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committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

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

SPONSOR Sandoval

ORIGINAL DATE

LAST UPDATED

1/31/08

HB 448

SHORT TITLE Air Base Center Construction Gross Receipts

SB

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

($46.0)

(50.0) Recurring General Fund

($38.0)

(41.0) Recurring

Local

Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 448 creates a gross receipts tax deduction for receipts from services to construct,

supply or operate a cyberspace command center at an air force base in New Mexico. The bill also

creates a compensating tax deduction for the value of services and tangible property purchased to

construct, supply or operate a cyberspace command center at an air force base in New Mexico.

The bill defines a “cyberspace command center" as an installation that defends the United States

against attacks conducted over the internet or other communications systems that may disable or

interrupt computer, communications or satellite systems or other vital strategic infrastructure that

contaminate, destroy or access the information stored or processed through those systems.

The deductions created will apply to reporting periods on or after July 1, 2008.

House Bill 448 – Page

2

FISCAL IMPLICATIONS

The amount and timing of this fiscal impact depends on if and when a cyberspace command

center locates in New Mexico. TRD estimates that only $1 million in ongoing services that were

taxable in FY07 would become eligible for the proposed deductions. The fiscal impact estimate

assumes these receipts grow by 10 percent per year.

LFC cautions that the fiscal impact of the bill will be much larger if the cyberspace command

center is located in New Mexico.

SIGNIFICANT ISSUES

According to EDD, the U.S. Air Force has proposed establishing a permanent cyberspace

command center by October 1, 2008 and is actively evaluating potential locations. Cyberspace

command has been provisionally located at Barksdale air force base in Louisiana. Over 500

military personnel and civilian employees are expected to be employed by the command center.

EDD also reports that Governor Richardson established a task force to make New Mexico’s case

to be the permanent location of the cyberspace command center. The task force believes Kirtland

air force base would be an optimum location for the center due to existing technical capabilities

and proximity to New Mexico’s national laboratories. By reducing the cost of construction,

supplying and operating the command center in New Mexico, this bill would provide an

additional incentive for the cyberspace command center to locate at Kirtland air force base.

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.

ADMINISTRATIVE IMPLICATIONS

The administrative impact on TRD will be minimal.

SS/bb