LANL Tax Payments Lower Than Early Estimates

By Raam Wong
Journal Northern Bureau
LOS ALAMOS— Los Alamos National Laboratory's annual gross receipts tax payments could be significantly lower than previously projected, meaning less money for state and local government coffers.

The lab became subject to the tax when a for-profit corporation took over lab management from the University of California, a nonprofit, in June 2006.

Then, LANL and state officials estimated the lab's annual tax payments could total nearly $90 million. Now, officials say payments are more likely to be between $50 million to $80 million.

The reason for the revised estimate is that the lab's new corporate manager, Los Alamos National Security, has been in continuous discussions with the state Taxation and Revenue Department and an independent accountant in an effort to pinpoint exactly what lab business is and what is not taxable.

One exception found so far: the lab's out-of-state work, most notably weapons research at the Nevada Test Site, will not be subject to the tax, LANL spokesman Kevin Roark told the Journal on Friday.

Other nontaxable activities include educational outreach and contracting with small or minority businesses.

The lab is also looking at whether it can deduct its production of nuclear weapons triggers, known as pits, which are shipped to the Pantex nuclear weapons plant, in Amarillo.

"It's one of those negotiating points," Roark said. The state tax department is conducting an ongoing audit of the lab's gross receipts tax payments, Roark said.

The lab formerly paid about $35 million in gross receipts taxes annually because its manager, University of California, was exempt from a large share of the taxes because of its nonprofit status.

When the lab management was transferred to Los Alamos National Security, state lawmakers salivated over the estimated windfall— $50 million a year to state coffers and $40 million to Los Alamos County.

In March, county officials announced plans to share some of that new wealth with surrounding cities and counties in the form of regional transportation projects, health care and other initiatives.

But lab officials said the lab's tax bill was intentionally overestimated to avoid budget problems.

"No one realistically thought (the tax) was going to be that high," Roark said.
The lab's new estimate of between $50 million and $80 million includes the approximately $35 million that the lab was already paying.

Rep. Jeannette Wallace, R-Los Alamos, acknowledged that state and local governments would likely see less tax revenue from the lab than previously thought.

But she added that lower tax payments make it less likely that the cash-strapped lab will have to lay off workers. "There's been a pro and con all along," Wallace said.

LANL director Michael Anastasio on Friday cited the new tax liability as one reason money is so tight at the lab. Anastasio told the state Legislature's LANL Oversight Committee that the lab has had to cut contract positions, travel, maintenance and other expenses to make ends meet.

Before the management switch, the idea of taxing the lab— northern New Mexico's largest employer— had been bandied about by legislators and others for years. Supporters of such a move pointed to Sandia National Laboratory, which provides similar services but pays the tax because it is operated by a private corporation.