HOUSE BILL 96
51st legislature - STATE OF NEW MEXICO - second session, 2014
INTRODUCED BY
Carl Trujillo and Michael Padilla
AN ACT
RELATING TO TAXATION; AMENDING THE TECHNOLOGY JOBS TAX CREDIT ACT TO CREATE THE TECHNOLOGY JOBS AND RESEARCH AND DEVELOPMENT TAX CREDIT ACT; AMENDING, REPEALING AND ENACTING SECTIONS OF CHAPTER 7 NMSA 1978.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 7-9F-1 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 22, Section 1) is amended to read:
"7-9F-1. SHORT TITLE.--[This act] Chapter 7, Article 9F NMSA 1978 may be cited as the "Technology Jobs and Research and Development Tax Credit Act"."
SECTION 2. Section 7-9F-2 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 22, Section 2) is amended to read:
"7-9F-2. PURPOSE OF ACT.--It is the purpose of the Technology Jobs and Research and Development Tax Credit Act to provide a favorable tax climate for technology-based businesses engaging in research, development and experimentation and to promote increased employment and higher wages in those fields in New Mexico."
SECTION 3. Section 7-9F-3 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 22, Section 3) is amended to read:
"7-9F-3. DEFINITIONS.--As used in the Technology Jobs and Research and Development Tax Credit Act:
A. "affiliate" means a person who directly or indirectly owns or controls, is owned or controlled by or is under common ownership or control with another person through ownership of voting securities or other ownership interests representing a majority of the total voting power of the entity;
B. "annual payroll expense" means the wages paid or payable by the taxpayer [for the one-year period ending on the day] in the taxable year for which the taxpayer applies for an additional credit pursuant to the Technology Jobs and Research and Development Tax Credit Act;
C. "base payroll expense" means the wages paid or payable by the taxpayer [for the one-year period ending on the day one year prior to the day] in the taxable year for which the taxpayer applies for an additional credit pursuant to the Technology Jobs and Research and Development Tax Credit Act, adjusted for any increase from the preceding taxable year in the consumer price index for the United States for all items as published by the United States department of labor [since that day] in the taxable year for which the additional credit is claimed. In a taxable year during which a taxpayer has been part of a business merger or acquisition or other change in business organization, the taxpayer's base payroll expense shall include the payroll expense of all entities included in the reorganization for all positions that are included in the business entity resulting from the reorganization;
D. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;
E. "facility" means a factory, mill, plant, refinery, warehouse, dairy, feedlot, building or complex of buildings located within the state, including the land on which [the facility] it is located and all machinery, equipment and other real and tangible personal property located at or within [the facility] it and used in connection with [the] its operation [of the facility];
F. "local option gross receipts tax" means a tax authorized to be imposed by a county or municipality upon the taxpayer's gross receipts, as that term is defined in the Gross Receipts and Compensating Tax Act, and required to be collected by the department at the same time and in the same manner as the gross receipts tax; "local option gross receipts tax" includes the taxes imposed pursuant to the Municipal Local Option Gross Receipts Taxes Act, Supplemental Municipal Gross Receipts Tax Act, County Local Option Gross Receipts Taxes Act, Local Hospital Gross Receipts Tax Act, County Correctional Facility Gross Receipts Tax Act and such other acts as may be enacted authorizing counties or municipalities to impose taxes on gross receipts, which taxes are to be collected by the department in the same time and in the same manner as it collects the gross receipts tax;
[F.] G. "qualified expenditure" means an expenditure or an allocated portion of an expenditure by a taxpayer in connection with qualified research at a qualified facility, including expenditures for depletable land and rent paid or incurred for land, improvements, the allowable amount paid or incurred to operate or maintain a facility, buildings, equipment, computer software, computer software upgrades, consultants and contractors performing work in New Mexico, payroll, technical books and manuals and test materials, but not including any expenditure on property that is owned by a municipality or county in connection with an industrial revenue bond project, property for which the taxpayer has received any credit pursuant to the Capital Equipment Tax Credit Act or the Investment Credit Act, property that was owned by the taxpayer or an affiliate before [the effective date of the Technology Jobs Tax Credit Act] July 3, 2000 or research and development expenditures reimbursed by a person who is not an affiliate of the taxpayer. If [an] a "qualified expenditure" is an allocation of an expenditure, the cost accounting methodology used for the allocation of the expenditure shall be the same cost accounting methodology used by the taxpayer in its other business activities;
[G.] H. "qualified facility" means a facility in New Mexico at which qualified research is conducted other than a facility operated by a taxpayer for the United States or any agency, department or instrumentality thereof;
[H.] I. "qualified research" means research:
(1) that is undertaken for the purpose of discovering information:
(a) that is technological in nature; and
(b) the application of which is intended to be useful in the development of a new or improved business component of the taxpayer; and
(2) substantially all of the activities of which constitute elements of a process of experimentation related to a new or improved function, performance, reliability or quality, but not related to style, taste or cosmetic or seasonal design factors;
J. "qualified research and development small business" means a taxpayer that:
