SB0518

SENATE BILL 518

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

INTRODUCED BY

Stuart Ingle

AN ACT

RELATING TO TAXATION; REVISING THE PROCEDURE FOR CORRECTING DISTRIBUTIONS AND TRANSFERS AUTHORIZED IN THE TAX ADMINISTRATION ACT; PROVIDING AUTHORITY TO EXPEND MONEY IN THE APPROPRIATION CONTINGENCY FUND; DECLARING AN EMERGENCY.

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

SECTION 1. Section 6-4-2.3 NMSA 1978 (being Laws 1991, Chapter 10, Section 7) is amended to read:

"6-4-2.3. APPROPRIATION CONTINGENCY FUND.--There is created within the general fund the "appropriation contingency fund".

A. The appropriation contingency fund may be expended only:

(1) upon specific authorization by the legislature; [or]

(2) as provided in Sections [6-7-1] 12-11-23 through [6-7-3] 12-11-25 NMSA 1978 in the event there is no surplus of unappropriated money in the general fund and in the amount authorized by the legislature; or

(3) pursuant to Section 7-1-6.15.

B. Notwithstanding Section 6-4-4 NMSA 1978, for the seventy-ninth fiscal year, if the revenues of the general fund exceed the total appropriations from the general fund, the excess revenue shall be transferred to the appropriation contingency fund.

C. Five million dollars ($5,000,000) is transferred from the operating reserve fund to the public school state-support reserve fund in the eightieth fiscal year.

D. If revenues and transfers to the general fund, excluding transfers to the operating reserve, appropriation contingency fund and public school state-support reserve, as of the end of the seventy-ninth fiscal year, are not sufficient to meet appropriations, the governor, with state board of finance approval, may transfer at the end of that year the amount necessary to meet the year's obligations from the unencumbered balance remaining in the general fund operating reserve in a total not to exceed sixty million dollars ($60,000,000)."

SECTION 2. Section 7-1-6.15 NMSA 1978 (being Laws 1983, Chapter 211, Section 20, as amended) is amended to read:

"7-1-6.15. ADJUSTMENTS OF DISTRIBUTIONS OR TRANSFERS TO MUNICIPALITIES OR COUNTIES.--

A. The provisions of this section apply to:

(1) any distribution to a municipality of gross receipts taxes pursuant to Section 7-1-6.4 NMSA 1978 or of interstate telecommunications gross receipts tax pursuant to Section 7-1-6.36 NMSA 1978;

(2) any transfer to a municipality with respect to any local option gross receipts tax imposed by that municipality;

(3) any transfer to a county with respect to any local option gross receipts tax imposed by that county;

(4) any distribution to a county pursuant to Section 7-1-6.16 NMSA 1978;

(5) any distribution to a municipality or a county of gasoline taxes pursuant to Section 7-1-6.9 NMSA 1978;

(6) any transfer to a county with respect to any tax imposed in accordance with the Local Liquor Excise Tax Act;

(7) any distribution to a municipality or a county of cigarette taxes pursuant to Sections 7-1-6.11,

7-12-15 and 7-12-16 NMSA 1978;

(8) any distribution to a county from the county government road fund pursuant to Section 7-1-6.26 NMSA 1978;

(9) any distribution to a municipality of gasoline taxes pursuant to Section 7-1-6.27 NMSA 1978; and

(10) any distribution to a municipality of compensating taxes pursuant to Section 7-1-6.55 NMSA 1978.

B. If the secretary determines that [any prior distribution or transfer to a political subdivision was erroneous] administration of the monthly net receipts requires adjustment of prior period distributions or will result in a net negative monthly distribution or transfer to a political subdivision, the secretary shall increase or decrease the next distribution or transfer amount for that political subdivision after the determination [except as provided in] pursuant to Subsection C, D, [or] E or F of this section, by the amount necessary to [correct the error] properly reconcile the distribution or transfer of net receipts to that political subdivision. Subject to the provisions of [Subsection E of] this section, the secretary shall notify the political subdivision of the amount of each increase or decrease to a distribution no later than the date of the next distribution or transfer to that political subdivision following the determination, provided that no notification need be made if the amount of the change is less than one hundred dollars ($100).

C. [No] If the secretary determines that any prior distribution or transfer to a political subdivision was an erroneous distribution, prior to the distribution or transfer date of the next ensuing month following the month in which the political subdivision was notified pursuant to Subsection B of this section, the secretary shall increase or decrease the amount of the distribution or transfer made to that political subdivision by the amount necessary to effect the change, provided that no increase or decrease shall be made to current or future distributions or transfers to a political subdivision for any [excess] change made pursuant to this subsection to a prior distribution or transfer made to that political subdivision more than one year prior to the calendar year in which the determination of the secretary was made.

