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

SPONSOR Lopez

ORIGINAL DATE

LAST UPDATED

2/7/08

HB

SHORT TITLE Property Tax Delinquency Notices and Timing

SB 516

ANALYST Earnest

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

NFI

NFI

* Recurring

(Parenthesis ( ) Indicate Revenue Decreases)

*See narrative

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Responses Not Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 516 amends the Property Tax Code to change the notification period for delinquent

property taxes from two years to three years, change the period after which property is listed as

delinquent, and changing the period in which a property may be sold by the state from three yeas

to four years.

FISCAL IMPLICATIONS

The fiscal implications are limited to a delay in revenue collection for the state and possibly

counties. Because the notification period is extended from two to three years, additional penalty

interest may accrue on the delinquent accounts.

According to a TRD analysis of similar legislation in 2007, the fiscal implications are uncertain.

The Property Tax Division (PTD) collects about $2.3 million annually in penalty, interest, and

proceeds from sale of properties. The most likely result of the proposed measure would be that

Senate Bill 516 – Page

2

some portion of the $2.3 million in penalty and interest charges would not be received by PTD in

FY 2012, because it would not be provided a delinquency list for property tax year 2008 on July

15, 2011. Lists provided to the department in the following year—July 15, 2012—would

probably be similar to lists that would have been transferred in the prior year. However, many of

these accounts will have accrued substantial increases in penalty and interest obligations. Hence,

some portion of the revenue that would have been collected in FY 2012 would probably appear

in subsequent years.

SIGNIFICANT ISSUES

TRD reported in 2007 that under current statutes, interest accrues on unpaid property taxes at the

rate of 1% per month with no limit on the total amount that can accrue. The state also assesses a

penalty of 1% per month, subject to a maximum amount of 5% of unpaid taxes. When taxes are

paid on properties prior to transfer to the PTD for collection, penalty and interest amounts are

retained by county treasurers. When properties are transferred to the PTD on a delinquency list,

penalty and interest amounts, as well as costs associated with sales, are retained by the PTD,

subject to appropriation by the Legislature.

In that same analysis, TRD indicated that the apparent intent of the bill is to allow counties time

to develop enhanced collection units, which would increase penalty and interest paid to counties,

and decrease revenues to the state. The intent of current statutes (Section 7-38-71 NMSA) in

distributing penalty and interest to PTD, subject to appropriation by the Legislature, is to

encourage counties to collect delinquent property taxes; if they fail to do so and it becomes

necessary for PTD to collect them, counties forego penalty and interest.

ADMINISTRATIVE IMPLICATIONS

The bill may have and impact on the Property Tax Division of TRD. Under this bill, the revenue

from penalty and interest would be reduced significantly for one year – the latter half of FY 2012

and the first half of FY 2013. Requests for additional appropriations from the general fund to

offset this one year impact could be expected.

BE/bb