(1) employed no more than fifty employees as determined by the number of employees for which the taxpayer was liable for unemployment insurance coverage in the taxable year for which an additional credit is claimed;
(2) had total qualified expenditures of no more than five million dollars ($5,000,000) in the taxable year for which an additional credit is claimed; and
(3) did not have more than fifty percent of its voting securities or other equity interest with the right to designate or elect the board of directors or other governing body of the business owned directly or indirectly by another business;
[I.] K. "rural area" means any area of the state other than [a class A county, a class B county that has a net taxable value for rate-setting purposes for any property tax year of more than three billion dollars ($3,000,000,000), the municipality of Rio Rancho and the area within three miles of the exterior boundaries of a class A county] the state fairgrounds, an incorporated municipality with a population of thirty thousand or more according to the most recent federal decennial census and any area within three miles of the external boundaries of an incorporated municipality with a population of thirty thousand or more according to the most recent federal decennial census;
[J.] L. "taxpayer" means any of the following persons, other than a federal, state or other governmental unit or subdivision or an agency, department, institution or instrumentality thereof:
(1) a person liable for payment of any tax;
(2) a person responsible for withholding and payment or collection and payment of any tax;
(3) a person to whom an assessment has been made if the assessment remains unabated or the assessed amount has not been paid; or
(4) for purposes of the additional credit against the taxpayer's income tax pursuant to the Technology Jobs and Research and Development Tax Credit Act and to the extent of their respective interest in that entity, the shareholders, members, partners or other owners of:
(a) a small business corporation that has elected to be treated as an S corporation for federal income tax purposes; or
(b) an entity treated as a partnership or disregarded entity for federal income tax purposes; and
[K.] M. "wages" means remuneration [in cash or other form] for services performed by an employee for an employer."
SECTION 4. Section 7-9F-4 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 22, Section 4) is amended to read:
"7-9F-4. ADMINISTRATION OF ACT.--The department shall administer the Technology Jobs and Research and Development Tax Credit Act pursuant to the Tax Administration Act."
SECTION 5. Section 7-9F-5 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 22, Section 5) is amended to read:
"7-9F-5. BASIC CREDIT--ADDITIONAL CREDIT--AMOUNTS--CLAIMANT.--
A. The basic credit provided for in the Technology Jobs and Research and Development Tax Credit Act is an amount equal to [four] five percent of the amount of qualified expenditures made by a taxpayer conducting qualified research at a qualified facility.
B. The additional credit provided for in the Technology Jobs and Research and Development Tax Credit Act is an amount equal to [four] five percent of the amount of qualified expenditures made by a taxpayer conducting qualified research at a qualified facility."
SECTION 6. Section 7-9F-6 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 22, Section 6) is amended to read:
"7-9F-6. ELIGIBILITY REQUIREMENTS.--
A. A taxpayer conducting qualified research at a qualified facility and making qualified expenditures is eligible to claim the basic credit pursuant to the Technology Jobs and Research and Development Tax Credit Act.
B. A taxpayer conducting qualified research at a qualified facility and making qualified expenditures is eligible to claim the additional credit pursuant to the Technology Jobs and Research and Development Tax Credit Act if:
(1) the taxpayer increases the taxpayer's annual payroll expense at the qualified facility by at least seventy-five thousand dollars ($75,000) over the base payroll expense of the taxpayer;
(2) the increase in Paragraph (1) of this subsection has not previously been used to meet the requirements of this subsection; and
(3) there is at least a seventy-five thousand dollar ($75,000) increase in the taxpayer's annual payroll expense for every one million dollars ($1,000,000) in qualified expenditures claimed by the taxpayer in a taxable year in the same claim."
SECTION 7. Section 7-9F-9 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 22, Section 9) is amended to read:
"7-9F-9. CLAIMING THE BASIC CREDIT [FOR CERTAIN TAXES].--
A. A taxpayer may apply for approval of a credit within one year following the end of the [calendar year] reporting period in which the qualified expenditure was made.
B. A taxpayer having applied for and been granted approval for a basic credit by the department pursuant to the Technology Jobs and Research and Development Tax Credit Act may claim the amount of the approved basic credit against the taxpayer's compensating tax, withholding tax or gross receipts tax, [or withholding tax] excluding local option gross receipts tax, due to the state of New Mexico; provided that no taxpayer may claim an amount of approved basic credit for [any] a reporting period in which the basic credit is being claimed that exceeds the sum of the taxpayer's compensating tax, withholding tax and gross receipts tax, [compensating tax and withholding tax] excluding local option gross receipts tax, due for that reporting period.
[C. A taxpayer who has applied for and been granted approval for an additional credit by the department pursuant to the Technology Jobs Tax Credit Act may claim the amount of the approved additional credit against the taxpayer's income tax or corporate income tax due the state of New Mexico; provided that:
(1) no taxpayer may claim an amount of approved additional credit for any reporting period that exceeds the amount of the taxpayer's income tax or corporate income tax due for that reporting period; and
(2) a husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the additional credit that would have been allowed them on a joint return.
