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F I S C A L I M P A C T R E P O R T
SPONSOR Miera
ORIGINAL DATE
LAST UPDATED
1/23/06
HB 201
SHORT TITLE Municipal Property Tax Rebate
SB
ANALYST Francis
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
FY08
NFI
NFI Recurring Local Govern-
ment
NFI
NFI Recurring General Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates SB 222
SOURCES OF INFORMATION
LFC Files
Taxation and Revenue Department (TRD)
NM Municipal League (NMML)
Department of Finance and Administration (DFA)
Responses Received From
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
House Bill 201 amends the property tax rebate in the Income Tax Act to allow a local option for
municipalities. Currently, only counties have the ability to issue a property tax rebate to low-
income residents. HB 201 also allows for municipalities to hold an election for the purpose of
levying additional property tax up to a maximum of one mill ($1.00 per $1,000.00 of assessed
value) to pay for the rebate to low-income residents.
The rebate is 75 percent of property tax liability for the lowest income scaling to 35 percent for
taxpayers with modified gross income between $22,000 and $24,000 with a maximum credit of
$350.00. The rebate is also refundable which means that if the rebate exceeds the tax liability the
taxpayer receives a refund of the remaining amount.
pg_0002
House Bill 201 Page
2
FISCAL IMPLICATIONS
TRD reports that there are no significant fiscal implications for state and local funding sources as
the rebates will likely be a rare occurrence. Los Alamos County has so far been the only county
to provide a rebate which totaled $21,000 in 2004. Since the bill contains language that calls for
an election to increase the property tax mill levy to pay for the rebate, the costs will be covered
by the increased mill levy in most cases.
The only eligibility criteria is modified gross income so low-income taxpayers who are over 65
years old will be eligible for both credits with an individual maximum of $600 ($350 for the low
income rebate and $250 for the low income over 65 rebate). Since it is a municipal credit and
not a state credit, there would be no state fiscal impact.
ADMINISTRATIVE IMPLICATIONS
TRD:
Modest administrative impacts would be imposed on the Department by the proposed legis-
lation. Personal income tax forms would, for example, need to be modified to allow taxpay-
ers to claim the rebates. Changes in the state's computer system would also be necessary.
Taxpayer education would also be required. Representatives of the Department of Finance
and Administration's Local Government Division would also be required to modify property
tax rate certificates to display the new debt-service rates resulting from the proposed rebate
program.
DUPLICATION
SB 222 is a duplicate bill.
TECHNICAL ISSUES
TRD:
A few New Mexico municipalities extend across county boundaries. In such cases, if one
county has adopted the current rebate system and another has not, the prohibition on the
municipality adopting the proposed rebate if the county has already adopted it would mean
that the proposed rebate could only be implemented in part of the municipality, creating
numerous difficulties.
OTHER SUBSTANTIVE ISSUES
TRD:
Current statutes (Section 7-2-14.3 H) require counties to consider providing the rebates in
every odd-numbered year in which they are not currently providing them. Counties often re-
quest estimates of the numbers of taxpayers that would qualify for the rebates. This is prob-
lematic because data available to the Department does not contain information on modified
gross income by county (or municipality) that can be linked with property tax liability.
Counties may be reluctant to provide the rebates because they have no way of generating
accurate estimates of their net fiscal impacts, i.e., revenue raised with one-mill rate imposi-
tions compared with the likely amount of the personal income tax rebates.
pg_0003
House Bill 201 Page
3
ALTERNATIVES
The property tax rebate for low income taxpayers who are over 65 years old allows credit for
renters as well as owners with an implicit assumption that 6 percent of rent is passed-through
property taxes from the landlord. This feature could be added by adding language to include
renters which may better target the low-income community.
NF/nt