BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE:  February 24, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: HB – 887  (REVISED to show revenue gain to Santa Ana)

SPONSOR: Representative Lujan

BILL SHORT TITLE: Providing a Personal and Corporate Income Tax Credit for Tribal Economic Development Taxes

DESCRIPTION: this bill provides a 100% credit against state personal and corporate income taxes for taxes imposed by an Indian tribe, nation or pueblo on economic development property. This is a non-refundable credit, but any excess over current liability may be carried forward for three years. The credit is the lesser of the tribal tax amount or the state amount. Mineral properties, pipelines, power generation and transmission and telecommunications equipment are not “economic development properties” for the purpose of this credit. However, the creditable tax is only a specific ad valorem property tax imposed by Santa Ana Pueblo on a proposed tax on “economic development property” located on Santa Ana lands.

EFFECTIVE DATE: not stated – 90 days after adjournment (June 17)

FISCAL IMPACT (Thousands of dollars):  		Note: Parenthesis ( ) indicate a revenue loss:
		Recurring or		
Estimated Impact on Revenues	Nonrecurring	Funds 	
	 FY 2002 	Full Year	     Impact     t     	             Affected          .             	
	Uncertain, but probably 0	Up to (4,000)	Recurring	General Fund	
	Uncertain, but probably 0	Up to 4,000	Recurring	Santa Ana Pueblo government	

ADMINISTRATIVE IMPACT: significant. Since both corporate and personal income taxes are involved, and the developer might have many partners or pass-through entity shareholders, both systems will have to be adapted to this new credit.

TECHNICAL ISSUES: 
1.	Suit could be brought on equal protection grounds and on the prohibition of Article IV, Section 24 of the New Mexico Constitution, “the legislature shall not pass local or special laws … [relating to] the assessment or collection of taxes; … [or] exempting property from taxation. In every other case where a general law can be made applicable, no special law shall be enacted.” This bill specifically identifies the type of project, the exact physical location of the project to benefit from the provisions of the bill – even the exact nature of the Santa Ana tax. Thus, it clearly violates the constitutional prohibition on local or special legislation. In many cases of constitutional violation, there are no clear losers to sue the state. In this case, however, any commercial enterprise located on Indian land would have standing and reason to sue. Commercial activity on Navajo or Jicarilla would be particularly encouraged to sue because of the tribal business activities and possessory interest taxes imposed by these entities.

2.	What is interesting in this proposal, is that the project is no more or less attractive to the developer with or without the tax credit. The full amount of the tax credit be added to pueblo coffers. No matter how the proposal is phrased, this is directly equivalent to an appropriation of state funds to an entity not under the control of the state. The state and its citizens (with the exception of a few hundred enrolled Santa Ana tribal members) derive absolutely no benefit from this proposal.

3.	Counsel points out that the developer could sell state tax credits to investors. Rather than allocating this tax credit on a prorata basis, the proposal gives the developer the right to designate which partner or shareholder can claim the New Mexico income tax credits. It is quite certain that the developer would allocate the credits so that none would go unused or rolled forward.

OTHER IMPACTS AND ISSUES:
1. In some ways, this proposal is reminiscent of 1997’s intergovernmental business tax credit. This law -- Laws 1997, Chapter 58 (SB-1211) – “was enacted mainly to assist the potential development of an agricultural processing plant in Indian country, qualifying corporations may credit against state corporate income tax up to 50% of business taxes owed to an Indian government with respect to its operations on that tribe's land in New Mexico. Only manufacturers, processors or growers may qualify; manufacturers and growers may count only tribal taxes due on business facilities created after July 1, 1997. Any tribal taxes covered by any other intergovernmental credit are not eligible under this credit.”  In this case, the ad valorem tax has not been enacted, no benefits of the bill accrue to the private developer, and the project is highly viable, even without the tax credit.