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F I S C A L I M P A C T R E P O R T
SPONSOR Sanchez, M.
ORIGINAL DATE
LAST UPDATED
1/24/07
HB
SHORT TITLE National Lab Small Business Tax Credits
SB 1
ANALYST Schardin
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
(1,200.0)
Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates House Bill 236
SOURCES OF INFORMATION
LFC Files
Responses Received From
Economic Development Department (EDD)
SUMMARY
Synopsis of Original Bill
Senate Bill 1 expands the existing laboratory partnership with small business tax credit. The bill
increases the credit that a national laboratory can claim against its gross receipts tax liability for
assistance to each small business in Bernalillo County from $5 to $10 thousand per year, and
increases the credit that a national laboratory can claim for assistance to each small business
outside of Bernalillo County from $10 to $20 thousand per year. The total amount of credits that
can be claimed by a national laboratory is increased from $1.8 to $2.4 million per year.
The bill will also require national laboratories claiming this credit to submit a joint annual report
to the Taxation and Revenue Department (TRD), the Economic Development Department
(EDD), and the appropriate legislative interim committee by October 15 of each year. The report
will summarize program results, describe projects funded, provide results of surveys of small
businesses that received assistance, quantify the total amount of credits claimed, and include an
economic impact study of jobs created and retained.
If more than one national lab claims the credit, those labs will be required to coordinate their
efforts.
pg_0002
Senate Bill 1 – Page
2
Senate Bill 1 also expands eligibility requirements for claiming the laboratory partnership with
small business tax credit. To be eligible for the credit, the national laboratory providing small
business assistance will be required to 1) offer each small business receiving assistance the
option of obtaining ownership of license to property developed through the assistance; 2)
acknowledge that the small business assistance is rendered once it is completed; and 3) provide
forms for small business assistance requests and for completion of small business assistance that
are in accordance with state and federal laws.
The effective date of these provisions is July 1, 2007.
FISCAL IMPLICATIONS
Under current law, Sandia National Laboratories (SNL) and Los Alamos National Laboratory
(LANL) are each eligible to claim $1.8 million per calendar year in credits (LANL became
eligible for the credit in 2006 when its new contract made it liable for the gross receipts tax). By
increasing the total amount of credits that each national laboratory can claim to $2.4 million per
calendar year, the bill will reduce state gross receipts tax collections from each lab by $600
thousand per year, for a total of $1.2 million per year. The fiscal impact assumes that SNL will
be able to reach the higher cap of $2.4 million in calendar year 2007, while LANL will not reach
the cap until calendar year 2008.
Since this gross receipts tax credit can only be claimed against the state portion of gross receipts
tax liability it has no impact on local governments.
SIGNIFICANT ISSUES
LFC notes that while individual credits, deductions and exemptions 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.
EDD reports that this credit has enabled SNL to help New Mexico businesses create 449 jobs
with an average salary of $37 thousand per year over the last five years. According to TRD, this
credit benefited 278 small businesses in 2004.
By doubling the cap on assistance a national laboratory may provide to each small business from
$5 to $10 thousand in Bernalillo County and from $10 to $20 thousand in the rest of the state, the
bill is likely to result in a smaller number of businesses receiving assistance, but those that do
receive assistance will receive a larger amount.
ADMINISTRATIVE IMPLICATIONS
The bill will have minimal administrative impacts on TRD.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Senate Bill 1 duplicates House Bill 236.
pg_0003
Senate Bill 1 – Page
3
TECHNICAL ISSUES
TRD notes that to qualify for the program, small businesses must certify that assistance is not
available at a reasonable cost through private sources. There is currently no mechanism in place
to verify these assertions.
SS/csd