local option gross receipts taxes, so ambulance providers will still pay a little over 1 percent local

gross receipts tax.

Information provided by the NMAA suggests that there are nine for-profit ambulance providers

in the state and with taxable gross receipts of about $10.8 million. Assuming that the impacted

tax base will grow by 7 percent each year, the credit will reduce general fund revenue by about

$155.3 thousand in FY08, 333.8 thousand in FY09, and $532.9 thousand once it is fully phased-

in in FY10.

SIGNIFICANT ISSUES

NMAA reports that this bill is meant to level the playing field between for-profit and nonprofit

ambulance providers since nonprofit providers due not pay gross receipts tax.

NMAA also reports that about 62 percent of ambulance transports are for Medicare and

Medicaid recipients. Gross receipts tax payments cannot be passed on to consumers for Medicare

patients because the federal government will not pay it, and Medicaid reimbursements cover

about 30 percent of costs.

LFC notes that while individual credits 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.

LFC notes that receipts of health practitioners have historically grown faster than receipts of

other industries. Removing receipts from high-growth sectors from the gross receipts tax base

makes it more difficult for tax revenue to keep pace with inflation.

ADMINISTRATIVE IMPLICATIONS

TRD reports that the proliferation of gross receipts tax credits that contain hold-harmless

provisions for local governments increases the complexity and costliness of complying with and

administering the gross receipts tax.

TRD reports they will need to create a new form and process the credit manually. TRD will also

need to educate taxpayers, train personnel, and modify audit processes.

SS/nt:csd