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F I S C A L I M P A C T R E P O R T
SPONSOR Arnold-Jones
ORIGINAL DATE
LAST UPDATED
1-27-2006
HB 384
SHORT TITLE Managed Tax Audit Payments & Reporting
SB
ANALYST Dearing
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
FY08
($0.1)*
Recurring General Fund
*Please See Narative
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates SB319
Conflicts HB380
House Bill 380 also contains an amendment to Section 7-1-71.2, setting up a possible conflict if
both bills are passed.
SOURCES OF INFORMATION
LFC Files
Responses Received From
Department of Health (DOH)
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
House Bill 384 introduced for the Revenue Stabilization and Tax Policy Committee, proposes
technical changes that would increase time frames relating to taxpayer payment extension of
time, tax payment due dates and exemption from tax penalty for a taxpayer participating in a
managed audit.
Three changes are proposed to the Tax Administration Act:
1.
The Secretary of Taxation and Revenue would be authorized to extend the due date for
payment of income tax or filing of the return by up to six months rather than four months
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House Bill 384 Page
2
under present law.
2.
The interest-free period for payment of tax liability identified through a managed audit
would be extended from 30 days to 180 days.
3.
The double local option penalty for mis-reporting of food and medical services deduc-
tions under the gross receipts tax would not apply to taxpayers who participate in a man-
aged audit.
FISCAL IMPLICATIONS
HB384 is a proposal that came out of the interim work of the Legislative Revenue Stabilization
and Tax Policy Committee. HB384 contains technical changes that could have a minimal impact
on revenues. The legislation extends the penalty free time-frame that those taxpayers within a
managed-audit are allowed from thirty to one-hundred and eighty days. Additionally this bill
extends the automatic extension in Section 7-1-13 e.) NMSA 1978 from four months to six
months.
In general, those taxpayers that have entered into a managed-audit agreement, under certain cir-
cumstances, will accrue no interest on some tax deficiencies. Accordingly, there could be a
minimal, indeterminate fiscal impact, due to lost interest on these delinquent tax accounts. The
level of lost revenue associated with this interest could be substantial however, depending on the
number of those taxpayers who enter into a managed-audit agreement.
SIGNIFICANT ISSUES
According to the Taxation and Revenue Department, enactment of this bill should incur no sig-
nificant impacts on state or local revenues. Although the extension of an interest-free period for
managed audits has potential to reduce revenue, this could be offset by encouraging more man-
aged audits, which encourage taxpayers to identify liabilities that the Department has not yet
identified and therefore increasing revenue.
ADMINISTRATIVE IMPLICATIONS
1.
Allowing the Secretary to extend the due date for income tax returns will enable state
taxpayers to file state income tax returns at the same time as they file their federal income
tax returns.
2.
Extending the period in which a person must pay tax assessed in a managed audit from
30 days to 180 days and eliminating the penalty for misreporting food and medical de-
ductions for persons in a managed audit, should encourage more managed audits. Man-
aged audits provide taxpayers an opportunity to identify and report liabilities that have
not yet been identified by the Department. Thus, they encourage payment of taxes that
might otherwise not be paid.
TECHNICAL ISSUES
Because the effective date is July 1, 2006, taxpayers filing a 2005 return will be limited to 4
months. It would be best to make this effective for returns due on or after January 1, 2005, so the
provision will apply to the tax year 2005 returns being processed this year
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House Bill 384 Page
3
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
Deadlines and penalties during tax audits will remain the same.
PD/mt