BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE: March 9, 2001	Submitted by: TAXATION AND REVENUE DEPT.       
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER:  HB-497 as amended by the House Taxation and Revenue Committee (3/8/2001)

SPONSOR: Representative Watchman

BILL SHORT TITLE: Petroleum Products Fee Deduction for Tribes

CONFLICTS, DUPLICATES, COMPANIONS:  

DESCRIPTION:  This bill revises imposition of the Petroleum Products Loading Fee (PPL Fee) on gasoline sold within Indian Reservation boundaries.  The PPL Fee deduction currently allowed for fuel sold at retail within tribal boundaries would be contingent upon imposition of a tribal tax similar to the state’s PPL Fee.  A credit against the PPL Fee would be allowed for the amount of tribal tax imposed for purposes of corrective action at sites contaminated by leaking fuel storage tanks.  Also, the volume of gasoline reported for purposes of the PPL Fee would “be calculated to the nearest one-hundredth of a load” (80 gallons).

The HTRC amendment restored the current law deduction allowed for fuel sold by “registered Indian tribal distributors” outside tribal boundaries—that is, for the 60,000,000 gallons sold by Nambé and Santo Domingo.

EFFECTIVE DATE:  Effective immediately under an Emergency Clause (Section 2).

FISCAL IMPACT (Thousands of dollars)   Parenthesis ( ) indicate a revenue loss:

Estimated Impact on Revenues   		Recurring or   		
				Nonrecurring	Funds	
	(FY 2000-2001)	(FY 2001-2002)		     Impact     	         Affected         	
	*	*		Recurring	Corrective Action Fund	
	*	*		Recurring	Local Governments Road Fund	
TOTAL	*	*				

*  The fiscal year 2001 impact is uncertain and depends primarily on passage of the bill with an Emergency Clause.  Indian Tribes and Pueblos may not have time to respond with imposition of their own leaking storage tank tax and so may become subject to the PPL Fee on volumes retailed within reservation and pueblo boundaries.

Approximately 100 million gallons of gasoline are reported annually by “registered Indian tribal distributors” as exempt from state gasoline tax.  Of that amount, approximately 60 million gallons is attributable to two distributors specially certified for sales outside tribal reservation boundaries.  The HTRC amendment continues the current law deduction allowed those two distributors.  The remaining 40 million gallons represents volumes sold at retail within tribal boundaries in New Mexico by numerous tribally-recognized distributors.  

If tribes and pueblos fail to impose their own leaking storage tank tax, the fiscal impact could range up to about $400 thousand to $600 thousand ($200 to $400 thousand for the Corrective Action Fund and $200 thousand for the Local Governments Road Fund).  The range in the fiscal impact illustrates a PPL Fee tax rate of 1 cent per gallon and 1.5 cents per gallon, although other tax rates are possible.  The PPL Fee rate can be adjusted each year on October 1st based on balances in the Corrective Action Fund.

SUBSTANTIVE ISSUES:  The aim of the original bill was to impose the PPL Fee on fuel sold by all retailers with standing to apply for aid from the Corrective Action Fund to remedy leaking underground fuel storage tanks. The HTRC amendment eliminated imposition of the PPL Fee on 60 million gallons of gasoline which are sold outside tribal boundaries by two specially certified distributors under the Section 7-13-4, Subsection F gasoline tax deduction.  Thus, an unknown number of retailers in Northern New Mexico with standing to request assistance from the Corrective Action Fund may not be contributing their fair share to that fund.

TECHNICAL ISSUES:

•	Whenever the PPL Fee tax rate changes, tribes would probably have an interest in being informed of the change with enough advanced notice so they might adjust their tax rate.   It would be quite helpful if the Environment Department could inform tribes of proposed changes in the PPL Fee tax rate.

•	A change in administration of the PPL Fee in the middle of a month (pursuant to an Emergency Clause), will be extraordinarily difficult to accomplish.  An effective date of April 1, 2001 might be considered.

ADMINISTRATIVE IMPACT: The Emergency Clause presents awkward implementation issues for the Department.  Otherwise, the bill’s provisions could be implemented with existing department resources.

OTHER IMPACTS AND ISSUES:

•	If tribes were to impose their own leaking storage tank tax on special fuel (diesel), that fuel would be subject to double taxation.  There is no PPL Fee deduction allowed in the bill for special fuel.  This may not be an important issue since not much, if any, special fuel would be subject to dual jurisdiction at this time.