46th legislature - STATE OF NEW MEXICO - first session, 2003

RELATING TO TAXATION; ENACTING SECTIONS OF THE INCOME TAX ACT AND THE CORPORATE INCOME AND FRANCHISE TAX ACT TO PROVIDE TAX CREDITS FOR CERTAIN CONTRIBUTIONS TO QUALIFIED ENDOWMENTS.

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] CREDIT--GIFTS TO QUALIFIED ENDOWMENTS.--

A. A taxpayer who files an individual New Mexico income tax return may claim a credit in an amount equal to fifty percent of the present value of the aggregate amount of the charitable gift portion of a planned gift made by the taxpayer during the taxable year to any qualified endowment up to a maximum amount of ten thousand dollars ($10,000), subject to the limitations in Subsection D of this section. The credit allowed under this section may not be claimed by an individual taxpayer if the taxpayer has included the full amount of the contribution upon which the amount of the credit was computed as a deduction for federal income tax purposes.

B. A contribution to a qualified endowment by an estate qualifies for the credit provided in Subsection A of this section if the contribution is a planned gift or if the contribution is an outright gift to a qualified endowment. A credit not used by the estate may be attributed to each beneficiary of the estate in the same proportion used to report the beneficiary's income from the estate for New Mexico income tax purposes. The maximum amount of credit that a beneficiary may claim is ten thousand dollars ($10,000), subject to the limitations in Subsection D of this section.

C. A contribution to a qualified endowment by a small business corporation, partnership or limited liability company carrying on any trade or business for which deductions would be allowed under 26 U.S.C. 162 or carrying on any rental activity qualifies for the credit provided in Subsection A of this section. The credit must be attributed to shareholders, partners or members or managers of a limited liability company in the same proportion used to report the corporation's, partnership's or limited liability company's income or loss for New Mexico income tax purposes. The maximum credit that a shareholder of a small business corporation, a partner of a partnership or a member or manager of a limited liability company may claim in a taxable year is ten thousand dollars ($10,000), subject to the limitations in Subsection D of this section.

D. The credit provided in this section may only be deducted from the taxpayer's New Mexico income tax liability for the taxable year. No carryback or carryforward of the credit shall be allowed.

E. A husband and wife 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 credit provided in this section that would have been allowed on a joint return.

F. As used in this section:

(1) "planned gift" means an irrevocable contribution to a permanent endowment held by or for a tax-exempt organization, when the contribution uses any of the following techniques that are authorized under the Internal Revenue Code:

(a) charitable remainder unitrusts or charitable remainder annuity trusts, as defined by 26 U.S.C. 664; provided that neither of these techniques is a planned gift unless the trust agreement provides that the trust may not terminate and the beneficiaries' interest in the trust may not be assigned or contributed to the qualified endowment sooner than the earlier of the date of death of the beneficiaries or five years from the date of the contribution;

(b) pooled income fund trusts, as defined by 26 U.S.C. 642(c)(5);

(c) charitable lead unitrusts or charitable lead annuity trusts qualifying under 26 U.S.C. 170(f)(2)(B);

(d) charitable gift annuities or deferred charitable gift annuities undertaken pursuant to 26 U.S.C. 1011(b); provided that: 1) a contribution using a deferred charitable gift annuity is not a planned gift unless the payment of the annuity is required to begin within the life expectancy of the annuitant or of the joint life expectancies of the annuitants, if more than one annuitant, as determined using the actuarial tables adopted by department regulation in effect on the date of the contribution; and 2) a contribution using either technique described in this subparagraph is not a planned gift unless the annuity agreement provides that the interest of the annuitant or annuitants in the gift annuity may not be assigned to the qualified endowment sooner than the earlier of the date of death of the annuitant or annuitants or five years after the date of the contribution;

(e) charitable life estate agreements qualifying under 26 U.S.C. 170(f)(3)(B); or

(f) paid-up life insurance policies meeting the requirements of 26 U.S.C. 170; and

(2) "qualified endowment" means a permanent, irrevocable fund that is held by a New Mexico incorporated or established organization that is a tax-exempt organization under 26 U.S.C. 501(c)(3) or is a bank or trust company that is holding the fund on behalf of such a tax-exempt organization.

