HOUSE BILL 436
48th legislature - STATE OF NEW MEXICO - first session, 2007
INTRODUCED BY
Ben Lujan
AN ACT
RELATING TO TAXATION; PROVIDING FOR A STATE INCOME TAX CREDIT EQUAL TO A CERTAIN PERCENTAGE OF A FEDERAL INCOME TAX CREDIT FOR EARNED INCOME FOR WHICH PERSONS WHO DO NOT CLAIM THE LOW-INCOME COMPREHENSIVE TAX REBATE ARE ELIGIBLE; CREATING THE WORKING FAMILIES TAX CREDIT; RECONCILING MULTIPLE AMENDMENTS TO THE SAME SECTION OF LAW IN LAWS 2003.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. Section 7-2-2 NMSA 1978 (being Laws 1986, Chapter 20, Section 26, as amended by Laws 2003, Chapter 13, Section 1 and by Laws 2003, Chapter 275, Section 1) is amended to read:
"7-2-2. DEFINITIONS.--For the purpose of the Income Tax Act and unless the context requires otherwise:
A. "adjusted gross income" means adjusted gross income as defined in Section 62 of the Internal Revenue Code, as that section may be amended or renumbered;
B. "base income":
(1) means, for estates and trusts, that part of the estate's or trust's income defined as taxable income and upon which the federal income tax is calculated in the Internal Revenue Code for income tax purposes plus, for taxable years beginning on or after January 1, 1991, the amount of the net operating loss deduction allowed by Section 172(a) of the Internal Revenue Code, as that section may be amended or renumbered, and taken by the taxpayer for that year;
(2) means, for taxpayers other than estates or trusts, that part of the taxpayer's income defined as adjusted gross income plus, for taxable years beginning on or after January 1, 1991, the amount of the net operating loss deduction allowed by Section 172(a) of the Internal Revenue Code, as that section may be amended or renumbered, and taken by the taxpayer for that year;
(3) includes, for all taxpayers, any other income of the taxpayer not included in adjusted gross income but upon which a federal tax is calculated pursuant to the Internal Revenue Code for income tax purposes, except amounts for which a calculation of tax is made pursuant to Section 55 of the Internal Revenue Code, as that section may be amended or renumbered; "base income" also includes interest received on a state or local bond; and
(4) includes, for all taxpayers, an amount deducted pursuant to Section 7-2-32 NMSA 1978 in a prior taxable year if:
(a) such amount is transferred to another qualified tuition program, as defined in Section 529 of the Internal Revenue Code, not authorized in the Education Trust Act; or
(b) a distribution or refund is made for any reason other than: 1) to pay for qualified higher education expenses, as defined pursuant to Section 529 of the Internal Revenue Code; or 2) upon the beneficiary's death, disability or receipt of a scholarship;
C. "compensation" means wages, salaries, commissions and any other form of remuneration paid to employees for personal services;
D. "department" means the taxation and revenue department, the secretary or any employee of the department exercising authority lawfully delegated to that employee by the secretary;
E. "fiduciary" means a guardian, trustee, executor, administrator, committee, conservator, receiver, individual or corporation acting in any fiduciary capacity;
F. "filing status" means "married filing joint returns", "married filing separate returns", "head of household", "surviving spouse" and "single", as those terms are generally defined for federal tax purposes;
G. "fiscal year" means any accounting period of twelve months ending on the last day of any month other than December;
H. "head of household" means "head of household" as generally defined for federal income tax purposes;
I. "individual" means a natural person, an estate, a trust or a fiduciary acting for a natural person, trust or estate;
J. "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended;
K. "lump-sum amount" means for the purpose of determining liability for federal income tax, an amount that was not included in adjusted gross income but upon which the five-year-averaging or the ten-year-averaging method of tax computation provided in Section 402 of the Internal Revenue Code, as that section may be amended or renumbered, was applied;
L. "modified gross income" means all income of the taxpayer and, if any, the taxpayer's spouse and dependents, undiminished by losses and from whatever source, including:
(1) compensation;
(2) net profit from business;
(3) gains from dealings in property;
(4) interest;
(5) net rents;
(6) royalties;
(7) dividends;
(8) alimony and separate maintenance payments;
(9) annuities;
(10) income from life insurance and endowment contracts;
(11) pensions;
(12) discharge of indebtedness;
(13) distributive share of partnership income;
(14) income in respect of a decedent;
(15) income from an interest in an estate or a trust;
(16) social security benefits;
(17) unemployment compensation benefits;
(18) workers' compensation benefits;
(19) public assistance and welfare benefits;
(20) cost-of-living allowances; and
(21) gifts;
M. "modified gross income" excludes:
(1) payments for hospital, dental, medical or drug expenses to or on behalf of the taxpayer;
(2) the value of room and board provided by federal, state or local governments or by private individuals or agencies based upon financial need and not as a form of compensation;
(3) payments pursuant to a federal, state or local government program directly or indirectly to a third party on behalf of the taxpayer when identified to a particular use or invoice by the payer; or
(4) payments [pursuant to Sections 7-2-14,
7-2-18, 7-2-18.1] for credits and rebates pursuant to the Income Tax Act and made for a credit pursuant to Section 7-3-9 NMSA 1978;
N. "net income" means, for estates and trusts, base income adjusted to exclude amounts that the state is prohibited from taxing because of the laws or constitution of this state or the United States and means, for taxpayers other than estates or trusts, base income adjusted to exclude:
