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

SPONSOR Carraro

ORIGINAL DATE

LAST UPDATED

2/1/06

HB

SHORT TITLE NMMI Scholarships Donations Income Tax Credit SB 424

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(125.0)

(250.0)

(250.0) Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Military Institute (NMMI)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 424 would allow a personal income tax credit for taxpayers who donate to the New

Mexico military institute scholarship fund. The credit is up to one half of the donation and all

credits awarded by the Taxation and Revenue Department shall not exceed $250 thousand in any

one tax year.

The bill also sets up the New Mexico military institute scholarship fund which would provide

scholarships to students who have a parent or legal guardian imprisoned in a New Mexico cor-

rectional facility.

FISCAL IMPLICATIONS

In 2005, the New Mexico Military Institute (NMMI) matriculated 483 students. Approximately

200 are on scholarships. A full year as a resident costs approximately $8 thousand. If the maxi-

mum credits were claimed, the donations, $500 thousand, would allow 60 students to attend

NMMI. If $500 thousand is donated, the total fiscal impact would be a reduction in personal in-

come taxes of $125 thousand in FY06 and $250 thousand in FY07 and subsequent years. This is

Senate Bill 424 – Page 2

the maximum possible fiscal impact. The likelihood is that it will be somewhat lower since this

assumes that 20 percent of the new students will come from this program.

SIGNIFICANT ISSUES

NMMI reports that the students would still have to have the necessary qualifications to attend the

school.

TECHNICAL ISSUES

TRD:

1.

Throughout the bill, the donation is referred to as a “donation”, but in two places it is re-

ferred to as a “contribution.” (Subsection D, Line 11 and Subsection F, Line 22) Perhaps

it should be referred to as a “donation” throughout.

2.

Section 1, Subsection A (line 25). The wording is not clear as to the year in which the

taxpayer may claim the credit. It refers to the “taxable year for which the return is filed”

when it is clear from language later in the bill (Section 1, Subsection F, Line 22) that the

credit may be taken for the tax year in which the donation is made. While both mean the

same thing, the latter language is more clear.

3.

Section 1, Subsection A, Page 2, Lines 2-6: While it is clear from the context of the entire

bill that the intent of the legislature is to allow only $250,000 of tax credits in the aggre-

gate for all taxpayers, this is not clear from reading only these lines. These lines alone

could just as easily mean that the limit is $250,000 per taxpayer.

4.

Section 1, Subsection C, Page 2, Line 19: Cumbersome wording. Move the phrase “of

the donation” between the words “proof” and “satisfactory.”

5.

Section 1, Subsection C, Page 3, Line 9. Received by whom. Clarify. “… order re-

ceived by the New Mexico Military Institute.”

6.

Section 2, Page 4, Line 6. It would be best to specify the time frame in which the parent

is incarcerated in order to make the child eligible for this preference. For instance, “…

imprisoned in a New Mexico correctional facility at the time of the application for finan-

cial assistance” or “…at the time of the application for admission.”

ALTERNATIVES

NMMI reports that there are other scholarships available for students.

NF/mt