BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE:  February 25, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: HB-869

SPONSOR: Representative Garcia

BILL SHORT TITLE: Property Tax Code amendments -- valuation cap for disabled persons

CONFLICTS, DUPLICATES, COMPANIONS: HB-623, HB-718 (conflict)

DESCRIPTION: This measure would index the modified gross income (MGI) cap used in qualifying elderly low-income owners of single-family residential property for the 0% valuation increase limitation. The cap would be adjusted by the consumer price index for urban consumers. The bill would also allow disabled persons to qualify for the cap. The proposal also clarifies that new improvements to properties by individuals subject to the elderly low-income value cap are not subject to the cap.
	A disabled person is defined in the proposal as a person who has been determined to be disabled or blind under provisions of the Social Security Act or has been determined to be permanently and totally disabled under the Worker's Compensation Act.

EFFECTIVE DATE: The measure is applicable to property tax year 2001 and subsequent property tax years.

FISCAL IMPACT:  No significant impacts on state or local revenue sources would result from passage of the proposed measure. 

ADMINISTRATIVE IMPACT: The proposed changes could be administered with resources currently available to the Department. 

TECHNICAL ISSUES:

1)  The measure's attempt to freeze values on properties owned by disabled persons probably violates Article 8, Section 3 of the New Mexico Constitution stating that:"...taxes shall be in proportion to the value thereof, and taxes shall be equal and uniform upon subjects of taxation of the same class". An exception is made stating that "The legislature shall provide by law for the valuation of residential property for property taxation purposes in a manner that limits annual increases in valuation of residential property. The limitation may be applied to classes of residential property taxpayers based on owner-occupancy, age or income.". The proposed measure would limit value increased based on disability, and thus is not covered by the exception.

2) The monthly consumer price index published by the Department of Labor is cumulative by nature. It measures  inflation occurring between the month in question and the base year period. Hence, rather than specifying the average change in the consumer price index for four successive quarters, as is done in the proposed measure, an easier method of accomplishing the same task would be to simply specify the ratio of, say the consumer price index in June of 2000 to the consumer price index in June of each successive year.

3) The measure's provisions will first apply to property tax year 2002 because the valuation date -- January 1 -- has already occurred for 2001.

OTHER IMPACTS AND ISSUES:  

1) Indexing the MGI figures would prevent inflation from causing some low-income taxpayers to fail to qualify for the valuation freeze. Nonetheless, allowing a person with an income of $18,000 to qualify for the freeze, while a person whose income is $18,001 does not, may not be perceived as fair by some taxpayers.

2) The valuation cap provides tax relief averaging approximately $20 per taxpayer, but varies substantially with property value and tax rates. The cost of administering the cap probably exceeds relief provided by the cap in many cases.