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committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

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

SPONSOR Salazar

ORIGINAL DATE

LAST UPDATED

8/17/08

8/17/08 HB 17

SHORT TITLE Tax Credit Administration Costs

SB

ANALYST Lucero

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY09

FY10

$1,000.0

Nonrecurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Conflicts with SB1, SB16, SB24

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House bill 17 appropriates $1.0 million from the general fund to Taxation and Revenue

Department (TRD) for the purpose of administering tax credits adopted in the current special

session.

FISCAL IMPLICATIONS

The appropriation of $1.0 million contained in this bill is a non-recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of FY09 shall revert to the

general fund.

ADMINISTRATIVE IMPLICATIONS

TRD’s response on administering the tax credits proposed in SB24:

Information systems will need to be modified. Checks will need to be printed and mailed.

Phone inquiries concerning rebates will need to be answered. Significant outreach efforts

to Native Americans, active members of the military, retirees, and low-income residents,

House Bill 17 – Page

2

who might not have filed a 2007 New Mexico income tax return, will need to be

undertaken. A notice in English and Spanish describing tax rebates and credits and HSD

programs for low- and middle-income taxpayers will be inserted in all rebate checks.

Also, to simplify filing for individuals who would otherwise not file a 2007 New Mexico

income tax return, TRD will create a highlighted PIT-1 form, which will be the same as

the current form but with the necessary entries that need to be completed for the rebate

(name, address, SSNs, residency, dependents, filing status, AGI, and signatures)

highlighted.

Three Senate bills would provide a rebate, SB1, SB16 and SB24.

SB1 has an upper income taxpayer limit of $70,000 and TRD estimates the number of rebates

would be 641,200. The department estimates the minimum administrative cost of SB1 is $746.3

thousand but could be as much as $890.0 thousand. The costs vary due to variable costs such as

overtime, printing costs, and the number of taxpayer calls to a help line.

SB16 and SB24 have an income upper income tax payer limit of $80,000 and TRD estimates the

number of rebates would be 671,200. The department estimates the minimum administrative

cost of SB16 and SB24 is $765.5 thousand but could be as much as $910.0 thousand. The costs

vary due to variable costs such as overtime, printing costs, and the number of taxpayer calls to a

help line.

SIGNIFICANT ISSUES

(See consequences below)

PERFORMANCE IMPLICATIONS

TRD notes that if the department does not receive additional funding, the department will have to

hold positions vacant which could result in:

•

a loss of revenue collections: $26.2 million

•

a delay in processing of deposits of about $17 to $20 million per day; thus risking

compliance with 24 hour deposit rule, an audit exception; significant delay in processing

of taxpayer refunds and response to taxpayer inquiries

•

a inability to hold DWI driver’s license (DL) revocation hearings within 90 days due to

staffing cuts: persons arrested for DWI would keep their DL

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

All of the current bills proposing tax credits have an appropriation of an identical amount. This

bill would double the appropriation if one of the tax credit bills (SB1, SB16, and SB24) pass in

tact. If the appropriation were stripped from one of those bills, HB17 would serve to restore the

appropriation.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

TRD estimates the following consequences may occur if the department does not receive an

appropriation to process the rebate checks:

House Bill 17 – Page

3

Rebate checks will be delayed until after Thanksgiving, and possibly until 2009

If TRD had to absorb the cost of processing and mailing the rebate checks, the department would

have to hold a greater number of positions vacant than normal to create enough vacancy savings

to cover postage, printing costs, the purchase of additional warrant stock, outreach, etc. The

division which would be impacted the most would be in Tax Administration. The department

noted in an LFC review Review of Collections and Distribution of Taxesand Enhanced

Delinquent Tax Collection Initiative June 19, 2008 that if the forced vacancy rate is reduced, the

department can deliver an $8.00 return for every $1.00 invested. TRD estimates the forced

vacancy and temporarily assigning tax collectors and auditors to work on the rebate could

be as high as $26.2 million and result in lower performance measure outcomes.

ALTERNATIVES

Contingency language should be adopted to avoid a doubling up of the appropriation. If current

bills pass intact and HB17 is also enacted, $2 million will be appropriated.

DL/mt