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

SPONSOR Trujillo

ORIGINAL DATE

LAST UPDATED

1/22/08

1/24/08 HB 284/aHENRC

SHORT TITLE Advanced System Septic Purchase Tax Credit

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

($700.0)

($831.3) Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD) FIR to similar legislation (SB919) in the 2007 session

Response Received From

NM Environment Department

SUMMARY

Synopsis of HENRC Amendment

The House Energy and Natural Resources Committee amended HB284 changing the word

“disposal" to “treatment." This satisfies NMED’s concern (reported in the previous FIR) about

the definition and whether the credit would be available for disposal systems.

Synopsis of Original Bill

House Bill 284 creates a new $2,500 credit against personal income tax (PIT) liability for the

purchase and installation of an eligible liquid waste disposal system in the taxpayer’s primary

residence. If the credit exceeds liability, the balance may be carried forward for up to 3 years.

The taxpayer must be a New Mexico resident and not a dependent of another taxpayer.

The credit is in effect for tax years beginning January 1, 2008. There is no sunset or repeal date.

FISCAL IMPLICATIONS

The fiscal impact assumes 350 units will be eligible for the credit but NMED notes significant

issues about the terminology in the bill that could potentially affect the fiscal impact. It is

House Bill 284/aHENRC – Page

2

assumed that 80 percent of the credit will be taken in the current year, 15 percent carried forward

to the second year and 5 percent carried forward to the third year. NMED representatives also

state that 1) the types of systems likely to qualify for the proposed credits typically cost in the

neighborhood of $8,000 to $10,000, but sometimes cost as much as $20,000; 2) the units are

usually installed on rural residential lots that make use of leaching fields when disposing waste;

and 3) systems are often required by local regulations.

Fiscal Impact

Number of Systems 350

Credit

$2,500

Fiscal Impact

$875,000

FY09

$700,000

FY10

$831,250

FY11

$875,000

SIGNIFICANT ISSUES

According to NMED,

The WTAC, created by statute, has developed performance standards for wastewater

treatment technologies to be approved for advanced treatment. The WTAC has not

developed advanced treatment standards for wastewater disposal technologies, nor has it

established that disposal technologies are capable or achieving advanced treatment.

Consumers could be misled by HB 284 into thinking that such disposal products can

perform advanced treatment when that may not be the case.

PERFORMANCE IMPLICATIONS

NMED reports that it will be difficult to ensure that advanced treatment is occurring at the

disposal end when no such product has been approved as required by statue, and no standards

have yet been established to demonstrate that disposal technologies can achieve advanced

treatment.

NF/mt