D. If the secretary determines that any distribution or transfer of net receipts to a political subdivision, for any reason other than an error of the department that is to be distributed or transferred pursuant to Subsection C of this section, will result in a net negative monthly distribution or transfer of the greater of either one thousand dollars ($1,000) or ten percent of the total distribution or transfer to the political subdivision during the prior twelve months prior to the month in which the net negative distribution or transfer notification was provided by the secretary, then the secretary may:

(1) prior to the distribution or transfer date of the next ensuing month following the month in which the political subdivision was notified pursuant to this section and in consultation with the subject political subdivision, obtain authorization pursuant to Subsection J of this section to draw funds from the appropriation contingency fund in an amount sufficient to offset the negative distribution, such amount determined by the sum of:

(a) the net negative distribution for the subject month and political subdivision; plus

(b) an amount equal to the twenty-fifth percentile of the most recent twelve months of positive distributions to that political subdivision;

(2) prior to the distribution or transfer date of the next ensuing month following the month in which the political subdivision was notified pursuant to this section and after consultation with the subject political subdivision, in lieu of recovery from the next distribution or transfer amount, may recover [an excess] a net negative distribution or transfer [of one hundred dollars ($100) or more] to the political subdivision in installments from current [and future] distributions or transfers to that political subdivision pursuant to an agreement with the officials of the political subdivision [whenever the amount of the distribution or transfer decrease for the political subdivision exceeds ten percent of the average distribution or transfer amount for that political subdivision for the twelve months preceding the month in which the secretary's determination is made; provided that for the purposes of this subsection, the "average distribution or transfer amount" shall be the arithmetic mean of the distribution or transfer amounts within the twelve months immediately preceding the month in which the determination is made]; or

(3) upon agreement and after consultation with the subject political subdivision, decrease net distributions or transfers in the next ensuing month following the month in which the political subdivision was notified of the taxpayer's reduced tax liability pursuant to this section by the amount of the taxpayer's reduced tax liability.

E. If the secretary determines that the aggregate monthly net receipts distribution or transfer to a political subdivision will be reduced specifically as the result of a reduction in an individual taxpayer's previously paid tax liability and if that taxpayer's reduction in the political subdivision's monthly distribution or transfer will be more than the greater of either one thousand dollars ($1,000) or seventy-five percent of the average monthly distribution to the political subdivision during the prior twelve months prior to the month in which the taxpayer's tax liability reduction is applicable to the political subdivision's distributions or transfers, then the secretary, after notification and consultation with the subject political subdivision, may suspend the distribution or transfer related to the taxpayer's reported liability for a period of up to the next ensuing month's distribution or transfer date, and may:

(1) prior to the distribution or transfer date of the next ensuing month following the month in which the political subdivision was notified pursuant to this subsection and in consultation with the subject political subdivision, obtain authorization pursuant to Subsection J of this section to draw funds from the appropriation contingency fund in an amount sufficient to offset the reduction in the distribution or transfer as the result of a reduction in an individual taxpayer's previously paid tax liability;

(2) prior to the distribution or transfer date of the next ensuing month following the month in which the political subdivision was notified of the taxpayer's reduced tax liability pursuant to this section, and after consultation with the subject political subdivision, in lieu of full distribution or transfer in the next ensuing month's distribution or transfer amount recover a reduction in the taxpayer's tax liability by distribution or transfer to the political subdivision in installments from current and future distributions or transfers to that political subdivision pursuant to an agreement with the officials of the political subdivision; or

(3) upon agreement and after consultation with the subject political subdivision, decrease net distributions or transfers in the next ensuing month following the month in which the political subdivision was notified of the taxpayer's reduced tax liability pursuant to this subsection by the amount of the taxpayer's reduced tax liability.

