NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.



Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Suite 101 of the State Capitol Building North.





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





SPONSOR: Cisneros DATE TYPED: 02/15/00 HB
SHORT TITLE: Limit Refund Investment Credit Earned SB 85/aSWMC
ANALYST: Eaton


REVENUE



Estimated Revenue


Subsequent

Years Impact



Recurring

or Non-Rec**



Fund

Affected

FY00 FY01*
$ (500.0) Non-Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)



*The negative fiscal impact represents less than 2% of the roughly $28 million in total investment credit balances.



**Since rebate eligibility provisions are so restrictive, and timing of investment credit applications and approvals unpredictable, the negative fiscal impact is essentially nonrecurring. The impact in FY 2001 does not represent new investment credit claims, but only an acceleration in the payment of claims already granted.



SOURCES OF INFORMATION



Taxation and Revenue Department (TRD)



SUMMARY



Sponsored for the Revenue Stabilization and Tax Policy Committee.



Synopsis of SWMC amendment



The amendment strikes Section C and adds a new Section C that places a time limit and a minimum tax liability to the eligibility provisions of the investment credit refund proposed by this bill. The eligible taxpayer to claim the investment credit must have in the calendar year the credit is claimed a credit amount of less than $500,000. The also adds a minimum tax liability of 10,000 requirement in the prior calendar year.



Synopsis of Bill



This bill amends the Investment Credit Act (Section 7-9A-8 NMSA 1978) to allow limited refunds of unclaimed investment credit to qualified taxpayers. To be eligible for a refund, a taxpayer must have a credit balance of less than $500,000. Additionally, the taxpayer's combined gross receipts, compensating, and withholding tax liability for the previous calendar year must total less than 35% of available credit on January 1 of the current calendar year. Taxpayers have until September 30 of the current calendar year to apply for a refund of up to $250,000.



The intent of the 35% of liability to credit balance restriction is to target smaller, relatively new manufacturing firms making significant capital investments. This proposal would save these taxpayers, who may tend to carry large investment credit balances relative to CRS tax liability, some opportunity costs of having "money" sit idle. For example, qualified taxpayers would have funds available for business operations and development, or to move into interest-bearing investments.



FISCAL IMPLICATIONS



The estimated impact of the bill as amended would reduce the general fund by $500.0 (non-recurring). The negative fiscal impact represents less than 2% of the approximately $28 million in total investment credit balances.



Since rebate eligibility provisions are so restrictive, and timing of investment credit applications and approvals unpredictable, the negative fiscal impact is essentially nonrecurring. The impact in FY 2001 does not represent new investment credit claims, but only an acceleration in the payment of claims already granted.



ADMINISTRATIVE IMPLICATIONS



Minimal impact on the Taxation and Revenue Department (TRD).



JE/njw