Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

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

SPONSOR Jennings

ORIGINAL DATE

LAST UPDATED

2/9/07

2/27/07 HB

SHORT TITLE Tax Rebate For 2007 Taxable Year

SB 812

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($189,400.0)

($63,100.0)

Nonrecurring General Fund

See Narrative

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

Response Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 812 creates a personal income tax rebate for all NM residents who filed a tax return

in 2006 who are not dependents of another taxpayer and who are residents on the last day of

2006 or for NM residents who file a tax return in 2007 provided they are a resident on the last

day of 2007. The rebate amount is $138 per exemption declared for federal income tax purposes.

For those taxpayers who filed a return in 2006, the rebate is an advanced rebate that will be

issued no later than June 30, 2007. For those taxpayers who did file a return in 2007 and did not

receive an advance payment, the rebate can be claimed on the 2007 tax return. Either way, the

rebate is exempt from NM personal income taxes.

There is an emergency clause so the effective date is upon signing by the governor.

FISCAL IMPLICATIONS

SB812 sets up a rebate similar to the one issued in 2005 by legislation enacted following the

Senate Bill 812 – Page

2

2005 special session. Whereas that rebate had varying amounts depending on income and

number of exemptions, this rebate is $138 per exemption regardless of income. In 2005, there

were 939 thousand returns with 1.83 million exemptions claimed, according to Taxation and

Revenue Department data. The rebate will reduce personal income tax revenues which flow to

the general fund by $252.5 million. Assuming that 25 percent growth in tax returns based on the

growth from 2004 to 2005, it is estimated that $189.4 million will be included in the advanced

payments and $63.1 million will be claimed on the 2007 tax return in FY08. Over sixty percent

of the rebates would go to those with less than $35,000 in adjusted gross income. The average

rebate per taxpayer is $284.

Table 1: Average Rebate by Income

Share

Average Rebate

Average

Exemptions

0 to 10,000

17% $ 192.9 1.40

10,001 - 20,000

22% 282.8 2.05

20,001 - 35,000

22% 304.3 2.20

35,001 - 50,000

11% 319.6 2.32

50,001 - 100,000

22% 358.5 2.60

100,001 +

6% 379.4 2.75

All Taxpayers 284.1 2.06

ADMINISTRATIVE IMPLICATIONS

TRD:

For example, the cost of mailing approximately 700,000 rebate checks in 2005 was

$441,641. Assuming the same amount of rebates is provided by the proposed bill, this cost is

likely to increase to $475,000. The proposed legislation would also require substantial

programming costs. Administering the proposed rebates would create a number of problems

for the Department, as outlined in the Other Issues section below

.

NF/csd