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

SPONSOR McSorley

ORIGINAL DATE

LAST UPDATED

2/14/07

HB

SHORT TITLE

FAMILY MEDICAL LEAVE EMPLOYER TAX

CREDIT

SB 589

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($4,320.0)

Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 589 provides an income tax credit for employers who pay salaries or wages for

employees on family medical leave. The credit is equal to 25 percent of the amount paid to an

employee who has taken leave for the adoption or birth of a child, the care of a child, spouse or

parent that necessitates inpatient care in a hospital, hospice or residential health care facility or

requires continuing treatment or care by a health care provider. The credit can be claimed

against personal or corporate income tax liability.

FISCAL IMPLICATIONS

TRD:

Over a typical career, an employee will likely require this type of leave for approximately

three 12- week periods. Hence over a 25-year career employees will require

approximately 1.5 weeks of paid medical leave per year. Assuming a typical New

Senate Bill 589 – Page

2

Mexico worker is paid approximately $16 per hour,

1

the annual cost of 1.5 weeks of paid

medical leave will be approximately $960, or $16 x 60 hours per employee. Statistics

describing typical employer practices in providing paid medical leave are scarce.

However, data published in a recent issue of the Monthly Labor Review

2

seem to suggest

approximately 2 percent of employers currently provide this benefit. Assuming 3 percent

of the New Mexico private sector labor force receives paid medical leave benefits

(roughly 18,000 employees) as a result of the proposed legislation, total payments would

be $17.3 million (18,000 x $960). Since the credits would be one-fourth this amount, the

resulting impact on the General Fund would be approximately $4.3 million.

TECHNICAL ISSUES

TRD:

Under provisions of the proposal, taxpayers could “double dip" by taking the wage

expense deduction and then the credit for the payment of wages while the employee is on

FMLA. The imprecise definition of family medical leave is unspecific, hence provisions

of the bill may create enforcement problems.

Provisions of the bill limit family medical leave tax credits to leave taken with regard to

the birth or adoption of a child, the care of a child, spouse or parent who has a health

condition, which requires inpatient care or continuing supervision by a health care

provider.

NF/nt

1

According to the New Mexico Labor Department website, the average is about $16.30 per hour. Please see

“Occupational Employment Statistics" statewide, updated to March 2006.

2

“Family Leave Coverage in the 1990’s", by Jane Waldfogel, Monthly Labor Review, October, 1999