Today, the Senate Corporation and Transportation Committee has a busy schedule and will hear:

HB144: UNEMPLOYMENT COMPENSATION INCREASE sponsored by Rep. M. Stewart. This bill raises the unemployment compensation contribution by employers having a positive balance in their reserve account of at least one percent. The contribution increases by two-tenths percent of payroll for the period July 1, 2010 through December 31, 2011. Under the current law, a portion of the contribution is earmarked for the State Unemployment Trust Fund. Under this bill, all of the contribution would flow to the Unemployment Compensation Fund. The balance in the State Unemployment Trust Fund is transferred to the Unemployment Compensation Fund and the statutory authority for the State Unemployment Fund (Section 51-1-19.1) is repealed.

ACI supports this bill as the bottom line is that if nothing is done the Department of Workforce Solutions would be forced to take out a loan from the US Department of Labor.  As soon as that happens, and as repayment begins, the statutorily defined ratios vis-à-vis fund balance would dictate that we would move immediately from UI tax schedule 0 to schedule 6. (from $156 average contribution per employee to $528).  Needless to say, this would be a disaster for New Mexico businesses of all sizes. If the total fund amount is equal to three-tenths percent of the total payrolls in the state at any given time, the Secretary must implement schedule 6.  House Bill 144 does seem to be a good way to address the crises by spreading out the impact over time and avoiding crisis mode.

SB25: STATE INCOME TAX ACT DEDUCTION CHANGE introduced by Sen. G. Ortiz y Pino would provide that in determining a taxpayer’s net income for state income tax purposes the amount paid by that taxpayer in state and local taxes may not be deducted. Under present law a taxpayer may deduct the full amount of the standard or itemized deductions shown on the taxpayers federal income tax return. Under this bill a state income taxpayer could still take one or the other of the federal deductions but would be required to reduce them by the amount attributable to the payment of state and local taxes. This bill would impact the same taxpayers as the surtax on income, and in effect, would double-hit those taxpayers who itemize.  The fiscal impact of this bill is unknown, and the bill has three committee referrals.  ACI will oppose this bill.

SB121: CIGARETTE TAX INCREASE introduced by Sen. B. Sanchez would increase the excise tax on cigarettes from $.0455 to $.0705 if the cigarettes are packaged in lots of 20 or 25, from $.091 to $.0141 if they are sold in lots of 10 and from $.182 to $.282 if they are packaged in lots of 5. This would have the effect of increasing the tax of on a pack of 20 cigarettes by 50 cents.  The distribution of cigarette taxes will change as follows: For the county and municipality recreational fund 1.35% to 1.08%, to the county and municipal cigarette tax fund 2.69% to 1.85%, to the UNM Cancer Research and Treatment Center 1.35% to 1.08%, to the Finance Authority 2.02% to 1.61%, to the Finance Authority on behalf of and for the UNM Health Sciences Center 14.37% to 11.49%, to the Finance Authority for Department of Health facilities 6.05% to 4.84%, to the Finance Authority for the credit enhancement account 15.79% to 11.49% percent and to the Finance Authority for the Rural County Cancer Treatment Fund 1% to .8%. Provides for an effective date of March 1, 2010 if adopted by two-thirds of both houses, or July 1, 2010 if passed by less than a two-thirds vote of either house. ACI will oppose this bill with three committee recommendations.

SB126: LIQUOR EXCISE TAX INCREASES introduced by Sen. L. Lovejoy would increase the liquor excise taxes as follows: spirituous liquors, from $1.60 per liter to $2.73; beer, from $.41 per gallon to $.95; wine, from $.45 per liter to $.95; fortified wine, from $1.50 per liter to $1.93; microbrewer beer produced and sold in-state, $.08 to $.62; small winegrower wine produced and sold in-state, from $.10 to $.44 on the first 80,000 liters, and from $.20 to $.54 on all liters above, up to 950,000; and cider, from $.41 to $.95.  Effective July 1, 2010, increases liquor excise tax rates, as follows: on spirituous liquors, from $1.60 to $2.73 per liter; on beer (except that produced by microbreweries) from $0.41 to $0.94 per gallon; on beer produced by microbreweries, from $0.08 to $0.61 per gallon; on fortified wine, from $1.50 to $1.92 per liter; and on cider, from $0.41 to $0.94 per gallon. The revenues would be spent by the Human Services Department for mental health and substance abuse treatment. No fiscal analysis has been completed and it cannot be predicted how much of the liquor sales by consumers would be shifted to out-of-state vendors or to the pueblos.  The impact would be to the private in-state retailer and restaurant owner. ACI will oppose this bill that has three committee referrals.