D.] C. Any amount of approved basic credit not claimed against the taxpayer's compensating tax, withholding tax or gross receipts tax, [compensating tax or withholding tax] excluding local option gross receipts tax, due [and any amount of approved additional credit not claimed against the taxpayer's income tax or corporate income tax due for a reporting period] may be claimed in subsequent reporting periods [provided that a husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the additional credit that would have been allowed them on a joint return] for a period of up to three years from the date of the original claim."
SECTION 8. A new section of the Technology Jobs and Research and Development Tax Credit Act, Section 7-9F-9.1 NMSA 1978, is enacted to read:
"7-9F-9.1. [NEW MATERIAL] CLAIMING THE ADDITIONAL CREDIT.--
A. A taxpayer may apply for approval of an additional credit pursuant to the Technology Jobs and Research and Development Tax Credit Act within one year following the end of the taxable year in which the qualified expenditure was made.
B. A taxpayer that has applied for and been granted approval for an additional credit by the department pursuant to the Technology Jobs and Research and Development Tax Credit Act may claim the amount of the approved additional credit against the taxpayer's income tax or corporate income tax liability. Except as provided in Subsection C of this section, no taxpayer may claim an amount of approved additional credit for a taxable year in which the additional credit is being claimed that exceeds the amount of the taxpayer's income tax or corporate income tax due for that taxable year.
C. If a taxpayer is a qualified research and development small business and the amount of approved additional credit for the taxable year in which the additional credit is being claimed exceeds the taxpayer's income tax liability or corporate income tax liability, the excess shall be refunded to the taxpayer pursuant to Paragraphs (1) through (3) of this subsection. If the taxpayer's total qualified expenditures for the taxable year for which the claim is made is:
(1) less than three million dollars ($3,000,000), the excess additional credit shall be refunded to the taxpayer;
(2) greater than or equal to three million dollars ($3,000,000) and less than four million dollars ($4,000,000), two-thirds of the excess additional credit shall be refunded to the taxpayer; and
(3) greater than or equal to four million dollars ($4,000,000) and less than or equal to five million dollars ($5,000,000), one-third of the excess additional credit shall be refunded to the taxpayer.
D. Any amount of approved additional credit not claimed against the taxpayer's income tax or corporate income tax due for a taxable year or refunded to the taxpayer may be claimed in subsequent reporting periods for a period of up to three years from the date of the original claim.
E. Married individuals filing separate returns for a taxable year for which they could have filed a joint return may each claim only one-half of the additional credit that would have been claimed on a joint return."
SECTION 9. A new section of the Technology Jobs and Research and Development Tax Credit Act is enacted to read:
"[NEW MATERIAL] TAXPAYER REPORTING REQUIREMENT.--A taxpayer claiming a credit pursuant to the Technology Jobs and Research and Development Tax Credit Act shall file reports with the department. The reports shall be submitted on or before June 30 of the year following a calendar year in which the taxpayer claims a basic or additional credit and by June 30 of each of the two succeeding years. The reports shall contain information describing the taxpayer's business operations in New Mexico that is sufficient for the department to enforce the recapture provision pursuant to Section 7-9F-11 NMSA 1978. If a taxpayer fails to submit a required report, the amount of any basic or additional credit claimed for that year shall be subject to the recapture provision."
SECTION 10. TEMPORARY PROVISION--TRANSITION OF THE RESEARCH AND DEVELOPMENT SMALL BUSINESS TAX CREDIT.--A taxpayer that is eligible for a research and development small business tax credit but has not claimed the credit prior to July 1, 2014 may claim the credit in accordance with the provisions of the Research and Development Small Business Tax Credit Act in effect immediately prior to July 1, 2014. The taxation and revenue department shall approve claims submitted but not approved prior to July 1, 2014 if the claim meets the requirements of the Research and Development Small Business Tax Credit Act in effect immediately prior to July 1, 2014. Claiming the research and development small business tax credit pursuant to this section with respect to a reporting period renders the taxpayer ineligible to claim a credit for the same reporting period pursuant to the Technology Jobs and Research and Development Tax Credit Act.
SECTION 11. TEMPORARY PROVISION--TRANSFER OF REFERENCE OF LAW.--On and after July 1, 2014, references in law to the Technology Jobs Tax Credit Act shall be deemed to be references to the Technology Jobs and Research and Development Tax Credit Act.
SECTION 12. REPEAL.--Sections 7-9F-7 and 7-9H-1 through 7-9H-6 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 22, Section 7 and Laws 2005, Chapter 104, Sections 11 through 16, as amended) are repealed.
SECTION 13. APPLICABILITY.--
A. The provisions of Section 8 of this act apply to taxable years beginning on or after January 1, 2014.
B. The provisions of this act apply to taxpayers that make a qualified expenditure beginning on or after January 1, 2014.
SECTION 14. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2014.
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