sb0128cts

SENATE CORPORATIONS AND TRANSPORTATION COMMITTEE SUBSTITUTE FOR

SENATE BILL 128

53rd legislature - STATE OF NEW MEXICO - second session, 2018

AN ACT

RELATING TO TAXATION; REQUIRING SEPARATE REPORTING FOR CERTAIN GROSS RECEIPTS TAX DEDUCTIONS; REQUIRING THE TAXATION AND REVENUE DEPARTMENT TO PRESENT ANNUAL REPORTS FOR CERTAIN GROSS RECEIPTS TAX DEDUCTIONS; NARROWING THE PREMIUM TAX IN LIEU PROVISION AND A RELATED GROSS RECEIPTS TAX EXEMPTION; AMENDING AND REPEALING CERTAIN TAX CREDITS AND DEDUCTIONS.

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

SECTION 1. Section 7-9-24 NMSA 1978 (being Laws 1969, Chapter 144, Section 17, as amended) is amended to read:

"7-9-24. EXEMPTION--GROSS RECEIPTS TAX--INSURANCE COMPANIES--AGENTS OF INSURANCE COMPANIES.--

A. Exempted from the gross receipts tax are the receipts of insurance companies or any agent thereof from premiums and any consideration received by a property bondsman, as that person is defined in Section 59A-51-2 NMSA 1978, as security or surety for a bail bond in connection with a judicial proceeding.

B. Revenues or receipts that are not directly attributable to persons, entities and activities subject to the provisions of the New Mexico Insurance Code are not exempted pursuant to this section."

SECTION 2. Section 7-9-54.3 NMSA 1978 (being Laws 2002, Chapter 37, Section 8, as amended by Laws 2010, Chapter 77, Section 2 and by Laws 2010, Chapter 78, Section 2) is amended to read:

"7-9-54.3. DEDUCTION--GROSS RECEIPTS TAX--WIND AND SOLAR GENERATION EQUIPMENT--SALES TO GOVERNMENTS.--

A. Receipts from selling wind generation equipment or solar generation equipment to a government for the purpose of installing a wind or solar electric generation facility may be deducted from gross receipts.

B. The deduction allowed pursuant to this section shall not be claimed for receipts from an expenditure for which a taxpayer claims a credit pursuant to Section 7-2-18.25, 7-2A-25 or 7-9G-2 NMSA 1978.

C. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

D. The department shall compile an annual report on the deduction provided by this section that shall include the number of taxpayers that claimed the deduction, the aggregate amount of deductions claimed and any other information necessary to evaluate the deduction. The department shall present the report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the cost of the deduction.

[C.] E. As used in this section:

(1) "government" means the United States or the state or a governmental unit or a subdivision, agency, department or instrumentality of the federal government or the state;

(2) "related equipment" means transformers, circuit breakers and switching and metering equipment used to connect a wind or solar electric generation plant to the electric grid;

(3) "solar generation equipment" means solar thermal energy collection, concentration and heat transfer and conversion equipment; solar tracking hardware and software; photovoltaic panels and inverters; support structures; turbines and associated electrical generating equipment used to generate electricity from solar thermal energy; and related equipment; and

(4) "wind generation equipment" means wind generation turbines, blades, nacelles, rotors and supporting structures used to generate electricity from wind and related equipment."

SECTION 3. Section 7-9-56.2 NMSA 1978 (being Laws 1998, Chapter 92, Section 2) is amended to read:

"7-9-56.2. DEDUCTION--GROSS RECEIPTS TAX--HOSTING WORLD WIDE [WEB SITES] WEBSITES.--

A. Receipts from hosting world wide [web sites] websites may be deducted from gross receipts. For purposes of this section, "hosting" means storing information on computers attached to the internet.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

C. The department shall compile an annual report on the deduction provided by this section that shall include the number of taxpayers that claimed the deduction, the aggregate amount of deductions claimed and any other information necessary to evaluate the deduction. The department shall present the report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the cost of the deduction."