(1) an amount equal to the standard deduction allowed the taxpayer for the taxpayer's taxable year by Section 63 of the Internal Revenue Code, as that section may be amended or renumbered;
(2) an amount equal to the itemized deductions defined in Section 63 of the Internal Revenue Code, as that section may be amended or renumbered, allowed the taxpayer for the taxpayer's taxable year less the amount excluded pursuant to Paragraph (1) of this subsection;
(3) an amount equal to the product of the exemption amount allowed for the taxpayer's taxable year by Section 151 of the Internal Revenue Code, as that section may be amended or renumbered, multiplied by the number of personal exemptions allowed for federal income tax purposes;
(4) income from obligations of the United States of America less expenses incurred to earn that income;
(5) other amounts that the state is prohibited from taxing because of the laws or constitution of this state or the United States;
(6) for taxable years that began prior to January 1, 1991, an amount equal to the sum of:
(a) net operating loss carryback deductions to that year from taxable years beginning prior to January 1, 1991 claimed and allowed, as provided by the Internal Revenue Code; and
(b) net operating loss carryover deductions to that year claimed and allowed; and
(7) for taxable years beginning on or after January 1, 1991, an amount equal to the sum of any net operating loss carryover deductions to that year claimed and allowed, provided that the amount of any net operating loss carryover from a taxable year beginning on or after January 1, 1991 may be excluded only as follows:
(a) in the case of a timely filed return, in the taxable year immediately following the taxable year for which the return is filed; or
(b) in the case of amended returns or original returns not timely filed, in the first taxable year beginning after the date on which the return or amended return establishing the net operating loss is filed; and
(c) in either case, if the net operating loss carryover exceeds the amount of net income exclusive of the net operating loss carryover for the taxable year to which the exclusion first applies, in the next four succeeding taxable years in turn until the net operating loss carryover is exhausted; in no event shall a net operating loss carryover be excluded in any taxable year after the fourth taxable year beginning after the taxable year to which the exclusion first applies;
O. "net operating loss" means any net operating loss, as defined by Section 172(c) of the Internal Revenue Code, as that section may be amended or renumbered, for a taxable year as further increased by the income, if any, from obligations of the United States for that year less related expenses;
P. "net operating loss carryover" means the amount, or any portion of the amount, of a net operating loss for any taxable year that, pursuant to Paragraph (6) or (7) of Subsection N of this section, may be excluded from base income;
Q. "nonresident" means every individual not a resident of this state;
R. "person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, limited liability company, joint venture, syndicate or other association; "person" also means, to the extent permitted by law, any federal, state or other governmental unit or subdivision or agency, department or instrumentality thereof;
S. "resident" means an individual who is domiciled in this state during any part of the taxable year or an individual who is physically present in this state for one hundred eighty-five days or more during the taxable year; but any individual, other than someone who was physically present in the state for one hundred eighty-five days or more during the taxable year, who, on or before the last day of the taxable year, changed [his] the individual's place of abode to a place without this state with the bona fide intention of continuing actually to abide permanently without this state is not a resident for the purposes of the Income Tax Act for periods after that change of abode;
T. "secretary" means the secretary of taxation and revenue or the secretary's delegate;
U. "state" means any state of the United States, the District of Columbia, the commonwealth of Puerto Rico, any territory or possession of the United States or any political subdivision of a foreign country;
V. "state or local bond" means a bond issued by a state other than New Mexico or by a local government other than one of New Mexico's political subdivisions, the interest from which is excluded from income for federal income tax purposes under Section 103 of the Internal Revenue Code, as that section may be amended or renumbered;
W. "surviving spouse" means "surviving spouse" as generally defined for federal income tax purposes;
X. "taxable income" means net income less any lump-sum amount;
Y. "taxable year" means the calendar year or fiscal year upon the basis of which the net income is computed under the Income Tax Act and includes, in the case of the return made for a fractional part of a year under the provisions of the Income Tax Act, the period for which the return is made; and
Z. "taxpayer" means any individual subject to the tax imposed by the Income Tax Act."
Section 2. Section 7-2-14 NMSA 1978 (being Laws 1972, Chapter 20, Section 2, as amended) is amended to read:
"7-2-14. LOW-INCOME COMPREHENSIVE TAX REBATE.--
A. Except as otherwise provided in Subsection B of this section, any resident who files an individual New Mexico income tax return and who is not a dependent of another individual may claim a tax rebate, to be referred to as the "low-income comprehensive tax rebate" for a portion of state and local taxes to which the resident has been subject during the taxable year for which the return is filed. The tax rebate may be claimed even though the resident has no income taxable under the Income Tax Act. 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 tax rebate that would have been allowed on a joint return.
