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New Mexico resolves tax dispute with $50M payment

August 31, 2021 GMT
FILE — In this July 29, 2021, file photo New Mexico Gov. Michelle Lujan Grisham speaks at a news conference in Santa Fe, N.M. The governor signed an executive order Wednesday, Aug. 25, 2021, making New Mexico the latest western state to join an ambitious effort to conserve nearly one-third of America's lands and waters by 2030. (AP Photo/Morgan Lee, File )
FILE — In this July 29, 2021, file photo New Mexico Gov. Michelle Lujan Grisham speaks at a news conference in Santa Fe, N.M. The governor signed an executive order Wednesday, Aug. 25, 2021, making New Mexico the latest western state to join an ambitious effort to conserve nearly one-third of America's lands and waters by 2030. (AP Photo/Morgan Lee, File )
FILE — In this July 29, 2021, file photo New Mexico Gov. Michelle Lujan Grisham speaks at a news conference in Santa Fe, N.M. The governor signed an executive order Wednesday, Aug. 25, 2021, making New Mexico the latest western state to join an ambitious effort to conserve nearly one-third of America's lands and waters by 2030. (AP Photo/Morgan Lee, File )

SANTA FE, N.M. (AP) — Local governments will get a $50 million boost to resolve a 2018 lawsuit that accused the state of botching tax distributions to 44 counties and municipalities across New Mexico.

Albuquerque, Santa Fe, Las Cruces, Roswell and Farmington were among the major plaintiffs to the lawsuit that alleged the state has short changed them revenue that pays for law enforcement, fire protection and other services.

The state Taxation and Revenue Department on Tuesday announced terms of the financial settlement on the sharing of gross receipts taxes.

Gross receipts taxes apply to sales and business services at a rate of between 5% and 9% by location. The state distributes more than $1.9 billion in revenues from gross receipts taxes to local governments each year.

Local governments also complained of wild fluctuations in amount of gross receipts shared each month, previously with little explanation by state taxation authorities.

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In a statement, Taxation and Revenue Secretary Stephanie Schardin Clarke said that “local governments deserve to have confidence in how their tax revenues are handled, and we’ve been able to demonstrate to them that the system is working.”

Her agency says it added a liaison to improve communications with local governments, rigorous monthly reviews of local tax distributions, more robust auditing and greater access to state financial reports.

State economists say that gross receipts taxes have surpassed expectations by $330 million during the fiscal year ending on June 30, 2021.

They linked the surge in revenues to deployment of the coronavirus vaccine this year, the reopening of businesses and the release of pent-up consumer demand.