SENATE BILL 59

51st legislature - STATE OF NEW MEXICO - first session, 2013

INTRODUCED BY

Carlos R. Cisneros

AN ACT

RELATING TO TAXATION; REDUCING CORPORATE INCOME TAX RATES; PROVIDING FOR USE OF A SINGLE SALES FACTOR BY CERTAIN TAXPAYERS IN APPORTIONING CORPORATE INCOME TO THE STATE; PROVIDING FOR COMBINED REPORTING OF CORPORATE INCOME FOR UNITARY CORPORATIONS; REPEALING THE RURAL JOB TAX CREDIT, THE INVESTMENT CREDIT ACT, THE TECHNOLOGY JOBS TAX CREDIT ACT, THE HIGH-WAGE JOBS TAX CREDIT AND THE RESEARCH AND DEVELOPMENT SMALL BUSINESS TAX CREDIT ACT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. Section 7-2A-5 NMSA 1978 (being Laws 1981, Chapter 37, Section 38, as amended) is amended to read:

     "7-2A-5. CORPORATE INCOME TAX RATES.--The corporate income tax imposed on corporations by Section 7-2A-3 NMSA 1978 shall be at the rates specified in the following table:

    If the net income is:                 The tax shall be:

Not over $500,000                         [4.8%] 4.2% of net                                           income

Over $500,000 but not 

    over $1,000,000                       [$24,000] $21,000                                           plus [6.4%] 5.8% of                                           excess over $500,000

Over $1,000,000                           [$56,000] $50,000

                                          plus [7.6%] 7.0% of                                           excess over                                           $1,000,000."

    SECTION 2. Section 7-2A-8.3 NMSA 1978 (being Laws 1983, Chapter 213, Section 12, as amended by Laws 1993, Chapter 307, Section 4 and by Laws 1993, Chapter 309, Section 2) is amended to read:

    "7-2A-8.3. COMBINED RETURNS.--

         A. A unitary corporation that is subject to taxation under the Corporate Income and Franchise Tax Act and that has not previously filed [a combined return pursuant to this section or] a consolidated return pursuant to Section 7-2A-8.4 NMSA 1978 [may elect to] shall file a combined return with other unitary corporations as though the entire combined net income were that of one corporation. The return filed under this method of reporting shall include the net income of all the unitary corporations. Transactions among the unitary corporations may be eliminated by applying the appropriate rules for reporting income for a consolidated federal income tax return. Any corporation that has filed an income tax return with New Mexico pursuant to Section 7-2A-8.4 NMSA 1978 shall not file pursuant to this section unless the secretary gives prior permission to file on a combined return basis.

         B. Once corporations have reported net income through a combined return for any taxable year, they shall file combined returns for subsequent taxable years, so long as they remain unitary corporations, unless the corporations elect to file pursuant to Section 7-2A-8.4 NMSA 1978. [or unless the secretary grants prior permission for one or more of the corporations to file individually.

         C. For taxable years beginning on or after January 1, 1993, no unitary corporation once included in a combined return may elect, or be granted permission by the secretary, for any subsequent taxable year to separately account pursuant to Paragraph (4) of Subsection A of Section 7-2A-8 NMSA 1978.]"

    SECTION 3. Section 7-4-10 NMSA 1978 (being Laws 1993, Chapter 153, Section 1, as amended) is amended to read:

    "7-4-10. APPORTIONMENT OF BUSINESS INCOME.--

         A. Except as provided in [Subsection] Subsections B and C of this section, all business income shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor and the denominator of which is three.

         B. For taxable years beginning prior to January 1, 2020, a taxpayer whose principal business activity is manufacturing may elect to have business income apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus twice the sales factor and the denominator of which is four. To elect the method of apportionment provided by this subsection, the taxpayer shall notify the department of the election, in writing, no later than the date on which the taxpayer files the return for the first taxable year to which the election will apply. The election will apply to that taxable year and to each taxable year thereafter until the taxpayer notifies the department, in writing, that the election is terminated, except that the taxpayer shall not terminate the election until the method of apportioning business income provided by this subsection has been used by the taxpayer for at least three consecutive taxable years, including a total of at least thirty-six calendar months. Notwithstanding any provisions of this subsection to the contrary, the taxpayer shall use the method of apportionment provided by Subsection A of this section for the taxable year unless:

             (1) the taxpayer's corporate income tax liability for the taxable year, computed by the same method of apportionment used in the preceding taxable year, exceeds the corporate income tax liability for the taxpayer's immediately preceding taxable year; or

             (2) the sum of the taxpayer's payroll factor and property factor for the taxable year exceeds the sum of the taxpayer's payroll factor and property factor for the taxpayer's base year. For purposes of this paragraph, "base year" means the taxpayer's first taxable year beginning on or after January 1, 1991.