B. No claim for the tax rebate provided in this section shall be filed by a resident who was an inmate of a public institution for more than six months during the taxable year for which the tax rebate could be claimed or who was not physically present in New Mexico for at least six months during the taxable year for which the tax rebate could be claimed.
C. The tax rebate provided in this section shall not be allowed for a taxpayer who has claimed a working families tax credit for the taxable year.
[C.] D. For the purposes of this section, the total number of exemptions for which a tax rebate may be claimed or allowed is determined by adding the number of federal exemptions allowable for federal income tax purposes for each individual included in the return who is domiciled in New Mexico plus two additional exemptions for each individual domiciled in New Mexico included in the return who is sixty-five years of age or older plus one additional exemption for each individual domiciled in New Mexico included in the return who, for federal income tax purposes, is blind plus one exemption for each minor child or stepchild of the resident who would be a dependent for federal income tax purposes if the public assistance contributing to the support of the child or stepchild was considered to have been contributed by the resident.
[D.] E. The tax rebate provided for in this section may be claimed in the amount shown in the following table:
Modified gross And the total number
income is: of exemptions is:
But Not 6 or
Over Over 1 2 3 4 5 More
$ 0 $ 500 $ 120 $ 160 $ 200 $ 240 $ 280 $ 320
500 1,000 135 195 250 310 350 415
1,000 1,500 135 195 250 310 350 435
1,500 2,000 135 195 250 310 350 450
2,000 2,500 135 195 250 310 350 450
2,500 3,000 135 195 250 310 350 450
3,000 3,500 135 195 250 310 350 450
3,500 4,000 135 195 250 310 355 450
4,000 4,500 135 195 250 310 355 450
4,500 5,000 125 190 240 305 355 450
5,000 5,500 115 175 230 295 355 430
5,500 6,000 105 155 210 260 315 410
6,000 7,000 90 130 170 220 275 370
7,000 8,000 80 115 145 180 225 295
8,000 9,000 70 105 135 170 195 240
9,000 10,000 65 95 115 145 175 205
10,000 11,000 60 80 100 130 155 185
11,000 12,000 55 70 90 110 135 160
12,000 13,000 50 65 85 100 115 140
13,000 14,000 50 65 85 100 115 140
14,000 15,000 45 60 75 90 105 120
15,000 16,000 40 55 70 85 95 110
16,000 17,000 35 50 65 80 85 105
17,000 18,000 30 45 60 70 80 95
18,000 19,000 25 35 50 60 70 80
19,000 20,000 20 30 40 50 60 65
20,000 21,000 15 25 30 40 50 55
21,000 22,000 10 20 25 35 40 45.
[E.] F. If a taxpayer's modified gross income is zero, the taxpayer may claim a credit in the amount shown in the first row of the table appropriate for the taxpayer's number of exemptions.
[F.] G. The tax rebates provided for in this section may be deducted from the taxpayer's New Mexico income tax liability for the taxable year. If the tax rebates exceed the taxpayer's income tax liability, the excess shall be refunded to the taxpayer.
[G.] H. For purposes of this section, "dependent" means "dependent" as defined by Section 152 of the Internal Revenue Code of 1986, as that section may be amended or renumbered, but also includes any minor child or stepchild of the resident who would be a dependent for federal income tax purposes if the public assistance contributing to the support of the child or stepchild was considered to have been contributed by the resident."
Section 3. A new section of the Income Tax Act is enacted to read:
"[NEW MATERIAL] WORKING FAMILIES TAX CREDIT.--
A. A person who files an individual New Mexico income tax return and who is not a dependent of another taxpayer may claim a credit in an amount equal to ten percent of a federal income tax credit for which that person is eligible pursuant to Section 32 of the Internal Revenue Code if the person does not claim a rebate for the taxable year pursuant to Section 7-2-14 NMSA 1978. The credit provided in this section may be referred to as the "working families tax credit".
B. A husband and wife who file separate returns for a taxable year in which they could have filed a joint return may claim only one-half of the credit that would have been allowed on a joint return.
C. The working families tax credit may be deducted from the income tax liability of a person who claims the credit and qualifies for the credit pursuant to this section. If the credit exceeds the person's income tax liability for the taxable year, the excess shall be refunded to the person."
Section 4. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2007.
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