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

SPONSOR Barela

ORIGINAL DATE

LAST UPDATED

1/28/08

HB 295

SHORT TITLE Raise Property Tax Limitation Income Limit

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

*See Narrative

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to SB116

SOURCES OF INFORMATION

LFC Files

Responses Received From

Aging and Long Term Services

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 295 changes the property tax valuation limit for low income homeowners who are 65

years and older. Current law freezes valuation on property if the homeowner is 65 years or older

and has a modified gross income of less than $18,000. HB295 would change the income thresh-

old to 200 percent of the federal poverty level (FPL). The valuation freezes on 2008 if the tax-

payer is over 65; freezes on the year the taxpayer turns 65; or freezes on the tax year after the tax

year a home is first occupied if the owner is over 65.

House Bill 295 – Page

2

2007 Federal Poverty Level (FPL)

Family Size

200%

1

20,424

2

27,384

3

34,344

4

41,304

5

48,264

6

55,224

7

62,184

8

69,144

The effective date is May 14, 2008.

FISCAL IMPLICATIONS

TRD reports that 7,500 currently benefit from the limitation and that with this change about

4,500 additional taxpayers will benefit. Since these taxpayers also benefit from the 3 percent

maximum valuation increase, the impact both individually and collectively is likely to be very

small. Any impact will be absorbed by other taxpayers as rates adjust to maintain the funding

level required for debt service.

SIGNIFICANT ISSUES

Aging and Long Term Services:

The need for accessible, affordable housing in New Mexico is a serious issue for those

over the age of 65. Health and housing concerns are often interrelated. Increases in

property taxes may prevent a senior from being able to maintain community living. This

issue is frequently cited as a major concern among seniors on fixed incomes whose dis-

posable income is greatly reduced by increased housing costs. The Aging and Long-term

services department is committed to promoting lifelong independence and healthy aging,

and to supporting services being provided in home and community-based settings. This

bill would assist some seniors to remain in their own homes, in the community, and to

"age in place" instead of moving to unfamiliar surroundings, or being cared for in an al-

ternative setting such as a nursing home or assisted living facility.

Accessible and affordable housing is an equally significant issue for people living with a

disability. The Section of law that is being amended could extend this limitation on in-

crease in home value to the disabled population, but it does not. The Aging and Long-

Term Services Department serves the needs of all persons in need of long-term care ser-

vices and support, including those with disabilities. We would recommend amending the

bill to extend this important provision to people living with disabilities, as well as to indi-

viduals over the age of 65.

TECHNICAL ISSUES

TRD notes that the effective date makes the valuation limitation applicable to tax year 2008 but

that assessors have already mailed out or will have by the time the law is effective on May 14,

2008. Making the law effective for tax year 2009 would avoid any confusion that may arise from

any difference between the valuation letter and the property tax bill.

House Bill 295 – Page

3

ADMINISTRATIVE ISSUES

TRD reports administrative impacts on the Taxation and Revenue Department from the proposed

measure would be relatively minor. The stipulation that eligibility would be based on federal

poverty guidelines would be problematic, however, because county representatives would be re-

quired to verify the number of dependants in households of taxpayers claiming the exemption.

This would probably not be substantially more difficult than the current practice of determining

modified gross income, however. A solution would consist of simply specifying that FPL guide-

lines based on a family size of two for all taxpayers would be the single criteria on which eligi-

bility is based. As indicated above, this would place the eligibility threshold at $27,380 in 2008.

OTHER ISSUES

TRD:

The Santa Fe County Assessor’s office reports 56 taxpayers qualified for the limitation in

tax year 2007. The individuals that qualified were mostly from older neighborhoods

where property values are relatively low. Bernalillo County reports that 2,464 taxpayers

are subject to the limitation. Dona Ana County representatives state that 457 taxpayers

are subject to it, while the total in San Juan County is currently 100 taxpayers. In Sierra

County, which has a relatively high concentration of retirees, only 53 taxpayers took ad-

vantage of this exemption. Estimates made by the Property Tax Division in the Taxation

and Revenue Department indicate that approximately $200,000 in tax benefits are pro-

vided statewide by the current limitation.

Taxpayers are probably not claiming the exemption because 1) the benefit is, in most

cases, minor, and 2) they are not aware of it. A low-income taxpayer whose tax bill is

$500 would receive a tax benefit totaling only approximately $15 the first year the tax-

payer receives the bill. The benefit from the limitation to any particular taxpayer grows

over time. The limitation does not insulate taxpayers from tax increases caused by rate

increases, however.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

SB116 also raises the income limit for taxpayers 65 years and older but raises it to $32,000 rather

than a percentage of FPL.

NF/mt