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

SPONSOR Campos

ORIGINAL DATE

LAST UPDATED

1/23/06

2/10/06 HB 8/aHBIC/aHTRC

SHORT TITLE

HEALTH FACILITY CONSTRUCTION GROSS

RECEIPTS

SB

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(412.0)

(421.0) Recurring General Fund

(275.0)

(280.0) Recurring

Local

Governments

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates SB200

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of HTRC Amendment

The House Taxation and Revenue Committee amendment to House Bill 8 clarifies the section

heading on page 1 of the bill so that the new gross receipts tax deduction for engineering, archi-

tectural and new facility construction services will only apply to “certain” public health facilities.

Synopsis of HBIC Amendment

The House Business and Industry Committee amended House Bill 8 so that the new gross re-

ceipts tax deductions contained in the bill will only apply to construction of new hospitals, not to

renovations to existing hospitals.

Synopsis of Original Bill

House Bill 8 creates two new deductions from the gross receipts tax that apply to construction of

a sole community provider hospital in a federally designated health professional shortage area.

House Bill 8/aHBIC/aHTRC – Page 2

The first deduction is for receipts from engineering, architectural and construction services used

to construct such a hospital. The second deduction is for receipts from the sale of construction

equipment and materials used to construct such a hospital.

To qualify for these deductions, the services, equipment or materials must be sold to a founda-

tion or nonprofit organization that has signed a written agreement with a county to pay at least 95

percent of the hospital construction costs.

The effective date of these provisions is July 1, 2006.

FISCAL IMPLICATIONS

The House Business and Industries Committee amendment limits the new deductions to con-

struction of “new facilities.” This amendment reduced the fiscal impact of House Bill 8 signifi-

cantly. TRD’s amended fiscal impact estimate assumes $10 million per year of new hospital con-

struction per year. TRD estimates that the new deductions will decrease general fund revenue by

about $412 thousand per year, and decrease local government revenue by about $275 thousand

per year.

SIGNIFICANT ISSUES

The U.S. Public Health Service Act defines a “health professional shortage area” as an area

which the federal Health and Human Services Department determines to have a shortage of

health professionals. Areas with less than one physician per 3,500 people can receive a health

professional shortage designation. The restriction that a hospital eligible for these new deduc-

tions is built in a “federally designated health professional shortage area disqualifies only two

counties in New Mexico.

The deductions could apply to new construction as well as renovation of a hospital.

TECHNICAL ISSUES

The terms “health professional shortage area” and “sole community provider hospital” are not

defined. If these terms are federally defined, federal definitions should be cited. In addition,

“nonprofit” and “foundation” should be defined to avoid confusion.

The bill requires that a nonprofit or foundation sign a written agreement with a county to pay at

least 95 percent of construction costs. First, it is unclear if the bill should be amended so that the

nonprofit or foundation agrees to pay at least 95 percent of engineering, architectural and con-

struction costs. Second, the bill should explain what will happen if a nonprofit or foundation

does not fulfill its written agreement to pay at least 95 percent of costs.

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