SENATE CORPORATIONS AND TRANSPORTATION COMMITTEE SUBSTITUTE FOR

SENATE BILL 344

53rd legislature - STATE OF NEW MEXICO - first session, 2017

AN ACT

RELATING TO TAXATION; INCREASING THE TAX IMPOSED BY THE INCOME TAX ACT FOR CERTAIN INCOME LEVELS; LIMITING THE CAPITAL GAINS DEDUCTION; DISTRIBUTING A PORTION OF THE TAX IMPOSED BY THE INCOME TAX ACT TO PRE-KINDERGARTEN FUNDS FOR EARLY CHILDHOOD CARE AND EDUCATION SERVICES PROVIDED FOR PRENATAL CARE THROUGH THIRD GRADE AND TO THE PUBLIC SCHOOL STATE EQUALIZATION GUARANTEE DISTRIBUTION TO SUPPLEMENT THE NON-CATEGORICAL DISTRIBUTION; REPEALING AN OUTDATED VERSION OF SECTION 7-2-7 NMSA 1978 (BEING LAWS 2005 (1ST S.S.), CHAPTER 3, SECTION 2); MAKING AN APPROPRIATION.

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

     SECTION 1. A new section of the Tax Administration Act is

enacted to read:

     "[NEW MATERIAL] DISTRIBUTION--INCOME TAX--PUBLIC PRE-KINDERGARTEN FUND AND CHILDREN, YOUTH AND FAMILIES PRE-KINDERGARTEN FUND--SUPPLEMENTAL PUBLIC SCHOOL STATE EQUALIZATION GUARANTEE DISTRIBUTION.--

          A. Beginning July 1, 2019 and prior to July 1, 2020, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the public pre-kindergarten fund for early childhood care and education services provided for prenatal care through third grade in an amount equal to seventy-five hundredths percent of the net receipts attributable to the tax imposed by Section 7-2-3 NMSA 1978.

          B. Beginning July 1, 2020, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the public pre-kindergarten fund for early childhood care and education services provided for prenatal care through third grade in an amount equal to one and one-half percent of the net receipts attributable to the tax imposed by Section 7-2-3 NMSA 1978.

          C. Beginning July 1, 2019 and prior to July 1, 2020, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the children, youth and families pre-kindergarten fund for early childhood care and education services provided for prenatal care through third grade in an amount equal to seventy-five hundredths percent of the net receipts attributable to the tax imposed by Section 7-2-3 NMSA 1978.

          D. Beginning July 1, 2020, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the children, youth and families pre-kindergarten fund for early childhood care and education services provided for prenatal care through third grade in an amount equal to one and one-half percent of the net receipts attributable to the tax imposed by Section 7-2-3 NMSA 1978.

          E. Beginning July 1, 2019 and prior to July 1, 2020, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the public school fund for the state equalization guarantee distribution, to supplement the non-categorical distribution, in an amount equal to four and one-half percent of the net receipts attributable to the tax imposed by Section 7-2-3 NMSA 1978.

          F. Beginning July 1, 2020, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the public school fund for the state equalization guarantee distribution, to supplement the non-categorical distribution, in an amount equal to three percent of the net receipts attributable to the tax imposed by Section 7-2-3 NMSA 1978."

     SECTION 2. Section 7-2-7 NMSA 1978 (being Laws 2005, Chapter 104, Section 4) is amended to read:

     "7-2-7. INDIVIDUAL INCOME TAX RATES.--The tax imposed by Section 7-2-3 NMSA 1978 shall be at the following rates for any taxable year beginning on or after January 1, 2008:

          A. For married individuals filing separate returns:

     If the taxable income is:       The tax shall be:

Not over $4,000                       1.7% of taxable income

Over $4,000 but not over $8,000       $68.00 plus 3.2% of excess over $4,000

Over $8,000 but not over $12,000      $196 plus 4.7% of excess over $8,000

Over $12,000 but not over $125,000    $384 plus 4.9% of excess over $12,000

Over $125,000                         $5,921 plus 6.4% of excess over $125,000.

          B. For heads of household, surviving spouses and married individuals filing joint returns:

     If the taxable income is:       The tax shall be:

Not over $8,000                       1.7% of taxable income

Over $8,000 but not over $16,000      $136 plus 3.2% of excess over $8,000

Over $16,000 but not over $24,000     $392 plus 4.7% of excess over $16,000

Over $24,000 but not over $250,000    $768 plus 4.9% of excess over $24,000

Over $250,000                         $11,842 plus 6.4% of excess over $250,000.

