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F I S C A L I M P A C T R E P O R T
SPONSOR Taylor, J.
ORIGINAL DATE
LAST UPDATED
2/07/07
2/26/07 HB
SHORT TITLE Aircraft Manufacturer Gross Receipts
SB 477/aSCORC
ANALYST Schardin
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
($158.4)
($237.6) Recurring General Fund
($105.6)
($158.4) Recurring
Local
Governments
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates HB 530, Conflicts with HB 256
SOURCES OF INFORMATION
LFC Files
Eclipse Aviation
Responses Received From
Economic Development Department (EDD)
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of SCORC Amendment
In response to technical issues raised by TRD, the Senate Corporations and Transportation
Committee amendment to Senate Bill 477 provides definitions to several terms used in the bill.
The amendment defines an “aircraft manufacturer" as a business entity that designs and builds
FAA certified private or commercial aircraft. “Control" of a business is defined to mean at least
50 percent of total voting power and at least 50 percent of equity in the business.
Synopsis of Original Bill
Senate Bill 477 expands an existing deduction for receipts of an aircraft manufacturer from
selling aircraft to include receipts from an aircraft manufacturer’s affiliate from selling aircraft
parts, components, flight support, pilot training, or maintenance training services.
pg_0002
Senate Bill 477/aSCORC – Page
2
An affiliate is defined as a business entity that is directly or indirectly controlled by an aircraft
manufacturer. Flight support is defined as providing navigation data, charts, weather
information, online maintenance records and other aircraft or flight-related information and the
software needed to access such information.
The effective date of these provisions will be July 1, 2007.
FISCAL IMPLICATIONS
Based on industry information and the Report 80, “Analysis of Gross Receipts by Standard
Industrial Classification," TRD estimates taxable gross receipts for the new deduction will total
about $4 million in FY08 and about $6 million thereafter. With a statewide average gross
receipts tax of 6.6 percent, the bill will reduce gross receipts tax revenue by about $264 thousand
in FY08. About 60 percent of this revenue loss will accrue to the general fund and the remaining
40 percent will accrue to local governments.
SIGNIFICANT ISSUES
According to EDD and Eclipse Aviation, this bill will help aviation manufacturing companies
located in New Mexico competitively provide manufacturing services. New Mexico aircraft
service providers compete with providers in other states that may not be subject to gross receipts
or sales tax and that may have more convenient locations.
The language contained in this bill will benefit Eclipse Aviation’s JetComplete program, which
provides pilot and maintenance training, data services, flight support services, and aircraft repair
and maintenance services on a fixed payment basis. Eclipse asserts that the deduction creates a
favorable business climate for aircraft owners to have services performed in New Mexico instead
of other out-of-state locations.
Eclipse currently plans to develop a national customer and product support headquarters in
Albuquerque. This facility is expected to employ 77 workers at an average annual salary of $42.8
thousand and a median annual salary of $32 thousand.
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.
ADMINISTRATIVE IMPLICATIONS
Administrative impacts on TRD will be minor.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Senate Bill 477 duplicates House Bill 530.
Senate Bill 477 conflicts with House Bill 256, which creates amends the same section to create a
gross receipts tax deduction for belowground irrigation systems.
SS/nt