SB271: NONPROFITS LOSE SOME GROSS RECEIPTS EXEMPTION STATUS Sen. T. Jennings repeals the gross receipts exemption for 501(c)(3) organizations on their receipts from any source and chambers of commerce, visitor bureaus and convention bureaus from carrying on their functions. As a small compensation, the exemption for dues and registration fees of nonprofit social, fraternal, political, trade, labor or professional organizations at 7-9-39 is expanded to include donations, and to also cover chambers of commerce, visitor bureaus and convention bureaus. ACI will oppose this bill which has two committee referrals.

Today on the House Floor, HB270: TAXES ON TAXES sponsored by Rep. M. Stewart will be heard.  This bill requires personal income taxpayers who itemize their deductions to reduce the amount of itemized deductions for New Mexico purposes by the amount of state and local taxes included in the itemized deductions for federal purposes.  New Mexico currently allows the same itemized deductions as allowed for federal income tax purposes, including the deduction for state and local taxes. Deductible taxes include income taxes, property taxes and, under certain circumstances, sales taxes. This policy provides ease of compliance for taxpayers, but one consequence is a reduction in the effective income tax rate for households that itemize deductions. In general, households are more likely to itemize deductions the higher their income level. ACI opposes this bill.

HB237: GOVERNMENT RESTRUCTURING TASK FORCE sponsored by Rep. L. Varela creates a 17-member Government Restructuring Task Force to study the resources of the state’s agencies’ programs, services, funding and polices, and the public need served by them; and also seeks to examine the laws, constitutional provisions, rules and court decisions governing state government and reorganization. The task force must meet at the call of the chair at least one time per month beginning no later than April 22, 2010. The Department of Finance and Administration (DFA) and various state agencies must cooperate with the task force and provide them with information regarding budget, staffing, organizational structure and other requested information.

The 17-member task force is comprised of the following:

• 5 members of the House of Representatives appointed by the Speaker;
• 5 members of the Senate appointed by the Committees’ Committee unless appointments are made in the interim by the President Pro Tempore after consulting with a majority of the Committees’ Committee member;
• 6 members from the public and private sector, 3 of whom are appointed by the Speaker and 3 of whom are appointed by the President Pro Tempore of the Senate. (These members should reflect the ethnic, cultural and geographic diversity of the state.)
• 1 member will be the Secretary of Finance and Administration.

The task force must study:

• recommendations of the governor's committee on government efficiency;
• need for consolidation of agencies and elimination or reduction of redundant, duplicative or overlapping programs or services;
• current and projected staffing needs of state agencies for full-time, part-time, term, temporary and contract employment; and
• current and projected revenue estimates for the next three to five fiscal years.

The task force must make a report of its findings and recommendations by December 1, 2010 to the Governor and Legislature, and must make presentations to the Legislative Council, the LFC and the LESC. A final report and proposed legislation must be made available to the Governor and legislators by December 31, 2010.  ACI will support this bill.

