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committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports
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F I S C A L I M P A C T R E P O R T
SPONSOR HBIC
DATE TYPED 3-01-2005 HB 904/HBICS
SHORT TITLE Department of Health Hospital Gross Receipts
SB
ANALYST Taylor
REVENUE
Estimated Revenue
Subsequent
Years Impact
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
($2,900)
($5,000)
($6,300) Recurring
General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates Senate Finance Committee substitute for SB 643
SOURCES OF INFORMATION
LFC Files
Taxation and Revenue Department (TRD)
SUMMARY
The House Business and Industry Committee substitute for Senate Bill 643 provides a gross re-
ceipts tax credit for gross receipts taxes from hospitals licensed by the Department of Health.
The credit is applied against the state’s portion of gross receipts tax from providing commercial
contract or medicare part A,B or C services. The credit is phased in over three years, beginning
on July 1, 2005. In municipalities the rate in calendar year 2005 is 1.258 percent, in 2006 it is
2.516 percent and in 2007 it is 3.75 percent. For hospitals located in the unincorporated areas of
a county, the rate in 2005 is 1.67 percent; in 2006 the rate is 3.34 percent; and in 2007 the rate is
5 percent.
FISCAL IMPLICATIONS
The New Mexico Hospital Association’s survey on hospital gross receipts payments for the last
12 month period indicates that investor owned hospitals paid total gross receipts of $15.2 mil-
lion. Assuming a state-wide average gross receipts tax rate of 6.6 percent, this implies a tax base
of about $230 million. The hospital association also reported that about 32 percent of this was
due from Medicare payments (parts A, B and C) and 34 percent from commercial contracts.
These are the two sources that would benefit from the credit, and together they account for two-
thirds, or $152 million of the $230 million tax base. The remaining one-third comes from Medi-
caid and self pay.
pg_0002
House Bill 904/HBICS-- Page 2
The bill phases in the credit beginning on July 1, 2005. Although the phase-in schedule begins
on the fiscal year, the rates change each calendar year. The result is that the phase-in rates on a
fiscal year basis are the average of the calendar year rate reductions. In FY06, the credit would
equal 1.887 percent of gross receipts, in FY07 3.146 percent, and in FY08 3.775 percent.
The fiscal impacts of the bill (revenue loss) apply to the state general fund only; they were de-
termined as follows:
1.
FY06: $2.9 million. The impact is calculated by multiplying the $152 million tax base
by 1.887 percent.
2.
FY07: $5.0 million. The calculation is $160 million ($152 million plus 5 percent
growth) times 3.146 percent.
3.
FY08: $6.3 million. The calculation is $168 million ($160 million base plus 5 percent
growth) times 3.775 percent.
ADMINISTRATIVE IMPLICATIONS
TRD’s analysis included this administrative impact:
High impact. System coding and troubleshooting must be performed; forms and instruc-
tions must be revised; taxpayer education materials and instruction publications must be
prepared; and personnel must be trained. A new special rate code would have to be im-
plemented in the Department’s tax computer system. Audit processes and compliance is-
sues would increase the cost of handling this credit
TECHNICAL ISSUES
TRD’S report noted the following technical issue:
The bill states that a credit can be taken against the “state portion” of gross receipts tax.
This language should probably read: “The credit shall be applied against the State Gen-
eral Fund distribution of the net receipts attributable to the Gross Receipts Tax.”
BT/lg:yr