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

SPONSOR Campos

DATE TYPED 2-24-2004 HB 454

SHORT TITLE Municipal Income Tax Distribution

SB

ANALYST Taylor

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

(5,500.0)

(11,000.0) Recurring

General Fund

5,500.0

11,000.0 Recurring Municipal Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

SUMMARY

House Bill 454 reduces the state gross receipts distribution to municipalities from 1.225 percent to 1.0

percent, and provides a new distribution that is equal to 0.275 percent of the municipality’s residents’

total adjusted gross income reported pursuant to the Income Tax Act two years prior to calendar year or

0.225 percent of the municipalities’ gross receipts, whichever is higher. The new distribution would be

made monthly.

The Taxation and Revenue Department Secretary and the Executive Director of the Municipal League

would be required to report annually to the Revenue Stabilization and Tax Policy committee the annual

distributions under the new formula along with recommendations for changes to the formula or revenue

sources.

The bill carries an effective date of January 1, 2006.

FISCAL IMPLICATIONS

TRD estimates that this bill would reduce state general fund revenues by $11 million on a full year ba-

sis, and increase municipal revenues by the equivalent amount. The FY 2006 estimate is half the full

year impact because of the January 1, 2006 effective date.

House Bill 454 – Page

2

TRD’s analysis showing the impact for all the state’s municipalities is attached. They caution that the

municipal impacts may not be precise because they are estimated based on taxpayers’ mailing addresses.

All impacts are either positive or zero. This follows from the hold harmless provision that guarantees

that all municipalities’ distribution will be at least as large as what they would currently receive from the

existing 0.225 gross receipts distribution.

ADMINISTRATIVE IMPLICATIONS

TRD submitted the following administrative impact:

The PIT forms would need to change in tax year 2006 to determine the site of residence of in-

come tax payers, which our current forms do not do accurately. This would need to occur by tax

year 2006, and would require additional keystrokes for all returns.

TECHNICAL ISSUES

TRD raised this technical issues :

1) In proposed new Section 7-1-6.43(A) the first alternative distribution amount references the

amount that would be distributed under Section 7-1-6.4 “…if the percentage used for purposes of

that section was two hundred twenty-five thousandths percent…” The problem is that there are

two percentages used in Section 7-1-6.4. The section would be clearer if it read “…if the per-

centage into which the tax rate imposed by Section 7-9-4 is divided in that section were two

hundred twenty-five thousandths percent…” 2) Taxpayers often report negative figures for ad-

justed gross income. In tax year 2003, adjusted gross income in one municipality – Causey--

summed to a negative amount. AGI was accordingly treated as zero. 3) The proposal does not

specify what revenue source TRD is to use in making the required distribution. The bill should

specify the intended source.