Yesterday the Senate Public Affairs Committee used a “dummy” bill (a bill filed before the deadline as a placeholder for later legislation) and passed SB285 which is a duplicate of HB276: AIR QUALITY PERMIT STANDARDS sponsored by Rep. B. Egolf.  This bill would amend the New Mexico Air Quality Act to authorize the New Mexico Environment Department to deny new air permits or revoke existing permits under “bad actor” provisions. It also requires certain air quality applicants file a disclosure statement. While the bill sounds like a worthy cause, the Act would be stricter than the federal standards and would impose heavy burdens on industry in the state of New Mexico.  Both bills authorize denial of an application or revocation of a permit, but neither specifies any process or hearing requirements before an agency takes action.  There is no guarantee, as the bill is written, that an applicant or permittee will have the ability to submit evidence in opposition to the proposed action.  There is concern that the criteria in the bills are vague and could be misapplied by an overly zealous regulator. Both bills give groups opposed to projects additional means to slow down or stop facilities that are unrelated to air quality.  HB276 is on the House Calendar to be heard on the floor.  SB285 was passed by SPAC without any debate allowed and now has now moves to the Senate Floor.  ACI will continue to oppose both bills.

The House on a 38-23 vote passed HB208: OIL AND GAS CONSERVATION TAX USES, RATE sponsored by Rep. J. Heaton. The House Taxation and Revenue Committee substitute for House Bill 208 increases the rate of the Oil and Gas Conservation Tax on oil from a maximum of 0.19 percent to a rate of 0.24 percent when the average price of West Texas Intermediate crude in the previous quarter exceeds $70 per barrel. The Oil and Gas Reclamation fund would be distributed 19.7 percent of net revenue from the tax. The House now moves to the Senate where ACI will continue to oppose.

The House Health and Government Affairs Committee on a 4-4 vote took no action (in essence tabled) HB254: PROHIBITS STBS IN COUNTIES WITH OIL AND GAS RESTRICTIONS sponsored by Rep. K. Gardner.  This bill starts an important policy discussion in that it proposes to enact a new section of the Severance Tax Bonding Act to prohibit the issuance of severance tax bonds to benefit projects located in counties or municipalities that have enacted ordinances that have an “onerous effect” upon extractive industries.  In other words, those counties who have banned drilling in their counties would not be able to benefit from the revenue generated by the oil & gas industry. ACI supported this bill.

The House Health and Government Affairs committee will hear an interesting bill today—HB254: PROHIBITS STBS IN COUNTIES WITH OIL AND GAS RESTRICTIONS sponsored by Rep. K. Gardner.  This bill starts an important policy discussion in that it proposes to enact a new section of the Severance Tax Bonding Act to prohibit the issuance of severance tax bonds to benefit projects located in counties or municipalities that have enacted ordinances that have an “onerous effect” upon extractive industries.  In other words, those counties who have banned drilling in their counties would not be able to benefit from the revenue generated by the oil & gas industry.  ACI will support this bill which has three committee referrals.

The House Transportation & Public Works Committee will hear:
HB271: UPS MOTOR VEHICLE EXCISE TAX sponsored by Rep. B. Gonzales would increase the motor vehicle excise tax by 1 percent (from 3 percent to 4 percent) and evenly distributes the revenue from the 1 percent increase to the general fund and the state road fund. If passed, the increase would generate $18M in revenue for the Road Fund.  ACI opposes this bill with two committee referrals.

The House Floor will hear:
HB208: OIL AND GAS CONSERVATION TAX USES, RATE sponsored by Rep. J. Heaton. The House Taxation and Revenue Committee substitute for House Bill 208 increases the rate of the Oil and Gas Conservation Tax on oil from a maximum of 0.19 percent to a rate of 0.24 percent when the average price of West Texas Intermediate crude in the previous quarter exceeds $70 per barrel. The Oil and Gas Reclamation fund would be distributed 19.7 percent of net revenue from the tax. The Reclamation Fund could accept donations. Money in the Reclamation Fund could be used to remediate facilities used for transportation, storage or disposal of waste from oil and gas operations. LFC recently reviewed New Mexico’s oil and gas production taxes compared with those of nearby oil and gas producing states. New Mexico’s combined rate of tax is relatively high, exceeding that of neighboring states. The proposal would increase that rate by a relatively modest amount, but it would push the rate even farther above that of neighboring states. The bill would decrease the General Fund by $91M and increase The Reclamation Fund by $2.1B.  ACI will oppose this bill.

