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F I S C A L I M P A C T R E P O R T
SPONSOR Snyder
ORIGINAL DATE
LAST UPDATED
1/23/08
HB
SHORT TITLE Employer Health Insurance Tax Credit
SB 115
ANALYST Francis
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY08
FY09
FY10
(70,000.0)
Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
SB115 relates to and conflicts with several health bills introduced in the 2008 session. See
section below for table of all bills.
SOURCES OF INFORMATION
LFC Files
Taxation and Revenue response to SB723 in 2007 session
Responses Received From
Human Services Department (HSD)
SUMMARY
Synopsis of Bill
Senate bill 115 creates a credit for employers with 50 or fewer employees who provide health,
disability or long term care insurance for employees. The credit is equivalent to 50 percent of
the employer contribution to insurance premiums for the first five years of providing coverage
and 35 percent after five years. The credit can only be claimed against the taxpayer’s current
personal or corporate income tax liability and if the taxpayer is a member of a partnership, S
corporation or business association the credit is proportional to the taxpayer’s ownership or
interest.
FISCAL IMPLICATIONS
TRD has not updated its analysis and the analysis for SB723 from 2007 session is used.
According NM Department of Labor statistics, 95 percent of employers have fewer than 50
employees which make this credit available to most employers (Table 1). These firms have
286,000 employees. The Health Policy Commission has reported that 74 percent, or 208,000, of
pg_0002
Senate Bill 115 – Page
2
these employees have some form of employer sponsored health insurance which averages $5,100
per year in employer paid premiums. According to analysis provided by the Taxation and
Revenue Department, the total amount of premiums eligible, $1.06 billion, would generate a
maximum credit value of $371 million at a 35 percent credit rate. TRD: “Actual credit claims
would be limited by income tax liability of firm owners. Business operators in New Mexico pay
a total of roughly $400 million per year in corporate and personal income tax. Using the ratio of
income tax paid to total wages and salaries, total income tax liability for the firms with less than
50 employees is estimated to be about $70 million per year. This amount is the limit of the total
credits that can be claimed assuming that the bill does not provide for refund ability or carry-
forward of credits in excess of tax liability."
Table 1: Employers by Firm Size in NM
Firm Size # Employers
100+
1,071
2%
50-99
1,090
3%
25-49
2,190
5%
10-24
5,689
13%
5-9
7,242
17%
1-4
19,804
46%
0
5,992
14%
43,078
95%
Source: NMDOL
TECHNICAL ISSUES
TRD:
The rate of credit under the bill is made conditional on the time period during which an
employer has been providing insurance to their employees. It is unclear from this
language how the statute would apply to taxpayers currently paying employee health
insurance premiums. The options are: the five-year period could begin with the effective
date of the bill or with the point in time when an employer first provided insurance, even
if that was at some time in the past. If employers currently offering insurance are not
allowed the higher rate of credit, they have an incentive to cease paying premiums for
some time period in order to qualify for credits during the first five years in which they
resume paying premiums.
The bill would create an incentive for a “taxpayer" with more than 50 employees to break
up into several “taxpayers" in order to claim the credit. To limit tax avoidance through
this mechanism, the proposal should contain additional language requiring that all related
entities are to be counted as part of the same “taxpayer" for purposes of the bill.
SIGNIFICANT ISSUES
The importance of health care coverage in New Mexico cannot be understated. Other than
Texas, no other state has a higher percentage of uninsured than New Mexico. The chart below
shows the state rankings.
pg_0003
Senate Bill 115 – Page
3
ADMINISTRATIVE IMPLICATIONS
TRD reports that forms and instructions for personal income tax and corporate income tax will
have to be revised but can be incorporated into the annual revisions and should not be a
significant burden.
pg_0004
Senate Bill 115 – Page
4
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Bill H/S Sponsor Title
37 H
Wirth ELECTRONIC MEDICAL RECORDS ACT
62 H
Heaton HEALTH SOLUTIONS NEW MEXICO ACT
147 H
Picraux HEALTH CARE AUTHORITY ACT
182 H
Varela SIMPLIFY MEDICAID ELIGIBILITY
205 H
Foley HEALTH INSURANCE EXCHANGE ACT
214 H
Gonzales HEALTH SECURITY ACT
3 S
Cisneros HEALTH SECURITY ACT
14 S
Feldman
HEALTH PROFESSIONAL RECRUITMENT &
RETENTION
37 S
Beffort
REQUIRE COLLEGE STUDENT HEALTH
INSURANCE
38 S
Beffort
NON-RESIDENT COLLEGE STUDENT HEALTH
INSURANCE
39 S
Beffort HEALTH INSURANCE TAX CREDIT
40 S
Beffort
HEALTH INSURANCE IN COLLEGE
SCHOLARSHIPS
62 S
B.
Sanchez HEALTH EDUCATION CULTURAL TASK FORCE
115 S
Snyder
EMPLOYEE HEALTH INSURANCE PREMIUM TAX
CREDIT
129 S
Feldman HEALTHY NEW MEXICO TASK FORCE
158 S
Komadina HEALTH CARE PRACTITIONER GROSS RECEIPTS
225 S
Feldman HEALTH CARE AUTHORITY ACT
228 S
Komadina HEALTH INSURANCE EXCHANGE ACT
NF/bb