SENATE BILL 167

52nd legislature - STATE OF NEW MEXICO - second session, 2016

INTRODUCED BY

Sue Wilson Beffort

AN ACT

RELATING TO TAXATION; PROVIDING AN INCOME TAX CREDIT FOR CLAWBACK REPAYMENTS OF AMOUNTS PREVIOUSLY REPORTED AS INCOME FROM A PONZI SCHEME.

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

     SECTION 1. A new section of the Income Tax Act is enacted to read:

     "[NEW MATERIAL] CLAWBACK REPAYMENT INCOME TAX CREDIT.--

          A. A taxpayer who is not a dependent of another individual, who in a taxable year has made a clawback repayment of amounts previously reported as income from a Ponzi scheme and who has taken a credit pursuant to Section 1341 of the Internal Revenue Code for the taxable year in which the taxpayer made the clawback repayment, may claim a credit against the taxpayer's tax liability imposed pursuant to the Income Tax Act. The credit provided by this section may be referred to as the "clawback repayment income tax credit".

           B. The amount of a clawback repayment income tax credit shall be calculated as follows:

                (1) determine the amount of tax due for the taxable year in which the clawback repayment is made, without deducting the amount repaid; then

                (2) determine the amount of tax due for the taxable year in which the amounts from a Ponzi scheme were reported as income, without including in income the amount repaid in the year of repayment; and then

                (3) determine the amount of credit by subtracting the amount of tax in Paragraph (2) of this subsection from the amount of tax in Paragraph (1) of this subsection.

          C. A taxpayer shall claim the clawback repayment income tax credit on an original or amended tax return for the taxable year in which the clawback repayment was made. That portion of a clawback repayment income tax credit that exceeds a taxpayer's tax liability in the taxable year in which the credit is claimed shall be refunded to the taxpayer.

          D. 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 credit that would have been claimed on a joint return.

          E. As used in this section:

                (1) "clawback repayment" means that amount of money a taxpayer:

                     (a) withdrew from the taxpayer's purported returns from the taxpayer's investment in a Ponzi scheme; and

                     (b) is required to pay back to a bankruptcy trustee for redistribution to a larger pool of the Ponzi scheme's victims; and

                (2) "Ponzi scheme" means an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors."

     SECTION 2. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2016.

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