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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 Barela

ORIGINAL DATE

LAST UPDATED

2/20/07

2/22/07 HB 833/aHBIC

SHORT TITLE Low-Income Housing Material Gross Receipts

SB

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($396.0)

Recurring General Fund

($264.0)

Recurring

Local

Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of HBIC Amendment

The House Business and Industry Committee amendment to House Bill 833 addresses a

technical issue raised by TRD. The amendment requires the buyer to deliver a nontaxable

transaction certificate to the seller for receipts to receive the deduction. The amendment also

restricts the deduction to receipts for materials purchase by a non-profit entity that is directly

related to its tax-exempt purpose.

Synopsis of Original Bill

House Bill 833 expands a gross receipts and governmental gross receipts deduction granted in

Section 7-9-60 NMSA 1978 to allow receipts from selling construction material or metalliferous

mineral ore to a 501(c) (3) organization organized to provide homeownership opportunities to

low-income families to be deducted.

The effective date of these provisions is July 1, 2007.

House Bill 833/aHBIC – Page

2

FISCAL IMPLICATIONS

Based on information from federal tax returns filed by New Mexico non-profit entities TRD

estimates that 20 to 30 non-profit entities operate in New Mexico each year to provide low-

income homeownership opportunities. Total income of these entities is about $30 million per

year TRD assumes that $10 million of that income is spent on construction materials and would

be eligible for the proposed deduction. Taxed at a statewide rate of 6.6 percent, the proposal

would reduce gross receipts tax collections by about $660 thousand. About 60 percent of that

revenue decrease would accrue to the general fund and the remaining 40 percent would accrue to

local governments.

SIGNIFICANT ISSUES

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.

The bill will reduce local government gross receipts tax collections. Many of New Mexico’s

local governments are highly dependent on gross receipts tax revenue.

ADMINISTRATIVE IMPLICATIONS

The bill has no major administrative impacts on TRD.

TECHNICAL ISSUES

TRD notes that the term “low-income" should be defined, possibly in the same way low-income

is defined in federal statutes governing the low-income hosing tax credit.

SS/mt:nt