Master FIR (1988)

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

SPONSOR:	Maes		DATE TYPED:	02/27/99		HB
SHORT TITLE:		Construction Materials Tax Deduction				SB	288/aSWMC
					ANALYST:		Eaton

REVENUE

Estimated Revenue		Subsequent Years Impact	Recurring or Non-Rec	Fund Affected
FY99	FY2000	Subsequent Years Impact	Recurring or Non-Rec	Fund Affected
	$(unknown)*		Recurring	General Fund
	$(unknown)*		Recurring	Counties/Munic

*Taxation and Revenue Department has not submitted an impact estimate as of this date.

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

Taxation & Revenue Department (TRD), 1998.

New Mexico Department of Labor (NMDL)

SUMMARY

Synopsis of SWMC Amendment

This amendment adds the stipulation that the counties to which this legislation would apply must have an unemployment rate of seven percent or higher.

Synopsis of Bill

This bill creates a deduction from gross receipts for the sale of certain services, materials and equipment for manufacturing operations. The legislation further provides that if a taxpayer executes nontaxable transaction certificates for the purchase of construction services, materials and installation services, the taxpayer cannot claim the credit under the Investment Credit Act (Chapter 7, Article 9A, NMSA 1978).

FISCAL IMPLICATIONS

SWMC amendment

The Taxation and Revenue Department (TRD) estimated in 1998 that the total recurring impact to be $23 million if this legislation was enacted. With the amendment, the fiscal impact will be lower. The Taxation and Revenue Department (TRD) has not reported what that impact might be as of the date of this analysis.

The counties that have unemployment rates at or about seven percent or higher are:

Mora

Luna

Chaves

Taos

Guadalupe

Cibola

McKinley

San Juan

Catron

Rio Arriba

San Miguel

Eddy

Dona Ana

Grant

ADMINISTRATIVE IMPLICATIONS

Training of the audit and legal staff of the Taxation and Revenue Department (TRD) would be necessary. Education and training of the manufacturers through TRD annual tax workshops would also be necessary.

POSSIBLE QUESTIONS

How will the Taxation and Revenue Department (TRD) determine if a manufacturer is wrongfully using Non-Taxable Transaction Certificates (NTTC's) for a construction project?

If a manufacturer finances construction using Industrial Revenue Bonds (IRB's) and is therefore exempt from paying property taxes until all the bonds are called, what taxes, if any, might be paid for new manufacturing construction?

JBE/njw