NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Room 416 of the State Capitol Building.

* Other funds include State Aviation Fund, Municipal Arterial Fund and the Motorboat Fuel Tax Fund.

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates SB-432

SOURCES OF INFORMATION

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 498 amends the gasoline tax act in the following ways:

• The definition of when gasoline is received is struck and a new definition provided. The new definition does the following:
• It clarifies that fuel is received at the time of delivery.
• It changes the determination of when gasoline imported from outside the state is received. Under current law gasoline is received when it is first unloaded. The proposed definition would have gasoline being received at the time and place it is imported.
• It establishes that gasoline received on an Indian reservation or pueblo on which no gasoline taxes are paid and is later transported off the reservation or pueblo (except in the supply tank of a motor vehicle), is received by the registered distributor once it transported off the Indian reservation or pueblo.
• A definition of registered "Indian Tribal distributor" is added. The Indian Tribal distributor includes (a) Indian nations, tribes or pueblos, (b) corporations or business enterprise wholly owned by the Indian nation, tribe or pueblo, (c) corporations or business enterprises wholly owned by one or more members of the Indian nation tribe or pueblo that is registered with the Taxation and Revenue Department (TRD) as a distributor. The Indian nation, tribe or pueblo would have to certify the corporation or other business entity is either wholly owned by them or by one or more of their tribal members before TRD could register the corporation or enterprise as an Indian tribal distributor.



• Provisions covering gasoline that may be deducted from gasoline received and subject to the gasoline tax is changed in two ways:



• The treatment of gasoline received in the state but exported deduction is tightened so that the gasoline must be exported "for consumption" outside the state.
• A new deduction is added for gasoline received in New Mexico and sold at retail by registered Indian tribal distributors.



• The exemptions to the petroleum products loading fee are repealed. Current law exempts petroleum products that are loaded in New Mexico and exported for resale and consumption outside the state, and petroleum products sold to the United States or any agency or instrumentality thereof.




FISCAL IMPLICATIONS





TRD estimates that enacting this legislation would increase state road fund revenues by $1.3 million in FY2000 by eliminating "tax pre-empted off-reservation wholesaling activity." TRD estimates that 35 million gallons of tax preempted gasoline is sold by tribal and Indian-owned entities. Since the gasoline tax is 17 cents per gallon, the estimated revenue loss is $5.9 million. Given that the revenue gain from the proposed bill is $1.3 million, most of the revenue loss must come from retail sales.





The impact would be recurring, but the long-run impacts uncertain, they say. The uncertainty is due to two offsetting factors. The proposed law would curtail the growth of wholesaling on Indian lands. On the other hand, the provision of a deduction for retailing on Indian lands could increase Indian retail gasoline sales.





ADMINISTRATIVE IMPLICATIONS





TRD reports that the bill would have no significant administrative impact on its duties.





OTHER SUBSTANTIVE ISSUES





TRD suggests that definition of registered Indian tribal distributors may lead to legal conflicts as "non-Indian operated business organized to appear 51% Indian owned presumably would claim the deduction for on-reservation retail sales and be denied by the Department."





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