BREAKING: Gov. Martinez vetoes gross receipts tax bill

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Gov. Susana Martinez vetoed a bill Wednesday that would tax the gross receipts of certain non-profits, including any new non-profit contractor to take over management of Los Alamos National Laboratory.

In her message to the senate explaining the veto Wednesday, Martinez said the bill was "poorly crafted tax policy." A proposed amendment would have required all non-profits that make over a certain threshold to pay gross receipts tax, but it was withrawn, she said. Also, she said the bill was another "piecemeal attempt at tax reform."

Los Alamos County may see a loss of about $22 million a year in gross receipts tax revenue, according to some estimates, if the contract to manage and operate the Los Alamos National Laboratory is awarded to a non-profit entity. Martinez said that while the loss of gross receipts tax is a concern, it may be less than what some claim it will be, as subcontractors will become taxable.

State Rep. Stephanie Garcia Richard (D-43) said the amendment, which she said was recommended by State Rep. and House Taxation and Revenue Committee member Jason Harper (R-57) would have left Los Alamos without GRT revenue for a year if the bill included it.

“(The amendment) said it(the threshold) would be calculated beginning this year,” Garcia Richard said. “If a new contractor were to take over the lab that means the county would be without gross receipts for a year. They would have no gross receipts for the fiscal year.”

The amendment was  also written with a revenue threshold in mind that was supposed allow  for only the state’s two national laboratories to be taxed, though the labs weren’t specifically named in the bill.

“(The amendment) was poorly worded, it had the unintended consequence of impacting hospitals and that was not our intention at all. The intention of the bill was to preserve the revenue that the state, the region and the county receive from having the lab in our backyard,” Garcia Richard said. “There is a cost  associated with hosting a DOE (Department of Energy) facility. All we were saying is that we need to recoup that cost. Our communities need to provide services to be a community that can attract the caliber of employee that the lab requires.”

The news is expected to disappoint many people in Los Alamos who had been working since last June to get SB 17 passed in this year's session.

The bill, sponsored by Sen. Carlos Cisneros (D-6), Sen. Richard Martinez (D-5) and Garcia Richard was designed to preserve the millions of dollars the county and the state receives each year from the gross receipts tax the for-profit contractor that manages Los Alamos National Laboratory pays every year.

New Mexico’s tax code currently exempts non-profit organizations from paying a gross receipts tax. While a for-profit contractor presently runs the Los Alamos National Laboratory, the management contract is in transition, with the possibility that the contractor could be a non-profit.

Los Alamos County Councilor Chris Chandler worked as a legislative analyst reviewing and analyzing legislation for the Senate Judiciary Committee in the last session. She’s not sure what’s going to happen.

“We don’t know who is going to be the LANL contractor beginning in the fall, if it’s a for-profit, then the issue has resolved itself at least temporarily and the community and will be essentially status quo in terms of revenues to support the community’s operation,” Chandler said. “If it is a 501(c)3 operator, then the county is going to have to regroup probably have to make some serious budget decisions that will impact certain budget programs that the community supports and loves.”

Los Alamos National Security LLC the lab’s current management and operations contractor, has used its profits to fund a $3 million community fund and other community initiatives to help support area non profits from the gross receipts tax. Revenues from the gross receipts tax also helped support many county services.

Speaking for just himself and not for the council, Los Alamos County Councilor Pete Sheehey, who gave testimony for the bill during the legislative session, said the veto may negatively impact the northern New Mexico region.

“The concerns cited in the governor's letter vetoing SB17 were thoroughly debated in the NM House and Senate,” Sheehey said. “Large bi-partisan majorities in both Houses found that those concerns were not valid reasons to oppose the bill; they voted 31-4 in the Senate and 48-19 in the House in favor of SB17.  The veto potentially creates a major revenue problem for the state and northern New Mexico.”

County Manager Harry Burgess also commented about the decision.

"We are understandably disappointed in the Governor’s veto of SB17," Burgess said. "The bill had received widespread support in the House and Senate, and we felt it offered positive benefits to the State as well. Los Alamos National Laboratory is an economic driver not only for our community, but for neighboring jurisdictions across Northern New Mexico, and we all worked collectively to support the passage of this important bill."

Burgess continued, "Without the assurance of a continued taxable status that would have been possible if SB17 was enacted into law, revenue collection for Los Alamos County and the region will be uncertain every time the federal government considers management changes at the Laboratory. The revenues we have received in recent years have allowed us to fund important infrastructure projects and services that any future LANL contractor will be relying upon for their operations and recruitment of employees; however our future is now in a predicament as we await a decision in the next few months about the LANL (operations and management) contract award."

Andrea Romero, the former executive director of the Regional Coalition for LANL Communities, a group that represents the coalition was also devastated to hear the news.

“To go against the state’s interests and the community interests is really detrimental to the overall health of the state and local communities. It continues to show the lack of understanding of community interests coming from the governor’s office,” Romero said.

The NNSA has yet to announce the next contractor to manage Los Alamos National Laboratory. An announcement is expected sometime this year. If it is a for profit contractor, then the county, state and region will continue to receive revenue from the lab’s gross receipts tax. If it is a nonprofit, Cisneros said it will be the Los Alamos County and the rest of the region that will be most affected.

“The state may be able to absorb it, but it may be difficult for local governments to do the same,” Cisneros said.

Cisneros also said the only hope they have now is to try again in the next session.

“We won’t know the status of who gets the contract until probably later on in the year. That will only leave us a short period of time to submit the legislation again with hopefully a more favorable governor at the helm.”

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