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

SPONSOR SIAC

ORIGINAL DATE

LAST UPDATED

03/02/07

HB

SHORT TITLE

Public Peace, Health, Safety & Welfare

Tribal Member Military Service Tax Refund

SB 1230/SIACS

ANALYST Hanika Ortiz

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

(see

narrative)

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Awaiting a Response From

Taxation & Revenue Department (TRD)

SUMMARY

Synopsis of SIAC Substitute

The Senate Indian Affairs Committee Substitute enacts a new section of the Tax Administration

Act (Act) and requires TRD to identify and notify certain taxpayers of possible overpayment of

taxes; and, extends the time for refund claims with respect to certain military income of enrolled

tribal members.

The new section of the Act requires TRD to review earned income tax records of certain taxpay-

ers in the armed forces to identify possible overpayments. The taxpayers under review will be

residents of New Mexico; enrolled members of a federally recognized Indian nation, tribe or

pueblo; and, who resided during service on the enrolled member’s or member’s spouse’s feder-

ally recognized tribal lands.

The substitute also amends Section 7-1-26 NMSA 1978 by adding new language that extends the

time for tax refunds from amounts paid or withheld from income earned during service in the

armed forces, until December 31, 2017; and, provides clean up of language to the bill into com-

pliance with current law by deleting Article 9D, the Capital Equipment Tax Credit Act, which

was previously repealed.

SB 1230/SIACS – Page

2

FISCAL IMPLICATIONS

TRD is being requested to participate in an audit of tribal members for possible overpayments

from taxes either paid or withheld from military income of tribal members; and, the fiscal impact

cannot be ascertained until TRD responds to the request for an analysis.

SIGNIFICANT ISSUES

The substitute states the basis of the refund claim is from possible overpayments by taxpayers

who otherwise were not subject to income taxes for military pay because of being an enrolled

tribal member living on their federally recognized tribal lands.

PERFORMANCE IMPLICATIONS

Current New Mexico law provides that military pay of an enrolled member of an Indian nation,

tribe or pueblo for periods in which the member’s home of record is on the lands of that Indian

nation, tribe, or pueblo are exempt from New Mexico income tax. Lands include formal and in-

formal reservations, dependent Indian communities, and Indian allotments whether restricted or

held in trust by the United States.

ADMINISTRATIVE IMPLICATIONS

TRD is expected to send a notice to each taxpayer detailing possible overpayments to their last

known address and in a timely manner.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Pursuant to Section 7-1-26 NMSA 1978, taxpayers who believe they have overpaid or have been

denied a credit or rebate may claim a refund by submitting a written claim to the Department, to

include a brief statement of the facts and the law on which the claim is based.

AHO/mt