BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  1

DATE: February 19, 2001	Submitted by: TAXATION AND REVENUE DEPT.       
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER:  SB-808

SPONSOR:  Senator Pinto

BILL SHORT TITLE:  Special Fuels Agreements with Navajo Nation

CONFLICTS, DUPLICATES, COMPANIONS:  SB-559 and HB-807

DESCRIPTION:  This bill would allow the Taxation & Revenue Department to enter into a cooperative agreement with the Navajo Nation regarding administration and collection of  the state Special Fuel Excise Tax and a similar tax imposed by the Navajo Nation.  The full amount of the Navajo Nation tax would be credited against the state’s tax.  The Navajo Nation tax would be imposed in locations “within the exterior boundaries of the Navajo Nation”.  

EFFECTIVE DATE:  July 1, 2001

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

Estimated Impact on Revenues    	Recurring or		
			Nonrecurring	Funds	
	(FY 2001-2002)	(FY 2002-2003) 	     Impact     	         Affected         	
	(*)	(960)	Recurring	State Road Fund (88.89%)	
	(*)	(120)	Recurring	Local Governments Road Fund (11.11%)	
Total:	(*)	(1,080)			

(*)  It is unlikely an agreement would be implemented in time to have a significant fiscal impact during fiscal year 2001-2002. 

The fiscal impact assumes the Navajo Nation Tax would apply only within the strict boundaries of the Navajo Nation, and would not apply in the “Indian County” checkerboard area of McKinley County adjacent to Interstate 40 (see Substantive Issues).  The Department is attempting to gather information regarding diesel fuel sales within the Navajo Nation boundaries, but has been unable to complete the research as of this date. The fiscal 2002-2003 impact illustrates loss of state tax on 6 million gallons of diesel fuel. 

ADMINISTRATIVE IMPACT:  The extent of the adverse administrative impact would depend on specific details of the cooperative agreement.

OTHER IMPACTS AND ISSUES:
•	Tax returns filed by IFTA taxpayers and New Mexico Special Fuel Excise Tax users would not be affected by the cooperative agreement.  Taxpayers would receive credit for state taxes paid on gallons of diesel purchased, even though the state received no tax revenue.

•	The Navajo Nation would receive 100% of the tax on sales within the Nation’s boundaries, and would be insulated from the risk of gain or the risk of loss associated with allocating taxes among jurisdictions based on miles traveled.  The IFTA cannot recognize the Navajo Nation as a state for purposes of revenue allocation.

It is unlikely the cooperative agreement could address the issue of revenue sharing of the net special fuel tax revenue (suppliers tax plus IFTA).  That would require additional authority and direction from the legislature.

•	The Department has already entered into an information sharing agreement with the Navajo Nation to assist monitoring and compliance of fuel tax activity.