HB276: AIR QUALITY PERMIT STANDARDS sponsored by Rep. B. Egolf.  This bill would amend the New Mexico Air Quality Act to authorize the New Mexico Environment Department to deny new air permits or revoke existing permits under “bad actor” provisions. It also requires certain air quality applicants file a disclosure statement. While the bill sounds like a worthy cause, the Act would be stricter than the federal standards and would impose heavy burdens on industry in the state of New Mexico.  ACI opposes this bill.

The House Business & Industry Committee will hear:
HB245: CUTS CAPITAL GAINS DEDUCTION sponsored by Rep. M.P. Garcia which would reduce the New Mexico capital gains deduction to the lesser of the amount of federal net capital gains or $1,000. No fiscal analysis has been done on this bill yet.  ACI will oppose this bill which has two committee referrals.

The Senate Public Affairs Committee will hear:
SB127: CAPS EXEMPT EMPLOYEES APPOINTED BY GOVERNOR introduced by Sen. J. Ryan.  The bill provides that no more than 165 exempt employees under the Personnel Act may be maintained in executive department agencies, including not more than twenty in the Governor’s office. Limiting the number of exempt positions would result in operational cost savings within the personnel costs and employee benefits category. In FY10, there is an estimated 816 exempt employees within state government. Limiting the executive branch to 165 would reduce the amounts spent on salaries for exempt positions. ACI supports this bill which has three committee referrals.

Today the Senate Rules Committee will hear SJM7: MODEL STATE ADMINISTRATIVE PROCEDURE ACT sponsored by Sen. T. Keller.  This Joint Memorial creates a task force to consider use of part or all of the proposed Model State Administrative Procedure Act for rulemaking and adjudicatory proceedings by state agencies. The task force will consist of 19 members comprised of legislators, cabinet secretaries and representatives of various legal organizations and regulatory bodies. A report by the task force will be presented to a legislative interim committee, the LFC, and the governor, and will be posted on the Internet before October 1, 2010. Copies of the memorial will be distributed to the Legislative Council, Secretaries of affected state agencies, the Attorney General, the Governor and other legal entities. ACI will support this Joint Memorial that has two committee referrals.

The Senate Judiciary Committee will hear SB160: TAX LIGHTNING FIX introduced by Sen. S. Neville changes the basis for valuing residential properties for property taxation purposes from a “current and correct” (i.e., market) basis to a cost basis. For 2012 and subsequent property tax years, any increase in valuation may not exceed five (up from three) percent but only in counties with a sales ratio of 95 or higher. The increase limitation will apply to residential properties which changed hands in the prior year. The cost method calculates the residence’s valuation by subtracting from the residence’s cost a measure of depreciation and adding the result to the property’s land value.

The bill calls for the Taxation and Revenue Department to prepare a county-by-county sales ratio analysis for tax year 2011. If a county’s sales ratio is less than 95, it must reassess all residential property so that the county’s ratio is at least 95. The annual valuation increase cap does not apply in the county until its sales ratio is at least 95. Once having achieved a sales ratio of 95, the county loses the ability to apply the annual valuation increase cap if its sales ratio drops below 85 for three consecutive years. In that case, the county must reassess again and achieve a sales ratio of 95 or higher.  The bill has three committee referrals. ACI will support this bill.

On the Senate Floor, SB14: IN-STATE BUSINESS PROCUREMENT PREFERENCE sponsored by Sen. T. Keller will be heard. This bill raises from five percent to ten percent the preference advantage that is given to resident New Mexico businesses over out-of-state businesses when bidding to furnish goods under state procurement contracts.

Several years ago, in order to cover the purchase of equipment not available from a New Mexico resident business, but available in New York, and wanting to extend the benefit of the New Mexico business bid preference advantage to a business in New York, the Legislature took the unusual step of including New York businesses within the definition of a New Mexico resident business. This bill removes that inclusion, thus restoring the preference advantage on busses to New Mexico resident business. ACI supports this bill.