          C. For single individuals and for estates and trusts:

     If the taxable income is:       The tax shall be:

Not over $5,500                       1.7% of taxable income

Over $5,500 but not over $11,000      $93.50 plus 3.2% of excess over $5,500

Over $11,000 but not over $16,000     $269.50 plus 4.7% of excess over $11,000

Over $16,000 but not over 

$166,666.67                           $504.50 plus 4.9% of excess over $16,000

Over $166,666.67                      $7,887.17 plus 6.4% of excess over $166,666.67.

          D. The tax on the sum of any lump-sum amounts included in net income is an amount equal to five multiplied by the difference between:

                (1) the amount of tax due on the taxpayer's taxable income; and

                (2) the amount of tax that would be due on an amount equal to the taxpayer's taxable income and twenty percent of the taxpayer's lump-sum amounts included in net income."

     SECTION 3. Section 7-2-34 NMSA 1978 (being Laws 1999, Chapter 205, Section 1, as amended) is amended to read:

     "7-2-34. DEDUCTION--NET CAPITAL GAIN INCOME.--

          A. Except as provided in Subsection C of this section, a taxpayer may claim a deduction from net income in an amount equal to [the greater of

                (1)] the taxpayer's net capital gain income for the taxable year for which the deduction is being claimed, but not to exceed one thousand dollars ($1,000) [or

                (2) the following percentage of the taxpayer's net capital gain income for the taxable year for which the deduction is being claimed:

                     (a) for a taxable year beginning in 2003, ten percent;

                     (b) for a taxable year beginning in 2004, twenty percent;

                     (c) for a taxable year beginning in 2005, thirty percent;

                     (d) for a taxable year beginning in 2006, forty percent; and

                     (e) for taxable years beginning on or after January 1, 2007, fifty percent].

          B. [A husband and wife] Married individuals 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 deduction provided by this section that would have been allowed on the joint return.

          C. A taxpayer may not claim the deduction provided in Subsection A of this section if the taxpayer has claimed the credit provided in Section 7-2D-8.1 NMSA 1978.

          D. As used in this section, "net capital gain" means "net capital gain" as defined in Section 1222 (11) of the Internal Revenue Code."

     SECTION 4. Section 32A-23-8 NMSA 1978 (being Laws 2005, Chapter 170, Section 8) is amended to read:

     "32A-23-8. FUNDS CREATED--ADMINISTRATION.--

          A. The "public pre-kindergarten fund" is created as a nonreverting fund in the state treasury. The fund shall consist of appropriations, income from investment of the fund, gifts, grants and donations. The fund shall be administered by the public education department, and money in the fund is appropriated to the department to carry out the provisions of the Pre-Kindergarten Act; provided that the distributions made pursuant to Subsections A and B of Section 1 of this 2017 act shall be used for early childhood care and education services provided for prenatal care through third grade. Disbursements from the fund shall be by warrant of the secretary of finance and administration upon vouchers signed by the secretary of public education or the secretary's authorized representative. The department may use up to ten percent of the money in the fund each year for administrative expenses.

          B. The "children, youth and families pre-kindergarten fund" is created as a nonreverting fund in the state treasury. The fund shall consist of appropriations, income from investment of the fund, gifts, grants and donations. The fund shall be administered by the children, youth and families department, and money in the fund is appropriated to the department to carry out the provisions of the Pre-Kindergarten Act; provided that the distributions made pursuant to Subsections C and D of Section 1 of this 2017 act shall be used for early childhood care and education services provided for prenatal care through third grade. Disbursements from the fund shall be by warrant of the secretary of finance and administration upon vouchers signed by the secretary of children, youth and families or the secretary's authorized representative. The department may use up to ten percent of the money in the fund each year for administrative expenses."

     SECTION 5. REPEAL.--That version of Section 7-2-7 NMSA 1978 (being Laws 2005 (1st S.S.), Chapter 3, Section 2) is repealed.

     SECTION 6. APPLICABILITY.--The provisions of Sections 2 and 3 of this act apply to taxable years beginning on or after January 1, 2018.

     SECTION 7. EFFECTIVE DATE.--The effective date of the provisions of Sections 1 and 4 of this act is January 1, 2019.

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