Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports
if they are used for other purposes.
Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).
Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and
attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.
F I S C A L I M P A C T R E P O R T
SPONSOR Jennings/Ingle
ORIGINAL DATE
LAST UPDATED
8/17/08 HB
SHORT TITLE
Refundable Personal Income Tax Credit for 2007
Taxable Year
SB 16
ANALYST Gutierrez
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY09
FY10
$1,000.0
Non-recurring
General Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY09
FY10
FY11
($62,836.0)
Non-Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
Relates to SB 1 and SB 24
SOURCES OF INFORMATION
LFC Files
Taxation and Revenue Department (TRD)
Responses Received From
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
The bill provides a refundable personal income tax credit for the 2007 taxable year. A taxpayer
who files a New Mexico Personal Income Tax Return for the 2007 taxable year, is a full-year or
first-year resident of New Mexico, is not a trust, estate, or dependent of another taxpayer, and
was not an inmate of a public institution for more than six months during the 2007 taxable year
would be eligible for the credit. The credit would be issued as a refund to taxpayers who had
pg_0002
Senate Bill 16 – Page
2
2
already paid any 2007 liability. For taxpayers with an outstanding 2007 liability, the credit
would be given as a reduction in the liability.
The credit would be as follows:
AGI
Taxpayer Credit (each)
Dependent Credit (each)
Under $40,000
$50
$50
$40,000 - $60,000
$40
$40
$60,000 - $80,000
$35
$35
$80,000 and over
$0
$0
Source: Taxation and Revenue Department
According to TRD, the number of eligible taxpayers and dependants for each Adjusted Gross
Income (AGI) category was estimated from 2006 New Mexico income tax return data. These
numbers were then adjusted to account for growth in the number of returns between 2006 and
2007, and for additional filers in 2007 who would not have filed without the rebate. The credit
amounts per AGI category were then used to calculate the revenue impact.
The bill includes an appropriation of one million dollars from the General Fund to the Taxation
and Revenue Department to administer this credit.
FISCAL IMPACT
The total estimated cost in FY2009 is $62.8 million. TRD would incur an additional $1 million
of administrative costs for printing, postage, mailing, processing and systems changes.
SIGNIFICANT ISSUES
Eighty-five percent of the rebate goes to taxpayers making less than $80,000. The distributional
impact of the cost of living tax credit is shown in the following table.
Number of
Average
Returns Amount Percent of Benefit
AGI
(000) ($ millions) Total
($)
Under $10,000
156.4 $12.2
19.4%
$78
$10,000 - $20,000
143.4 $14.0
22.3%
$98
$20,000 - $30,000
112.2 $12.0
19.1%
$107
$30,000 - $40,000
84.0
$8.9
14.1%
$106
$40,000 - $50,000
60.6
$5.4
8.6%
$89
$50,000 - $60,000
47.0
$4.4
7.0%
$94
$60,000 - $70,000
37.5
$3.3
5.2%
$87
$70,000 - $80,000
30.0
$2.7
4.3%
$90
Subtotal
671.2 $62.8 100.0%
$94
$80,000 and over
115.3
$0.0
0.0%
$0
Total
786.5 $62.8 100.0%
$80
Total Benefits
Distribution of the Cost of Living Personal Income Tax Credit
pg_0003
Senate Bill 16 – Page
3
3
Source: Taxation and Revenue Department
The new refundable personal income tax credit for 2007 will not be taxable directly to
taxpayers. However, those taxpayers who itemize their deductions for income tax purposes and
who receive a rebate due to the credit will need to follow the standard federal income tax rule
that requires a refund of an itemized tax to be included in income the year the refund is received.
ADMINISTRATIVE IMPLICATIONS
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, 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.
BLG/mt