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

SPONSOR:	Payne		DATE TYPED:	2-4-99		HB
SHORT TITLE:		School Contributions Tax Credit				SB	112
					ANALYST:		Taylor

REVENUE

Estimated Revenue		Subsequent Years Impact	Recurring or Non-Rec	Fund Affected
FY99	FY2000	Subsequent Years Impact	Recurring or Non-Rec	Fund Affected
N.A.	$ (15,090.0)	$ (15,600.0)	Recurring	General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

Taxation and Revenue Department (TRD)

State Department of Education (SDE)

Commission on Higher Education (CHE)

SUMMARY

Synopsis of Bill

Senate Bill 112 proposes a new tax credit against personal income taxes for persons making a cash contribution to a New Mexico public school or public post-secondary institution. The bill caps the credit at one hundred dollars. The credit is not refundable and may not be carried forward, meaning that it cannot exceed the amount paid in personal income taxes during the year the contribution is made. The bill would become effective January 1, 1999, affecting taxes paid to FY2000.

FISCAL IMPLICATIONS

TRD has estimated that this bill would decrease general fund revenues by $15 million in the first year, and by $15.6 million the following. They base the estimate on the assumptions that there are 300 thousand students enrolled in K-12 public schools and an average contribution per child of $50. They also assumed that the credit would stimulate an additional one thousand cash donations.

ADMINISTRATIVE IMPLICATIONS

TRD reports minimal administrative impact.

OTHER SUBSTANTIVE ISSUES

TRD notes that academic research suggests that tax credits for charitable contributions do not stimulate a lot of additional giving, but rather serve to compensate those who were giving anyway.

SDE reports that to the degree that the credit does stimulate additional giving, it could exacerbate resource differences between rich and poor schools because those most able to give would tend to be from higher income families.

TRD notes that because the credit is non-refundable, a poor family making a cash contribution would not be eligible for a credit. This is problematic in that those expenses are more of a burden to poorer families, they say.

BT/gm