Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

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

SPONSOR Smith

DATE TYPED 2/27/05

HB

SHORT TITLE Incorrect Gross Receipts Reporting Penalty

SB 177/aSJC

ANALYST Taylor

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

(Uncertain)

(Uncertain)

Recurring

General Fund

(Uncertain)

(Uncertain)

Recurring Local Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of the Senate Judiciary Committee Amendments

The Senate Judiciary Amendments:

1.

make the repeal of the penalty provisions effective January 1, 2005; and

2.

add an emergency clause.

Synopsis of Original Bill

SB 177 repeals provisions of the law regarding incorrect reporting of gross receipts deductions of

sales of food for home consumption and certain medical services. The repealed penalty is equal

to the misreported deduction multiplied by twice the gross receipts rate (including local options).

The bill does not carry an effective date. The bill is assumed effective 90 days after enactment.

FISCAL IMPLICATIONS

TRD reports that the fiscal impact uncertain because no penalties have been collected under the

statute, which went into effect January 1, 2005.

Senate Bill 177/aSJC -- Page 2

ADMINISTRATIVE IMPLICATIONS

The Taxation and Revenue Department reports that it will need to make changes to systems,

forms, publications, processing and training. Short-term costs of perhaps 0.5 FTE combined.

They also say that the Senate Judiciary Committee amendment adding an emergency clause will

shorten the time available for implementation.

OTHER SUBSTANTIVE ISSUES

TRD’S bill analysis raised the following issue:

The penalties being repealed in this bill were designed to insure accurate reporting by lo-

cation to facilitate the distribution of “hold harmless” amounts to local governments, but

the magnitude of the penalties – equivalent to 100% of the misreported local option gross

receipts tax – is much larger than that for other tax underpayment penalties that are lim-

ited to 10% of the principal amount.

BT/rs