SECTION 4. Section 7-9-56.3 NMSA 1978 (being Laws 2003, Chapter 232, Section 1, as amended) is amended to read:

"7-9-56.3. DEDUCTION--GROSS RECEIPTS--TRADE-SUPPORT COMPANY IN A BORDER ZONE.--

A. The receipts of a trade-support company may be deducted from gross receipts if:

(1) the trade-support company first locates in New Mexico within twenty miles of a port of entry on New Mexico's border with Mexico on or after July 1, 2003 but before July 1, 2013 or on or after January 1, 2016 but before January 1, 2021;

(2) the receipts are received by the company within a five-year period beginning on the date the trade-support company locates in New Mexico and the receipts are derived from its business activities and operations at its border zone location; and

(3) the trade-support company employs at least two employees in New Mexico.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

C. The department shall compile an annual report on the deduction created pursuant to this section that shall include the number of taxpayers approved by the department to receive the deduction, the aggregate amount of deductions approved and any other information necessary to evaluate the effectiveness of the deduction. [Beginning in 2016 and every four years thereafter that the deduction is in effect] The department shall [compile and] present the [annual reports] report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the effectiveness and cost of the deduction.

D. As used in this section:

(1) "employee" means an individual, other than an individual who:

(a) bears any of the relationships described in Paragraphs (1) through (8) of 26 U.S.C. Section 152(a) to the employer or, if the employer is a corporation, to an individual who owns, directly or indirectly, more than fifty percent in value of the outstanding stock of the corporation or, if the employer is an entity other than a corporation, to an individual who owns, directly or indirectly, more than fifty percent of the capital and profits interests in the entity;

(b) if the employer is an estate or trust, is a grantor, beneficiary or fiduciary of the estate or trust or is an individual who bears any of the relationships described in Paragraphs (1) through (8) of 26 U.S.C. Section 152(a) to a grantor, beneficiary or fiduciary of the estate or trust; or

(c) is a dependent, as that term is described in 26 U.S.C. Section 152(a)(9), of the employer, or, if the taxpayer is a corporation, of an individual who owns, directly or indirectly, more than fifty percent in value of the outstanding stock of the corporation or, if the employer is an entity other than a corporation, an individual who owns, directly or indirectly, more than fifty percent of the capital and profits interests in the entity or, if the employer is an estate or trust, of a grantor, beneficiary or fiduciary of the estate or trust;

(2) "port of entry" means an international port of entry in New Mexico at which customs services are provided by United States customs and border protection; and

(3) "trade-support company" means a customs brokerage firm or a freight forwarder."

SECTION 5. Section 7-9-57.2 NMSA 1978 (being Laws 2002, Chapter 10, Section 1) is amended to read:

"7-9-57.2. DEDUCTION--GROSS RECEIPTS TAX--SALE OF SOFTWARE DEVELOPMENT SERVICES.--

A. To stimulate new business development, the receipts of an eligible software development company from the sale of software development services that are performed in a qualified area may be deducted from gross receipts.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

[B.] D. As used in this section:

(1) "eligible software development company" means a taxpayer who is not a successor in business of another taxpayer; [and] whose primary business in New Mexico is established after [the effective date of this section] July 1, 2002 and is providing software development services; and who had no business location in New Mexico other than in a qualified area during the period for which a deduction under this section is sought;

(2) "qualified area" means the state of New Mexico except for an incorporated municipality with a population of more than fifty thousand according to the most recent federal decennial census; and

(3) "software development services" means custom software design and development and [web site] website design and development but does not include software implementation or support services."

SECTION 6. Section 7-9-62.1 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 4, Section 2, as amended) is amended to read:

"7-9-62.1. DEDUCTION--GROSS RECEIPTS TAX--AIRCRAFT SALES AND SERVICES--REPORTING REQUIREMENTS.--

A. Receipts from the sale of or from maintaining, refurbishing, remodeling or otherwise modifying a commercial or military carrier over ten thousand pounds gross landing weight may be deducted from gross receipts.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

C. The department shall compile an annual report on the deduction provided by this section that shall include the number of taxpayers approved by the department to receive the deduction, the aggregate amount of deductions approved and any other information necessary to evaluate the effectiveness of the deduction. [Beginning in 2019 and every five years thereafter that the deduction is in effect] The department shall [compile and] present the [annual reports] report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the effectiveness and cost of the deduction."

