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       Jun. 17, 2019                 
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Town of Silver City
Box 1188
Silver City, NM 88062

Legislative News and Updates
Synopsis of Senate Bill 274:

Senate Bill 274 attempts to resolve the controversy surrounding 2010ís phased repeal of the food and medical hold harmless distributions. These hold-harmless distributions were enacted in 2004 and served to, as the name implies, hold counties and municipalities harmless to the fiscal effects of a gross receipts tax deduction for food sold at retail stores and some medical services. This bill resolves the controversy by essentially re-imposing the municipal and county tax rates on food sold at retail, but not re-imposing the state tax rate effective within municipal boundaries. The bill has several subtle details and adequate provisions to protect revenue bond covenants. A section by section description is included with this analysis as well as a summary matrix. The bill also increases the working familiesí tax credit administered through the personal income tax system from 10 percent of the federal credit amount to 14 percent of the federal credit. This feature addresses a portion of the regressivity implicit in a transaction tax like the New Mexico Gross Receipts Tax.

The effective date of the act or the provisions of the act is essentially July 1, 2015, however, some of the sections dealing with distributions are technically effective August 1, 2015. The Working Families Tax Credit would be effective for the 2015 tax year. TRD could allow this credit by adjusting the Withholding Tables effective July 1, 2015, but might delay this provision and allow the full amount of the Working Families Tax Credit. The design of the bill is for the General Fund and the Counties and Municipalities, in aggregate, to be approximately revenue neutral.  On the other hand, both the Gross Receipts Tax and compensating tax reductions are straightforward and conform to the February Consensus Revenue Estimating Groupís (CREG) revised revenue estimate.

The current rate for all goods and services in the Town of Silver City is 7.7500% broken down into:
  • 3.900% state rate
  • 1.225% state share
  • 1.5625% municipal option
  • 1.0625% county option
  • 7.7500% total

The rate with the 3/8ths % Hold Harmless option included:
  • 3.900% state rate
  • 1.225% state share
  • 1.5625% municipal option
  • .3750 Hold Harmless options
  • 1.0625% county option
  • 8.1250% total

With the changes in this bill, the rate on all commodities except for food will be:
  • 3.775% state rate in municipal areas
  • 1.225% muni basic option
  • 1.5625% municipal option
  • 1.0625% county option
  • 7.6250% total

But for food, the state rate drops out:
  • 1.225% muni basic option
  • 1.5625% municipal option
  • 1.0625% county option
  • 3.8500% total

Increasing the Working Families Credit by $22 or $23 million may have the effect of moderating the regressively of the tax.
This is a synopsis of the bill and does not list the details of each section or the complexities within the bill. For full details of the bill please review the Fiscal Impact Report at http://www.nmlegis.gov/Sessions/15%20Regular/firs/SB0274.PDF

Synopsis of Senate Bill 712

Senate Bill 712 unlike SB 274 leaves the phase out of the Hold Harmless and the newly authorized Hold Harmless Gross Receipts in place.  However, exempting the municipalities that have a population under 12,500.  The current law exempts municipalities under 10,000 from the phase out of Hold Harmless.  This is a very simple repair for some of the smaller municipalities that are not made whole by the imposition of the Hold Harmless Gross Receipts Tax.

Municipalities added back to the Hold Harmless are:
  • Artesia
  • Espanola
  • Los Alamos
  • Lovington
  • Portales
  • Silver City

There does not appear to be any data driven reason that a population of 10,000 was chosen other than this is the number utilized in the Small Cities Assistance program that was implemented din 1978.  The population has increased to 150% of the 1978 level and this change would be an adjustment of half of that.  Municipalities that have imposed the 3/8% Hold Harmless Gross Receipts would be subject to the phase out in accordance with the 2013 law.  Additionally, this legislation allows a larger number of smaller municipalities to retain the lower GRT rates.

You may review the Fiscal Impact Report for this legislation at: http://www.nmlegis.gov/Sessions/15%20Regular/firs/SB0712.PDF

Other important information:

To view the New Mexico Legislature website for other  important legislative news and contact information, visit http://www.nmlegis.gov/lcs/.

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