County fears loss of tax revenue if Los Alamos lab gets nonprofit status
Los Alamos County officials are concerned that a stream of gross receipts tax revenues from Los Alamos National Laboratory — tens of millions of dollars a year — could dry up in coming months if the lab’s new management contractor obtains nonprofit status from the IRS.
Under current state law, 501(c)(3) status would exempt the lab from the tax, and the state and county would lose revenue for critical services including the fire department, roadway infrastructure, the local transit system, public schools and public services for low-income residents.
The lab’s former operating contractor, Los Alamos National Security LLC, was a for-profit company; during the 12 years of its leadership, it paid the 7.3125 percent gross receipts tax in the county, like all other for-profit businesses.
Compared to other businesses in Los Alamos County, however, the lab has an outsize impact. Its multibillion-dollar annual budget brings the state roughly $50 million in taxes each year — including $20 million that goes to Los Alamos County.
That’s about 40 percent of the county’s total general fund, County Manager Harry Burgess said.
On Nov. 1, a new company, Triad National Security LLC, took over operations at Los Alamos. Each of its three partners — the University of California, Battelle Memorial Institute and the Texas A&M University System — is a nonprofit.
Triad has been paying gross receipts taxes since it began operating at the lab, “based on a determination by the New Mexico [Taxation and Revenue Department],” said Matt Nerzig, a spokesman for the lab and Triad.
Nerzig did not answer questions about whether Triad was considering filing for tax-exempt status.
The National Nuclear Security Administration, which oversees the lab, also did not respond to questions about the issue Friday.
But Burgess worries now that the company might be considering filing for nonprofit status.
Indeed, it was not until 2006, when the lab was taken over by Los Alamos National Security, that the county began receiving gross receipts taxes. Prior to LANS, the lab was run as a nonprofit by the University of California.
“We have always been a one-horse town,” Burgess said. “We’re basically a bedroom community to the lab, and as such, we provide services largely for those that are employed by the lab.”
Operating those services without tax revenue from the lab would be difficult, he said.
Burgess says the lab’s taxes help cover the $5 million annual budget for a fire department trained to respond to emergency situations specific to the lab’s operations. The fire staff recently increased by 15 people, he said.
Roads and water infrastructure the federal government built for the Manhattan Project is now deteriorating and needs to be replaced, he added, and some money from the taxes is aside for school grants, airport operations and economic development.
Sen. Carlos Cisneros, D-Questa, said the tax revenue loss also would be felt by the state over time, particularly in years without an oil boom.
Cisneros is a co-sponsor of a bill introduced in the 2019 legislative session that seeks to amend the New Mexico Tax Code to prevent gross receipts tax exemptions for major contractors formed to operate one of the state’s national labs.
“We rely on that funding for education and government services,” Cisneros said.
If oil and gas “goes south, it takes a chunk of the budget, and we are back in a recession mode,” he said. “So this additional cushion of up to $30 million coming in from the national lab is just as crucial for the state of New Mexico as it for the local government.”
If Triad does obtain 501(c)(3) status, Los Alamos County would have to repay any taxes it has already collected from the company.
“That is a very difficult thing for a municipality,” said Los Alamos County Councilor David Izraelevitz.
Like Burgess, Izraelevitz is concerned about the future of tax revenues from the lab.
“At this point, we are going basically month to month,” he said, “until we hear any confirmation from them as to whether they will apply or not.”