SECTION 7. Section 7-9-63 NMSA 1978 (being Laws 1969, Chapter 144, Section 53) is amended to read:

"7-9-63. DEDUCTION--GROSS RECEIPTS TAX--PUBLICATION SALES.--

A. Receipts from publishing newspapers or magazines, except from selling advertising space, may be deducted from gross receipts.

B. Receipts from selling magazines at retail may not be deducted from gross receipts.

C. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

SECTION 8. Section 7-9-64 NMSA 1978 (being Laws 1969, Chapter 144, Section 54) is amended to read:

"7-9-64. DEDUCTION--GROSS RECEIPTS TAX--NEWSPAPER SALES.--

A. Receipts from selling newspapers, except from selling advertising space, may be deducted from gross receipts.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

SECTION 9. Section 7-9-65 NMSA 1978 (being Laws 1969, Chapter 144, Section 56) is amended to read:

"7-9-65. DEDUCTION--GROSS RECEIPTS TAX--CHEMICALS AND REAGENTS.--

A. Receipts from selling chemicals or reagents to any mining, milling or oil company for use in processing ores or oil in a mill, smelter or refinery or in acidizing oil wells [and receipts from selling chemicals or reagents in lots in excess of eighteen tons] may be deducted from gross receipts. Receipts from selling explosives, blasting powder or dynamite and receipts from selling chemicals or reagents for use as fuel may not be deducted from gross receipts pursuant to this section.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

SECTION 10. Section 7-9-73.1 NMSA 1978 (being Laws 1991, Chapter 8, Section 3, as amended) is amended to read:

"7-9-73.1. DEDUCTION--GROSS RECEIPTS--HOSPITALS.--

A. Fifty percent of the receipts of hospitals licensed by the department of health may be deducted from gross receipts; provided that this deduction may be applied only to the taxable gross receipts remaining after all other appropriate deductions have been taken.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

SECTION 11. Section 7-9-73.2 NMSA 1978 (being Laws 1998, Chapter 95, Section 2 and Laws 1998, Chapter 99, Section 4, as amended) is amended to read:

"7-9-73.2. DEDUCTION--GROSS RECEIPTS TAX AND GOVERNMENTAL GROSS RECEIPTS TAX--PRESCRIPTION DRUGS--OXYGEN.--

A. Receipts from the sale of prescription drugs and oxygen and oxygen services provided by a licensed medicare durable medical equipment provider may be deducted from gross receipts and governmental gross receipts.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

[B.] D. For the purposes of this section, "prescription drugs" means insulin and substances that are:

(1) dispensed by or under the supervision of a licensed pharmacist or by a physician or other person authorized under state law to do so;

(2) prescribed for a specified person by a person authorized under state law to prescribe the substance; and

(3) subject to the restrictions on sale contained in Subparagraph 1 of Subsection (b) of 21 USCA 353."

SECTION 12. Section 7-9-83 NMSA 1978 (being Laws 1993, Chapter 364, Section 1, as amended) is amended to read:

"7-9-83. DEDUCTION--GROSS RECEIPTS TAX--JET FUEL.--

A. [From July 1, 2003 through June 30, 2017,

fifty-five percent of the receipts from the sale of fuel specially prepared and sold for use in turboprop or jet-type engines as determined by the department may be deducted from gross receipts. B. After June 30, 2017] Forty percent of the receipts from the sale of fuel specially prepared and sold for use in turboprop or jet-type engines as determined by the department may be deducted from gross receipts.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

SECTION 13. Section 7-9-84 NMSA 1978 (being Laws 1993, Chapter 364, Section 2, as amended) is amended to read:

"7-9-84. DEDUCTION--COMPENSATING TAX--JET FUEL.--

A. [From July 1, 2003 through June 30, 2017, fifty-

five percent of the value of the fuel specially prepared and sold for use in turboprop or jet-type engines as determined by the department may be deducted in computing the compensating tax due. B. After June 30, 2017] Forty percent of the value of the fuel specially prepared and sold for use in turboprop or jet-type engines as determined by the department may be deducted in computing the compensating tax due.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

