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

SPONSOR Varela

ORIGINAL DATE

LAST UPDATED

2/4/08

HB 617

SHORT TITLE Property Tax On Communications System Land

SB

ANALYST Wilson

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

$0.1

$0.1

$0.1 Recurring Property Tax

Recipients*

(Parenthesis ( ) Indicate Revenue Decreases)

* Counties, school districts, municipalities and other entities that receive revenues from property tax levies.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance & Administration (DFA)

Taxation & Revenue (TRD)

SUMMARY

Synopsis of Bill

House Bill 617 amends Section 7-36-2 NMSA 1978 of the Property Tax Code. The bill specifies

the types of property that are subject to assessment for property tax purposes by the Taxation and

Revenue Department’s Property Tax Division (PTD). Property assessed by PTD and listed in 7-

36-2 is commonly called “centrally assessed" or “state-assessed" property. It typically extends

across county boundaries and is subject to “special assessment methods" of valuation via

appraisal methods that differ from traditional appraisal procedures due to unusual characteristics

of the property that is centrally assessed.

Property listed in Section 7-36-2 and thus subject to central assessment includes property of

railroads, communications systems (as defined in Section 7-36-30), public utilities and airlines.

The PTD has not assessed cable systems in the past, in part because the statute is unclear

regarding the issue of whether this type of property is indeed subject to central assessment. The

proposed legislation is designed to clarify the statute. It would amend the definition of

“communication system" in Section 7-36-30 to include a system that provides for transmission

or reception of information for use by another person for consideration. The definition of the

term “plant" is also amended to mean all tangible property in New Mexico used for the

House Bill 617– Page

2

transmission or reception of information rather than for the provision of communication service,

as is the current law.

This bill has an emergency clause.

FISCAL IMPLICATIONS

The net taxable value for cable companies currently totals approximately $30 million statewide

and generates a total of approximately $800,000 in property tax revenues. If the TRD were to

determine that communication company property is under-assessed, provisions of the proposed

measure would generate increases in assessed value of cable communication property which

would generally be offset by rate reductions through the state’s yield-control mechanism. Debt

service rates would also presumably adjust. Hence, fiscal impacts on property tax recipients are

likely to be minimal. Cable companies, however, would likely experience property tax increases.

SIGNIFICANT ISSUES

DFA notes this bill

will allow local taxing entities to collect taxes on communication systems

that under the previous language are excluded. This bill catches up the property tax collection

system to new and development technologies, such as cable television. Previously, cable

television was considered "reception of information" only, which exempted it from property

taxation. This bill remedies this situation by defining communications systems as "transmission

or reception" or both.

TRD provided the following:

This bill is necessary to clarify that cable television systems are subject to central

assessment even if not providing broadband or other two-way communication services.

An emergency clause could, however, place undue burdens on taxpayers who, if the bill

is signed before February 29, 2008, will have to file the annual reports required by

Section 7-38-8 by February 29, 2008.

As communication systems evolved, the language of the special method applicable to the

firms did not keep pace by anticipating the changes in digital media such as Voice Over

Internet Protocol, streaming video, or digital gaming and bundling of technologies for

multiple uses through single providers. Language of the proposed statute broadens the

definitions of eligible technologies to incorporate large cross-county concerns such as

cable-based providers of communication services. The principal benefit of this change is

that cable companies and similar technology vendors will report to the Property Tax

Division’s State Assessed Properties Bureau for property tax assessment purposes.

The benefits of this change are:

•

single reporting point for communications companies;

•

the option of electing a depreciated cost or unitary valuation method, which is not

currently employed by New Mexico’s 33 County Assessors;

•

uniformity of assessment between communication companies that provide similar

services, and

•

uniformity of reporting requirements for communication companies.

DW/bb