G. To carry out the provisions of this section, the department shall provide by regulation for life expectancy tables that are derived from the actuarial tables contained in the most recent publication 1457 issued by the internal revenue service or any successor publication."

Section 2. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] CREDIT--GIFTS TO QUALIFIED ENDOWMENTS.--

A. A taxpayer who files a New Mexico corporate income tax return may claim a credit in an amount equal to fifty percent of the present value of the aggregate amount of the charitable gift portion of a planned gift made by the taxpayer during the taxable year to any qualified endowment. The maximum amount of credit allowed for all contributions made pursuant to this section shall not exceed ten thousand dollars ($10,000). The credit allowed under this section may not be claimed by a corporation if the corporation has included the full amount of the contribution upon which the amount of the credit was computed as a deduction for federal income tax purposes.

B. A contribution to a qualified endowment by a small business corporation, partnership or limited liability company carrying on any trade or business for which deductions would be allowed under 26 U.S.C. 162, or carrying on any rental activity qualifies for the credit provided in Subsection A of this section. The credit must be attributed to shareholders, partners or members or managers of a limited liability company in the same proportion used to report the corporation's, partnership's or limited liability company's income or loss for New Mexico income tax purposes. The maximum credit that a shareholder of a small business corporation, a partner of a partnership or a member or manager of a limited liability company may claim in a taxable year is ten thousand dollars ($10,000), subject to the limitations in Subsection C of this section.

C. The credit provided in this section may only be deducted from the taxpayer's New Mexico corporate income tax liability for the taxable year. No carryback or carryforward of the credit shall be allowed.

D. As used in this section:

(1) "planned gift" means an irrevocable contribution to a permanent endowment held by or for a tax-exempt organization, when the contribution uses any of the following techniques that are authorized under the Internal Revenue Code:

(a) charitable remainder unitrusts or charitable remainder annuity trusts, as defined by 26 U.S.C. 664; provided that neither of these techniques is a planned gift unless the trust agreement provides that the trust may not terminate and the beneficiaries' interest in the trust may not be assigned or contributed to the qualified endowment sooner than the earlier of the date of death of the beneficiaries or five years from the date of the contribution;

(b) pooled income fund trusts, as defined by 26 U.S.C. 642(c)(5);

(c) charitable lead unitrusts or charitable lead annuity trusts qualifying under 26 U.S.C. 170(f)(2)(B);

(d) charitable gift annuities or deferred charitable gift annuities undertaken pursuant to 26 U.S.C. 1011(b); provided that: 1) a contribution using a deferred charitable gift annuity is not a planned gift unless the payment of the annuity is required to begin within the life expectancy of the annuitant or of the joint life expectancies of the annuitants, if more than one annuitant, as determined using the actuarial tables adopted by department regulation in effect on the date of the contribution; and 2) a contribution using either technique described in this subparagraph is not a planned gift unless the annuity agreement provides that the interest of the annuitant or annuitants in the gift annuity may not be assigned to the qualified endowment sooner than the earlier of the date of death of the annuitant or annuitants or five years after the date of the contribution;

(e) charitable life estate agreements qualifying under 26 U.S.C. 170(f)(3)(B); or

(f) paid-up life insurance policies meeting the requirements of 26 U.S.C. 170; and

(2) "qualified endowment" means a permanent, irrevocable fund that is held by a New Mexico incorporated or established organization that is a tax-exempt organization under 26 U.S.C. 501(c)(3) or is a bank or trust company that is holding the fund on behalf of a tax-exempt organization.

E. To carry out the provisions of this section, the department shall provide by regulation for life expectancy tables that are derived from the actuarial tables contained in the most recent publication 1457 issued by the internal revenue service or any successor publication."

Section 3. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2003.