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

SPONSOR SFC

ORIGINAL DATE

LAST UPDATED

1/23/06

2/6/06 HB

SHORT TITLE Jet Fuel Gross Receipts Deductions

SB 9/SFCS/aSFl#1

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(330.0) Recurring State Aviation Fund

(200.0) Recurring Local Governments

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Transportation (DOT)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of SFl#1 Amendment

Senate Floor Amendment 1 deletes Section 1 of the Senate Finance Committee substitute for

Senate Bill 9, which contained a drafting error.

Synopsis of Bill

The Senate Finance Committee substitute for Senate Bill 9 amends Sections 7-1-6.7, 7-9-83, and

7-9-84 NMSA 1978 to extend the current 55 percent gross receipts and compensating tax deduc-

tions for receipts from the sale of jet fuel permanent through the end of FY12, after which the

deduction will fall to 40 percent. Under current law, this 55 percent deduction is scheduled to fall

to 40 percent at the beginning of FY08.

The provisions the bill will become effective July 1, 2006.

Senate Bill 9/SFCS/SFl#1 – Page 2

FISCAL IMPLICATIONS

TRD and DOT estimate total receipts from jet fuel sales will be about $46 million in FY08. With

this base, maintaining the 55 percent deduction would reduce taxable gross receipts by $6.9 mil-

lion (15 percent deduction X $46 million). 4.79 percent of this amount, or $330 thousand would

have gone to the state aviation fund, and 2.9 percent, or $200 thousand would have gone to local

governments.

SIGNIFICANT ISSUES

For several years, DOT has advocated increasing funding to the state aviation fund because 5

percent state and local matching from the state aviation fund can be used to generate a 95 percent

match from the federal aviation administration (FAA).

The rate of distribution to the state aviation fund was increased from 3.59 percent to the current

level of 4.79 percent of taxable gross receipts from the sale of jet fuel to hold it harmless when

the gross receipts tax deduction for jet fuel was increased from 40 to 55 percent in FY04. Al-

though at that time the deduction was only supposed to stay at the 55 percent level until the end

of FY07, there was no provision to reduce the rate of distribution to the state aviation fund back

to 3.59 percent when the deduction fell back to 40 percent. It can be argued that the 55 percent

deduction rate is more consistent with the 4.79 percent state aviation fund distribution contained

in current law.

ADMINISTRATIVE IMPLICATIONS

The bill will have minimal implications for TRD.

SS/nt:yr