         C. A taxpayer whose principal business activity is manufacturing may elect to have business income apportioned to this state beginning in the taxable year following the taxable year in which investments are made as described in this subsection by multiplying the income by a fraction, the numerator of which is the total sales of the taxpayer in New Mexico during the taxable year and the denominator of which is the total sales of the taxpayer from any location within or outside of the state during the taxable year if:

             (1) the taxpayer has invested in New Mexico in a taxable year beginning on or after January 1, 2014 but not on or after January 1, 2023, at least five hundred million dollars ($500,000,000) in capital equipment and facility construction or renovation;

             (2) the taxpayer has invested in New Mexico in a taxable year beginning on or after January 1, 2014 but not on or after January 1, 2023, at least two hundred fifty million dollars ($250,000,000) in capital equipment and facility construction or renovation; or

             (3) the taxpayer has invested in New Mexico in a taxable year beginning on or after January 1, 2014 but not on or after January 1, 2023, at least one hundred twenty-five million dollars ($125,000,000) in capital equipment or facility construction or renovation.

         D. A taxpayer electing to have business income apportioned pursuant to Subsection C of this section may continue that election for a period not to exceed:

             (1) eight consecutive taxable years from the taxable year that an election pursuant to Paragraph (1) of Subsection C of this section is first claimed and approved;

             (2) four consecutive taxable years from the taxable year that an election pursuant to Paragraph (2) of Subsection C of this section is first claimed and approved; or

             (3) two consecutive taxable years from the taxable year that an election pursuant to Paragraph (3) of Subsection C of this section is first claimed and approved.

         E. A taxpayer electing to have business income apportioned pursuant to Subsection C of this section shall not, in the same taxable years for the same capital equipment, claim a credit pursuant to the Investment Credit Act.

         [C.] F. For purposes of this section:

             (1) "capital equipment" means equipment that is a depreciable asset pursuant to Section 179 of the Internal Revenue Code;

             (2) "facility construction or renovation" means construction of a new facility specifically to house a manufacturing business activity or expansion or a significant remodeling of an existing facility for manufacturing; and

             (3) "manufacturing" means combining or processing components or materials to increase their value for sale in the ordinary course of business, but does not include:

                  [(1)] (a) construction;

                  [(2)] (b) farming;

                  [(3)] (c) power generation, except for electricity generation at a facility other than one for which both location approval and a certificate of convenience and necessity are required prior to commencing construction or operation of the facility, pursuant to the Public Utility Act; or

                  [(4)] (d) processing natural resources, including hydrocarbons."

    SECTION 4. REPEAL.--Sections 7-2E-1.1, 7-9A-1 through

7-9A-11, 7-9F-1 through 7-9F-12, 7-9G-1 and 7-9H-1 through

7-9H-6 NMSA 1978 (being Laws 2007, Chapter 172, Section 2, Laws 1979, Chapter 347, Sections 1 and 2, Laws 2001, Chapter 57, Section 2 and Laws 2001, Chapter 337, Section 2, Laws 1979, Chapter 347, Sections 3 through 7, Laws 1983, Chapter 206, Section 6, Laws 1979, Chapter 347, Sections 8 and 9, Laws 1997, Chapter 62, Section 2, Laws 2000 (2nd S.S.), Chapter 22, Sections 1 through 12, Laws 2004, Chapter 15, Section 1 and Laws 2005, Chapter 104, Sections 11 through 16, as amended) are repealed.

    SECTION 5. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2014.

    SECTION 6. EFFECTIVE DATE.--The effective date of the provisions of this act is January 1, 2014.

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