The House Rules Committee will hear HB253: UNEMPLOYMENT COMPENSATION BENEFITS TEMPORARY INCREASE REMOVED sponsored by Rep. K. Gardner. This bill eliminates the temporary, two-year increase for unemployment compensation benefits enacted last year. The bill deletes the language added in 2009 that, for calculating unemployment compensation from July 1, 2009 to June 30, 2011, the weekly benefit amount shall be 60 percent of the base period in which the worker’s wages were highest, but never less than 10 percent nor more than 60 percent of the state’s average weekly wage for all insured work. ACI supports this bill.

The Committee will also hear HB284: CHARITIES MUST REPORT POLITICAL ACTIVITY sponsored by Sen. K. Gardner. This bill requires tax exempt Internal Revenue Code 501(c)(3) charities to report the total amount expended during the previous calendar year, as well as the recipient, for lobbying, political contributions, voter education and political advocacy. The charity must also report the total compensation paid to each director and officer of the organization unless no such expenditures were made. Information must be filed annually with the Secretary of State by May 1. The information is public record and the secretary must maintain a website with a searchable database. ACI supports this bill.

Alert: Today on the House Floor, three tax proposals will be debated:

HB9: ONE PERCENT INCOME TAX SURTAX introduced by Rep. E. Sandoval adds a one and one-half (1.5%) percent personal income tax surtax on married individuals filing separate returns with income over $100,000, on heads of household, surviving spouses and married individuals filing joint returns with income over $200,000 and on single individuals and estates with income over $133,000 for the 2010, 2011 and 2012 tax years.  Note also that the surtax would be retroactive to the beginning of 2010. ACI continues to oppose this bill.

HB119: FOUR-YEAR HIKE IN GROSS RECEIPTS, COMPENSATING TAXES Speaker Lujan raises the rates of both the gross receipts and compensating taxes from 5.0 percent to 5.50 percent for the period July 1, 2010 through June 30, 2011. Thereafter, the rates fall by one-eighth percent at the start of each fiscal year, once again reaching five percent on July 1, 2014. The bill grants a new tax credit to certain Medicaid dentists. The bill also restricts local governments’ authority to impose local option gross receipts taxes during the four-year period. The bill mandates that no new municipal or county local option gross receipts tax may be imposed during the four-year period if (1) the sum of the state tax increase in effect plus the total of all local option gross receipts taxes in effect exceeds 2.5 percent or (2) would exceed 2.5 percent with its imposition. ACI continues to oppose this bill.

HB270: TAXES ON TAXES (introduced and tabled earlier as HB:143) sponsored by Rep. M. Stewart. This bill requires personal income taxpayers who itemize their deductions to reduce the amount of itemized deductions for New Mexico purposes by the amount of state and local taxes included in the itemized deductions for federal purposes.  New Mexico currently allows the same itemized deductions as allowed for federal income tax purposes, including the deduction for state and local taxes. Deductible taxes include income taxes, property taxes and, under certain circumstances, sales taxes. This policy provides ease of compliance for taxpayers, but one consequence is a reduction in the effective income tax rate for households that itemize deductions. This bill will also impact small business owners.  The predicted revenue numbers are based on 2007 data when unemployment was low. ACI continues to oppose this bill.

Today the House Energy & Conservation Committee will debate HB78: GREENHOUSE GAS EMISSIONS RULES sponsored by Rep. R. Madalena. This bill would add a new section to the Air Quality Control Act authorizing the Environmental Improvement Board to adopt rules to quantify, verify and grant greenhouse gas early reduction and offset allowances to industry and to require reporting by importers of electricity and fuels whose production or use may cause emissions equivalent to 10,000 metric tons of carbon dioxide. The bill requires the board to ensure that gas reductions leading to these allowances are accurately measured, real, verifiable, voluntary, additional and permanent. The bill sets the effective date of the provisions at July 1, 2010.  The bill, in effect, would set emission standards that are different from those of the nation.  ACI believes that GHG emissions need to be addressed nationally and globally in order to be effective and to be fair.  ACI will oppose this bill which has two committee referrals.

