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 Taylor

ORIGINAL DATE

LAST UPDATED

2/19/07

HB

SHORT TITLE Chile Farming Tax Credits and Employment

SB 1191

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

0.1

Recurring General Fund

* See Narrative

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to HB1011

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

SUMMARY

Synopsis of Bill

Senate Bill 1191 amends the Investment Credit Act to redefine manufacturing to include “chile

farming" and exempts chile-related manufacturing from the employment requirements of the

Act. This would allow the investment tax credit for purchases of chile farming and processing

equipment. The investment tax credit allows a credit against CRS taxes—withholding, gross

Senate Bill 1191 – Page

2

receipts taxes and compensating taxes—up to 85 percent of the combined liability. The credit

may be carried forward if the credit exceeds liability and can be refunded under certain

circumstances.

The changes apply to qualified equipment purchases on or after January 1, 2007.

FISCAL IMPLICATIONS

Taxation and Revenue Department has not finalized its analysis and calculation of fiscal

impact is dependent on TRD input.

The Economic Development Department (EDD) reports that the fiscal impacts are likely to be

substantial:

Taxation and Revenue has not determined the amount of the fiscal impact for this facility.

However, the impact would probably be substantial as this credit would apply to the

purchase of chili farming equipment. New Mexico’s chili industry is substantial and

there are a number of chili farmers that would purchase new equipment under this new

provision who are currently paying compensating and gross receipts taxes. The

exemption of the job creation component would limit the increase in revenues to the

general fund because the purchase of new equipment would not increase payrolls.

Therefore, the fiscal implications are substantial.

SIGNIFICANT ISSUES

EDD:

This bill expands the investment credit act for farming equipment and exempts chili

processors from the job creation component to qualify for this credit. The job creation

component is an important aspect of the Investment Credit Act as it encourages a positive

benefit for the state of New Mexico for this tax incentive. Luna and Hidalgo counties are

two of the counties that have significant chili production. According to NMDOL, the

unemployment in October 2006 for Luna County is 6.3% and for Hidalgo county is 3.9%.

This bill does not encourage job creation in the chili production industry. Job creation

increases payroll which in turn will increase gross receipts, compensating, withholding

taxes and income taxes which affect the general fund.

NF/nt