SECTION 14. Section 7-9-86 NMSA 1978 (being Laws 1995, Chapter 80, Section 1, as amended) is amended to read:

"7-9-86. DEDUCTION--GROSS RECEIPTS TAX--SALES TO QUALIFIED FILM PRODUCTION COMPANY.--

A. Receipts from selling or leasing property and from performing services may be deducted from gross receipts or from governmental gross receipts if the sale, lease or performance is made to a qualified production company that delivers a nontaxable transaction certificate to the seller, lessor or performer.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

[B.] D. For the purposes of this section:

(1) "film" means a single media or multimedia program, including an advertising message, that:

(a) is fixed on film, digital medium, videotape, computer disc, laser disc or other similar delivery medium;

(b) can be viewed or reproduced;

(d) is intended for reasonable commercial exploitation for the delivery medium used;

(2) "production company" means a person that produces one or more films for exhibition in theaters, on television or elsewhere;

(3) "production costs" means the costs of the following:

(a) a story and scenario to be used for a film;

(b) salaries of talent, management and labor, including payments to personal services corporations for the services of a performing artist;

(d) photography, sound synchronization, lighting and related services;

(e) editing and related services;

(f) rental of facilities and equipment; or

(g) other direct costs of producing the film in accordance with generally accepted entertainment industry practice; and

(4) "qualified production company" means a production company that meets the provisions of this section and has registered or will register with the New Mexico film division of the economic development department.

[C.] E. A qualified production company may deliver the nontaxable transaction certificates authorized by this section only with respect to production costs."

SECTION 15. Section 7-9-108 NMSA 1978 (being Laws 2007, Chapter 172, Section 10) is amended to read:

"7-9-108. DEDUCTION--GROSS RECEIPTS--RECEIPTS FROM PERFORMING MANAGEMENT OR INVESTMENT ADVISORY SERVICES FOR MUTUAL FUNDS, HEDGE FUNDS OR REAL ESTATE INVESTMENT TRUSTS.--

A. Receipts from fees received for performing management or investment advisory services for a mutual fund, hedge fund or real estate investment trust may be deducted from gross receipts.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

[B.] D. As used in this section:

(1) "hedge fund" means a private investment fund or pool, the assets of which are managed by a professional management firm, that:

(a) trades or invests, through public market or private transactions, in securities, commodities, currency, derivatives or similar classes of financial assets; or

(b) is not an investment company pursuant to the provisions of 15 U.S.C. 80a-3(c)(1) or 15 U.S.C. 80a-3(c)(7);

(2) "mutual fund" means an entity registered pursuant to the federal Investment Company Act of 1940, as amended; and

(3) "real estate investment trust" means an entity described in Section 856(a) of the Internal Revenue Code of 1986, as amended, the investments of which are limited to interests in mortgages on real property and shares of or transferable certificates of beneficial interest in an entity described in Section 856(a) of the Internal Revenue Code of 1986, as amended."

SECTION 16. Section 7-14-6 NMSA 1978 (being Laws 1988, Chapter 73, Section 16, as amended) is amended to read:

"7-14-6. EXEMPTIONS FROM TAX.--

A. A person who acquires a vehicle out of state thirty or more days before establishing a domicile in this state is exempt from the tax if the vehicle was acquired for personal use.

B. A person applying for a certificate of title for a vehicle registered in another state is exempt from the tax if the person has previously registered and titled the vehicle in New Mexico and has owned the vehicle continuously since that time.

C. A vehicle with a certificate of title owned by this state or any political subdivision is exempt from the tax.

D. A person is exempt from the tax if the person has a disability at the time the person purchases a vehicle and can prove to the motor vehicle division of the department or its agent that modifications have been made to the vehicle that are:

(1) due to that person's disability; and

(2) necessary to enable that person to drive that vehicle or be transported in that vehicle.