F. Except as otherwise provided in Subsection B, C, D or E of this section, if the secretary determines prior to the date a monthly net receipts distribution or transfer is to occur that the aggregate monthly distribution or transfer to a political subdivision appears abnormally high or low, and notifies the political subdivision of the factual issues upon which it is determined that a potential distribution appears abnormally high or low, the secretary may withhold a reasonable portion of the potential distribution or transfer upon providing notification of the determination to the political subdivision. The secretary shall determine the reasonable proportion of the potential distribution to be withheld as a matter of administrative efficiency, but in no case shall the secretary determine that more than seventy-five percent of the average annual monthly distribution or transfer made to that political subdivision in the past twelve months shall be withheld pursuant to this subsection. The secretary may withhold a portion of the distribution or transfer pursuant to this subsection exclusively to allow for efficient administrative avoidance of unreasonable distributions or transfers that might be avoided by investigation of the factual circumstances that have created the appearance of the abnormally high or low distribution or transfer. Upon determination by the secretary that withholding a portion of a distribution or transfer is reasonable pursuant to this subsection, an investigation of the factual basis for such conclusion shall be undertaken and completed before the next ensuing month's date of distributions or transfers to political subdivisions. Unless that investigation establishes a clear and unambiguous basis for continuing to withhold a portion of the distribution or transfer, the prior month tax revenues that were withheld shall be distributed and transferred at the time of the next ensuing month's date of distributions or transfers to political subdivisions.

[E.] G. Except for the provisions of this section, if the amount by which a net receipts distribution or transfer would be adjusted pursuant to Subsection B of this section is one hundred dollars ($100) or less, no adjustment or notice need be made.

[F.] H. The secretary is authorized to decrease a distribution to a municipality or county upon being directed to do so by the secretary of finance and administration pursuant to the State Aid Intercept Act or to redirect a distribution to the New Mexico finance authority pursuant to an ordinance or a resolution passed by the county or municipality and a written agreement of the municipality or county and the New Mexico finance authority. Upon direction to decrease a distribution or notice to redirect a distribution to a municipality or county, the secretary shall decrease or redirect the next designated distribution, and succeeding distributions as necessary, by the amount of the state distributions intercept authorized by the secretary of finance and administration pursuant to the State Aid Intercept Act or by the amount of the state distribution intercept authorized pursuant to an ordinance or a resolution passed by the county or municipality and a written agreement with the New Mexico finance authority. The secretary shall transfer the state distributions intercept amount to the municipal or county treasurer or other person designated by the secretary of finance and administration or to the New Mexico finance authority pursuant to written agreement to pay the debt service to avoid default on qualified local revenue bonds or meet other local revenue bond, loan or other debt obligations of the municipality or county to the New Mexico finance authority.

[G.] I. Upon the direction of the secretary of finance and administration pursuant to Section 9-6-5.2 NMSA 1978, the secretary shall temporarily withhold a distribution to a municipality or county that has failed to submit an audit report required by the Audit Act or a financial report required by Subsection F of Section 6-6-2 NMSA 1978. The amount to be withheld, the source of the withheld distribution and the number of months that the distribution is to be withheld shall be as directed by the secretary of finance and administration. A distribution withheld pursuant to this subsection shall remain in the tax administration suspense fund until distributed to the municipality or county and shall not be distributed to the general fund.

J. To allow for the efficient administration of taxes identified in Subsection A of this section and to provide the secretary and political subdivisions an optional mechanism to adjust distributions or transfers pursuant to this section, the secretary may obtain funds necessary for a distribution or transfer pursuant to this section from the appropriation contingency fund, subject to the following conditions and restrictions:

(1) the secretary shall obtain the approval of the state board of finance to utilize the appropriation contingency fund for a distribution or transfer to a political subdivision; and

(2) the subject political subdivision shall demonstrate that the reduction of subject distribution or transfer:

(a) cannot be reasonably mitigated with reductions in discretionary expenditures on services, procurements and programs, excluding those services, procurements and programs providing for the public health and safety requirements of the residents of the political subdivision; and

(b) whether as a reduction in distributions or transfers over time pursuant to available installment agreement terms or as a direct reduction in distributions, will reduce available revenues for the subject political subdivision's discretionary expenditures by more than fifty percent during the next ensuing twelve-month period.

K. As used in this section:

(1) "discretionary expenditures" means all political subdivision expenditures, excluding:

(a) authorized intercept transfers pursuant to the State Aid Intercept Act or by the amount of the state distribution intercept authorized pursuant to an ordinance or a resolution passed by the county or municipality and a written agreement with the New Mexico finance authority;

(b) publicly approved bond or loan repayment obligations of the political subdivision; and

(2) "erroneous distribution" means a prior distribution to a political subdivision that is subsequently determined to be incorrect as a result of an action or determination by the department that was factually inaccurate or otherwise in error due to the actions or inactions in the administration of the secretary's duties."

SECTION 3. APPLICABILITY.--The provisions of this act apply to determinations of the secretary of finance and administration made on or after May 1, 2013.

SECTION 4. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.

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