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

SPONSOR Lovejoy

ORIGINAL DATE

LAST UPDATED

2/4/08

HB

SHORT TITLE Native American Veterans Tax Withholdings

SM 43

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

NFI

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Memorial 43 finds that

•

Native Americans have a long history of serving in the U.S. armed forces and have made

great sacrifices in serving their country through active duty in the military.

•

Native American veterans domiciled on tribal lands during their periods of active duty

military service may have been exempt from paying personal income taxes and had

personal income taxes improperly withheld from their military income and were unaware

of it until recently

•

New Mexico’s three-year statute of limitations recently prevented recovery of refunds by

Native American veterans that had served in the military, and that other Native Americans

that may have subject to the same withholding are unable to recover taxes.

The memorial therefore requests that the Taxation and Revenue Department, along with the

Veteran’s Services Department, conduct a study on the question of whether Native American

veterans -- who were domiciled on tribal lands during the period of their active military duty --

had state income taxes improperly withheld from their pay. Furthermore, if it is determined that

they had, that the agencies should explore the feasibility to compensate these taxpayers. The

findings and recommendations should be presented to the appropriate interim legislative

committees.

Senate Memorial 43 – Page

2

FISCAL IMPLICATIONS

See administrative impact implications.

ADMINISTRATIVE IMPLICATIONS

According to TRD there is a significant administrative impact to the department.

TRD:

The proposed study would require considerable use of human resources in the Taxation

and Revenue Department. For example, the Department does not have ready access to

much of the data required to conduct the study. Certain records are not currently received

and methods to obtain such records from entities outside the Department may not be

possible. The Department would need to obtain records of service members in the Armed

Forces who are established as domiciled on that members or spouses’ tribal land and sort

through W-2 records to match potentially qualified service members records to tax

withheld to income tax returns. If a service member did not file a New Mexico personal

income tax return, the Department would probably look to other records, for example

driver’s license records, to determine an address. Gathering the data would require

significant systems time and manual resources to accomplish. Once the data was

gathered, manual resources would be needed to either systematically or manually match

potential service members, and to identify the overpayments.

BE/bb