E. A person is exempt from the tax if the person is a bona fide resident of New Mexico who served in the armed forces of the United States and who suffered, while serving in the armed forces or from a service-connected cause, the loss or complete and total loss of use of:

(1) one or both legs at or above the ankle; or

(2) one or both arms at or above the wrist.

F. A person who acquires a vehicle for subsequent lease shall be exempt from the tax if:

(1) the person does not use the vehicle in any manner other than holding it for lease or sale or leasing or selling it in the ordinary course of business;

(2) the lease is for a term of more than six months;

(3) the receipts from the subsequent lease are subject to the gross receipts tax; and

(4) the vehicle does not have a gross vehicle weight of over twenty-six thousand pounds.

[G. From July 1, 2004 through June 30, 2009, vehicles that are gasoline-electric hybrid vehicles with a United States environmental protection agency fuel economy rating of at least twenty-seven and one-half miles per gallon are eligible for a one-time exemption from the tax at the time of the issuance of the original certificate of title for the vehicle.]"

SECTION 17. Section 59A-6-6 NMSA 1978 (being Laws 1984, Chapter 127, Section 106, as amended) is amended to read:

"59A-6-6. PREEMPTION AND IN LIEU PROVISION.--The state government of New Mexico preempts the field of taxation of insurers, nonprofit health care plans, health maintenance organizations, prepaid dental plans, prearranged funeral plans and insurance producers as such and payment of the taxes, licenses and fees provided for in the Insurance Code shall be in lieu of all other taxes, licenses and fees of every kind now or hereafter imposed by this state or any political subdivision thereof on any of the foregoing specified entities, excepting the regular state, county and city taxes on property located in New Mexico and excepting the income tax on insurance producers. [No provision of law enacted after January 1, 1985 shall be deemed to modify this provision except by express reference to this section] The provisions of this section shall not apply to revenues or receipts that are not directly attributable to persons, entities and activities subject to the provisions of the Insurance Code."

SECTION 18. TEMPORARY PROVISION--EXHAUSTION OF CREDITS.--

A. If a taxpayer has met the eligibility requirements to apply for and claim a credit pursuant to Section 7-2-18.4, 7-2-18.5, 7-2-18.8, 7-2-18.21, 7-2-18.27, 7-2A-15 or 7-2A-23 NMSA 1978 or a credit pursuant to the Venture Capital Investment Act for a period prior to the effective date of this act, the taxpayer may claim, and the taxation and revenue department may approve, the credit for those periods, including amounts that may be carried forward pursuant to those sections and that act as they were in effect prior to the effective date of this act.

B. If a taxpayer has claimed and been awarded a credit pursuant to Section 7-2-18.4, 7-2-18.5, 7-2-18.8, 7-2-18.21, 7-2-18.27, 7-2A-15 or 7-2A-23 NMSA 1978 or a credit pursuant to the Venture Capital Investment Act, but a portion of the credit claimed remains unused, the taxpayer may claim the unused portion, including amounts that could have been carried forward pursuant to those sections or that act as they were in effect prior to the effective date of this act.

SECTION 19. DELAYED REPEAL.--Sections 7-2-18.4, 7-2-18.5, 7-2-18.8, 7-2-18.21, 7-2-18.27, 7-2A-15, 7-2A-23, 7-2D-1, 7-2D-2 and 7-2D-4 through 7-2D-14 NMSA 1978 (being Laws 1994, Chapter 115, Section 1, Laws 1998, Chapter 97, Section 2, Laws 2001, Chapter 73, Section 1, Laws 2007, Chapter 204, Section 7, Laws 2011, Chapter 89, Section 1, Laws 1994, Chapter 115, Section 2, Laws 2007, Chapter 204, Section 8, Laws 1993, Chapter 313, Sections 1, 2 and 4 through 8, Laws 1995, Chapter 89, Section 8 and Laws 1993, Chapter 313, Sections 9 through 14, as amended) are repealed effective January 1, 2019.

SECTION 20. REPEAL.--Section 7-9-106 NMSA 1978 (being Laws 2007, Chapter 172, Section 8) is repealed.

SECTION 21. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2018.

- 23 -