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F I S C A L I M P A C T R E P O R T
SPONSOR Lujan, B
ORIGINAL DATE
LAST UPDATED
2/9/07
2/15/07 HB 797
SHORT TITLE Health Care Clinical Lab Gross Receipts
SB
ANALYST Schardin
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
($668.3)
Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates SB 684; Conflicts with HB 638, SB 893
SOURCES OF INFORMATION
LFC Files
Responses Received From
Taxation and Revenue Department (TRD)
Department of Health (DOH)
SUMMARY
Synopsis of Bill
House Bill 797 expands the list of health practitioners who receive a gross receipts tax deduction
for receipts from managed care providers, commercial health insurers and Medicare part C to
include accredited clinical laboratories that are not located in a physician’s office or hospital.
Clinical laboratories were not included in 2004 legislation that made many other health provider
receipts deductible from gross receipts tax.
The effective date of the provisions in this bill is July 1, 2007.
FISCAL IMPLICATIONS
Based on the Report 80, “Analysis of Gross Receipts by North American Industry Classification
System." TRD believes taxable gross receipts for clinical labs not located in a physician’s office
or a hospital will be $54 million in FY08. Based on information from the federal Centers for
Medicaid and Medicare Services (CMS) and from industry representatives, about 75 percent of
that total comes from facilities not associated with physicians’ offices or hospitals, and about 25
percent of these receipts come from managed care insurers. Therefore, the bill’s general fund
fiscal impact is estimated to be $668.3 thousand in FY08 ($54 million X 75 percent X 25 percent
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House Bill 797 – Page
2
eligible receipts X 6.6 percent statewide tax rate). This impact includes the direct impact of
making these clinical laboratory receipts deductible, as well as the impact of holding local
governments harmless from the new deductions.
SIGNIFICANT ISSUES
Proponents of this legislation note that recruitment and retention of health providers has been
difficult in New Mexico because of the gross receipts tax. Although much of this problem was
addressed in 2004 when Section 7-9-93 was enacted, some healthcare practitioners in New
Mexico still pay gross receipts tax, while their counterparts in most other states do not. Unlike
many businesses that are subject to gross receipts tax but pass the tax on to consumers, many
health providers cannot pass the tax on because managed care organizations and Medicare refuse
to pay the tax.
LFC notes that while individual deductions from the gross receipts tax may have small fiscal
impacts, their cumulative effect significantly narrows the gross receipts tax base. Narrowing the
gross receipts tax base increases revenue volatility and requires a higher tax rate to generate the
same amount of revenue.
LFC notes that receipts of health practitioners have historically grown faster than receipts of
other industries. Removing receipts from high-growth sectors from the gross receipts tax base
makes it more difficult for tax revenue to keep pace with inflation.
ADMINISTRATIVE IMPLICATIONS
Administrative impacts to TRD can be handled with existing resources.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
House Bill 797 duplicates Senate Bill 684.
House Bill 797 conflicts with House Bill 638, which contains the same provisions as Senate Bill
684 regarding clinical labs but also expands a gross receipts deduction for receipts from
payments by the federal government for the provision of medical services to include doctors of
oriental medicine, athletic trainers, chiropractic physicians, counselors and therapists, dentists,
massage therapists, naprapaths, nurses, nutritionists, dietitians, occupational therapists,
optometrists, pharmacists, physical therapists, psychologists, radio logic technicians, respiratory
care physicians, audiologists, and speech-language pathologists.
House Bill 797 conflicts with Senate Bill 893, which contains the same provisions as Senate Bill
684 regarding clinical labs but also allows receipts from co-payments or deductibles to be
deducted from gross receipts taxes.
TECHNICAL ISSUES
TRD notes that Section 7-9-93 might not be the right location for the deduction proposed in this
bill because it adds clinical laboratories to the list of health practitioners. However, clinical
laboratories are defined as health facilities under 42 U.S.C. Section 263a.
SS/nt