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

SPONSOR Jennings

ORIGINAL DATE

LAST UPDATED

2/8/07

HB

SHORT TITLE Tax Credit For Livestock Killed By Wildlife

SB 616

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

(3,000.0)

(3,000.0) Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Agency

Affected

Total 400.0-800.0 200.0-400.0 200.0-400.0 800.0-1600.0 Recurring Game and

Fish

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

US Department of Agriculture

Responses Received From

Taxation and Revenue Department

Department of Game and Fish

SUMMARY

Synopsis of Bill

Senate Bill 616 amends the Income Tax Credit to provide a credit for owners of livestock who

suffer losses due to wildlife predators. The credit is for the assessed value of the livestock as de-

termined by the county assessor or the Taxation and Revenue Department (TRD). The depart-

ment of game and fish shall determine whether livestock was killed by a wildlife predator within

24 hours of the owner reporting the loss. If Game and Fish does not respond within 24 hours, the

owner’s claim will be honored.

Senate Bill 616 – Page

2

Livestock is defined to include horses, asses, mules, cattle, sheep, goats, swine, bison, poultry,

ostriches, emus, rheas, camelids, farmed cervidae and other domestic or domesticated animals

that are used or raised on farm or ranch land in New Mexico. Exotic animals raised in captivity

are also included but cats and dogs are explicitly excluded.

There is no effective date so it is assumed that the effective date is June 15, 2007.

FISCAL IMPLICATIONS

The US Department of Agriculture keeps statistics on livestock killed by predators. The USDA

data on livestock with estimated values is shown in Table 2. “Other animals useful to man" is a

rough estimate and not based on USDA statistics. The credit results in a reduction of personal

income taxes of $2.7 million per year. Assuming that approximately half of this amount is not

captured, due to inadequate reporting on swine, bison, ratites and other included animals, the fis-

cal impact is $4 million per year. Assuming that only 75 percent of the credit will actually be

claimed, the net fiscal impact is a $3 million reduction in general fund revenues.

Table 2: USDA Reported Predatory Kills

Livestock Number Killed Market Value Credit Amount

Cattle

700

500

350,000

Calves

5,000

400

2,000,000

Sheep

1,500

65

97,500

Lambs

6,300

35

220,500

13,500

2,668,000

Other

5,400.0

250

1,350,000

Total

4,018,000

Source: USDA (http://usda.mannlib.cornell.edu/reports/nassr/livestock)

The federal government may treat the credit as income which would increase PIT collections

since NM adjusted gross income is tied to the federal AGI.

SIGNIFICANT ISSUES

Game and Fish:

The bill does not define a “wildlife predator". This could be any wild by nature animal that

can cause harm or death to another animal. This includes non-protected animals, such as

coyotes and skunks that the Department currently does not manage or respond to these types

of wildlife complaints.

On page 2, paragraph B, the department of game and fish shall

determine whether the live-

stock was killed by a wildlife predator within 24 hours. This makes the Department’s re-

sponse mandatory for investigating any livestock kill or death. The Department will have to

respond on a 24/7 basis and it is predicted that the Department will be responding daily and

Senate Bill 616 – Page

3

will not be able to respond to all the complaints without bringing on additional FTE. The (4-

8) FTE fiscal impact is a minimal estimate. In addition, complaints not investigated and de-

termined that a wildlife predator caused the death of the livestock allows the owner the abil-

ity to claim a tax relief without verification; therefore taxable income is reduced.

Currently, the bill does not require the landowner to notify the Department within specified

timeframe, manner, or making a good faith effort to determine that the cause of death was by

a predator and not some other cause of death. An owner could wait one day, week, or month

prior to contacting the Department about the loss. This could make determining the cause of

death difficult or impossible. Also, there is no requirement for the landowner to preserve or

maintain evidence of the kill so that the Department can make a thorough investigation and

determine which species caused the death.

ADMINISTRATIVE IMPLICATIONS

Game and Fish:

An additional 4-8 FTEs will be needed to support the activities outlined in this bill. Increased

time, gas and oil, overtime, equipment, and training will be significant in order to properly

identify and determine the exact species that caused death to the livestock. It is estimated that

it will cost the Department $400.0-$800.0 to hire and equip individuals to properly respond to

the mandates to this bill.

The initial cost of hiring employees to address this bill is more in the first year than in subse-

quent years. The reason is the employees will be equipped, trained, and in the field comply-

ing with the mandates of this bill. Since these investigations would likely occur in remote ar-

eas, employees would need a 4-wheel drive vehicle, radio, telephone, and computer equip-

ment as well as other field supplies that would increase the cost for the initial year. It is esti-

mated that after the first year, operating cost will be approximately half, as much of the major

equipment and training supplies to outfit each FTE has occurred. Some additional expense

will occur as equipment and supplies are replaced. However, it is unknown how much this

will cost.

OTHER SUBSTANTIVE ISSUES

Game and Fish:

There is a logical, scientific procedure for evaluating predator kills to determine the species

responsible, but there is no simple series of steps which lead to consistent and accurate de-

termination (Procedures for Evaluating Predation on Livestock and Wildlife; D.A. Wade,

Bowns, J.E. 1985). These investigations are complex and should be carried out as soon as

possible as evidence can disappear or be eradicated. By not requiring owners to report within

a specified time, will make the cause of determination less likely. This bill does not address

the owner’s entitlement to a tax credit if the Department can not determine what happened or

killed the livestock.

TRD:

(1) By reducing potential losses due to predator damage, the proposed measure may reduce in-

centives of livestock owners to prevent predator damage. (2) In reaction to enactment of the pro-

posed legislation, owners of other types of business may seek similar types of credits. An exam-

ple might be tax credits for agricultural produce damaged by inclement weather.

Senate Bill 616 – Page

4

Illustration 1: Calves and Cattle Lost From Predators, USDS Publication

Illustration 2: New Mexico Livestock Values for Property Tax Purposes

NF/sb