BT/yr

House Bill 454 – Page

3

Illustration: Estimated Impacts of HB-454 by Municipality

Municipality

Estimated FY 05 Dis-

tribution Estimated New Distribution

Change from Estimated

Distribution

Alamogordo

6,453,115 6,453,115 -

Albuquerque

162,250,269 162,250,269 -

Angel Fire

886,980 886,980 -

Artesia

3,578,872 3,711,578 132,707

Aztec

1,488,581 1,746,607 258,026

Bayard

173,966 208,082 34,116

Belen

2,462,903 2,660,661 197,758

Bernalillo

1,002,245 1,096,025 93,780

Bloomfield

1,755,213 1,886,790 131,577

Bosque Farms

470,668 639,345 168,677

Capitan

171,159 202,681 31,522

Carlsbad

6,712,869 6,721,917 9,048

Carrizozo

142,886 152,930 10,044

Causey

5,192 5,192 -

Chama

290,087 290,087 -

Cimarron

111,917 135,915 23,998

Clayton

453,536 453,536 -

Cloudcroft

279,559 302,342 22,783

Clovis

7,778,346 7,778,346 -

Columbus

68,250 342,816 274,565

Corona

39,851 45,547 5,696

Corrales

996,904 1,461,242 464,337

Cuba

217,011 368,271 151,260

Deming

2,717,458 2,717,458 -

Des Moines

27,701 147,467 119,766

Dexter

241,774 266,266 24,491

Dora

17,423 34,090 16,667

Eagle Nest

75,323 75,924 601

Edgewood

768,871 1,118,481 349,610

Elephant Butte

142,481 266,935 124,453

Elida

23,001 191,827 168,826

Encino

12,547 16,280 3,733

Espanola

3,724,189 3,724,189 -

Estancia

334,470 334,470 -

Eunice

769,557 769,557 -

Farmington

21,574,123 21,574,123 -

Floyd

42,114 588,001 545,887

Folsom

3,997 8,238 4,241

Fort Sumner

168,190 168,190 -

Gallup

7,609,858 7,609,858 -

Grady

10,637 329,439 318,803

Grants

2,053,310 2,053,310 -

Grenville

1,142 83,424 82,282

Hagerman

145,527 152,536 7,009

Hatch

293,077 301,981 8,904

Hobbs

11,701,096 11,701,096 -

Hope

4,335 240,973 236,638

House

32,511 32,511 -

Hurley

82,463 95,627 13,165

Jal

269,860 288,113 18,253

Jemez Springs

57,669 168,616 110,947

House Bill 454 – Page

4

Illustration: Estimated Impacts of HB-454 by Municipality (continued)

Municipality

Estimated FY 05 Dis-

tribution

Estimated New Distribu-

tion

Change from Esti-

mated Distribution

Lake Arthur

18,287

70,891 52,604

Las Cruces

24,795,346

24,795,346 -

Las Vegas

3,058,568

3,902,203 843,635

Logan

125,102

293,971 168,868

Lordsburg

498,290

498,290 -

Los Alamos

10,148,286

10,148,286 -

Los Lunas

3,518,378

4,200,184 681,806

Los Ranchos

908,290

1,000,901 92,611

Loving

135,760

147,573 11,814

Lovington

1,921,848

1,921,848 -

Magdalena

110,899

207,259 96,360

Maxwell

15,979

33,353 17,374

Melrose

56,001

71,813 15,812

Mesilla

338,427

492,199 153,772

Milan

765,555

768,148 2,592

Moriarty

873,715

885,682 11,967

Mosquero

12,607

58,192 45,585

Mountainair

119,501

127,194 7,693

Pecos

127,717

190,368 62,651

Portales

1,875,252

1,875,252 -

Questa

134,331

253,136 118,805

Raton

1,420,823

1,420,823 -

Red River

434,271

446,949 12,679

Reserve

51,775

67,895 16,120

Rio Rancho

9,453,025

9,977,494 524,470

Roswell

9,967,234

10,085,237 118,002

Roy

50,524

410,568 360,043

Ruidoso

2,879,630

2,879,630 -

Ruidoso Downs

1,214,674

1,214,674 -

San Jon

96,677

2,317,070 2,220,393

San Ysidro

42,328

45,337 3,009

Santa Clara

39,915

168,312 128,396

Santa Fe

35,778,108

35,778,108 -

Santa Rosa

622,604

622,604 -

Silver City

3,233,281

3,233,281 -

Socorro

1,473,489

1,592,472 118,984

Springer

121,201

132,024 10,823

Sunland Park

1,193,647

1,193,647 -

Taos

4,399,657

4,399,657 -

Taos Ski Valley

390,530

390,530 -

Tatum

180,637

317,959 137,322

Texico

62,098

82,876 20,778

Tijeras

388,589

765,067 376,477

T or C

999,742

1,069,106 69,364

Tucumcari

869,395

967,000 97,605

Tularosa

274,981

373,139 98,158

Vaughn

74,383

102,586 28,203

Virden

1,813

4,776 2,963

Wagon Mound

148,458

148,458 -

Willard

8,647

13,910 5,263

Williamsburg

25,450

43,929 18,480

Totals

376,150,812

387,066,465 10,915,653