The House Rules Committee will hear HB253: UNEMPLOYMENT COMPENSATION BENEFITS TEMPORARY INCREASE REMOVED sponsored by Rep. K. Gardner that would eliminate the temporary, two-year increase for unemployment compensation benefits enacted last year. This bill deletes the language added in 2009 that, for calculating unemployment compensation from July 1, 2009 to June 30, 2011, the weekly benefit amount shall be 60 percent of the base period in which the worker’s wages were highest, but never less than 10 percent nor more than 60 percent of the state’s average weekly wage for all insured work.  This measure is necessary to keep the Unemployment Insurance Fund in our state solvent.  ACI will support this bill which current has only been referred to Rules to determine if it is germane.

This Committee will also hear HB284: CHARITIES MUST REPORT POLITICAL ACTIVITY sponsored by Rep. K. Gardner. This bill would require tax exempt 501(c)(3) charities to report the total amount expended during the previous calendar year, as well as the recipient, for lobbying, political contributions, voter education and political advocacy. The charity must also report the total compensation paid to each director and officer of the organization unless no such expenditures were made. Information must be filed annually with the Secretary of State by May 1. The information is public record and the secretary must maintain a website with a searchable database. A late fee of $50 per day is authorized. The same penalty applies to a person filing a false or incomplete report. Definitions are provided for the activities that must be reported. ACI supports this bill which current has only been referred to Rules to determine if it is germane.

The Senate Corporations and Transportation Committee has the following scheduled for today:

SB162: COUNTIES MAY BOND GROSS RECEIPTS TAX INCREMENT Sen. J. Sapien. This bill would allow counties imposing the 1/16 percent increment of the county local option gross receipts tax to pledge revenue from that increment to payment of gross receipts tax revenue bonds. Under current law, counties are allowed to pledge revenue from the first and third 1/8 increments of the county local option gross receipts tax as well as any increment of the county infrastructure and county capital outlay gross receipts tax. ACI will support this bill which has two committee referrals.

SB180: GENERAL TAX AMNESTY sponsored by Sen. P. Griego.  The bill authorizes the Secretary of Taxation and Revenue, with the concurrence of the Governor, to declare a tax amnesty period of up to 90 days in FY 2011. Only taxes administered by the Taxation and Revenue Department can be covered. The bill does exclude taxpayers to whom the department issues a notice of the commencement of an audit before the taxpayer asks for amnesty. The bill covers almost every tax administered by the department, including state and local gross receipts taxes, compensating tax, personal income tax, corporate income tax, liquor, cigarette, boat and other excise taxes, taxes on mineral production, gasoline, weight distance and other transportation taxes and workers compensation fee. Property tax, copper ad valorem tax and trip tax are excluded.

The Senate Judiciary Committee is scheduled to hear:

SB139: RE-SETS THREE PERCENT VALUATION CAP ON RESIDENCES AFTER REAPPRAISAL introduced by Sen. M. Boitano proposes that for property tax year 2011, residential property is to be valued at “current and correct” (i.e., market) value and subsequent tax years, the three percent cap on annual increases in valuation is reinstated for all residential properties, including those sold in the previous year, if the county’s sales ratio for 2011 is at least 92.  ACI supports this bill which has three committee referrals.

SB160: TAX LIGHTNING FIX introduced by Sen. S. Neville changes the basis for valuing residential properties for property taxation purposes from a “current and correct” (i.e., market) basis to a cost basis. For 2012 and subsequent property tax years, any increase in valuation may not exceed five (up from three) percent but only in counties with a sales ratio of 95 or higher. The increase limitation will apply to residential properties which changed hands in the prior year. The cost method calculates the residence’s valuation by subtracting from the residence’s cost a measure of depreciation and adding the result to the property’s land value. The bill has three committee referrals. ACI will support this bill.

SB217: ANOTHER PROPERTY VALUATION FIX sponsored by Sen. M. Boitano.  This bill directs county assessors to bring nonresidential property to current and correct (market) value and to value residential property that has changed ownership at a value not to exceed the greater of 103 percent of the value of the preceding tax year or 106 percent of the value established two tax years prior to the current valuation, but in no case greater than market value. ACI supports this bill has two committee referrals.